The Freeman 1972 - The Ludwig von Mises Institute

FreemantheVOL. 22, NO.1. JANUARY 1972In Search of a New Monetary Order Hans F. Sennholz 3Monetary alchemists have yet to find an internationally acceptable substitute forgold.Legal Tender: Sellers ,Beware Paul L. Poirot 12Why national socialist monetary policy breaks down in international trade.Why Some Are Poorer Henry Hazlitt 15Concerning cases of personal poverty in industrial societies and possible ways tohelp.Economics: ABranch of Moral PhilosophyRight and wrong ways to cope with the problem of scarcity.Leonard E. Read 22Morality and Controls Milton Friedman 28By making actions illegal that are in the pUblic interest, controls undermine individualmorality.Can We Sustain Prosperity? W. A. Paton 33Have Americans so softened, in their affluence, that they can no longer negotiatethe free man's path to progress?The Founding of the American Republic:6. The Mercantile Impasse Clarence B. Carson 42How British mercantile policies interfered with business and trade in the coloniesand led to war.Book Reviews: 55"The Genius of the West" by Louis Rougier"Politically Impossible ...?" by W. H. Hutt"Financial Policy in a Changing Economy" by Enders M. Voorhees"The Little House Books - A· Pioneer Chronicle" by Laura Ingalls WilderAny~me wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

theFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON-HUDSON. N. Y. 10533 TEL: (914) 591·7230LEONARD E. READPAUL L. POIROTp1resident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system.,and. limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,000---as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printed inU.S.A. Additional copies, postpaid. to one address: Single copy, 50 cents;3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Mich·igan 48106. Permission granted to reprint any article from this issue,with appropriate credit, except "Why Some Are Poorer" and "Moralityand Controls."

ij~ ~I\~©~ @~ ~ ~m~@~~~~W @~[ID~~HANS F. SENNHOLZEVER SINCE President Nixon suspendedgold payments, on August15, 1971, the question of realisticpar values of the world's currencieshas become a vexing internationalpclitical issue. Governments andCEntral banks are searching fornew rules that permit "more flexible"currency fluctuations. Somethingbeyond dollars and gold isneeded, they believe, to provide asolid base for a new monetary order.Return to the old systemspawned at Bretton Woods, N. H.,in 1944, is out of the question. Itwas a gold and dollar standard,with the U.S. dollar payable ingold ,at $35 an ounce while othercountries pegged their moneys tothe dollar, holding them within arange of 1 per cent up or downDr. Sennholz heads the Department of Economicsat Grove City College and is a notedwriter and lecturer on monetary and economicprinciples and practices.from the parity registered withthe lIB-country InternationalMonetary Fund.Now, since the suspension ofgold payments, the world has beenwaiting for monetary authoritiesto find a new monetary system..The process must necessarily beslow, as a political solution issought to economic problems thatwere generated by various politicalconsiderations. After all, thedepreciation of the U.S. dollar,which finally led to the gold paymentsuspension, was a politicalact by the monetary authorities ofseveral Federal administrations.The decision to "float" the dollarrather than face the humiliationof a formal devaluation was alsoa political act. Similarly, the othergovernments are motivated politicallyin their attempts at monetarymanagement.3

4 THE FREEMAN JanuaryWhile most "experts" make thegovernment, its powers and objectives,their point of departure formonetary deliberation, a few scholarscontinue to base their inquirieson the fundamental principlesthat flow from individual choiceand action. In their judgment, thefactors that affect the exchangerelations between various nationalcurrencies rest on the economicprinciples that determine the purchasingpower of each and everytype of medium of exchange,whether it is a precious metal orgovernment fiat money.As they see it, the purchasingpower of any monetary unit dependson the relation between thedemand for and the quantity ofmoney in individual cash holdings.The demand for money is purelyindividual, although a great manyextraneous factors may influencethis demand. There is, for' instance,the expectation of futurechanges in the exchange value ofmoney. An expected fall tends toreduce the demand for money andthus its purchasing power; an expectedrise brings about the opposite.Also, the availability of goodsaffects the demand for money. Inan expanding economy when moreand better goods are offered onthe market, the demand for moneytends to rise; in a declining economy,where capital is consumedand the division of labor breaksdown, the demand for money tendsto decline.!The Stock of MoneyThe supply of money is thestock of money available for exchange.During the ,age of thegold standard it consisted of goldbullion, gold coins and their varioussubstitutes, such as banknotes, tokens, and demand deposits.In this age of governmentcurrency, it consists of fiat moneyand its substitutes, such as tokensand demand deposits. The substitutesmay either be fully backedby money proper or else they arefiduciary, Le., uncovered. Thus, anexpansion or contraction of fiduciarymedia directly a,ffects thetotal quantity of money availablefor exchange.A change in the money relationthrough changes in either the demandfor money or the stock ofmoney affects changes in the purchasingpower of money. As onefactor of demand or supply cannotperfectly offset changes in theother factors, money can never beneutral. Now, if there a.re two ormore media of exchange, such asgold or silver, or va.rious fiat currencies,what determines the exchangeratio between the various'1 Ludwig von Mises, The Theory ofMoney and Credit (Irvington-on-Hudson,N. Y.: The Foundation for Economic Education,Inc., 1971), p. 97 et seq.

6 THE FREEMAN Januarybetween the various currencyunits consisting of gold thus weredetermined by their relative measuresof gold.International AcceptabilityThe world had an internationalcurrency while on the classicalgold standard. It evolved withoutinternational treaties, conventionsor institutions. Noone had tomake the gold standard work asan international system. When theleading countries had adoptedgold as their standard money theworld had an international currencywithout problems of convertibilityor even parity. Thefact that the coins bore differentnames and had different weightshardly mattered. As long as theyconsisted of gold, the nationalstamp or brand did not negatetheir function as an internationalmedium of exchange.The purchasing power of gold,tended to be the same the worldover. Once it was mined, it renderedexchange services throughoutthe world market, moving backand forth and thereby equalizingits purchasing power except forthe costs of transport. It is true,the composition of this purchasingpower differed from place toplace. A gram of gold would buymore labor in Mexico than in theU.S. But as long as some goodswere traded, gold, like any othereconomic good, would move to seekits highest purchasing power andthereby equalize its value throughoutthenworld market. As an coinsand bullion were traded in termsof weight of gold, there were no"exchange rates" such as thosebetween gold and silver, or variousfiat monies.The Exchange-Rate DilemmaThe departure from the goldcoinstandard, set the stage forthe present exchange-rate dilemma.At first, governments beganto restrict the actual circulationof gold. They gradually establishedthe gold-bullion standard inwhich government or its centralbank was managing the country'sbullion supply. Gold coins ,verewithdrawn from individual cashholdings and national currencywas no longer redeemable in goldcoins, but only in large, expensivegold bars. This standard then gaveway to the gold-exchange standardin which the gold reserveswere replaced by trusted foreigncurrency that was redeemable ingold bullion at a given rate. Theworld's monetary gold was held bya few central banks, such as theBank of England and the FederalReserve System, that served as thereserve banks of the world. 3 But3 Cf. Leland B. Yeager, InternationalMonetary Relations (New York: Harper& Row, Publishers, 1966), p. 251 et seq.

1972 IN SEARCH OF A NEW MONETARY ORDER 7after World War II, the Bank ofEngland which was holding thegold reserves for more than 60countries, commonly called thepound sterling area, gradually lostits eminent position. It began tohold most of its reserves in U.S. dollarclaims to gold, which made theFederal Reserve System the ultimatereserve bank of the world;thus the gold-exchange standardbecame a de facto gold and dollarstandard. Finally, during the acceleratinginflation and credit expansionof the 1960's in the U.S.,the dollar gradually fell from itsrespected position. Several monetarycrises which triggered worldwidedemands for dollar redemptiongreatly depleted the Americanstock of gold, and createdprecarious payment situations.Altogether, in less than fouryears, we experienced seven currencycrises that foretold the endof the international monetary system.In November, 1967, GreatBritain devalued the pound and anumber of other countries immediatelyfollowed suit. In Marchof 1968, under the pressure ofmassive pound sterling liquidation,the nine-nation gold pool wasabandoned and the two-tier systemadopted. The third crisis occurredin France in May, 1969,when political riots, followed byrapid currency expansion, greatlyweakened the franc which waslater devalued. The fourth crisiserupted in September, 1969, whenmassive dollar conversions to WestGerman marks forced the Germancentral bank to "float" the markand then revalue it upward by 9.3per cent. The·. fifth crisis occurredin March and early April, 1971,when a new flight from the dollarthreatened to inundate severalEuropean central hanks. In a concertedeffort, the U.S. Treasuryand the Export-Import Bank endeavoredto "sop up" the dollarflood. The sixth crisis began inMay, 1971, when a new flow ofdollars into German marks, Swissfrancs, and several other currenciescaused the mark to float anew,the Swiss franc to be revalued upwardby 7.07 per cent, and severalother currencies to be allowed tofloat or be revalued. The seventhand last crisis was of such massiveproportions that PresidentNixon was forced to announce thecollapse of the· old monetary order.Why the Breakdown ofInternational Monetary Relations?What had caused this gradualdeterioration of international monetaryrelations? An understandingof the causes may provide an answerto the dilemma, preventfurther deterioration, and hopefullyfind a cure to all its somberconsequences.The popular. explanation usually

8 THE FREEMAN Januaryruns as follows: The rapid 'worseningof the U.S. international balance-of-paymentdeficit was theproverbial straw that broke thesystem's back. From a small surplusof $2.7 billion in 1969,achieved mainly through variousgovernment manipulations thatamounted to window dressing, the1970 payments deficit soared to anall-time record deficit of some$10.7 billion, on official settlementbasis, i.e., official settlements betweengovernments only. Then, inMay, 1971, the U.S. Commerce Departmentannounced that the firstquarter 1971 deficit had grown toa record $5.4 billion. 4 And finally,private sources estimated that in1971, up through mid-August, some$22 billion more dollars flowed outof the country than came in.These new payment deficitswere added to the accumulated unpaiddeficits of the U.S. for manyyears. U.S. dollars and short-termclaims to dollars in foreign handsamounted to $43 billion at the endof 1970. After deducting U.S.short-term claims on foreignersour net obligations exceeded $32billion, plus the current deficitsmentioned above. And while theU.S. gold stock stood at $11 billion,the lowest level since World WarII, it became obvious that the U.S.4 Federal Reserve Bulletin, Sept., 1971,p. A75.could not meet its foreign obligationsin gold. 5Dr. Arthur F. Burns, Chairmanof the Federal Reserve Board,probably reflected the official positionof the U.S. government when,on May 20, 1971, he blamed foreigngovernments for the precarioussituation. He urged them torelease their restraints on importsand American investments, and tohelp us with our foreign militaryoperating expenses. Raising ourinterest rates, he asserted, was notthe right way to improve the ailingdollar. He advocated more U.S.borrowing from the Eurodollarmarket through Treasury certificatesand, in order to become morecompetitive in world markets, an"incomes policy" that would restrainthe cost-push momentum ofAmerican labor. 6 Less than threemonths later President Nixon announceda 90-day price and wagefreeze, to be followed by some governmentcontrol thereafter, and a10 per cent surtax on imports tostem the floodgoods.of cheap foreignIINafional Balance of Payment llAcademic theories basically concurredwith Dr. Burns' explanationalthough some offered differentsolutions, such as a crawling5 Ibid., p. 94.6 The Commercial and FinancialChronicle, June 9, 1971, p. 16.

1972 IN SEARCH OF A NEW MONETARY ORDER 9peg, a wider bank, flexible exchangerates, or the creation ofnew reserve assets, such as SpecialDrawing Rights by the InternationalMonetary Fund. 7 But nomatter what solution they proffer,their point of departure is.the collectivistconcept of the "national"balance of payment. Without anyreference to individual actions andbalances, they build ambiguousstructures that ignore the causes.Balance of payments of a countryis that very small segment of thecombined balances of millions ofindividuals, the segment that is7 Cf. William Fellner "On Limited ExchangeRate Flexibility," Chapter 5 ofMaintaining and Restoring Balance inInternational Payments, Princeton UniversityPress, 1966; George N. Halm,"The Bank Proposal: The Limit of PermissibleExchange Rate Variations,"Princeton Special Papers in InternationalEconomics, No.6; John H. Williamson:"The Crawling Peg," Princeton Essays inInternational Finance, l'fo.50; FrancisCassell, International Adjustment andthe Dollar, 9th District Economic InformationSeries, Federal Reserve Bank ofMinneapolis, June, 1970; Walter S. Salant,"International Reserves and PaymentsAdjustment;" Banca Nazionale delLavoro, Quarterly Review, Sept., 1969;Thomas D. Willet and Francesco Forte,"Interest Rate Policy and External Balance,"Quarterly Journal of Economics,May, 1969; Friedrich A. Lutz, "MoneyRates of Interest, Real Rates of Interest,and Capital Movements," Chapter 11 ofMaintaining and Restoring Balance inInternational Payments, Princeton UniversityPress, 1966; Milton Gilbert, "TheGold-Dollar System: Conditions of Equilibriumand the Price of Gold," PrincetonEssays in International Finance, No. 70.based on personal exchangesacross national boundaries. As anindividual may choose to increaseor decrease his cash holdings, somay the millions of residents of agiven country. But when they increasetheir holdings, that iscalled "favorable" in balance ofpayments terminology. And whenthey choose to reduce their cashholdings, that is called "unfavorable."The fact is that drains ofgold are not mysterious forcesthat must be managed by wisegovernments, but are the result ofdeliberate choices by people eagerto reduce their cash holdings.Wherever governments resort toinflation, people tend to reducetheir cash holdings through purchasesof goods and services. Whendomestic prices begin to rise whileforeign prices continue to be stableor rise at lower rates, individualslike to buy more foreign goods atbargain prices. They ship some oftheir money ab!oad in exchangefor cheaper foreign products orproperty. Thus, an outflow of foreignexchange and gold sets in. Itis the inevitable result of a rate ofdomestic inflation that exceedsthat of the rest of the world andsets into operation "Gresham'sLaw."During the 1960's, the decade ofthe "Great Society," and againduring 1970 and 1971, money andcredit were created at unprece-

10 THE FREEMAN Januarydented rates prompted by recordbreakinggovernment deficits. Privatedemand deposits, bank creditat commercial banks, and FederalReserve credit, which is fuelingthe credit expansion, often rose atrates of 10 per cent or more a year.Therefore, in spite of countlesspromises and reassurances by thePresident and his advisers, theU.S. dollar suffered inevitable depreciationat horne and abroad.And the August 15, 1971, defaultof payment was the result of thisdepreciation.Blaming the CreditorRefusal to make gold paymentsby the United States, the richestand most powerful country onearth, casts serious doubt on futuremonetary cooperation. Theimmediate prospect for worldwidemonetary reform is not toobright. The U.S., as the defaultingdebtor, is taking· the positionthat it is up to the countries withhuge surpluses in their internationalpayments to adjust theircurrencies upward against the dollar.It is Washington's basic premisethat the U.S. was unfairlytreated in international commerceand that it is time for correction.Convinced of the indispensabilityof the U.S. dollar as a world reservecurrency, the U.S. is defiantlywaiting for the others to act.Bad debtors, when called uponto make payment, often make suchcharges against their creditors. Itis shocking, however, that the U.S.government should prove to besuch a poor debtor. Even its basicassumption, the indispensability ofthe dollar, no longer goes unchallenged.Sterling balances ,lookmore attractive today than dollarholdings. In fact, the holdings ofdeutsche marks by central banksand treasuries probably exceed $3billion. Foreign airlines and shippershave ceased to accept U.S.currency. And Eurodollar bondsare all but unsaleable in Europeancapital markets, while mark, guilder,and Swiss franc securities remainin demand. The foreign positiongenerally rejects the Washingtoncharge of unfair treatment.If the U.S. had adopted appropriatedomestic policies, foreign officialsargue, it would not haveaccrued its huge international paymentsdeficits. Therefore, theywant the U.S. to share the burdenof realignment. They are seekinga devaluation of the dollar alongwith realignment of their currencies.And above all, no one is suggestingthat the U.S. dollar continueto serve as an internationalreserve currency.After all, managed currenciesare the products of political manipulationsby parties and pressuregroups, and all are destined to bedestroyed gradually by. weak ad-

1972 IN SEARCH OF A NEW MONETARY ORDER 11ministrations yielding to popularpressures for government largessand economic redistribution. Nosuch currency can serve for longas the international reserve currencyto which all others can repair.The U.S. dollar is no exception.In the chaotic conditions of late1971, the world may still have thefollowing options:(1) It may continue on its presentroad of fiat money and inflation,government manipulation ofexchange rates, trade restrictions,and exchange controls. The goal is"national autonomy" in monetaryand fiscal policies, an essential objectivefor all forms of central economicplanning. On this road weare bound to suffer not only moreinflation and depreciation, but alsoa gradual disintegration of theworld economy and its division oflabor. Our ultimate destination isa world-wide depression.(2) Or the world may choose toturn off this road of self-destructionand seek stability in soundmoney. The very monetary authoritiesthat have created thechaos and are now sitting in judgmentover the, international monetaryorder must relinquish theirrights and powers over the people'smoney. This road leads to thevarious forms of gold standard,from the gold-exchange to thegold-bullion, and finally the goldcoinstandard. For gold is the onlyinternational money the quantityof which is limited by high costsof mining and the value of whichis independent of political aspirationsand policies. Only the goldstandard can afford monetary stabilityand peaceful internationalcooperation. ~IDEAS ONLIBERTYFreedom is the AnswerTHERE IS NOTHING wrong with money that freedom will not cure.This is another way of saying that the Good Society which manyreformers have sought by way of monetary reform' cannot beachieved that way; if it is ever to be achieved, it will be done byfreedom. So, then, the fight for sound money, to have meaning,must be related to the broader fight for freedom. It is only oneof the several battles that must be fought.F RAN K C HOD 0 R 0 v, from "Shackles of Gold"

'10PAUL L. POIROTSellers BewareA PLEASANT premise underlyingsocialism is that everyone shouldbe able and willing to pay priceshigh enough to cover costs. Then,no one ever would be obliged towork for less than "a living wage."Such is the foolish dream of personswho do not understand theprocess and the advantages of freetrade.True, oue trades in order togain something of greater valueto him than what he gives up inexchange, and so does every othertrader. Each strives to satisfy hiswants with the least effort or expenditure;but the trader differsfrom socialists for he does not expectanyone else to give up somethingfor nothing.A second significant differencebetween a trader and a socialistconcerns their respective viewsabout money. To a trader, moneyis that particular item of commerceso much more universallyacceptable in trade than otherscarce and valuable items that itserves as a useful medium of exchange.It opens up a far widerrange of market opportunitiesthan could possibly be reachedthrough direct barter. It is usefulas money because the overwhelmingmajority of traders are willingand anxious to accept it in paymentfor their wares.An entirely different concept ofmoney is implied in the languageand philosophy of socialism. Thosewho speak of "a living wage" andof "prices high enough to covercosts" are not thinking about willingcustomers, or of a money that

1972 LEGAL TENDER: SELLERS· BEWARE 13arises naturally out of willing exchangesin the open market. Whatthey seem to have in mind, instead,is a purchasing power to becreated out of thin air - that ancientdream of alchemists andcounterfeiters.Counterfeiters Need ilLegal Tender llNow, it's easy enough to takea base metal and color it "gold,"or to print a slip of paper and callit "money." The trick is to makeothers believe it. Counterfeitersand confidence men are indeed anuisance to producers, traders,savers, especially to those who arewilling to venture into shadydeals. But with a bit of experienceand wariness, an honest •tradercan readily spot such risks and directhis business toward men andmoney he trusts.So, what is the poor counterfeiterto do? He will do his bestto have his "money" declared legaltender, which means that the governmentwould force creditors toaccept it when offered in paymentof any debt.Any debt? Including taxes? Thegovernment that levies and collectstaxes is expected to grant tosomeone a note-printing monopoly?It takes no political geniusto rise to the conclusion that ifanyone is to print notes to be enforcedas legal tender, surely thatmonopoly had best be exercised bythe government itself! And that issocialist monetary policy in a nutshell:the government in full controlof the "money machine."If government expenditures rise,just print additional bogus money.Soon enough,. this bogus-moneydeclared-legal-tenderwill havedriven into hoarding or hidingany more substantial or trustworthymedium of exchange. AsSir Thomas Gresham observed:"Bad money drives out good."This is the monetary manifestationof the more general law thatpeople always.will use the cheapestand easiest means available toobtain their various ends. In otherwords, if the government decreesthat a piece of paper or an alloyedcoin is equal in purchasing powerto the precious metal that themarket had chosen as money, thencustomers will do their best tomake sellers take the bad money.And even the most honest andscrupulous of men will gladly usethe bad money to meet his taxpayments.However, a small problem loomsfor a national government: itstaxing power and legal tendermonopoly end at the border. Itmay be able to fool or to browbeatforeign suppliers for a time intoaccepting printed p~per to covertrade deficits ; but eventually, internationaltrade balances are payablein goods of value, such as

14 THE FREEMAN Januarygold. Even an international monetarycartel such as the BrettonWoods a.greement breaks down assoon as the gold runs out - abreakdown which President Nixondeclared official on August 15,1971.It Stops at the BorderAt this point, let us pick up thethread of the labor theory of valuewith which we began this discussionof inflation: the socialisticpresumption that everyone is entitledto "a living wage," whetheror not he earns it. The late LordKeynes translated this fallacy intothe language of politics, sayingin effect:. the way to stay in officeis to woo organized labor; if theunions demand higher wages, meettheir demands through use of themoney machine.Some witnesses, seeing that the"money" button is now beingpushed by organized labor, havecome to the remarkable conclusionthat this is a new kind of "costpush"inflation, unlike the old "demand-pull"type; the union wagedemands are pushing prices up,so the money-machine isn't theculprit after all. Therefore, let'sfreeze wages and let the machinerun until the economy has regainedits health! That, too, wasimplicit in the official declarationof August 15, 1971.Despite all the InternationalBrotherhoods of this and that, thenew "cost-push" inflation has nogreater power over foreignersthan has any other name for thegame. In the markets of the world,it's' still the same: put up, or shutup; if you want our goods andservices, give us your goods oryour gold; worthless paper not acceptedhere; the exorbitant wagedemands of American labor unionsare not legal tender in Japan, sosorry!So, in the final analysis, what anation can do is to inflate itselfout of the world market and practiceits splendid isolationism tothe very brink of its own disaster- if not further. And a citizenrythat will thus demand and toleratesocialism fully deserves it. Nor isit an eff~ctive cure for inflation todemand that the government morestringently regulate the monopolypowers granted to organized labor;of course those powers are usedand abused to everyone's detrimentand ought to be withdrawn.So should numerous other specialprivileges and government-sanctionedinterventions that disruptpeaceful production and trade.However, as long as the governmenthas power to declare thatpaper is legal tender, there is littleprospect that the economy may befree of inflation and socialism. I)

I lyWhySomeArePo - erHENRY HAZLITTTHROUGHOUT HISTORY, until aboutthe middle of the eighteenth century,mass poverty was nearlyeverywhere the normal conditionof man. Then capital accumulationand a series of major inventionsushered in the IndustrialRevolution. In spite of occasionalsetbacks, economic progress becameaccelerative. Today, in theUnited States, in Canada, in nearallof Europe, in Australia,New Zealand, and Japan, masspoverty has been pra.ctically eliminated.It has either been conqueredor is in process of beingconquered by a progressive capitalism.Mass poverty is still foundin most of Latin America, most ofAsia, and most of Africa.Yet even the United States, theHenry Hazlitt is well known to FREEMANreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as a chapter in a forthcoming book, TheConquest of Poverty, to· be published by ArlingtonHouse.most affluent of all countries, continuesto be plagued by "pockets"of poverty and, by individual poverty.Temporary pockets of poverty,or of distress, are an almost necessaryresult ofa free competitiveenterprise system. In such a systemsome firms and industries aregrowing or being born, others areshrinking or dying; and many entrepreneursand workers in thedying industries are unwilling orunable to change their residenceor their occupation. Pockets ofpoverty may be the result of afailure to meet domestic or foreigncompetition, of a shrinkageor disappearance of demand forsome product, of mines or wellsthat have been exhausted, of landthat has become a dust bowl, andof droughts, floods, earthquakes,and other natural disasters. Thereis no way of preventing most of15

16 THE FREEMAN Januarythese contingencies, and no all-encompassingcure for them. Each islikely to call for its own specialmeasures of alleviation or adjustment.Whatever general measuresmay be advisable can best be consideredas part of the broaderproblem of individual poverty.This problem is nearly alwaysreferred to by socialists as "theparadox of poverty in the midst ofplenty." The implication of thephrase is not only that such povertyis inexcusable, but that itsexistence must be the fault ofthose who have the "plenty." Weare most likely to see the problemclearly, however, if we stop blaming"society" in advance and seekan unemotional analysis.Diverse and InternationalWhen we start seriously to itemizethe causes of individual poverty,absolute or relative, theyseem too diverse and numerouseven to classify. Yet in most discussionwe do find the causes ofindividual poverty tacitly dividedinto two distinct groups - thosethat are the fault of the individualpauper and those that are not.Historically, many so-called "conservatives"have tended to blamepoverty entirely on the poor: theyare shiftless, or drunks or bums:"Let them go to work." Most socalled"liberals," on the otherhand, have tended to blame povertyon everybody but the poor:they are at best the "unfortunate,"the "underprivileged," if not actuallythe "exploited," the "victims"of the "maldistribution ofwealth," or of "heartless laissezfaire."The truth, of course, is not thatsimple, either way. We may, occasionally,come upon an individualwho seems to be poor throughno fault whatever of his own (orrich through no merit of his own).And we may occasionally find onewho seems to be poor entirelythrough his own fault (or rich entirelythrough his own merit).But most often we find an inextricablemixture of causes for anygiven person's relative poverty orwealth. And any quantitative estimateof fault versus misfortuneseems purely arbitrary. Are weentitled to say, for example, thatany given individual's poverty isonly 1 per cent his own fault, or99 per cent his own fault - or fixany definite percentage whatever?Can we make any reasonably accuratequantitative estimate of thepercentage even of those who arepoor mainly through their ownfault, as compared with thosewhose poverty is mainly the resultof circumstances beyond their control?Do we, in fact, .have any objectivestandards for making theseparation?A good idea of some of the older

1972 WHY SOME ARE POORER 17ways of approaching the problemcan be obtained from the articleon "Poverty" in The Encycloped'iaof Social Reform, published in1897. 1 This refers to a table compiledby a Professor A. G. Warnerin his book, Ameri,can Charities.This table brought together theresults of investigations in 1890to 1892 by the charity organizationsocieties of Baltimore, Buffalo,and New York City, the associatedcharities of Boston and Cincinnati;the studies of CharlesBooth in Stepney and St. Pancrasparishes in London, and the statementsof Bohmert for 76 Germancities published in 1886. Each ofthese studies tried to determinethe "chief cause" of poverty foreach of the paupers or poor familiesit listed. Twenty such "chiefcauses" were listed altogether.Professor Warner converted thenumber of cases listed under eachcause in each study into percentages,whereverthis had not alreadybeen done; then took an unweightedaverage of the resultsobtained in the fifteen studies foreach of these "Causes of Povertyas Determined by Case Counting,"and came up with the followingpercentages. First came six"Causes Indicating Misconduct":Drink 11.0 per cent, Immorality4.7, Laziness 6.2, Inefficiency and1 Ed. by Wm. D. P. Bliss (New York:Funk & Wagnalls).Shiftlessness 7.4, Crime and Dishonesty1.2, and Roving Disposition2.2 - making a total of causesdue to misconduct of32.7 per cent.Professor Warner next itemizedfourteen "Causes IndicatingMisfortune" : Imprisonment ofBread Winner 1.5 per cent, Orphansand Abandoned 1.4, Neglectby Relatives 1.0, No Male Support8.0, Lack of Employment 17.4, InsufficientEmployment 6.7, PoorlyPaid Employment 4.4, Unhealthyor Dangerous Employment 0.4, Ignoranceof English 0.6, Accident3.5, Sickness or Death in Family23.6, Physical Defect 4.1, Insanity1.2, and Old Age 9.6 - makinga total of causes indicating misfortuneof 84.4 per cent.No Objective StandardsLet me say at once that as astatistical exercise this table isclose to worthless, full of moreconfusions and discrepancies thanit seems worth analyzing here.Weighted and unweighted averagesare hopelessly mixed. Andcertainly it seems strange, for example,to list all cases of unemploymentor poorly paid employmentunder "misfortune" and noneunder personal shortcomings.Even Professor Warner pointsout how arbitrary most of thefigures are: "A man has beenshiftless all his life, and is nowold; is the cause of poverty shift-

18 THE FREEMAN Januarylessness or old age? . . . Perhapsthere is hardly a single case in thewhole 7,000 where destitution hasresulted from a single cause."But though the table has littlevalue as an effort in quantification,any attempt to name and classifythe causes of poverty does call attentionto how many and variedsuch causes there can be, and tothe difficulty of separating thosethat are an individual's own faultfrom those that are not.An effort to apply objectivestandards is now made by the SocialSecurity Administration andother Federal agencies by classifyingpoor families under "conditionsassociated with poverty."Thus we get comparative tabulationsof incomes of farm and nonfarmfamilies, of white and Negrofamilies, families classified by ageof "head," male head or femalehead, size of family, number ofmembers under 18, educational attainmentof head (years in elementaryschools, high school, orcollege) , employment status ofhead, work experience of head(how many weeks worked or idle),"main reason for not working: illor disabled, keeping house, goingto school, unable to find work,other, 65 years and over"; occupationof longest job of head,number of earners in family; andso on.These classifications, and theirrelative numbers and comparativeincomes, do throw objective lighton the problem, but much still dependson how the results are interpreted.Oriented Toward the futureA provocative thesis has beenput forward by Professor EdwardC. Banfield of Harvard inhis book, The Unheavenly' City.2He divides American society intofour "class cultures": upper, middle,working, and lower classes.These "subcultures," he warns, arenot necessarily determined bypresent economic status, but bythe distinctive psychological orientationof each toward providingfor a more or less distant future.At the most future-oriented endof this scale, the upper-class individualexpects long life, looksforward to the future of his children,grandchildren, even greatgrandchildren,and is concernedalso for the future of such abstractentities as the community,nation, or mankind. He is confidentthat within rather wide limits hecan, if he exerts himself to do so,shape the future to accord withhis purposes. He therefore hasstrong incentives to "invest" inthe improvement of the futuresituation - i. e., to sacrifice somepresent satisfaction in the expectationof enabling someone (him-2 Boston: Little Brown, 1970.

1972 WHY SOME ARE POORER 19self, his children, mankind, etc.)to enjoy greater satisfactions atsome future time. As contrastedwith this:"The lower-class individual livesfrom moment to moment. If hehas any awareness of a future, itis of something fixed, fated, beyondhis control: things happen tohim, he does not make them happen.Impulse governs his behavior,either because he cannot disciplinehimself to sacrifice a present fora future satisfaction or becausehe has no sense of the future. Heis therefore radically improvident:whatever he cannot consumeimmediately he considersvalueless. His bodily needs (especiallyfor sex) and his taste for'action' take precedence over everythingelse - and certainly overany work routine. He works onlyas he must to stay alive, and driftsfrom one unskilled job to another,taking no interest in the work."3Professor Banfield does not attemptto offer precise estimates ofthe number of such lower-class individuals,though he does tell us atone point that "such ['multiproblem']families constitute a smallproportion both of all families inthe city (perhaps 5 per cent atmost) and of those with incomesbelow the poverty line (perhaps 10to 20 per cent) . The problems thatthey present are out of proportion3 Ibid., p. 53.to their numbers, however; in St.Paul, Minnesota, for example, asurvey showed that 6 per cent ofthe city's families absorbed 77 percent of its public assistance, 51per cent of its health services, and56 per cent of its mental health andcorrection casework services."4Obviously if the "lower class culture"in our cities is as persistentand intractable as Professor Banfieldcontends (and no one candoubt the fidelity of his portraitof a sizable group), it sets a limiton what government policy makerscan accomplish.By Merit, or by LuckIn judging. any program of relief,our forefathers usuallythought it necessary to distinguishsharply between the "deserving"and the "undeserving"poor. But this, as we have seen, isextremely difficult to do in practice.And .it raises troublesomephilosophic problems. We commonlythink of two main factors asdetermining any particular individual'sstate of poverty or wealth- personal merit, and "luck.""Luck" we tacitly define as anythingthat causes a person's economic(or other) status to be betteror worse than his personal meritsor efforts would have earnedfor him.Few of us are objective in4 Ibid., p. 127.

20 THE FREEMAN Januarymeasuring this in our own case.If we are relatively successful,most of us tend to attribute oursuccess wholly to our own intellectualgifts or hard work; if wehave fallen short in our worldlyexpectations, we attribute the outcometo some stroke of hard luck,perhaps even chronic hard luck.If our enemies (or even some ofour friends) have done better thanwe have, our temptation is toattribute their superior successmainly to good luck.But even if we could be strictlyobjective in both cases, is it alwayspossible to distinguish betweenthe results of "merit" and"luck"? Isn't it luck to have beenborn of rich parents rather thanpoor ones? Or to have receivedgood nurture in childhood and agood education rather than to havebeen brought up in deprivationand ignorance? How wide shall wemake the concept of luck? Isn'tit merely a man's bad luck if heis born with bodily defects - crippled,blind, deaf, or susceptible tosome special disease? Isn't it alsomerely bad luck if he is born witha poor intellectual inheritancestupid,feeble-minded, an imbecile?But then, by the same logic,isn't it merely a matter of goodluck if a man is born talented,brilliant, or a genius? And if so,is he to be denied any credit ormerit for being brilliant?We commonly praise people forbeing energetic or hard-working,and blame them for being lazy orshiftless. But may not these quaHtiesthemselves, these differencesin degrees of energy, be just asmuch inborn as differences in physicalor mental strength or weakness?In that case, are we justifiedin praising industriousnessor censuring laziness?However difficult such questionsmay be to answer philosophically,we do give definite answers tothem in practice. We do not criticizepeople for bodily defects(though some of us are not abovederiding them) , nor do we (exceptwhen we are irritated) blame themfor being hopelessly stupid. Butwe do blame them for laziness orshiftlessness, or penalize them forit, because we have found in practicethat people· do usually respondto blame and punishment, orpraise and reward, by puttingforth more effort than otherwise.This is really what we have inmind when we try to distinguishbetween· the "deserving" and the"undeserving" poor.What Happens to IncentiveThe important question alwaysis the effect of outside aid on incentives.We must remember, onthe one hand, that extreme weaknessor despair is not conduciveto incentive. If we feed a man who

1972 WHY SOME ARE POORER 21has actually been starving, we forthe time being probably increaserather than decrea.se his incentives.But as soon as we give anidle able-bodied man more thanenough to maintain reasonablehealth and strength, and especiallyif we continue to do thisover a prolonged period, we riskundermining his incentive to workand support himself. There areunfortunately many people whoprefer near-destitution to takinga steady job. The higher we makeany guaranteed floor under incomesthe larger the number ofpeople who will see no reasoneither to work or to save. Thecost to even a wealthy communitycould ultimately become ruinous.An "ideal" assistance program,whether private or governmental,would (1) supply everyone in direneed, through no fault of his own,enough to maintain him in reasonablehealth; (2) would givenothing to anybody not in suchneed; and (3) would not diminishor undermine anybody's incentiveto work or save or improve hisskills and earning power, butwould hopefully even increasesuch incentives.But these' three aims are extremelydifficult to reconcile. Thenearer we come to achieving anyone of them. fully, the less likelywe are to achieve one of the others.Society has found no perfect solutionof this problem in the past,and seems unlikely to find one inthe future. The best we can lookforward to, I suspect, is some never-quite-satisfactorycompromise.Fortunately, in the UnitedStates the problem of relief isnow merely. a residual problem,likely to be of constantly diminishingimportance as, under free enterprise,we 'constantly increasetotal production. The real problemof poverty is not a problem of "distribution"but of production. Thepoor are poor not because somethingis being withheld from them,but because, for whatever reason,they are not producing enough.The only permanent way to curetheir poverty is to increase theirearning power. ~IDEAS ONLIBERTYSelf-HelpTHE SPIRIT of self-help is the root of all genuine growth in theindividual; and, exhibited in the lives of many, it constitutes thetrue source of national vigor and strength.SAMUEL SMILES

ECONOMICS:A BranchofMoralPhilosophyLEONARD E. READTHE AUTHOR of The Wealth ofNati,ons (1776) is frequentlyclassed as an eighteenth centuryeconomist. 'But Adam Smith wasprimarily a professor of moralphilosophy, the discipline which Ibelieve is the appropriate one forthe study of human action andsuch subdivisions of it as may beinvolved in political economy.Moral philosophy is the studyof right and wrong, good and evil,better and worse. These polaritiescannot be translated into quantitativeand measurable terms and,for that reason, moral philosophyis sometimes discredited as lackingscientific objectivity. And it isnot, in fact, a science in the sensethat mathematics, chemistry, andphysics are sciences. The effort ofmany economists to make thestudy of political economy a naturalscience draws the subject outof its broader discipline of moralphilosophy, which leads in turn tosocial mischief.Carl Snyder, long-time statisticianof the Federal Reserve Board,exemplifies an economic "scientist."He wrote an impressivebook, Capitalism the Creator.lI agree with this author thatcapitalism is, indeed, a creator,providing untold wealth and materialbenefits to countless millionsof people. But, in spite of all thelearned views to the contrary, Ibelieve that capitalism, in its significantsense, is more than Snyderand many other statisticians andeconomists make it out to be - farmore. If so, then to teach thatcapitalism is fully explained inmathematical terms is to settle forsomething less than it really is.This leaves unexplained and vul-1 Carl Snyder, Capitalism the Creator(New York: The Macmillan Company,1940; Arno Press, 1972), 492 pp.22

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 23nerable the real case for capitalism.Snyder equates capitalism with"capital savings." He explainswhat he means in his Preface:"The thesis here presented issimple, and unequivocal; in itsgeneral outline, not new. What isnew, I would fain believe, is theproof; clear, statistical, and factualevidence. That thesis is thatthere is one way, and only oneway, that ,any people, in all history,have ever risen from barbarismand poverty to affluence andculture; and that is by that concentratedand highly organizedsystem of production and exchangewhich we call Capitalistic: onew,ay, and one alone. Further, thatit is solely by the accumulation(and concentration) of this Capital,and directly proportional tothe amount of this accumulation,that the modern industrial nationshave arisen: perhaps the sole waythroughout the whole of eight orten thousand years of economichistory."No argument - none whatsoever- as to the accomplishments ofcapitalism, or that it has to dowith "capital savings." But whatis capital?The Ideas Behind CapitalThe first answer that comes tomind is that capital means thetools of production: brick andmortar in the form of plants, electricand water and other kinds ofpower, machines of all kinds includingcomputers and other automatedthings, ships at sea andtrains and trucks and planes - youname it! These things are indeedcapital, but is capital in the senseof material wealth sufficient to tellthe whole story of capitalism andits creative accomplishments orpotentialities'?Merely bear in mind that all ofthis fantastic gadgetry on whichrests a high standard of living hasits origin in ideas, inventions, discoveries,insights, intuition, thinkof-thats,and such other unmeasurablequalities as the will to improve,the entrepreneural spirit,intelligent self-interest, honesty,respect for the rights of others,and the like. These are spiritualas distinguished from material orphysical assets, and always theformer precedes and is responsiblefor the latter. This is capitalin its fundamental, originatingsense; this accumulated wisdom ofthe ages - an over-all luminosity- is the basic aspect of "capitalsavings."It is possible to become awareof this spiritual capital, but not tomeasure, let.alone to fully understandit - so enormous is its accumulationover the ages. Awareness?Sit in a jet plane and askwhat part you had in its m,aking.

24 THE FREEMAN JanuaryVery little, if any, even though youmight be on the production line atBoeing. At most, you presssed abutton that turned on forces aboutwhich you know next to nothing.Why, no man even knows how tomake the pencil you used to signa requisition. These "capital savings"put at your disposal an energyperhaps several hundredtimes your own. This accumulatedenergy - the workings of humanminds over the ages - is capital!"Truly Scientific llWith this concept of capital inmind, reflect on how unrealisticare the ambitions of the "scientific"economists. Carl Snyderphrases their intentions well in theconcluding paragraph of his Preface:"It was inevitable, perhaps, thatanything like a "social science"should be the last to develop. Itsbases are so largely statistical thatit was only with the developmentof an enormous body of new knowledgethat anything resembling afirmly grounded and truly scientificsystem could be established.It is coming; already the mostfundamental elements of thisknowledge are now available, asthe pages to follow will endeavorto set forth." (Italics added)Snyder is, indeed, statistical. Hedisplays 44 charts. Nearly all ofthese show the ups and downsmostlyups - of physical assets indollar terms. This, in his view, isa "truly scientific system." Buthow scientific can a measurementbe if the units cannot be quantifiedand the measuring rod is asimprecise in value as is the dollaror any other monetary unit?And what is truly scientificabout showing the growth in coalproduction, for instance, if therebe a shift in demand favoringsome other fuel? This would beonly a pseudo-measurement withno more scientific relevance than acentury-old chart showing the dollargrowth in buggy whip production.Professor F. A. Hayek enlightensus:"All the physical laws of production"which we meet, e.g., in economics,are not physical laws inthe sense of the physical sciencesbut people's beliefs about whatthey can do.... That the objectsof economic activity cannot be definedin objective terms but onlywith reference to a, human purposegoes without saying. Neithera 'commodity' or an 'economicgood,' nor 'foods' or 'money,'can be defined in physical termsbut only in terms of views peoplehold about things."22 See The Counter-Revolution of Scienceby F. A. Hayek (New York: TheFree Press of Glencoe, The Crowell-CollierPublishing Co., 1964), p. 31.

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 25National AccountingEconomic growth for a nationcannot be mathematically or statisticallymeasured. Efforts to doso are highly misleading. Theylead people to believe that a mereincrease in the measured output ofgoods and services is, in and of itself,economic growth. This fallacyhas led to the forced savings programsof centrally administeredeconomic systems - programswhich decrease the range of voluntarychoice among individuals.This is the heart of the· failure ofthe socialistic policies of the underdevelopednations of Asia,Africa,and Latin America. As Prof.P. T. Bauer has written so eloquently:"I regard the extensionof the range of choice, that is, anincrease in the range of effectivealternatives open to people, as theprincipal objective and criterionof economic development; and Ijudge a measure principally by itsprobable effects on the range ofalternatives open to individuals."3Indeed, even an individual's economicgrowth can no more bemeasured, exclusively, in terms ofhistorical statistics than can hisintellectual, moral,and spiritualgrowth. These ups and downs cannotbe defined in physical terms3 P. T. Bauer, Economic Analysis andPolicy in Underdeveloped Countries(Duke University Press and CambridgeUniversity Press, 1957), p. 113.but only in terms of views peoplehold about things. These viewshighlypersonal - are in constantflux ; you may care nothing tomorrowfor that which you highlyprize today.Once we grasp the point that thevalue of any good or service iswhatever others will give in willingexchange) and that the j udgmentsof all parties to all exchangesare constantly and foreverchanging, it should be plainthat even physical assets - money,food, or whatever - do not lendthemselves to measurements in thescientific sense.And when we further reflect onthe fundamental nature of "capitalsavings,"- that they emergeout of ideas, inventions, insights,and the Iike- the idea of scientificmeasurement becom~s patentlyabsurd.In any event, it is this penchantto make a science of political economy,to reduce capitalistic behaviorto charts, st.atistics, theorems,arbitrary sysmbols, thatleads to such nonsense as theGross National Product (GNP),"national goals" and "socialgains."4 The more pronounced this4 For more on the GNP fallacy andhow economic growth cannot be "factually"reported, see "A Measure ofGrowth" in my Deeper Than You Think(Irvington-on-Hudson, N. Y.: The Foundationfor Economic Education, Inc.,1967), pp. 70-84.

26 THE FREEMAN Januarytrend, the less will the economicsof capitalism and the free societybe understood - "a dismal science,"for certain. Indeed, couldthe ambitions of the "scientificeconomists" be realized, dictatorshipwould be a viable political system.At the dictator's disposalwould be all the formulae, all theanswers; disregarding personalviews and choices, he would simplyrun his information through computersand thus meet productionschedules.When we grasp the point thatno man who ever lived has beenable to foresee his own futurechoices, let alone those of others,economic scientism, as it might becalled, makes no sense.Man'5 ArroganceHow did we ever get off on thisuntenable course? Perhaps we canonly speculate. A flagrant display:At one point in a recent Seminardiscussion I repeated, "Only Godcan make a tree." And then thisexclamation by a graduate student,"Up until now!" This, it appearsto me, is the reflection of a notion,so prevalent in the eighteenth andnineteenth centuries, that everyfacet of Creation, even life itself,lies within the powers of man.Merely a matter of time!To tear human action asunderand then to assign symbols orlabels to the pieces, as the scientistsproperly do with the chemicalelements, is no service to economicunderstanding. This methodmakes understanding impossiblefor the simple reason that itpresupposes numerous phases ofhuman action that can be mathematicallyor scientifically distinguishedone from the other whensuch is not the case. Why am Imotivated to write this or you toread it? Doubtless, each of us canrender a judgment of sorts but itwill not be, cannot be, in the languageof science.Political economy is as easy or,perhaps, as difficult to understandand practice as the Golden Rule orthe Ten Commandments. Economicsis no more than a study of howscarcity is best overcome, and thefirst thing we need to realize isthat this is accomplished by thecontinued application of humanaction to natural resources.Natural resources are what theyare, no more, no less - the ultimategiven! The variable is humanaction.Political economy, then, resolvesitself into the study ofwhat is and what is not intelligenthuman action. It should attemptto answer such questions as:.Is creative energy more efficientlyreleased among free or coercedmen?Is freedom to choose as much aright of one as another?

1972 ECONOMICS: A BRANCH OF MORAL PHILOSOPHY 27Who has the right to the fruitsof labor - the producer or nonproducer?How is value determined - bypolitical authority, cost of production,or by what others will givein willing exchange?What actions of men should berestrained - creative actions oronly destructive actions?How dependent is overcomingscarcity on honesty, respect ofeach for the rights of others, theentrepreneurial spirit, intelligentintepretation of self-interest?Viewed in this manner, politi-cal economy is not a natural sciencelike chemistry or physics but,rather, a division of moral philosophy- a study of what is rightand what is wrong in overcomingscarcity and maximizing prosperity- the problem to which itaddresses itself.Once we drop the "scientific"jargon and begin to study politicaleconomy for what it really is,then its mastery becomes no moredifficult than understanding thatone should never do to othersthat which he would not have·them do unto him. IIIDEAS ONLIBERTYFreedom, an IllusionFREEDOM is an illusion, though an important one; in any society,restraints and restrictions, obligations and compulsions are therealities."Free as the wind" is such an illusion. Consider the restraintsand restrictions and obligations and compulsions. For wind isnothing but air being pushed from areas of high pressure to low,cold and heavy air displacing warmer and lighter air, its coursemodified by solid objects of nature and man in its path, subject toall the laws of gases, gravity, mass, matter, and so on.The illusion of freedom has been broad indeed in America withits unique government of limited and specific powers - limitingthe restraints and restrictions, the obligations and compulsions towhich Americans might be subjected. No such illusions of freedompersist in totalitarian societies, be they Communist, Fascist, Socialistor whatever. For it is made abundantly clear that thepeople subject to these regimes are free only to support and servethe state, with ample restraints and restrictions to shatter anyother illusions of freedom.Why is this illusion of freedom so vitally important? Becausethe more free men feel to serve. themselves, their fellows, andtheir Creator, the better they do in fact serve all.J. KESNER KAHN, Chicago, Illinois

28MORALITYandCONTROLSMILTON FRIEDMANMOST DISCUSSION of the wagepricefreeze and the coming PhaseII controls has been strictly economicand operational: were theyneeded, will they work, how willthey operate. I have recorded myown opposition to them in threecolumns- in N eW8week.There has been essentially nodiscussion of a much more fundamentalissue. The controls aredeeply and inherently immoral. Bysubstituting the rule of men forthe rule of law and for voluntarycooperation in the marketplace,the controls threaten the veryfoundations of a free society. Byencouraging men to spy and reporton one another, by making itDr. Friedman, Professor of Economics, Universityof Chicago, needs no introduction toFREEMAN readers.This article was first published in two partsin The New York Times on October 28 and 29,1971. © 1971 by The New York Times Company.Reprinted by permission.in the private interest of largenumbers of citizens to evade thecontrols, and by making actionsillegal that are in. the public interest,the controls undermine individualmorality.One of the proudest achievementsof Western civilization wasthe substitution of the rule of lawfor the rule of men. The ideal isthat government restrictions onour behavior shall take the formof impersonal rules, applicable toall alike, and' interpreted and adjudicatedby an independent judiciaryrather than of specific ordersby a government official to namedindividuals. In principle, underthe rule of law, each of us canknow what he mayor may not doby consulting the law and determininghow it applies to his owncircumstances.The rule of law does not guaran-

1972 MORALITY AND· CONTROLS 29tee freedom, since general laws aswell as personal edicts can be tyrannical.But increasing relianceon the rule of law clearly played amajor role in transforming Westernsociety from a world in whichthe ordinary citizen was literally .subject to the arbitrary will of hismaster to a world in which theordinary citizen could regard himselfas his own master.Contract or Status?The ideal·was, of course, neverfully attained. More important, wehave been eroding the rule of lawslowly and steadily for decades, asgovernment has become more andmore a participant in economicaffairs rather than primarily arule-maker, referee, and enforcerof private contracts. It was, afterall, the development of the privatemarket that made possible theoriginal movement from a worldof status to a world of voluntarycontract. As government has. triedto replace the market in one areaafter another, it has inevitablybeen driven to restore a world ofstatus.The freeze and even more thepay board and· price board of thePhase II controls are clearly anothermassive step away from therule of law and back toward· therule of men. True, the rule of menwill be under law but that is a farcry from the rule of law - Stalin,Hitler, Mussolini, and now Kosygin,Mao, and Franco all rule underlaw.The price that you and I maycharge for our goods or our laboror that we may pay others for theirgoods or their labor will now bedetermined, not by any set oflegislated •standards applying toall alike, but by specific orders bya small number of men appointedby the President. And jf governmentaledict is to replace marketcontract, there is no alternative.There are millions of prices, millionsof wage rates arrived at byvoluntary agreements among millionsof people. The collectivisticcountries have been unable in decadesto find simple rules enablingprices and. wages to be establishedby any alternative impersonalmechanism.Politics and PatriotismWe are not likely to succeed.And we are not trying. Instead,the appeal is to the patriotism,civic responsibility, and judgmentof political appointees, must ofwhom represent vested interests.How do patriotism and judgmentdetermine that the price of awidget may rise 2.8 per cent butthe price of a wadget, only 0.3 percent; the wage of a widgeteer by2 per cent but of a wadgeteer, by10 per cent? Clearly they do not.

30 THE FREEMAN JanuaryArbitrary judgment, political power,visibility - these are what willmatter.The tendency for such an approachto violate human freedomis even more clearly exemplifiedby the present situation with respectto dividends. The Presidenthas requested firms not to raisedividends - he has no legal powerto do more. The request has beenaccompanied by surveillance, acalling down to Washington andpublic lambasting of the handfulof corporations that did not conform,and a clear, implied threatto use extralegal powers. Thesemeasures have no legal basis atall. Yet I know of only one smallcompany that has had the courageto refuse to cooperate ·on groundsof principle.The full logic of the system willnot work itself out this time. Ourstrong tradition of freedom, theineffectiveness of the controls, theingenuity of the people in findingways around them - these willlead to the collapse of the controlsrather than to their hardening intoa full-fledged straitjacket. Butnonetheless, it is disheartening tosee us take this further long stepon the road to tyranny so lightheartedly,so utterly unaware thatwe are doing something fundamentallyin conflict with the basicprinciples on which this country isfounded. The first time, we mayventure only a small way. But thenext time, and the next time?A Nation ollnlormersEnforcement of the price andwage controls, as of the freeze,must depend heavily on encouragingordinary citizens to be informers- to report "violations" togovernment officials.When you and I make a privatedeal, both of us benefit - otherwisewe do not have to make it. We arepartners, cooperating voluntarilywith one another. The terms, solong as they are mutually agreeable,should be our business. Butnot any longer. Big Brother islooking over our shoulders. Andif the terms do not correspondwith what he says is O.K., one ofus is encouraged to turn in theother. And to turn him in for doingsomething few people haveever regarded and do not now regardas .in any sense morallywrong; on the contrary, for doingsomething that each of us regards,when it affects us, as our basicright. Am I not entitled to sell mygoods or my labor for what I considerthem worth as long as I donot coerce anyone to buy? Is itmorally wrong for Chile to expropriatethe property of AnacondaCopper - Le., to force it tosell its copper mines for a priceless than its value; but morallyright for the U.S. government to

1972 MORALITY AND CONTROLS 31force the worker to sell his laborfor less than its value to him andto his employer?By any standards, the edicts ofthe pay board and the price board,like the initial freeze, will be fullof inequities and will be judged tobe by ever increasing numbers ofpeople. You believe that you areentitled to a pay raise, your employeragrees and wishes to giveyou one, yet the pay board says no.Will there not be a great temptationto find a way around theruling? By a promotion unaccompaniedby any change in dutiesbut to a job title carrying ahigher permitted pay. Or by youremployer providing you withamenities you formerly paid for.Or by one or another of the innumerablestratagems - legal,quasi-legal, or illegal - that ingeniousmen devise to protect themselvesfrom snooping bureaucrats.Two W fongs = Two W fongsIn general, I have little sympathywith trade unions. They havedone immense harm by restrictingaccess to jobs, denying excludedworkers the opportunity to makethe most of their abilities, andforcing them to take less satisfactoryjobs. Yet surely in thepresent instance they are rightthat it is inequitable for the governmentretroactively to void contractsfreely arrived at. The wayto reduce the monopoly power ofunions is to remove the speciallegal immunities they are nowgranted, not to replace one concentratedpOWE1!" by another.When men do not regard governmental.measures as just andright they will find a way aroundthem. The. effects extend beyondthe original source, generate widespreaddisrespect for the law, andpromote corruption and violence.We found this out to our cost inthe 1920's. with Prohibition; inWorld War II with price controland rationing; today with druglaws. We shall experience it yetagain with price and wage controlsif they are ever more thana paper fa

32 THE FREEMAN Januarythe controls are enforced, the moreharm they do. They render behaviorwhich is immoral from onepoint of view socially beneficial.They thus introduce the kind offundamental moral conflict that isutterly destructive of social cohesion.Our markets are far from completelyfree. Monopoly power oflabor and business means thatprices and wages are not whollya product of voluntary contract.Yet these blemishes, real and importantthough they are, are minorcompared to replacing marketagreements by government edict,compared to giving arbitrary powerto a small number of appointedofficials, compared to inculcatingin the public contempt for the law.The excuse for the destructionof liberty is always the plea ofnecessity - that there is no alternative.If indeed, the economywere in a state of crisis, of a lifeand-deathemergency, and if controlspromised a sure way out, alltheir evil social and moral effectsmight be a price that would haveto be paid for survival. But noteven the gloomiest observer of theeconomic scene would describe itin any such terms. Prices risingat 4 per cent a year, unemploymentat a level of 6 per centtheseare higher than we wouldlike to have or than we need tohave, but they are very far indeedfrom crisis levels. On the contrary,they are rather moderate by historicalstandard. And·there is farfrom uniform agreement thatwage and price controls will improvematters. I happen to believethat they will make matters worseafter an initial deceptive periodof apparent success. Others disagree.But even their warmest defendersrecognizethat they imposecosts, produce distortions in theuse of resources, and may fail toreduce inflation. Under such circumstances,the moral case surelydeserves at least some attention.IDEAS ON*LIBERTYThe Abolition of Private PropertyA GOVERNMENT that sets out to abolish market prices is inevitablydriven towards the abolition of private property; it has to recognizethat there is no middle way between the system of privateproperty in the means of production combined with free contract,and the system of common ownership of the means of production,or Socialism. It is gradually forced towards compulsory production,universal obligation to labor, rationing of consumption, and,finally, official regulation of the whole of production and consumption.L U D WIG VON MIS E s, The Theory of Money and Credit

Can we sustainPROSPERITYW. A. PATONTHOUGHTFUL contemplation of thecurrent scene, supplemented withsome scanning of the historicalrecord, is likely to set the observerto wondering if any nation is capableof achieving and maintaininga broadly affluent society. Toilingup the slope, overcoming obstaclesand adversity, human beingsoften display courage, resourcefulness,endurance, tenacity,ability to cope and continue climbing,but when they reach the topof the hill, have it made, manyseem to have a tendency to shedtheir heroic trappings and becomeconfused, disorderly, unenterprising,and - in some cases- downrightshiftless and dependent.The cycle of great progress fol-Dr. Paton is Professor Emeritus of Accountingand of Economics, University of Michigan,and is known throughout the world for hisoutstanding work in these fields. His currentcomments on American attitudes and behaviorare worthy of everyone's attention.lowed by decline seems to be in theprocess of striking illustrationhere in America. As to the fact ofan astonishing advance there canbe no question. In two centuries,roughly, the United States hasmoved from a scattering of settlements,loosely affiliated, along oureastern seaboard to a countrystretching across a continent, andrecognized as a major world power.In this period, too, a primitivetechnology has been transformedinto a productive mechanism placingus in a forefront industrial position,with a· per-capita. standardof living that is unmatched, anywhere.In this· process hardshipsand difficulties were encounteredby our forefathers that looked insurmountableat times, and thatwere mastered only by an amazingdisplay of determination and fortitudeon the part of many individualsand families. The commitment33

34 THE FREEMAN Januaryof the founders of the nation to arepublican form of government, asexpressed in our constitution, andthe accompanying atmosphere offaith in individual initiative and afree, competitive market economy,undoubtedly played a great, andperhaps decisive, role in makingpossible the tremendous gains thathave been chalked up in such ashort span of years.But now that we've arrived, soto speak, there are ominous signsof decay and collapse. When onelooks squarely at the prevailingtendencies and conditions it is hardto be optimistic about the future.With the widespread slackening ofthe willingness to work, and workdiligently and well, exemplifiedright and left in absenteeism, carelessperformance on the job, demandsfor ridiculously short weeklyworking hours, to mention a fewof the evidences, a decline in productivityper person can hardly beavoided, even if the momentum ofthe technical march is maintainedfor a time and there is persistentabatement in the rate of populationgrowth. Still more serious is theapparent waxing,among many, ofthe spirit of dependency; thereseem to be few signs of reluctanceto accept a place on the relief rollsand no widespread urge to get offthe list of those who are living atthe expense of the taxpayinggroup. The fearful increase in thelevel of serious crime, includingdestruction of both private andpublic property, the growing cancerof drug abuse, the outrageousirresponsibility and disorder onthe educational front, the carnageon the highways, are examples ofother factors that are rampantand that surely are having a negativeimpact on the quality of livingas well as the quantity of commoditiesand services available forconsumers.Before going on I should pointout that it would be difficult todemonstrate that marked materialprogress is inherently bound togenerate a general downhill slide;but it does seem clear that weAmericans have suffered a severeattack of softening-up, particularlyevident among the coddledand unruly young folks but foundin varying degrees among all agesand classes. And it also seemsclear that some of the seriousproblems with which we are confrontedcould hardly germinate, tosay nothing of growing like badweeds, in the absence of a highlevel of economic output and prosperity.There is a chain of evidence,too, of cyclical patterns ofbehavior among both individualsand groups, historically as well ascurrently, although there is roomfor argument as to underlyingcauses of rise and fall in particularsituations.

1972 CAN WE SUSTAIN PROSPERITY? 35Striding into SocialismThe problems and difficulties referredto above are by no meansthe whole story of what ails us.During the past forty to fifty yearsthe freedom of initiative andchoice that we have enjoyed, andthat is so substantially responsiblefor the progress made, has beenrapidly eroded. Government interferenceand control have beengrowing like the psalmist's greenbay tree. Fostered by war andpostwar problems', the depressionof the early thirties, and the policiespromoted during the Rooseveltera, we have seen the hand ofthe state, at all levels, bearingdown more and more heavily onthe mechanism of the market,throughout the economic pipeline.Business men and politicians arestill giving persistent lip serviceto "our system of free enterprise,"but the continuing reiteration ofthis phrase is becoming a bit absurdin the light of the actualstate of affairs. The most discouragingaspect of the situation, forthose with genuine allegiance tothe view that the free competitivemarket is the effective means ofstimulating and directing the economicapparatus, is the extent ofgeneral acquiescence in the marchtoward a completely socialistic society.Indeed, there seems to be an increasingtide of clamor for moreand more government interventionand dictation in the process of productionand distribution, rangingfrom such fields as specificationsfor motor vehicle manufacture tothe details of cereal packaging.This clamor gives evidence of bothgross ignorance and a form ofmysticism. Many act as if theywere unaware of what the freemarket has accomplished for thiscountry, and are equally lacking inthe ability to distinguish betweenthe essence of a· free economy andthe nature of statism. And a hostof people appear to believe that theordinary humans who operate agovernment agency somehow becomesupermen, wizards, whenthey put on the official cloak. Actuallythere is abundant evidencethat government employment isstill not regarded with great favorby many.of the exceptionallytalented and' ambitious and thatthose entering the service of thestate tend to become' insulated bycivil service and other factorsfrom the kind of pressures thatstill prevail in private business,with resulting impairment of anyurge in the direction of top-flightperformance.• Belief in the superiorityof government operationover that of typical private organizationsis surely one of the mostunjustified of all the familiar delusionsfrom which we are suffering.Experience with the mail

36 THE FREEMAN Januaryservice alone should be sufficientto cure anybody - even .the mostgullible - of such a conviction.The Poverty BugabooThe activists in the driveagainst private business undertakingsand an economy depending onthe market for guidance generallystart their attack by questioningthe position that by these meanswe have achieved a genuinely prosperousstatus. They can hardlydeny the fact of an astonishingadvance in technical devices andmethods and an accompanyingsurge in the level of economic output,but they contend that the ma-­jor benefit of the improvementgoes to the few rather than themany, and that the injustices inherentin the way the pie is cutand distributed are so serious asto warrant the indictment of thesystem rather than its support.That the mechanism of the marketwill not work out perfectly inpractice, even if not harassed orhamstrung by interventions, mustbe acknowledged. The Americanexperience, .although extraordinary,has certainly not been freefrom difficulties and inequities;the results, even from a neutralpoint of view, fall short of achievingan ideal state of affairs. Thefrailties of men have not been overcome;unfairness and predatoryconduct have not been eliminated.But any careful examination ofthe available data will show thatthe radical detractors, the peopledetermined to substitute completecollectivism for a still partiallyfreemarket economy, are way offbase. In the first place they makethe old Marxian mistake of assumingthat you can have mass productionwithout mass consumption.If millions of bathtubs aremade there must be millions ofusers; they can't all be crowdedinto the homes of the very wealthy.The truth is that capitalism hasbeen the great leveler. In the industrialcountries generally, andespecially in the United States, themost striking feature of the trekup the hill has been the great improvementin the lot of the ordinary,mine-run individual. Withthe development of machine methods,broad markets, and representativegovernment, it becameno longer possible for a small rulingclass to skim off all the cream,leaving the masses at or near thesubsistence level - the conditionprevailing through most of humanhistory.The willingness of those workingto destroy private enterpriseand enthrone government to closetheir eyes to the actual situationis somewhat puzzling, and at timesmakes one question the sincerityof their accusations and protestations.It is true, of course, that

1972 CAN WE SUSTAIN PROSPERITY? 37some people have larger incomes,better housing, and more propertythan others, and such a .conditionmay arouse envy and even hate, aswell as provide powerful motivationfor greater effort and productivity.But it is simply not a factthat America is a land of largescalepoverty and economic distress.The air is full of baloney atthis point. The attitudes of manyremind one of the tale of the gooseand the golden eggs. Present-dayAmericans are affluent, amazingly,when their condition is comparedwith the lot of their grandparentsand great-grandparents, to go backno further. Let the complainerstry to find examples of families atthe bare subsistence level; they'llhave trouble in locating a singlecase. When· the writer was ayoungster, in contrast, .there werehouseholds in many neighborhoodswhere at times perhaps the onlyavailable foodstuff was corn-meal- and not much of that. And thepeople suffering real privation inthose days were often still tooproud and ambitious to expect tobe taken care of by either theneighbors or any branch of government.Abject poverty - wherekeeping body and soul together isa problem - has almost disappearedin this country, and todaywe are arguing about the frills,not the necessities.I recall flying across Appalachiaone beautiful evening during theperiod when the hue and cryabout the pathetic state of theminers and their families was atits height. It was just at dusk, butfollowing the valleys at less thana mile up I. had a good view ofhundreds of cabins and smallhouses, both scattered and in thevillages along our route. And Iwas struck by the fact that therewas a television tower on almostevery home, including the shanties,and one or two cars standingin nearly every driveway (andthey didn't all look like jalopies).I realize that the presence of atelevision set and a· car doesn'tdemonstrate affluence, but neitherdoes it suggest a state of acutemisfortune and misery.With the campaign to abolish"poverty" now in full swing, mainlythrough the means of coercedtransfers from those with to thosewithout (by political definition)there is grave danger that therewill shortly be an accelerating reluctanceon the part of those providingthe wherewithal to continueto carryon for the benefit ofthe idle and nonproductive, andthat the resulting decline in outputwill produce a crisis that willfinally lead to a tyrannical dictatorship.Indeed, there is alreadysome evidence of slackening effort,on the part of those still workingand. paying taxes, in the face of

38 THE FREEMAN Januarythe mounting burden of the "welfare"program.The Importance of PressuresThe question propounded in theheading for these comments, however,should not be answered by ablunt negative. It leads into thebroad problem of motivation, asubject worthy of serious study.In attempting to examine thisproblem very briefly, and to takenote of some of the limitations ofthe pessimistic position outlinedhere, some further attentionshould be given, first, to the impactof hardships and rough sleddingon the development of characterandstriving for improvement.That pressure of some kind isrequired to induce man to bestirhimself, vigorously and resourcefully,to spur him to effort and accomplishment,seems quite clear.As somebody has put it, "when thegoing gets tough the tough getgoing." The basic, universal pressureis the urge to survive. Amongour remote, primitive ancestorsthis pressure was undoubtedlymost urgently felt in the need tofind food adequate to maintainlife, and in .many parts of theplanet today this need is still paramount.In the Western World,and particularly here in America,this primary pressure has receded,at least for the time being, intothe background. As a result ofgreat technical progress and otherfactors we are now concernedwith a high rather than a bareliving level, as already pointed out.In the matter of food we havemeat, dairy products, fruit, vegetables,and a great array of processedand packaged foodstuffs, andit would be difficult for mostAmericans even to imagine themselvesrestricted to a diet - for example- of unpolished rice with anoccasional dab of fish. In clothingit is style that counts, not theneed to keep from freezing. Inhousing almost everyone has elec...;tric lights, and central heating andair-conditioning are so widespreadas to be commonplace. Improvedstreets and highways are crowdedwith more than 100,000,000 motorvehicles. Tra.vel, entertainment,educational facilities, a floodof printed matter, are generallyavailable. And so on. As I saidbefore we a,re affluent, and sustenanceis not our immediate problem.It is difficult to judge what isthe over-all ~ffect of the presentdayrelease, on a substantialscale, from the threat of starvation,and the general slackening ofthe struggle for the other "necessities".That the absence of thesefundamental pr'essures has a bearingon current conditions mayreasonably be concluded. One evi-

1972 CAN WE SUSTAIN PROSPERITY? 39dence of the effect of the "goodtimes", often pointed out, is foundin the many cases where the sonsand daughters of those who havemade the grade show little ofthe urge to work hard, to hustle,to strive, as did their parents andgrandparents. And in view of theextent to which some of the youngstersare indulged this should notbe surprising. Another evidence issupplied by artificial, built-in barriersto pressure. Civil service andprofessorial tenure are examplesof shelters that often contributeto sluggishness and poor performance.If the boss has no power tofire anybody why should an employeego all out to improve hisproductivity? Why should he notslow down in the traces? I oncejoshingly suggested to a. universitypresident that the board ofregents should fire at least one fullprofessor annually, even if hewere picked by lot, as a means ofkeeping the teaching staff on theirtoes. (Of course there are caseswhere conscience, a developed workhabit, and native ambition to excel,will offset the tendency to takeit easy under the protection affordedby tenure.)Relieve Unnecessary PressuresSupporters of tenure, unionpower, and other policies, aimed atpreventing dismissals, may contendthat the resulting freedomfrom fear, increased sense of security,will serve to promote ratherthan check the inclination topitch in hard at the work in hand,and this point is not utterly withoutmerit. Acute and continuingfear, at any rate, may not be conduciveto top performance. Thusthe constant dread of' finding thepink slip of dismissal in the payenvelope, and anxiety as to arbitraryand unjust treatment, arenot favorable conditions for thestimulation of first-class effort.But such conditions are a far cryfrom those. in which dismissal forserious cause - persistent absenteeism,drunkenness, sloppy workmanship,sabotage, and so on - isimpossible because of tenure orother restraints on management.On the market place there isbroad evidence of the pressure requirement..Without the push providedby competition the marketcan not be expected to furnishprice structures and movementsthat will .act as sound thermostaticguides in production and distribution.It is beyond the scopeof this piece to consider the meaningandimpact of competition, butit is not inappropriate here to insistthat the very essence of a· conditionof active competition is C'orttinui,ngpressure in the directionof better products and services tothe consumer, a.t the lowest possiblecost.

40 THE FREEMAN JanuaryThe Need for LuresBefore concluding these commentsnotice should also be takenof the importance of the carrot infront as well as the stick behindas a stimulant. Opportunity, encouragement,inducement, as wellas hardship and difficulty, can prodmen to action and increased effort.Thus it can be argued thatthe opportunity presented to earlyAmerican settlers by a relativelyopen continent, blessed withabundant natural resources, ratherthan the obstacles and difficultiesas such, is the factor that explainsthe great forward surge intechnology and productivity. Opportunitybeckons, without doubt,and a hopeless outlook, with nosign of a silver lining in view, isnot conducive to great endeavor.This is very evident in the areasof capital formation and investment;without the lure of earningsthe incentive to save and invest issurely impared if not largely destroyed.In climbing the hill, to considerthe possible effect of opportunitya bit further, every step successfullytaken may provide encouragementfor attempting anotherstride, and as the momentum ofprogress increases the glimpses ofthe possibilities lying ahead maybecome even more potent than thesight of the obstacles yet in theway. It is hardly practicable, andnot necessary, to pass judgmenton the relative weights of the impactsof lure and pressure, but wecan all agree that the presence ofopenings, prospects, of doors atleast ajar, may well be of crucialsignificance in any society, at anystage of its development.Will the Upward Climb Be Resumed?Are there chinks in the cloudsthat have been gathering over ourheads in America, and have beenbecoming blacker and blacker forsome time? Do our currenttroubles constitute the earlystages of a long decline into somekind of "dark ages"? As I've alreadyindicated, grounds for optimismare rather hard to find.But a turnabout - perhaps in ageneration or two - shouldn't beruled out. It is conceivable thatpresent destructive trends will bechecked, by some juncture of circumstances,and even reversed indue course. Many Americans stillhave a lot of latent spunk left, thatcomes to light occasionally in theheroic efforts - for example - torescue trapped miners, children inperil, or even the cat or dog lostin a sewer. In the field of sport,too, we see the survival of astrong competitive spirit and devotionto the ideal of top performance.And there are other and stillmore impressive evidences of courage,sacrifice, and dedication.

1972 CAN WE SUSTAIN PROSPERITY? 41Especially needed is recognitionof the plain fact that our societyhas done no more than climb thefoothills; the mountain top is along way off. On the technologicalfront, .certainly, there are stillchallenges galore. Perhaps attentionshould be shifted from outerspace to the Earth's crust. Thusfar the deepest we have dug is notmuch more than a mile. Undergroundhousing has been experimentedwith here and there, butthere is room for a. tremendousdevelopment in this field -- as anyvisitor to the underground homeat the last world's fair in NewYork will attest.! It would not beout of the question to put a wholecity underground. As our reservesof basic metals and other resources,that we don't know how to replacein kind, become exhaustedthere will be increasing need forthe production of substitutes fromthe sand and other substances thatare available in inexhaustibleamounts. It's unlikely, but scarcelyinconceivable, that the problemof transmutation may be solvedthedream of the ancient alchemist.Our great railroad system isalmost prostrate, but it could be1 For the first outline of the possibilitiesof underground construction see theauthor's "On Going Underground," MichiganQuarterly Review, January, 1962,and a discussion ofthis article in the Sundayedition of the Detroit Free Press,March 31, 1963.restored and greatly advanced.Why not have tubes crossing thecontinent through which both passenger.and· freight trains couldmove at speeds of two or threehundred miles per hour? Thesefew suggestions are only a sma.llsample of major possibilities.And minor improvements - ofthe zipper class - are possible bythe thousand. We still don't havea pitcher from which we can pourour cream or syrup without dripping!Or even ·a, cereal dish witha slanting bottom, so that we cancream our corn flakes, by stages,without soaking the whole dishful.And when is somebody goingto come along with a good transparentplastic storm window, to behung inside on a roller, so thehouseholder can put it on or off ina twinkling?In conclusion I feel obliged toreturn to the point that we can'tput our feet back on the path thatmay lead, eventually, to the highestpeak, unless we abandon thedownhill track on which we arenow chugging along toward themistaken goal of complete governmentcontrol and operation - thesocialist state. Here is the crucial_~ifficulty that must be overcome ifan upward course is to be resumed.And daydreaming, disorder, anddestruction.won't help us to makethe shift.I

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC6The MercantileImpasseWHAT PROVOKED the American coloniststo resist British acts, torebel against restrictions placedupon them, and eventually to declareand effect their independence?To put the· matter in moreconventional terms: What causedthe American· revolution?Men who have spent years studyingthe questions propound differentanswers. Some hold thatthe British mercantile system providedthe provocation to revolt.Others have held that the Americancolonists benefited from mercantilismand that, this being so,mercantilism was hardly at theroot of the difficulty. Anotherthesis that has been argued, mostpersuasively by Lawrence HenryGipson, is that the American colonieshad attained a level of maturitythat made them no longerdependent upon Britain and nolonger desirous of the connection.Some historians have gone so faras to charge that American debtorswith the desire to rid themselvesof pressing British creditorsstirred up resistance andbrought off a revolution. Thoselooking for a class struggle explanationof the conflict have tried tomake the revolt against Britain apart of an internal struggle be-Dr. Carson lives in Florida. He is a noted lecturerand author, his latest book entitledThrottling the Railroads.42

1972 THE MERCANTILE IMPASSE 43tween the haves and have-nots. Inshort, almost every interpretationthat could be imagined has beenoffered, and many of these havebeen buttressed by impressivearguments and such evidence asfitted them.One thing· is about as clear assuch things can ever be: mercantilistacts did not provoke the initialresistance in the mid-1760's.The Stamp Act of 1765 was not amercantilist act, nor was theSugar Act of 1764 primarily mercantilistic.Indeed, the Sugar Actaltered some of the original mercantilistfeatures of the MolassesAct of an earlier date. Moreover,there had been mercantilist restrictionson the American colo ...nists for more than a century, andnone of these had provoked violentresistance. There can be no doubtthat colonists were long since usedto mercantilist restrictions, andpeoples are unlikely to revoltagainst that to which they havebecome accustomed. The fact isthat when representatives of thecoloni~ts gathered at the StampAct Congress to air their grievances,they announced that whatthey fundamentally opposed was"taxation without representation"a, thing contrary to the Britishconstitution. They readily granted- at first - that Britain had theright to regulate their commerce.It follows, then, that the immediateprovocation to resistance wasnot mercantilist measures.But this is only to look at thingsfrom the surface and to wrenchthem out of a much broader historicalcontext where they belong.Suppose that instead of askingwhy and what the colonists resistedwe ask why the British persistedin passing measures whichprovoked the colonists. More directly,why did Parliament attemptto raise revenues from thecolonies in ways that departedfrom custom and long establishedpolicy? Why did they lay directand indirect taxes on the colonies?For Revenue OnlyThe answers to these questionsare not far to seek. The Britishgovernment was in dire need ofnew sources of revenue. The wa.rsof the eighteenth century had beenhighly expensive, and the indebtednessof the government wasmounting. The debt in 1755 - justprior to the Seven Year's War (orFrench and Indian War as it wasknown in America) - stood atabout £ 75,000,000. By 1766 ithad mounted to £ 133,000,000. 1The British people were heavilytaxed, and new taxes were beingadded. The reaction in the mothercountry to an added tax on do-1 Lawrence H. Gipson, The Coming ofthe Revolution (New York: Harper Torchbooks,1962), pp. 55-56.

44 THE FREEMAN Januarymestic cider is instructive. "Thenews of the passing of the cideract was the signal for 'tumultsand riots' in the apple-growingcountries of England, and manyproducers of cider threatened tocut down their orchards if the excisewere collected."2 In short, theheavily-taxed British were in nomood to accept additional burdens.By contrast, American colonistswere generally lightly taxed, andseveral colonies had no governmentdebt to speak of. For example,one historian describes thesituation in Pennsylvania in thisway: "Not only were the inhabitantsrelieved of all ordinarycharges of government during theyears 1760-63 but, aside from arevived excise tax on liquors, theyalso enjoyed such relief duringthe remainder of the period downto the Revolution. Moreover, thepersonal and estate taxes ... representeda per capita levy of lessthan one shilling..." by 1775. 3 Areport from Maryland in 1767 indicatedthat "all levies for thesupport of the provincial government- in contrast to those for thesupport of the clergy, the schools,and other county and parishcharges - amounted to less than£ 5,500, an annual per capita taxof about a shilling."4 Though not2 Ibid., p. 58.3 Ibid., p. 136.4 Ibid., p. 138.all the colonies had such a pleasanttax situation, neither was it generallyunpleasant. On top of this,colonial governments had been reimbursedfor their military outlaysduring the French and IndianWar.If these conditions be acceptedat face value, if there be no lookingbehind them, it would appearthat the case for Britain's taxingthe colonists would· certainly ·beunderstandable and probably justifiable.But the situation does warrantan examination of the background.British taxation of thecolonists broke a long-term contractwith them - so the colonistssaid - and heralded a major policyturn. Back of this policy shiftwere the mercantilistic policiesand practices which had produceda domestic crisis for the Britishwhich their government tried torelieve by bringing pressure onthe colonies.Bitter Fruits of a LongHistory of MercantilismThe contradictions of mercantilismhad produced a long harvestof bitter fruit, some of which theBritish government and peoplewere no longer willing to accept.No more, in justice, could theAmerican colonists be expected toaccept them. It is true that thedebates of the 1760's and 1770'swere not usually conducted in

1972 THE MERCANTILE IMPASSE 45terms of mercantile policy. Thecontradictions were there, andpolicy changes should be viewedin the light of them. During thistime; Adam Smith was putting togetherhis monumental work, TheWealth of Nations, which laidbare the fallacies and contradictionsof mercantilism. It may beaccounted appropriate, too, thatthis work appeared in print in1776, the same year as the Declarationof Independence. A littleexa,mination into British mercantilismwill show its role in producingan impasse between Britainand America.Mercantilism was a compositeof ideas and practices which hadgrown helter-skelter over a coupleof centuries before the revolt inthe American colonies. Most ofthe ideas were formulated in theseventeenth and eighteenth centuries,but some of the practicesassociated with it are much· older.The theory of mercantilism wasthe first faltering effort at devisinga general theory of economicsin the modern era. As some thinkerscut loose from a Christianframework and attempted to lookat things naturally, they deviseda crude economics to fit new preconceptions.The theory wasweighted down with two assumptions,however, which were culturalin origin rather than natural.Measured in GoldThe first of these assumptionswas made up largeiy of what iscommonly called the bullion theory.Bullionism is· the notion thatwealth consists of precious metals,particularly gold, and that thevalue of everything else derivesfrom the fact that precious metalswill be exchanged for it. It is understandablethat men should ha:vecome to think. in this way. Goldwas the most universally acceptablemedium of exchange in bothEast and West. It hardly deteriorates;it weighs little in proportionto its exchange value forother things; it has many practicaluses; and it is malleable. Menever and again mistake money,because it can be exchanged forgoods, for the source of the valuewhich their demand gives to thegoods. Small wonder, then, theyshould make this confusion aboutgold when gold is valued as a commodityas well as a medium ofexchange.The second major assumption ofmercantilism was nationalistic.That is, mercantilists thought exclusivelyabout how a single nationmight enhance its wealth byincreasing its supply of gold. Onenation's wealth, as they saw it,was usually gained at the expenseof another nation. Ordinarily, onenation gains gold from anothernation which is losing its supply.

46 THE FREEMAN January(It is interesting to speculate thatmercantilistic theory and practicemay well have been born out ofthe intense desire of many countriesto separate the Spanish fromthe great hordes of gold they hadfound in the Americas.) Accordingto the bullion theory, then, onenation's wealth is increased bydiminishing that of another.Intergovernmental AffairsThe thrust of mercantilism wasto make trade into a contestamong the governments of nations.This was so because tradewas now conceived of as a potentialmeans for increasing the bullionholdings of a nation. This.would be accomplished, accordingto mercantilists, by way of a favorablebalance of trade. A favorablebalance of trade is said to existwhen the goods and serviceswhich one nation sold to anotherexceeded those bought from theother. In brief, a nation had a favorablebalance of trade when exportsexceeded imports. This wasthought to be "favorable" becausethe difference would be made upin gold and the "wealth" of thenation thus favored would be augmented.Anation which importedmore than it exported would, ofcourse, have an unfavorable balanceof trade.Numerous practices whichmight help a nation to get a fa:vorablebalance of trade were contrivedor justified by this theory.The practices were usually aimedat increasing exports and decreasingimports. Imports could be decreasedif more of the goods consumedin a country were producedthere. To that end governmentsencouraged manufacturing by specialcharters and encouraged thegrowing of certain crops by subsidiesand bounties. Of course, importswere more directly discouragedby tariffs, quotas, and discriminatorycharges levied againstforeign suppliers. Similar practicesalso might help a country toincrease its exports.Colonies were conceived of asbeing particularly valuable in enhancingthe wea1th of a nation.Frequently wanted were raw materialsfor manufacturing as wellas produce which could not begrown economically at home. Ifsuch exotic products could be acquiredfrom colonies they neednot be imported from some othercountry. In addition to this, acolony might have an unfavorablebalance of trade with the mothercountry and thus be a source ofthe precious metals it would sendto make up the trade deficit.The American continental colonieswere part of a British empirewhich had been shaped in theseventeenth and eighteenth centuriesas a result of the mercan-

1972 THE MERCANTILE IMPASSE 47tile policies of England. Initially,the kings of England had attemptedto plant and benefit fromcolonies by granting them as monopoliesto private companies andproprietors. These companies andindividuals were empowered toregulate the activities of those whocame over so that the undertakingswould benefit the owners and,perchance, enhance the wealth andpower of England. Things did notwork out that way very consistently.Colonists frequently caredlittle enough about whether theybenefited the original charter holdersor not; instead, they concentratedtheir efforts on doing whatwas to their own benefit. Moreover,as colonists gained some measureof control over their governments,they often enacted their own mercantilepolicies with the intent ofmaking a colony self-sufficient. 5Such action ran counter to Britishaims, of course.Acts of InterventionBy the mid-seventeenth century,then, Britain was ready to beginto impose a general system of mercantilerestrictions on the colonists.The most general of the mercantileacts are those known as the5 See E. A. J. Johnson, American EconomicThought in the Seventeenth Century(New York: Russell and Russell,1961), pp. 8-29.Navigation Acts. A series of theseacts was passed over the yearsfrom 1651 through 1663. The numberof acts passed was increasedbecause legislation passed in the1650's was considered invalid afterthe restoration of monarchy in1660. This being the case, the latera.cts are the only ones that needconcern us here. The NavigationAct of 1660 - re-enacted in 1661- required that all trade with thecolonies be carried in Englishbuiltships which were mannedpredominantly by Englishmen."English" was defined for thispurpose to include the inhabitantsof the colonies. All foreign merchantswere excluded from thecommerce of the English colonies,and certain enumerated articles,e. g., tobacco, could only be exportedfrom the colonies to Britainor British possessions. The StapleAct of 1663 provided that goodsto be exported from Europeancountries to English colonies mustfirst be shipped to England."These acts intended to giveEngland a monopoly of the tradeof· her colonies," one historiannotes:- not a monopoly to particular persons,but a national monopoly .inwhich all English merchants shouldshare. The Staple Act meant not onlythat English merchants would get thebusiness of selling to the colonies butalso that English manufacturers

48 THE FREEMAN Januarymight dispose of their wares at anadvantage in that the foreign goodswhich had to pass through Englanden route to the colonies might betaxed, therehy raising their pricesand enahling English goods to undersellthem. Similarly, the enumeratedarticle principle assured that mostof the colonial staples important toEngland would he exported hy Englishmerchants, who were also guaranteedemployment for their vesselsthrough the exclusion of foreign vesselsfrom the English colonies. 6Parliament passed another NavigationAct in 1696, but it wasonly an effort to tighten the administrationof existing law ratherthan to add new features. 7British legislation also attemptedto prevent certain kindsof manufacturing and trade fromdeveloping in the colonies. TheWoolens Act of 1699 prohibItedthe export of wool or woolen goodsfrom a colony either to other coloniesor to other countries. The HatAct of 1732 prohibited the exportationof hats from the colony inwhich they were made and limitedthe number of apprentices ahatmaker might have. The MolassesAct of 1733 placed highduties on molasses, sugar, andrum imported into the coloniesfrom any source other than Brit-6 Curtis P. Nettels, The Roots of AmericanCivilization (New York: Appleton­Century-Crofts, 1963, 2nd ed.), p. 283.7 Ibid., p. 375.ish colonies. This was an attemptto give the British West Indies avirtual monopoly of the trade. Itmay also have been intended toincrease income from the tariff orto reduce the shipping activitiesof New Englanders. The Iron Actof 1750 permitted pig iron to beexported from the colonies to Englandduty free but prohibited theerection of new iron mills for thefinishing of products in the colonies.There were other types of mercantileregulations than thoseabove. Over the years, it was usuallyillegal for specie (gold coins)to be exported from England tothe colonies. The British tried toencourage production of wantedgoods in the colonies by payingbounties. For example, the Britishgovernment paid these premiumsto importers of colonial navalstores: "£4 a ton for pitch andtar; £3 a ton for resin and turpentine;£6 a ton for hemp; and£1 a ton for masts, yards, andbowsprits."sThe purpose of all these regulationsand restrictions was to makethe colonies profitable to Britainof course. To that end, the col~onists were encouraged to producegoods which could not be competitivelyproduced in England, discouragedto compete with themother country, encouraged to8 Ibid., p. 434.

1972 THE MERCANTILE IMPASSE 49send specie to England, discouragedfrom receiving specie fromthat country, and discouragedfrom developing markets in Americawhich could serve either Englandor other countries. Therewere, however, many unwantedside effects of these policies. Theyare commonly referred to as theinner contradictions of mercantilism.The Road to WarThe most dire result of mercantilismwas war. Indeed, somebelieve that mercantilism did notso much lead to war as war ledto mercantilism. One writer saysthat the "needs of constant warfare,especially its costs, had encouragedevery power to developand marshall its resources, attemptingto become self-sufficient,especially in the sinews of war.. . . This economic nationalism,generally described as m,ercantilism,is less a theory than aweapon - the use of economicmeans to serve political ends."9There is no doubt that mercantilistmethods were used sometimesin warfare, but the usual causalrelation is the other way around.Mercantilism ranges governmentpower behind the commercial activitiesof a nation, uses govern-9 Engen Weber, A Modern History ofEurope (New York: Norton, 1971), pp.145-46.ment power to support the merchantsof a nation against thoseof other nations, prohibits tradeactivities of '. foreigners in orderto give advantages to native tradesmen.In order to support or protecttheir tradesmen, other nations.retaliated with similar restrictionsand sought colonies which wouldbe protected trade areas for theirpeople. If tr~de is free, competitionis peaceful, but mercantilismshifts the contest into the-, realmof governmental power. When governmentscontest for advantage inthis way they are moving in thedirection of the ultimate recourse-war.Such were the results of mercantilismin the seventeenth andeighteenth centuries. War followedupon war with monotonous regularityas naval and colonial powerscontested with one anotherfor dominance and advantages.The wars between the British andDutch in the, mid-seventeenth centurywere clearly mercantile inorigin'and character. Nettels notesthat the Navigation Act of 1651"precipitated the First Anglo­Dutch War of 1652-54."10 Further,4e says that the "acts of 1660-63threatened to exclude the Dutchcompletely from the English coloniesand consequently new fuelwas added to the old rivalry. In1664 occurred the Second Anglo-10 Nettels, Ope cit., p. 281.

50 THE FREEMAN JanuaryDutch Wa.r...."11 It was not simplyincidental, either, that duringthis conflict the English gainedcontrol of the Middle Colonies inAmerica. A third war br0ke outin 1672. "Although a Dutch fleetrecaptured New Amsterdam inAugust 1673 the treaty of peace in1674 once more restored it to England- an act which marked thepassing of the Dutch menace toEngland's North Americantrade."12Impact on the ColoniesUnfortunately, it did not endthe rivalry in North America northe train of mercantilistic wars.France was now emerging in thelatter part of the seventeenth centuryas a major power under theaggressive leadership of LouisXIV. Louis courted English monarchsso that they would allow himroom to operate to fulfill his ambitionson the continent of Europe.The courtship may have been theundoing of Charles II and James II ;at any rate, it came to an end withthe Glorious Revolution in 1688.A Dutchman, William of Orange,became William III of Englandand joint ruler with his wife Maryduring the rest of her lifetime. Invery short order, Britain went towar with France (King William'sWar) and by so doing began a se-11 Ibid., p. 283.12 Ibid., p. 284.ries of conflicts with that nationwhich did not finally end until theCongress of Vienna in 1815. Sinceother nations and their possessionswere usually involved inthese conflicts between Englandand France, these wars may wellbe called world wars.While King William's War ofthe 1690's was ostensibly foughtto maintain a balance of power inEurope, the colonies were at stake,also, at least potentially. One historyindicates that in issuing hisdeclaration of war "William tookcognizance of the offenses of Louis'subjects in America against theEnglish colonies there - in Newfoundland,in Hudson Bay, in theWest Indies, in New York, and inNova Scotia."13 Though there wasconsiderable fighting in America,there were no significant territorialchanges as a result of thatwar.Maps of North America showingterritorial possessions of Europeanpowers and changes inthem from 1700-1763 indicatesomething of the bearing of thecolonial situation on the greatwars of this period. In 1700, theEnglish held only a relatively narrowstrip of the eastern coast ofNorth America from New Eng-13 Max Savelle and Robert Middlekauff,A History of Colonial America(New York: Holt, Rinehart and Winston,1964, rev. ed.), p. 261.

1972 THE'MERCANTILE IMPASSE 51land to Georgia, with claims run-,ning back to the Appalachianmountain chain generally. Most ofthe territory which is now Canadawas then claimed by France, alongwith the vast hinterland regiondrained by the Mississippi River.South and west of these were theextensive Spanish possessions. TheEnglish hold on the continent wasstill precarious, and the colonieswere surrounded except on theside of the Atlantic Ocean. by territoryclaimed by other Europeanpowers. This situation would bedramatically altered by 1763 as aresult of the wars.A Struggle for ControlThe War of the Spanish Succession(1702-13, known in Englandas Queen Anne's War) was foughtover issues which were tied to thequestion of who would dominatethe Americas. Louis XIV was determinedthat his grandson shouldbecome king of Spain immediatelyand should eventually succeed himto the throne of France. Thiswould not only bring under oneperson two great powers in Europebut would also link two massiveempires in America. This wasan intolerable prospect for England.As one history puts the matter:"For Holland and England, itwas a war over colonies and trade.These two countries were determinedto prevent a union of theFrench and Spanish crowns; butthey were above all determined toprevent France from getting intoa position to block their own commercialand territorial ambitionsin America."14 At the conclusionof the war, provisions were madefor perpetual separation of theFrench and Spanish crowns, andBritain gained new territory inAmerica: Newfoundland, Acadia,and the Hudson Bay territory.England got involved in warwith Spain in 1739, known as theWar of Jenkin's Ear, and a part ofthe struggle was over possession ofGeorgia. There was some fightingin America, but it was very limited,for the conflict shifted toEurope and the more general convulsionknown as the War of theAustrian Succession (1740-48) .This war did not result in any territorialchanges, though therewere changes in alliances on thecontinent of Europe which affectedfuture events.The peace that followed thissecond of world wars in the eighteenthcentury was unusually brief.The French and Indian War brokeout in America, 1754; it involvedmost· basically a contest over territoryin what is now western Pennsylvaniabetween the French andIndians on the one hand and theBritish and English Am'ericans onthe other. As an extension of this14 Ibid., p. 265.

52 THE FllEEMAN Januaryconflict, a general war broke outin Europe in 1756, known as theSeven Year's War. A major conflictcontinued in America, reachingits climax with the Battle ofQuebec in 1759. There the Britishforces decisively defeated theFrench. By the Treaty of Parisof 1763, the British got all theFrench Canadian holdings andFrench and Spanish territory eastof the Mississippi.Triumphant, and BrokeThe British had apparentlyemerged triumphant in these warsagainst France. The American coloniesnow had an extensive domainto be opened up and exploited;it was a long way to thefrontiers of any other Europeancolonial power. A vast British empirehad been acquired and wasready for the shaping.So it may have looked to an imperialist,but the British Parliamentand people were confrontedwith grave difficulties in the wakeof the apparent triumph. Therewas, as earlier told, a huge debt inEngland in 1763 as a result of thewars. It was a debt of a size thatwould most likely dwarf all theprofits gained thus far from mercantilistpolicies. But even if thebalance books had stood otherwise,the contradictions of mercantilismwould still, most likely, haveproduced an impasse.One of the fallacies of mercantilismis that the wealth within anation constitutes the wealth of anation. Wealth in Britain was notdistributed among the inhabitantsequally but individually possessed.Undoubtedly, some merchants,manufacturers, shippers, andtradesmen extracted great wealthas a result of special favors withinthe mercantile system. But thisneed not have increased the wealthof the populace in general. Indeed,when it is understood that mercantilepolicies restricted the entryof goods from other lands andraised their prices, it becomesclear that the populace in generalfrequently suffered rather thanbenefited from mercantilism. Whenthe burden of taxes to pay formercantile wars was added to this- taxes levied on the populace ingeneral- it is easy to understandwhy there was widespread dissatisfactionin Britain.Of course, the British governmentdid not proclaim mercantilisma failure. Even if this hadbeen clearly understood at thetime, it is doubtful that those inpower would have reversed theirpolicies. At any rate, they did notdo so. Instead, they laid the blamefor difficulties on American evasionof mercantile restrictions, determinedto enforce them morevigorously, and declared that theAmericans must be taxed to help

1972 THE MERCANTILE IMPASSE 53pay for the wars, a portion ofwhich had been fought in theirdefense.This course of action seemedeminently fair to many Englishmen.After all, the colonists hadbeen prime beneficiaries of Britishprotection. Moreover, many Americanswere reported to be livingwell if not luxuriously. Not onlythat, but to make matters· worse,these colonists paid very little by,way of taxes. Such expenses asthey had incurred in the recentFrench and Indian War had beenreimbursed from the British treasury.Surely, there could be no reasonableobjection to mild taxationof the colonists. As a matter offact, there could and would be, butwe have not yet come to that partof the story.Victims or Beneficiaries?What is most relevant here isthe impact of mercantilism on theAmerican colonies. The questionhas been raised by some historiansas to whether the colonistswere not really the beneficiaries ofBritish mercantilism rather thanthe victims. The fact that manyAmericans prospered under thesystem is submitted as evidencethat they benefited from the system.There is also negative evidencethat Americans had roughgoing economically after the· breakfrom England. The reasoning underlyingthis argument confusesbecause of with in spite of. Thethrust of mercantilism is not suchthat it would produce prosperityin general for those on whom' it isimposed. Its ·thrust is to siphonresources from the colonies (andother countries) into the mothercountry. To restrict manufacturing,to deny the development oflocal markets, to constrict intercolonialtrade, and to make themother country the port of entryfor many goods could hardly benefitthe colonists generally.Perhaps the most fundamentalflaw of mercantilism is the viewthat a nation's wealth can be increasedby •exporting more ingoods and services than is imported.This policy was quite harmfulto colonies without providing correspondingbenefits to Britain. TheBritish succeeded in a "favorable"balance of trade with the Americanmainland colonies. The mostimmediate effect was the golddrain from the colonies to Britain.This tendency was augmented byprohibiting the export of goldfrom Britain. Moreover, many ofthe ways by which the colonistsmight have made up the differencewere denied to them by mercantilerestrictions.In consequence, the colonistssuffered a shortage of specie. Thepractical effect was that colonistspaid higher prices for goods com-

54 THE FREEMAN Janua'fYIn sum, the break from Englandwas preceded by an impasse at­tributable to mercantilism. Morethan a century of wars had beenfought in the pursuit of mercantileaims by Britain. These hadleft a heavy burden of debt whichthe British people found hard tobear. Thus, the government turnedto the colonies as a new source ofpayers) . revenue. But the colonies wereMuch of the economic activity hardly in a position to take on thewithin the colonies was an uphill burden. They were already drainedeffort to overcome the ill effects of of specie, and many colonists weremercantile policies. Probably, the deeply and perpetually in debt tofixing of slavery so extensively can British merchants. To say thatbe ascribed in the main to mercan- they were lightly taxed at hometilism. (British policy was opposed answers nothing as t~ what theto the emancipation of slaves be- effect of British taxation would be.cause slaves were frequently col- Mercantile restrictions imposedlateral for loans.) Planters were barriers between Britain and thedriven to expand their production colonies. An imbalance of trade al­- to the acquisition of more and ready existed, with the colonies onmore slaves - in the often vain the "unfavorable" end of that. Taxhope of balancing their trade. The payments to Britain could only beTriangular Trade by New Eng- made by reducing imports or goinglanders, which included the slave deeper in debt to British lenders.trade, was an extended effort to When the time came for resisting,get specie. The paper money· emis- colonists made their justificationssions which became so common to- along different lines than thoseward the close of the period were above, but what they were resisteffortsto deal with the monetary ing had been brought on by thecrisis. Of course, many of the ef- mercantile impasse. I)Next: The First American C1'"~sis: 1763-66ing from England than they wouldhave had to do if a free marketin gold had existed, because goldwas more plentiful in Britain thanin America. It is even doubtfulthat British merchants benefitedfrom this situation as much asmight be supposed, for they usuallymade loans. to Americans toenable them to buy their goods.Americans also had their credit inEngland augmented by such paymentsas reimbursement for participationin wars (an augmentationat the expense of British tax-forts of colonists to find ways todeal with the situation were prohibitedbefore they were well established.

55A REVIEWER'S NOTEBOOKJOHN CHAMBERLAINThe Genius oftheWestWE, in the West, are supposed tohang our heads in shame thesedays. The bill of complaints broughtagainst us is long. We are "imperialists."We are "materialists."We have used the "Third World"as a quarrying ground for raw materialswithout giving adequatecompensation for what we havetaken. We indulge ourselves in raceprejudice. Weare enemies of freedom,and we oppose the revolutionof the masses. Our sons and daughters,listening to the vindictivechorus, begin to go over to the sideof our detractors. Susan Sontag, ayoung literary critic, even goes sofar as to say that the white race(meaning the nations of the West)is the cancer of humanity.The whole bill of alleged particularsis, of course, the sheerestmoonshine. So it is good to comeupon Louis Rougier's The Gen.iusof the West (Nash, $8.50), with itsdiscerning introduction by F. A.Hayek. As one in a series of publicationsissued by the Principles ofFreedom Committee this bookturns to the historic record of threemillennia to prove that Westerncivilization, alone among twentytwodistinctive civilizations recognizedby Arnold Toynbee, has managedto avoid the quagmires of fatalism.It is the only civilizationthat has been moved by a beliefthat man can improve his conditionby understanding and masteringthe forces of nature. And, far from"oppressing" the "Third World"and the "colored races" by its "imperialistic"urges, it is the Westthat has brought the hope of progressto many a land that now joinsin thoughtless excoriation of thevery spirit that has created all thethings that are now claimed as auniversal birthright.

56 THE FREEMAN JanuaryLucky AccidentsIn one sense the "West" is theresult of a happy concatenation. Itcould have gone down the drain atnumerous points if lucky accidenthad not intervened. The Greeks,who demythologized nature anddemonstrated the logical necessityof abstract relationships, thus givingsubstance to "reason," gave usthe beginnings of theoretical science.With the rise of the city-state,they developed the idea of the ruleof law as something better thancapricious government by men.Greek rationalism created freemen, and free men, using geometrichypotheses, physical instrumentsand mathematical devices,learned how to conquer space andtime. Their maps made them bettervoyagers, better traders. And, witha mastery of the sea extendingtheir reaches all over the Mediterranean,they hit upon the virtuesof money and the market economy.Rome superimposed order onGreek liberty without killing it.But Rome, with its conquests, tookmore slaves than the Greeks hadever taken. In Louis Rougier'sopinion it was the institution ofslavery that brought about the collapseof the ancient world. Withslaves to do the work, the inventionsof Archimedes - the lever,the wedge, the pulley, the wormscrew, the winch - were regardednot as labor-saving necessities butas mere intellectual playthings. Theprejudice against any practical applicationof the mechanical artswas so strong that Archimedes, soPlutarch tells us, never bothered toleave any written treatise on hisaccomplishments. And when Heroninvented a device involving theprinciple of the steam engine inancient Alexandria, it was usedonly for childish amusements suchas making marionettes dance andtoy trumpets blow. It apparentlynever occurred to Heron that hemight have lightened that most exhaustingtask of women, the grindingof grain.With more and more slaves attheir disposal, the Romans hadeven less reason to develop the"mechanic arts" than the Greeks.Conquest after conquest broughtmore captives to till the extensiveacreage of the Roman latifundia.The small peasant landholder, unableto meet slave competition,drifted into Rome to join the plebswho clamored for bread and circusesand got what they wantedfrom corrupt politicians. ThusRome decayed, and 40,000 slaveseventually joined Alaric in the sackof the city that liked to think ofitself as eternal.The Christian ContributionThe Christian church, which roseon the ruins of the ancient world,had no particular interest in the

1972 THE GENIUS OF THE WEST 57things of this world. But it condemnedthe enslavement of prisonersas an infringement of Godgivenhuman dignity. And, sinceJesus had been a carpenter and St.Paul a tent-maker and St. Peter afisherman, it saw no reason to objectwhen the monks in the firstmonasteries made a virtue of work.In time the Middle Ages developedan entirely different attitude towardlabor-saving devices than wasprevalent in Greek and Romantimes. Louis Rougier makes a fascinatingstory of the linkage betweenthe "social revolution ofChristianity" and the developmentof the water mill, the wind mill, thehydraulic hammer, and 'the variouslifting tools that were needed tocover Europe "with a white robe ofcathedrals." Without intending itas such, the church unleashed somethingof a medieval technologicalrevolution. Slaves became serfs,cities grew, and the stage was setfor the "new humanism" of theRenaissance.The Christian attitude towardwork was the first lucky break ofthe West in the time of Rome'scollapse. But work, with its premiumon practical inventions suchas the lifting jack, would not haveflowered in a scientific revival ifthe church itself had not changedsufficiently to permit a secularizationof life during much of theworking week. By a second luckyaccident the elders of the City ofFlorence happened to entertain aByzantine scholar, Manuel Chrysoloras,who was traveling in Italy ona diplomatic mission. The Florentineelite flocked to hear Chrysolorastell about Homer, Plato, Thucydides,and Xenophon, and soonthere was a horde of Florentinesdescending on Byzantium, buyingforgotten Greek texts. If it hadn'tbeen for the rediscovery of theGreek and Latin writers whoseworks had somehow survived thegreat burning of pagan documentsthat marked the advent of Christianity,the modern scientific, economic,and political revolutionswould never have come to pass.Inquiry Halted in OrientDuring the so-called Dark Ages,Arab civilization seemed to promisemuch more than anything thatwas happening in western Europe.And the Chinese were way aheadof the West is such things as theuse of coal, gunpowder, and printingwith movable letters. But theTurks, as Louis Rougier puts it,"imposed their· heavy yoke on Islam;and Islam, returning to itssources, paralyzed inquiry with aformula which brooked no answer:Allah aalam, God knows best whatis." As for the Chinese, instead oftrying to dominate nature theysought an adjustment that·stressedfinding contentment in the midst

58 THE FREEMAN Janu.aryof poverty and adversity. The Hindus,with their caste system, permittedno invigorating circulationof elites. So it was the West, withits legend of Prometheus, who stolefire from the gods, that was left topush the idea of progress.Now, even as they revile us, theIslamic, Confucian and HinduworIds are clamoring for all thebenefiits that the West has developedthrough three millennia ofthe activist attitude. We need notbegrudge them their desires. Butthe notion that the West needapologize for its history is too ridiculousfor words.~ POLITICALLY IMPOSSIBLE ... ?by W. H. Hutt (London: The Instituteof Economic Affairs, 1971),100 pp. ($1.80).Reviewed by Henry HazlittW. H. HUTT is one of the outstandingeconomists of our age. Born inLondon, professor and later deanof the Faculty of Commerce at theUniversity of Cape Town, and recentlyvisiting professor at a numberof American universities, hehas published half-a-dozen booksof which the two most influentialhave been his short Theory of CollectiveBarga.ining in 1930 and the446-page Keynesianism - Retrospectand Prospect in 1963.His work has been distinguishednot only for remarkable acumenbut for no less remarkable independenceand courage. The presentpaperback is devoted to trying toinstill some of his own candor andcourage into ~is professional colleagues.For what Professor Hutt findsis that most 'of these colleagues,particularly in the last forty years,have become increasingly pooreconomists in the effort to become"realistic" politicians. Wheneveran honest economist has come upwith a recommendation, based onprinciple, for the outright repealof some entrenched bad law or discontinuanceof some other disruptivegovernment policy, not onlythe political demagogues but hisown colleagues have dismissed hisrecommendation as "politically impossible."As a result, more andmore economists have abandonedcandor, refrained from even suggestingthe "politically impossible"proposal, and instead have' putforward compromise proposalsthat they think have a politicalchance of being adopted. Or theyhave sought a reputation for influenceby recommending whatthey thought was going to be doneanyway. Or they have resorted tooutright demagogy in calling forsome new form' of inflation, control,soch'llism, or seizure. The resulthas been a deplorable degenerationin economic thought.

1972 OTHER BOOKS 59Hutt illustrates his thesis infour separate - fields - moneta.rypolicy, income transfers, Keynesianism,and the strike-threatsystem. His comments on particulareconomists are candid andsometimes unspa.ring.Keynes, for example, he pointsout, gained his great reputationamong his colleagues as well aswith the general public by pretendingthat he had found an easyway out of unemployment and depression.This consisted of cheapmoney, government deficits, andinflation. The word "inflation" itselfwas suspect. "But an inspiredinsight enabled the Keynesians toperceive that, if called somethingelse, 'the maintenance of effectivedemand,' for instance, it can becomerespecbible."Under no conditions did Keyneswant to risk offending the unionsby suggesting that they were evenpartly responsible for creating themass unemployment of the 1930'sby pushing up and keeping upwage rates to unworkable levels.So he invented the untenable "unemployment·equilibrium" theory:"Keynes, perceiving that itwould be politically suicidal tomention the unmentionable, saw away out through the most successfulconjuring trick in historywhich, deceiving an audience thatwished to be deceived, led to itsbeing hailed as a great discovery,as revolutionary and important asEinstein's theory of relativity. Iam not accusing Keynes of intellectualdishonesty. He deceivedhimself with his 'conjuring trick.'That is how I have come to regardhis 'unemployment equilibrium' notion,together with the subsidiarytheories with which it was bolstered."What is now commonly dismissedas "politically impossible"usually turns out on closer examinationto be merely the politicallydifficult or politically unlikely. Itis only made more difficult andmore unlikely when economistslose the courage even to propose it.Hutt's book is essentially a pleato his professional colleagues formore honesty and candor:"N0 policy which is for the advantageof the people is incapableof being effectively explained tothem. It will of course take timeand persistence to convince a majority.In the meantime compromisewill be needed whenever urgentsteps are required. But compromise,while it is the politician'sprivilege and necessity, is thescholar's deadly sin - unless it ispresented clearly and unmistakablyas compromise and is alwaysaccompanied (a) by the noncompromisingproposal and (b) an explicitexplanation of the vote-procurementreasons for the compromisingproposal."

60 THE FREEMAN JanuaryThis "dual form of exposition,"as Hutt calls it, would certainly bea great advance compared with thepresent typical ambiguity and disingenuousness.Yet, while there isonly. one ideal course, there areusually an indefinite number ofpossible compromises. If eacheconomist plumps for one of these,in accordance with his own amateurnotions of its political feasibility,the conflict among theirrecommendations may only end byconfusing public opinion. In thelong run it seems better for theeconomist to point to the path ofprinciple, and leave the compromisesto the politicians.;. FINANCIAL POLICY IN ACHANGING ECONOMYby Enders M. Voorhees (Lebanon,Penna.: Sowers Printing Company,1970), 232 pp., $5.00 (Plus tax,where applicable.)Reviewed by Melvin D. BargerBy PRESENT standards, the economicchanges of the 1943-1955 periodappear to have been modest. Inflationwas in motion, but not galloping.There was social upheaval,but not open rebellion. Businesswas under attack, but the attackswere not wildly out of control.The stage was being set forfurther trouble, however, and manythoughtful persons knew it. Oneastute business executive whosmelled the future was Enders M.Voorhees, chief financial officer aswell as articulate spokesman forU.S. Steel Corporation until hisretirement several years ago. Mr.Voorhees' speeches and writingsduring that 12-year period havebeen preserved in book form inFinancial Policy itn a Chang'ingEconomy, a privately published volumewhich should serve as a valuablesource book for business historiansand economists.Mr. Voorhees' views are importantfor several rea.sons. One, hewas in a key position as the chieffinancial officer of the steel companylong known as the industry"pacesetter." Secondly, he is a. vigorouschampion of the free market,and uses a substantial stock offacts to document many of his arguments.Third, he was a. tough fighterwho took his arguments to Congressionalcommittees and otherinfluential groups in an effort tosteer a safe financial course for hiscompany under greatly changingconditions.You catch the tone of Mr. Voorhees'thinking in the very firstchapter, a commencement addressentitled "The Uncommon Man."This is a. term which harks backto other libertarian thinkers, andMr. Voorhees leaves little doubtthat he favors giving the individualconsiderable elbowroom for

1972 OTHER BOOKS 61creative accomplishment. He isalso suspicious of special interestgroups. He remarks, "Fanciedwrongs seem real if you talk onlyto those of a similar fancy andsoon you are likely to find. yourselvesorganized into monopoliesor pressure groups to get somethingfor nothing from the otherfellow who is assumed to be gettingtoo much for too little." Propheticwords, particularly for a1948 speech.His other chapters tend to becomemore specific, but he frequentlyreturns to this questionof establishing genuine equity inbusiness and economic relationships.In a brilliant chapter onspecia1ized occupations (actually,a 1943 speech), he w,arns that theprocess of specialization may have"built up opposing rather thancomplementing groups whosestrife for exploitative power canbreak up and disintegr,ate us, evenas happened in France before theinvasion." He warned of revolutionarytheories that "boil downnot only to eliminating the titheof the miller but insisting that hefurnish flour without wheat beingbrought to him." Now that suchtheories seem to be popping outof the very woodwork, it is· interestingto note that Mr. Voorheesmade this comment 28 years ago.Since most of his speeches focusedon corporate financial problems,Mr. Voorhees' book is anotherreminder of the delicatebalancing act that financial officersmust perform to keep a large-scaleenterprise alive and functioning.Many critics,. in the 1940's and1950's, saw U.S. Steel as the dominantpartner. in an "oligopoly"that could administer prices atwill and manipulate its businessenvironment as it pleased. But itdidn't look that way to Mr. Voorhees.He s,aw U.S. Steel as an extremelyvulnerable organizationthat could virtually be wiped outby a few years of unfair taxationpractices or shortsighted financialcontrols. His.frequent warningsagainst the dangers of insufficientdepreciation charges and exorbitantwage settlement seem moretimely today, with American steelcompanies steadily losing groundto more efficient foreign competitors.At the same time, the recentPenn Central and Lockheed crisesare grim proof that even giantcorporations do not have unlimitedresources and must work underthe iron disciplines of the marketif they are to survive.Many of Mr. Voorhees' talks beforeCongressional committeescame when historic issues werebeing fought out in labor-managementrelations and other areas. Insome cases, of course, the battlewas lost and the struggle hasmoved on to new fronts. As a rule,

62 THE FREEMAN Januaryhowever, the present troubles involveprinciples that do not growobsolete and cannot be repealed bycompulsions and legislation. Currently,for example, reformerswarn that business must solve society'smany problems "or else"the government will step in anddo it for them. "The 'or else' connotesthat the perfect state liesready and willing to take over,"Mr. Voorhees said in 1943. "Ifthat were the case and if only thecupidity of private owners stoodbetween us and perfect materialhappiness, I am sure we should allstampede to the arms of the perfectstate." There are many othersuch gems in Mr. Voorhees' writings."If we want ample tools ofproduction and the jobs their presencecreates, we had best set up inAmerica a social .atmosphere endorsingrather than condemningample dividends and the profitswhich make them possible," hesaid in 1949. And in an earliertalk: "We shall not forget that atthe end of every tax plan is a humanbeing. And I need not remindyou that human beings are notabstractions." And, "Managementhas no weapon to point at customers'heads to match the strikeweapon that labor leaders flourish."But if there's any chapter in thebook that should be carved onstone tablets for all time, it's probablyone entitled, "Needed - DependableDollars." Written 21years ago (when inflation wassupposedly mild), it deals withthe endless problems that arisesimply bec.ause the currency is beingmanipulated and diluted. "Almostevery business calculationand estimate is bedeviled by theabsence of dollar· dependability,"Mr. Voorhees said to students atDartmouth College. Perhaps thinkingof the West Germans who hadonly recently put their currencyon a new basis, he added, "It seemsto be those peopl_e who have hadbitter personal experience of livingunder bad currencies whomost appreciate good currenciesand are willing to make some sacrificesto secure and maintainthem."His rundown of the problemscaused by inflated currency almostappears to be a synopsis ofthe next 20 years' troubles: overstatedprofits, concealed confiscationof savings and other assets,increased labor-management conflicts,accounting problems, increaseddemands for subsidies,and wage and price fixing. It is asif Mr. Voorhees had been able toreview the chaos of 1971 whilepreparing this 1950 speech.Though written by a businessmanof great distinction in hisown industry, this book is notlikely to be widely circulated or

1972 OTHER BOOKS 63quoted. Some of it is hard re,ading,challenging the reader to sortthrough charts, tables, and otherlists of figures. There is also thefact that financial m,atters andterms can often be dryas dust.But the most likely reason it wouldbe ignored is that the world stillhotly pursues the disastrous policiesthat Mr. Voorhees deploredduring the seemingly calm periodof 1943-1955. That's all the morereason why it's well that his insightshave been published in bookform. It may turn out to be usefulmedicine when the popular nostrumshave failed... THE LITTLE HOUSE BOOKS ­A PIONEER CHRONICLE byLaura Ingalls Wilder (New York:Harper & .Row Trophy Books,8 Vols. 95¢ each)Reviewed by Robert M. ThorntonTHESE BOOKS were first publishednearly forty yea.rs ago when LauraIngalls Wilder was in her sixties.The eighteenth printing in clothwas run in 1970, and now we havethe first paperback edition. Laura(I just can't bring myself to c~llher Mrs. Wilder) wrote the firstbook in the series without any plansto continue, but the enthusiasticresponse of young readers promptedher to keep going until the storiesreached the time of her marriageto Almanzo Wilder on August23, 1885 - eight volumes from awoman who asa young girl told herPa that she could never write abook!Laura was born in 1867, andlived for ninety years, most of thattime with her husband on theirfarm near Mansfield, Missouri.Their daughter, Rose Wilder Lane,who died in 1968, is well-known tolibertarians as the author of TheDiscovery of Freedom, a bookwhich inspired Henry Grady Weaver'sThe Mainspring of Hu,manProgress. Rose displayed hersturdypioneer stock when at the age of 78she was sent to Vietnam as a correspondent!What is so. fine and enjoyableabout these "Little House" books?First, they take the reader out ofhis own world and into differentplaces and earlier times, into theIives of the pioneers on the prairiein the 1870's and 1880's. Whatthrill is there reading about themilkman or the neighborhood grocer?Second, they make the reflectivereader thankful for all theblessings we enjoy in the UnitedStates today. Laura writes of thefun she had asa girl on the prairieand the happy times with her family,but she does not romanticizeher exeriences. Life was hard inthose days in an untamed land.

64 THE FREEMAN JanuaryThere were empty stomachs whencrops were destroyed by fire,drought, locusts or storm. Sicknessmight mean death because doctorsand medicine were scarce on thefrontier. Everyone except the veryold and very young had to work.The pleasures were simple - noradios, automobiles, televisions andthe like. There was little money onhand, so Christmas presents forthe children might be a penny anda stick of candy! There were happytimes and terrible times, each apart of living.Third, and most important, thesebooks can help us recapture thespirit of the pilgrims,patriots, andpioneers who founded this nationand made it great. Part of thatspirit is the taste for independenceand a sense of individual responsibility.Laura's family didn't expectanyone else to take care of them.They took care of themselves andrecognized that having freedommeans the freedom to fail as wellas to succeed. Another part of thisgreat spirit is not to bemoan one'sfate or complain about not gettingone's "fair share" of the world'sgoods. Another, is a sense of communitywhere so much is accomplishedon a voluntary basis, everyonepitching in to contribute whateverhe can in time, talent andmoney.In answer to inquiries about herselfand her books Laura wrote:"The Little House Books arestories of long ago. Today our wayof living and our schools are muchdifferent; so many things havemade living and learning easier.But the real things haven'tchanged. It is still best to be honestand truthful; to make the most ofwhat we have; to be happy withsimple pleasures and to be cheerfuland have courage when thingsgo wrong. Great improvements inliving have been made because everyAmerican has always been freeto pursue his happiness, and so longas Americans are free they willcontinue to make our country evermore wonderful."It is no easy matter for today'schildren to learn these truths, butso long as these books are read thelessons will not be lost. t)

theFreemanVOL. 22, NO.2. FEBRUARY 1972Why Can't We Have Both? Jean Hockman 67Reasons why the rejection of Capitalism in America ought to be reconsidered.Rights and Pseudo-Rights John D. Lindl 73A genuine right applies equaUy to all, at the expense of no one in particular.On Re-reading THE LAWA book worth reading is worth reading again.Ra,y L. Colvard 76From Price Control to Valley Forge: 1777-78 Percy L. Greaves, Jr. 81A timely reminder of the sorry consequences of closing the market.We and the Third World Erik von Kuehnelt-Leddihn 85A realistic appraisal of the prospects of helping the developing nations.The Modern Volunteer Army David J. Kramer 95Concerning various aspects of the draft-army mentality that are inconsistent witha voluntary organization.Should We Divide the Wea,lth? Henry HazliU 100To concentrate on the division of wealth is to neglect the production upon whichall else depends.Free. Givingvs. the Welfare State Charles R. LaDow 109Personal giving is the only kind; and it is best done voluntarily.The Founding of the American Republic:7. The First American Crisis: 1763-66 Clarence B. Carson 112How George III and Parliament set the stage for colonial resistance.Book Reviews: 125"Toward Liberty" by various authors on 90th birthday of Ludwig von Mises."First Things, Last Things" by Eric HofferAnyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tt1eFreemanA ·MONTHLY JOURNAL OF IDEAS ONLIBERTYIRVINGTON·ON·HUDSON. N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTP1'esident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,OOO-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printed inU.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also Isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Michigan48106. Permiss'ion granted to reprint any article from this issue,with appropriate credit, except "Why Can't We Have Both?", "From PriceControl to Valley Forge: 1777·78" and "Should We Divide the Wealth?"

Whycantwe have both?JEAN HOCKMANTHE CURRENT political discussionin the United States centers onhow to control the economy. Notshould the government control theeconomy but how! The proprietyof government intervention intothe private financial affairs of thepeople is a question long overdue.For years America has been tryingto "solve the problem" of howto have her cake and eat it too.Expert and layman alike struggleto understand why the governmentcan't spend money it doesn't haveand still remain solvent; why wecan't have government handoutswithout raising taxes; and whyevery American can't be financiallysecure, with enough left overto support the poor on a· globalscale. Just what miracle do Americansbelieve will be forthcoming?Mrs. Hockman of Tacoma, Washington, is ahousewife and free-lance author with a biastoward freedom.Let us leave aside opInIons ofeconomic experts who insist thata government-managed economicsystem is necessary, or superior to,or consistent with freedom. (Thislast, despite .the fact that thehistorical record of all such attemptsreveals that the people arerequired to live in a state of forcedsubjugation to the leadership, inbehalf of the nation and/or the"common good.") Instead, let usapply an ingredient that has allbut vanished from the Americanscene - common sense.Federal bureaucracy is spreading(unchecked) over our land likea fungus. And like fungus, it feedsoff the main crop, i.e., the earningsof the people. A fungus is a parasitethat attaches itself to healthygrowth, gradually weakening andultimately destroying it. If thefungus is caught and destroyed,the main crop will be free to re-67

68 THE FREEMAN Februa.rycover and continue its healthygrowth at its own speed. If thefungus is allowed to spread, itgathers momentum, perpetuatingitself until there is nothing left tofeed on. So it is with bureaucracy.It feeds and perpetuates itselffirst.Bureaucracy Has First ClaimOne needn't be an expert tofigure out how it works; and further,that it can work no otherway. In any society, some peopleproduce more than others - andsome produce nothing at all. But,the bureaucracy has first claim onall production, and siphons profitsoff the top. What seeps back to thepeople is considerably less thanthey have produced, thereby limitingtheir capacity for economic expansionand tending to lower theirlevel of living.We have been told repeatedlythat "some" economic controls arenecessary because men in privatelife are either unable or unwillingto successfully and honestly man..age their own affairs. If this weretrue (of course, it isn't), onemight logically ask the followingquestion. By what magical meansdo men, hired by the government,suddenly acquire the wisdom andhonesty to manage the economicaffairs of the entire population?Apparently, we are expected to believethat people aren't capable of"handling" freedom, but that thegovernment is.The first order of private busi..ness is to make a profit. It shouldgo without saying that an unprofitablebusiness is scarcely in a positionto survive (much less expand)and is'of no use to anyone.Government a Profit TakerBut government is a profit takingoperation. It is not economicallyproductive, but economicallydependent upon the earnings generatedby the private enterprise ofthe people. If a government programis ineffective or inefficient(and which ones aren't?), the governmentdoes not account for theloss; it simply draws against thepeople's private earnings and businessprofits and perpetuates theloss.Observe the rising clamoragainst American business formaking profits, the demand that"excess" profits be penalized. Yetthe biggest profit taking organizationin this country, the Federalgovernment, is being encouragedto expand its operations and createnew agencies of economic control.To what end?If the goal is to eliminate povertyand unemployment througheconomic prosperity, the expansionof business must be encouraged,not restricted; and the role of governmentreduced - not expanded.

1972 WHY CAN'T WE HAVE BOTH? 69Economic control does not lead togrowth, progress, and prosperity.It never has and it never will.Economic control is the means bywhich government maintains totalpolitical control over the people, afact which the American peoplewill have to face sooner or later ­one way or another.Government intervention is alwaysrestrictive, and for this reasonit is impossible for governmentto "manage" or "control" afree economy. It is a contradictionin terms - and in reality.Communism Controls ThroughForce and SubjugationIf proof is needed,. communismhas proven for all to see thateconomic control can only be fullyachieved and maintained throughsheer force and total human subjugation.Socialism (the supposedlybenign version of communism)is failing miserably in every countrythat has tried it. Under socialismthe people are taxed unmercifully,and end up bickering amongthemselves and clamoring to theirbureaucratic "benefactors" for agreater "share." In short, economiccontrol is a, vicious, static,dead,:,end cycle that can only resultin the ultimate loss of all humanliberty and dignity, and a loweredlevel of living. (Note that fascism"permits" private ownership, butdenies property rights and ismerely a variation of the sametheme.)This leads toa question which Iask now, and future historiansmay well ponder. Why did America.abandon the free enterprise system,.or more precisely - capitalism?Do Americans really believe thecommunist propaganda that wasdeliberately designed to destroythe most successful economic systemin the history of mankind? Iam 35 years old, and I can't recallhearing a single American politicianstand up and defend capitalismon the righteous grounds thatit is entirely consistent with theCQnstitutionalprinciples of individualliberty by which we aresupposedly· bound. In fact, onerarely hears capitalism mentionedat all, except in negative terms."Private enterprise" is referred.to and grudgingly accepted (primarilyas a source of governmentspending power). But a fully consistentsystem ·of capitalism (laissezfaire) does not exist anywherein the world - and never has. Itcertainly doesn't exist in America.Nor is it being seriously considered.Why not?Efficient and ProfitableCapitalism is the most efficient,progressive, and profitable economicsystem ever devised. Peopleseek their livelihood on their own

70 THE FREEMANterms, according to their ownability, for and with their ownmoney. They deal directly withone another, not through the government- thereby saving the expenseof useless bureaucracy.(Properly, government should enterthe picture only upon request,i.e., in the event of a legal disputeor a criminal offense, to determinethe legality of a given situation interms of the natural rights of theindividuals involved. Needless tosay, no government, includingours, has yet confined itself to thisrole. This doesn't mean it isn'tpossible or desirable.)Capitalism also contains its ownbuilt-in checks and balances. Peopleare required to exercise soundjudgment, or suffer the consequencesof their own folly. Itdoesn't carry any guarantees. Onerisks failure along with the prospectof success. And if we are honest,we know that there are no realguarantees possible in life - notin theory, or in reality. Life is aprocess of change and risk, growthand setback, and ultimately whatone can realistically hope for is toachieve a just measure of successcommensurate with one's ownability. This is what capitalism is,and does. It puts the responsibilitywhere it belongs - on the individual- which is, after all, the meaningof independence. One is not independentif he is not responsiblefor his own needs. Nor can onebecome independently responsibleif the government intervenes tomake it impossible.Economic Disaster FollowsMonetary ManipulationThe greatest economic disasterin America's history came afterthe Federal Reserve Act had relievedpeople of the responsibilityand the means of making an accuratejudgment. The subsequentfrantic efforts of government to"create" a sound economic balancethrough legislative force havebrought us to our present state ofchronic insecurity and collectivedependency.Yet government is rarely blamedfor our economic difficulties. Afterall, hasn't it been.trying to curethem for over 40 years? Capitalismis blamed.The accusation that capitalismexploits the worker has been repeatedso often that it is generallyaccepted as true with no furtherthought. Let it be stated here forthe record that capitalism is thesystem for the working man. Itdoes not reward the idle - only theman who is willing to work for hiswages. Consider the present situationin our "mixed" economy. Arewe to believe that the working manis not exploited when a portion ofthe money he earns is forcibly extractedfrom his wages to support

1972 WHY CAN'T WE HAVE BOTH? 71government programs which harmrather than benefit him?Another supposedly unpleasantfacet of capitalism is that it appealsto one's selfish nature. Thisis absolutely true. Selfishnessmeans to be primarily concernedwith one's own self-interest. Anybodywho claims to be otherwise iseither a fool or a liar (to borrowan old phrase). Self-preservationis primary to all living things. Ifman were not selfish by nature, hewould be extinct. Yes, capitalismserves the self-interest of eachand every individual. Which simplymeans that capitalism servesthe individual, as an individual.Which is why it should be the economicsystem of the only nationever founded in behalf of the individual-America.It is also said that capitalismpromotes greed. Does it? Who isgreedy: the man who wishes toearn his keep, and keep what heearns? Or the man who wants alegislative advantage, who wishesspecial privilege so he can compete"fairly" in the "free" market?Observe the present clamor atthe doors of Congress for straightfinancial handouts to accommodateevery conceivable whim. The questfor the product of what anotherman has earned constitutes greedin my estimation. Every dollar thegovernment gives away was earnedby a citizen of this country. Itmakes no difference if the citizencan afford it or not. It is a matterof principle; and the principle involvedis the right of the individualto own what he earns, choosehow his earnings are spent, andthe right not to be forced to supporta "spending," "subsidy," or"charitable" program of which hepersonally disapproves.If, for example, I were to askyou for a voluntary contributionto support a farmer too stupid tostop growing crops for which thereis no market, you would undoubtedlyrefuse. Who would voluntarilysupport such a; program? It mightwork the first time around, butit would surely die of its own accordif it were pursued; and in acourt of law it might even be construedas fraudulent.This is but one example of a"program" which would neitherbe tolerated nor sustained on avoluntary basis. The list of selfdefeating,useless, inefficient, anddownright wasteful undertakingsof government is endless,and wellknown to many of us.The Inevitable TrendIt is not my purpose- here toprove that government "manages"economic affairs in the least efficientmanner possible. The situationhere, and throughout theworId, speaks for itself.

72 THE FREEMAN FebruaryMy point is that such is the inevitableresult of government interventionin the financial affairsof its citizens. When governmentassumes the "right'" to manipulateeconomic matters, where does itdraw the line? Thus far, in America,it has not seen fit to draw anyline at all. And herein lies the danger.Anything goes, if enoughpressure is applied in the "rightplaces." It is a, shameful abuse ofa political system designed to limitthe powers of government in orderthat the people might be free ofgovernment compulsion. If it wereotherwise, (i.e., consistent withour fundamental principles), whyis such effort made to hide thetruth?The attempt to conceal the trendtoward statism in America, is evidencedby the increasing use ofevasive semantics. The economicpolicies outlined in the CommunistManifesto are written into law inthe United States of America underthe heading of "social legislation."Individual liberty is graduallyreplaced by "the needs of achanging society," i.e., collectivism.And our "mixed" economy is movingsteadily toward a "new" versionof full-fledged fascism underthe heading of "responsive government."Economic control lis the key topolitical dictatorship. And conversely,capitalism is the key topolitical freedom. Observe thatcapitalism has been the primarytarget of communism from theoutset. Communism, as an economicsystem, can't hold a candle tocapitalism. But.it is the most effectivesystem of political dictatorshipever devised, precisely becausethe individual has no propertyrights.Cause and EffectWhen are we going to see theconnection? Why don't we see itnow? We can't have our cake andeat it too. America is no more immuneto the natural law of causeand effect than any other nation,past or present. The strength ofany nation lies in its consistentdevotion to its own stated principles.Communism isn't spreadingbecause it's a better system. Itspreads because communists aresteadfastly committed to everyfacet of communism; and no similarcommitment to capitalismstands in its way.Americans have been apologizingfor and compromising capitalism,at first slowly, but with increasingrapidity throughout mostof this century. Where once wehad a, simple government structurebased on a solid foundation, wenow have a gigantic superstructureresting on a mish-mash ofcontradictory inconsistencies.Where once we had a· thriving,

1972 WHY CAN'T WE HAVE BOTH? 73progressive economy, we now haveimminent disaster. By our ownhand we are divided, weakened,a.nd vulnerable - fair game foranyone and anything.Figuratively and literally, themiddle of the road is a dangerousplace to stand. It indicates irrationalbehavior at best, and suicidaltendencies at worst. Thereare only two fully consistent andseparate views of life. Two sidesof the road. It's an either/orproposition.One side is collective dependencywith full political ownership andeconomic control, i.e., total humanslavery. This view is exemplifiedto its fullest extent by communism,but has preva.iled in varyingdegrees throughout the entire historyof mankind.The other (and only) alternativeis individual liberty with privateownership rights, economicfreedom, and political protectionof the individual as an independentagent, exemplified briefly (imperfectly,but significantly) bycapitalism in American history. f)JOHN D. LINDLRIGHTS &RIGHTSCONGRESS has been working on awelfare reform bill,The FamilyAssistance Plan, for two yearsnow. What is the nature of thisbill? If it is approved, Congresswill have declared its intention toMr. Lindt is a graduate student at PrincetonUniversity.guarantee to every American.the"right" to a minimum yearly income.As such it merely representsa logical extension of recent trendsof the sixties which has seen aproliferation Qf "rights" - rightsto health care, education, housing,jobs, and fooo.• The only difference

74 THE FREEMAN Februarybetween this and other measuresthat have been enacted is its scopeand potential for expansion. Butbills enacted in the late sixtieswere more expensive than those ofthe early sixties, and so forth. Assuch, this is just a continuingtrend, too. All of these bills are ofa single nature and must be analyzedas such.Their common denominator isthe "rights" they declare, astrange set of rights, indeed. Despitethe rhetoric of proponentswho claim these are rights guaranteedto every American, theyquite obviously are not. If everyAmerican quit working, therewould be no goods to satisfy theirclaims for these rights. So thesebills in effect provide goods andservices to those who have not providedfor themselves, at the expenseof those who have. A "right"of one person that can only besatisfied at the expense of anotheris obviously no right at all. It is adecree that sets up two classes ofpeople, those served, and those requiredto serve. The proliferationof such laws is one of the mostdangerous developments in recentU.S. political history.A primary right must always bea right to action, not ,to goods assuch. All goods must be producedby prior actions and hence are alreadysomeone's rightful property.The right to act implicitly ineludesthe responsibility for theconsequences of one's action andthe right to the use and disposalof the products of one's action.The rights of the American Constitutionare all proper rights toaction. But the very principle ofthese rights has been underminedby the growth of belief in variouspseudo-rights.The Nature of RightsRights reside in individuals.There is no such thing as grouprights except as they'are an extensionof individual rights. Apolitical right which is not possessedby every individual, regardlessof his membership in a group,is merely a license for a particulargroup to exploit others not in thegroup. For example, consider"Welfare Rights." This is generallyta.ken to mean the right tothe means for a certain level of existence.Is this a right, universallyapplicable to all? Could we guaranteeto everyone the right to aminimum subsistence without imposingon some group the responsibilityof providing that subsistence?Clearly not. This is thetest to distinguish between agenuine and a bogus right. If itapplies equally to all, at the expenseof no one in particular, it isa genuine right~ If some one groupbenefits while another foots thebill, it is a counterfeit.

1972 RIGHTS AND PSEUDO-RIGHTS 75A common response to these argumentsis that a majority of the.people have elected the representativeswho have passed the laws;so they really have chosen freelywhere their money and effortshould go. But even on the face ofit, this is not true. A member ofCongress can be elected by 51 percent of the vote. But even that 51per cent is surely going to disagreewith their representative afair fraction of the time. So, beforea candidate ever records avote, he probably has fewer than50 per cent of the voters behindhim. And then, legislation can bepassed with the assent of a mere51 per cent of the legislators,further reducing the likelihoodthat even a majority of personsagree with the decision. So thebest one can say of a representativedemocratic process is that thelargest fraction wins.Democracy Justified in MaintainingThe Rule of LawThe only justification for a systemwhere the largest fraction imposesits will on everyone else isthat such a system has historicallybeen the most effective in curbingand limiting the police power ofthe state. This police power is anecessary protection against thosemembers of every society whowould try to impose their will byforce or fraud on other humanbeings. A government whose policepower is used solely for thispurpose is no threat to any peacefulcitizen, since it may never initiatethe use of force. It only actsto prevent the use of force. Historically,no people has everachieved a society whose governmentstrictly adhered to this function.But the democracies of theworld have come closest; and ofthem, the United States of thenineteenth century came closest ofall. This achievement of democracyis its only justification. If itfails in this function, a democracyhas no justification at all.Majority tyranny is no less a tyrrannybecause it is a majority.The argument that democracyjustifies the various pseudo-rightsis pernicious. It perverts the functionof democracy and further obscuresthe meaning of rights. Inthe end it serves to destroy democracyby giving rise to pressuregroupwarfare.Until these facts are recognizedand acted upon, the present trendin domestic legislation will continuewith undiminished vigor. ~

ON RE-READINGRAY L. COLVARDTHE STORY, perhaps apocryphal, istold of ~ young man who had along, earnest conversation withhis father on the eve of the son'sdeparture for the university. Whenhe was graduated, he talked withhis father again. As the youth describedit: It was amazing howmuch the old man had learned infour years.A few years ago, when I receiveda copy of The Law fromDr. George C. Roche III, then Directorof Seminars for the Foundationfor Economic Education, Iwas not immediately impressed.The ideas appeared logically soundto me, but with application limitedto places and times other thanmodern America. Robert L. Heilbronerin The Worldly Philosophersplaced Frederic Bastiat, theauthor of The Law, in "the underworldof economics."Mr. Colvard teaches at Clairemont High Schoolin San Diego.The Law is a disturbing book,however. I read it again. Beforethe fall of the old regime, Voltairehad made an acid observation that"in general, the art of governmentconsists in taking as much moneyas possible from one class of citizento give to the other." Bastiatcalled this exchange "legal plunder."He pointed out: The plunderersare within the law, actingbenignly, with the best of motives,under the glow of "false philanthropy."It made- sense - but.In this matter of education, the lawhas only two alternatives: It can permitthis transaction of teaching-andlearningto operate freely and withoutthe use of force, or it can forcehuman wills in this matter by takingfrom some of them enough to pay theteachers who are appointed by governmentto instruct others, withoutcharge. But in this second case thelaw commits legal plunder by violatingliberty and property.76

1972 ON RE-READING THE LAW 77Now that was just too much.Back in the foothills of ruralNorth Carolina during the firsthalf of this century the traditionof the summer "protracted meeting"was firmly fixed in fundamentalistcongregations. Visitingrevivalists of a fire-and-brimstonebent attempted to electrify hot,sleepy listeners by cataloguing thealleged sins of erring neighbors.Over in the "amen corner" DeaconJones munched his seasoned bolusof Sta.r Plug tobacco and •accompaniedthe preacher by noddinghis placid agreement.". . . the sin 01 young mendrink1ing . . .""A-men!"". . . the sin 01 young womensmoking . ..""A-men!"". . . the sin 01, old, men chewi.ng.' .."At this point ·Deacon Jones roseout of his seat, sputtering. "Nowjust a. minute, Reverend," he objectedangrily. "Now you've quitpreaching and started meddling."This portion of'The Law seemedabsurd: public education beinglinked with legal plunder. Justwhat do economists think teachersdo? Don't they know we loose theglorious, exuberant spirits· of students?Weencourage discovery.We produce scientists, entrepreneursand statesmen who maintainthe nation's economic and politicalstability. We prepare citizensto become contributing, ratherthan dependent,members of acomplex, competitive industrialdemocracy.Somewhere from the dusty pastI seemed to hear a soft chortle andlow whisper: "false philanthropy."This was ridiculous, I thought.It's my ox that's being gored now.It's all right to question the proprietyof industrial monopolies,protective tariffs, and agriculturalsubsidies. Leave education to educators.The :National EducationAssociation'scampaign for a ·NationalDepartmentof Education isin full swing. With the right Secretaryin the Presidential Cabinet,public education could be run efficiently,like the post office. Withenough power educational leaderscould enforce academic freedomfor all teachers, defend martyrslike Peter Abelard and Socrates. Itried not to remember at thispoint that Abelard got himself intotrouble playing around with anubile teen-ager and Socratesreally had been "corrupting theyouth."A Skeptical StudentDuring the week of the'FEEseminar that. summer I remainedskeptical of Bastiat's freedomphilosophy, at least that partabout public education, though hewas quoted respectfully by the

78 THE FREEMAN February3-R's of the seminar: Read, Russell,and Roche. (For clarificationand lest I appear lacking in respect,may I amend this remarkto: Mr. Leonard Read, Dr. DeanRussell, and Dr. George C. RocheIII.) I listened to them, but I wasnot fully convinced. I re-read TheLaw more carefully, however, whenI returned home."Look at the madhouse of aworld," Frederic Bastiat had suggestedin an early work. The world"goes to enormous efforts to tunnelunderneath a mountain to connecttwo countries and then it setsduties and custom guards at eachentrance to make passage as difficultas possible." Interesting.The latest, fourteenth edition ofEncyclopaedia Britannica allowsFrederic Claude Bastiat two dozentepid lines. However, going backto the eleventh edition, publishedin 1910, I found this magnificenttribute:He alone fought socialism hand tohand, body to body, as it were, notcaricaturing it, not denouncing it, notcriticizing under its name some merelyabstract theory, but taking it asactually presented by its most popularrepresentatives, considering patientlytheir proposals and arguments,and proving conclusively thatthey proceeded on false principles,reasoned badly and sought to realizegenerous aims by foolish and harmfulmeans.I was beginning to discover thatBastiat was, indeed, quite a man.A Very Good YearlThe year 1776 was a vintageone for freedom. It brought forththe master work of Thomas Jeffersonand Adam Smith. In the vernacularof today's bright youth,"Groovy! Everybody has rightsand everybody should do his ownthing." The concept of libertywhich came out of the enlightenedeighteenth century and achievedwide popularity in the nineteenthhas lost ground in the twentieth.The political term, "liberal," hasshifted in meaning from thosewho would break government'shold on its citizens to those whoadvocate greater government controlsbe placed on individuals. Thegreat utopian appeal of collectivism,even in the modern extremesof fascism and communism, is thefond hope of equality. Collectivismproclaims high ideals and promisesreforms. Literacy and publicenlightenment are laudable goalsfor us to undertake in public education.Can this be "legal plunder"?One might as well imagineSanta Claus an "enemy agent."There is profound danger incultivating the cult of equality.Tocqueville, the great admirer ofAmerican democracy, warned ofthe danger during his travels inthe United States in the Jackson

1972 ON RE-READING THE LAW 79era. Democracy would, he foresaw,pose an irreconcilable dilemma toAmericans. They who treasuredboth freedom and equality wouldeventually choose to give up theformer· to gain the latter.The Need for RulesMan must live by rules, but theyshould be rules of his own· choosing.Ludwig von Mises stated thisconcept beautifully in his HumanAction:Liberty and freedom are the conditionsof man within a contractualsociety.... As far as he gives andserves other people, he does so of hisown accord in order to be rewardedand served by the receivers. He exchangesgoods and services, he doesnot do compulsory labor and does notpaytribute. He is certainly not independent.He depends on the othermembers of society. But this dependenceis mutual.The late jurist, Learned Hand,wrote about the benevolent "beastin us" which leads us to destroyliberty for others. "Liberty," henoted, "is an essence so volatilethat it will escape any vial howevercorked." The logic of Bastiat,von Mises, and Hand at this pointseems virtually irrefutable.The public school system is aninstitutionalized cork restraininghuman freedom. It makes use(benevolently, of course) of theworst elements of socialism andprotectionism. In truth, we teachersare in the jail business. Educators,like a majority of the adultpopulation, defend compulsory attendancelaws which are in factnothing more than bills of attainderagainst our young.We illogically uphold these extra-judicialcanons despite theirexpressed ban by Sections 9 and10 of Article I of the Constitutionof the United States. This basicconstitutional injunction has beenblandly ignored. In Brown vs.Board of Education the SupremeCourt appeared to actively favorcompulsion. In the words of theCourt, "Compulsory school attendancelaws and the .great expendituresboth demonstrate our recognitionof the importance of educationto our democratic society."We are wildly inconsistent in defining"liberty." First we confrontyouth with our terrible dictum:You have no inalienable rights.Then we expect him to becomelaw-abiding while he is, himself,outside the law. We expect him toachieve a mature autonomous levelin personal growth without exercisingthe right of free choice. Weexpect him to develop value judgmentstripped of a compulsion forresponsibility. A frenetic realityexists in compulsory education.We guard students possessively asthey attempt to escape our bureaucracy.They are not allowed to

80 THE FREEMAN Februarybecome nonconsumers in our educationalmonopoly. We employ"Keystone" cops called "truant officers"or more euphemistically,"attendance coordinators,"to chasethem when they attempt to declineour services.Twentieth century school systemshave come to be blatant examplesof nineteenth century enterprise.Writing about anachronousindustries, Henry Hazlittnoted: "It is just as necessary tothe health of a dynamic economythat dying industries be allowedto die as that growing industriesbe allowed to grow." A like casecould be made for abandoning outmodedcompulsory institutionalizededucation.Cand/emaker's PetitionBastiat's masterpiece of economicsatire was the tongue-incheekpetition to the Chamber ofDeputies requesting that ownersof houses be made to do withoutdoors and windows. He beratedsunlight as a foreign, low-cost,unfair source of illumination andasked that it be shut out to createa demand for artificial light whichwould benefit French manufacturersof lamps, tallow, and candles.Weeducators today are logicaltargets for the Bastiat philosophyas we defend our right to a monopolyof artificial enlightenment.It is. my belief that the servicesrendered by teachers in publicschools are a. primary economicgood. Our professional expertise isof such value that it need not beforced on anyone. In learning'sfree market, demand exceeds supply.Young people need not becompelled by legal entails to cometo school. It's a compulsion theyhave reason to hate. They have avalid case in history. Tea-lovingColonists refused to drink teawhen it was forcibly pressed onthem by a benevolent England.The Boston Tea Party made Americaa nation of coffee drinkers.Public education as it exists todayis economically unsound andpatently unfair. Schools offer contractsfor services to youths, butstudents have no legal way of enforcingthe obligation. In even therelatively modest school districts,teachers report to principals whoreport to area directors who reportto assistant superintendentswho report to associate superintendentswho eventually report tothe superintendents who are solelyresponsible to the boards ofeducation.Each level above the pedestrianclassroom teacher is insulatedfrom students. Every educatorposition above the teacher levelin the system is politicaL Publicrelations know-how is the criteriafor successful ·performance. Qualityof the product that reachesthe consumer is of· small concern

1972 ON RE-READING THE LAW 81to middle management in educationalenterprises. Managers arenever partners in concerns vvhichare without entrepreneurs. Educatorsare men of means, not ofends, and the means at their disposalare collectivism, centraliza,;.tion, and compulsion.Bastiat made a vvild and vvonderfulsuggestion to us: "Let usnow try liberty."Away with the whims of governmentaladministrators, their socializedprojects, their centralization,their tariffs, their governmentschools, their state religions, theirfree credit, their bank monopolies,their regulations, their restrictions,their equalization by taxation, andtheir pious moralizations!In my latest reading of The Lwwthere.emerges a classic frameworkof freedom: the belief in a harmonyin human nature, the knowledgethat individual aspiration ifleft unfettered contributes to thegeneral good, the sober understandingthat man is not God.The story is told that at themoment of Fredric Bastiat's passinghe whispered something. Thesound vvas virtually inaudible, butthe listening. priest thought thevvhisper vvas,. "Truth, truth. "What else could it have been! ~From PRICE CONTROLPERCY L. GREAVES, JR.PRICE control has been often tried.It has been strongly enforced. Yet,it has consistently failed to producethe desired results. Our an-Professor Greaves is now a free-lance economistand lecturer. This article first appeared inChristian Economics, May 20, 1952.cestors learned the follies of papermoney and price control the hardvvay. They learned a lesson vvhichmany present-day Americans seemto have forgotten. Price controlsalmost vviped out our independencein the first years of our existence.

82 THE FREEMAN Februa,ryOur Continental Congress firstauthorized the printing of Continentalnotes in 1775. The Congresswas warned against printingmore and more of them. In a 1776pamphlet, Pelatiah Webster,America's first economist, told hisfellow men that Continental currencymight soon become worthlessunless something was done tocurb the further printing and issuanceof this paper money.The people and the Congressrefused to listen to his wise advice.With more and more papermoney in circulation, consumerskept bidding up prices. Pork rosefrom 4·¢ to 8¢ a pound. Beef soaredfrom about 4¢ to 10¢ a pound. Asone historian tells us, "By November,1777, commodity prices were480% above the prewar average."The sittllation became so bad· inPennsylvania that the people andlegislature of this state decided totry "a period of price control,limited to domestic commoditiesessential for the use of the army."It was thought that this would reducethe cost of feeding and supplyingour Continental Army. Itwas expected to reduce the burdenof war.The prices of uncontrolled, importedgoods then went sky high,and it was almost impossible tobuy any of the domestic commoditiesneeded for the Army. The controlswere quite arbitrary. Manyfarmers refused to sell their goodsat the prescribed prices. Fewwould take the paper Continentals.Some, with large families to feedand clothe, sold their farm productsstealthily to the British inreturn for gold. For it was onlywith gold that they could buy thenecessities of life which they couldnot produce for themselves.On December 5, 1777, theArmy's Quartermaster-General,refusing to pay more than the government-setprices, issued a statementfrom his Reading, Pennsylvaniaheadquarters saying, "If thefarmers do not like the pricesallowed them for this produce letthem choose men of more learningand understanding the next election."This was the winter of ValleyForge, the very nadir of Americanhistory. On December 23, 1777,George Washington wrote to thePresident of the Congress, "that,notwithstanding it is a standingorder, and often repeated, that thetroops shall always have two days'provisions by them, that theymight be ready at any sudden call;yet an opportunity has scarcelyever offered, of taking an advantageof the enemy, that hasnot been either totally obstructed,or greatly impeded, on this account.. . . we have no less thantwo thousand eight hundred andninety-eight men now in camp

1972 PRICE CONTROL AND VALLEY FORGE 83unfit for duty, because they arebarefoot and otherwise naked.....I am now convinced beyond adoubt, that, unless some great andcapital change suddenly takesplace, this army must inevitablybe reduced to one or other of thesethree things: starve, dissolve, ordisperse in order to obtain subsistencein the best manner theycan."Lesson LearnedThe severity of the situation increased.Our ragged regimentalswere dispersing. In February,1778, the Pennsylvania Assembly"passed a law appointing commissionersin every city of the statewith full power to purchase or toseize, at stated prices, all provisionsnecessary for the army."But, appeals to patriotism, accompaniedby force and threats ofmore force, failed to bring out thenecessary provisions. The farmersjust would not trade the fruit oftheir hard labors for paper moneywhich bought less and less as theweeks passed by.On April 21, 1778, GeorgeWashington wrote a delegate inCongress, "Men may speculate asthey will; they may talk of patriotism;they may draw a few examplesfrom ancient history, ofgreat achievements performed byits influence; but whoever buildsupon them, as a sufficient basis forconducting a long and bloody war,will find themselves deceived inthe end. We must take the passionsof men as nature has giventhem, and those principles as aguide, which are generally therule of action. 1 do not mean toexclude altogether the idea ofpatriotism. I know it exists, andI know it has done much in thepresent contest. But I will ventureto assert, that a great and lastingwar can never be supported onthis principle alone. It must beaided by a prospect of interest, orsome reward. For a time it may,of itself, push men to action, tobear much, to encounter difficulties;but it will not. endure unassistedby interest."Valley Forge taught GeorgeWashington and the Pennsylvaniaadvocates of price control a verycostly lesson. They had hoped forplenty at low prices. Instead theygot scarcity and indescribablemisery. Anne Bezanson's valuablebook, Prices and Inflation duringthe Americam Revolution, tells us,"By June 1, 1778, the act of regulatingthe several articles on theprice lists was wholly suspended."Price control· had failed.Army Better fedThis same book informs us thatafter this date the commissaryagents were instructed, "to givethe current price ... let it be what

84 THE FREEMAN Februaryit may, rather than the armyshould suffer which you have tosupply and the intended expeditionbe retarded for want of it."As a result the Army was betterprovided for in the fall of 1778,than had previously been the case.In· the words of Miss Bezanson,"the flexibility in offering pricesand successful purchasing in thecountry in 1778 procured neededwinter supplies wanting in theprevious year."In January, 1780, Pelatiah Websterwrote, "As experiment is thesurest proof of the natural effectsof all speculations of this kind ...it is strange, it is marvelous to me,that any person of common discernment,who has been acquaintedwith all the above-mentionedtrials and effects, should entertainany idea of the expediency of tryingany such methods again. . ..Trade, if let alone, will ever makeits own way best, and like anirresistible river, will ever runsafest, do least mischief and mostgood, suffered to run without obstructionin its own natural channel."Price control is an attempt toalter God's law of supply and demand.Those who endorse it frequentlybelieve that the supply ofgoods and human satisfactions canbe maintained at prices which arelegally sef below the free marketprice. They are ever doomed todisappointment. When a price isset below the free market price,marginal producers will alwayscease to produce. The availablesupply is thus reduced. On theother hand, prices held below thefree market rates always attractmore prospective buyers than thehigher market prices. The resultwill ever be, other things beingequal, a decreased supply and anincreased demand.Free prices allocate scarce goodsto the highest bidder. In consumersgoods, the highest bidder is theperson who has best served society.In producers goods, the highestbidder is usually the personwho can make the best use of thescarce labor and materials available.He can pay the highest pricebecause he expects society to payhim more for his final productthan it will pay for the product ofany lower bidder. When the state,or some bureaucratic agent of thestate, sets prices, he must also decidewho shall have and who shallhave not.The power of allocating the necessitiesof life is the power of lifeand death. Under price controlthat power is given to the politicalpowers that be. Consumers areentirely at their mercy. Price controlis, therefore, the very antithesisof freedom. Price control iseconomic slavery. ~

WEandtheTHIRDERIK VON. KUEHNELT-LEDDIHNANote ofChristian Dissent"Truth alone offends."- French proverbAs A WORLD TRAVELER more or lesspermanently on the move, I mustconfess to the odious crime of thoroughdisagreement with currentconceptions in regard to the Westernworld's relationship with, andduties toward, the so-called developingnations. My disagreementconcerns not only the secular viewson the subject but .also those prevailingincreasingly in the majorityof the Christian Churches. Travelsand intensive studies over a periodof fifteen years have convinced methat our general Western notionsin regard to this delicate subjectmust be thoroughly revised. Obviously,an exhaustive argument cannotbe expected within a shortarticle, nor elaborate statistics presented.All that can be done hereDr. Kuehnelt-Leddihn is a European scholar,linguist, world traveler, and lecturer. Of hismany published works, perhaps the best knownin America are Liberty or Equality? and TheTimeless Christian.is to tabulate various of the current- largely erroneous - views,followed by a few critical remarks."Colonialism Was a Crime,Its Record Entirely Negative"Let us begin with the widespreadassumption that "colonialism" wasa crime and its record entirelynegativee Many Americans especially,I would say, are "dedicated"to this notion, forgetting that theUnited States still has colonies (inthe Pacific) and that without theBritish colonial effort the gloriousAmerican nation would not exist.A patriotic American"anticolonialist"can be likened to a man in hisprime, proud of his record andachievements but fulminatingagainst fatherhood-without whichhe would not exist - an attitudereminding one of the Oedipus Complexand worthy of medical. attention.85

86 THE FREEMAN FebruaryWithout British colonialismthere would be no Nigeria, Ghana,or Australia, no India liberatedfrom the Moslem yoke, and soforth. Without the Roman colonialdrive neither the French nor theSpanish language would exist, norEnglish as we know it, and presumablynot even our modern, civilization.And let me add thatwithout Bavarian colonizing myown country, Austria, would notexist either. A furious Braziliananticolonialist would seem veryfunny to me. Several years ago,when I was asked in Irkutsk whatI thought of that capital of EasternSiberia, I replied that it testifiedto the vigor of Russian colonialism.Thereupon, I was earnestlyexhorted not to say "kolonialism"but "osvoyeniye," which means "incorporation."Keeping a straightface, I wrote this word down inmy notebook while, out of the cornerof my eye, I watched the broadgrins all around me."Colonialism" is a neologism notto be found in older dictionaries.It is not an "ism," but expressesa mere law of history and politics.No power vacuum can exist forany length of time; it invitespenetration and occupation. In thisrespect, geography does not differfrom physics.Point two is the charge thatEurope and the United Statescontinue to take brutal advantageof the former colonies and other"developing countries" throughinvestments there. However,"emerging nations" are in need ofcapital - foreign capital, if theyhave none of their own and refuseto practice the harsh policy of lowwages and high investments. Thisharsh policy characterized ourEuropean economy and industrymore than a hundred years agoandlaid the foundations for ourpresent high living standards.Until the end of 1958, Francodesperately and foolishly struggledagainst foreign investmentsin his then truly "underdeveloped"country whose living standardswere well below those of Chile.Fortunately, he was finally prevailedupon to give up this sterileattitude; as a result, not only foreigncapital and local investors,but the Spanish masses, too, beganto prosper. On the other hand,many "capitalists" until recentlystill invested considerable sums inpolitically unstable overseas nationsand lost them through revolutions,riots, guerilla warfare andconfiscations, or simply because ofthe unavailability of efficient manpower.And as for foreign aid, theFrench - to cite only one example- still pay more per capita thanthe Americans do, and they paymore to their colonies than theydid in the colonial period. If theItalians do not shell it out in simi-

1972 WE AND THE THIRD WORLD 87Jar fashion, the reason may bethat living standards in parts ofNigeria are higher than they arein Italy's deep south, in the Mezzogiorno.IIDeco/onization a Boon llThirdly, there is the prevalentview that "decolonization" hasbeen a real boon for the liberatedmasses, giving them a chance todevelop their own cultural heritage.Yet, in most cases .only athin layer of westernized "natives"benefited from a prematuredecolonization - for which theyhave to thank the Cold War andthe invisible Washington-MoscowAxis of "anticolonialists" outbiddingeach other under the motto:"I can be more anticolonialist thanyou are." But the rule of the newmen, whether politicians, mobmasters,or dictators, has not beenmarked by greater efficiency,greater justice and magnanimity,more peace, or (least of all) lesscorruption.Nobody would have dared to slipa hundred rupee note into thehand of a British judge in India;among the little people there onefinds today the greatest admirersof colonial rule, which to many ofthem now appears as a GoldenAge. (Did you ever talk to themontwgnards in Vietnam? Or tosimple Cambodian farmers? Youwill find the same attitude there.)Let us also remember our ownGermanic ancestors, real savageswho destroyed the already ChristianizedRoman Empire. How longdid it take them to gain standardscomparable to those of the Romanculture they destroyed? Six hundredyears? Eight hundred years?Still, many are those who insistthat the undeniable "backwardness"of the emerging nationsis due to our past oppressionand/or to our refusal to educatethem. But what would have happened,let us say, had we thrown acordon sanita.irre around tropicalAfrica and never set foot on thatpart of the Dark Continent? Dowe not have the admission of Mr.Tubman of Liberia and of EmperorHaile Selassie that theircountries, unfortunately, are lackingthe hard but salutary experienceof colonialism ? Have thePortuguese been really so amiss ineducating the Angolans? (What isthe illiteracy rate in Portugalproper?) Or what of the Belgiansin the Congo? Did not LovaniumUniversity have an atomic reactorbefore the University of Vienna?How many Ph.D.s and M.D.s werethere in the ancient Kingdom ofthe Congo before the white manarrived? And as for wicked westernization:is not the Third Worlddesperately trying to continue thisprocess? Is not Marxism morewestern than Confucianism, Tao-

88 THE FREEMAN Februaryism, or Buddhism, or modern technologyand medicine more so thanancestor worship, magic, and sorcery?"Old World Domination"Fairy tales about the ThirdWorld abound in America as wellas in Europe. Thus, we hear that,in Latin America especially, thehangovers from Old World dominationare responsible for the bigso·cial differences and the continuedinternal exploitation. Now,whence does the poverty of theLatin American masses come?How great is the expectation ofraising disciplined, skilled, laboriousmen in the sometimes nearlypolyandric and matriarchal "families"with up to 80 per cent illegitimatebirths, characteristic ofthe Caribbean and other· moresouthern areas?In addition, one has to rememberthat only three areas in theentire world have "modern" workethics or what the Spaniards callla gana de trabajar: Europe (withthe center of gravity in theNorthwest), North America, and EastAsia (including perhaps Vietnam,but certainly excluding Laos andCambodia) . We must bear in mindthat in the Middle Ages the year,according to regional customs, hadbetween 90 and 130 holy days ofobligation besides the 52 Sundays.Systematic and rationalized workbecame an ideal only with theReformation. In a generally easygoingcountry, if a small minority(often of alien origin) works reallyhard, it will, for want of competition,become rich almost overnight.Hence the "social problem,"hence the rapid rise of ferventlyenvied minorities all over theglobe - the Parsees in India, theJapanese in Brazil and Peru, theSpaniards (los zopilotes!) in Mexico,the Chinese in Southeast Asia,the Lebanese in Africa, the Jewsin Central and Eastern Europe,the Ibos in Nigeria, and so on.They will always serve as scapegoatsfor mankind's most deepseatedvice: envy, murderous, furiousenvy. Naturally, these unpopularminorities rarely feel safe;demagoguery agitates againstthem, and they tend to seek securityfor their savings.Related to the myth of the OldWorld's culpability is another one:given the "deplorable sins of thepast" in these areas, the only reasonableeconomic development canbe one along socialist lines. "Letus help them to follow Marx!"True, individualism and a competitivespirit are essentiallyWestern characteristics, but besidesSpain we have the cases ofJapan, Formosa, Singapore, theIvory Coast, and Lebanon wherefree enterprise has, after all,proved to be the goose that lays

1972 WE AND THE .THIRD WORLD 89the golden eggs. Russian livingstandards (we are not speakingof the GNP) are barely above thelevels of 1914.Then there are those who insistthat weare "bound in justice" tohelp the emerging nations economically,financially, materially. Well,in more than 150 years we managedwith blood, sweat, and tears andwith endless patience to buildupan industrial civilization whichonly in the last· two or three decadeshasyielded a "life of plenty"for any sizable numbers amongus. Due to the big capital investmentsrequired in the beginning,only few branches·of productionin a young industrial economy canafford to pay "liberal" ("living")wages. In some cases it takes generations.Our wealth, too,:did notcome swiftly. or smoothly. Out ofvoluntary charity we ought to helptheothe~s to catch up with us materially,but they have no demandson.us "in justice."In this connection the. "idealists"among us might reply thatour wealth does not stem from ourefforts, but from the past andpresent exploitation of "colored"peoples .. and their raw materials.The alleged immense benefits fromour· colonial .period, however, areyet another myth. Decolonization,in spite of large-scale confiscations,ushered .in our Europeanprosperity. (The most prosperousEuropean nations, such as Switzerlandor Sweden, never had colonies.)Even the Belgian Congowas profitable only between 1940and 1957; of. the German coloniesonly little Togo paid off. AdamSmith, in the face of AmericanIndependence, declared that businesswith colonies is no moreprofitable than with foreign countries.Actually, trade with theformer Thirteen Colonies rosefrom 15 to 61 million dollars inthe period 1775-1806. In 1852 Disraeli,referring to Britain's foreignpossessions, spoke about"those miserable colonies" andCobden asked·ironically: "Who· isthe enemy who will do us thepleasure to steal our possessions1"Colonies appealed to patriots, missionaries,na,valofficers, and adventurousentrepreneurs(a~dspeculators) who rarely saw theirdreams come true. The necessaryinitial investment - roads, railroads,hospitals, military establishments,canals, drainages, pestcontrol, schools, training centers,ports, telegraph lines, sanitation ­was so enormous that decolonizationfrequently came before ·realprofits began to make themselvesfelt.Nevertheless, the·steady lamentabout our European (and evenAmerican) mistreatment of theformerly colonized nations continues.Europeans, especially if

90 THE FREEMAN Februarythey broke with the Christianfaith and fell for neo-pagan ideologies,have always been far morecruel toward each other (rememberAuschwitz, Dresden, Katyn)than toward any "natives"; andas for the "natives" among themselves,we need only open a newspaperalmost any day to hear whatthey do to each other. (Imaginethe reactions if the BangIa Deshmovement had been suppressed inthe way it was by a British general!And the same applies to theextermination of the Ibos, to mentiononly two especially starkcases.) Brutal treatment? Probablytwo-thirds of the populationsof the "emerging nations" wouldnot exist were it not for Westernmedicine. Sleeping sickness, bubonicplague, yellow fever, bilharzia,filhosis, cholera, dysentery,and leprosy would still decimateentire regions. Horrors like Zenanyana,Dahomey's "Evil Night,"the antics of the Kings of Benin,Suttee (burning of widows) inIndia, "eating long pig" (cannibalism)in Polynesia, not to mentionthe bestial slaughters onMexico's Teocalli, would still goon were it not for "colonialism."However, we are constantly exhorted:"The world cannot be· permittedto go on being one quarterrich and three quarters poor." Tothis we have to reply that the differencein living standards be~tween Europe-America-Japan andthe rest of the world will continueto exist as long as the humanelement - skill, management, economy,intelligence, determination towork hard - differs so significantly.(In the Congo the Belgiansimported highly paid bricklayersfrom the homeland because eachone did more than three times thework of a native.) Of course, thismight change in time. Today Germanmanufacturers prefer Spaniardsand Balkanites to "native"workers.A Framework of TechnologyThe dream of European-American-Japaneseliving standards onthe basis of "Protestant workethics" can only be fulfilled withinthe framework of a high order oftechnology. Scientifically speaking,there is no answer to the questionwhether we are normal and theothers lazy, or the others normaland we neurotic. (Climate hashardly anything to do with theissue which depends upon a voluntarychoice between leisure andspending and poverty, or hardwork and saving and wealth.)Three years ago Dr. J. S. Kamwarof the Indian Council for AgrarianResearch stated that if only two ofthe larger Indian states were totill the soil intensively and withmodern methods, all of India couldbe fed properly; and if all the

1972 WE AND THE THIRD WORLD 91farmers in all 14 states were totoil scientifically and ,diligently,two-thirds of the produce couldbe exported.To all this I would like' to addfour supplementary remarks:1) The democratic republic,sometimes a failure even in highlycivilized nations (vide the case ofGermany), becomes swiftly bankruptoutside of "Euramerica."When monarchy is ruled out asobsolete - and the Third Worldalways craves for what it considersthe most "modern" institutions- the father image is soonreplaced by that of Big Brother.Yet, tyrannies tend toward a bureaucraticand centralized collectivism("socialism") and thus theeconomy is "politicized." Confiscations("nationalizations") alwayscontribute to the reluctance offoreign investors. In fact, the industrialentrepreneur or landownerwho, under such circumstances,does not salt away at leastsome of his profits to foreignbanks, must be a super-patriot, asaint, or a soft-brained simpleton.2) Almost everywhere in theThird World there is the failureto recognize that Western cultureand civilization represent a packagedeal. One cannot arbitrarilypick some items and leave the rest.He who wants to own, keep andrepair a car has to accept - consciouslyor unconsciously - Aristotelianand Cartesian notions.N either modern wars nor modernagriculture are possible without anindustrial background. No industrycan be based on animistic,Buddist, or Vedantic foundations.The engineer has been born in theshadow of the Cross. Scientificthinking is "exclusive," not syncretisticor relativistic. WhetherWestern,civilization is superior orinferior to others is beside thepoint. The fact remains that allnations on this globe want to bewesternized. But with an unerringinstinct they usually choose theworst the West has to offer, forexample the obsolete nineteenthcenturyideas embraced by Maxism.3) "Social engineering" will notalleviate poverty.This is even more'true if (as it happens in the ThirdWorld) the social pyramid has avery broad basis, shrinks rapidlytoward the middle and ends in along, thin needle. The needle maybe conspicuous, but its cubic contentis very small. "Redistribution"will not cure the misery ofthe masses, only the baking of abigger cake will have this effect,which presupposes wise leadershipandmany.motivation among the4) Humanity, according to thescientists, is at least half a million

92 THE F'REEMAN Februaryyears old. If we equate this periodto 12 hours we can say that whatwe today arbitrarily call "decenthuman living standards" havebeen the privilege of a very fewonly during the last five minutesbefore twelve - and available formore or less entire nations onlywithin the past thirty seconds. Upto then ~there was only hunger,cold, vermin, fear, disease, despair,brutishness, and boredom.The average life-span for thosewho survived infancy in the neolithicage was 28 years for menand 22 for women. Even LouisXIV could never get rid of hislice, and in the summer Versaillesemitted :an unbearable stench. Theliving standards of His Excellency,Herr Johann Wolfgang vonGoethe, would be rejected by anyGerman skilled worker today. Historicallyand geographically speaking,"a decent life" (or familywages) has always been somethingof a "unique situation" in thisworld.Christian Aspects ofthe ProblemAs for specific Christian aspectsof this whole problem, let us adda few more points:The masochism, the cringingself-accusation of good Christiansin regard -to the Third World isnot so surprising if we bear inmind that Christianity alwaysfeared a Pharisaical, holier-thanthouattitude. To beat one's breastover one's shortcomings is veryChristian, but this should neverbe an automatic, thoughtless gesture.A feeling of guilt must bebased on real guilt, otherwise itbecomes a purely medical problem- and ceases to be of any spiritualvalue.Racism exists undeniably and ithas been traditionally muchstronger in countries belonging tothe Reformed Churches than inthe Catholic orbit. (Toynbee hassome pertinent passages on thatsubject.) In the World Council ofChurches (with its seat in Geneva)Christian masochism hasled to a policy which reminds oneof all those benighted spirits whostarted out as blinded do-goodersand ended up as criminals if notmurderous terrorists. To financethe Chinese-trained and Chineseledterrorists in Southern Africa,who have committed abysmalatrocities (mostly toward otherAfricans) is the height of confusion."We have been racists,now we must do something againstracism and not only preachagainst it," are the words of Dr.Eugene Carson Blake. An "Anglo­Saxon" telling the Portuguese notto practice racism - this is thezenith of impudence!The Catholic world, on theother hand, has 'always been lack-

1972 WE AND THE THIRD. WORLD 93ing in first-rate economists andfinancial experts. For this thereare good reasons; one need onlyread St.· Thomas on commerce inDe Regimine Princ'ipum. I canthink of only two living· contemporarieswho are Catholics andeconomists of world renown. Totalk about global, especially "ThirdWorld" problems without cleareconomic and financial concepts isjust as futile, silly, and criminalas to talk about economics withoutethical considerations. It is difficultto say whether today Catholicor communistpolitical-economicsocialthinking is more divorcedfrom the deeper realities of lifeand from truly global perspectives.Another thing we can observeis the· evil inherent in the transferof monastic ideals to secular life,a tendency which is at the bottomof Catholic leftism, insofar as itis not inspired by purely worldlynotions. (The fact that there aretoday Episcopalian, Presbyterian,and Lutheran monasteries andconvents indicates that one shouldnot underrate the all-round fascinationof monasticism.) It isinteresting that in many· Catholicquarters the envious hatred forthe rich- for the Jewish banker,the Calvinist manufacturer, theAnglican landowner, dependingon the. country in question - isconnected with an ecstatic love andadmiration for the poor whom,paradoxically, one wants to renderwealthy (and thus less likely toenter the Kingdom of Heaven?),preferably by expropriating therich rather than by teaching thenatural virtues: a. Third Worldproblem of the first order.Social RomanticismThere exists, moreover, not onlya Western but also an ecclesi.asticmasochism which fosters SocialRomanticism and Third Worldreveries, according to which theChurch has always sided with therich and is.also in possession of"great riches." Actually, mostpriests, monks, and nuns comefrom the poorer classes and aretoday often the victims of leftistpolitical trends fostering (afterso many excesses in the oppositedirection) a. startling disloyalitytoward the Catholic past. The seIfaccusinglament that the CatholicChurch has, through its missionaries,westernized other nationsand races and thus weakened, ifnot destroyed, local cultures in theThird World can frequently beheard. Of course, in the Christianfaith the ·European past is as ineradicableas the Hebrew, Greek,and Roman background, whetherwe take the religion of a CatholicIrishman, a Methodist American,a Christian .Japanese or Angolan- an undeniable phenomenon.The bleeding-heart approach to

94 THE FREEMAN Februarythe Third World - caused by realsympathy - is perfectly in order,but Catholics especially shouldbear in mind that among the nationsinvited to dig deep into theirpockets there are only two predominantlyCatholic ones: Franceand Belgium. Catholic sentimentalistsare actually asking countriesbelonging to the ReformedChurch to shell it out, countriesthat worked hard while the Catholicnations (to whom I myselfbelong) enjoyed a dolce vita. ofleisure, reverie, and artistic pleasures(even if in relative poverty.)How loudly can Catholics ask theirseparated brethren to be the mainproviders?If, on the other hand, the entireChristian world decides to helpthe "emergers," we have to reflectmost carefully on how this is bestto be done. Obviously, not bydistributing bank bills on streetcorners, nor by giving money tocertain governments one wouldnot like to touch with a bargepole. Under no condition would Ilike to see my tax money squanderedon socialist experimentswhich have empirically shown sucha poor record. Realistic aid isgiven by Misereor, Oxfam, andother charitable organizations.And there are also our courageousentrepreneurs who have gone outto teach skills and disciplines, toprovide for jobs, salaries and taxmoneys.All in all, I think that we oughtto make concerted efforts to reinvestigateall these issues, cease tobe lachrymose cry-babies, calculatewith paper and pencil, travel,read the necessary source books,learn languages, study the manyfacets of human nature. Only thenwill we put an end to making foolsof ourselves and begin to help thedeveloping nations - firmly, scientifically,without yielding to blackmail,impudence or guilt complexes,helping them in all charity,as we would help our children, togrow up and to achieve what wehave achieved. I)IDEAS ON$LIBERTYThe Tyrant As SlaveHE WHO IS THE REAL TYRANT, whatever men may think, is thereal slave, and is obliged to practice the greatest adulation andservility, and to be the flatterer of the vilest of mankind. He hasdesires which he is utterly unable to satisfy, and has,more wantsthan anyone, and is truly poor, if you know how to inspect thewhole soul of him: all his life long he is beset with fear and isfull of convulsions, and distractions, even as the State which heresembles: and surely the resemblance holds? PLATO, The Republic

TI-IE ModERNVOlUNTEER ARMyDAVID J. KRAMERTHE MODERN VOLUNTEER· ARMY isa term heard more and more frequentlyin both military and civiliancircles. Newspapers and magazinescite "drastic changes," suchas new regulations on hair length,pay raises, and the like,. as giantsteps toward a bright future forthe military.Despite the new regulations andpublicized changes, the trickle ofmen into the MVA is at the rateof $2,585 spent on advertising foreach recruit. 1 Dissatisfaction runshigh among enlisted men, and theApril antiwar demonstrations saw1 The Castle, July 21, 1971 (The newspaperof Ft. Belvoir, Va.).SP4 David J. Kramer was born in Joliet, Illinoisin 1946. He received a master"s degree ingeology from Northern Illinois University in1970, a few weeks before he was inducted intothe service.Specialist Kramer received basic training at Ft.Polk, La., and has since been stationed at Ft.Belvoir. He is currently working in the FuelsHandling Equipment Division at USAMERDC.This article does not represent any official Armyviewpoint.many of them throwing away theirdecorations in utter disgust. Somethingobviously is wrong with thesystem..High-ranking officers and civilianpolicy makers are unable toexplain the difficulties except tosay that the youth of today aresomehow different from "their"youth. If they were able to viewthe situation from the bottom ofthe heap instead of the top, theymight discover that they are tryingto cure an illness by treatingonly its symptoms. Over the yearsthat the military draft has existed,procedures have evolved ,vhich areentirely appropriate to an agencyemploying coercion to obtain itsneeded manpower. But the procedures,the multitude of petty rulesand regulations, are merely manifestationsof the underlying coercion.And minor easing of therules is simply not sufficient to95

96 THE FREEMAN Februaryinduce young men to enter the serviceof their own free will.Just as the proper role of thepolice force is to protect citizensand property from internal aggressors(i.e., criminals), the jobof the armed forces is to protectthe nation from foreign aggressors.Needless to say, every civilizedsociety must have some suchprotection in order to survive; theduties of the policeman and soldierare just as important as those ofthe farmer, educator, and industrialist.A Sacred DutyThe Army, however, sees its roleas not only necessary but sacred(for an example of this, chat withany senior officer). A young manthinking of the military as a careerwill find highly unsavory thisnotion of "sacred duty" - completewith a fantastic aversion toconstructive criticism and wholecompanies whose'sole (though notofficial) purpose is to parade onSundays. The defense of this nationis not a sacrosanct honor buta demanding and often thanklesstask which must be approachedrealistically.The view that the Army's' job issacred is. often used to·justify themilitary .draft in the, eyes of thepublic. If defense were consideredto be no more vital to the countrythan food production, the draftwould appear strange and unfair.(We don't draft farmers, so whydraft soldiers?) But so long asnational defense is believed to bean activity worthy of "specialconsideration," this system ofcoercion seems necessary and just-the government has a right todraft a man into the service. Thisnotion stands in contradiction tothe central concept of an all-volunteerforce which, in effect, declaresthat the wishes of the individualcome before those of thegovernment. In a broader sense,the idea that it is proper for acitizen to sacrifice the whole orpart of his life to some "higherorder" has been the cornerstoneof every dictatorship which hasever existed.We are not saying here thatpersons should never come to theaid of their country in time oftrouble. A government which upholdsand protects the rights ofthe people will never have to worryabout a lack of support. But historytells clearly what happenswhen the "rights" of the statecome. before those of the individual."Government must be the servant,never the master," cries therecord, and the youth of today arelistening.A second part of the problem isthe attitude of Army officialdomtoward those in the lower. ranks:"personnel," to be used in any way

1972 THE MODERN VOLUNTEER ARMY 97seen fit. Once the premise is acceptedthat the· government hasthe "right" to take two years ofa man's life, the conclusion followsthat the Army in effect "owns" theindividual for those years. Thereare no drivers with whips or toil..ing masses building a Colosseum,but the att,itude is there despitetalk about enlisted men's councilsand the airing of grievances. 2Discipline is necessary, ofcourse, for the success of any ventureand is of· vital importancewhen the agency involved, such asthe armed forces or the police,possesses the capability of massivedestruction. True discipline,however, is a product .of respect.If .a man respects the laws heobeys, the superior he follows, andthe power of the weapons he controls,there is no problem of discipline.Inferc:hangeabilifyThe attitude of "ownership" ofthe rank-and-file soldier gives riseto .other problems: the notion ofthe "interchangeability" ... of enlistedmen, and the separate systemof justice for the military.The· old tales about master mechanicsand· holders of advanceddegrees serving as cooks and infantrymenfor two years are true2 The nickname "GI" stands for Gov.ernment Issue, a term applied to govern·ment property.even today. 3 •.The idea behind thesemisallocations is that, since theArmy."owns" the soldier, he canperform efficiently any job that heis programmed to perform, andhis own thoughts about the taskhe is given may simply be ignored.The results are plain to see:men held in positions below theirability become despondent andnegligent once their efforts atattaining other positions havefailed, while men held in jobsabove their ability become anxiousand insecure. A perpetual wasteof individual talent· occurs.The Army does make someeffort to allocate jobs according toability when a group of men areinducted. However, this attitudeof draftee interchangeability - aswell as the fact that the draft isgeared to numbers, not skillsdoesmuch to negate the effort.Few soldiers relish the thoughtthat they can be shuttled into differentpositions and. duty stationsby superiors who may not evenask the soldier's opinion on thematter. Also, the enthusiasm of apotential volunteer will not be increasedif his friends in .the mili-3 "A glaring example is the job assignmentsof men trained as soil scientists.In fiscal 1969 the Army needed 103 soilscientists. In calendar 1969, 244 enlistedmen entered·the army with such trainingbut only 6, or 2.5 per cent of those avail.able were assigned to their college spe·cialty." Chemical & Engineering News,June 29, 1970.

98 THE FREEMAN Februarytary declare, "Sure, the MVA isa nice idea, but they can still dowhatever they want with you." Noprivate business would ever tr.eatits employees in such a cavaliermanner; yet, a soldier in a volunteerarmy is an employee, muchthe same as a policeman.A more serious obstacle is theidea behind military justice, theidea that a separate system ofjustice is needed for military m~nbecause, as "property" of the government,they are different fromother citizens. The result is adouble standard, sometimes unbelievable.For example, a recentamendment in Army regulationshas allowed military men to readany literature they wanted, evenwhen the literature was criticalof the government. This went intoeffect 180 years after the Bill ofRights was adopted! Five yearsago, a man at Ft. Knox, Kentucky,was refused an accelerated promotionsimply because he had a copyof an "underground" militarynewspaper in his locker. 4In discussing military justice,we are not talking about thoselaws which are derived from generalprinciples and which apply4 The Castle, July 14, 1971. It is nottrue that military justice is mostly biasedagainst the enlisted man. In some instanceshe has more legal rights than thecivilian. The important thing to rememberis that the two systems are separate.specifically to soldiers. All occupationshave complementary sets ofrules and ethics. What concerns ushere is the idea that a system forcreating and administering thelaw may be set up apart from thegeneral system of justice in theUnited States.This attitude has no place inany plan for a truly effective volunteerarmy. The life of the soldiershould be tied in as closely aspossible with that of the rest ofthe society, not cut off and isolatedwithin a separate sphere. This integrationof systems will be noeasy task, and the man who findsa way of solving the special needsof military justice through thesystem of civil jurisprudence willcertainly be considered one of thefounders of the MVA.Summation and ConclusionHere, in summary, are the variouspoints we have discussed:• A major problem facing anyattempt to create a volunteer armyis the "draft-army" mentality, aset of attitudes and ideas belongingto an agency which has longbeen using coercion to supply itsmanpower requirements, but ideasthat are incompatible with theprinciples behind an all-volunteerdefense force.• The outward aspect of thismentality consists of the notionthat a citizen "owes" two years of

1972 THE MODERN VOLUNTEER ARMY 99his life to the country and that thegovernment may determine howthose two years shall be used. Justificationof this notion lies in theArmy's view of itself as a supersacredagency whose role in thesociety is far above all others.• The inward aspect is mainlythe idea of ownership - the Armyis owner and the soldier the temporaryproperty. This has fosteredthe notion of the interchangeabilityof the rank-and-file in thevarious occupations and the attitudethat a separate system ofjustice for the military man is aproper institution.At this moment the draft-armymentality may not appear to be acause for alarm. But posters havebeen put up throughout militaryinstallations announcing this orthat new program to help imple-ment the MVA, and the advertisingcampaigns continue in fullforce. 5 Sooner or later the Army,called upon to fulfill its "campaignpromises," will run aground on itsown rules. Now is the time forthose who set policy to evaluatein a sober manner the whole Armyphilosophy. If they succeed inbreaking through this stifling collectionof attitudes, they will notonly make their branch of the servicemore efficient and responsive,but will prove that coercion is notnecessary for the defense of thenation. If they fail, the proponentsof state omnipotence will gloatover another failure of the principleof voluntarism to achieve thedesired goal - in an area wherevoluntarism never had a chance. f)5 General Westmoreland has set July1, 1973, as the target date for an allvolunteerarmy.IDEAS ONLIBERTYDaniel WebsterA MILITARY FORCE CANNOT BE RAISED, in this manner, but by themeans of a military force. If administration has found that it cannot form an army without conscription, it will find, if it ventureon these experiments, that it can not enforce conscription withoutan army. The Government was not constituted for such purposes.Framed in the spirit of liberty, & in the love of peace, it has nopowers which render it able to enforce such laws. The attempt,if we rashly make it, will fail; & having already thrown awayour peace, we may thereby throwaway our Government.-From a speech in the House of Repres-entatives, December 19, 1814.

)WE-kL-T-H? •HENRY HAZLITTFROM TIME IMMEMORIAL therehave been reformers who demandedthat wealth and income shouldbe "divided equally" - or at leastdivided with less glaring inequalitiesthan the reformers sawaround them.These demands have never beenmore insistent than they are toda.y.Yet most of them are based, in thefirst place, on a completely erroneousidea of the extent to whichpresent wealth or income in theUnited States is "maldistributed."An American socialist, Daniel DeLeon, announced in a celebratedspeech in 1905 that, on the average,.the owners of American industrygrabbed off 80 per cent ofthe wealth produced in their factories,while the workers got· onlyHenry Hazlitt is well known to FREEMANreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as a chapter in a forthcoming book,The Conquest of Poverty, to be published byArlington House.20 per cent.! His contention wa.swidely accepted and· exerted greatinfluence.Yet the truth, as we have seenin the article on "The Distributionof Income" (the Freeman,October, 1971), is exactly the· opposite.Labor in America is gettingthe lion's share of the na.­tion's output. In recent years theemployees of the country's corporationshave been getting morethan seven-eighths of the corporateincome available for division,and the shareowners less than aneighth. More than 70 per cent ofthe personal income in the nationin 1970 was received in the formof wages and salaries. Businessand professional income totaledless than 7 per cent, interest paymentsonly 8 per cent, and dividendsonly 3 per cent.The truth seems to be that per-1 See Howard E. Kershner, Dividing theWealth (Devin-Adair, 1971), pp. 17-24.100

1972 SHOULD WE DIVIDE THE WEALTH? 101sonal income in this country· is alreadydistributed roughly in proportionto each person's currentcontribution to output as measuredby its market value. Somepeople, of course, inherit morewealth than others, and this affectstheir total personal income.How large a role this plays isstatistically·.difficult to determine,but the income distribution figuresjust cited would indicate that therole is. minor. As a -percentage ofthe total population, there are todayvery few "idle rich," howeverconspicuous a few playboys maymake themselves at the night clubsand gaudy playgrounds of theworld.Moreover, the "surplus" moneysimply doesn't exist to raise massincomes very much. In 1968, outof a total of 61 million incometaxpayers, 383,000, or six-tenthsof 1 per cent, paid taxes on incomesof $50,000 or more. Theirtotal adjusted gross income cameto some $37 billion, or 6.6 per centof total gross incomes •reported.Out of this amount they paid alittle more than $13 billion, or 36per cent of their income,. in taxes.This left them with about $24 billion.for themselves.Suppose the government hadseized the whole of this and distributedit among the 200 milliontotal population. This would havecome to $120,· or $10 more amonth~ .per person. As the disposablepersonal per capita income in1968 was $2,939, this expropriationwould have raised the averageincome of the recipients by 4per cent to $3,059. (Per capita incomeactually rose anyway to$3,108 in 1969 and to $3,333 in1970.) Of course if the governmentresorted to any such violentexpropriation, it could not repeatit after the first year, for thesimple reason that people wouldcease earning incomes of· $50,000a year or more to be seized.A Destructive ProcessAny attempt to equalize wealthand income by forced redistribution·must destroy wealth .and income.We can recognize this mostclearly if we begin with the extremecase.• If the median incomeper family has been $10,000 ayear, and we decide that everyfamily must be guaranteed exactlythat and no family can beallowed to retain more than that,then we will destroy·all economicincentives to work, earn, improveone's skills, or save. Those whohad been getting less than thatwould no longer need to work forit; those who had been gettingmore would no longer see the pointin working for the surplus to beseized, or even in working at all,since their income would be "guaranteed"in any case. People could

102 . THE FREEMAN Februarybe got to work only by coercion;most labor would be forced labor,and very little of it would beskilled or efficient.The so-called "instinct of workmanship,"without economic rewards,would have nothing toguide it into one channel ratherthan another, and nothing to holdit beyond the point of fatigue.Dseful and profitable work wouldbe black-market work. Those whosurvived would do so at a nearsubsistencelevel.But the same kind of results,less extreme in degree, would followfrom less extreme redistributionmeasures. The most fashionableof these at the moment is theGuaranteed Annual Income. I havealready analyzed this at length,together with its most popularvariant, the Negative Income Tax,in my book, Man vs. the WelfareState,2 and will only briefly indicatethe objections to it here.A guaranteed minimum incomewould not have quite the universaldestructive effect on incentives aswould an attempt to impose a compulsorilyequal income, with theceiling made identical with thefloor. At least people earning incomesabove the minimum guarantee,though they would beoppressivelytaxed, would still havesome incentive to continue earn-2 (New Rochelle, N. Y.: ArlingtonHouse, 1969), pp. 62-100,ing whatever surplus they were allowedto retain. But all thoseguaranteed a minimum income,whether they worked or not, wouldhave no incentive to work at allif the guaranteed minimum wereabove what they had previouslybeen earning for their work; andthey would have very little incentiveto work even if they had previouslybeen earning, or were capableof earning, only a. moderateamount above the guarantee.It is clearly wrong in principleto allow the government forciblyto seize money from the peoplewho work and to give it unconditionallyto other able-bodied peoplewhether they accept work ornot. It is wrong in principle togive money to people solely becausethey say they haven't anyandespecially to support such peopleon a permanent and not merelyon a temporary emergency basis.It is wrong in principle to forcethe workers and earners indefinitelyto support the nonworkersand nonearners.This must undermine the incentivesof both the workers and thenonworkers. It puts a premium.onidleness. It is an elementary requirementof economic incentiveas well as justice that the manwho works for a living should alwaysbe better off because of that,other things equal, than the manwho refuses to work for a .living.

1972 SHOULD WE DIVIDE THE WEALTH? 103VVe have to face the fact thatthere are a substantial number ofpeople who would rather live innear-destitution without workingthan to live comfortably at thecost of accepting the disciplines ofa steady job. The higher we raisethe income guarantee (and oncewe adopted it, the political pressureswould be for raising it constantly),the greater the numberof people who would see no reasonto work.Nor would a so-called ~'NegativeIncome Tax" do much to solve theproblem. The Negative IncomeTax is merely a misleading euphemismfor a tapered-off guaranteedminimum income. The proposalis that for every dollar thata man earns for himself, his governmentincome subsidy would bereduced, say, only 50 cents, insteadof being reduced by thewhole amount that he earns. Inthis way, it is argued, his incentivefor self-support would not beentirely destroyed: for every dollarhe earned for himself he would beable to retain at least half.This proposal has a certain surfaceplausibility; in fact, the presentwriter put it forward himselfmore than thirty years· ago, 3 butabandoned it shortly thereafterwhen its flaws became evident. Letus look at some of these:3 In The Annalist (published by TheNew York Times), Jan. 4, 1939.• 1. The NIT (negative incometax), by neglecting the careful applicant-by-applicantinvestigationof needs and resources made bythe traditional relief system,would, like a flat guaranteed income,open the government to massivefraud. It would also, like theflat guaranteed income, force thegovernment to support a familywhether or not it was making anyeffort to support itself.• 2. It is true that the NITwould not destroy incentives quiteas completely as the flat guaranteedincome, but it would seriouslyundermine them nonetheless. Itwould still give millions of peoplea guaranteed income whether theyworked or not. Once more we mustkeep in mind that there are a substantialnumber of people who prefernear-destitution in idleness toa comfortable living at the costof working. It is true that underthe NIT scheme they would be allowedto keep half of anythingthey earned for themselves up tonearly twice the amount of thebasic NIT benefit, but they wouldtend to look upon this as theequivalent of a tax of 50 percenton these earnings, and many wouldnot think such earnings worth thetrouble.• 3. The NIT might prove evenmore expensive for the taxpayersthan the flat guaranteed income.The sponsors of NIT, in their

104 THE FREEMAN Februaryoriginal monetary illustrations,proposed that the "break-off point"of their scheme. would be somethinglike the official "povertythreshold"income - which.is now(1972) about $4,320 for a nonfarmfamily of four. At this pointno NIT benefits would be paid. Ifthe family's income was only$3,320, falling short of the poverty-lineincome by $1,000, then a$500 NIT benefit would be paid.And if the family's earned incomewas zero, then a benefit of $2,160would be paid.But, of course, if no other governmentsubsidy were paid to thefamily (and the original NITsponsors proposed that their planbe a complete substitute for allother welfare payments) then thegovernment would be paying thepoorest families only half of whatits own administrators officiallydeclared to be the minimum onwhich such families could reasonablybe expected to live. How couldsuch a program be politically defended?As soon as the NIT programgets into practical politics, therefore,the pressure will be irresistibleto make the payment to afamily with zero income at leastequal to the official poverty-lineincome. If this means $4,320 fora family of four, say, then someNIT payment must be made toeach family until its incomereaches twice the official povertylineincome, or $8,640 for everyfamily of four. And this meansthat even if a family were alreadyearning much more than the officialpoverty-line income - say,$8,000 a year - it would still haveto be subsidized by the government."Everybody must be treatedalike."• 4. This would be ruinously expensive,but it is still not the end.The subsidized families would object to paying a 50 per cent incometax (as their spokesmen would putit) on everything they earned forthemselves. So they would be allowedto earn a certain amountentirely exempted from such a deduction.(Such an exemption hasalready been granted on self-earningsof Social Security recipients,and it is proposed in a. pendingCongressional bill to enact anNIT.) This would make the NITstill more crushingly expensive forthe remaining taxpayers.• 5. There would be politicalpressures every year for increasingthe amount of these·exemptedearnings. In fact, a 50 per cent"income. tax on the poor" wouldbe denounced as an outrage. Intime the proposal would be certainto be made that all theself-earningsof the NIT subsidy recipientsbe exempted from any offsettingdeductions whatever. But thiswould mean that once a family had

1972 SHOULD WE DIVIDE THE WEALTH ? 105been granted the initial minimumincomeguarantee of, say, $4,320a year, it would still be gettingthat full sum in addition to whateverit earned for itself. But "everybodymust be· treated alike."Therefore therewould be no break-.off point, or even any taperingoff. Every family -'- including theRockefellers, the Fords, theGettys, and all the other millionaires- would get the full guaranteedincome.This end-result cannot be dismissedas mere fantasy. The principleof a government subsidy toany family, no matter how rich,is already accepted in our own SocialSecurity scheme and in GreatBritain under the name of "familyallowances." It is merely that theamounts are smaller. So the NegativeIncome Tax, as a social measure,turns out to be only a halfwayhouse. Carried to its logicalconclusion, it becomes a uniformguaranteed handout to industriousand idle, thrifty and improvident,poor and rich alike.• 6. It is an anticlimax to pointout, but it needs to be done, thatthere is no political possibilitythat a flat guaranteed income or a"negative income tax" would beenacted as a complete subsbitutefor the existing mosaic of welfareand relief measures. Can·we seriouslyimagine that the specificpressure groups now getting veterans'allowances, farm subsidies,rent subsidies, relief payments,Social Security benefits, .foodstamps, ~edicare, ~edicaid, oldageassistance, unemployment insurance,and so on and so on,would quietly give them up, withoutprotests, demonstrations, orriots? The. overwhelming probabilityis that a guaranteed incomeor NIT.program would simplybe thrown on top of the wholepresent rag-bag of welfare meassurespiled up over the last thirtyto forty years.We may put it down as a politicallaw that all State handoutschemes tend to grow and growuntil they bring on a hyper-inflationand finally bankrupt theState.Land ReformPerhaps I should devote at leastone or two paragraphs here to socalled"land reform." This appearsto be the most ancient of schemesfor forcibly dividing the wealth.In 133 B. C., for example, TiberiusGracchus succeeded in getting alaw passed in Rome severely limitingthe number of acres that anyone person could possess. The typical"land reform" since his day,repeatedly adopted in backwardagricultural countries, has consistedin confiscating the big estatesand •either "collectivizing"them or breaking them up into

106 THE FREEMAN Februarysmall plots and redistributingthese among the peasants. Becausethere are always fewer such workableparcels than families, and because,though each parcel of landmay be of the same nominal acreage,each has a different nature,fertility, location, and degree ofdevelopment (with or withoutclearance, grading, irrigation,roads, buildings, and the like),each must have a different marketvalue. The·distribution of land cannever be universal and can neverbe "fair"; it must necessarily favora selected group, and somemore than others within thatgroup.But apart from all this, such ameasure always reduces efficiencyand production. From the momentit is proposed that property beseized, its owners "mine" its fertilityand refuse to invest anotherdollar in it, and some may noteven raise another crop. It doesnot pay to use modern equipmenton small farms, and in any casethe owners are unlikely to havethe necessary capital. "Land reform"of this type is an impoverishmentmeasure.The Henry George scheme of a100 per cent "single tax" onground rent would also discouragethe most productive utilization ofland and sites, and adversely affectgeneral economic development.But to explain adequatelywhy this is so would require solengthy an exposition that I mustrefer the interested reader to theexcellent analyses that have alreadybeen made by Rothbard,Knight, and others. 4Progressive TaxationAmong the' "advanced" nationsof the West, however, the mostfrequent contemporary method ofredistributing income and wealthis through progressive income andinheritance taxes. These now commonlyrise to near-confiscatorylevels. A recent compilation 5 comparingthe highest marginal income-taxrates in fifteen countriesyielded the following results:Switzerland 8 per cent, Norway50, Denmark 53, West Germany55, Sweden 65, Belgium 66, Australia68, Austria 69, Netherlands71, Japan 75, France 76, UnitedStates 77, Canada 82, UnitedKingdom 91, and Italy 95 per cent.Two main points may be madeabout these hyper-rates: (1) theyare counter-productive even inraising revenues, and (2) they dohurt not only the rich but the poor,and tend to make them poorer.4 Murray C. Rothbard, Power and Market:Government and the Economy (MenloPark: Institute for Humane Studies,Inc., 1970), pp. 91-100. Frank H. Knight,"The Fallacies in the 'Single Tax'," TheFreeman, Aug. 10, 1953.5 First National City Bank of NewYork.

1972 SHOULD WE DIVIDE THE WEALTH? 107All the revenues yielded by theu. S. personal income tax of 1968,with its rates ranging from 14 to70 per cent, plus a 10 per centsurcharge, would have beenyielded, with the same exemptionsand deductions, by a flat incometax of 21.8 per cent. If all the taxrates above 50 per cent had beenreduced to that level, the losswould not have been as much as ittook to run the government for afull day. In Great Britain, in thefiscal year 1964-65, the revenuefrom all the surtax rates (rangingabove the standard rate of41 1 4 per cent up to 96 1 4 per cent)yielded less than q per cent of allthe revenue from the income tax,and barely more than 2 per centof Britain's total revenues. InSweden, in 1963, the rates between45 and 65 per cent broughtin only 1 per cent of the total nationalincome-tax revenue. And soit goes. The great masses of thepeople are accepting far higherrates of income tax than theywould tolerate if it were not fortheir illusion that the very rich-are footing the greater part of thebill.One effect of seizing so high apercentage of high earnings is todiminish or remove the incentiveto bring such earnings into existencein the first place. It is verydifficult to estimate this effect inquantitative terms, because we arecomparing actualities merely withmight-be's and might-have-been's.In March, 1947, the National CityBank, based on reports of the Bureauof Internal Revenue, presentedthe illuminating table below.(The dollar figures stand formillions of dollars.)1926-28averageNational Income .. $77,000Incomes over$300,000:Total amount $ 1,669Taxes paid $ 281Top tax rate 25%No. of returns...... 2,2761942$122,000$$37629288%654In other words, during the sameperiod in which the total nationalincome irncreased 58 per cent, totalincomes over $300,000 fell 77 percent. If the aggregate of such$300,000 incomes had risen proportionatelyto the whole nationalincome, the total would havereached $2,644 million - seventimes greater than it actually was.A great deal more statisticalanalysis of this sort could instructivelybe undertaken not onlyfrom U. S. but many foreign income-taxreturns.It is not merely the effect ofpersonal and corporate incometaxes in reducing the incentivesto bring high earnings into existencethat needs to be considered,but their total effect in soaking upthe sources of capital funds. Mostof the funds that the present tax

108 THE FREEMAN Februarystructure now seizes for currentgovernment expenditures are preciselythose that would have goneprincipally into investment - i. e.,into improved machines and newplants to provide the increased percapita productivity which is theonly permanent and continuousmeans of increasing wages andtotal national wealth and income.In the long run, the high rates ofpersonal and corporate incometaxes hurt the poor more than therich.Equality, Once for AllA socialist proposal that usedto be aired frequently a generationor two ago, but is not muchheard now (when the emphasis ison trying to legislate permanentequalization of incomes), is thatthe wealth of the country oughtto be distributed equally "once forall," so as to give everybody aneven start. But Irving Fisherpointed out in answer that thisequality could not long endure. 6It is not merely that everybodywould continue to earn differentincomes as the result of differencesin ability, industry, and6 Elementary Principles of Economics(New York: Macmillan, 1921), pp. 478­483.luck, but differences in thrift alonewould soon re-establish inequality.Society would still be divided into"spenders" and "savers." One manwould quickly go into debt tospend his money on luxuries andimmediate pleasures; anotherwould save and invest present incomefor the sake of future income."It requires only a verysmall degree of saving or spendingto lead to comparative wealthor poverty, even in one generation."Even communists have nowlearned that wealth and incomecannot be created merely by alluringslogans and utopian dreams.As no less a figure than Leonid I.Brezhnev, First Secretary of theSoviet Communist party, recentlyput it at a party congress in Moscow:"One can only distribute andconsume what has been produced,this is an elementary truth."7What the communists· have stillto learn, however, is that the institutionof capitalism, of privateproperty and free markets, tendsto maximize production, while economicdictatorship and forced redistributiononly discourage, reduceand disrupt it. ~7 The New York Times, May 29, 1971.

CHARLES R. LA DowDESPITE the ever-burgeoning taxburden of our welfare state, voluntarygiving by the Americanpeople goes on apace, as the numberof philanthropic appeals steadilyincreases. Without recourse tostatistics, the average person'sdaily mail, plus reiterations in themedia, assure him of the persistentsuccess of privately supportedcauses. Furthermore, the buildingsand equipment of privately fundedphilanthropic institutions are visualproof of their vitality. Tax deductibilityonly partially eases thecost of giving, a cost assumed bypersons of every class. The majormotive for giving is clear; in thisprivate sector, the individual isallowed to give to causes which hetruly wants to support. Also, he isassured of the effectiveness of hisdonations by the knowledge thatMr. La Dow, of San Diego, recently retired asa teacher of social studies in high school.he can withdraw support wheneverhe believes an organization is nolonger worthy and the certaintythat such organizations are awareof his option.The "public philanthropy" of thewelfare state possesses no suchmotivation and no such safeguard.Based, of necessity, on class legislation,it appeals to the greed ofthe individua.!, as a member ofsome arbitrary, abstract group.(Private philanthropy would be inthe same condition if its beneficiarieswere empowered to voteupon, and lobby for, the natureand amounts of their benefits. Whowould contribute to such institutions?)Since all classes of citizens,directly and indirectly, arenow dependent on public largesse,it is understandable that each individualis motivated to vote sothat his class, hence himself, willget the largest possible share of109

110 THE FREEMAN February ,public funds. (The person is rare,indeed, who asks for a cut in wagesor benefits!) Hence, we are facedwith the odd spectacle of a millionaireallowing Medicare to pay forhis operation, while a recipient ofrelief goes to the doctor every timehe has a sore thumb. People of everyclass and political persuasionare aware of the shortcomings ofgovernmental welfare programs;but the very nature of the processimpels them to demand more ofthe same. There is also the haunting,long-held, fear that, if weshould scrap these programs andturn to a free market, we wouldhave a ghastly depression.Reality suggests otherwise.Should we continue as we are doing,a terrible awakening is certainto come. The truism of economicsis inescapable: "Wants are unlimited,while resources are in limitedsupply." We haye been squanderingour resources for decades,having attempted to repeal thelaw of supply and demand and thenatural restraints it imposes. Thecontinuing vitality of Hong Kong,surrounded by totalitarianism; theastounding recovery of war-devastatedGermany and Japan; theseare examples of the effectivenessof open competition. Our welfarestate is even threatened, economicallyand militarily, by the totalitarianpowers. We must awakenfrom our long holiday. Are theAmerican people too effete to answera challenge of "blood, sweat,toil, and tears?" Their record ofvoluntary giving and ability torise quickly to real emergency indicatesotherwise.No Lack of PhilanthropyAs to any fear that dismantlingof the welfare state would dry upphilanthropy in this nation andsee people dying for lack of foodor medical care, one need onlyread the daily paper to see the improbabilityof such happenings.Even with the load of tax-supportedwelfare, the people's responseto ,individual troubles is amazing.Appeals for help for the unfortunateare usually oversubscribed;nor is such help given, or taken,in a demeaning way. As always, itis public welfare, not private charity,which is truly demeaning.Generosity and gratitude arebeautiful emotions which drawpersons together as no public largessecan do. Think of the goodwhich could be done voluntarily ifthe funds extracted for public welfaremeasures were left in thehands of individuals!The foregoing suggestion maynot justly be called Brahministicor devoid of concern for the commonman. The tax load of the welfarestate falls most heavily on thecommon man, who is in no positionto claim capital losses or tax

1972 FREE GIVING VS. THE WELFARE STATE 111shelters, or to pass along his taxcosts in the form of higher prices.The easy road to great fortunesand the tax-free status of many ofour wealthiest persons are hallmarksof the welfare state. At theother extreme, the poor man,spending most of his income fornecessities, is locked into the cruelbind of tax and inflation. Whopays for the government's farmprograms? The only honest reply:"The poor people in the cities." Onthe other hand, farmers are impoverishedby rising costs of machineryand supplies due to governmentpampering of organizedlabor, plus the exorbitant taxesand interest which stem from theprofligate policies of a welfarestate. The true charge of Brahminismfits best those welfare policieswhich are designed to fastenthe individual to a place in an arbitrarycaste system of "benefits"while taxing away his chances ofsocial mobility.Failure of the current administrationto even begin to dismantlethe bureaucracy as promised indicatesa need for major surgery.When government officials, in somany cases, seem no more awareof fundamental economic law thanare their constituents, it is difficultto see how correction cancome. It usually takes a greatshock to shake a nation.into agrand decision. The blitz-bombingdid it to England. Catastrophic defeat. accomplished it in WestGermany and Japan. Such feats,as in England, are often ephemeral.The magic of Germany andJapan may well end in reaction.However, the debacle of 1929,which introduced our welfare stateand started a movement continuingto this day, is some proof ofour persistence, however perverse.Nevertheless, a steady growth ofconservative opposition, both inquantity and quality, has been apparent.Those who are rebuffed areobliged to pursue education andimprove their talents, while thosein power grow slack. It may wellbe that when the next shock comes,as it surely must, voters will beready to listen to the call to turnphilanthropy back to the people. ~IDEAS ONtrlh\W~D.LIBERTYWilliam Featheris better off, one which organizes a new upliftWHICH TOWNmovement every three months, or one which opens a new factory?The William Feather Magazine, December 1971

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC7The First AmericanCrisis: 1763-66IT MAY WELL BE that the pivotalevent for the onset of Americanresistance was the coming to thethrone of the United Kingdom in1760, of George III. He was thethird of the Hanoverian monarchsof England, the grandson ofGeorge II who immediately precededhim, and the great grandsonof George I. He was the firstof this line of British rulers to benative-born, a fact he thoughtworth emphasizing. When GeorgeIII came to the throne, he was inthe first blush of manhood, andthis promising young man shouldhave been a welcome relief fromthe rule of his grandfather, whohad no high regard for his ownabilities. Indeed, the powers ofthe monarch had declined greatlyin the unsure hands of bothGeorge I and George II. It wascommonly said that ministerswere kings during this earlierperiod, and there can be no doubtthat the Whigs had dominated solong that the government was runby factions within a party ratherthan by political parties.It became clear rather quicklythat George III intended to changemuch of this. He meant to bringthe executive authority into hishands and to direct the course ofDr. Carson lives in Florida. He is a noted lecturerand author, his latest book entitledThrottling the Railroads.112

1972 THE FIRST AMERICAN CRISIS: 1763-1766 113Parliament as well. George IIIwas a man of strong will - unbendablystubborn when he hadset his mind on a course- muchcourage, and already in grasp ofsome of the principles of powerwhen he was crowned.One of his first acts was to displaceWilliam Pitt, the Elder, fromleadership of the government. Beyondthat, he acted to break up thedominance of the Whig party, professingto want members of thecabinet who were the ablest insteadof those who belonged to aparticular party, but probablymoved also to this as a means ofloosening Whig rule. His methodof dominating Parliament was notparticularly subtle: he bought thenecessary numbers by handing outsinecures to those who would dohis will. He visualized himself asa patriot king who would not onlyrestore some of the glory of monarchybut also instill pride andgreatness in the people over whomhe ruled. Instead, it was his lotto see the dismemberment of hisempire and the British people determinedto limit the power onceagain of a briefly resurgent monarchy.Harsh Rule andAdditional AppointmentsThis new king's determinationto rule as well as to reign affectedthe colonial situation in two waysparticularly. Whig ministers hadgenerally ruled with an eye towardaccommodating the Americansrather than using undueforce. For example, Pitt arrangedto reimburse the colonies for theireffort during. the French and IndianWar rather than insist thatthey should honor requisitionswithout hope of return. Over theyears, Parliament had permittedthe colonies to legislate for themselves- subject to having theiracts vetoed, of course - ratherthan imposing legislation uponthem for their internal arrangements.As the new monarch brokeup this Whig rule, he appointedofficers more concerned with imposingBritish rule and less concernedwith maintaining goodtrade relations which would benefitBritish merchants.Secondly, the new monarch augmentedhis power by increasingthe number of appointive positions.By appointments he rewardedhis friends in Parliamentand increased the number of peoplewho owed their positions tohim. This fact of political lifegave George III incentive to maintainlarger armies and navies aswell as more civilian agents inthe colonies. That such actions didnot endear the monarch to hiscolonial subjects did not.greatlytrouble him during the early yearsof his rule.

114 THE FREEMAN FebruaryWrits of Assistance, 1761It is difficult to decide exactlywhen the train of events got underway which led to open resistancein the colonies. The Britishgovernment adopted a morerigorous enforcement of the navigationlaws during the Frenchand Indian War. As already noted,George III came to the throne in1760. Convention has it that thetrain of events began in earnestin 1763. But there was one bellwetherevent which occurred inthe colonies· before that time. Itinvolved a court case which wasargued in 1761 in Massachusettsover the issuance of writs of assistancein that colony. A writ ofassistance was a kind of generalsearch warrant without a fixeddate of termination which wouldenable officers to search for merchandiseillegally brought into thecolonies. Unlike a search warrant,it did not require the naming ofthe place to be searched or whatgoods were to be located. Suchwrits had been issued in 1755, andthere were applications for newones after George III came to thethrone.James Otis took the leadershipin opposing the issuance of newwrits before the court in the oldtownhouse in Boston. If Otis hadcontented himself to argue againstthe issuance of the writs on thegrounds simply that there werefew precedents for them in morerecent times, the occasion mightnot have been remembered. But hewent much further than this: heproclaimed such writs to be contraryto reason and denouncedthem as arbitrary and tyrannicalby nature. According to John Adams'reconstruction of his speech,he said: "Everyone with this writmay be a tyrant; if this commissionbe legal, a tyrant in a legalmanner also may control, imprison,or murder anyone withinthe realm. . . . Every man mayreign secure in his petty tyranny,and spread terror and desolationaround him."I He declared his oppositionto them in emotionallycharged language: "I will to mydying day oppose with all the powersand faculties God has givenme, all such instruments of slaveryon the one hand, and· villany on theother, as this writ of assistanceis."2J ames Otis lost this particularcase before the court, but heemerged from it as the man whowould take the earliest leadershipin presenting and arguing theAmerican cause. His local popularitywas vouchsafed in the- ensuing.election when he becamerepresentative for Boston in the1 John Braeman, The Road to Independence(New York: Capricorn Books,1963), p. 14.2 Ibid., p. 13.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 115Massachusetts legislature. For thenext three or four years he usedhis pen as well as his forensicabilities to formulate and expoundthe rights of Americans and thelimits of British rule. Whether hewould have continued his earlyleadership role in the later stagesof resistance will never be known,for he was inactivated by boutswith insanity after 1769.Turning Point in 1763A cluster of events in 1763 doesmark a turning point in Britishand American relations, as hasbeen commonly held. Up to thatpoint, there is no evidence of resistanceto British rule, though, ofcourse, there were objections toparticular actions. To all outwardappearances, Americans generallyaccepted British rule if it couldnot be said that they were alwayscontented with it.In retrospect, historians are aptto see' that the stage was alreadyset for independence. Trends werewell on their way to fruitionwhich prepared the way for Americanseparation. Americans werevery nearly cut loose already fromthe Church of England which wasthe religious basis of being English.Colonists had much experiencein politics which preparedthem for governing themselves.There was widespread sensitivityto any dangers to liberty in actionsby the British government.The natural law philosophy wasfamiliar to thinkers, and was athand to serve as a basis both forbreaking from England and erectingnew governments. Feudal,mercantile, and religious restrictionswere very nearly anachronismsin America already.Even so, Americans were a longway from being ready for independencein 1763. The above wereconditions which might well havecontinued to exist for a long whilewithout leading to independence.Americans still professed theirallegiance to the king, as theywould continue to do for morethan a decade. Their rights andprivileges they still traced to England,and the claims to their propertyto royal grants. There was asyet neither a sense of unity amongthe continental colonies nor anyfactual unity, except for a commonallegiance to the British monarch.Theconference at Albany in1754 had shown how little desirethere was for common action bythe colonists.Resistance to Britain, then, wasprovoked by changes in Britishpolicies, and these began mostnotably with a cluster of actionsin 1763. Most of what happenedin 1763 was not so much the provocationof resistance as the preludeto it. One of the most momentousof the developments of that

116 THE FREEMAN Februaryyear was not provocative at all.It was the Treaty of Paris whichbrought to a conclusion the SevenYear's War. By its terms, Britaingot all French territory in Canadaand all territory east of the Mississippiriver, except New Orleans,belonging to both France andSpain. No longer were the Americancolonies threatened by Europeanpowers with immediately adjacentterritories. It was nowmuch easier to think in terms ofindependence from Britain.Restrictions on opening up thisnew territory did provoke manycolonists. Pontiac's Rebellionbroke out as Indians feared andresisted encroachment by. thewhite man in the interior. TheBritish government attemped toprevent settlement beyond themountains by the Proclamation of1763. The crucial part of theProclamation is found in this prohibition:"that no governor orcommander in chief of our othercolonies or plantations in America,do presume for the present, anduntil our further pleasure beknown, to grant warrant of survey,or pass patents for any landsbeyond the heads or sources ofany of the rivers which fall intothe Atlantic Ocean from the westor north west...."3 The effect of3 Jack P. Greene, ed., Colonies to Nation(New York: McGraw-Hill, 1967), pp.17-18.this on colonists has been describedin this way: "The establishmentof the boundary line of1763 blocked at once the plans ofland companies such as the OhioCompany of Virginia which hada grant west of the line, and theschemes of new companies whichplanned to take up land in theOhio and Mississippi valleys. Thewhole region on which men hadfastened such high hopes was nowreserved to the despised Indians."4These restrictions were particularlygalling in view of the factthat taxes were shortly to belevied on the colonists to help payfor their defense.The "Parson's Cause"Another symptomatic event occurredin 1763. It is known as the"Parson's Cause." It was a symptomboth of the potential for resistanceto British impositionsand of the limits to that resistanceat this time. The "Parson'sCause" was a court case arisingout of the payment of the Anglicanclergy in Virginia. A VirginiaAct of 1748 provided that eachsuch clergyman should have anannual salary of sixteen thousandpounds of tobacco. Confrontedwith a crop failure in 1758, theVirginia legislature authorized4 Merrill Jensen, The Founding of aNation (New York: Oxford UniversityPress, 1968), PP. 58-59.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 117that all debts and taxes payablein tobacco could be paid at therate of two pence per pound oftobacco, a rate of about one-thirdthe price that tobacco was bringing.The Privy Council in Englanddisallowed the law, and some clergymensued for damages. Themost famous suit was brought bythe Reverend James Maury. Thecourt found the law invalid andremanded the case to trial beforea jury to determine the amount ofdamages to be paid.The case attained its fame becauseof the efforts of PatrickHenry, who was one of the lawyersopposing Maury. Patrick Henry'sarena was politics, and the endeavorin which he excelled wasoratory. It took him a while todiscover this. He was an undistinguishedstudent. He tried hishand twice at storekeeping, andwas a failure both times. His effortsat becoming a farmer metwith a like reward. He thenstudied law briefly, and was admittedto practice at the age of24. He rapidly acquired a sizablepractice, and emerged as a popularpolitical leader and a muchsought after lawyer following the"Parson's Cause." His fiery oratoryin defense of colonial rightseventually earned him a specialniche in history books and aunique position among Americanheroes.Enter Patrick HenryAccording to the Reverend Mr.Maury, who was, of course, abiased witness, Patrick Henry'harrangued .the jury for nea.r anhour" toward the close of the caseknown as "Parson's Cause." Heargued that the Virginia Act of1758 met all the qualifications ofgood law, and "that a King, bydisallowing Acts of this salutarynature, from being the father ofhis people, degenerated into a Tyrantand forfeits all right to hissubjects' obedience." Moreover, hedeclared that it was the duty ofthe clergy of an established churchto support law, and not to be goinginto the courts to challenge it. Thejury upheld Mr. Maury's claim, asit was informed by the court itmust, and awarded him one penny'sdamagefor his losses. Britishrule had been technically vindicated,but everyone perceived thatHenry had, in fact, won the case.His remarks about the king's becominga tyrant were greeted withmurmurs of "treason,"5 but neitherjudge nor jury reproved him.Virginians were used to maneuversby which the will of Britishrulers was thwarted. There wasnothing new in this. Henry's rhetoricwas audacious, however, andthe reward he received in publicadmiration suggests that sentimentwas shifting away from5 See Braeman, Ope cit., pp. 17-19.

118 THE FREEMAN Februaryancient loyalties toward new visions.Occasions for expressing thesechanging sentiments were notlong in coming. In fact, a changein ministries in Britain had occurredbefore some of the aboveevents which set the stage for provocativeaction. In April of 1763,George Grenville became Chancellorof the Exchequer and formedaround him a new government.Grenville should have been ableto deal with Britain's financialproblems, if anyone could, for hehad long experience in finance. Hehad served earlier as a lord of thetreasury and as treasurer of thenavy. Moreover, "Grenville's chiefconcern was revenue and economy;they were his passion, which hepursued relentlessly.... He couldnot endure the sight of red ink,an unbalanced budget, or wasteand extravagance...."6 KingGeorge found him to be a borewith his interminable talk ofmoney, but Grenville was the mangiven the task of doing something,and do something he did from1763 to 1765.George Grenville's ministry wasresponsible for two major Jines ofaction on the American colonies.One was the tightening of administrationand enforcement of the6 John C. Miller, Origins of the AmericanRevolution (Boston: Little, Brownand Co., 1943), p. 83.laws. The other was the passageof laws which were aimed at raisingrevenue from the colonies. Anapparently casual action by Parliamentin 1763 set the stage formuch that followed. In March ofthat year funds were voted formaintaining a standing army inAmerica. This was handled withoutmuch ado, since there wasalready an army in America inconnection with the war. Grenvillehad a more direct hand instationing naval vessels in America.He was First Lord of theAdmiralty, and had much to dowith getting the la.w passed whicheffected this. "The law gave navalofficers power to act as customsofficials.... By the autumn of1763, naval vessels were cruisingin American waters from Newfoundlandto the West Indies, withtheir officers and crews on thealert for the profits to be gainedfrom the capture and successfulprosecution of illegal traders."7 Aprofound change was occurringbetween Britain and her colonies;the decision to have military forceavailable was a prelude to increasedexercise of authority byBritain. This change could bemade with little fanfare becauseit did not differ on the surfacefrom what had just been doneduring the French and IndianWar.1 Jensen, Ope cit., p. 45.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 119That Grenville meant businessshould have been clear from hisorders to customs officials in 1763.Appointments to major customsposts in the colonies had long beensinecures for Englishmen. Quiteoften they drew their pay whilecontinuing to reside in Britain.Grenville decreed that henceforththey must reside in America.Many who held such positions resignedrather than to go to Iive inthe colonies, and new officers wereappointed in their stead.Grenville took the lead in gettingmuch new legislation for thecolonies in 1764. The key· piece oflegislation is the one usually referredto as the Sugar Act, thoughit dealt with a great deal morethan sugar. The act lowered theduties on molasses coming into thecolonies, prohibited the importationof rum, added items to theenumerated lists, and providedstrenuous regulations on shippingfor its enforcement. The greatestdeparture from precedent in it wasthat it was designed to raise revenue.The preamble reads, in part:"Whereas it is expedient that newprovisions and regulations shouldbe established for improving therevenue of this kingdom ...: andwhereas it is just and necessary,that a revenue be raised, in yourMajesty's said dominions in America,for defraying the expences ofdefending, protecting, and securingthe same; we ... have resolvedto give and grant unto your Majestythe several rates and dutiesherein after mentioned."8Regulations on ShippingEven more galling to many peopleinvolved may have been theonerous regulations on shippingfrom the British West Indies. Captainsof vessels had to haveaffidavits,certificates, definitive listingsof goods, and had to postbond. Moreover, the burden ofproof that he had in every waycomplied with the law was placedon the shipper in order to reclaima vessel after it had been seizedby the authorities. The Act read,in part: "... if any ship or goodsshall be seized for any cause offorfeiture, and any dispute shallarise whether the customs and dutiesfor such goods have been paid,or the same have been lawfullyimported or exported, or concerningthe growth, product, or manufacture,of such goods ... , theproof thereof shall lie upon theowner or claimer...."9 In addition,the act provided mandatorydecisions for juries, partially, atleast, taking discretion from them."The result of these provisionswas to free· customs officers fromvirtually all responsibility fortheir actions.· . . . Small wonder8 Greene, op. cit., p. 19.9 Ibid., p. 24.

120 THE FREEMAN Februarythat the Americans fought back."loThe Currency Act of 1764 wasyet another attempt of the Britishgovernment to impose its authority.This act forbade the coloniessouth of New England to make anyfurther issues of paper moneywhich would be legal tender in anysense. They were now to be at themercy of a money situation whichwas artificially tipped in favor ofBritain.The colonists had hardly hadtime to take in the implications ofthe Sugar Act when Parliamentpassed the Stamp Act. It waspassed in March of 1765. TheStamp Act required that after N0­vember 1, 1765, stamps be used onall legal papers, commercial papers,liquor licenses, land instruments,indentures, cards, dice,pamphlets, newspapers, advertisements,.almanacs, academic degrees,and appointments to office.The money collected from the saleof stamps was to go to the Britishtreasury to be used for expensesinc.urred in America. This act wasthe most clear-cut departure fromtradition yet made by the Britishgovernment, for it placed a directtax on the Americans, somethingthat had not been done before.It was followed in very short orderby an indirect taxing measure,an act known as the QuarteringAct, passed in May of 1765. The10 Jensen, OPt cit., p. 51.act provided for the quartering oftroops in the facilities of colonialgovernments, in alehouses andinns, and in ~noccupied dwellings.So far, so good, but the act alsoprovided that "all such officers andsoldiers, so put and placed in suchbarracks ... be furnished and suppliedthere by the persons to beauthorized or appointed for thatpurpose . . . with fire, candles,vinegar, and salt, bedding, utensilsfor dressing their victuals . . .without paying any thing for thesame. That the respective provincesshall pay unto such personor persons all such sum or sumsof money so by them paid...."11In short, the colonies were to beindirectly taxed for the maintainingof troops in quarters; theymight levy such taxes themselves,but they were to be.compelled todo so.However, the fat was already inthe fire well before news of theQuartering Act had reached America.Resistance was mounting inAmerica even before the StampAct was passed. Some werealarmed by the revenue aims ofthe Sugar Act, perceiving in it aviolation of the principle of taxationwithout representation."When it was learned in Bostonthat the British government intendedto collect duties on foreignmolasses, the merchants appointed11 Greene, OPt cit., p. 44.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 121a corresponding committee to consolidatethe opposition of theNorthern merchants to the SugarAct and to 'promote a. union andcoalition' of their councils.' "12 TheNew York legislature denied thejustice of duties placed on thetrade of New Yorkers, and declaredthat it was their right to befree of involuntary taxes. 13But it was resistance to theStamp Act that drew the coloniestogether in a unity of opposition.Opposition was shaping up evenbefore the act was passed. Norwas Parliament wanting in opponentsof the taxing idea. VVhenCharles Townshend asked: "VVillthese Americans, children plantedby our care, nourished up by ourindulgence ... ,will they grudgeto contribute their mite ...?" Hewas answered in resounding termsin a speech by Sir Isaac Barre:They planted by your care? No!Your oppressions planted 'em inAmerica. They fled from your oppression....They nourished by your indulgence?They grew up by your neglectof 'em. As soon as you began to careabout 'em, that care was exercised insending persons to rule over 'em....They protected by your .arms?They have nobly taken up. arms inyour defence. . . .1412 Miller, Ope cit., p. 10l.13 Jensen, Ope cit., pp. 94-95.14 Ibid., pp. 63-64.This was the famous "Sons of Liberty"speech, for Barre used thephrase in describing the Americans,and it came· to be used as thebasis of organizations in America.Befort the Stamp Act was passed,several colonial legislatures wenton record as opposing it. All thiswas to no avail, the die had beencast in 1764, and Parliament proceededto the enactment of a directtax.American Sentiment MisreadNot only was Parliament misinformedas to the probable receptionof the act in America, buteven colonial agents representingcolonies in England had misjudgedAmerican sentiment·and determination.Several agents acceptedcommissions as stamp agents, actionswhich they were to regret.Even the usually prudent BenjaminFranklin caused friends to beappointed stamp agents and expressedhimself of the opinion thatthe wise course would be to abideby the law. 15Whether it would have beenwise to do so or not, obedience wasnot the course followed in America.On the contrary, Americansmoved from opposition to resistanceto outright defiance. Coloniallegislatures adopted resolu-15 See Lawrence H. Gipson, The Comingof the Revolution (New York: HarperTorchbooks, 1962),p.83.

122 THE FREEMAN Februarytions against the tax. Virginia ledthe way under the prodding ofPatrick Henry. He charged thatthe Stamp Act was an act of tyrannyand was reported to have declared': "Tarquin and Caesar hadeach his Brutus, Charles the Firsthis Cromwell, and George theThird -" The Speaker of theHouse interrupted him to declarethat he had spoken "Treason!"With only a brief pause, Henrycontinued: "- may profit by theirexample! If this be treason, makethe most of it."16 Not all of Henry'sresolutions were adopted bythe House of Burgesses (thoughthey were all published in newspaperselsewhere), but, of thosethat were, the following gives thecrux of the argument:Resolved. That the taxation of thepeople by themselves, or by personschosen by themselves to representthem, who can only know what taxesthe people are able to bear, or theeasiest method of raising them, andmust themselves be affected by everytax laid on the people, is the onlysecurity against a burthensome taxation,and the distinguishing characteristickof' British freedom, withoutwhich the ancient constitution cannotexist.l 1Massachusetts sought to go beyondthe action of separate reso­16 Ibid., p. 87.17 Richard B. Morris, The AmericanRevolution (Princeton: D. Van Nostrand,1955), P. 90.lutions by colonial legislatures tosome sort of common action. Theassembly of that colony, therefore,sent out a call for a congress. Itwas fulfilled, at least partia.lly, bythe meeting of the Stamp ActCongress in New York in October,of 1765. Six legislatures sent delegates,and three other colonieswere represented by delegates notso formally chosen. The delegatesin Congress assembled affirmedtheir allegiance to the king andtheir willing subordination toParliament when it acted properly.But they resolved that therewere limits to this authority, someof which they spelled out:That it is inseparably essential tothe freedom of a people, and the undoubtedright of Englishmen, that notaxes be imposed on them but withtheir own consent, given personallyor by their representatives....That the only representatives ofthe people of these colonies are personschosen therein by themselves,and that no taxes ever have been orcan be constitutionally imposed onthem, but by their respective legislatures.ISThe most dramatic action, ofcourse, was direct action. Thegroundwork was laid for directaction by the Committees of Correspondence,and much of it wasdone by the Sons of Liberty. Thefirst effort was to secure the res-18 Ibid., p. 91.

1972 THE FIRST AMERICAN CRISIS: 1763-1766 123ignation of stamp agents, withoutwhom the stamps could not readilybe distributed. In some colonies,stamp agents resigned when theyperceived the temper of the people.In others they held out forawhile, and were subject to threats,abuse, and humiliation. The caseof Jared Ingersoll of Connecticutwho had accepted an appointmentas stamp agent while in Englandas colonial representative showsthe lengths to which crowds wentsometimes to secure a resignation."They caught Ingersoll at Wethersfieldand silently and pointedlyled him under a large tree. Theyparlayed for hours ... , with Ingersollsquirming, arguing and refusingto resign. The crowds ...grew so large and threatening thatfinally Ingersoll read his resignationto the mob and yielded to thedemand that he throw his hat inthe air and cheer for 'Liberty andProperty.' "19No Stamps AvailableSo successful was this direct effortthat on the day that theStamp Act was to go in effectthere were no stamps available inthe mainland colonies. The questionbecame now whether businesswould go on as usual in defianceof the law. If the law were observed,ships would not sail, courtswould not hold sessions, newspa-19 Jensen, op. cit., p. 113.pers would not be published, andmuch of life would come to astandstill. Many newspapers continuedto be published; shipssailed, and some courts carried onbusiness. In short, the colonistsoperated in defiance of the law.Parliament was confronted witha crisis in America, one of its ownmaking, when it convened in Decemberof 1765. However, theking's speech opening the sessionacknowledged only that "mattersof importance have lately occurredin some of my colonies in America.••."20 Even so, Parliament had totake some kind of action. It had totake Draconian measures toachieve enforcement, or it had toback down. Grenville's ministryhad already fallen,' and a new gov-,ernment was organized under theleadership of Rockingham. Withthe matchless orator, William Pitt,Earl of Chatham, taking the leadin the debate for repeal, the Housevoted 275 to 167 for repeal onFebruary 22, 1766. The bill wassigned into law on March 18. However,Parliament refused to yieldon the principle, for it insisted onpassing the Declaratory Act,which went into effect on the sameday that the Stamp Act was repealed.'The Declaratory Act triedto make up in unyielding languagefor what had, in fact, been yielded.It declared, in part: "that the20 Gipson, op. cit., p. 105.

124 THE FREEMAN FebruaryKing's majesty, by and with theadvice and consent of the lordsspiritual and temporal, and commonsof Great Britain, in parliamentassembled, had, hath, and ofright ought to have, full powerand authority to make laws andstatutes of sufficient force andvalidity to bind the coloniesin all cases whatsoever."21The theoretical issue was joined,but the crisis had passed - for themoment.This was the first Americancrisis. It was the first because forthe first time all the colonies weredrawn together in action and resistanceto Britain. Heretofore,they had been separate, linked onlyby their common allegiance toBritain; now, they had been linkedwithout that tie in common sentimentand for a common cause. Notonly that, but they had seen Britainfalter before their resolutionand back down.Several other points need to bemade about· this crisis. One is thatit was provoked by British action.Parliament was the innovatorabandoning precedent to tax th~colonies, extending itself to directtaxation, which hardly anyone inAmerica would admit was itsright. The colonists were defend-21 Greene, Ope cit., p. 85.ing; in an important sense, theywere conservative, for they wereattempting to preserve the rightsand privileges they had enjoyed.Another point is that the courseon which Parliament was bent waspotentially tyrannical. Force wasbeing assembled in America;Parliament was moving to takecolonial control of their domesticaffairs from them. Thirdly, thecolonists based their arguments onthe rights of Englishmen and theBritish constitution. They werenot rebelling; they were resistingwhat they perceived as unconstitutionalaction.The colonists drew a line beyondwhich they said Parliamentwas not to go. They denounced directtaxes imposed from without,and distinguished between internaland external taxation, the lattersome theorists held to be acceptable.Parliamentary leaderslearned from this debacle. Neveragain would they act so directlyon America. They would now tryby less direct means to accomplishtheir object. But the Americanshad been aroused; henceforth, everyact of Parliament would be examinedwith great care to see ifthere was in it a potentiality foroppression. Such acts were notlong in coming.IJNext: British Acts become Intolerable.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAINTHE STORY is told that wheneverProfessor Ludwig von Mises encountereda gleam of originalityin a paper submitted by a student,he would urge that student to developthe perception or insight ina systematic way. The sixty-sixauthors who have contributed tothe two volumes of Toward Liberty,a collection of essays offeredby the Institute for Humane Studies($10.00) in honor of Mises onthe occasion of his ninetieth birthday,are all, in one sense or another,graduates of the Mises"praxeological" school, students of"human purposive activity" (thequotation is from Murray Rothbard).What we have here, then,is originality as sparked by themost fecund economic teacher ofour times, a vast expansion of perceptionsthat could not have beendeveloped by one man alone. Yet,as surely has been the case withMises' own seminar students, thesixty-six contributors to TowardLiberty would certainly admit thatthey stand on the shoulders of oneman alone, which gives Misessomething of the stature of anAtlas. (Need we add that his particularAtlas,. unlike the flawedfigure in the title of Ayn Rand'snovel, has never "shrugged?")The unifying thread in thesetwo volumes is provided by a commondevotion to the principle ofpeaceful voluntarism, which enables"human action" to proliferatein thousands of fructifyingways that are strangled in the cribin any interventionist atmosphere.Within the basic unity, however,the diversity of the sixty-sixessays presents an insuperable obstacleto the reviewer. Many ofthe essays concentrate on the direeffects of state intervention in theeconomic processes of relatively125

126 THE FREEMAN Februaryfree societies. Other papers focuson the impossibility ofcalculation insocieties that have gone most ofthe way to communism. A few authorspay their specific disrespectsto the late Lord Keynes. Since thecontributors come from seventeendifferent countries, it is interestingto observe what local conditionshave done to affect specificapproaches to voluntarism. Thenthere are the essays which seemto depart from the Misesian linebut which really do not when oneconsiders that in the wider Misesianmarket "all human values areoffered for option," even the valuesthat affect economics only by indirection.The richness of the books is evidentin the multiplication of strayobservations that defy currentorthodoxies. Picking at random,we have Paul Poirot's observationthat the most polluted propertiesare those not clearly subjectto private ownership - rivers,streets, parks, schools and thebody politic, to mention a few.Hans Sennholz notes an irony inMilton Friedman's efforts to getaway from the orthodox goldstandard - "monetary freedom,"says Sennholz, "would soon givebirth to a 'parallel standard'" thatwould permit individuals to make"gold contracts," and so we wouldbe back on a gold standard despiteFriedman's efforts to do away withsomething that he regards astyranny.Results of InterventionLooking at thirty years of rentcontrol in Sweden, Sven Rydenfeltnotes that the rich seem to windup with the most desirable housing,while young families havefrequently to wait for years fordecent space. In' Yugoslavia, accordingto Ljubo ~irc, the attemptto superimpose an "as if" competitivesystem on State enterprisecan't get off the ground becausethe founding of new enterprisesremains in the hands of politicalbodies. The English contributors, to TOlward Liberty struggle to findscope for free choice in an advancedwelfare state. Ralph Harrissees some hope in the movementtoward "selectivity in welfare,"but he laments that right-wingpaternalists gang up with leftwingtraditionalists to prevent asignificantly large return to "privatewelfare suppliers" in insurance,medicine and education.Writing about the struggle ofLatin American countries toachieve "take-off," Ulysses R. Dentof Guatemala remarks on thestrange irony that the foreign aidponied up by taxpayers in thecapitalistic U.S.A. has providedthe funds for socialistic takeovers.

1972 TOWARD LIBERTY 127 ,Thus we export what we professto hate. A Mexican contributor,Alberto Salceda, speculates that itwas "Essene" corruption of Biblicaltexts that has made Jesus seemanti-capitalist. In the non-Esseneparts of the gospels Jesus frequentlyendorsed the· Commandmentthat says "Thou shalt notcovet," which means that he wasno supporter of the envy that is atthe root of modern efforts tospread "social justice" by force.The topic of GNP - gross nationalproduct - begets a sapientobservation from Giuseppe UgoPapi of Italy that a preoccupationwith macroeconomics keeps usfrom seeing that augmentationsof the GNP st~rt from below, inthe potential of the individual.When governments try to expandthe GNP by planning, they.. reallylead to its diminution in realterms. An Irish contributor,George Alexander Duncan, thinksit odd that the governments of theUnited States, the United Kingdomand the French Republic havedestroyed the economic basis oftheir Caribbean dependencies bysusidizing extravagant beetsugarproduction at home - andthen compound the idiocy by sending"aid" to the cane-sugar countriesto be wasted by politicos whoneither toil nor spin.Publishers and the MarketHenry Regnery, the dean of ourconservative publishers, obviouslyhopes he will not be condemnedfor lese majesty when he pointsout that Mises' great work, HumanAcUon, was originally publishedby a university press thatwas "neither subject to the disciplinesof the market nor to therestrictions that purely marketconsiderations impose." Actually,despite Mr.· Regnery's trepidation,there was no doctrinal contradictioninvolved in the fact that itwas a noncommercial publisher,the Yale University Press's EugeneDavidson, who accepted HumanAction back in 1948 withoutthe change of a single word. TheYale Press in Davidson's time(and maybe now, for all I know)was the recipient of support thatwas voluntarily donated by nongovernmental.benefactors, whichbrings it within the purview ofLeonard Read's "anything that'speaceful" test. A voluntarily subsidizeduniversity press is part ofthat wider market in which "allhuman values are offered for option."The voluntary subsidizersin the case of Human Action weregetting what they paid for, whichhappened to be the circulation ofa work which their chosen editorhad rightly approved. So let HenryRegnery stop worrying; he has

128 THE FREEMAN Februarynot had to make any exceptionfrom Misesian principle in writinghis essay on "The Book in theMarket Place."I have merely scratched the surfacein this attempt to indicatesome of the riches of the twovolumedToward Liberty. Sixtysixessays are too much for onereview. Fortunately they are nottoo much for a single reader,though he will need a command offour languages to read every wordthat is offered "for option" by thebooks' editors.~ FIRST THINGS, LAST THINGSby Eric Hoffer (New York: Harper& Row, 1971, 132 pp., $4.95)Reviewed by Robert M. ThorntonTHE ICONOCLASTIC ex-longshoremanis in rare form in his newbook. Hoffer fits none of the contemporarypigeonholes but directshis shafts of idiocy and sham whereverhe finds them. Today's huntingis best on the left, and Hoffer'sdeadly aim picks off a number ofcows held sacred by today's intellectuals.What a pleasure to read aman who nonchalantly heaves deadcats into the stuffy sanctuaries of"liberalism."Consider his treatment of ecology.The cry is "back to nature,"but Hoffer reminds us that thegreat achievements of civilizationhave come from cities and that naturehas always been, in a sense,man's antagonist, something hemust live with but also overcome orbe destroyed. In Africa, for instance,therealbattle is not againstcolonialism but nature. Even in thegreat cities of our nation, hewrites, the problem is still nature ­our inner natures which are turningmany into primitive savages asself-discipline and outside controlsare cast aside. Hoffer denies thatmere expenditures of money willhelp the cities. The task, he writes,is to lure out the chronically poorand induce exiled suburbanites toreturn. One way to achieve theformer is to end the welfare system,and the latter will be accomplishedwhen city governments performtheir rightful functions welland relieve taxpayers of the burdenof unnecessary expenditures.This is a book to stir up themind, for despite his scorn for thepseudo-intellectual, Hoffer is thereal thing, a man of ideas who hasnot gone "a'whoring after falsegods." And he is an example of thebest that America can produce incommon men. Without family connections,social position or inheritedwealth and with very littleformal education, Hoffer neverthelesshas been able to make his markin the world of ideas. One hopesthis won't be his last slim volumeof hard thinking and clear writing.~

theFreemanVOL. 22, NO.3- MARCH 1972Utopia: Dream into Nightmare Alexander Winston 131A historical review o'f utopian ventures, culminating In the twentieth-centurywelfare statism; prospects for a revival of freedom. .Digging DitchesA job worth doin'g is worth doing well.Robert W. Demers 140On Appeasing Envy Henry Hazlitt 142The very measures taken to appease envy often tend to aggravate it.The Founding of the American Republic:8. British Acts Become Intolerable Clarence B. Carson 147Parliamentary pressures after 1766 lead eventually to open warfare.Who Is the Marginal Producer? W. A.Paton 160The first to withdraw unless conditions improve is not necessarily foretold bythe. firm's balance sheet.American Competitivism: Cause or Result? Ron Heiner 164How can. we revive a competitive spirit if we reject· the condition of freedomthat spawned it?Fixed Exchange Rates and Monetary Crises Gary North 168Price control, whether of goods and services or of money, interferes with thepeaceful processes of trade.BookReviews:186IICruising Speed: A Documentary" by William F. Buckley, Jr."Libertarianism: a Political Philosophy for Tomorrow" by John HospersliThe Regulated Consumer" by Mary Bennett PetersonAnyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tileFreemanAMONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,OOO-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printed inU.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also Isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Michigan48106. Permission granted to reprint any article from this Issue,with appropriate credit, except liOn Appeasing Envy."

UTOPIAdrBamintonALEXANDER WINSTONPLATO FATHERED the first blueprintof a planned society, and hisdescendants still clasp us in asticky embrace while they rifleour freedoms. His Republicmapped out a spartan state runby benevolent philosophers, defendedby a secondary caste ofwarriors, and supplied with thenecessities of life by a mass offarmer-artisans whose only politicalrole was to obey. He did awaywith two obstacles to the orderedstate : private property and thefamily. In the Republic each citizenperforms that task for whichhe is fitted; the lowly toiler'signorance is his bliss; and allparts of the body politic functiontogether in well-oiled harmony.Thomas More's Utopia (Greekfor "no-place") in 1516 gave theA former lecturer in philosophy at Tufts College,Dr. Winston has written extensively in thefield of history. His most recent book is No ManKnows My Grave: Privateers and Pirates,1665-1715.name to this whole type of literature.A spate of others followed:Andreae's Christianopolis (1619),Campanella's City of the Sun(1623); Bacon's New Atlantis(1627), to cite a few; then agrowing flood rising from theFrench Revolution and spreadingamidst the industrial turmoil ofthe nineteenth century (EdwardBellamy's Looking Backward,1888, being the most popular);and on to our own day in suchprojections of the future as H.G.Wells' Modern Utopia (1905) andB.F. Skinner's Walden Two (1948).They number by the score, andtheir variety in detail is as great.The majority rely on rule by anaristocracy of merit, a few try topreserve a modicum of democracy;most are communistic, but one atleast (Hertzka's Freelands, 1890)recognizes self-interest as basicand aims to save capitalism byrestraint on overproduction. They131

132 THE FREEMAN Marchmay be secular or religious, agriculturalor industrial, favorableto education or distrustful of it,resolutely egalitarian or franklyhierarchical.Common AssumptionsHowever, certain elements ofthese multiform visions emergewith such frequency that they deserveour attention. The utopianpictures a static society in whichcareful planning solves every majorproblem of human life..Faithis placed in a collectivity that ownsor controls all property. Competitionfor markets or jobs vanishes.Family ties diminish, and therearing of children by the stateis taken for granted. Everythingis· rationally ordered by thosemost capable of doing so: Plato'sguardians, More's king and hisadvisers, Bacon's Solomon'sHouse scientists, Bellamy's industrialcouncil, Wells' austere samurai,Saint-Simon's Council ofNewton, Campanella's quartet ofsuperior men, Skinner's panel ofpsychologists.In utopia everyone works, thewomen on equal terms with themen. Hours are short - four tosix daily-and retirement as earlyas age fifty, but the wants of thepeople have a stoic simplicity, andall enjoy a decent living. There islittle to quarrel over, the atmosphereis uniformly brotherly,crime is almost unknown anddisease rare - a perfect whole ofperfect parts, all supremely content."U-topia," the no-place, isplainly "eu-topia" the happy place.But how to get there? Utopianshad no answer to that, and avoidedthe question. They sprang theirflawless states full-armed fromthe ink-pot, always somewhereelse - a distant island, an obscurewilderness, another planet - or· ata dim future time. The transitionfrom a callous, exploitive society,its people already deformed byprevalent evil, to one of affectionand universal sharing, struck theutopians dumb. Their residue' ofhope rested in a double view ofhuman nature. They mixed thesetwo elements at will, for each onefavored a regeneration of man'ssorry existence. In one they sawman fundamentally good (but pervertedby a debasing environment); in the other they saw manquite plastic, molded. to the' lastdetail by his surroundings. Eitherway, the right society would veryquickly set men right.A combination of circumstancesafter 1800 convinced social idealiststhat the time was ripe forbringing heaven to earth. TheFrench Revolution had produceda new crop of theorists, the longhours and short pay of .the earlyfactory system .promised to grinddown the poor, and overseas the

1972 UTOPIA: DREAM INTO NIGHTMARE 133American republic offered a havenfor all who wanted to try somethingbetter than mankind hadever known. "Our fathers havenot seen it," said Saint-Simon;u our children will arrive thereone day, and it is for us to clearthe way for them."American ExperimentsThe result was more than 130attempts to establish utopian societiesin the United States duringthe nineteenth·century. A fermentof change filled the air, even instaid New England. "Weare ana little wild here with numerousprojects, of social reform," Emersonwrote to Carlyle. "Not a readingman but has a draft of a newcommunity in his waistcoatpocket." Many of the settlementswere European in origin as wellas theory; some seeking. escapefrom -religious persecution, othersimbued with recent secular plansfor utopia; but all drawn by thecheap land of the American frontierand the easy tolerance of theyoung republic that had thrownoff the shackles of old Europe andconsidered itself the vehicle of thenew age. At last the utopians hadbefore them something very likethe fabulous island of the olddreamers. In America they couldfound minuscule states, as selfsufficientas possible, based oncommon ownership of property,filled with the brotherly spirit,and isolated from contaminationby the outside world. "Our ulterioraim," said young CharlesDana of Brook Farm, "is nothingless than heaven on earth."As might be expected, some ofthese starry-eyed experimentswere simply preposterous. AtFruitlands that "tedius archangel"Bronson Alcott would notharness work-horses to the plow(unnatural), nor allow sugar(reaped by slaves), nor wearwoolen cloth (robbed from sheep),nor spread manure on the fields(filthy stuff) ,nor burn whale-oillamps (from slaughtered whales).Shakers led by an illiterate factorygirI hailed as "Ann theWord" were strictly celibate, andregulated the lives of the faithfuldown to such details as what shoeto put on first in dressing, andwhich trouser-leg to step into. Anirresistible little fellow in Michigangot himself proclaimed JamesI of Zion by 2,000 adherents andfive wives; "King Benjamin" ofthe House of David announcedthat he was the younger brotherof Jesus Christ; the·final verdictin the early days of the Amanasettlement rested with an oracularWerkzeug whose utterances camestraight from God ; the ruler of aFlorida colony taught that we alllive inside the earth, our feet onits inner surface. The Lake Erie

134 THE FREEMAN MarchBrotherhood of the New Life gavemajor attention to the sisterhood,in the belief that:"Soul-life and sex-life are at one,In the Divine their pulses run."Robert Owen and Charles FourierFounders of other perfectionistsettlements were more sincere anda bit less silly. Robert Owen, asuccessful English textile manufacturer,believed community ofproperty essential to the goodlife, and was sure that the individualis totally shaped by hisenvironment. In 1825 he boughtup the extensive holdings of areligious community that wasmoving from Harmony, Indiana.The 900 who flocked in at hisopen invitation seemed to Owen'sson a "heterogeneous collection ofradicals, enthusiastic devotees toprinciple, honest latitudinariansand lazy theorists, with a sprinklingof unprincipled sharpersthrown in." Owen's communalsystem gave full vent to theirshabby ways. They couldn't runanything properly-flour mill, sawmill, tannery or smithy-and theironly solution to problems of productionwas to write another constitutionor make another speech.The industrious soon tired·of supportingthe idle. From the Nashoba,Tennessee Owenite settlement,leader Frances Wright informedOwen that "cooperationhas nigh killed us all," and departed.Within two years everyOwenite venture, fourteen in all,disintegrated.Disciples of the unsmilingFrenchman Charles Fourier setup no less than twenty-sevenAmerican experiments. Fourierbased his utopian ideal less onman's malleability than on hisfundamental goodness. The twelvepassions, which he carefully listedand classified, would act in perfectharmony with each other and withsociety as a whole if given achance. Let people gather into"phalanxes" of some 2,000 members,housed communally in onehuge "phalanstery" lying in aspread of 1,600 acres owned incommon. Let each choose the workhe wished to do. Pay the highestwage for disagreeable butnecessarylabor, less for the' more: attractive,and least for work thatwas downright pleasurable. Bringall goods produced to a singlewarehouse, where they could bepurchased with work-tickets. InFourier's ample vision all mankindwould finally be gathered intothree million phalanxes, coordinatedby an Omniarch in Constantinople.Fourier-inspired communesquickly died of dissension, ineptitude,and sheer tomfoolery. Anattempt to use some Fourier principlesdealt the final blow to the

1972 UTOPIA: DREAM INTO NIGHTMARE 135most charming and humane of allthe utopi~n experiments, BrookFarm. The Farm was owned inshares; it intended to support itselfby voluntary labor at an equalwage for all (ten cents an hour),and have plenty of time leftoverfor culture. Some choice soulssought refuge there: The Rev.George Ripley, founder; NathanielHawthorne, who soon discoveredthat forking manure ten hours aday was not conducive to literature;George Curtis, later to editHarper's; and Isaac Hecker, ahumble German who became apriest and instituted the PaulistFathers. Good families sent their·boys down to be prepared for Harvardat the Farm school.Into this idyllic but financiallyprecarious community of likeminds swept a voluble enthusiastfor Fourier, Albert Brisbane. Heconvinced them that their happyanarchy wouldn't work. Theymust organize. Tasks were specializedon Fourier principles; aSacred Legion took on the dirtierjobs; unequal wages replacedequal pay; work became compulsory;uneducated artisans camein with their ignorant and sharptonguedwives; and before longthe genial spirit that had heldBrook Farm together evaporated.Six years after its beginning in1841 the Farm was sold to WestRoxbury (Mass.) for an almshouse,thus passing, in the wordsof one observer, from "the highestideal" to "the lowest actual."Two That RemainTwo utopian communes havethe distinction of remaining,though much altered, to the presentday. In 1848 John HumphreyNoyes settled fifty-one Perfectionistsalong Oneida Creek nearUtica, New York, an area sofilled with fiery religious fanaticsthat wits called it "the burnedoverdistrict." A slab-chinned fellowwith a scraggly beard andbleating voice, Noyes was neverthelesspersonally impressive, anda canny manager of people.· Hequipped that too many agriculturalcommunes had "runaground," and set out to makeOneida industrial. The growingmembership (an average of 250)canned farm produce for the market,made traveling bags and aspecial type of steel trap, spunsilk, silver-plated dinnerware, andprospered.Noyes' word was law. He restedit on divine inspiration, and exertedpressure so gently that noone thought him despotic. The individualat Oneida had no lifeapart from the community- propertyin common, personal acts undercommon· scrutiny, sexual sharingon the theory that monogamywas un-Christian "claiming." The

136 THE FREEMAN Marchwomen said that they belonged toGod first and Noyes next, an orderof precedence that they in factreversed. A system of selectivebreeding called "stirpiculture"admitted only the most fit toparenthood. Children lived apart,rarely seen by their parents.For thirty years Oneida adheredto the original plan. By1880 Noyes had aged; the religiousspiritthat he had evokedflickered; the young revolted atthe idea of sharing spouses andsurrendering their children. Thecommune converted to a jointstockcompany in an effort toavoid collapse, but its old habitswere too ingrained. In 1890 P.B.Noyes, one of the founder's "stirpiculture"sons (he sired ten)saved the community by transformingit into a typical well-runAmerican business. He concentratedon silverware, cut costs,emphasized teamwork, hustled,advertised, and competed. TodayOneida differs in no essentialfrom any other enlightened manufacturingfirm.Where Oneida, chose industry,the Amana community of Iowa remainedrural, and even more pervasivelyreligious. Eight hundredGermans of the "True Inspiration"sect established it in 1854on 26,000 choice acres, seven villagesspread in a circle aroundthe central one. Every membersurrendered all his capital to thecommon fund (if he left, he gotit back with interest) and in returnwas guaranteed his necessitiesfor life. Under the rule ofchurch elders the maxim, "obey,without reasoning, God, andthrough God your superiors," keptmembers in line. Amana suppliedits own needs - weavers, cobblers,tailors, watchmakers, pharmacies,printshop - and exported onlyhigh-grade woolen cloth. As muchas possible the members ignoredthe world around them, even hiringoutsiders to serve in the hotellest their own girls be corrupted.By 1900 Amana's piety hadwaned. Without the invigoratingspur of competition the economylagged badly. In 1932 it became' ajoint-stock company intent onprofit. A business managerbrought in from the outsidetrimmed the labor force of itshired hands, closed shops that hadrun at a loss for years, eliminatedfifty-two inefficient dining halls,sold businesses into private handsand houses to their occupants. Stillquaint and quiet today, Amana isa producing and marketing cooperative,without a vestige of itsformer communism.American experiments thatwent under in two years, as manydid, had too large a proportion ofmisfits whose record outside wasone of .steady failure. Intimacy

1972 UTOPIA: DREAM INTO NIGHTMARE 137bred discord, as people living ·tooclose together bumped each otherat every turn. The absence ofcompetition resulted in lethargy.None of these eccentrics had anybusiness sense; the purchase of a300-acre tract in Pennsylvania,for example, was made in midwintersnows by an artist, a doctorand·a cooper, and turned outto be rock-and-sand that had to beabandoned in a year. The Ruskincolony in Tennessee (1894) wasruined by an agent who took suchpleasure in making a sale that hesold regularly at a loss. Occasionallyplain chicanery was too muchfor the innocent: the Rev. AdinBallou lost his "miniature Christianrepublic" at Hopedale- whenone of his Christians bought upenough shares to force everyoneelse out. Worse, the· utopians misreadhuman nature. "If men wereangels," remark the FederalistPapers, "no government would benecessary." The utopians discoveredto their sorrow that men arenot angels now, nor can be soshaped.Displaced by the Welfare StateWhile these sad little failuresgathered dust, Americans awoketo the fact that in the welfarestate of the western democracies,and more explicitly in communistRussia, utopia had already arrivedon a massive scale. The re-sults inthis country stirred up a generalunease. Every.step that added tothe individual's security detractedfrom his liberty; every movetoward the better life exacted itstoll. The United States governmentassumed vast new powers totax, spend - and regulate the affairsof its citizens. Mass productionand the communicationsmedia created a bland uniformity,with the flesh-and-blood breadwinnerconverted into a SocialSecurity number. Welfare programsthat averted gross povertyalso robbed the -individual of hisinitiative. Women's equality didmuch to skyrocket divorce. Thesame technological advance thatincreased abundance polluted thelandscape. Nuclear energy wasmore bomb than blessing. Parentsdid all they could to make a heavenon earth, and their children kickedthem in the stomach for the effort.The West edged piecemealtoward the planned· society; Russiamade it in a leap. Marx hadrevived the utopian dream andpromised its fulfillment: abundanceof consumer goods, universalhappiness, absolute equality,peace at home and abroad,government that would .hardlyneed to .govern - a perfect wholeof perfect parts. Liberals who hadbeen beguiled by this splendidvision shuddered at the actuality.In Russia the·government clamped

138 THE FREEMAN Marchan iron grip on the people andshowed no inclination to let go.Everything was in short supplyexcept armaments. The mildestcritic of the regime was brandeda traitor, and shipped off to Siberia.Art and science became toolsof the Party; news media spewednothing but the official line; andthe calculated lie became a. habit.The planned society, dreamed ofthrough the a.ges, turned out tobe the police state.Americans who had believed ina steady march to the promisedland now quailed at the prospect.Once they had yearned for utopia.;now they asked themselves, "Whatcan we do to prevent it?"Anti-utopian novels clanged likewarning bells in the night. EugeneZamiatin's We (1920) was amongthe first, and dozens followed (ifwe include science fiction) , notablyAldous Huxley's Brave NewWorld (1932), Vladimir Nabokov'sBend Sinister (1947) andGeorge Orwell's 198J" in 1949.They draw a frightening pictureof the planned society: its ruthlessmanipulation by the rulers ofthe ruled, its grey-faced homogeneity,its stifling of creativechange, its reduction of man to aproducing and consuming animal,its hideous distortion of truth.Once the masters of this. nightmaresociety are in the saddle,few can escape or even want to.Human nature, in these antiutopias,is infinitely malleable;men can be taught to kiss theirchains.Are we all doomed to this?There is reason to doubt it. Theanti-utopian sounds a neededalarm, but he badly overplays hishand. He regards the individualas an empty sack into which anyrubbish can be poured. Even thelonely rebels of anti-utopian novelsare spineless, stupid, or both.D-503 of We can build a cosmicmachine, but is otherwise a bumblingidiot; Bernard in Brave NewWorld is a sniveling coward;Smith in 198J" is a perverter oftruth by vocation and a. love':sickninny on the side; the renownedphilosopher Kruger inBend Sinisterhas a backbone of rope. Inanti-utopia western man hasthrown away every vestige of hishard-won rights, to gain a bovineplacidity. All the world is contentto chew its cud.Common Sense .May PrevailSuch a view undoes history.Western man has shown himselffar too stubborn, restless andplain cussed for any such fate.Once the common man has hada full taste of speaking his mind,no one can shut him up for long.Once he is used to the ballot, andthe exhilarating experience ofthrowing the rascals out, he can

1972 UTOPIA: DREAM INTO NIGHTMARE 139be deprived of it only under themost extraordinary conditions.Once real power is firmly establishedat the base of the politicalpyramid (as it never was in Russiaor China), tyranny from thetop becomes an outside chance.This may be faith, but it is afaith worth having. A man's essenceis his hazardous freedom.It is built-in, inexpungeable. Forit he has fought wars, rioted, hiddenin catacombs, gone to thestake, killed kings, languished inprison, and he does not forget.Freedom disrupts old orders, andsometimes gives the impressionthat everything nailed down iscoming loose, but as long asAmericans demand it as theirright, the horrors of the policestate will stay beyond our borders.~IDEAS ONLIBERTYUmpireIN GENERAL, nothing happens except a change in the weather,unless somebody makes it happen. Under a free economic system,the man who makes things happen is called an enterpriser. Withhis own savings ·or savings. borrowed from others, he goes intofarming, manufacturing, mining, or banking, and begins producinggoods or moving them around. That much is basic.Thomas Nixon Carver, the economist, said the reason manycountries are backward is that there was nobody who cared toinvest in them. Either the government itself was predatory, orthieves and robbers roamed unmolested. In such countries therich keep their wealth in the form of unproductive goods - goldand jewels - which they can hide and easily transport whenthings get too tough.If a nation wants production and prosperity,the persons toencourage are the enterprisers. Not only· should they be encouragedto build and produce, but they should be assured that theirproperty and a decent part of their gains are protected againstconfiscation. If they lose part or all of their savings in the competitivegame, they must take the loss and shut up. Government'smain job is to see that the rules are fair and are enforced.FROM The William Feather Magazine, November, 1971

DIGGINGROBERT W. DEMERSI FIRST MET Joe when I was aboutten. My dad was foreman on asewer job in our town and theywere digging a long ditch for thepipe ·on the street where we lived.I was watching the men dig - nomachines in those days. Aboutmid-morning a horse-drawn vegetablewagon pulled up where severalof the men were on the banktaking a "break." I noticed Joebecause he bought a large cab-. bage, cut it in half with his jackknife, and proceeded to munch onit, raw. I was watching him, wideeyed,when he smiled, cut off aslice of the cabbage, and offered itto me. I bit into it,hesitantly, andsoon found that I liked it' verymuch. That was the first goodthing I learned from Joe, the firstof many things I would learn fromhim over a period of several years.Joe was a short, squat man,barrel chested, short legs, and along, powerful torso. He was alreadypast 40 when I first methim, with a thick thatch of greyinghair and a catching little accentin his voice. His father cameMr, Demers is a vocational . counselor inVeneta, Oregon,DITCHESto this country from Italy, but Joewas born in New York City andhad migrated to the mountainswith his wife and family. That'swhen he began working for mygranddad, digging ditches.Whenever I could, through theyears, I would "visit" with Joewherever he was working. He hadmany interesting stories to tell ayoung boy, and a great pride inhis work.He taught me the proper way touse a round-nosed shovel, a squarenosedshovel, a long-handled anda short-handled shovel. It was im;.portant tq keep the sides of theditch perpendicular, to keep thebanks clean, to throw the dirt ina certain place and a certain distancefrom the edge of the ditch.The ditches varied in width, andthe angles of the sides varied dependingupon the condition of thesoil. No facet of Joe's digging wastoo insignificant to command hisfull interest and attention. Heloved to talk about his job and toshow others how to do the job"properly."I recall my sadness on hearingthat Joe no longer dug ditches for140

1972 DIGGING DITCHES 141the city. One of his daughters, inmy class at school, told me herfather had gone into .business forhimself, digging ditches. Beforelong, he was the most sought afterditch digger in town. Mechanicalcontrivances were now available,but there were still a hundred andone places where a ditch could onlybe dug by hand; there you'd findJ oe.Most of the plumbers in townwere "waiting in line" for Joe'sskills, even holding off on certainjobs until he could dig their ditch,or their hole, or whatever diggingthey needed.Through the lean Depressionyears, Joe was one of the very,very few who found full employment.Somewhere Joe kept "digging."His pay sometimes· was asack of beans, a chicken, or adozen eggs, but his children, allseven of them, remained well,strong, and in school.Few, indeed were the· people intown who didn't know Joe, whodidn't know and who didn't telleverybody that he was "the bestditch digger ever," and that healso built the "best stone wallsand fences," and grew the "mostbeautiful roses."Years later, on a fall day whenthe cabbages were ripe, I soughtout Joe, where he was digging aditch. along a side hill. I was onleave for a few weeks and hadlearned that Joe's son, one of myclassmates, had died on the beachesat Normandy. As I walked up thehill, Joe greeted me with the samebig smile. His hair was snowywhite now, his back a little morehunched, his stance a bit moresquat, but his arms were stillsinewy, muscular and powerful, ashe cupped one·hand over the endof the hickory handle of his belovedshovel and extended theother warmly and affectionately inmy direction.We talked long in the warmthof the autumn sun. I learned thata job worth doing is a job thatought to be extremely well done. Ilearned something of the distanceI must travel toward such a. worthygoal. Joe was sure that most ofthe trouble in the world stemmedfrom the refusal of people to exerciseto their fullest potential thetalents with which they wereblessed. I wish that everyonemight hear the tone, the richness,the wisdom in Joe's voice as hesaid: "A man ought to find out,as soon as possible, what it is thathe can do, then learn and study,and do it as best he can all of hislife. If a man really did this he'dhave no time to drift to the rightor the left, or to stumble up ordown because he'd' be too busy doingwell what he knew best, bestfor himself and for all th.ose abouthim; and he'd be happy and rich,both here and beyond."

ONAPPEASINGHENRY HAZLITTANY ATTEMPT to equalize wealthor income by forced redistributionmust only tend to destroy wealthand income. Historically the bestthe would-be equalizers have eversucceeded in doing is to equalizedownward. This has even beencaustically described as their intention."Your levellers," saidSamuel Johnson in the mideighteenthcentury,. "wish to leveldown as far as themselves; butthey cannot bear levelling up tothemselves." And in our own daywe find even an eminent liberallike the late Mr. Justice Holmeswriting: "I have no respect forthe passion for equality, whichseems to me merely idealizingenvy."!Henry Hazlitt is well known to FREEMANreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as a chapter in a forthcoming book,The Conquest of Poverty, to be published byArlington House.At least a handful of writershave begun to recognize explicitlythe all-pervasive role played byenvy or the fear of envy in lifeand in contemporary politicalthought. In 1966, Helmut Schoeck,professor of sociology at the Universityof Mainz, devoted. a penetratingbook to the subject. 2There can be little doubt thatmany egalitarians are motivated atleast partly by envy, while stillothers are motivated, not so muchby any envy of their own, as bythe fear of it in others, and thewish to appease or satisfy it.But the latter effort is bound to1 The Correspondence of Mr. JusticeHolmes and Harold J. Laski Cede M. DeWolfe Howe, 2 vol. Cambridge, Mass.,1953). From Holmes to Laski, May 12,1927, p. 942.2 Helmut Schoeck, Envy (Englishtranslation, Harcourt, Brace & World,1969) .142

1972 ON APPEASING ENVY 143be futile. Almost no one is completelysatisfied with his status inrelation to his fellows. In the enviousthe thirst for social advancementis insatiable. As soon asthey have risen one rung in thesocial or economic ladder, theireyes are fixed upon the next. Theyenvy those who are higher up, nomatter by how little. In fact, theyare more likely to envy their immediatefriends or neighbors, whoare just a little bit better off, thancelebrities or millionaires who areincomparably better off. The positionof the latter seems unattainable,but of the neighbor who has.iust a minimal advantage they aretempted to think: "I might almostbe in his place."The Urge to Deprive OthersMoreover, the envious are·morelikely· to be mollified by seeingothers dep~ived of some advantagethan by gaining it for themselves.It is not what they lack that chieflytroubles them, but what othershave. The envious are not satisfiedwith equality; they secretlyyearn for superiority and revenge.In the French revolution of 1848,a woman coal-heaver is reportedto have remarked to a richlydressed lady: "Yes, madam, everything'sgoing to be equal now; Ishall go in silks and you'll carrycoal."Envy is implacable. Concessionsmerely whet its appetite for moreconcessions. As Schoeck writes:"Man's envy is at its most intensewhere all are almost equal; hiscalls for redistribution are loudestwhen there is virtually nothingto redistribute."3(We should, of course, alwaysdistinguish· that merely negativeenvy which begrudges others theiradvantage from the positive ambitionthat leads men to active emulation,competition, and creativeeffort of their own.)But the accusation of envy, oreven of the fear of others' envy,as the dominant motive for anyredistribution proposal, is a seriousone to make and a difficult ifnot impossible one to prove. Moreover,the motives for making aproposal, even if ascertainable,are irrelevant to its inherentmerits.We can, nonetheless, apply certainobjective tests. Sometimesthe motive of appeasing other people'senvy is openly avowed. Socialistswill often talk as if some formof superbly equalized destitutionwere preferable to "maldistributed"plenty. A national incomethat is rapidly growing in absoluteterms for practically everyonewill be deplored because it ismaking the rich richer. An impliedand sometimes avowed principleof the British Labor Party leaders3 Ibid., p. 303.

144 THE FREEMAN Marchafter World War II was that "Nobodyshould have what everybodycan't have."Equality, Yes; Abundance, No!But the main objective test of asocial proposal is not merelywhether .it emphasizes equalitymore than abundance, but whetherit goes further and attempts topromote equality at the expense ofabundance. Is the proposed measureintended primarily to help thepoor, or to penalize the rich? Andwould it in fact punish the rich atthe cost of also hurting everyoneelse?This is the actual effect, as wesaw earlier,4 of steeply progressiveincome taxes and confiscatory inheritancetaxes. These a.re notonly counter-productive fiscally(bringing in less revenue from thehigher brackets than lower rateswould have brought), but·theydiscourage or confiscate the capitalaccumulation and investmentthat would have increased nationalproductivity and real wages. Mostof the confiscated funds are thendissipated by the government incurrent consumption expenditures.The long-run effect of such taxrates,of course, is to leave theworking poor worse off than theywould otherwise have been.There are economists who will4 "Should We Divide the Wealth1" inTHE FREEMAN, February, 1972, p. 100.admit all this, but will answer thatit is nonetheless politically necessaryto impose such near-confiscatorytaxes, or to enact similarredistributive measures, in orderto placate the dissatisfied and theenvious - in order, even, to preventactual revolution.Appeasement Provokes EnvyThis argument is the reverse ofthe truth. The effect of trying toappease envy is to provoke moreof it.The most popular theory of theFrench Revolution is that it cameabout because the economic conditionof the masses was becomingworse and worse, while the kingand the aristocracy remained completelyblind to it. But Tocqueville,one of the most penetrating socialobservers and historians of his orany time, put forward an exactlyopposite explanation. Let me stateit first as summarized by an eminentFrench commentator in 1899:Here is the theory invented byTocqueville.... The lighter a yoke,the more it seems insupportable;what exasperates is not the crushingburden but the impediment; whatinspires. to revolt is not oppressionbut humiliation. The French of 1789were incensed against the nobles becausethey were almost the equals ofthe nobles; it is the slight differencethat can be appreciated, and whatcan be appreciated that counts. The

1972 ON APPEASING ENVY 145eighteenth-century middle class wasrich, in. a position to fill almost anyemployment, almost as powerful asthe nobility. It was exasperated bythis "almost" and stimulated by theproximity of its goal; impatience isalways provoked by the final strides. 5I have quoted this passage becauseI do not find the theorystated in quite this condensedform by Tocqueville himself. Yetthis. is essentially the theme of hisL'Ancien Regime et la Revolution,and he presented impressive factualdocumentation to support it.As the prosperity which I havejust described began to extend inFrance, the community neverthelessbecame more unsettled and uneasy;public discontent grew fierce; hatredagainst all established institutionsincreased. The nation was visibly advancingtoward a revolution. . . .It might be said that the Frenchfound their position the more intolerableprecisely where it had becomebetter. Surprising as this factis, history is full of such contradictions.It is not always by going from badto worse that a country falls intorevolution. It happens most frequentlythat a people, which had supportedthe most crushing laws withoutcomplaint, and apparently as ifthey were unfelt, throws them offwith violence as·soon as the burden5 Emile Faguet, Politicians and M oralistsof the Nineteenth Century (Boston:Little, Brown; 1928), p. 93.begins to be diminished. The state ofthings destroyed by a revolution isalmost always somewhat better thanthat which immediately preceded it;and experience has shown that themost dangerous moment for a badgovernment is usually that when itenters upon the work of reform.Nothing short of great political geniuscan save a sovereign who undertakesto relieve his subjects after along period of oppression. The evilswhich were endured with patienceso long as they were inevitable seemintolerable as soon as a hope can beentertained of escaping from them.The abuses which are removed seemto lay bare those which remain, andto render the sense of them moreacute; the evil has decreased, it istrue, but the perception of the evilis more keen. . . .No one any longer contended in1780 that France was in a state ofdecline; there seemed, on the contrary,to be just then no bounds toher progress. Then it was that thetheory of the continual and indefiniteperfectibility. of man took its origin.Twenty years before nothing was tobe hoped of the future: then nothingwas to be feared. The imagination,grasping at this near, and unheardof felicity, caused men to overlookthe advantages they already possessed,and hurried them forward tosomething new. 66 Alexis de Tocqueville, On the Stateof Society in France before the Revolutionof 1789. (London : John Murray,1856) pp. 321-324. Also' available as TheOld Regime and. the French Revolutionin a Doubleday paperback.

146 THE FREEMAN MarchAggravated by SympathyThe expressions of sympathythat came from the privilegedclass itself only aggravated thesituation:The very men who had most tofear from the fury of the people declaimedloudly in their presence onthe cruel injustice under which thepeople had always suffered. Theypointed out to each other the monstrousvices of those institutionswhich had weighed most heavilyupon the lower orders: they employedall their powers of rhetoricin depicting the miseries of the commonpeople and their ill-paid labor;and thus they infuriated while theyendeavored to relieve them. 7Tocqueville went on to quote atlength from the mutual recrimi-7 Ibid., pp. 329-330.nations of the king, the nobles,and the parliament in blamingeach other for the wrongs of thepeople. To read them now is to get.the uncanny feeling that they areplagiarizing the rhetoric of thelimousine liberals of our own day.All this does not mean that weshould refrain from taking anymeasure truly calculated to relievehardship and reduce poverty.What it does mean is that weshould never take governmentalmeasures merely for the purposeof trying to assuage the enviousor appease the agitators, or to buyoff a revolution. Such measures,betraying weakness and a guiltyconscience, only lead to more farreachingand even ruinous demands.A government that payssocial blackmail will precipitate thevery consequences that it fears. ~IDEAS ONLIBERTYThe "Law of Sympathy"BUT AID and sympathy must operate in the field of private andpersonal relationships under the regulation of reason and conscience.If men trust to the State to supply "reason and conscience,"they so deaden themselves that the "law of sympathy"ceases to operate anywhere. Men who shrug off their personalobligations become hard and unfeeling, and it is small wonderthen that they are entirely willing to go along with hard andunfeeling politics. It is when he decides to "let the State do it" thatthe humanitarian ends up by condoning the use of the guillotinefor the "betterment" of man.FROM JOHN CHAMBERLAIN'S REVIEW OF SUMNER'SWhat Social Classes Owe to Each Other,September 1955 issue of Ideas on Liberty.

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC8British ActsBecome IntolerableTHE REPEAL of the Stamp Act inearly 1766 did not put an end toresistance in America. It didlower the level of the contest betweenBritain and America fromits crisis proportions by removingthe most conspicuous irritant. Butrepeal of the Stamp Act only whettedthe appetite of some Americansfor much more thoroughgoingremoval -of British impositions.As early as April the NewYork Sons of Liberty were demandingthat "Americans shouldalso insist on the removal of allrestrictions on trade, the abolitionof post offices and admiraltycourts, and they should do so 'whilethe colonies are unanimous.' "1After all, most of the parliamentaryacts against which the colonistsobjected were still on thebooks, and executive action remainedunaltered. Troops werestill stationed in America, and navalships of war were stationedalong the coast. The Sugar Actwas still in effect. New York merchantssent a petition to Parliamentin 1766 complaining bitterlyabout the effects of trade restrictionsupon their commerce. Re-1 Merrill Jensen, The Founding of aNation (New York: Oxford UniversityPress, 1968), p. 186.Dr. Carson lives. in Florida. He is a notedlecturer and author, his latest book entitledThrottlinA the Railroads.147

148 THE FREEMAN Marchstraints upon imports and exportsof sugar were particularly galling,and their·trade was hurt badly bylimitations on how wood productscould be sold. 2 The Quartering Actstill placed requirements on thecolonies involved which some ofthem refused to comply with. TheCurrency Act restricted the issuanceof paper money both uponcolonies which had responsibly re..;tired theirs in the past as well asthose which had not. And therewas the Declaratory Act with itsstrident claims about the unlimitedpowers of Parliament.The'Strategy of ResistanceThe colonists employed a varietyof tactics in their resistanceto British impositions during thedecade or so after 1763: some legal,some extra-legal, and othersillegal. These tactics ranged fromresolutions of legislatures, to petitionsto the government in England,to unauthorized conventionsand congresses, to boycotts, todemonstrations, all the way torioting and the intimidation of officialsby mobs. The use of some ofthese latter tactics in recent yearshas been justified on the groundsthat they were employed by ourvenerated forebears - an excusewhose merits would be dependentupon analogous conditions. It maybe of some use to examine the con-2 Ibid., pp. 207-08.ditions of the resort to violenceby some Americans of that earliertime, both for the light it will shedon their situation as well as whatit may tell us about the appropriatenessof this justification forcontemporary violence. By such anexamination, too, the issues betweenthecolonists and the Britishcan be sorted out.What tactics are appropriate issurely dependent on the options.available. To understand what optionswere available to the colonists,one needs to review the politicalsituation.The colonists did not fully controltheir governments. Far fromit, in most cases. Usually, the governorwas appointed from England(the charter colonies of Connecticutand Rhode Island were exceptions), and he quite often receivedinstructions from officials there.No more did the colonists ordinarilychoose the members of thegovernor's council. The assemblywas popularly elected, but its actionscould be severely circumscribed.It met on call from the governor,could have its acts vetoedby him, and was subject to beingdismissed or dissolved by the executive.There were even efforts tocontrol assemblies from England.For· example, the New York legislaturewas suspended for its failureto provide supplies for thetroops under the Quartering Act.

1972 BRITISH ACTS BECOME INTOLERABLE 149Therefore, legislatures were greatlyhampered when it came to preventingimpositions on the colonies.No direct action was open tothem ordinarily because. of thepower of governor and council tonegate such action.Nor was there any establishedm.eans for intercolonial action;none had ever been set up, and theBritish were not about to allowany to be legally established duringthe decade under consideration.At best, only extra-legalmeans were available for concertedaction across the lines of colonies.The means for legal action by thecolonists were limited then, not, asis the case usually, the means forsome minority to express itself,but for the colonies as a people.This distinction is quite germaneboth for the justifications of revolutionwhich would be offered inthe 1770's and for such justificationas there could be for illegalaction prior to the revolt.A Balance of PowersNow the elected legislatures hadgained considerable power duringthe colonial period, as was shownin an earlier chapter. That powerderived mainly from their authorityto originate taxes and appropriations.Governors even dependedupon the elected legislaturefor their salaries in most colonies,and all actions requiring moneysawaited legislative action. Governorsand other crown officialswere dependent upon or subject tothe local populace in other ways aswell. The force that had ordinarilybeen at their disposal before theperiod· under discussion had to beexercised by militia and other localpersons. Crown officials had toact through courts whose judgesmight be appointed by governorsbut whose most basic decisionswere made by juries; and theycould, themselves, be brought beforethe courts for mistreatingcolonists.In short, a precarious balance ofpowers had grown up over theyears in most colonies. Coloniallegislatures were counter-balancedby governors and councils, and thegovernor's power was limited bythe necessity of his relying uponelected legislatures. Action dependedupon a considerable measureof co-operation among the branchesof government. If they wouldnot act together, many kinds ofaction could not be taken.Massive resentment was arousedin the 1760's, then, when Parliamentmoved to alter these arrangements:by taxing colonists, bymaking appropriations, by· sendingstanding armies, by setting up admiraltycourts without juries, andso on. The thrust of parliamentaryaction was to eviscerate the independenceof elected legislatures.

150 THE FREEMAN MarchThe Quartering Act points this up,for the act required that coloniesappropriate supplies for troopswithin the colony. If a legislaturehad to act in this fashion, it washardly independent of Parliament.If Parliament could tax the colonists,it could appropriate moneysto free officials within the coloniesfrom dependence on the legislatures.The fear of this was nophantom, for Parliament wasmovingin this direction on governor'ssalaries. Of course, taxation byParliament raised another basicissue. The Connecticut legislatureput the matter in this fashion in1765:That, in the opinion of this House,an act for raising money by dutiesor taxes differs from other acts oflegislation, in that it is always consideredas a free gift of the peoplemade by their legal and electedrep,resentatives; and that we cannotconceive that the people of GreatBritain, or their representatives,have right to dispose of our property.3In fact, Parliament was movingto unbalance the powers withincolonies and make the colonies subjectto itself. The colonists raisedthe question from the outsetwhether Parliament had the au-3 Quoted in Edmund S. Morgan, "ColonialIdeas of Parliamentary Power,:The Reinterpretation of the AmericanRevolution, Jack P. Greene, ed. (NewYork: Harper and Row, 1968), p.166.thority to do this. This question,in turn, led to an even more basicone: What was the extent of parliamentaryauthority over America?This was a question for whichno definitive answers had everbeen given. As Richard Bland ofVirginia said in 1766: "It is invain to search into the civil constitutionof England for directionsin fixing the proper connection betweenthe colonies and the motherkingdom....The planting coloniesfrom Britain is but of recent date,and nothing relative to such plantationcan be collected from theancient laws of the kingdom...."He argued that "As then we canreceive no light from the laws ofthe kingdom, or from ancient historyto direct us in our enquiry,we must have recourse to the lawof nature, and those rights of mankindwhich flow from it."4 Otherssought to base the argument, however,on charter rights.Colonial spokesmen generallymaintained that Parliament couldproperly regulate relations amongthe parts of the empire and withother nations. They accepted thesovereignty of the British governmentover them and did not question- during the early yearsthatParliament played a role inchanges in the actions of the sov-4 Jack P. Greene, ed., Colonies to Nation(New York: McGraw-Hill, 1967),pp. 88-89.

1972 BRITISH ACTS BECOME INTOLERABLE 151ereign. Beyond these general functions,Parliament should not go.The position of Parliament regardingits powers over the colonieswas set forth in the DeclaratoryAct: it could legislate for thecolonies in all matters whatsoever.Who was right? The answer tothat question depends on what isright. The majority in both housesof Parliament never proposed toconsider the question. They did notdoubt that they had the authorityto take what actions they would(Where were the limits uponthem?), and they did not appearto .doubt that when called uponthey would have the necessarypower to enforce their acts. It wasnot a matter of what was right (aminority in Parliament disagreedabout this), it was only a matterof what was expedient.The colonial opposition, fromthe beginning, did tackle the questionfrom the angle of what wasright. They believed that Parliament,by right, was limited inwhat it could do. They believedthat the original charters, theBritish constitution, and, in thefinal analysis, the laws of nature,set bounds to the authority ofParliament. The colonists shouldbe adjudged to have been right,then. Since Parliament chose toact on the grounds of expediency,it is only fair that they should bejudged, in part, on those grounds.It turned out not to have been anexpedient course, for by it theAmerican empire, except forCanada, was lost. Since Parliamentdid not choose to stand onright, the colonist's position as toright can be accepted without difficulty,because it was not contested.5In any case, Parliament and thecolonies were on a collision courseeach time they acted fro~ theiropposite premises. Parliamentmight, and did, find it expedient toback down on particular issues,though not on the general principle.The colonists, on the otherhand, since they did not supposethemselves to be acting from expediency,did not back down. OnceParliament no longer found it expedientto back down, the die wascast.The Townshend ActsParliament plunged ahead withnew legislation aimed at the coloniesin 1767. The leader in formulatingthis legislation was CharlesTownshend, and it became known5 This does not mean that colonistswere right in everything they did in oppositionto British action, nor thatothers at some later time would be justifiedin imitating their every action, evenif they found themselves in analogousconditions. The rightness of a cause doesdoes not absolve people from moral andjust behavior. That a cause is just isreason for working for its triumph, notfor the engaging in wrongful acts.

152 THE FREEMAN Marchas the Townshend Acts. For awhile after the repeal of theStamp Act, things began to lookbetter for the colonies. WilliamPitt formed a cabinet, and he hadbeen quite outspoken on the sideof the colonies during the debatesover the Stamp Act. In fact, Pittwas far and away the most popularEnglishman in America at thistime, though truth to tell he hadlittle competition. But Pitt wasmade the Earl of Chatham, movedinto the House of Lords, and wasdebilitated by illness. The legislativeleadership passed to CharlesTownshend, chancellor of the exchequer,in 1767.Taxes and InterventionThe act which has drawn themost attention was the one levyingimport duties on glass, lead,painter's colors, paper, and tea.During the debates over the stamptax the distinction between internaland external was talked aboutconsiderably. Some got the impressionthat Americans accepted externaltaxes, but not internal ones.Operating from this premise,Townshend argued that Americansshould accept these new duties,since they were levied on importsand would be consideredexternal taxes. The act indicatedthat it was for the purpose ofraising a revenue, that such moneysas were raised would go firstto defray costs of governing inAmerica, that what was left wouldgo to the British treasury, andthat the.duties must be paid insilver. It also authorized the useof writs of assistance to be usedin searching for goods on whichduties had not been. paid andspecifically empowered "his Majesty'scustoms to enter and go intoany house, warehouse, shop, cellar,or other place, in the Briti-sh coloniesor plantations in America, tosearch for and seize prohibited oruncustomed goods" with writswhich courts in America were directedto issue.Another act, passed at the sametime, was the American Board ofCustoms Act. This established aboard of customs for America, tobe composed of five commissioners,and to be located at Boston. Alittle later in the year, an act waspassed suspending the New Yorklegislature for not providing troopsupplies. In a similar vein, an actin September of 1767 curtailedthe power of colonial elected legislatures.Finally, an act passed inJuly of 1768 extended and spelledout the jurisdictions of vice-admiraltycourts in the colonies andincreased the number of courts inAmerica from one to four.Resistance to the Townshendduties, as to the other British actions,was preceded or accompaniedby theoretical formulations,

1972 BRITISH ACTS BECOME INTOLERABLE 153formulations which held that Britishaction was in violation of immemorialrights. These theoreticalformulations frequently appearedfirst as' a series of anonymous lettersin newspapers and then aspamphlets, though the order mightbe reversed. America had quite anumber of men ready to enter thelists with such writings at criticaljunctures. James Otis, SamuelAdams, Daniel Dulany, and RichardBland provided some of theearly grist for the mills of opposition.John'Dickinson's "Letters"The man who came forward todo duty against the TownshendActs was John Dickinson, a Marylanderborn, who was sometimesfrom Pennsylvania but most regularlyfrom Delaware. He belongsin that select circle of men entitledto. be called Founding Fathers.From 1767 to 1775 he was thetheoretician of colonia.l resistance.Though he opposed declaring independence,he headed the committeewhich produced the Articles ofConfederation. He served in thearmy for a time during the Warfor Independence and was a delegateto the constitutional. conventionfrom Delaware, though leadershipin such matters was now inother hands.Dickinson's position on theTownshend duties was publishedas a series of letters published'weekly in the PennsylvaniaChronicle and Universal Advertiserbeginning November 30,1767. These collected letters werecalled Letters from a Farmer inPennsylvania. New England newspapersbegan publishing them inDecember, and before it was overall colonial neswpapers except fourpublished them. They were publishedas a pamphlet in 1768, wentthrough seven American editions,one in Dublin, two in London, and3. French translation. 6 A historiansums up their impact in this way:"Immediately, everyone took Dickinson'sargument into account:Americans in assemblies, townmeetings, and mass meetingsadopted resolutions of thanks;British ministers wrung theirhands; all the British press commented,and a portion of it applauded;Irish malcontents readavidly; even the dilettantes ofParis salons discussed the Pennsylvaniafarmer."7For one thing, the tone of theLetters was right..Dickinson notonly claimed a formal loyaltyto theking and the empire but actuallycast.his argument in terms of thewell being of the empire. Thoughthe natural law philosophy. under-6 See Jensen, op. cit., pp.241-42.1 Forrest McDonald, intro., Empireand Nation (Englewood Cliffs: Prentice­Hall, 1962), p. xiii.

154 THE FREEMAN Marchlay much of what he wrote, he didnot· emphasize natural laws andnatural rights so as to distinguishthem in a divisive manner fromthe rights of Britons under theConstitution, as some writers hadrushed to do prematurely. His appealwas to tradition, precedent,prudence, self-interest, the desireof liberty, and continuity with thepast. And though he bade Americansto resist the Townshend duties,he proposed that they do soin an orderly fashion. First, theyshould send petitions; if these didnot get results, turn to somethinglike a boycott of goods; only whenall peaceful means had failed,should other approaches be considered.But he pled with Americansnot to give in to a spirit. ofriotousness. "The cause of libertyis a cause of too much dignity tobe sullied by turbulence and tumult.It ought to be maintained ina manner suitable to her nature.Those who engage in it, shouldbreathe a sedate, yet ferventspirit, animating them to actionsof prudence, justice, modesty,bravery, humanity and magnanimity."8The Argument Against TaxesThe great appeal of his workstemmed, of course, from the factthat he shredded the argument forthe Townshend duties, showed it8 Ibid., p. 17.to be grounded in sophistry - nobetter than the case for the StampAct, only more subtle - and foundthe duties violative of the rightsof British subjects and potentiallyconfiscatory. As for these dutiesbeing acceptable because theywere external taxes, he thoughtthe case hardly worth considering.The objection to taxation by Parliamentdid not hinge upon thedistinction between internal andexternal; it was to taxation assuch. Americans accepted, hepointed out, as they had accepted,duties that were for the purposeof regulating trade, but not thoselevied for the raising of revenue.·The latter were clearly taxes, andthey involved the taking of propertywithout the consent of theowners. True, incidental revenuesmight arise from the regulationof trade, but they were a consequence,not the cause of it. Nosuch case could be made for theTownshend duties; they were laidon items which must be obtainedfrom England. Certainly, it wasnot the aim of the British to inhibittrade in them nor to restrainit. In fact, it was simplya tax, for the colonists were notpermitted to obtain the goods elsewhere,and might, if the Britishchose, be prohibited from manufacturingthem. There was ampleprecedent for this.Property was no longer· secure,

1972 BRITISH ACTS BECOME INTOLERABLE 155Dickinson said, if the principle ofparlia.mentary taxation of the coloniesbe· once accepted. "If theparliament have a right to lay aduty of Four Shillings and Eightpenceon a hundred weight ofglass, or a. ream of paper, theyhave a right to lay a duty of anyother sum on either.... If theyhave any right to tax us - then,whether our own money shall continuein our own pockets or not,depends no longer on us, but onthem. 'There is nothing which' we'can call our own; or, to use thewords of Mr. Locke - WHAT PROP­ERTY HAVE' WE 'IN THAT, WHICHANOTHER MAY, BY RIGHT, TAKE,WHEN HE PLEASES, TO HIMSELF?'''9Massachusetts' Circular LetterColonial elected legislatures beganto act in 1768. Massachusettstook the lead in February bydrawing up a Circular Letterwhich it sent around to the othercolonies. This letter was subsequentlyendorsed by New Hampshire,Virginia, Maryland, Connecticut,Rhode Island, Georgia, andSouth Carolina, sometimes by assemblies~and, if they were notsitting, by the Speaker. 10 TheBritish reply came from the Earlof Hillsborough in April; it was9 Ibid., pp. 43-44.10 See Lawrence H. Gipson, The Comingof the American Revolution (NewYork: Harper Torchbooks, 1962), pp.185-87.sent as a. circular letter to thegovernors of all the colonies. Hehad already written to GovernorBernard of Massachusetts that atthe next session of the House ofRepresentatives he "must 'require'"them "to rescind theCircular Letter and declare" their"'disapprobation of and dissent tothat rash and hasty proceeding.'''l1To the other governors,he declared that his expectationwas that their assemblies wouldnot participate in this new effortto arouse resentment to Britishrule. "But if notwithstandingthese expectations and your mostearnest endeavors, there shouldappear in the Assembly of yourProvince a disposition to receiveor give any Countenance 'to thisSeditious Paper [the MassachusettsCircular Letter], it will beyour duty to prevent any proceedingupon it, by an immediateProrogation or Dissolution...."12In June, Hillsborough orderedtroops to Boston.Non-Importation AgreementIt was obvious from these andother instances - the harassmentof shippers by customs agents,the increasing of military forcesin the colonies, the rejection ofpetitions - that petitions and resolutionsalone would not produce11 Jensen, Ope cit., p~ 253.12 Greene, Colonies to Nation, p. 143. ,

156 THE FREEMAN Marcha change in British policy. Thecolonists, then, moved toward attemptingto hit Britain where itwould hurt - in trade. Boston tookthe lead in adopting a non-importationagreement in August of1768. What they proposed to do,among other things, was to ceasealmost all imports from Britain.The movement to do this spreadthrough the colonies, though itwas rough going. Understandably,importers and shippers were notoverly enthusiastic about this,especially those for whom this wasa major source of income. Moreover,it needed to be a concertedeffort throughout the colonies. Ifit were not, ports which· remainedopen could put the efforts of theothers to nought. Colonists didsucceed in closing down the majorport cities in America to mostBritish imports in the course of1769. The best weapon againstports which did not co-operate wasto cut off commercial relationswith them. ~ This usually broughtthem into line.Though non-importation wasfar from absolute, it did succeed.Imports from Great Britain intothe colonies fell from £2,157,218in 1768 to £ 1,336,122 in 1769. 13Some ports did much better thanthis average. For example, Phil-13 Richard B. Morris, ed., Encyclopediaof American History (New York: Harper,1953), p. 78.adelphia's imports from Britaindropped from £432,000 in 1768to £ 200,000 in 1769 to £ 135,000in 1770. 14 More importantly, sincethe object of non-importation wasnot simply to reduce imports fromBritain, the British began to backdown once again in the face ofdetermined colonial opposition. In1769, Parliament moderated itsposition on the Quartering Act toallow colonies to supply troops ontheir own initiative.Reduced Tensions under Lord NorthMore success for the colonieswas to follow with the coming ofa new ministry. Lord North became,in effect, Prime Minister inearly 1770, a position which hewas to hold until 1782. Duringthese years he served George IIIas best he could, doing his willduring a time when a man oflesser loyalty and fortitude wouldhave sought a less demanding job.Re served his king first by actingto reduce tensions in America. InApril, the Townshend duties wererepealed, except for the tax ontea. Some concessions were alsomade in the application of theCurrency Act.I t was not long before the nonimportationagreements began tobe abandoned. There was considerablesentiment for continuingthem - after all, the tax on tea14 Jensen, op. cit., p. 357.

1972 BRITISH ACTS .BECOME INTOLERABLE 157had not been repealed, nor hadother sources of tension been removed- but many of the merchantshad had ~nough of suchself-denial. By various maneuvers,they opened up the ports to Britishgoods once again. This coursewas the more attractive generallybecause the hasty efforts at increasingdomestie manufacturesto replace British imports hadproduced few tangibl~ results.Calm Before StormThe colonies were comparativelycalm during 1771. Although therehad been clashes between Britishtroops and colonists at New Yorkand Boston (the latter leading tothe "Boston Massacre") in 1770,these did not expand into anygeneral conflict. Such as remainedof the British threat to the colonieswas difficult to dramatize;there can hardly be said to be atrend toward oppression if the oppressivemeasures are being reduced.At any rate, no major figureventured forth to attempt anydramatization. Even though teacontinued to be taxed, the amountof tea imported into the coloniesfrom England increased from thelow point for the past severalyears of 110,000 pounds in 1770to 362,000 pounds in 1771. 1515 See Donald B. Cole, Handbook ofAmerican History (New York: Harcourt,Brace and World, 1968), p. 51.It was, however, the calm beforethe storm, the clouds for whichbegan to gather in 1772. The firstof these was the burning of therevenue ship, the Gaspee, byRhode Islanders in June. TheGaspee had been harassing shippingcoming into Rhode Islandfor some time; the captain wasparticularly obnoxious in histreatment of those on shipsstopped for searches. The Gaspeeran aground, and while she was inthat disabled condition, a partyboarded her, drove the crew offand burned the ship. An investigatingcommittee turned up nouseful information but its appointmentfrom England stirred resentment.A little later in the year,the British Exchequer took overthe payment of the salaries of thegovernor and judges in Massachusetts.Here the move that had beenlong feared: to remove crown officialsfrom reliance on the electedlegislature. In November, Bostonformed a committee of correspondencewhich sent statements toother towns in Massachusetts andto all colonial assemblies. Earlythe next year, the House of Burgessesin Virginia established acommittee of correspondence, andmost·other colonies followed suit.Tea Act 01 May, 1773What stirred the colonists toopen resistance once again, how-

158 THE FREEMAN Marchever, was the Tea Act in May of1773. The purported intent of thisact was to rescue the East IndiaCompany. That company was indire straits, on the verge of bankruptcy,and sorely in need of amarket for its tea. Though importshad picked up in the Americanmarket, it is generally believedthat most of the tea consumedin America came from theDutch; by buying such tea thethe colonists unlawfully evadedthe tax on it. The Tea Act wasdevised to make tea from the EastIndia Company almost irresistible.It enabled that company tosell tea directly in America, relievingit of the necessity of sellingit first at auction to merchantsin England. "By eliminating themiddleman . . . the company wasable to sell tea in the coloniescheaper than in England," eventhough it was still taxed in the colonies."More significantly, its teanow undersold that of the Dutchsmugglers."16A Monopoly, plus TaxesThe British were about to succeedin doing what John Dickinsonindicated to be the danger.They were going to establish amonopoly for a taxed item, somethingwhich could not be compet-16 John C. Miller, Origins of the AmericanRevolution (Boston: Little, Brownand Co., 1943), p. 339.itively produced in America, butwas very popular. It is likely thathad Parliament contented itselfwith establishing a monopoly itmight have got away with it. Butthe fact that tea was taxed entangledthe monopoly question withtaxation-without-representation.The objections which had beenraised before had now a freshexemplar; but now Americanswere to be seduced into complianceby a lower price.It did not happen. True, theEast India.Company caused chestsof tea to be loaded on many shipsfor America, and these put intoport at Boston, Philadelphia, NewYork, and Charleston. The colonistswere ready for them; theywould not buy or consume thetea, nor would they allow it to belanded if they could help it. Themost dramatic opposition occurredat Boston, where Bostoniansdressed as Indians boarded theships and heaved the chests intothe water. Patriots prevented teafrom being landed in Philadelphia.It was landed and transferred tothe customs house at Charleston;there it stayed until war came.The Intolerable AdsThis time Parliament did notback down when confronted bycolonial resistance. The majoritydetermined, instead, on a policy ofcoercion, a policy backed by four

1972 BRITISH ACTS BECOME INTOLERABLE 159acts passed between March 31stand June 2nd of 1774. They areknown formally as the CoerciveActs. The force was to be concentratedon Boston and Massachusetts.The Boston Port Actclosed the port of Boston to commercialshipping until such timeas the East India Company hadbeen compensated for the tea. TheMassachusetts Government Actprovided that the governor's councilwould be appointed by the king,not elected as had been the case,that the governor and king wouldappoint judges, that juries wouldbe chosen by the sheriff, and thattown meetings could not be heldwithout the consent of the governor,except for annual electionmeetings. The Administration ofJustice Act was of general effectand provided for the trying ofcertain officials from the coloniesin England, if the governorthought it necessary. The QuarteringAct applied generally to thecolonies, also; it authorized thequartering of troops in occupied·dwellings.The colonists dubbed them theIntolerable Acts. (INext: The Prelude to Independence.IDEAS ONLIBERTYA Policeman's LotA GOVERNMENT'S proper function in a free society· is to act asa policeman, not as a regulator over people's actions Ot" choices.The more regulations or restrictions, the more corruption.Why? Because we have reached a time when honest businessmenmust get the right to produce or engage in a business frommen who do not produce. A dozen permits are needed by businessmenbefore they can engage in activity which is their right.More often than not, they must grease the palm of every parasiteissuing these permits or suffer deliberate and disastrousdelays. In addition the city has the "right" to take away thesepermits, in the event some asinine regulation is not complied with.JACK MORANO, A MEMBER OF THE TACTICAL PATROL FORCE OF NEW YORK CITY,FROM A LETTER TO The Wall Street Journal, December 28, 1960.

Who is theMARC!LR ODUCER?w. A. PATONCONCEPTIONS of the marginal entityranging from the fuzzy tothe downright indefensible arefrequently encountered in currentdiscussions of business managementand finance and pe:t;haps thisjustifies some comments aimed atclarification and sharper definition.Marginal firm DefinedIn making use of the term"marginal" in this connectionthere is a need, to begin with, tohave clearly in view the qualityor characteristics we are lookingfor when .attempting to define themarginal enterprise. In thissearch our concern, presumably,is with the price-making process,and we are focusing attention onDr. W. A. Paton is Professor Emeritus of Accountingand of Economics at the Universityof Michigan. This article is adapted from onesection of a paper prepared for the "Mises 90thBirthday Collection," copyright by The Institutefor Human~ Studies.the business firm that occupiesthe crucial position in this process,for a special field or marketarea, at a particular point orperiod in time.The· definition I consider appropriatemay be stated as follows:The marg·inal producer is theone who is just barely induced toremain in operation by the existingstate of affairs and who is sosituated with respect to volume ofoutput that his dropping out willexert sufficient pressure on thearray of price-itnftuencing forces,through the supply side of themarket, as to bring about a recognizablechange in product price.This was the description of themarginal man or firm, as I recallit, stressed by my revered mentor,Fred Manville Taylor, when I wasin his graduate courses sixtyyears ago. A slightly differentversion that is acceptable is: The160

1972 WHO IS THE MARGINAL PRODUCER? 161marginal producer is the·. one whowill be the first to withdraw unlessconditions improve.The Break-Even ApproachThe most common conception ofthe marginal producer nowadays,so it seems, is that of the entitythat is precisely at the breakeven,zero-earnings stage. Thetextbooks in the courses in managementand other subjects in theschools of business administrationare full of charts which identifythe break-even position as of criticalimportance. I am one of thosewho are getting very tired of thispreoccupation with break-even"analysis." In my judgment noconvincing case has ever beenmade for the view that the zeroearninglevel is a decisively significantspot in connection withbusiness decision-making. Andwhen the "analysis" includes thedesignation, of the firm at thebreak-even point as "marginal"those who know anything abouteither economic theory or actualbusiness operation can feel theirhackles rising.The notion that the marginalposition is occupied by the breakevenproducer finds no solid supportin business experience.· Evenfirms operating at .a loss oftenhang on for years. This is particularlytrue in the case of thesmall or medium-sized firms withownership and control residing ina family or small local group, butthe condition is not unknownamong relatively large enterprises.As long as revenues covercurrent expenditures, includingattractive salaries for executives,immediate management has astrong urge to continue operations,even if the outlook is unpromisingto the point of beingdownright gloomy. This accountsfor the phenomenon of corporationsthat are worth more deadthan alive. Examples. are not rareof substantial concerns whoseshares have been quoted formonths or even years at less thannet liquidation value (that is, atless than could be realized if theentity disposed of all assets forwhat they would bring, paid allliabilities, and distributed the balanceto shareholders).In some. of these cases the announcement,finally, that the directorshad decided on a, programof liquidation has caused a sharpadvance in the price of the stock.I recall one example, a miningcompany, with shares listed on amajor exchange, where the marketprice of .the stock - which hadbeen hovering under $2 per sharefor some time - promptly movedup to $16 when the plan to go outof business was formally decidedupon at a board meeting. The lowprice preceding the announcement

162 THE FREEMAN Marchwas of course based on the assumption- by those trading inthe company's shares - that themanagement would continue tofritter away the liquid resourcesin unprofitable operation and exploration.(By these observationsI am not intending to deny thatthere have been many cases wheretenacity in the face of a poorshowirig over a considerable timehas finally paid off.)It may be safely concluded thatin a given situation neither thefirm at the zero-earning point northe concern suffering persistentlosses is necessarily the vulnerable,marginal entity, the enterprisejust barely hanging on, andthat will be the first to drop outif conditions become less favorable.And it may also be concludedthat even the most badly situatedfirm, the one at the very bottomof the stairway of earning power(or that shows the greatest levelof loss) need not be in the marginalposition in the sense definedabove. (Of course, the term mightbe used to designate the worst-offenterprise - and some seem toemploy it for this purpose.)Profit Maker May Be MarginalIndeed the marginal producer,soundly defined, may be an enterprisethat has an established ea.rningpower. Assume, for example,a producer operating in a highriskfield for some time has beenachieving an earning rate·of 4 percent on the stockholder capitalemployed (computed in terms ofthe current value of resourcesless liabilities). Assume, further,that a 10 per cent annual returnis regarded as the necessary lurefor risk capital in this field, asevidenced by the data of the investmentmarket. With these conditionsthe management may welldecide to curtail production - orstop operations altogether as soonas practicable - and thus step intothe marginal-entity role. Remember,it's the producer just on theverge of dropping out, and whosedecision will have an effect onproduct price, who may be regardedas marginal.In practice, it must be conceded,the identification of themarginal producer in a given industryand time period may bedifficult if not impossible. Thisis especially true when we thinkof such producers as poised onthe brink of withdrawal, but notyet having taken decisive action.The difficulty in the way of specificidentification, however, is nowarrant for adoption of sloppy orunsound concepts and definitions.A good guess would be that seldomdoes reaching the preciseposition of a zero level of earningssignal or trigger a ceaseproductiondecision.

1972 WHO IS THE MARGINAL PRODUCER? 163The Cost of Capital-FurnishingIn conclusion I wish to returnto the fashionable break-evencharts and discussions for a momentto register an objectionsomewhat outside the question ofthe definition of the marginalfirm. From the standpoint of goodmarket-economy theory the basicdifficulty with an this rubbish liesin an improper conception of whatit means to "break even." If cap'ital-furnishingis a primary, essentialfactor in the productive process- and that this is the case hasbeen brilliantly demonstrated byeconomists over and over againitshouldn't be ignored in the com:-putation of total cost in the broadsense of price-influencing cost.And if, in a given situation, thiscost is omitted from the reckoning,and revenues just match therecognized costs, the producer isnot truly breaking even. Instead,he is operating at a loss (even ifthis is not the way the accountantslook at it). Here is a crucialpoint in the case for the freemarketeconomy as opposed to socialism,and certainly those whostrongly prefer control by themarket to authoritarian directives(including "freezes") shouldn'tuse concepts and terms that playinto the enemy's hands. t)IDEAS ONLIBERTYHow to Attract CapitalTHERE IS NO REAL SHORTAGE of capital in the world, and I do notknow of any major project which has been held up solely becauseof the lack of money. Capital is plentiful wherever it is "wantedand well treated." The real bottleneck in the development of theworld is the shortage of human capital: people with the skill,training, and education intelligently to employ the world'sresources.The facts are that when political freedom and free enterprisespread, markets increase, and that the expansion of markets isonly prevented through political motivation. The interest ofAmerican business in the expansion of a free enterprise systemaround the world as part of a free political system is based notonly upon moral considerations, but on the hard fact that thereis no market for consumer goods among slaves.WALTER B. WRISTON

RON HEINERFROM TIME IMMEMORIAL, thinkersand philosophers have attributedto that which has been called the"character" or "spirit" of the peopleall of those noteworthy accom.;,;plishments achieved by variouscivilizations. Rome was the productof a great spirit of disciplineand a genius of organizationalability; the European Renaissancewas the product of a rebirth ofenergy and creativity; and theAmerican rise to world eminencewas due to the unheralded ruggedcompetitive spirit of its people.The preeminence of this view isseen by its implicit reflection inmost ethnic jokes (Le., the implication·being in certain jokes thatthe Polish are stupid, the Italiansare lazy, the Germans are militaristic'and so on) .Mr. Heiner is a third-year undergraduate ineconomics at the University of Washington.Concomitant with this view isthe belief that if order and civilizationare on the decline,if "timesare bad," what is needed is a recommitment,a rededication, a renewedspirit of sacrifice on thepart of the citizens and then allwill be well again.In the last two centuries, however,a select group of thinkershas fundamentally challenged thecorrectness of these views concerningcivilization and social life.Beginning most recognizably withthe writings of Adam Smith, TheWealth of Nations, there emergedan essentially new discipline laterto be called economics, and with itsprang a different view of humancivilization which was to revolutionizesubsequent thought. Twoparagraphs from the openingpages of Ludwig von Mises' HumanAction serve as a striking164

1972 AMERICAN COMPETITIVISM: CAUSE OR RESULT? 165introduction to this view and itssignificance:"Other philosophers . . . lookedat human things from the viewpointof government. They wereintent on establishing rules ofpolitical action, a technique, as itwere, of· government and statemanship.Speculative minds drewambitious plans for a thoroughreform and reconstruction of society.The more modest were satisfiedwith a collection and systematizationof the data of historicalexperience. But all were fully convincedthat there was in the courseof social events no such regularityand invariance of phenomena ashad already been found in the operationof human reasoning andin the sequence of natural phenomena.They did not search forthe· laws of social cooperation becausethey thought that man couldorganize society as he pleased. Ifsocial conditions did not fulfill thewishes of the reformers, if theirutopias proved unrealizable, thefault was seen in the moral failureof man. Social problems were consideredethical problems. Whatwas needed in order to constructthe ideal society, they thought,were good princes and virtuouscitizens. With righteous ·men anyutopia might be realized."The discovery of the inescapableinterdependence of marketphenomena overthrew this opinion.Bewildered, .people had to face anew view of society. They learnedwith·stupefaction that there is anotheraspect from which humanaction might .be viewed than thatof good and bad, of fair and unfair,of just and unjust. In thecourse of social events there prevailsa regularity of phenomenato which man must adjust his actionsif he wishes to succeed. It isfutile to approach social factswith the attitude of a censor whoapproves or disapproves from thepoint of view of quite arbitrarystandards and subjective judgmentsof value. One must studythe laws of human action and socialcooperation as the physiciststudies the laws of nature. Humanaction and social cooperation seenas the object of a science of givenrelations, no longer as a normativediscipline of things that oughtto be - this was a revolution oftremendous consequences forknowledge and philosophy as wellas for social action."lIn other words,·the belief in thesole primacy of ethics in socialmatters was fundamentally challenged:society.could not be organizedaccording to any set ofethical norms; and further, thereprevailed certain inescapable effectsof. various social structureswhich could not be nullified re-1 Ludwig von Mises, Human Action(3rd ed., Chicago. Regnery, 1966), p. 2.

166 THE FREEMAN Marchgardless of the sincerity and diligenceof those individuals attemptingto reform the social system interms of various desired ethicalqualities (such as equality in allaspects of social life). Indeed, theview now developed that many ofthese qualities (viz., character,spirit, dedication, and so forth ofthe people) could more correctlybe regarded as effects or resultsof certain patterns of social collaboration,rather than the causeof the specific social structure andthe achievements of the peopletherein.Ethics Plus OrganizationThus, one of the significantrevelations derived through thedevelopment of economics is thatthe necessary conditions for theprogression and "flowering" of acivilization include not only a systemof workable ethical values butalso the appropriate system of BOcialorganization, and that neitheris sufficient without the other.Moreover, if there prevails a setof ethical norms, the practice ofwhich precludes the developmentof an appropriate system of socialorganization (for example, beliefswhich consider merchants andlenders of money who demand interestas people engaged in activitiesof low moral character), therecan be no general advancement forthat civilization; or, if the appIicationof a set of political andeconomic doctrines also precludesthe establishment and continuanceof an appropriate system of socialorganization, then appeals and effortsto revitalize the dedicationand moral spirits of the populacecannot succeed in bringing aboutadvancement (or preventing downfall)for that civilization.It could be argued, therefore,that the oft-cited American "competitivespirit" and "rugged individualism"are consequences ofthat system of social collaborationcharacterized by the unhamperedmarket economy, and that thiscompetitive drive could not havedeveloped without this system ofsocial collaboration.Very much related to the abovediscussion is a remarkable andsignificant series of events in recentmonths most dramaticallyrepresented by the current "wagepricefreeze." In one of the statementsmade by President Nixonshortly after the initiation of the"freeze," it was emphasized that,in the long run, what is needed torevitalize America (in addition towage-price controls) is a rededicationby Americans to that spirit ofcompetitivism which made Americagreat.In light of the preceding development,however, this plea for arecommitment of the American"rugged individualist spirit" is

1972 AMERICAN COMPETITIVISM : CAUSE OR RESULT? 167seen to be completely illusory.In fact, what has been done isto implement the most drasticform of restriction (general scaleprice controls) on that·system ofsocial organization (viz., the unhamperedmarket economy) whichis the cause or necessary co-conditionwhich permitted the emergenceof the very spirit of competitiveindividualism which thePresident deems as necessary forAmerica's continued greatness.This means that the Presidenthas embarked on a policy which,if continued and enlarged, willeliminate what is left of this competitivespirit and render its reemergenceimpossible.Compounding ErrorAll of this testifies to the wordsof Ludwig von Mises in the closingpages of Human Action 2 :"the study of economics is almostoutlawed today. The public discussionof economic problems ignoresalmost entirely all.that has beensaid by economists in the last twohundredyears. Prices, wage rates,interest rates, and profits are dealtwith as if their determinationwere not subject to any law. Governmentstry to decree and to enforcemaximum commodity prices2 Ibid., pp. 879-880.and minimum wage rates. Statesmenexhort businessmen to cutdown profits, to lower prices, andto raise wage rates as if thesematters were dependent on thelaudable intentions of individuals."In order to attain any end, appropriatemeans must be used inorder to effect the true causes ofthat which is sought. The ironic.aspect of the solely ethical interpretationof economic affairs isthat it fundamentally misconceivesthe operation of the socialsystem in such a manner as to suppressand obscure the real workingsand true causes of the problemsit seeks to remedy. In so doing,the measures which are thusimplemented themselves becomecauses of systematic distortionsin the economic system; whichare then interpreted as proof ofthe necessity for even more drasticextensions of those original policies- thus compounding and multiplyingthe distortions in a selfjustifyingcycle.All of these. considerations wouldbe academic but for the realitythat these measures and their. e~~tensions adversely affect millionsof lives in an essentially irreparablefashion, the ill effects possiblyenduring for centuries. t)

GARY NORTHntity ofato . An un­Sta~ interventenq~r.All th~t;LUDWIG VON l\USESof ~bney and Credit, P. 249PEOPLE ADVOCA?r~'''''''"id~ntical eco- intelinational monetarynomic policies for V~;Y"''di~tfe!~,,~~ transac Ions l~oUld set the pricesreasons. The recent interest, bot'h"',Q{",various/ currencies, includepractical and theoretical, in the ~'~Ii'et~,l:,!~Y~- who would havesubject of international monetary each goverhment manage its ownexchange rates is a point in ques- nation's money supply - as well astion. Advocates of flexible' ex- those who believe in a full goldchange rates, in which a free mar- coin standard to preclude governmentcontrol. Opponents of flexibleinternational exchange rates,Mr. North is a member of the staff of theFoundation for Economic Education.168

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 169on the other hand, include not onlythe creators of the Bretton Woodsagreement that established the InternationalMonetary Fund butalso a number of conservativeeconomists.! How is it possiblethat the camps could be. dividedin this fashion?To answer this, one has to examinethe contexts. Ludwig vonMises, for instance, believes intotal freedom in the monetarysphere: the government should belimited to the enforcement of contracts,whatever the exchangemedium might be in any particularcontractual ,obligation. MiltonFriedman also wants to see allcitizens free to own gold and tomake contracts in gold, but hethinks the central bank shouldguarantee a constant increase inthe supply of money each year.Mises would reject such a proposalas inflationary, unless the legaltender provision of Federal ReserveNotes were abolished andpeople were thereby free to avoiddoing business in fiat money. Butneither man wants to see any infringementon the right of menand women on either side of theborder or ocean to make bargainswith each other, even if thosebargains involve the exchange ofnational monetary units, presentor future.The Keynesians, who would preferFriedman's views on monetarymanagement to Mises' full goldcoin standard, find themselvesworking together with conservativeeconomists who support agoldstandard and are anti-inflationaryin perspective. Both the Keynesiansand these conservativesfavor the esbiblishment of government-enforcedlimits on the range'of prices that can legally exist betweenone currency unit and anyother. Unfortunately, no economistseems to be able to agree with anyof his colleagues as to the preciseacceptable range of price flexibilityorthe legal mechanism used toenforce such a range; this indicatesthe nature of the problem.Year after year, the publicationsof the International Finance Sectionof the Department of Economicsof Princeton Universitypour out Essa,ysin InternationalFinance. We read of crawling pegsand running pegs, of parities andcurrency swaps, of paper gold andinternational trust. What does itall mean? .80 far, no one has evenbeen able to define a Eurodollar,let alone explain how it works; orif someone can, no colleague agreeswith him. 2No Faith in FreedomThe Keynesian economist simplydoes not trust the free market'sunhampered price mechanism toclear itself of supplies of scarceeconomic resources. Thus, we need

170 THE FREEMAN Marchfiscal policY,fine tuning ofthe economy,econometric models, datagathering on .a massive scale, andcontrols over the money supply.Especially controls over the moneysupply. Naturally, certain flawsappear from time to time: a $1.5billion predicted surplus for fiscal1970 became a $23.3 billion deficit,but what's a few billion dollarsamong friends? We owe it to ourselves,right? A private firm, un~less it has a cost-plus governmentcontract, would not long survivein terms of such a woefully inefficienteconomic model, but whatdo businessmen know about economics,a faithful econometricianmay ask? If reality does not conformto the model, scrap reality,by law.So reality is scrapped, and theKeynesian finds it necessary toabandon one more area of marketfreedom, namely the freedom· ofprivate, voluntary internationalexchanges of money at prices establishedby the market. Such avoluntary system of internationalexchange would reduce the predictabilityof the government'seconometric model. That would allowa "bleeder" in the overall controldevice. That would allow mento measure the extent of the depreciationof their own and other'sdomestic currencies, thus callingattention to the policies of inflationand confiscation being enforcedby their governments andother governments. As for theUnited States, floating exchangerates on a free international marketfor currencies would end, overnight,the exported inflation of ourcontinual budgetary deficits. 3 Thatis why government bureaucratsdo not generally approve of floatingexchange rates.Flexible Exchange Rates:A Counsel of Despair?This does not explain why variousconservative economists also opposethe extension of the market into therealm of international monetaryexchange. The late William Roepkecalled the idea "a counsel of despair."4His argument against flexibleexchange rates: "Withoutstability of exchange rates any internationalmonetary system wouldbe flawed at an important point, becauseit would lack a major conditionof international economic integration."This sounds plausibleenough, until one reads his nextsentence: "Just how importantthis condition is will be seen if wereflect that national economic integration(among the separate regionsof one country) is unimaginablewith fluctuating rates ofexchange between, say, regionalcurrencies."5 The government'sanswer to this "unimaginable"process of regional currencies isto establish a central monopoly of

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 171money creation coupled with alegal tender law. And this is preciselythe goal of international socialistplanners: a single worldbank with a legal tender law to enforceits control over the entireface of the earth. 6 The plannerswant a "rational" world economy,but their faith is in bureaucraticrationalization - a bureaucratic'hierarchical chain of economiccommand - and not the rationalizationthat is provided by a voluntaryfree market and its sophisticatedcomputer, the freemarket price mechanism. 7 As yet,they have not achieved such "rationalization"simply because allthe nations want their own domestic,inflationary, autonomous "rationalizations."Fixed exchangerates are as close as they can cometo centralized world planning, sothey tried it, by means of the InternationalMonetary Fund, from1947 until August 15, 1971. OnDecember 19 they returned to thefamiliar policy of fixed exchangerates. Four months of internationalmonetary freedom were all theycould take.Let the State Control Itsel',Some Conservatives ArgueWhy do conservative economistslend support to fixed exchangerates? Because they think thatthis is a form of statist interventioninto the world market whichcan impose restraints on the state'sown policies of domestic·inflation.The state, the argument goes, willcontrol itself by law. To some extent,this may be true, tempora.rily.The fear of an internationalrun on the dollar may have restrainedthe Federal Reserve Systern'sexpansion of the domesticmoney supply from December,1968 through the spring of 1970.Officials may have feared the actionof foreign central bankers indemanding gold at the promisedprice fixed by 1934 law of $35 perounce. But this slowing in themoney supply created an inevitablereaction: the stock market fell byone third, and the governmentcould no longer finance its debtthrough sales of bonds to individualsor private corporations.Therefore, the Federal Reservestepped in once again to purchasethe available government· bonds atthe preferred low interest rate. Anew wave of inflation began in thespring of 1970. The pressures onthe American gold stock rose onceagain, and the President finallyescaped on August 15, 1971 - orhoped that he had. He cut thedollar's official tie to gold in internationalpayments and left it freeto float on' the international markets.Of course, this act was a violationof International MonetaryFund rules, to which the UnitedStates is a party (or was). As

172 THE FREEMAN MarchLenin said, treaties are made tobe broken.For a time, fixed exchange ratesseem to restrain policies of domesticmonetary inflation. But for howlong? Franz Pick's report lists devaluationsevery year, and thereare a lot of them. They are internationalviolations of contractviolationsthat call into questionthe whole structure of internationaltrade. The honoring of contractsis the very foundation offree exchange. Apart from this,economic prediction becomes exceedinglydifficult and productivitysuffers. Thus writes Alfred Malabre:International currency exchangescan transpire in various ways. Oneis through a system where CurrencyA can indefinitely be exchanged at afixed rate for Currency B. This is thesystem that allegedly prevailedthrough most of the post-World WarII era and to which most Westernleaders now wish to return. Ideally,it's a magnificent system, because. itpromises to eliminate uncertaintyfrom international financial dealings.The widget maker knows, when hegets an order from abroad, that themoney he will receive will be worthas much to him in the future as atpresent.In practice, however, fixed-rate arrangementsprovide anything butcertainty. Between 1944, when thepresent fixed-rate system was conceivedat Bretton Woods, N.H., andmid-August [1971], when the systemfinally collapsed, 45 countries changedthe international rates for their currencies.In some instances, changeswere repeated many times, so that inall 74 currency-rate changes occurred.8The problem with such devaluations,as Mises has shown, is thatthey create incentives for retaliatorydevaluations on the part ofother governments. "At the end ofthis competition is the completedestruction of all nations' monetarysystems."9 If there were nofixed exchange rates in the firstplace, there would be no need forthese governmentally imposed economicdiscontinuities.International Stability, a MythThe myth of international monetarystability is just that, a myth.Stability can only be approached,like economic equilibrium, andthen only by the free price mechanism.Exchange rates cannot befixed without increasing the pressuresfor the radical discontinuitiesof revaluation and devaluation.That is why the IMF rulesallowed for a 1 per cent band, upwardor downward, of flexibilityin exchange rates. That is whyrules imposed since December 19allow a currency a plus or minus2.25 per cent band. But fiat exchangerates cannot supply, stabil-

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 173ity in a world of fiat currencies;they can only mask the extent ofmutual inflation through an illusion,the illusion of fiat stability.And inevitably, the illusion will bebroken, sooner or later, as onAugust 15.Fixed exchange rates create anenormous temptation among menwhose professional careers are, ina planned economy, dependentupon deception. Fixed exchangerates, themselves a practical absurdityin a world of fiat currency,create a premium on lying. WhenSir Stafford Cripps promised thatthe pound would not be devaluedthroughout the first nine monthsof 1949, he led the people to believethat no devaluation was goingto take place. And yet it didon September 18, 1949. John Connallyhad to admit his own part ina similar deception in his August16 press conference. What elsecould we do, he pleaded. Whatelse indeed? Once you start thebig lie - that exchange rates canbe fixed by law without seriouseconomic consequences - you justcannot stop.Polylogism!Any economist, of whateverschool of thought, can tell you whybimetallism failed in the late nineteenthcentury. The legal paritybetween gold and silver,. unlesschanged continually, could notmatch the· true conditions of theforces of supply and demand betweenthe two metals. Thus, one orthe other precious metal was alwaysin short supply at the fixedprice.. The attempt to enforce sucha fixed ratio led to monetary disequilibrium- Gresham's Law - inwhich the artificially overvaluedcurrency drove the artificially undervaluedcurrency out of circula,;.tion and into either hoards or foreigncountries. Thus it is withevery attempt of government atany kind of price control. Thus itis with fixed exchange rates.Ask the economist who has justdemonstrated to his own satisfactionthat bimetallism is impossible,since the state cannot successfullyset a fixed exchange rate betweengold money and silvermoney, to extend his analysis todollars and pounds or francs· andmarks. Then watch him squirm.Logic, when applied to the case ofgold and silver, somehow becomesinoperable when applied to dollarsand pounds. Mises has an expressionfor this: polylogism. It is hismost contemptuous expression.Mises, of course, subsumes exchangerate fixing under the generaltheory of exchange, thus followingthe logic of bimetallismthrough to the logic of the impossibilityof permanent fixed exchangerates in internationalmonetary transactions. 10

174 THE FREEMAN MarchProfessor Mises long ago haddemonstrated the utter bankruptcytheoretically of fixed exchangerates and their tendency to leadto national bankruptcy in practice.He did so in his 1912 classic, TheTheory of Money and Credit, andin Human Action. The generaltheory of monetary exchangestarts from a premise:For the exchange-ratio between twoor more kinds of money, whether theyare employed side by side in the samecountry (the Parallel Standard) orconstitute what is popularly calledforeign money and domestic money,it is the exchange-ratio between individualeconomic goods and the individualkinds of money that isdecisive. The different kinds of moneyare exchanged in a ratio correspondingto the exchange-ratios existingbetween each of them and the othereconomic goods. l1In other words, if 1 ounce of goldis exchanged for 10 pounds of anothercommodity and 1 ounce ofsilver is exchanged for 1 pound ofthat same commodity, then theexchange-ratio of gold to silvershould be 1 :10. Fifty years later,Mises was still saying the samething:The final prices of the various commodities,as expressed in each of thetwo or several kinds of money, arein proportion to each other. The finalexchange ratio between the variouskinds of money reflects their purchasingpower with regard to the commodities.If any discrepancy appears,opportunity for profitable transactionspresents itself and the endeavorsof businessmen eager to takeadvantage of this opportunitytend tomake it disappear again. The purchasing-powerparity theory of foreignexchange is merely the applicationof the general theorems concerningthe determination of prices to thespecial case of the-. coexistence ofvarious kinds of money.l2That last sentence is crucial. Exchangerate theory is simply asubordinate application of themore general theory of price.Mises continues:Let us consider again the practicallyvery important instance of aninflation in one country only.The increase in the quantity of domesticcredit money or fiat moneyaffects at first only the prices of somecommodities and services. The pricesof the other commodities remain forsome time still at their previousstand. The exchange ratio betweenthe domestic currency and the foreigncurrencies is determined on thebourse, a market organized and managedaccording to the pattern and thecommercial customs of the stock exchange.The dealers on this specialmarket are quicker than the rest ofthe people in anticipating futurechanges. Consequently the pricestructure of the market for foreignexchange reflects the new money relationsooner than the prices of many

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 175commodities and services. As soon asthe domestic inflation begins to affectthe prices of some commodities, at anyrate long before it has exhausted allits effects upon the greater part ofthe prices of commodities and services,the price of foreign exchangetends to rise to the point correspondingto the final state of domestic pricesand wage rates.This fact has been entirely misinterpreted.People failed to realize thatthe rise in foreign exchange ratesmerely anticipates the movement ofdomestic commodity prices. They explainedthe boom in foreign exchangeas an outcome of an unfavorable balanceof payments. The demand forforeign exchange, they maintained,has been increased by a deteriorationof the balance of trade or of otheritems of the balance' of payments, orsimply by sinister machinations onthe part of unpatriotic speculators. 13The Speculator's RoleThe speculators perform a crucialset of services, contrary topopular opinion. They help balancethe supply of and demand forfuture moneys. In doing so, theyhelp to reduce the zone of uncertaintyabout the future. Second,they also alert citizens of anygiven country to the monetarypolicies of their own central bank.If the policies of monetary expansionare being pursued by the centralbank, the speculators will revealthis fact, ~aily, to anyonewishing to consult a financial newspaper.The citizen receives informationfrom an impartial sourceconcerning the latest opinions ofskilled, competitive and domesticmonetary experts concerning thestability or lack of stability of hisown country's money. Because ofthis, the freedom of the internationalmonetary speculator is ascrucial to the defense of free institutionsas one might imagine.Hamper his activities, and youhave taken a sinister step awayfrom freedom. .The bureaucratsknow this:What those; governments who complainabout a scarcity of foreign exchangehave in mind is, however,something different. It is the unavoidableoutcome of their policy of pricefixing. It means that at the pricearbitrarily fixed by the governmentdemand exceeds supply. If the government,having by means of inflationreduced the purchasing power of thedomestic monetary unit against gold,foreign exchange, and commoditiesand services, abstains from any attemptat controlling foreign exchangerates, there cannot be any questionof a scarcity in the sense in whichthe government uses this term. Hewho is ready to pay the market pricewould be in a position to buy as muchforeign exchange as he wants.But the government is resolved notto tolerate any rise in foreign exchangerates (in terms of the inflateddomestic currency). Relying

176 THE FREEMAN Marchupon its magistrates and constables,it prohibits any dealings in foreignexchange on terms different from theordained maximum price. 14Radical economic discontinuitiesare difficult to predict-far harderthan economic countinuities. Thesteady movement of internationalexchange transactions in terms ofan unhampered free market isbasic to economic continuity. Imposefiat exchange rates, and youcreate the "stability plus devaluations"program which the BrettonWoods agreement imposed onthe world. You create the "hotmoney" effect, as currency speculatorsare forced to anticipate radicaljumps in the fiat exchangerates, thereby encouraging themto transfer billions of dollars ormarks or pounds or francs fromone country to another, trying tobeat the imposition of September18ths or August 15ths. 15 It is ahuge game of musical chairs, exceptthat people's lives - economically,politically, and physically ­are at stake. In the 1949 edition ofHu,man Action, Mises wrote, concerning"hot money": "All thisrefers to European conditions.American conditions differ onlytechnically, but not economically.However, the hot-money problemis not an American problem, asthere is, under the present state'of affairs, no country which a capitalistcould deem a safer refugethan the United States."16 It is atestimony to the monetary inflationof the past twenty years inthis country that Mises saw fit todrop that footnote from the 1963and 1966 editions of his book.Instability?Wouldn't the establishment of atotally free market for internationalmonetary transactions addelements of instability into internationaleconomic affairs? Emphaticallyno ! What it would do isto present a highly accurate reflectionof the economically irrationalpolicies of fiat money creation thatare being pursued with a vengeanceby almost every governmenton earth. It would serve as an economicmirror which would answertruthfully the question, "Mirror,mirror on the wall, who has themost honest currency of themall ?" Daily, the international moneymirror would answer the truthand it would also give its guess asto the answer at any point in thefuture concerning any given currency.Like the wicked witch ofSnow White, domestic magiciansof fiat money resent that inescap;,.able answer. So they buy themselvesa new mirror - fixed exchangerates. Unfortunately, thesefiat mirrors break periodically,causing great confusion, consternation,and windfall profits andlosses to speculators. And, need we

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 177be reminded, everyone involved inforeign trade - prospective buyersof Volkswagens and Hong Kongtoys included - is an internationalspeculator.Instability is the charge that isalways made against the marketby statist interventionists. Marxand Engels leveled precisely thiscriticism of the theory of capitalisticeconomics. Capitalitsticdistribution, they argued, is anarchistic.17 Such a view of capitalistprocesses stems from afundamental misconception: supposedly,there are no laws of economicsregulating the voluntaryexchanges· which take place in thefree market, and therefore fiatstate rules must be imposed on the"disorder" of market affairs. Everywherethese critics look, thefree market tends toward instability- an instability defined asanything deviating from thatmodelwhich a central planning boardwould impose on the economy."Pass a law! Make it stable!" Notquite. "Pass a law! Make it rigid!Watch it break!" That's it exactly;the breaks, in internationalmonetary affairs, are caned devaluationsand revaluations. Theyhappen all the time.The Subsidy to BusinessIf .you do not impose fixed exchangerates, we are told by variousconservative economists aswell. as by neo-Keynesians, youwill see the destruction of internationaltrade. Businessmen apparentlycannot afford to bear.theterrible uncertainties associatedwith forward currency speculation.How do we know this? Becausebusinessmen, who have becomeused to international pricecontrols on money - fixed exchangerates - and who havelearned how to make profits undersuch interventionist measures,constantly tell us so. Like thefarmer who wants his subsidy(fixed parity prices guaranteed tohim by the state for his goods),like the domestic producers of steelwho want tariff subsidies, like. theairlines that want price floors fortheir .flights (whether internationalor domestic), like the laborunion leader who wants compulsorybargaining legislation, theforeign trade entrepreneur wantshis contract guaranteed by fixedexchange rates. He just cannotbear the uncertainties of futureprediction,in spite of the fact thatall entrepreneurial profit is a residualaccruingto· successful predictors.1s Instead, the state is supposedto bear the uncertainties ofprediction. The state is supposedto worry about· the rate of exchangeof its currency with anyother currency, at any time. Thebureaucrat in a state office is supposedto take the responsibility

178 THE FREEMAN Marchthat at a particular point in thefuture the currencies of the worldwill trade at certain fixed parities.Let the violent intervention of thestate compel men on both sides ofany border to accept each other'scurrencies at a legal rate, and youhave turned the economic affairsassociated with international tradeover to the bureaucrats. The entrepreneurs,by allowing state officialsto bear the responsibilityfor certain aspects of internationaltrade, thereby.give to thestate a great power over theirbusinesses. Thus, citizens in everycountry lose their personal freedomto that extent.Why is it that private entrepreneursinvolved in internationaltrade want the government to takeover the responsibility for organizingthe terms of the monetaryexchanges which govern the operationof their businesses? This isa familiar tale. It is the old respectedargument of the vast majorityof people: let my suppliersc0Ill:pete, keep my competitors outof the market. Let others bear theburden of predicting the future.Subsidize me. I'm the importantone. And governments do it. Theytake profits away from one group- international currency speculators- and guarantee the price offoreign exchange - almost. Unlessthere is a devaluation, of course.And then it is every man for himselfand any port in a storm. (Theport is usually Switzerland.)Counting the Costs of InterventionA key rule was' laid down byJesus to his disciples: count thecost (Luke 14 :27-30). He wasspeaking of spiritual matters, butas he so often did, he explainedthem in terms of familiar economicaffairs. That principle hasbeen the economic foundation ofWestern civilization, and especiallyof capitalism. It is, specifically, theinability of socialist economies tocount the costs of anything thatconstitutes the most patent economicfailure of socialism. 19 It isthe genius of the free market thatit allows voluntary, flexible pricingof scarce economic resources.Apart from this free pricingmechanism, there can be no freemarket economy, by definition, andno economic calculation.When a state inflates itsmonopolisticallycontrolled domestic currency- which it could not do if itdid not hold the monopoly - itcreates many problems for theeconomy. It makes forecastingmore difficult. This leads to thedemand for more controls over theeconomy - to mitigate the effectsproduced by the very policies ofmonetary inflation. These controlsare an attempt by bureaucrats todisguise these effects. The effectsare called rising prices. The con-

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 179troIs are called price and wagecontrols.On August 15, 1971, the Presidentof the United States announcedthe unmitigated failureof the IMF agreements of 1944.The gold-exchange standard nolonger operated, as it had for 25years, to shield this country fromthe effects of its own· policies ofmonetary inflation. So it wasscrapped. Bretton Woods is dead,Arthur Okun announced a fewhours later. Conservative economists- a few of them at leasthadbeen saying that since 1945.The President announced that thecure for this unparalleled economicfailure of international financewould be the complete abandonmentof fixed exchange rates internationally.International pricecontrols over the free exchange ofmoney, we were told, were clearlyleading to economic disaster. Indeed,that was exactly where suchcontrols were leading, as all interferencewith prices will invariablylead.Domestically, however, voluntarypricing had led to anotherdisaster: higher prices. The Presidentfailed to mention that Federaldeficits financed through FederalReserve fiat money creationhad caused prices to rise. So to"cure" domestic economic affairs,the President imposed price andwage controls. There is a peculiarsort of irony here. In order to curean international economic disasterwhich had been caused by pricecontrols, the President allowed thedollar to float. In order to cure thedomestic economic disaster, thePresident imposed domestic pricecontrols.Controls in internationa.l monetaryaffairs are specifically designedby bureaucrats to hide theeffects of policies of domestic monetaryinflation. Similarly, controlson domestic prices are designed tohide the effects of those same policiesof domestic monetary inflation.If the purpose of controls isto hide effects rather than to removecauses, then they involve theuse of fraud.What the advocates of a freemarket should desire is that theprice system be left completely uncontrolled,in order that it mightregister the subtle and unsubtleshifts in economic external conditions.Only then can entrepreneurspredict the future with anydegree of success. Only then willthose who wish to buy at the bestpossible price be served. Everyoneshould count the cost of his actions.Price controls interfere withsuch cost accounting.Exposing InflationAdvocates of floating exchangerates may be advocates of domesticmonetary inflation. But so can ad-

180 THE FREEMAN Marchvocates of fixed exchange rates, asKeynes would seem to demonstrate.The issue is not whetherfloating exchange rates will makeit easier for domestic governmentsto inflate. The issue is whetherprice controls are legitimate toolsof government economic policy. If .they are, then we can begin to examinethe specifics of the argumentsfor fixed exchange rates. Ifthey are not, then the debate .isended. For fixed exchange ratesare,· by definition, price controls.Good economic theory results ingood economic practice, as Misesand Hayek have explained repeatedly.We do not apply sound economictheory and produce economicdisaster. Thus, it is possibleto argue that free pricing in internationalmonetary affairs will bebeneficial to all citizens who wishto enter the market in order tomake voluntary exchanges. Freepricing among the various nationalcurrencies will help to exposethe policies of monetaryinflation in any given nation,thereby adding incentives to citizensof that country to challengetheir government's policies. This,of course, assumes that citizensgenerally are economically rationaland prefer good consequences tobad ones. It is easier for a man tocount the costs of· socialism in themonetary sphere if he can witness,daily, the statistics that chroniclethe deterioration of the purchasingpower of his money.Let Citizens Own GoldIf a citizen can own gold, somuch the better. If a free marketin gold is allowed to operate, somuch the better, for the price ofgold, in relation to the citizen'spaper currency, will rise as a consequenceof the continuing monetaryinflation. This gives a citizenthe opportunity to make a profitby taking his paper money to thelocal branch of the national Treasuryand buying gold at the fixed,legal rate of exchange (which hasbecome a legal fiction as a resultof· the monetary inflation).Let citizens, rather than thestate, profit from the higher priceof gold. Let their desire to makea profit act as a barrier that helpsto retard state officials in their inflationarypolicies, as the Treasury'ssupply of gold decreases.A fixed rate of exchange betweengold and a currency is notthe same thing as fixed rates ofexchange between currencies. Afixed ratio between gold and anyparticular currency is definitional:a. unit of paper money is said, bydefinition, to represent so muchgold at a specific fineness. Freeconvertibility of a currency intogold requires a legalized fixed ratioof exchange; ·free convertibilityofone national currency with

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 181any other requires a flexible rateof exchange set by the market. Theformer is a definitional relationship;the latter cannot be.Obviously, the best possibleworld would be one in which nogovernment has any monopoly ofcredit or money creation, whereall citizens all over the globe havethe right to own gold and makecontracts in gold. But just becauseutopia has not arrived, there isno reason to abandon the theoryof voluntary exchange at unhamperedprices. The argument we hearso often today is this: "Given thegovernment's monopoly overmoney, given policies of •deficitfinancing through monetary inflation,given domestic legal tenderlaws, we therefore need price controlsover international monetaryexchange." Polylogism! The factthat we find ourselves in an increasinglysocialistic economy inno way .disproves the theoreticalvalidity of free pricing - any time,any place, under any circumstance.If the theoretical (and thereforethe practical) validity of free pricingis undercut in any way simplybecause of all the socialistic"givens" that we operate under,then Marx was right, Hegel was.right, the German historical schoolof economics was right, institutionaleconomics is right, historicismis right, and economic theoryis wrong.Multiple InterventionsThere is a tendency, arguesMises, for one intervention by thestate into the economy to lead toanother intervention. The disruptionscaused by the first interventionlead to cries for further politicalintervention to solve them.The state takes control of .money,to "reduce the irrationality of thedomestic money markets." (And toarrogate unto itself ultimate sovereignty.)Then it inflates the currencyin order to increase its owninfluence in the affairs of men bygaining access to scarce economicresoures with the inflated cur,:"rency. Then citizens refuse to acceptthe debased money. So thestate's officials pass legal tenderlaws. The money, now artificiallyovervalued, drives out both goldand silver. People prefer to tradein the· artificially overvaluedmoney and either hoard the goldand silver or send it abroad whereit can purchase foreign goodscheaper than the domestic inflatedcurrency can purchase them. Asdomestic goods climb in price dueto the inflated paper currency, importsincrease and dollars flow out;foreign central banks then raisethe price of their currencies in relationto dollars. The United Statesgovernment realizes that this exposesits policies of domestic monetaryinflation and thereforepresses for fixed exchange rates.

182 THE FREEMAN MarchThen foreign governments, buriedin dollars (at the artificially lowprice), begin to demand gold (heldby our government at an artificiallylow 1934 price). One interventionleads to another, usually.But not always.The exception came on August15. Basically, the President hadthree choices. First, balance thebudget and stop the monetary inflation- maybe even use the surplusof revenue over expendituresto reduce the national debt. Unfortunatelyfor political purposes,such an action would have riskeddepression and high unemployment(given the previous policiesof monetary expansion and thedownwardly inflexible wage ratesthat prevailed in a unionized economy).20 Second, continuing thedeficits, he could let all of our gold(their gold, really, given our promiseto pay on demand) flow out.Third, the President could haveestablished floating exchange ratesand cut the redeemability of thedollar in terms of gold. This is exactlywhat he did. It involved areturn to free market pricing ofinternational monetary exchanges.He believed that it was preferableto do this than to take either ofthe first two steps. In this sense,pressures internationally on thedollar forced the President to returnto a policy which was closerto the free market than the policyof fixed exchange rates which. hadbeen established by the IMF in1947. Naturally, to make the operationtruly conservative, he shouldhave maintained the free convertibilityof gold provision and reestablishedit domestically withAmerican citizens. This did notdetract from the basic move whichhe made ; namely, to reestablishfree floating exchange rates inwhich voluntary transactions ofmoney internationally can prevail.By returning to fixed exchangerates on December 19, the Presidentthereby abandoned the advancemade on August 15, reestablishingthe rigidities thatlead toward economic discontinuities.Yet what did we find betweenAugust 15 and December 19?Many advocates of free marketeconomics were howling bloodymurder! "Free pricing is fine, andall that, but, given prior interventionsby the government. . . ."Leonard Read is right : "We aresinking in a sea of butS."21Return to GoldWhat is the proper position withrespect to valid internationalmoney? Clearly, a money systemwhich is the product of free men,voluntarily exchanging scarce economicresources. Professor MurrayRothbard has given us a pictureof what such a system might be:

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 183Why not freely fluctuating' exchangerates? Fine, let us have freelyfluctuating exchange rates on ourcompletely free market; let the Rothbardsand Browns and GMs fluctuateat whatever rate they will exchangefor gold or for each other. ThetI~ouble is that they would never reachthis exalted state because they wouldnever gain acceptance in exchangemoneys at all, and therefore the problemof exchange rates would neverarise.On a really free market, then, therewould be freely fluctuating exchangerates, but only between genuine commoditymoneys, since the paper-namemoneys could never gain enough acceptanceto enter the field. Specifically,.since gold and silver have historicallybeen the leading commoditymoneys, gold and silver would probablyboth be moneys, and would exchangeat freely fluctuating rates.Different groups and communities ofpeople would pick one or the othermoney as their unit of accounting. 22Floating exchange rates reflectwhat the prevailing external economicconditions really are. Therule governing the operation offloating exchange rates is identicalto the rule operating in allcomputer affairs: "Garbage in,garbage out." If prevailing economicconditions on the internationalmarkets are inflationary,then floating exchange rates willrespond appropriately, making'thebest of a very bad situation. If afull gold coin standard exists internationally,then floating exchangerates will make the bestof a very good situation. Floatingexchange rates are nothing moreand nothing less than freely fluctuatingvoluntary prices,on internationalmarkets (even if the primaryparticipants are nationalcentral banks). Like all otherforms of free pricing, floating exchangerates make things betterthan .things would be under coerciveprice controls. Floating exchangerates should not be regardedas some kind of economicpanacea for the world's inflationaryconditions, except insofar asfree pricing is always a panaceain relationship to the conditionswhich exist under governmentimposedprices. No matter whatother external conditions may be ­inflationary, deflationary, relativelystable, gold standard, fiat standard,electric money standard, orany other standard conceivable tothe mind of man - free pricing isalwa,ys preferable to fiat pri,ce controls.Always.There is no doubt that domesticmonetary inflation, especially ifcarried on by a majority of nationalgovernments, produces greatuncertaintiesininternationaltrade.There is also little doubt thatfloating exchange rates impose theburden of dealing with these economicuncertainties on the shoul-

184 THE FREEMAN Marchders of those who wish to participatein international trade andwho expect to profit from suchvoluntary exchanges. These peopleare precisely the ones who shouldbear the burdens associated witheconomic forecasting. They are allentrepreneurs. If they resent theuncertainties associated with internationaltrade in a world of fiatmoney, then they should put pressureon their respective governmentsto restore a full gold coinstandard domestically. Theyshould not be lured by the sirencall of statist price controls toreduce the visible effects of statistpolicies of domestic monetary inflation.If we want stable exchangerates, then -there is one way, andonly one way to get them: eachgovernment must impose upori. itselfthe restraint of the full goldcoin standard, give up its mone:­tary monopoly, return the right ofgold ownership to its citizens, andspend only that money which israised directly through taxation.That is the way to achieve thegoal of international monetary stability- not rigidity, but calculable,predictable, moderate stability.23The rule of gold alone hasproven itself to be a producer ofinternational monetary stability.That rule, and not the rule ofgovernment bureaucrats, is thefoundation of monetary stability.24The conclusion should be obvious:all advocates of free marketsshould call for solutions that promoteeconomic freedom. If the proposedsolutions do not promotefree pricing on free markets, theyare fallacious solutions. Fixed exchangerates limit the voluntaryeconomic exchange of goods amongfree men. Therefore, fixed exchangerates are the wrong solution.- FOOTNOTES -1 Paul Einzig, The Case Against FloatingExchanges (New York: Macmillan,1970). Einzig's weekly column in TheCommercial and Financial Chronicle includesan attack on floating exchangerates at least once a month. Cf. Brochure,Committee on Monetary Research andEducation, Inc. (1971), pp. 9-10.2 Business Week (September 25, 1971),pp. 91 ff.g On exported inflation, see WilhelmRoepke, "The Dollar as Seen from Ge-_neva," National Review (March 8, 1966) ;Against the Tide (Chicago: Regnery,1969), ch. 13: "The Dilemma of ImportedInflation."4 Against the Tide, p. 229.5 Ibid., p. 230.6 Ludwig von Mises, Human Action(3rd rev. ed.; Chicago: Regnery, 1966),pp.476-78.7 Cf. Gary North, "Statist Bureaucracyin the Modern Economy," THE FREE­MAN (January, 1970); Mises, Bureaucracy(New Rochelle, New York: ArlingtonHouse, [1944] 1969); North, "TheMythology of Spaceship Earth," THEFREEMAN (November, 1969). On thenature of knowledge and the market'sdivision of labor, see F. A. Hayek, I ndividualismand Economic Order (Universityof Chicago Press, 1948), ch. 2.

1972 FIXED EXCHANGE RATES AND MONETARY CRISES 1858 Alfred L. Malabre, Jr., "Is It ReallyTime for Monetary Cheer?" Wall StreetJournal (December 2,1971). Malabre'sestimate of the number of devaluations isfar too low. Franz Pick, in the introductionto the second edition of All theMonies of the World (1971), reports thatat least 418 partial or full devaluationstook place in 108 countries between 1954and the end of 1970. 1971 saw an additional99 devaluations: Barron's (January3, 1972), p. 9. This, in spite of theso-called stabilizing influences of the InternationalMonetary· Fund, the organizationdrawn up at the Bretton WoodsConference in July, 1944, officially establishedon December 27, 1945, and put intooperation on March 1, 1947.9 Mises, Human Action, p. 791.10 Ibid., p~ 800.n The Theory of Money and Credit(Foundation for Economic Education,1971), PP. 180-81.12 Human Action, p. 455.13 Ibid., pp. 455-56.14 Ibid., p. 801.15 Ibid., pp. 464-66.16 Ibid. (1949 ed.), p. 462n.17 Karl Marx, Capital (New York:Modern Library), p. 391. This is the firstvolume of Capital. He continued this sameargument in VoL 3 (Chicago: Charles H.Kerr, 1909), pp. 673, 1027. FrederichEngels, Herr Eugen Duering's Revolutionin Science [Anti-Duering] (London:Lawrence & Wishart, [1877] 1934), pp.296-301. For a critique of this concept ofcapitalist contradiction, see Gary North,Marx's Religion of Revolution (Nutley,New Jersey: Craig Press, 1968), p. 154.18 Mises, Human Action, pp. 289 ff. Cf.Frank H. Knight, Risk, Uncertainty andProfit (New York: Harper Torchbook,[1921] 1965), pt. 3.19 Mises, "Economic Calculation in theSocialist Commonwealth," (1920), inF. A. Hayek (ed.), Collectivist EconomicPlanning (London: Routledge & KeganPaul, [1935] 1963). Cf. Mises, Socialism(New Haven, Conn.: Yale UniversityPress, [1922] 1962), pp. 119-62; T. J. B.Hoff, Economic Calculation in the SocialistSociety (London: Hodge, 1949). Foran able refutation of the myth that OskarLange in some way "refuted" Mises onthis point, see Paul Craig Roberts,"Oskar Lange's Theory of Socialist Planning,"The Journal of Political Economy,LXXIX (1971), pp. 562-77. Roberts is notreally happy with Mises' original formulationof his critique, however.20 Mises, Human Action, ch. 20. Cf.Gary North, "Repressed Depression,"THE FREEMAN (April, 1969) ; North,"Downward Price Flexibility and EconomicGrowth," THE FREEMAN (May,1971) .21 Leonard E. Read, Talking to Myself(Foundation for Economic Education,1970), ch. 6.22 Murray N. Rothbard, "The Case fora 100 Per Cent Gold Dollar," in Leland B.Yeager (ed.), In Search of a MonetaryConstitution (Cambridge, Mass.: HarvardUniversity Press, 1962), PP. 100-01.23 Mises, Theory of Money and Credit,p. 240. Cf. North,"Donward Price Flexibility,"pp. 312-13.24 I must admit that the passage inMises' Theory of Money and Credit, "CurrencyReform in Ruritania," does notseem to conform to every other statementwritten by Mises with regard to the politicalcontrol of prices, including rates ofexchange. He calls for a state agency toset a legal parity and "to make this legalparity an effective real market rate, ..."(p. 445). The 'meaning of this obscurepassage is best understood in terms ofhis attack on statist foreign-exchangepolicy which appears on pp. 18-19. Thewhole corpus of Mises' writings is opposedto price controls; a single deviation- if, indeed, it is a deviation - should notbe used to compromise the impact of hisoverall defense of the free market.

A REVIEWER'S NOTEBOOKJOHN CHAMBERLAINCruisingSpeedWILLIAM F. BUCKLEY, JR.'S CruisingSpeed: A Documentary (Putnam,$6.95) begins as a chronicleof a week in the life of America'smost engaging publicist. But time,with Bill Buckley, has a Proustiandimension, so the form becomes anexcuse for unlocking years as wellas days. A telephone call to BillBuckley takes 'us in one direction,a "Dear Sir, You cur" letter inquite another, an encounter witha friend or colleague in still athird, until after darting down ahundred avenues one has the illusionthat one is peeling off one ofthose Chinese eggs which containegg within egg, almost to thevanishing point. But then, one reflects,the Chinese egg image won'tdo at all, for the average Buckleyegg is so bursting with its ownmeat that it could contain nothingelse.Since the form is immaterial, itscarcely matters that the docu-186

1972 CRUISING SPEED 187mented Buckley week began atBill's Stamford, Connecticut,seasidehome at ten o'clock on a Mondaymorning after a. newspapercolumn had been written and someroutine correspondence handled.The important thing is that onething provokes another even asBill is riding into Manhattan totape-record a couple of TV shows.Memories crowd until the bookbecomes as complex as the Buckleycharacter, which deceives manywho come upon it merely one aspectat a time. Yes, Bill Buckleycan be offensive to modern-dayliberals, as when he.sets down inhis list of accomplishments inWho's Who in America the factthat he founded the National Committeeto Horsewhip Drew Pearsonin 1967. Like any man of wit,Buckley outrages those who haveno wit at all. But witty outrage,with Buckley, procedes from a gorgeoussense of unmalicious fun.As Critics See HimUnlike a few polemicists whomI could mention, Buckley stays inthe kitchen not only because helikes to cook but also because hecan stand the heat. His sense ofeditorial honor does not permithim to hide anything, so he printsa long diatribe about his characterwritten by one Hank Levine, thechairman of the Party of the Leftof the Yale Political Union. Mr.Levine sees Buckley in terms of a"kind of silent leer-wince," which,whatever this may say about theLevine eyesight, indicates thatLeftist undergraduates at Yalecan be as tone-deaf as a mummy.What seems to Mr. Levine to bea superiority complex is, in a way,Mr. Buckley's way of overcominghis environment. He grew up with"liberals" to the left of him, to saynothing of .those who kicked himfrom behind and gouged him fromin front. (I recall defending BillBuckley years ago against acharge, made by an editor of awell-known "liberal" monthly, thatBuckley's National Review lackedhumor, which is about as idiotica criticism as could be made.) Billhad to rehabilitate wit among thewitless, to re-establish eleganceand finish in the arena of controversy,to bring tone and savor andcutting edge to our polemics. Hecould not have done this withouthaving had some theatrical sense.Underneath the showmanship isthe overmastering urge to instruct.A Becoming ModestyIt may seem strange to HankLevine, but Bill Buckley actuallycomes through in Cruising Speedas a person of most becoming modesty.He cail kid J. Kenneth ·Galbraith,who is his friend, but whenGalbraith tries, on the way to theski slope at the Rinderberg in

188 THE FREEMAN MarchSwitzerland, to persuade Bill tofocus his energies on books, thebantering tone disappears fromthe Buckleyian text. Give it up,says Galbraith, give up the wholething, National Review, journalism,television, radio, lecturing. Idid it, says Galbraith, I left Fortuneand went to Harvard. Cometo the academy and write books.It is only books that count in givingtheoretical depth to ideologicalpositions.Now, if Bill Buckley were trulyarrogant, he would have turned onGalbraith and said something tothe effect that books can misleadas well as lead. Instead of indulgingin a flip retort, however, Billwas provoked only to some dispassionateself-appraisal. He told himselfthat others had already providedthe theoretical depth forconservatism. Wasn't it his mission,therefore, to advertise theprofundity of the foundations alreadyprovided by others? How,he asked, could he hope to "dobetter against positivism thanVoegelin has done?" How could heimprove on "Oakeshott's analysisof rationalism?" How could he"rediscover orthodoxy more engrossinglythan Chest~rton?"What of the Reserves?To feel satisfied, so Bill Buckleytold himself while musing on Galbraith'schallenge, one must havea sense of social usefulness. Butwhat, he asked himself, were hisreserves? .What would he have tosatisfy those who listened to himtomorrow?Turning back to "cruisingspeed," which involved getting toWashington in Frank Stanton'sColumbia Broadcasting System jetplane and writing next day's column,Bill inevitably had to let thequestion of his reserves drop. Buthe needn't worry; the reserves willbe there.Since Bill himself has tossed thename of Chesterton, a. superlativejournalist, into the discussion, itshould be said that journalism itselfoften has a theoretical depththat is missing in books. Galbraith's.view of the superiority ofthe academy is all too simple. H. L.Mencken, no .academician, wrotejournalistic· essays and criticismthat have stood the transplantingbetween book covers. But who remembersW. C. Brownell, or HenryBeers, or other academic criticsof Mencken's heyday? Who knows,Buckley's "journalism" may provemore enduring than, let us say,Galbraith's The New IndustrialState? (Not wishing to be invidious,I hasten to add that I granta permanent literary value to Galbraith'sAffluent Society,. itsphrasing is always first-rate, even

1972 CRUISING SPEED 189when the logic leaves something tobe desired.)Government's Limited RoleJust how good Bill Buckley canbe is proved by his little essaywritten in defense of the NationalReview position (see page 92,where he passes along his musingswhile driving to Bridgeport to debatewith Dick Gregory.) "It wasfourteen years after NR began,"says Bill, "that .Peter Druckerwould write in The Age of Disconti.nuitythat the only thing governmentcando effectively is wagewar and inflate the currency ...individuation is what happenswhen the state ceases to be takenfor granted as the necessary instrumentfor human progress. Theconservative who spoke to littleaudiences fifteen years ago aboutthe necessity for arresting thegrowth of government was sayingthen what the followers of Reich(author of The Greening of America)have come upon, except thatthey are now condemning America,while what they ought to becondemning is what I once calledthe special effronteries of thetwentieth century. . . ."For fifteen years Bill Buckleyhas been. trying to tell people thatnobody can "lead happy or full livesby buying one share each of commonstock in - The State." Thisposition was not new when Chesterton.espoused it in England, norwhen Albert Jay Nock taking offfrom the German Franz Oppenheimer,gave "theoretical depth"to it in Our Enemy, The Sta,te.Readers of The Freeman knowbetter than most, however, thatthe theme was never in such needof refurbishing as now, whenprices are being "controlled" in atime of peace. Bill Buckley's refurbishingis elegant, precise, andengaging, whether it appears asjournalism - or in a book.• LIBERTARIANISM: A POLITI­CAL PHILOSOPHY FOR TO­MORROW by John Hospers. (LosAngeles: Nash Publishing Co.,$10)Reviewed by: Allan MalzTHIS simply and lucidly writtenintroduction to the free marketphilosophy summarizes the argumentsof the finest libertarianliterature.In the first ten chapters, the author- a University of SouthernCalifornia philosopher - discussesa broad range of topics. He definesthe proper scope of governmentaction, and analyzes the various

190 THE FREEMAN Marchtypes of State intervention whosedisastrous results are so oftenblamed on capitalism. A persuasivejustification of profit, on bothmoral and economic grounds, ispresented. In an especially incisivechapter, Professor Hospers examinesthe welfare state, describinghow, after each anti-povertyprogram, the poor somehow endup even poorer, and demonstratingthat only a truly free marketcan effectively reduce poverty.This leads him into a discussionof taxation and its corrosiveeffects on enterprise.The author's most importantarguments, however, are reservedfor the final chapter, in which hepresents the case against anarchism.The no-government philosophyspeaks for itself throughlengthy quotations from its partisans,after which Professor Hospersanalyzes it from a limitedgovernment point of view. Heshows that anarchy would meanopen season on minority groupsand nonconformists. In the absenceof government, there couldbe no Rule of Law, and certainlynot the "objective law" of whichthe anarchists claim to be thechampions. Even an anarchistmust admit that some servicescannot be supplied by the market,the author concludes, and it is preciselythese that is the task ofgovernment to provide. A societyin which any man can call himselfa "defense agency" and take thelaw into his own hands wouldsurely be an unstable one in whichpeaceful cooperation could notlast; a "no-government society isalways trembling on the verge ofchaos," he observes. And there isno reason to believe that any governmentemerging out of chaoswould be a limited one.The weakest section is Hosper'sdiscussion of natural rights. Toomuch of what Bentham wouldhave called "sentiment" is broughtinto the explication. The reader isgiven no firm reason to believethat natural rights really exist,and it is not explained why theyare' "inalienable." Rousing proseabout the beauty of liberty issometimes substituted for reasonedexplanation of its practicalbenefits. Fortunately, the flawsare limited to the opening chapters,and do not detract much fromthe value of the book.All in all, a useful book, both asan introduction for the beginnerand as a sort of memory-refresherfor the advanced student.

1972 OTHER BOOKS 191~ THE REGULATED CONSUMERby Mary Bennett Peterson (LosAngeles: Nash Publishing, 1971~271 pp., $7.95)Reviewer: Tommy W. RogersCONSUMERISM has spawned a multitudeof regulations and a hostof federal agencies to enforcethem, but has it helped the consumer?It is the author's contention,well documented and illustrated,that consumerism is inherentlyuneconomic - and, ironically,anticonsumer; it adverselyaffects individual choice and diminishesefficiency in the use ofour resources. Americans pay cartelprices for the coffee they drinkand the sugar they eat, and in theprocess injure efficient internationalproducers and world competition.Unions, as well as the governmentcontrolled farm sector,have the makings of giant cartelsas government induced and protectedmonopolies. Governmentfarm programs continue to widenthe gap between rich agriculturalist-businessmenand poor farmers,and compulsory unionism not onlylimits freedom but breeds corruption.The author contends that "com~binations and conspiracies againsttrade may appeal to the monopolisticmentality, but in practice,unless enforced by government,they tend to evaporate." Regulatoryagencies which supposedly"protect" the consumer becomebuffer agencies which act as accommodativebodies of the businessesthey.are supposed to regulate,at the expense of the public,as classically illustrated by the·InterstateCommerce Commission.A determined ICC seeking togive the image of zealously protectingthe public interest hasforced higher costs·on the shipper,carrier, and, most important of all,the consumer. The activities of theCivil Aeronautics Board similarlyillustrate that regulation can meananything but security for thosewho are regulated, or economy forthe consumers who are the supposedbenefactors. The CAB, anopponent of competition betweenairlines, has constantly reflected abasic anti-consumer, pro-producerbias. Because of CAB regulation"commercial aviation has beentreated as a giant subsidized publicutility, managerial decisionmakinghas been impeded, consumersovereignty frustrated,economies of scale blunted, innovationsand technological efficiencyin airlines operations hampered.""Interventionistic regulation,"as Mrs. Peterson thoroughly demonstrates,leaves much to be desired.It is structured against theinterests of the consumer whom

192 THE FREEMAN Marchits rhetoric claims it seeks to defend..Illustration after illustrationis used to nail down the truismthat quotas, minimum prices, subsidies,decrees, and regulations operateto the detriment of the ForgottenMan.There· is a remedy: an enlightenedgovernment and citizenryshould progressively deregulateour regulated society and reenthronethe consumer in the marketplace.Only so may we providejustice, preserve freedom. ~HANDSOME BLUE LEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

tileFreemanVOL. 22, NO.4. APRIL 1972Objectivity and Accountability: A One-Way Street C. Howard Hardesty, Jr. 195An appeal to public opinion for a better appreciation of the role of business.The Nature of Modern Warfare David Osterfeld 205A study of the path to war via domestic welfare programs and departure from themarket.The Economic-Power Syndrome Sylvester Petro 212Exploding the popular myth that business has a coercive power to impose its willupon consumers.The' Ballooning Welfare StateThe higher the subsidy rate, the greater the number of claimants.Henry Hazlitt 226The Founding of the American Republic:9. Prelude to Independence Clarence B. Carson 232A study in slow motion of the final aggravations that brought separation.The Federal Reserve System Ha.ns f. Sennholz 245A descriptive analysis of "the most important tool in the armory of economicinterventionism."Book Review: 254IIWilimoore Kendall Contra Mundum" edited by Nellie D. KendallAnyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tileFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTPresident, Ji"oundation forEconomic Education~1anaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,000-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printed inU.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also Isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Michigan48106. Permission granted to reprint any article from this issue,with appropriate credit, except "The Ballooning Welfare State."

Ob - -­~-~ ..~andAccounc. HOWARD HARDESTY, JR.THE TITLE for these remarks indicatesthat I have a bone to pick- and indeed I do. It may be stickingin your throat as well as mineand, if so, it's time to stop chokingand do something.As background, permit me toquote the first paragraph of thepublisher's summary to a recentbest selling book:This well documented expose. revealsthe incorporated rulers of the UnitedStates and, indeed, much of theworld. It shows them to be privategovernments which, as effectively aslegitimate public governments, decidewhether large numbers of uslive and die. They levy taxes in theFrom remarks by Mr. Hardesty, senior vicepresident of Continental Oil Company, beforethe annual meeting of the American MiningCongress in Washington, D. C., January 17,1972.form of price increases, unrestrainedby competition. They manipulatelegitimate governments, turning nationsinto welfare states for corporations.And they are generally responsibleonly to themselves.This book, America, Inc., was onthe best seller list for 17 weeksand Time magazine in its reviewdescribed it: "in the best muckrakingtradition it is thoroughlydocumented to present a look atthe seamy side of business."As it happens, in a recentspeech I used the term "muckraker"and to be sure we understandwhat is meant by it, let mequote from the .term's politicaloriginator, Theodore Roosevelt:The men with muckrakes are oftenindispensable to the well-being of so-195

196 THE FREEMAN Aprilciety, but only if they know when tostop raking the muck and to look upwardto the celestial vision abovethem, to the crown of worthy endeavor.There are beautiful things above andaround them and.if they graduallygrow to feel that the whole world isnothing but muck their power of usefulnessis gone.It would be naive to suggestthat inaccurate criticism is uniqueto the last half of the twentiethcentury. It is as old as speech, butperhaps T. H. Huxley put it bestwhen he said: "There are men towhom the satisfaction.of throwingdown a triumphant fallacy isas great as that which attends thediscovery of a new truth."Lack of objectivity and nonaccountabilityseem these days tobe the fashion. Too many peopleare "throwing down a triumphantfallacy" and others are treating itas "a new truth." To compoundthe felony, no one is held accountable.The AntipreneursI also have a new name for themuckraker of the 1970's. If youaccept "entrepreneur" as the genericterm for "businessman",perhaps we can refer to thesesingle-minded, persistent and totallymyopic critics of businessmenas "antipreneurs." The negativeprefix in "antipreneurs" isquite appropriate since those whohammer away at the business communityare for the most part anegative lot. They reject, and theyrebuke, and they reproach, andthey frequently view with alarm,but hardly ever do they come upwith .anything constructive.The enemies of private industryare active today as never before,they are influential today asnever before and - most disconcertingof all - they are succeedingtoday as never before.In what ways are they succeeding?Well, for one thing, they arechanging some basic attitudes inthis country. They are convertingthe United States of America froma nation that once respected initiativeand economic achievement,that honored the rags-to-richeshero, to a nation that imputes toits businessmen the most venalmotives and most despicable conduct,that is coming to idolize thereverse-twist, riches-to-rags antihero.Think I'm exaggerating? Thenconsider for a moment a fewstatistics.In 1966, Social Research, Incorporated,conducted a study on publicattitudes toward businessmen.Twenty-eight per cent of allAmericans polled agreed to thestatement that "big business isdangerous to our way of life."Twenty-eight per cent. A sizeable

1972 OBJECTIVITY AND ACCOUNTABILITY 197fraction, but not nearly so sizeableas it was to become. Fiveyears later, in 1971, the same organizationasked the same questionand this time the "yes" votewas forty-six per cent. In otherwords, nearly half of all Americansnow regard you, the nation'sbusinessmen, as a threat to theirexistence.Dr. Burleigh Gardner, Presidentof Social Research, interpretedthe results of his survey as evidencethat "the public· will nolonger rise to the defense of businessagainst extremists or protestgroups." And I would say thatthis was a reasonable assumption.Another set of studies, this oneconducted by Opinion ResearchCorporation, showed a similar pattern.Four years ago, 55 per centof all Atnericans questioned byOpinion Research felt that newlaws were needed to protect theconsumer from unscrupulous businessmen.Two years later, a follow-uppoll found that 68 per cent- or more than .two-thirds - ofthe nation favored additional consumerprotection laws. The increasein just two years was substantial- and significant.Regardless of how much hasbeen done to transfer control ofAmerican industry from privatehands to government hands, theantipreneurs cry out for more.Could it be that our antipreneurswill be satisfied with nothing lessthan de. facto nationalization .. ofindustry through a system of comprehensiverules disassociating allphases of production and distribution?The recent suggestion callingfor the Federal chartering of allcorporations with the governmentempowered to control not only hiringand firing but also the establishmentof production standardsand marketing procedures is nolonger deemed extreme by its proponents.What makes this pelt·mell rushtoward government control of industryall the more tragic is thefact that its public support stemsfrom the widespread acceptance ofslanted investigations, blatantfalsehoods and political pre-judgments.But I don't have to give you second-handreports on the activitiesof the antipreneurs. Let me provideyou with some personal, firsthandexperiences.The Energy GapPerhaps I should start by providingsome background information.The United States todayfaces an energy gap. This is thegrowing disparity between theamount of energy-source materialsproduced in our country and thetotal consumed.This energy gap was the focal

198 THE FREEMAN Aprilpoint of an unprecedented messageby President Nixon to Congresslast June and also of a reportissued several months ago bya special committee of the NationalPetroleum Council, an industryboard established undergovernment guide lines to help advisethe Secretary of the Interior.The report was the result ofthousands of hours of research by200 experts in their fields, the bestqualified staff people, finance specialists,government officials, andby teams of scientists and technologists.The American Mining Congressaccurately summarized the conclusionsreached in the NPC Report:1. The current natural gas shortagewill increase in severity.2. We will become increasingly dependenton imports of foreigncrude oil from the eastern hemisphere.3. The energy industries will find itdifficult to raise the estimated$374 billion in capital by 1985 to"provide for our burgeoning energyrequirements."On October 28th in Houston,Ralph Nader breezily dismissedany such situation and describedthe energy gap as "a promotion"of the fuel companies' advertisingdepartments. Actually, said thisself-designated authority on naturalresources, there is no shortageof fuel in this country. They arefinding resources, he assured everyone,faster than the public canconsume them.Mr. Nader's headline news thatthere is no shortage of fuel is atcomplete odds with the unanimousfindings of government and industryand can only serve to confusethe public. Do we or don't we havea shortage? I rely on the expertswho say we do, and I charge thatincomplete and inaccurate datawere used as a base to demonstratewe don't.Bias Also Showingin Halls 01 CongressBut it is not the consumer lobbyistsalone whose bias is showing.The Halls of Congress are no lessoverrun today with antipreneurs- whose zeal, if nothing elsecanonly be admired. But I despairover their lack of accuracy, theirlack of objectivity and their lackof accountability.I cite as an irrefutable exampleof thi~ situation the 1971 reportof the House Subcommittee onSpecial Small Business Problems.The transcript of the SubcommitteeHearings and its final reportreflect the mounting andhighly biased attack upon the associationof oil companies withcoal companies. That this bias isnot based on fact is apparent froma reading of the transcript andreport in which wholly unsubstan..;

1972 OBJECTIVITY AND ACCOUNTABILITY 199tiated innuendoes of monopoly andcollusion abound.A good example· of .the totallyunsupported charges of unlawfulconduct found in the report ·is theallegation that coal-related researchis being stifled by the oilcompanies.All the· factual evidence submittedto the subcommittee showedthat the oil companies enteringthe coal industry have acceleratedand expanded research· efforts andprojects related to synthetic conversionof coal and new and safermethods of mining. There is nofactual evidence to the contrary,yet the report recommends a reassessmentof research and developmentof the liquefaction andgasification of coal in order toeliminate conflicting priorities inthe attainment of economicallyfeasible synthetic fuel processes.The suggestion that priority conflictsexist is nothing more thangratuitous fiction.Who's Dominating Whom?The report repeatedly refers tothe domination of the coal industryby oil companies, yet the factsshow that all oil-associated coalcompanies together produce onlyabout 20 per cent of the nation'scoal and that Continental and HumbleOil combined own less than 2per cent jointly of this nation's recoverablereserves of coal. Almost65 per cent of this country's moreeconomic deposits of coal areneither presently owned nor underlease to any coal company. "Domination"by oil companies is, again,fiction.Finally, the report does not setforth any of the advantagesincreasedproduction, acceleratedcapital investments, expanded research- which have resulted fromparticipation by natural resourcecompanies in the coal industry.Since the natural resource industriesappear unable to obtainfair treatment from self-styledconsumer protection groups, andfrom self-dealing politicos, it hasbut the executive branch of governmentor regulatory agencies tolook to for objective evaluation ofthe described groundless charges.Can help be expected? I am afraidnot - and let me tell you why.Recently, Continental announcedthat it was voluntarily respondingto an inquiry from the FederalTrade Commission regardingthe FTC's desire to review Continental'sacquisitions of ConsolidationCoal Company. This requestwas made notwithsanding the factthat prior to the association ofthese two companies in 1966, theentire transaction was reviewed indepth by the Justice Department,and they indicated no intention tocontest it..However, the fact thatat this late date the Federal Trade

200 THE FREEMAN AprilCommission chose to reevaluate1966 determinations by the Departmentof Justice did not concernContinental nearly as muchas certain recent public statementsvoiced by several members of theCommission's staff.Note these dates: Due to themass of documentation requested,Conoco did· not file the requestedinformation with the FTC untilJanuary 7, 1972. Yet, on October28, 1971, in the course of appearingbefore the House Special Sub-'committee on Small Business Problemsin Nashville, Tennessee - Mr.Lawrence G. Meyer, Director ofPolicy Planning for the FTCstated to the press assembled:"The Federal Trade Commissionwill file the first of three or fouranti-trust actions against oil companiesinvading the coal industrywithin six months."It's shocking to learn that threemonths in advance of voluntaryfiling relating to a review of a previouslyapproved transaction, ahigh official representing the prospectiveprosecutor, judge and jury-the FTC-pronounces judgment.Is this objectivity? Is this impartiality?Or is this prejudgmentand public pandering in the worstsense?From Whence the Evidence?One might inquire: Where didMr. Meyer and his staff obtain theevidence which they relied on toprejudge a matter of such importanceto the future of the energyindustries and this Nation?Not from the ;~nergy industries!Not from Continental',s submission.The answer may be found in therecord of the House SubcommitteeHearings. On Page 61 of thetranscript of the Hearings, WorthRowley, an attorney representingthe American Public Power Association,an association dedicatedto fragmenting the coal industry,and Mr. Rayburn, Counsel to theSubcommittee, engaged in the followingexchange:Mr. Rayburn to Mr. Rowley: Whatdid your association have to do toget theJustice Department to transferthe Consolidation Coal/ContinentalOil case to the Federal TradeCommission? You make that statementon page 6.Mr. Rowley: When we met withAssistant Attorney General McLarenin March, just to start the proceedings,I asked him if he would releaseit - release the matter to the Commissionfor. investigation, and hesaid he would. We did not have to goto very great lengths. We just hadto assemble our committee membersand pop the question. Then there wasa delay of about 6 weeks and a littlemore pressure from us, and thatwhich had been promised came topass.Mr. Rayburn: What can your as-

1972 OBJECTIVITY AND ACCOUNTABILITY 201sociation do to aid the Federal TradeCommission's investigation in thisenergy field? What do you envisage?Mr. Rowley: Well, one thing wedid, ofcollrse, was to turn over whatinfor'mation,economic insights, andlegal, insights we Wad to them, andmade available certain of our membersfor purposes of consultation.From then on, the initiative restswith the Commission. Anything theywant which we can produce we areproducing.Doesn't this exchange tell yousomething about the source of Mr.Meyer's evidence?It is clear from the record thata special interest group has exerted'a powerful and effective influenceon the supposedly impartialactivities, of the Federal'TradeCommission. And it is not surprisingto also note that the previouslymentioned best seller, A merica,Inc., while devoting a great dealof attention to corporate influence,mentions not one word about thevast - wholly unregula:ted - powerof the liberally oriented pressuregroups which constantly seek toinfluence government.Help From the Media?Well, now if not consumer protectiongroups, the legislativebranch or the regulatory agencies- who can we look to to presentthe real facts? The media? I thinknot; omissions as well as errorsprovide a yeasty breeding groundfor compounded error among someof the media representatives whocite unsupported allegations astruths.For example, in a recent issueof The New Republic an articlecontains this serious charge:"High and steady ,profits havelured' the oil companies into thefield and they now control a majorityof the 50 largest coal firms."As for the fact of controlling amajority of the 50 largest coalfirms, it is nothing better than afigure plucked out of the air - totallyfalse.As for the suggestion that "highand steady profits" have attractedoil companies into the coal business,according to informationfrom the National Coal Association,the net income of all coalcompanies that had an income, lessthe deficit of those showing a loss,was $105 million in 1965. In 1966,it was $96 million. In 1969, it was$14 million. Is that a case of "highand steady profits?" No! Steadydecline? Yes!Corporate HurdlesIf I must also exclude the mediaas a source of' unbiased and informedreporting - what is left? Ithink only the industry - suspectas it maybe. But even this sourceis limited, and that is why Icharge that objectivity and ac-

202 THE FREEMAN Aprilcountability is a one-way street.Consider the hurdles a corporateexecutive must scramble over whenhe chooses - all too infrequently- to address himself to a majorpublic issue!The economics division reviewsthe text to make sure that all thefacts are correct.The legal division examinesevery word to make sure that allrules and regulations of the SEC,FTC, Justice Department and amultitude of other governmentagencies are complied. with.The public relations functionreads every word for hidden implicationsor possible backlash,and makes sure that it accuratelyrepresents the situation and isconsistent with company policy.The finance group reviews thetext to make sure that the interestsof bankers and analysts areconsidered.And finally, the pulse of theChief Executive Officer must betaken to protect your job in theprobability that non-business orientedmedia headlines will quoteyour statements out of context.Can anything be done to improvethe restrained posture ofthe business community vis-a-viswholly unrestrained critics?I'm a perennial optimist and believethat over the long haul wecan reverse the current trend.Walter Lippmann recently summedit up this way: "I've never knowna time when people had so littleconfidence in the future. They'reafraid they're not sure they areequal to it and there is a great dif~fidence about the future. But Idon't think that is irremediable. Ithink even with all our size andcomplications and so on, if therecomes a group of leaders - andthere may well be - and they canstrike the right note, the countrywill respond."Changing the Trend,a Matter of LeadershipPersonally, I believe he is rightand that people will respond ifleaders - and I suggest the leadersof enterprise - intensify their activitiesto provide truth in a massivedose. Truth is the only antidoteto the exaggerations of 'theantipreneur. If you are to concludepessimistically that the job can'tbe done, then let's fold up ourtents, go home and join the opposition.So let me close with these fewthoughts.The natural resource industriesof this nation are faced todaywith challenges which, if not resolved,endanger their continuedexistence. These challenges havethe potential of destroying theeconomic ability of free enterpriseto respond to society's needs. Ibelieve that these predictions are

1972 OBJECTIVITY AND ACCOUNTABILITY 203objective and I am willing to beheld· accountable for their ultimateaccuracy.My belief arises not from a fearthat the business community is incapableof meeting our nation'sdemands for energy and otherbasic natural resources. Rather, itstems from a recognition that ourcritics, if not questioned and heldaccountable for false or. misleadingcriticism, will divert business,government and the public fromthe pursuit of a common purpose.Now what can we do about thisstate of affairs?Come Out FightingFirst: Come out fighting for acause you believe to be just andfair. Recently, I attended a tradeassociation meeting to considerthe response to charges of a prominentmember of Congress whichbore no relationship to uncontrovertedfacts. I was astounded thatnot one of many outstanding businessleaders present would risk anopen fight. When top level managementis so afraid to stand on aplatform of truth, how can you expectone of your juniors to riska black eye?This whole philosophy of lowprofile must be discarded and thebusiness community must standup, fight back ltnd lead. Conditionswon't turn around overnight. Therewill be some stitches and suturesapplied, but your critic will beginto think twice before he playsloosely with the facts once he getsnailed to the cross.Second: Mr. Roalman, VicePresident of CNA Financial Corporation,in a recent article on"Why Business Is Losing ItsCase" said that, "managementneeds to go more often into thearena. Too often, top managementconfines itself to talking to itsboards of directors, its peers andtrade-related people. Its effortsmiss, grossly, most Congressmen,legitimate consumerist-critics,young people and the bulk of theeducational community." Of courseit's important to communicate withour boards and industry people,but such talk alone will not wrestlewith and resolve criticism beingleveled in classrooms, on thestreets and in the press. That'swhere the action is and we can nolonger ignore it.See the ReporterThird: I'll never cease to beamazed why most business executivesfeel that a friendly luncheonwith the publisher of a newspaperor president of a T. V. networkwill solve our problems. A story iscreated and subjective feelings expressedat the typewriter levelthereporter. Industry must openup its doors, its knowledge, its experienceand facts to this young

204 THE FREEMAN Aprilgroup of Americans who are gatheringand reporting news. Most ofthem are products of a very liberallyoriented undergraduate school- an area deserving much greatertime and attention - and are totallyinexperienced in business affairs.Until they know more aboutthe business community, whyshouldn't they accept the preachingsof America, Inc.? It's our jobto give them a true insight intowhat goes on and the good thingsthe muckraker ignores. I considercharacteristic the observation of afairly radical conservationist wehired. After observing our operationsand the extent of our effortsto eliminate pollution he commented,"I would never have believedit."Coordinate the Efforts 01Business and GovernmentFourth: We could spend hourstalking about the social responsibilityof business as it faces thefuture. One fact is clear - theworld is changing and society hasthe right to expect us to lead andnot follow..We must provide thecatalytic tool to coordinate the effortsof business and governmentas we approach tomorrow. Weshould not wait until a muckraker,a Federal·agency or a committeeof Congress prods us into defensiveaction. We have the ability toplan, organize and coordinate aneffective means of goal attainment,whether it be social or economic.At this moment, such an effort hasnot been given a sufficiently highpriority.Those four suggestions .areaimed at actions the business community·itself can take. But perhapsthe biggest turnaround inthis area of objectivity and accountabilitywould be achieved ifthe regulatory agencies and theCongressional committees wouldrequire.our critics to operate under.the same ground rules andlaws of disclosure and accuracy towhich we in industry are subjected.Until that goal is. miraculouslyachieved, we must continueto make those critics accountableto the final regulatory body: publicopinion. And this can only beaccomplished by continuous vigilanceon our part and a d~terminationto participate rather thanmerely to decry.•IDEAS ON$LIBERTYValue"THE VALUE of anything is not what you paid for it, not what itcost to produce, but what you can get for itat an auction."WILLIAM LYON PHELPS

205The Nature ofDAVID OSTERFELDIN REFLECTING upon the intensityof the sentiment and the methodsutilized in contemporary antiwarprotests, it seems manifest thatthe preference is always for peace;that nobody wants war. So, onemust ask why, if no one wantswar, do wars continue to occur?Perhaps wars result, not fromthe direct intentions of· "warmongeringcapitalists" or any othergroup for that matter, but asEdmund Opitz observed, they arethe "unexpected by-product," theinevitable culmination, of particularpolitical or economic policiesnot intended to be aggressive and,in fact, even humanitarianly motivated.What one must, therefore,attempt to discern is the genericnature of these particular policieswhose underlying elements propelMr.Osterfeld is a political science n~ajor, work.,.ing toward a Master's degree in InternationalRelations at the University of Cincinnati.us toward war. Only if we arecognizant of the processes thatcause wars can we ever hope toobviate these warlike tendencies.The crux of this thesis, however,is nearly diametrically opposedto today's prevailing ethoswhich attempts to explain war,more often than not, as the resultof the insidious machinations ofthe industrial magnates or the"warmongering capitalists," or· insiststhat by its nature the capitalistsystem must culminate inviolent conflicts and, ultimately,its own catastrophic demise. Theposition here is to equate classicalliberalism and capitalism withpeace rather than war. Conversely,it considers the factors begettingwar as endemic, not insocialism per se, but in any typeof government economic interventionof which socialism is merelyone form.

206 THE FREEMAN AprilAggressive Nationalismfollows InterventionWhile everyone is agreed thatthe cause of war is aggressive nationalism,the position here is thataggressive nationalism is the necessaryoutcome of government intervention.In other words, statismfosters nationalism. An in-depthstudy of nearly 1000 wars foughtin the West from 500 B. C. toA. D. 1925 was conducted by thesociologist, Pitirim Sorokin. Incontrasting the size of the casualtylist to the corresponding population,he determined that thewar magnitude of the first quarterof the twentieth century stood at52 per 1,000,000 (compared with17 for the nineteenth century)leading Sorokin to conclude that"the twentieth century will unquestionablyprove to be the bloodiestand most belligerent of allthe twenty-five centuries underconsideration."1- These figures are in accord withthe two salient contentions of thisarticle. If a general date can begiven for the beginning of theabandonment of the principles oflaissez-faire for those of governmentintervention and control, itwould be the 1870's, highlightedby events such as Germany's appointmentof Bismarck as Chan-1 As quoted by Edmund Opitz, Religionand Capitalism (New Rochelle: ArlingtonHouse, 1970), p. 268.cellor and the emergence of thefirst effects of Britain's ReformBill of 1867. Since that time, thetrend has been conspicuously awayfrom limited democracy and laissez-faireand toward governmenteconomic interference. We cansay, generally, that the age ofclassical- liberalism was the nineteenthcentury and that the ageof statism extends from the latterpart of that century to the present.In applying Dr. Sorokin's findingsto that of our historicalsketch, two things we have notedbecome manifest. On the one handis the relative peace and tranquilityenjoyed by a world embracinglargely laissez-faire principles. Onthe other we see, with the substitutionof the deification of thestate and rise of the controlledeconomy for the principles of classicalliberalism, the concomitantrise of war and international conflict.The question to be considerednow is why government intervention- whether it be socialism or a"mixed" or welfare economy, andwhether for humanitarian or insidiouspurposes - engenders internationalconflicts and war.Domestic Ramifications of StatismThe free market is perpetuallyheading toward equilibrium.Wages and prices are alwaysheading toward a point at which

1972 THE NATURE OF MODERN WARFARE 207the supply of laborers and of commoditiesequals the demand forthem. Any attempt to interferewith the natural operation of marketpricing is destined to engendereconomic imbalance, begettingin turn, international conflict.To illustrate how this occurs,we will follow the linkage ofevents in any government· interference.We will assume, moreover,that the intervention occurs underthe most propitious circumstances;that it is, in other words, humanitarianlymotivated. We will say,for example, that the governmenthas intervened in an endeavor toraise the wages of the hardpressedor to set a. minimum standardfor the lowest strata of theworking force. Surely, most wouldexclaim, this is a generous act;surely there could be nothing sinisteror pernicious about such apolicy; surely this would ease, notaggravate, tension. However, let'sexamine it more closely.If wages are forced up, pricesalso may rise. Either they will risenearly simultaneously, or the increasedwages will reduce the incomeof the entrepreneurs, thusdriving the marginal producersout of business and discouragingadditional investment in thosefields. This diminution in the'amount of capital investment willentail a reduction in the quantityof commodities produced, thuscausing prices to rise. And thesame thing is true of endeavorsto hold prices down. At the lowerprices, more is bought. But thereduced price discourages investmentand once again forces themarginal producers out of business,thereby engendering shortagesthat can only be corrected byeither (1) removing the controlsand permitting prices to rise or(2) carrying on productionthrough means of subsidies, whichrequires higher prices in otherfields. Any government intervention,therefore, must inevitablycreate imbalances in the economy;these, in turn, tend to bring a risein production costs and thereforein prices.This rise in prices, moreover,must have catastrophic internationalramifications. Since domesticwages and prices are artificiallyheld above the level set by thefree market, the lower prices offeredby imported goods will encouragethe buying of the importedcommodities in preference todomestically produced goods. Aslong as prices domestically aremaintained at bloated levels, .thisforeign underselling ultimatelywill force the domestic firms outof business. Moreover, maintainingwages domestically above theirrespective equilibrium levels willattract immigrants from abroad.The influx of new laborers will

208 THE FREEMAN Aprileither force the bloated wage leveldown or engender institutionalmass unemployment.The apparent solution for suchproblems is a policy of autarchy,viz., economic isolation, as bestmanifested by recource to tariffand migration barriers, exchangecontrols, and the· like.International Ramifications: WarIt should now be evident that acountry intent upon controllingwages and prices cannot permiteither imports .or immigration.Such penetration would easily andobviously frustrate the planners.Statism, therefore, becomes synonomouswith autarchy. With thepossible exceptions of the U.S. and.U.S.S.R., hardly any nation is adequatelyblessed with the means ofself-sufficiency; statism and autarchy,. therefore, .must manifestthemselves as a policy of aggressivenationalism. As Lionel Robbinsobserved: "It is really ridiculousto suppose that such a policyis possible for the majority....To recommend autarchy as a generalpolicy is to recommend waras an instrument for making autarchypossible."It may be well to consider thispassage further. In the. long run,exports must always equal imports.The only reason one givesup an object in trade is to acquirethat which he does not possess butvalues more than· what he is givingup; similarly, the only needfor exports is to pay for the requiredimports. Thus, the greaterthe imports demanded for subsistence,the greater the exportsrequired to pay for them.A nation, in endeavoring topreserve domestic wage and priceincreases through recourse to tariffand migration barriers, therebyeliminates the possibility ofexporting its surplus co~moditiesand thus acquiring the foreignexchange necessary to purchaseimports. There are only threeways to procure the necessities oflife: (1) to produce them at home,(2) .to trade for them, or (3) togo to war and take them. If anation does not possess the kindor the necessary quantities of naturalresources, and if it does notpossess enough fertile agriculturalland to provide for its population,then it must trade for these necessities.If it erects tariff barriersand prohibits imports - orif other nations erect tariffs thatprohibit exports - a nation is thenunable to trade for its necessities.Unless one subscribes to the unlikelyproposition that the peopleof one nation will passively acquiescein permitting either starvation.or a substantial reductionin their standard of living, thereis .only one recource left: war.World Wars I ·and II are replete

1972 THE NATURE OF MODERN WARFARE 209with support for this hypothesis. 2It is important to note that betweenthe wars, for example, allEuropean nations resorted to verystrict anti-immigration laws, inmost cases prohibiting immigrationaltogether. Every nation waseager to protect its wage levelagainst enchroachment from nationswith still .lower wage levels.Such policies were bound to engenderserious international friction.Moreover, like the "Sozialpolitik"of pre-1914 Germany, Hitler'sGermany endeavored to raise thewage rates of its workers. In doingso, prices were forced up.Since this would have encouragedimports and thus thwarted thestatist schemes, tariff barrierswere established. However, theGerman ban on imports meantthat no nation could acquire thenecessary German exchange topurchase German exports. Germany,an industrial nation, waslargely dependent upon foreignfoodstuffs. It had· to export itsindustrial commodities in order toobtain much of the needed food.By eliminating imports, it eliminated,in a like degree, the onlymeans by which it could peaceablyattain these necessary agricultural2 Easily the most lucid and cogent delineationof this position is to be foundin Ludwig von Mises' Omnipotent Government(New Rochelle: ArlingtonHouse, 1969).and other products. So, Germanyhad but one alternative; it had togo to war and take them.Rise of Aggressive NationalismThe nineteenth century was governedlargely by classical liberalprinciples. It was, for the mostpart, a peaceful century. The onslaughtof war accompanied theabandonment of these principles.The question to be considered,therefore, is precisely why thesepolicies were discarded. The answercanbe perceived if one realizesthat an integral element ofthis liberalism was democraticrule. It is imperative, however, toappreciate that this was the democracyof Tocqueville; that is, alimited democracy. Under the classicalliberal ideal, the power ofthe state - the apparatus of compulsionand control - was severelycircumscribed. The crux of thisconcept was the recognition ofindividual rights; the sole functionof the state was simply thesuppression of attempts by individualsto suppress -other individuals,that is, to provide a secureand peaceful framework to facilitatesocial cooperation. While themeans for determining who heldthe reins of government was to bedecided democratically, the powerand functions of government weresignificantly curtailed; the democracyof the classical liberal

210 THE FREEMAN Apriltradition was a strictly limitedconcept.Before this ideal could be fullyimplemented, it began, like mostideals, to be abused. As suffragewas extended - which was not necessarilyinimical in itself - thisdemocr~cy became ever less limited.In exchange for votes, the politiciansbegan to promise moreand more. The function of thestate, accordingly, could no longerbe restricted to the protection ofthe life, liberty, and property ofits citizens. The interventioniststate thus began to supplant thelaissez-faire state, even before thelatter had been fully established.These statist measures were, inmany cases, humanitarianly motivated,that is, aiding the poor, assistancefor the jobless, and so on.Nevertheless, the inevitable corollaryof this proliferation of governmentintervention was the precipitationof aggressive nationalism.It was the inevitable result ofan ethos that sanctioned the extensionof government into allphases of life. It was, in short, theemergence of the total state.Whether it came as autocracy oras the "despotism of the majority"was irrelevant.Significance of National BoundariesIn a planned, autarchic economy,territorial boundaries are ofsupreme importance. An isolatednation must possess all of its requirednatural resources. Thelarger the area under control, thebetter it can provide for its wantsand needs. Yet, no country isblessed with a position of completeeconomic self-sufficiency. Autarchy,accordingly, must manifestitself in aggressive nationalism,in the desire of every country forthe control of ever larger areas.What is required to make peaceviable, therefore, is a lessening ofthe significance of boundaries.This could only be attained,however, if the governments of theworld were confined in their activitiesto protecting the life, liberty,and property of their citizens.Only then would internationalboundaries lose their significance.It would then make no differencewhether a nation were large orsmall; its citizens could derive nobenefit or sustain any damagefrom the extension or loss of territory.Under a laissez-faire system,where all transactions wouldtake place between individuals unimpededby government, the sizeof a nation would not matter. Noone would be aided or hurt by atransfer of territorial jurisdiction,since all property would be held byindividuals and all transactionswould take place between individuals.If the primacy of private propertyand free trade were the rule,

1972 THE NATURE OF MODERN WARFARE 211at least one of the major causes ofwar would be all but eliminated.Noone would be artificially orforcibly excluded, by tariff or immigrationbarriers, from acquiringany needed goods or naturalresources. Noone would be penalizedfor having been born a foreigneror of a different race or ina country of limited natural resources.Under these terms, then,at least one of the causes of warwould be effectively ameliorated, ifnot eliminated entirely.ConclusionStatism, in so far as it begetsautarchy, engenders internationalantagonisms for which no peacefulsolution can be found within thecontext of our contemporary politico-economicethos. These antagonismscan be relieved only by achange in ideologies. What is neededto make peace viable is the acceptanceof the prinicples of limiteddemocracy and its economiccorollary, the free market. Only bysuch an advance can we ever hopeto surmount at least one of the underlyingfactors precipitating internationalconflicts and war.If this analysis possesses anycogency at all, then at least onething is surely manifest: all theantiwar marches, protests, demonstrations,and peace songs fromhere to China cannot improve thesituation one iota. While they maybe fun, they are nevertheless futile.They are futile because theyare premised upon a misunderstandingof war. Yet, wars continueto occur. Accordingly, warwill not be ameliorated, much lessabolished, by the mere utteranceof platitudes or by shock tacticsdesigned to scare us into peace.Only the elimination of its rootcause can greatly diminish thethreat of war. Such a policy, to repeat,entails a change in attitude,a policy impossible until the leadersand the people of the worldare prepared to accept it. ~IDEAS ON$LIBERTYTo Discipline a NationWHILE AN INDIVIDUAL peacebreaker can easily be punished andisolated in a penitentiary, a collectivist nation conducting policiesof economic nationalism can be disciplined and subjugated onlythrough a full-scale war and subsequent occupation of its territory.To discipline a nation that refuses to embrace the doctrinesof freedom and free enterprise is an endless and hopeless task.HANS F. SENNHOLZ, "Welfare States at War"

SYLVESTER PETROSYNDROMENATURE goes its own way, followinglaws of its own, shaped byforces in which human actionpassion,will, thought - is irrelevant.Man's laws and man's societiesare something else. The worksof Ludwig von Mises,summed upin the monumental Human Action,demonstrate more powerfully' thanthose of any other writer the roleplayed by human will and humanthought in the universe which affectsand is affected by human action.Not everything is possible tohuman action. Nature goes itsown way. In the generous realmof the possible, however, man'slaws, his rationally directed values,make a difference; perhaps thedifference. As a part of nature weDr. Petro is Professor of Law, New York University.This article is reprinted by permissionfrom the two-volume Toward Liberty series ofessays in honor of Dr. Ludwig von Mise&' on his90th birthday, September 29, 1971, publishedby the Institute for Humane Studies.share the universal conatus, thestriving to be. But our conatus isgeneric and undefined; we aremore than the birds and the bees,or perhaps less, but different, anyway.And our intelligence is correspondinglydifferent. We can killourselves, and we can err.More strangely still, we are capablethrough intellectual error ofkilling ourselves by policies whichwe believe necessary to our survival.I believe that what I callhere the "economic-power syndrome"constitutes one of the mostdestructive combinations of moraland intellectual error that mankindhas ever suffered, and I proposeto disperse this dark syndromewith the aid of one of ProfessorMises' most brilliant contributionsto the formulation ofsound social policy: his insistenceupon a central role for the conceptof consumer sovereignty.212

1972 THE ECONOMIC-POWER SYNDROME 213Anti-Business Bias in the u.s.For a hundred years, more orless, the policies of the UnitedStates have had a characteristicallyanti-business thrust, sometimescompelled, sometimes ·condoned,by dominant voices of popularopinion. For public opinion inthis country has always been infectedto a degree by dread, distrust,even hatred· of "big business."Thus Mr. Nader and hisraiders, J. K. Galbraith, VancePackard, even Marcuse, are farfrom representing a new attitude.They express the same fear, thesame suspicion, that brought aboutthe Interstate Commerce Act andthe Sherman Act in the nineteenthcentury and the mountain of restrictivelegislation and court decisionsof this century. In a word,what they fear and suspect is economicpower.The populist. antipathy toeconomicpower in general and to bigbusiness in particular has notswept all before it. Ambivalenceamong the. populists themselves,the achievements of American bigbusiness, and a persistent minorityin favor of liberty and its politicalcorollary, laissez-faire, have alsoinfluenced· our public policies. Politiciansand bureaucrats haveknown, too, that they could have$300 .billion to spend each yearonly if the economy produced $700billion to $1 trillion a year - anunattainable result without largescaleeconomic activity. Hencethey have been astute over theyears to balance the Sherman Actand other anti-business laws withappropriations small enough toguard against absolute frustrationof the need of businessmenfor flexibility and freedom. Likewisethey have been careful .tomitigate populist insistence uponconfiscatory income taxation withmany loopholes, and with taxesupon capital gains modest enoughto guarantee the continued growthof capital. and the survival of thecapital markets· upon which theprogress .and well-being of theAmerican economy rest.However, the dominant trend inthe public policies of this countryhas nevertheless been toward everincreasingregulation of business.Congress and the state legislaturesyear by year add to the burdenof restrictive legislation. Thecourts, especially .the SupremeCourt of the United States, zestfullyenforce far beyond its letterand spirit all legislation limitingthe freedom of businessmen; atthe same time, they read virtuallyout of existence laws, doctrines,and principles which would tendto preserve to businessmen therights and the freedom recognizedin the classic common law.In so deciding, the courts leavelittle room for doubt of the phil-

214 THE FREEMAN Aprilosophy underlying their decisions.Whether we speak of antitrust orlabor-law decisions, or even ofprivate-law decisions in which thecommon-law courts take sidesagainst business, the same themeprevails: Economic Power - it isas much to be dreaded, and thereforeto be confined, apparently, asthe threat of conquest by enemiesfrom abroad or of chaos by criminalsfrom within.Such views and policies, theworks of Ludwig von Mises demonstrate,are full of disastrous fallacies.The person who followsMises' argument emerges, on thecontrary, with the conclusionsthat, far from being an objectproperly of fear and doom, economicpower is in all ways goodand wholesome; that there are few,if any, capabilities at once so innocentof social harm and so productiveof social benefit; and thatthe fear of economic power whichnow threatens to tie up the economyin knots is the product of ignorance,confusion, and supersti-'tion.The Nature of PowerMuch of the confusion traces toconceptual complexity in the term"power" itself. The word "power,"integrally associated with the problemof causation, refers basicallyto the capability of affecting reality,of bringing about effects,changes, results. Some results arebrought about by strictly individualaction, as when primitiveman fells a tree with his barehands or with a tool fashioned byhimself. His will, his act, hispower is the only human one involvedthere. In society, things aredifferent. In society, all power,whether of the economic or politicalvariety, rests upon cooperation.This is true of the capacity of acriminal to compel a change in thelocation of money, from his victim'spocket to his own. Withoutthe cooperation of all those sectorsof society which feed, clothe, andarm him, the criminal is helplessto bring about the result he seeks- unless of course he does it withno aids other than those availableto the bushman, in which case hispower analyzes out as the same,equally modest and precarious.In society, and especially in respectof operations of a certainscale, power of all kinds, to repeat,rests upon cooperative activity;and, more than that, cooperativeactivity resulting from a coincidenceof opinion. Although he wasreferring to only governmental orpolitical power, David Hume wascorrect generally in relating powerto opinion. One way or another, directlyor indirectly, both economicand political power are founded inopinion.Ortega y Gasset thought it nec-

19'72 THE ECONOMIC-POWER SYNDROME 215essary, in The Revolt of theMasses, to distinguish in his discussionof governmental power betweenpolitical aggression and politicalrule. Observing the plainfact that Napoleon's conquest ofSpain obviously did not accordwith the opinion of the Spanishpeople, he said: "It is necessary todistinguish between a process ofaggression and a state of rule."The distinction, however, is bothunnecessary and misleading;Napoleon could subjugate Spainonly because its whole people, relativeto the people of France fromwhom Napoleon derived his power,amounted to a minority. The samesituation prevails between the peopleof Russia and the people ofCzechoslovakia today. The powerof Russia to quell the Czech revoltwas founded in the opinion of theRussian people, or at any rate ofthe .ruling majority of Russians,that it was better to support theirgovernment in its domination ofthe Czechs than to withhold suchsupport. I dare say that the samephenomena of majority rule determinedthe events in this countryin the period 1861-65. Theopinion of Northerners prevailedover the opinion of Southernersbecause there were more of themand they had more hardware. ·It is important to observe thecomprehensiveness and uniformityof the relationship between opinionand power. Within Spain duringthe Napoleonic wars, or Czechoslovakiatoday, or the SouthernStates during the War betweenthe States, the situation was notdifferent in kind from the situationbetween those countries andthe aggressors who subjugatedthem. Within each, the government,resting upon the opinion ofthe majority, similarly subjugatednonconsenting internal minorities.The government of Napoleon hadto deal with recalcitrants not onlyin Spain but also in France; andthe same was true within theNorthern States in 1861-65 and istrue today within Russia.The internal government of anystate, in brief, while resting aslong as it lasts upon the opinionof the consenting majority, imposesits will by force upon a nonconsentingminority. That is thespecific nature of governmentpower.I have had to emphasize, thepoint because it is common in ourtime to overlook this feature ofpolitical power, and because, inoverlooking this obvious feature,much of the confusion relating toeconomic power rests.The sharp difference betweeneconomic power and political powerdoes not reside in their respectivefoundations; both kinds of powerrest in opinion. The significant differencebetween economic and po-

216 THE FREEMAN Aprillitical power rests in the purelyconsensual .character of economicpower as contrasted to the onlypartly consensual character of politicalpower. For no businessman,qua businessman, can ever compela nonconsenting minority to dealwith him. It is the very essence ofgovernment, however, to imposethe will of the majority upon thenonconsenting minority. The difference,then, lies not in the foundationsof economic power and politicalpower but in their respectiveeffects and modes of operation.The productive power of anybusiness has its beginning in theman or men who found it and whoare able to convince others to investtheir capital and their talentsin it. However, the business succeedsonly if the consumers approveits production. In a marketeconomy there is no way for afirm to compel anyone to deal withit or to purchase its goods andservices. As Ludwig von Mises hassaid so often, the consumers dailyvote for and against the productsof American business. Those firmswhich gain the patronage of theconsumers prosper; those whichdo not, lose ground. In rewardingthose who best serve the consumers,the profit system constantlyinsures that current allocation ofresources which best suits the currentwishes of the community. Itexpands the assets of those firmsendorsed by public opinion; it enhancestheir capacity to bid in themarket for other factors of productionand thus to increase theireconomic power - by which I meantheir power to produce.The secret of the so-called ambivalenceof American public policytoward big business resides inthe phenomena just described. Onthe one side, mainly from "intellectuals,"we hear much about theabuses, the evils, the dark powersof big business to destroy smallbusiness, to exploit workers, .andto impose its will upon consumers.But these charges, however oftenmade, and however well publicized,have only a limited effect, frequentlyno more than the cracklingof thorns under a. pot. They resoundhollowly against the prodigiousfact that business growsbig only because and to the extentthat public opinion favors it withits voluntary purchases. More thanthat, if the polls are correct, Americansfavor and admire big businessin "greater numbers than theydo any other institution, includingthe government. However, sincethe anti-business opinion has aneffect also, we emerge with fra.gmentary,inconsistent, and am15ivalentpolicies.It is impossible to understandproperly either the meaning ofeconomic power or the real stand':'ing of business in the community

1972 THE ECONOMIC-POWER SYNDROME 217without a full and accurate graspof this fact of consumer sovereigntyin the market economy. Thelate Mr. Adolph A. Berle, in manyways a learned man and a. keenobserver of contemporary society,illustrated in his well-known writingsa characteristic error, tracingto inadequate grasp of consumersovereignty. Although yearby year he grew more moderate inhis criticisms of big business, yet,even in his latest book, Power(1969) he continued to hold to aconfused view of economic power.He attributed to that power aspecies of capability, a capacityfor decision and action which itsimply does not possess. He spokeas though big business had unlimitedpower in the dispositionof resources, the direction of investment,choice of product,amount of production, and level ofprice. From others, such as J. K.Galbraith, such a blunder mightbe expected. But Mr. Berle was adifferent case: he frequently displayeda genuine understandingof consumer sovereignty. For example,in his latest book, he hadthis to say:In economic life, every decisionmade affects, in some way, every lifein the modern world. This is thepeculiar quality of economics. The impactof economic-power decisions maybe imperceptible or great, but it is alwaysthere. The· woman who chosenylon stockings instead of silk (achoice she still has, though nylon hasclearly Yvon the campaign) affectedthe lives of silk growers in Japan,China, and Southeast Asia.Consumer PowerOnce one grasps the significanceof the female preference for nylonhosiery, it is no longer possible tomistake the locus of ultimatepower. The Dupont Company haspower, of course, but it is only thesame kind of power to propose, tooffer, that everyone else has, inbusiness and out. Business proposes,the· consumer disposes. Ifshe disposes favorably the businessprospers and may expand. Ifnot, the business must mend itsways or retire from the field.The business must do more thanpropose an attractive product. Itmust have the capability to deliverthat product at an attractiveprice which still exceeds productioncosts. When it demonstratesthat capability, it demonstrates atthe same time its social qualification~Profitability and social utilityare two names for the same thing.The business that makes losseshas abused the society in which itoperates; the business that makesprofits has served it; and, remark-. able as it may seem, it followsthat the higher the profit, thegreater the service.Much current literature viewsthe word "profit" and·its referent

218 THE FREEMAN Aprilin reality _as downright obscene.Nevertheless, the facts are whatthey are. The firm that must sellbelow cost and which, therefore,experiences losses rather thanprofits, has done society in, anddeserves to be penalized ratherthan praised. It has directed factorsof production improperly,from the point of view of consumersand society as a whole. Ithas engaged in a course of productionthe full costs of which theconsumers are unwilling to pay.In refusing to pay those full costsand thus imposing losses upon theincompetent producer, the sovereignconsumers redirect productionin a manner more to theirliking.Literature of the "New Left"Current "new-left" -literature ­faithful to its mentors, Messrs.Galbraith, Packard, Marx, andMarcuse - rejects the foregoinganalysis. It insists that economicpower involves a form of compulsioneven more objectionable thanthe physical compulsion exerted bygangsters or by the armed forcesof the state. Professor Mises' principleof consumer sovereignty, theysay, is a pure myth; the fact isthat the concentrations of economicpower in big business compelthe consumers by way of advertisingto want_certain thingsand to fulfill those wants in wayswhich serve the interests of bigbusiness, not of the people.No conscious human being- withnormal sensory equipment canfairly dismiss these charges out ofhand. All media of communicationbombard us constantly with commercialexhortations, appealing toevery aspect of human nature,from the most elemental to themost sophisticated, from the sub~liminal to the most obvious andcoarse. There -can be no doubtabout it. Advertising has us all insiege. And its objectives areamong others to expand, shape,and direct our desires.The question, however, iswhether, in what circumstances,and to what extent advertisingsucceeds. It will not do, in seekingan answer, to confine our attentionto the claims of advertising agenciesand Messrs. Galbraith, et al.They beg the question; they donot resolve it.Condensed to its meaningfulpoint, the charge is that, by advertising,big business substitutes itswill for that of the consumers,thus making the principle of consumersovereignty a mere myth.The fundamental weakness inthe Galbraithian thesis is its disregardof certain evident aspectsof human nature. For better orfor worse, mankind is so constitutedas to preclude thesubstitutionof one man's will for an-

1972 THE ECONOMIC-POWER SYNDROME 219other's, except fragmentarily andtemporarily, and then only bybrute force, not by any othermeans. No matter how often personsmay be bombarded by an appealto buy Pepsodent, or.Colgate,or Crest, the actual decisions whenthey stand at the counter as towhether to buy toothpaste at alland, if so, which brand, must bemade inside each person's mind. Inall but the autonomous functionsof the body, human beings mustact, must choose, as Mises says,and their choices, their actions,proceed necessarily from within.Our limbs and organs are all inner-directed.Some weight might justly be accordedthe Galbraithian thesis ina socialist society, where controlof all production and all media ofcommunication were concentratedin the same men who controlledalso· the physical power of society.In such a society the faculty ofchoice would still remain, but itwould, so to speak, lack traction.It would have nowhere to go, likean automobile with bald tires onslick ice. The government controlof all media, from the schools totelevision, would come close tobrainwashing the public, and thelack of variety in·· consumer goodswould carry forward the demolitionof practical choice. Consumerswould still retain their indestructiblehumanity; notwithstandingthe brainwashing attempts,they would still have wantsand still have to make their ownchoices; but they would have littlescope to exercise their power orfa«ulty of choice.Even sO,however, traces of thesovereignty which is fully theirsin market economies would remainalso in socialist societies,·for solong as man is man, he mustchoose if he is to live. So, in Russiatoday, there are shortages insome lines of consumer goods andsurpluses in others. To that extent,the consumer remains king,even in Russia, though only inrags.In a market economy, the Galbraithianthesis makes no senseat all. The characteristic featuresof a market economy all tendtoward providing traction for thefaculty of subjective choice. Authorityto use physical force isconfined to the state. The media ofcommunication are free. The consumeris encouraged on all sidesto choose from a vast array ofcompeting goods and services.American Motors, Chrysler, Ford,and General Motors must not onlycompete with each other; theyhave also to contend with Volkswagen,Mercedes-Benz, Toyota,and Fiat. And all the motor companiesmust compete with the airlines,the bus lines, the railroads,the subway systems, as well as the

220 THE FREEMAN Aprilfirms which encourage consumersto stay at home or enjoy themselvesin their gardens. EvenAmerican Telephone and Telegraphcompetes. It urges us to call,not write.The much maligned soapmanufacturers have only one thingto say: "Buy our product."Ultimately, when one thinksthings through, that is the basicmessage of all commercial advertising.Advertising agencies claim,quite rightly, I believe (on thewhole at any rate), a specialability to bring products and servicesto the attention of consumers.Their job is to acquaint the publicwith the fact that such and sucha product exists and to urge thatit be given a try. From there on,the consumer and the productmust fend for themselves. Theproduct must make good on theclaim made for it. Thus understood,the specific function of advertisingis to promote competition.Any other claim for it,whethey made by advertising menor Messrs. Galbraith et al., is merepuffing.If big business and its advertisinghad the power attributed toit by Messrs. Galbraith et al., theavidity of men and women for materialgoods would be a new phenomenon,observable in humanhistory for the first time only inthe last fifty years or so. Afterall, big business is a new ,phenomenonin the world, and advertisingagencies are still newer.But is it true that men and womenhave grown remarkably desirousonly in the last fifty or hundredyears? The question answers itself.,On the first page of'the first historybook ever written, The Historyof Herodotus, recounting thewars between the Greeks and thePersians, the author reports that"according to Persians best informedin history, the Phoeniciansbegan the quarrel." How wasthat? Herodotus continues:They ianded at many places on thecoast, and among the rest at Argos.... Here they exposed their merchandise,and traded with the natives forfive or six days; at the end of whichtime ... there came down to the beacha number of women, and among themthe daughter of the king.... Thewomen were standing by the stern ofthe ship intent upon their purchases,when the Phoenicians, with a generalshout, rushed upon them. The greaterpart made theirescape, but some wereseized and carried off....Anyone who has ever had the misfortuneto be in Macy's on a salesday will know that, whateverGalbraith says about it, big businessand advertising have notchanged women very much in theintervening two thousand fourhundred years.

1972 THE ECONOMIC-POWER SYNDROME 221Nor men, either. Aristotle wroteonly for men, it seems, in theNichomache,an Ethics. In discussingand urging the virtue· of temperance,he admonished againstthe development of voluptuaryhabits. More to the point, he focusedupon the inner sources ofluxurious desires. "It is absurd,"he said, "to make external circumstancesresponsible, and not oneself,as being easily caught bysuch attractions." There was hardlyany business around at all inAncient Greece, let alone bigbusiness, and B.B.D. & O. werestill in the far off future. Suchtoo was the case in 17th centuryEngland, when John Locke took. note of the insatiable desires ofmankind for material goods andservices. He said:We are seldom at ease, and freeenough from the solicitation of ournatural or adopted desires, but a constantsuccession of uneasiness out ofthat stock which natural wants or acquiredhabits have heaped up, takethe will in their turns; and no sooneris one action dispatched, which bysuch a determination of the will weare set upon, but another uneasinessis ready to set us on work.The Galbraithian-SDS thesis isout of touch, not only with themost profound and persistent realitiesof human nature, but alsowith the available statistical evidenceconcerning the use of commercialadvertising. Far from establishingthe contention that big,concentrated business to somemarked extent uses advertising towarp consumer desires, recent researchersreveal: (1) that there isno significant correlation betweenindustrial concentration and advertising;and (2) that there is indeeda contrary tendency, with advertisingexpenditures tending torise as industrial concentrationdecreases.Sources of MisunderstandingI must deal more briefly withthe two remaining major sourcesof. misunderstanding which makeup the "economic-power" syndrome- (1) the belief that economicpower can buy political power orthat, at any rate, (2) economicpower can shape the political opinionsof the community more orless at will.The first of these can be dispatchedfairly readily. Certainlyit is true that public servants atevery level of government are "forsale," as every person is, for thatmatter. The question is, however,in what medium of exchange dothey do business? In contemporaryrepres.entative government, themediurn of exchange is votes.While the wealthy and the bigbusinessmen could and do bid vigorouslyin the medium of exchangewhich they are well supplied with,

222 THE FREEMAN Aprilnamely, money, the sad fact fromtheir point of view is that theyare not very extensively suppliedwith votes - and votes are whatcount. If Tocqueville was correct,this situation has prevailedthroughout American history.Writing in 1840 or so about America,he said: "At the present daythe more affluent classes of societyhave no influence in politicalaffairs; and wealth far from conferringa right, is rather a causeof unpopularity than a means ofattaining power."One may argue that while dollarsare not convertible into gold,they are convertible into votes,and this is to some extent correct.But only to about the same extentas it would be correct to point outthat dollars can buy officials directly.In both cases dollar convertibilityis only marginal: adrunken Bowery derelict will sellhis vote for a bottle of whiskey;a faithless official will take a bribehere and there.But the wealthy and the bigbusinessmen are unable to! buypublic policies with their dollars.If they seek tariffs, exclusivefranchises, import quotas, andother such measures, they do notsucceed· unless the measures theyseek coincide with public opinion.Only public opinion to the effectthat such policies are good· for thecountry on the whole will securetheir adoption. And when the publicis convinced of the merits·of aparticular policy, dollars are incapableof affecting the result oneway or another.Subsidies for the poor, for commuters,for farmers, for the maritimeindustry, and pretty soon foreverybody else in the countryallthese are traded by politiciansin return for votes, not in returnfor dollars. When industry representativesgo to Washington fortariffs and import quotas, they aretold to return only when they canshow some political currency. Ifthey return with trade-union representatives,men who are thoughtto command votes, and if the unionmen join in seeking protectionistpolicies, the tariffs and quotas areforthcoming; otherwise not.The current situation with respectto tax exemption for intereston municipal bonds makes thepoint rather well. By and largesuch bonds are purchased by moreor less wealthy people. But if theirinterest were to be consulted exclusively,there is no doubt thatthe tax exemption would be removed.The exemption continuesbecause the citizens in lo~al communities,desiring local governmentalservices, such as publicschools, insist upon it. And theyinsist upon it because, in their(ultimately incorrect) opinion, tax-

1972 THE ECONOMIC-POWER SYNDROME 223exempt municipal bonds reduce forthe taxpayers the costs of theservices in question.For the disinterested observer,his reason unimpaired by passionand prejudice, there is no need togo on at length with this point.It is sufficient to notice that overthe past hundred years in thiscountry, the steady trend of legislationhas been against thewealthyand the successful businesses.David Hume was correct in statingas the first principle of governmentthat all public policies arefounded in opinion. On the otherhand, in declaring that governmentin capitalist countries servesexclusively the interests of thewealthy, Karl Marx was as wrongas he was when he said that profitscome exclusively from the exploitationof labor and that increasingpoverty for the masses isthe inevitable consequence undercapitalism.An Argument OmittedStrangely·enough, the victims ofthe economic-power syndromehave left almost completely undevelopedan argument which, ifthey could sustain it, would carrythe day for them. They could bearguing that, while it is true thatall government rests upon opinion- on political votes rather thandollars - the wealthy and·the bigbusinessmen control .governmentby controlling the political and socialideas of the citizenry. Why isthis argument so rarely made?I offer as a possible answer thefact that the argument is so patentlyat odds with reality. If weconfine ourselves to reality wecannot help observing a tremendousdisproportion in all the areasof intellectual communication andopinion-forming. A vast majorityof instructional personnel fromgrade-school through graduateschool roams somewhere left ofcenter. Most newspaper columnists,moreover, consider themselvesleftist-liberals and spendlittle time vaunting the virtues ofcapitalism. For every best-sellingauthor on the right, there are atleast ten on the left. Foundationsestablished by the wealthy spendinfinitely greater sums promotingthe welfare state than they do indefending capitalism. ProfessorPaul Samuelson has become awealthy man as author of an economictext sympathetic with thewelfare' state, if not with socialism.Galbraith's books become automaticbest sellers. The works ofLudwig von Mises, the most powerfulprotagonist of capitalism inprint, do not sell in sufficientquantities to feed him.Let us now approach the problemmore systematically. The contentionthat economic power translatesinto political power by way

224 THE FREEMAN Aprilof political indoctrination of themasses would have to establish, inthe first place, that the wealthyand the big businessmen are themselvesuniform exponents of a particularpolicy or set of policies,for the first requirement in anyindoctrination is a doctrine. Butthe argument then stumbles atthe threshold. The one outstandingand apparent fact about thewealthy and the big businessmenand the institutions they foundand support is ideological diversity.If we place H. L. Hunt on theright, as is customary these days,where shall we place the Rockefellers,the Kennedys, the Fords?And should we place all the·Rockefellersin the same category?Where exactly would you place theKennedys, father and sons?There is no common ideologyamong the wealthy and the bigbusinessmen, just as there is nocommon ideology among the masses.There are only vague, halfformed,often contradictory opinions,which veer one way now and'another way again. They spendtheir money accordingly. Thefoundations and institutions attackingcapitalism and free enterpriseand the profit system seemto have plenty of money. As far asI havebeen able to tell, the fewfoundations and colleges whichpromote free enterprise rarely, ifever, are wealthy.RecapitulationI have tried to make three points:1. Economic power, like politicalpower, rests upon favorable opinion,the sovereign opinion of consumers;unlike political power,however, it produces wealth in theform of goods and services and hasno compulsory capabilities. Theconsumers reward with profitsthose firms which serve the communityand penalize with lossesthose firms which do not.2. There is no way at all in a marketeconomy for business. to substituteits will for that of the consumersin respect of demand forgoods and services; it. proposes,the consumer disposes; the contentionthat advertising can supplantthe will or implant desiresin consumers conflicts with everythingwe know about human natureas well as with the externalfacts of life in the market economy.3. Economic power is not convertibleintopolitical power. Themedium of exchange owned by thepossessors of economic power ismoney; the medium of. exchangein politics is the vote. Dollars areproduced by economic capability;votes flow in accordance with politicalopinion. Unless the holdersof dollars represent interestswhich coincide with the independentlyderived opinions of thevoters, the interests of the wealthyare doomed.

1972 THE ECONOMIC-POWER SYNDROME 225I have in this brief paper failedto deal with a number of featuresof the economic-power syndrome:the relations between big businessand small business, the relationsbetween business and employees,the Jeffersonian ideal of a societycomposed of farmers and smalltradesmen, the notion that themanagerial revolution heralded byBerle and Means and by Burnhamhas somehow incapacitated bigbusiness for the service of thecommunity. With respect to theseI can say only that there was notspace. My silence on these pointsis not to be taken as an admissionof their strength. On the contrary,I believe it a simple matter, onthe basis of the points which Ihave dealt with, to demonstrateequal weaknesses in those whichI have not had the opportunity todiscuss here.I wish to say but one thingmore, and to quote a statementwhich sums up what I have had tosay here. First, I would not havemy remarks interpreted' as anapologia for the wealthy or forbig .business as such. My main interesthas been to clarify thoughton the subject of economic power.Secondarily, my interest is in consumersovereignty and its principalservant: the system of freecompetition emerging from thosetwo common-law institutions, privateproperty and freedornof contract.Ludwig von Mises has summedup a large part of what I havebeen trying to say. As he puts it:The rich, the owners of the alreadyoperating plants have no particularclass interest in the maintenance offree competition. They are opposed toconfiscation and expropriation oftheir fortunes, but their vested interestsare rather in favor of measurespreventing newcomers fromchallenging their position. Thosefighting for free enterprise and freecompetition do not defend the interestsof those rich today. They want afree hand left to unknown men whowill be the entrepreneurs of tomorrowand whose ingenuity will make thelife of coming generations moreagreeable. They want the way leftopen to further economic improvements.They are the spokesmen ofprogress....It is manifestly contrary to the interestof the consumers to prevent themost efficient entrepreneurs from expandingthe sphere of their activitiesup to the limit to which the public approvesof their conduct of business bybuying their products. Here again,the issue is who should be supreme,the consumers or the government?In the unhampered market the behaviorof consumers, their buying orabstention from buying, ultimatelydetermines each individual's incomeand wealth. Should one vest in thegovernment the power to overrule theconsumer's choices? t)

The~allooningWelfare StateHENRY HAZLITTMOST of the self-styled liberals ofthe present day would be astonishedto learn that the father ofthe welfare state that they somuch admire was none other thanthe fervent antiliberal and advocateof "blood and iron", Otto vonBismarck."He was the first statesman inEurope to devise a comprehensivescheme of social security, offeringthe worker insurance against accident,sickness, and old age. ThisBismarckian 'socialism' later becamea model for every other countryin Europe. It represented inpart the paternalistic function ofthe state which Bismarck, as a conservative,had always held."1Bismarck's scheme of compulsoryinsurance went into effect inHenry Hazlitt is well 19town to Freemanreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as a chapter in a forthcoming book,The Conquest of Poverty, to be published byArlington House.1883, and was soon even baptizedby German journalists as derWohlfahrtsstaat.The example of Germany wasfollowed by Austria in 1888 andby Hungary in 1891.It was not till 1912 that compulsoryhealth insurance was introducedin Great Britain, underLloyd George's National InsuranceAct of 1911. In 1925 came contributoryold-age, widows' and orphans'pensions. Unemployment insurancewas put on a fresh basisin the Unemployment Act of 1934,which set up at the same time anational system of unemploymentassistance. In 1945 the Family AllowanceAct was passed. It providedfor payment to every family,rich or poor, of an allowance foreach child, other than the eldest.In 1946 came the National HealthService Act, offering free medicalservices and medicines to everyone.226

1972 THE BALLOONING WELFARE STATE 227Then, in 1948, as a result of thereport of Sir William Beveridge,the whole system of compulsorycontributions for social insurancewas immensely extended, withwider unemployment benefits, sicknessbenefits, maternity benefits,widows' benefits, guardians' allowances,retirement pensions, anddeath grants.The continuous expansion of"social security" and welfare servicesin Great Britain is typical ofwhat has happened in most othercountries in the Western worldover the last half century. Thebroad pattern has been remarkablysimilar: a multitude of "insurance"programs, supported in partby compulsory contributions andin part by general tax funds,ostensibly protecting everyoneagainst the hazards of poverty,unemployment, accident, sickness,old age, malnutrition, "substandard"housing, or almost any otherimaginable lack; programs expandingyear by year in the numberof contingencies covered, inthe number of beneficiaries undereach program, in the size of individualbenefits paid, and ofcourse in the total financial burdenimposed.So, year by year, the tendencyhas been for every working personto pay a higher percentage of hisearned income either for his owncompulsory "insurance" or for thesupport of others. Year by year,also, the total burden of taxestends to go up, both absolutelyand proportionately. But directand acknowledged taxes havetended to go up less than totalexpenditures. This has led tochronic deficits that are met byprinting more irredeemable papermoney, and so to the almost universalchronic inflation that marksthe present age.Growth 01 Welfare Programsin the u.s. since J935Let us look at the ballooningwelfare state in detail as it hasdeveloped in our own country.We may begin with PresidentFranklin D. Roosevelt's 1935 messageto Congress in, which he declared:"The Federal Governmentmust and shall quit this businessof relief.... Continued dependenceupon relief induces a spiritual andmoral disintegration, fundamentallydestructive to the nationalfiber."The contention was then madethat, if unemployment and oldage"insurance" were put into effect,poverty and distress wouldbe relieved by contributory programsthat did not destroy the incentivesand self-respect of the recipients.Thus relief could graduallybe tapered off to negligiblelevels.

228 THE FREEMAN AprilThe Social Security Act becamelaw on August 4, 1935.Let us see first of all what happenedto the old-age provisions ofthat act. There have been constantadditions and expansions of benefits.The act was overhauled asearly as 1939. Coverage was broadenedsubstantially in 1950. In1952, 1954, 1956, 1958 and 1960(note the correspondence withyears of Congressional elections)there were further liberalizationsof coverage or benefits. The 1965amendments added Medicare forsome 20 million beneficiaries. The1967 amendments, among otherliberalizations, increased paymentsto the 24 million beneficiaries byan average of 13 per cent andraised minimum benefits 25 percent. In 1969, retirement and survivorsbenefits were raised againby about 15 per cent, effectiveJanuary 1, 1970.(It is sometimes argued thatthese benefit increases from 1950to 1970 were necessary to keeppace with increases in living costs.Actually, the increases in individualmonthly benefits totaled 83per cent, compared with a 51.3 percent increase in consumer pricesover the same period.)from $60 to $936From 1937 to 1950, Social Securitywas financed by a combinedtax rate of only 2 per cent onboth employer and employee (1per cent each) on wages up to$3,000 a year. Since then boththe rates and the maximum wagebasehave been increased everyfew years. In 1972 the combinedtax rate is 10.4 per cent (5.2 percent on each the employer and theemployee) on a maximum wagebasethat has been raised to $9,000.The result is that whereas themaximum annual payment up to1950 was only $60, it has risen to$936.In 1947, payroll tax collectionsfor old age and survivors insuranceamounted to $1.6 billion; by1970, these taxes had increased to$39.7 billion.At the beginning, the Social Securityprogram was sold to theAmerican public as a form of oldage"insurance." The taxes wererepresented as the "premiums"paid for this insurance. Everybodywho was getting benefits wasassured that he could accept thesewith no loss of "dignity',', becausehe was "only getting what he hadpaid for."This was never true, even at thebeginning, and has become lesstrue year by year. The low-wagereceivers have always been paidmuch more in proportion to their"premiurns" than the higher-wagereceivers. The disparity has beenincreased with succeeding revisionsof the act. The typical bene-

1972 THE BALLOONING WELFARE STATE 229ficiary even today is receivingbenefits worth about five times thevalue of. the payroll taxes. he andhis employer paid in. 2A Sad Mixture ofInsurance and Hand~utsThe OASDI program has developedinto a mixed system of insuranceand welfare handouts, withthe welfare element getting constantlylarger. It is today a badsystem judged either as insuranceor as welfare. On the one hand,benefits in excess of the amountsthey paid for are being .given, insome cases, to persons who are notin need of welfare. On the otherhand, persons who are in fact receivingwelfare handouts are beingtaught to believe that they aregetting- only "earned" insurance.Obviously, welfare programs canbe expanded even faster thanotherwise .if they are masked as"contributory insurance" programs.Our concern here, however, isnot with the defects of the OASDIprogram but primarily with itsrate of growth. In 1947, social securitybenefit payments coveredonly old-age and survivors insuranceand amounted to less thanhalf a billion dollars. In 1956, disabilityinsurance was added, andin 1965, health insurance. In 1970,these payments reached about $39billion.Unemployment InsuranceNow, let us look at unemploymentinsurance. This program wasalso set up under the Social SecurityAct of 1935. But whereasold-age insurance was on a strictlynational basis, unemployment insurancewas instituted on a stateby-statebasis within the broadscope of certain Federal criteria.While provisions have differedin each of the fifty states, unemploymentinsurance has shown thesame chronic growth tendency asold-age benefits. In 1937, the statestypically required periods of twoor three weeks before any benefitswere paid. The theory behind thiswas that a man just out of employmentwould have at least someminimum savings; that the statewould be given time to determinehis benefit rights; and that thebenefit funds should be conservedfor more serious.contingencies byreducing or eliminating paymentsfor short periods of unemploy..mente Now the waiting period hasbeen reduced to -only one week,and in some states does not existat all.In contrast with the $15 to $18weekly benefit ceilings in variousstates in 1940, the maximums nowrange between $40 and $86 a week,exclusive of dependents' allowancesin some states.Reflecting both legislated in;;.creases and rising wage levels, na-

230 THE FREEMAN Apriltionwide average weekly benefitpayments increased from $10.56 in1940 to $57.72 in 1971. Even afterallowing for higher consumerprices, the real increase in purchasingpower of these averagebenefits was 63 per cent, and theycontinue to increase much fasterthan either wages or prices. Forexample, from its average in 1969,the weekly payment in June, 1971,had increased 25 per cent as comparedto an8 per cent increase inwages and an 11 per cent increasein prices.Fulltime BenefitsAs of 1971, state legislationhad increased the maximum durationof unemployment benefitsfrom the predominantly prevailing16-week level in 1940 to 26 weeksin 41 states - and of longer durationranging to 39 weeks in theother states. In December, 1971,Congress voted to provide. 13weeks additional benefits in stateswith sustained unemploymentrates of more than 6~ per cent.This made it possible for workersin such eligible areas to drawsuch benefits up to a total of 52consecutive weeks.Total annual benefit paymentsincreased from about one-half billiondollars in 1940 to $3.8 billionin 1970 - more than a seven-foldincrease and the highest payout inhistory. In 1970 alone, total benefitsincreased 80 per cent ($1.7billion) over the 1969 level. Thecombination of legislated increasesin maximum weekly benefits andin maximum duration of the benefitshas increased nearly tenfoldthe total benefits potentially payableto the individual unemployedworker in a year's period (dollarsper week multiplied by the numberof weeks). 3This is bound to increase stillfurther. On'July 8, 1969, PresidentNixon called upon the statesto provide for higher weekly unemploymentcompensation benefits.He suggested that weeklymaximums be set at two-thirds ofthe average weekly wage in a stateso that benefits of 50 per cent ofwages would be paid to at least80 per cent of insured workers.Only one state - Hawaii - respondedpromptly with the fullraise suggested, but other stateshave scheduled future increases.There can be no doubt that unemploymentcompensation reducesthe incentive to hold on to an oldjob or to find a new one. It helpsuniQns to maintain artificiallyhigh wage rates and it prolongsand increases unemployment. Oneeconomist has likened it to "abounty for keeping out of the laharmarket."4Moreover, it is a complete misnomerto call it unemployment"insurance." In the United States

1972 THE BALLOONING WELFARE STATE 231the workers do not even make adirect contribution to it (thoughin the long run it must tend to reducethe real pay of the steadyworker). Like so-called governmentold-age "insurance", it is infact a confused mixture of insuranceand handout. Those who arecontinually urging an increase inthe percentage of the previouswage-rate paid, or the extensionof the benefit-paying period (toavoid undisguised relief), forgetthat it violates ordinary welfarestandards of equity by payinglarger sums to the previouslybetter-paid workers than to thepreviously lower-paid workers.But apart.from these shortcomings,what we are primarily concernedwith here is the tendencyof unemployment compensation,once adopted, to keep growing bothas a percentage of weekly wagesand in the length of idle time forwhich it is paid.Just what success, if any, theincreasingly costly Social Securityand unemployment compensationprograms have had in enabling theFederal government to "quit thisbusiness of relief" we shall see ina subsequent article. ~• FOOTNOTES •1 Encyclopedia Britannica, 1965, article"Bismarck", Vol. 3, p. 719.2 Colin D. Campbell and Rosemary G.Campbell, "Cost-Benefit Ratios under theFederal Old-age Insurance Program,"U. S. Joint ECQnomic Committee, Old-ageIncome Assurance, Part III (Washington,D. C., U. S. Government PrintingOffice, December 1967), pp. 72-84.3 Much of the foregoing material onSocial Security and unemployment compensationis derived from studies by theAmerican Enterprise Institute, Washington,D. C.4 W. H. Hutt, The Theory of Idle Resources(London: Jonathan Cape, 1939),p.129.Leisure Is Not FreeIDEAS ON$LIBERTYLEISURE IS NOT FREE. To the extent that we choose it rather thanproductive work, we exchange it for real income. Longer vacations,more holidays, and other time-off practices - like a shorterwork week - must all be charged against real income. The averageworker has gained about 50 hours in additional vacationtime since 1960. The ten-hour, four-day week may not reducework time; it may even add to the productive use of resources andequipment. But by emphasizing leisure instead of work it is likelyto point in an unhelpful direction.HERBERT R. NORTHRUP, professor of industryand. director, Industrial Research Unit,Wharton School of Finance and Commerce.

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC9Prelude toIndependenceTHE ISSUE was joined, and unremittinglypressed, after Parliamentpassed the Coercive Acts in1774. George III declared in Septemberof that year that "the dieis now cast, the colonies musteither submit or triumph...."1Young Alexander Hamilton putthe matter this way: "What thenis the subject of our controversywith the mother country? - It isthis, whether we shall preservethat security to our lives and properties,which the law of nature,the genius of the British constitution,and our charters afford us;or whether we shall resign theminto the hands of the British Houseof Commons...."2 Heretofore,when Britain had been faced bycolonial resistance, Parliament hadbacked down. This time, .Parliamentheld its ground, and the executiveprepared to use force.When that happened, a new dimensionwas added to the issue, thedimension of independence - independenceor submission.Colonial leaders· did not rush toformulate the issue in this way. Onthe contrary, they clung to the connectionwith Britain, continued toprofess their allegiance to theking, and indicated a willingnessto negotiate if Britain would· at-Dr. Carson shortly will join the faculty ofHillsdale College in Michigan as Chairman ofthe Department of History. He is a notedlecturer and author, his latest book entitledThrottling the Railroads.232

1972 PRELUDE TO INDEPENDENCE 233tend to their grievances. Indeed,George III had been ruling for sixteenyears before independencewas declared, specific grievanceshad .gone unresolved.for thirteenyears, and British troops were encampedagainst American forcesfor more than a year. Colonistsdid sometimes rush· to resist particularmeasures, but they movedvery slowly in conceiving of changingtheir relationship to Britain.Nor can it be maintained thatthe colonists moved slowly ingrasping the nettle of independencein order simply to manipulatethe British into taking aggressivemeasures which would determinethe outcome of the question.The provocation came increasinglywithout the aid of colonial inducement.Probably, most Americansdid not want independencethroughout the years of resistance.What is even more certain is thatmany Americans did not want thequarrel to eventuate in· independenceand that others who did beginto think of separation wereloathe to alienate this goodly numberso .long as it could be avoided.So far.as we can tell, virtually allAmericans opposed various of theBritish measures, with the obviousexception of Crown officiaJs. Thisnear unanimity was sundered bythe question of independence. Theslowness of the movement for independenceto surface can be attributedto the desire to avoid internaldivisions as well as, perhaps,the calculation of leaders notto outrun their followers.The colonists, in any event, didnot move· SWiftly toward decidingfor independence; and on the positiveside, they employed deliberativebodies when and where theycould to make the decisions. Ofcourse, these deliberative bodieswere frequently not legal, but theywere the nearest thing to it thatthe colonists had available. From1774 into 1776 the colonists werefrequently denied their legal legislativeassemblies; and when thesecould not meet, other bodies resemblingthem were assembled.The First Continental CongressThe main focus of the CoerciveActs was on Boston and Massachusetts.The Boston·Port Act whichclosed the port of Boston until thetea was paid for might conceivablyhave separated Boston from therest of Massachusetts, at least fora time. But when other acts followedto alter the government ofall of Massachusetts, this potentialeffect was nullified by Parliamentitself. There was a greater probabilitythat Massachusetts wouldbe isolated from the other coloniesand that the British might succeedin a policy of divide and conquer.But the colonial leaders were intenton preventing any such policy

234 THE FREEMAN Aprilfrom succeeding. The Committeesof Correspondence were already inexistence. Moreover, other colonieshad grievances of their own aswell as those shared with Massachusetts.Confronted with the CoerciveActs, some of Boston's leaderswanted to take immediate economicmeasures against Britainby way of retaliation. However,there was widespread sentimentthroughout the colonies for a congressto be held to decide uponwhat action to take. Providencec~lled for such a congress on May17, Philadelphia on May 21, andNew York City on May 23. TheMassachusetts House of Representativeswent along with the ideaby issuing a call for a congress onJune 17. Within colonies, delegateswere elected by provincial congressesor county conventions.The First Continental Congressmet in September, 1774, in Philadelphia.Twelve colonies sent 56delegates. Only Georgia did notsend delegates, which was not surprising,since that colony was notvery populous, its government wasnot self-supporting, and it was dependentmore than others on GreatBritain.But before the Congress assembled,important new formulationsof ideas had entered thestream. In July, Thomas Jefferson'sA Summary View of theRights of British America appeared,followed in August byJames Wilson's Considera,tions on... the Legislalive Authority of. . . Pa,rliament. While neither ofthese works necessarily representedcolonial opinion, they do indicatethe direction in which it wasthrusting. The colonists had heldfirmly to the idea from 1765 onthat Parliament could not lay taxesfor the raising of a revenue, butthey had shifted to a harder andharder position as to what was theauthority of Parliament over thecolonies. The main objection to theStamp Act was that it was a directtax. The major objection tothe Townshend Duties was thatthey aimed to raise a revenue. TheTea Act was opposed at the outsetboth because it was monopolisticand would raise a revenue.Jefferson of Virginia and Wilsonof Pennsylvania went beyond thisposition to suggest that the legislativeassemblies in America wereequals of Parliament in lawmakingand that Parliament reallyshould have no authority overAmerica.Freedom to TradeJefferson's position comes out inpart in his criticism of an earlieract of Parliament suspending thelegislature of New York. He said,"One free and independent legislaturehereby takes upon itself to

1972 PRELUDE TO INDEPENDENCE 235suspend the powers of another,free and independent as itself...."3In a closing impassioned appeal tothe king,. Jefferson pleaded: "N0longer persevere in sacrificing therights of one part of the empire tothe inordinate desires of another,but deal out to all equal and impartialright. Let no act· be passedby anyone legislature which mayinfringe on the rights and libertiesof another."4 Through the debatesover the years there hadbeen general agreement by colonialspokesmen that it was necessaryfor Parliament to regulate commercewith other nations. That is,Am"ericans were still very muchunder the influence of mercantilistassumptions. Jefferson, however,appeared to see no need for suchregulation; rather than a benefitto the colonies the regulations interferedwith the natural courseof trade and set the stage for tyranny.For example, he says: "Thatthe exercise of a free trade withall parts of the world, possessedby the American colonists as ofnatural right . . ., was next theobject of unjust encroachment...."Their "rights of free commercefell once more the victim to arbitrarypower.... History has informedus that bodies of men aswell as individuals are susceptibleto the spirit of tyranny. A view ofthese acts of Parliament for regulation,as it has been affectedlycalled, of the American trade . . .would undeniably evince the truthof this observation."5 In short, thecolonies did not need parliamentaryregulation of their trade butshould rather see it as a usurpationof their rights and an instrumentof tyranny.The Dominion TheoryJames Wilson's argument ismainly that the only political connectionof the colonies was withthe king. To support this view, hereviews American history:Those who launched into the unknowndeep, in quest of new countriesand habitations, still consideredthemselves as subjects of the Englishmonarchs, and behaved suitably tothat character; but it nowhere appears,that they still consideredthemselves as represented in an Englishparliament extended over them.They took possession of the countryin the king's name: they treated, ormade war with the Indians by hisauthority: they held the lands underhis grants, and paid him the rentsreserved upon them:· they establishedgovernments under the sanction ofhis prerogative, or by virtue of hischarters....6The principle toward which Wilsonwas moving is one which eventuallycame to be known as the dominiontheory of empire, a theoryin ,vhich each province had itsown government but continued to

236 THE FREEMAN Aprilhave allegiance to the Englishmonarch. John Adams argued thiscase more explicitly in the NovanglusLetters, which appeared afterthe First Continental Congresshad dissolved itself. 7Results of the MeetingThe First Continental Congresshad a relatively brief session fromSeptember 26 to October 22 of1774. It dealt with four majorpoints during that time. The firstof these was the Suffolk Resolveswhich were presented by Massachusettsdelegates and when confirmedwere formal advice fromthe Congress to that colony. TheResolves declared the Coercive Actsunconstitutional, advised Massachusettsto form its own governmentuntil such time as the actswere repealed, recommended thatthe people of that colony arm themselvesand form a militia, andcalled upon them to adopt economicsanctions against Britain. Thiswas, indeed, a strong stand againstBritish action, and it is not toomuch to label it defiance.The Congress next dealt withthe Galloway Plan of Union. Itwas the work of Joseph Gallowayof Pennsylvania, and is usuallyconsidered to have been conservativein character. Be that as itmay, the Plan was intended notonly to provide a general governmentfor the colonies· but to do sowithin the general frame of royaland parliamentary authority inthe British empire. The Plan wasdefeated, but there is little reasonto suppose that had it been adoptedanything would have come of it.The Declaration and Resolveswas the major policy positionadopted by the Congress. It setforth the rights of the colonies,enumerated the abuses of recentyears, delineated, once again, thelimits of parliamentary authority,and called for economic sanctions.A considerable debate occurredwithin committee as to whetherthey should found their argumentfor rights on natural law or not. 8The issue almost certainly wasnot over whether there is naturallaw and naturai right but over theimpact of referring to them on thecolonial relationship to GreatBritain. Those determined to preservethe connection with Britainwanted to hold on to the idea oftheir tracing their rights to Britain.Once the claim went to thelaws of nature the basis for makinga definitive. break would belaid. The outcome, however, wasthat the Congress confirmed bothsources for their rights. The preambleto the ringing statement ofrights reads:That the inhabitants of the Englishcolonies in North America, bythe immutable laws of nature, the

1972 PRELUDE TO INDEPENDENCE 237principles of the English Constitution,and the several charters orcompacts, have the following rights[among others] :That they are entitled to life, liberty,and property, and they havenever ceded to any sovereign powerwhatever, a right to dispose of eitherwithout their consent.That our ancestors, who first settledthese colonies, were at the timeof their emigration from the mothercountry, entitled to all the rights,liberties, and immunities of free andnatural-born subjects within therealm of England.That by such emigration they by. no means forfeited, surrendered, orlost any of those rights....9The line of action they were toundertake was provided for by theestablishment of a Continental Association.Themen gathered at theCongress hoped to get Britishpolicy altered by the use of economicsanctions. They adopted aprogram of non-importation, nonconsumption,and non-exportationfrom, of, and to Britain, the nonexportationto be put into effectlater than the others. Enforcementwas to be carried out in this way."In the first place, the people wereasked to pledge themselves not tobuy British merchandise - theNonconsumption Agreement-thusleaving ill-disposed merchants nomarket for their proscribed wares.Secondly, the enforcement of theAssociated.was entrusted to localcommittees...."10 Economic sanctionsare, of course, a two-edgedsword: they hurt the imposers aswell as those on whom they are imposed,though not necessarily inequal degree. In any case, theywere probably the most nearlypeaceful means open to the coloniststo attempt to inflict damageon the British. In the coloniesthere was much sentiment thatwhatever they did without wouldbe good for them, in any case.Whatever the merits of economicsanctions in general, they did notlead to a peacefulresolution of thedispute between· the colonies andEngland. The great majority ofthose in power in England favoredthe use of force now to bring thecolonists to terms. Colonial peti...:tions, declarations, and resolutionswere rejected with alacrity byParliament. Colonial agents inLondon were refused in their requestto appear before the Houseof Commons on behalf of a petitionfrom America by a vote of218-68. Petitions from London andBristol merchants were denied aneffective hearing by a vote of 250­89. William Pitt, now Earl ofChatham, offered a resolution forthe withdrawal of troops fromBoston; it was defeated by theLords temporal and spiritual, 68­18. Charles James Fox's efforts toget the ministry censured by the

238 THE FREEMAN AprilHouse for its American policieswas defeated 304-105. 11 On February2, 1775, Lord North, the king'schief minister, declared that someof the colonies were- in a state ofrebellion and that more troopsshould be sent to America. 12Since the two sides were nowset on a collision course, it wasonly a matter of time until thecontest would erupt into open hostilities.On February 9, Parliamentofficially declared Massachusetts tobe in a state of rebellion. On February26, British troops attemptedbut failed to seize colonial militarysupplies at Salem. Late in themonth Lord North succeeded ingetting what was billed as a conciliatoryplan through Parliament.It permitted the colonies the optionof taxing themselves insteadof having the tax imposed byParliament for meeting imperialexpenses. The concession hardlyinterested the colonies. On March22 Edmund Burke, longtime friendof America in Parliament, madehis famous speech calling for reconciliationwith America. It didnot sway Parliament, but the nextday Patrick Henry addressed hisfellow Virginians in a speech of adifferent temper which may havehelped to sway a continent. Had itbeen heard by all colonials in theversion with which later Americansare familiar, it would surelyhave aroused the passions of manyof them for action. Henry grewweary of the vain efforts of thoseseeking peace by some strategemor other. To those of this temper,he cried:Gentlemen may cry-peace, peace ­but there is no peace. The war is actuallybegun! The next gale thatsweeps from the North will bring toour ears the clash of resoundingarms! Our brethren are already inthe field! Why stand we here idle?What is it that gentlemen wish?What would they have? Is life sodear or peace so sweet as to be purchasedat the price of slavery? Forbidit, Almighty God - I know notwhat course others may take; but asfor me, give me liberty or give medeath!Lexington and ConcordNo more were Lord North andthe king determined upon peace.On March 30, Parliament passedthe New England Restraining Act,which barred the North Atlanticfisheries to New Englanders andprohibited any trade between thesecolonies and anyone else exceptin Britain and the British WestIndies. The next month these provisionswere extended to severalof the colonies south of New England.On April 14 General Gagegot his orders to use force to breakup the rebellion in New England.He acted with dispatch by. sendingtroops to Concord on April 19 underorders to seize a munitions

1972 PRELUDE TO INDEPENDENCE 239depot there. These troops were metby colonials at Lexington, someonefired ("the shot heard round theworld," Thomas Paine said), anda small battle took place. It wasenlarged during the course of theday, as riflemen gathered from allsides and threatened to destroythe British forces at one point.Reinforcements arrived, however,and the British were able to returnto Boston. Seventy-three Britishtroops were killed during theday, and a lesser number of colonials.Fighting on a war-likescale had taken place; the resolutionof the British and the Americanswould now be tried by arms.Less than a month after Lexingtonand Concord a Second ContinentalCongress assembled atPhiladelphia (May 10). The FirstCongress had voted its own dissolution,but they provided thata new congress should meet if thedisputes had not been settled. Soit was that a new body was assembledthat would attempt overthe next half dozen years to guidethe affairs of what was not yet theUnited States. Among the membersof the Second ContinentalCongress were some of the mosttalented men ever to grace theAmerican scene, men whose nameswill live as long as the foundingof the Republic is remembered.From Massachusetts came Johnand Samuel Adams along withJohn Hancock who was elected topreside over the· congress, fromPennsylvania came BenjaminFranklin, Robert Morris, andJ ames Wilson, among others, fromConnecticut came Roger Shermanand Oliver Wolcott, from Virginiacame George Washington, RichardHenry Lee, and Thomas Jefferson,and so on through the roll call ofthe signers of Declaration of Independence,as well as many who hadleft the Congress by that time.Some of the most talented followedother pursuits for the statesduring the war so that duringsome of the most trying days itwas not so lustrous a body. But atits inception it contained most ofthe men who would play the leadingroles in guiding America to independence.A Colonial ArmyCongress was confronted withthe task of what to do about thefighting from the moment it met.New Englanders had taken mattersin hand partially already, andon the same day that Congress metin Philadelphia Ethan Allen andBenedict Arnold led a force of colonialsin taking Fort Ticonderogaon Lake Champlain. And on June17 the Battle of Bunker Hill tookplace as a result of a British decisionto drive the Americans froma redoubt on Breed's Hill. Thisbattle pitted a British army

240 THE FREEMAN Aprilagainst a colonial army, andthough the British drove theAmericans from their positionsthey did so at the expense of heavycasualties.Before the Battle of BunkerHill, however, Congress had actedto take charge of the fighting.George Washington was appointedcommander-in-chief of the armedforces of the colonies; he leftstraightway to take charge of theforces in Massachusetts, which heaccomplished on July 3. GeorgeWashington had gained considerablemilitary experience in theFrench and Indian War. He hadsided with the colonies from theoutset, and while he was neverstrident in his resistance he wasalready beginning to show thatfirmness which was to become hishallmark. A very important considerationat the moment of hisselection, of course, was that hewas from Virginia, the most populousof the colonies; and the NewEnglanders could see that it wasessential to bring other colonies totheir support. The choice ofWashington was unanimous, andthrough all the difficult years andwrangling between Washingtonand Congress, that body neverreally faltered in its support ofhim. Washington chose not to takea salary for .. his contribution butonly to have his expenses paid.Though feeling was runninghigh in America against Britain,there were those in Congress whobelieved that they would be remissin their duty if they did not makeyet another effort to achieve reconciliation.John Dickinson tookthe leadership in drawing up andgetting through Congress on July5, 1775 what is known as the OliveBranch Petition to the king. Themembers assembled declared themselves"Attached to your Majesty'sperson, family, and government,with all devotion that principleand affection can inspire...."This being the case, "We, therefore,beseech your Majesty, thatyour royal authority and influencemay be graciously interprosed toprocure us relief from our afflictingfears and jealousies...."13Recognizing the realities, however,Congress on· the next day adopteddeclarations drawn by Jeffersonand Dickinson which explained theoccasion for their taking up·arms.Congress adjourned on August2 to await developments. Theywere not long in coming, forGeorge III proclaimed the coloniesto be in open rebellion on August23. Benedict Arnold led an expeditionto Canada in the fall, withthe permission of General Washington.In October, Congress authorizeda navy, followed by theopeningup of correspondence withother nations in November, withthe idea of gaining friends. In

1972 PRELUDE TO INDEPENDENCE 241November, the colonies receivedword that. the king had refused toreceive the Olive Branch Petition.The House of Commons then defeateda motion to make the Petitionthe basis of reconciliation bya vote of 83 to 33. Late in 1775 aroyal proclamation was issued closingthe colonies to all commerceafter March 1, 1776.A Reluctance to SeparateThat all these things had occurredand that the colonists stillcould not bring themselves to declarefor independence indicateshow reluctantly they took thatstep. By the winter of 1775-1776,some goodly number had alreadydecided for independence; but'many had not. •This was a mostdifficult decision to make, muchharder than merely deciding forresistance. Those who took thisstep must forswear ancient allegiances,must commit the mostheinous of crimes (or so they hadbeen taught) by becoming traitors,must· hazard their lives and fortunesupon the uncertain outcomeof a war, must almost certainlydivide the country, and might welllet loose domestic disorder on alarge scale. Prudent men mustever ponder carefully their coursebefore taking such an irrevocablestep. Arguments were made inpublic for and against independenceeven as men wrestled inwardlywith the difficult question.If men of those times had usedsuch terms as "conservative" and"liberal," which they did not, theymight well have debated the questionof which was the conservativeposition. From one point ofview, it would have been conservativeto have continued old allegiancesand connections. But fromanother angle, Britain was the innovator,and the colonists had insistedall along·that they werecontending for the ancient constitutionand the old order and harmonythat had prevailed. Indeed,the father of conservatism, EdmundBurke, saw the justice oftheir contention though, of course,he could ·not advise the coloniststo become independent.Probably, much of· the waitingwas in the hope that Englandwould take some action that wouldsway the most reluctant towardindependence. While this neverhappened, as time went on, andBritain committed more and moreacts, more did decide for independence.Thomas PaineBut it was the little book, CommonSense, published by ThomasPaine in January of 1776 whichdid so much to galvanize Americanopinion in favor of independence.Within three months, 120,­000 copies of it were in circula-

242 THE FREEMAN Apriltion. George Washington said thatit "worked a powerful change inthe minds of many men," and thetestimony of other contemporariesas well as historians confirms thisjudgment.That this little pamphlet shouldhave had such currency and impactmust surely be attributed to thefact that it encapsulated an ideawhose time had come rather thanto the character of its author. Fewwould have predicted before 1776that Thomas Paine would have theniche in history which he gained.He was born in Norfolk, England,the son of a staymaker. He hadnot done well as a governmentclerk, as a husband, or as managerof his own financial affairs. BenjaminFranklin encouraged him tocome to America in 1774, whichhe did, to be made editor of thePennsylvania Magazine. Somehowhe grasped the tendency of thecurrents in the new land and wasable to render them into languagewhich moved his lately acquiredfeIiow countrymen, the phrases ofwhich still ring with power aftertwo centuries.Paine took as his task in CommonSense the convincing of Americansthat the time had come forindependence. He sought to convincethem that the time wasright, that they could succeed, andthat their fears of the consequencesof independence should beseen in contrast with the certaintiesof ruin if they did not followthe indicated course.The body of the work begins ina peculiar way; it is theoreticaland apparently remote from hisobject. He iterates the distinctionbetween government and society,a distinction which, he says, peoplefrequently do not take care inmaking. Society, he points out, isnatural in origin; it arises out ofthe need of man for his fellows.Government, by contrast, is a construct,albeit a necessary one. Thepoint was quite germane, however.Paine was commending to a peoplethat they cast off the governmentover them. If government and societycan be distinguished onefrom the other, they can be separated.To rend society might beruinous, but to cast off a governmentwhich was not performingits allotted function would onlyprovide the opportunity for somethingmuch better.Attack on MonarchyMuch of Paine's rhetoric wasaimed at monarchy in general andin particular. The colonists, manyof them, had shifted in their thinkingto the point where they werewilling to acknowledge their allegianceonly to the king. This wasthe remaining cord to be severed.Of the institution of monarchy,Paine said:

1972 PRELUDE TO INDEPENDENCE 243Government by kings was first introducedinto the world by the heathens,from whom the children of Israelcopied the custom. It was themost prosperous invention the devilever set on foot for the promotion ofidolatry. The heathens paid divinehonors to their deceased kings, andthe Christian world has improved onthe plan by doing the same to their livingones. How impious is the title ofsacred majesty applied to a worm,who in the midst of his splendor iscrumbling into dust!14Of English monarchy, he hadeven more scathing things to say.Where did the line originate?A French bastard landing with anarmed banditti and establishing himselfking of England against theconsent of the natives is in plainterms a very paltry, rascally original.It certainly has no divinity init. However, it is needless to spendmuch time in exposing the folly ofhereditary right; if there are any soweak as to believe it, let them promiscuouslyworship the ass and lion,and welcome. I shall neither copytheir humility nor disturb their devotion.l5George III was disposed of asthe "royal brute of Britain," anda long line of monarchs disparagedas hardly worthy of mention.But the whole subject of monarchssoon palls on him: "Of more worthis one honest man to society, andin the sight of God, than all thecrowned ruffians that ever lived."16Mother England?Paine deals with another difficultpoint for Americans. Englandis the mother country, or so it hasbeen claimed. He denies the allegation.Europe is the origin ofAmerica, he says, in what may beone.of the weakest of his arguments.But, in any case, Britaindid not mother America; the inhabitantsof the New World weredriven from her shores and, incontrast even to the behavior ofbrutes, she was making war onthem. Moreover, there is no reasonin an island attempting to governa continent.Above all, Paine held up for examinationthe past record underBritain and contrasted it with thevision of what America shouldand could be. This should movemen to an early separation.o ye that Jove mankind! Ye thatdare oppose not only the tyranny butthe tyrant, stand forth! Every spotof the Old WorId is overrun with oppression.Freedom has been huntedround the globe. Asia and Africahave long expelled her. Europe regardsher like a stranger, and Englandhas given her warning to depart.O! receive the fugitive, andprepare in time an asylum for mankind.l7It took little more to tip the

244 THE FREEMAN Aprilscales for independence. In May of1776 Congress learned that theking had succeeded in hiring German(generally referred to asHessian) troops to send againstthem. On June 7, Richard HenryLee introduced a resolution to theeffect that the colonies were nowindependent of Britain. On June11, Congress appointed a committeeto draw up a declaration.The painful decision was all butmade. ~• FOOTNOTES •1 Quoted in Merrill Jensen, The Foundingof the Nation (New York: OxfordUniversity Press, 1968), p. 572.2 Leslie F. S. Upton, ed., Revolutionaryversus Loyalist (Waltham, Mass.: Blaisdell,1968), p. 21.3 Edward Dumbauld, ed., The PoliticalWritings of Thomas Jefferson (NewYork: Liberal Arts Press, 1955), p. 22.4 Ibid., p. 32.5 Ibid., pp. 19-20.6 Jack P. Greene, ed., Colonies to N a­tion (New York : McGraw-Hill, 1967),p.225.7 See Anne H. Burleigh, John Adams(New Rochelle: Arlington House, 1969),pp.122-29.8 See J ens~n, Ope cit., p. 493.9 Richard B. Morris, The AmericanRevolution (Princeton: D. Van Nostrand,1955), p. 114.10 John C. Miller, Origins of the AmericanRevolution (Boston: Little-Brown,1943), p. 385.11 See Jensen, Ope cit., pp. 575-78.12 Ibid.13 John Braeman, The Road to Independence(New York: Capricorn Books,1963), p. 275.14 Nelson F. Adkins, ed., Thomas Paine(New York: Liberal Arts Press, 1953),p.10.15 Ibid., p. 15.16 Ibi(l., p. 18.17 Ibid., p. 34.Next: The Declaration of Independence.IDEAS ON$LIBERTYThe LawIT IS IMPOSSIBLE to introduce into society a greater change anda greater evil than this: the conversion of the law into an instrumentof pIunder.No society can exist unless the laws are respected to a certaindegree. The safest way to make )aws respected is to make themrespectable. When law and morality contradict each other, thecitizen has the cruel alternative of either losing his moral senseor losing his respect for the law.In order to make plunder appear just and sacred to manyconsciences, it is only necessary for the law to decree and sanctionit. Slavery, restrictions, and monopoly find defenders not onlyamong those who profit from them but also among those whosuffer from them.FREDERIC BASTIAT (1850)

HANS F. SENNHOLZAFTER full use of the presidentialinfluence to get the legislationadopted, President Woodrow Wilsonsigned the act establishing theFederal Reserve System, on December23, 1913. The ReserveBanks opened their doors for businesson November 16, 1914.Why? What was the origin ofthis new System? How does itwork? What are its good points,if any, and what are its dangers?Trade cycles had been an unhappyexperience in the UnitedStates as well as in WesternEurope. The panic of 1907 and thesubsequent lethargy of businessand finance had increased thewidespread clamor for bankingand currency reform. "We need amore flexible currency," the advocatesof a reorganization of theAmerican banking system as-Dr. Sennholz heads the Department of Economicsat Grove City College and. is a notedwriter and lecturer on monetary and economicprinciples and practices.Theedefaleserveystemserted; "a currency that can hemade to expand or contract in a,ccordancewith the needs of business."This flexibility was toeliminate the recurring periods offinancial stress and disorder.The "reformers" pointedapprovinglyat the currency systemsin Western Europe. There was,for example, the Bank of England.It enjoyed a partial monopolyof note issue, and served thegovernment as banker and asa.gent. All other banks kept accountswith the Bank of Englandbecause its currency notes commandedthe greatest confidenceand widest circulation. At the endof each clearing period, the claimsof all other banks were settledthrough transfers among theirrespective deposits with the Bankof England. It was the "lender oflast resort." In times of financialcrisis it was expected to stayliquid, and to grant accommoda-245

246 THE FREEMAN Apriltion to the most esseJ,1tial creditneeds. It had done so during thecrises of 1873 and of 1890. And in1907 it had allayed alarm in Englandby merely increasing its discountrate.There ,also was the Reichsbankof Germany. It, too, conducted adiscount policy for the protectionof general banking liquidity. Butthe Reichsbank differed from theBank of England in one importantrespect, which had great appealfor the planners in the UnitedStates. This was the "elasticity"in its note circulation. So ourcentral banking institution wasfashioned, in general, after theReichsbank.While the Bank of England alwaysheld a full gold reserve forits notes issued, the Federal ReserveSystem was required tomaintain a, gold reserve of onlyforty per cent against its issuenotes; sixty per cent could be heldin trade and agricultural paperdiscounted by member banks. Andthe Reserve Banks had to keep onhand, in "lawful money," onlythirty-five per cent of all theirdeposits. In an emergency the fullreserve requirements could besuspended for thirty days, withrenewals of suspension for furtherperiods of fifteen days each - butat a penalty of a graduated tax onthe deficiency in reserves. Allthese features were to give thenew bank flexibility and elasticity.Economic control over the newSystem was given to seven governorswho are appointed by thePresident and approved by theU.S. Senate. Of course, ultimatecontrol lies in the hands of thePresident who makes the·appointments.In all important policymatters pertaining to Americanmoney and credit, his decisionprevails.In this age of radical interventionismand socialism, a sharpdistinction must always be madebetween economic control that isdecisive, and legal ownership thatis empty and meaningless. The1913 Congress that created theFederal Reserve System gave controlto the President actingthrough his seven governors, butrested the legal ownership withthe commercial banks that wereto join the System. The memberbanks thus could be made to financethe System through theforced sale to them of "stock"that lacked any right of control.After all, the new System was toafford support .and stability tocommercial banks. Why shouldn'tthey be made to finance such benefits?At least, this was the ra,­tionale of government in 1913.If the legal ownership of theSystem should ever be placed withthe Federal government - whichthe U.S. Congress, the creator of

1972 THE FEDERAL RESERVE SYSTEM 247the System, may legislate at will- the meaning and substance ofthe System will remain unaltered.The Federal Reserve was to a,ccommodateits memher banks withemergency reserves and credits.After 50 years of rapid growth ofgovernment it now holds completepowers over our money and banking.It works with three importantinstruments to suit whatever itspurposes m,aybe at any giventime. In the beginning it hadorat least used - only one. Thiswas the rediscoun.t irnstrumen.t.Rediscount RatePromissory notes, drafts, andbills of exchange, growing out ofactual commercial transactionsand with a maturity not to exceedninety days, accepted by the commercialbanks and then rediscountedwith the Federal Reserve- this constituted, by law, the baseand the boundary for the moneythe Federal Reserve could create.Thus a direct causal connectionwas to be established between themoney supply and the demand formoney. Since the total of commoditybills --rediscounted was supposedto be determined by theintensity of economic life, basingthe money supply on that totalwas supposed to bring about aperfect adjustment of this supplyto the fluctuating "needs of business."This arrangement was tomake money "neutral," smoothlyrendering the vital service of amedium of exchange without itselfaffecting prices.Of course, it did no such thing.The volume of "p.aper" thus offeredthe Federal Reserve forrediscount - and hence the amountof currency and credit it couldfeed into the economy - was determinedprimarily by the rediscountrate which the Federal Reserveitself established and couldchange ,af will. As so often happens,the planners had put thecart before the horse.Also, by 1935, the boundariesin this channel of operations hadbeen materially widened. Thepaper presented to the FederalReserve for advances to its memberbanks no longer had to ariseout of commercial transactions. Itcould even be government securities.If the notes, drafts, or billsof exchange had been drawn "foragricultural purposes," they couldnow have a maturity of ninemonths instead of three. Not onlybanks, but individuals, partnerships,and corporations also hadbeen given access to the discountingfacilities of the System. Finally,in 1942, the Federal governmentwas authorized to borrow upto five billion dollars directly fromthe Federal Reserve. And everyloan the Federal Reserve Systemmade to any borrower, for· any

248 THE FREEMAN Aprilpurpose, under these relaxed conditions,allowed it to issue thatmuch more currency, or credit inthe form of a bookkeeping entrysubject to the check of theborrower.Open-Market OperationsThe second tool of the FederalReserve System is its authorizationto buy or sell certain securities·in the open ma,rket. The originalAct granted it this power tobuy and sell obligations of theUnited States, and of any state,county, district, political subdivision,or municipality in the UnitedStates.By the 1920's it was recognizedthat these open-market transactionsby the Reserve Banks offeredan important method of centralcredit control. So a concentrationof this power into the hands ofone regulatory body was advocated.Legislation enacted in 1933decreed that no Federal ReserveBank should engage in open-marketoperations .except in accordancewith regulations adopted by theFederal Reserve Board. To improveand formalize this centralization,the Open Market Committeewas organized. And in 1935 anamendment to the 1933 Act finallyprovided that "no Federal ReserveBank shall engage or decline toengage in open-market operations... except in accordance with thedirection of, and regulationsadopted by,·the Committee."With this tool in familiar use,the Federal Reserve System nolonger had to wait for memberbanks to ask for .discounts andadvances, at whatever rate itmight have set, in order to affectthe money supply. It could do sodirectly, on its own initiative, bybuying or selling securities tomake the money and capital marketsmore liquid or more tight, asit might wish. In payment forsecurities the Federal Reservemerely draws, on itself, a checkwhich constitutes newly createdmoney. Then, as this check isdeposited by the recipient in hisbank, and redeposited by thatbank, it winds up as an additionto the reserve account of somebank with the Federal Reserve.Open-market operations of theFederal Reserve may deal in longtermsecurities. Thus they mayaffect, directly and immediately,long-term interest rates andyields. They are, therefore, a quitecomprehensive instrumentality ofcontrol. For this reason such operationshave high prestige andpreference in the plans of themoney managers.Reserve RequirementsThe third and perhaps mostpowerful instrument of credit controlin the hands of the Federal

1972 THE FEDERAL RESERVE SYSTEM 249Reserve System is its authority tochange the reserve requirementsof its member banks. Both therediscount process· and the openmarkettransactions either increaseor decrease member bankreserves, and hence.the amount ofcredit which these banks can· makeavailable. But changing the percentageof its deposits which abank must keep as a reserve is aneven more drastic form of influenceover the money and· creditsupply.Suppose a, bank has one milliondollars of demand deposits. If thereserve requirement is ten percent, it must .keep one'hundredthousand dollars in its ReserveBank. It may loan out or investthe rest. But if the reserve requirementshould now be lowered,let us say, to five per cent, ourbank would need only fifty thousanddollars as a reserve againstits demand deposits. It can nowlend or invest the remaining$50,000.If' this were the only effect,only $50,000 of additional moneywould enter the economy. In reality,however, this is merely thebeginning of a chain of moneycreation.. Let's assume that ourbank·decides to hold the reservesthus set free as "excess reserves."It may then extend more credit toits customers. Of course, it wouldhave to proceed very slowly lest itlose its reserves to other banks orcustomers demanding cash. It cannot.proceedany faster than otherbanks that also are expandingtheir credits on the basis of theirnewlywonexGess reserves.This is an oversimplification, 'ofcourse. But the impact on thecapital and money markets ofchanges in reserve requirementsis extremely potent. It is estimatedthat at present a, fluctuationof only one per cent tends to increaseor decrease the total volumeof bank credit by more than sixbillion dollars. This authority tovary reserve requirements wasgiven to the Federal Reserve Systemin 1933, as a special em,er~gency power. Since 1935 it hasbeen a permanent instrument ofcredit control.A Most Important Toolin the Armoryof InterventionAn appraisal of the good pointsand bad points of the Federal ReserveSystem depends on the politicaland economic philosophy ofthe appraiser. If he fa,vors' governmentcontrol over our economyhe will regard the Federal Reservemost favorably, for it holds absolutepower over the people's moneyand credit.If· one is convinced of the beneficialnature of an enterpriseeconomy, he will unconditionally

250 THE FREEMAN Aprilreject the Federal Reserve System.He will condemn it as thecontrolling body of an importantindustry. He will blame it forhaving shattered the Americandollar; for having caused booms,busts, recessions, and depressions;and for having made the fifty-sixyears of its existence a period ofunprecedented economic instability.In the opinion of this writer,this instability has fostered thegrowth of ideologies that are hostileto individual liberty. The FederalReserve, through its policiesof "boom and bust," helped tousher in the New Deal. And itnow acts as midwife to ever moreextensive government controls.Since it began operating in1914, the Federal Reserve Systemhas put some $55 billion in circulation,has extended some $65 billionin credit, and thereby hasdepreciated the .dollar by almostthree-fourths. And it continues toinflate the money supply at anaccelerating rate.First, the economic' planners inWashington clamor for an expansionof the volume of money andcredit, in order to bring aboutorsustain - a boom, prosperity,and full employment. They rejoiceover wage boosts, but dislike theparallel price rises and the hardshipswrought upon those withfixed incomes. They approve ofadditional housing construction,but disapprove of higher pricesfor houses. They like one set ofinflationary effects, but decry theinevitable twin set. And the economicplanners are always mostanxious indeed to do somethingabout these undesired effects. Inorder to "fight" inflation, theywant to curb economic actionswith credit controls, price controls,wage controls, and all· kindsof other government controls overour economic lives. They wantsocialism. In my opinion, an accelerationof the present longrangecredit expansion will leadus rapidly into the controlled economythey desire.Under these conditions, the F'ederalReserve System, is the mosti,mportant tool in the armory ofec'onomic interventionism. In theGovernors' own words, it is thesystem's objective "to help counteractinflationary and deflationarymovements, and to sha.re increating conditions favorable tosustain high employment, stablevalues, growth of the country, anda rising level of consumption."This is plain interventionism,with all of the planner's usualassumption of benevolent omniscience.An institution which wasestablished as a, cooperative undertakingby the banks of thecountry to pool their resources hasdeveloped into the right hand of

1972 THE FEDERAL RESERVE SYSTEM 251the government in promoting its"New Deal" and "Fair Deal" objectives.The beautiful fallacies ofsocialist "central planning" arebeing substituted for the hard,but lasting and productive, truthsof a free market. And the FederalReserve System supplies the magician'scloth under which thesubstitution is made.Its part in the colossal metamorphosisof our country is notlimited to the maintenance ofcheap money, in order to prolongor create a, boom. It also providesthe government itself with themoney the planners think theyshould have, beyond the amountthey dare take directly in taxes.The Federal Reserve Systemfacilitates the government's owninflationary financing "in periodsof emergency." It makes easy theinflationary financing of budgetdeficits and the inflationary refundingof government loans. Itstabilizes the government bondmarket through inflationary methodsand manipulates this marketto the advantage of the government.It does all of this by wreckingthe purchasing power of thedollar; by subtly stealing from thepeople of this country what itthus provides for the government,through a process similar to thecoin-clipping of ancient kingsbut.much more diabolical becauseso much less visible.Emergency Banking LawsNo matter how grave our indictmentfor past and presentevils, we must anticipate, an evenmore ominous role of the Systemin the future. For periods of nationalemergency, an administrationssince that of Eisenhowerhave issued emergency bankingregulations that grant extraordinarypowers to the Federal ReserveSystem. Although these maydiffer in detail, in substance theyare much alike.For instance, let us look atEmergency Banking RegulationNo.1, issued on January 10, 1961.It is probably the most radicalorder that ever emanated from anAmerican government. Yet, fewvoices of protest are heard, forfew would dare oppose governmentpreparations for a nationalemergency.Emergency Banking RegulationNo.1 is just one of a, number ofemergency measures that wouldimpose government control overrentals, prices, salaries-and wages,and introduce rationing. The Regulationorders the instant seizureof most bank deposits "in theevent of an attack on the UnitedStates." The Regulation is basedon The Trading with the EnemyAct of October 6, 1917, and coversall banking institutions, includingevery commercial bank, trust company,private bank, savings bank,

252 THE FREEMAN Aprilmutual savings bank, savings andloan association, building and loanassociation, cooperative bank,homestead association, credit union,and United States postal savingsoffice.Section 2 of Chapter V is mostshocking in its wanton denial ofindividual freedom and privateproperty. Lest we·be suspected ofmisinterpretation, we quote:"(a) No depositor or share or savingsaccount owner may transfer inany manner or by any device whatsoeverany balance to his credit on thedate on which this Regulation becomeseffective, except for the paymentof (i) expenses or reconstructioncosts vital to the war effort, (ii)essential living costs, (iii) taxes,(iv) payrolls, or (v) obligations incurredbefore the date on which thisRegulation becomes effective, to theend that the best interest of the wareffort and the public will be served.(b) Banking institutions shall prohibitthe transfer of credit in anycase where there is reason to believethat such transfer is sought for anyunauthorized purpose.(c) After this· Regulation becomeseffective, banking institutions shallretain until released by Federal authoritythe original or a photographiccopy (face and reverse sides) of eachcheck and other evidence of transferof credit in the amount of $1,000 ormore."In short, your money in thebank is blocked unless you proposeto spend it toward the wareffort, Le., buy U.S. Treasury obligationsor finance expendituresdeemed "vital" by the government.You may withdraw your .moneyfor living expenses, but only sumsdeemed "essential." You may paytaxes and wages, and dischargeold obligations. But any other useof your money is prohibited. Letus assume that you were savingfor another car, new furniture, ora house, or for your children'scollege education. As such objectivescan hardly be called "essential,"neither for the war effortnor individual living, your moneycould be blocked.The Emergency Regulationwould permit business to pay taxesand wages, but deny all other expensesof doing business.· Afterall, manufacturers need materials,tools, and equipment in order toproduce goods and services. Merchantsneed ever new supplies ofmerchandise in order. to .stay .inbusiness. Even professional people,such as doctors and dentists,have expenses other than taxesand wages. This is why the Regulationwould halt all economic activitybut that of government. Infact, no enemy attack no matterhow devastating to human lifeand property' could conceivablyhave a more disruptive effect thanthe Emergency Banking Regulation.

1972 THE FEDERAL RESERVE SYSTEM 253Chapter VI, Section 1, .of theRegulation would radically changethe very nature of banking."N0 banking institution may makeany loan, extend any credit, or discountor purchase any obligation orevidence of debt, unless it is establishedand certified in writing by theborrower and a banking institutionthat the purpose is to pay (i) expensesor reconstruction costs vital tothe war effort, (ii) essential livingcosts, (iii) taxes, or (iv) payrolls, tothe end that the best interests of thewar effort and the public will beserved."It is ironic that the statedpurpose of the Regulation is "continuanceof operations and functions"of all banking institutions.Indeed, banks would be requiredto "remain open and continuetheir operations and functions."(Chapter IV, Section 1). In real..ity, the stated purpose should read"cessation of all banking operationsand assumption of the exclusivefunction of governmentfinance." After all, what is ba.nking?It is negotiating credit betweenlenders and .borrowers, andmaintaining cash balances for theconvenience of depositors. It isobvious that banking ceases toexist if credit can no longer be- negotiatedand ca.sh no longer bepaid upon demand by the depositors.The Emergency Regulationwould make all financial institutionsagencies of the U.S. Treasury,with the Federal Reserve Systemas a subtreasury that polices thebanking system. ~IDEAS ONLIBERTYTrade in Good FaithTHE ECONOMIC LIFE of the world in 1913 went on in an atmosphereof good faith. Men with liquid capital used the capitalthemselves confidently in business enterprises or loaned theircapital at market rates of interest to others who would use it inproductive operations. There were no billions of dollars of "hotmoney" such as characterized jhe decade of the 1930's, movingnervously. about from one financial· center to another·throughfear of confiscation or through fear of further currency debasement- moving from countries which their owners distrustedmore to countries which they distrusted less, but finding nowherea place which they could really trust.BENJAMIN M. ANDERSON,Economics and the Public Welfare

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAINWillmoore Kendall Contra MundumI KNEW Willmoore Kendall, who isnow presented posthumously in awide-ranging selection called WillmooreKendall Contra, Mundum(Arlington House, $11.95), whenhe functioned as the book editorat Bill Buckley's National Review.I had heard stories that he was a,most "difficult" man, forever gettinginto trouble with his colleagues,whether at Yale or elsewhere,for disputatious reasonsthat, according to Dwight Mac­Donald, often ended in the "shoutingstage." But, like Jeffrey Hart,who contributes an illuminatingbiographical introduction to thisrepresentative collection of Kendalliana,I found him to be unfailinglyconsiderate at all times.I could only conclude that mostof the difficulties that Kendall encounteredcame from the "liberal"bi,as of academia, a bias that refusedto accept the fact (whichKendall insisted upon) that oJPerAmerican orthodoxies that stillprevailed beyond the limits of thecampus had a continuing legitimacy,even though (as in the ca.seof Senator Joe McCarthy) theirproponents sometimes made stupidmistakes in arithmetic. It was thestandard opInIon at the Yale ofWillmoore Kendall's time that"McCarthyism" imperiled academicfreedom, yet ironically, theonly academic causualty of the"McCarthy period" that I knowwas Willmoore Kendall, who waschivvied into relinquishing hisprofessorial tenure because he insistedon the need for strongmeans to keep Communist subversivesout of sensitive positions inWashington. The actual "Mccarthyism"of the campus in theFifties and early Sixties w,as practicedby the liberals themselves,and Willmoore Kendall was theirmost conspicuous victim.But what were Kendall's actualpositions? As one uncovers themin the articles in Willmoor KendaUContra Mundum, they were mostlyderived from an intense preoccupationwith The Federalist, particularlythe contributions of JamesMadison. Kendall had his·reservationsabout John Locke because, ashe saw it, Locke's thinking (whichtrusted to the good sense of theBritish parlia.ment) provided forno substantial defenses against thepossible madness of a majority asrepresented by a single branch of254

1972 WILLMOORE KENDALL CONTRA MUNDUM 255government. It is the triumph ofthe American system that it hasprovided for what Kendall calls"the two majorities." The sameelectorate that selects the Presidentas the leader of "all the people"also determines the composi~tion of Congress, which, throughits committee system and its controlof the purse, often acts as abrake on what a Utopian occupantof the White House might want todo.· This is the Madisonian systemas bequeathed to us by the Found~ers, to whom Kendall made the un~orthodox obeisance of accepting alltheir goals, the necessity of pro~viding for the common defenseand maintaining a more perfectunion as well as the desirability ofprotecting such individual rightsas free speech and freedom of assembly.One thing that made Kendall·"difficult" was his refusal to slidearound the great enigmas of ourtime. How does one reconcile a beliefin justice with a belief in majorityrule? (After all, an absolutemajoritarian must concedethe right of 50.1 per cent of thevoting population to send 49.9­including nonvoters - to the gaschambers.) How does one squarethe use of the Fourteenth Amend~ment to compel many things thatwere left to the jurisdiction.of theStates, or to the individuals themselves,by the Ninth and TenthAmendments? (After all, nobodyhas ever argued that the Ninthand Tenth Amendments have beenrepealed.) Kendall could not settlethe great contradictions, but he in~sisted that they be confronted andargued about. And this made himan uncomfortable fellow among hisfaculty colleagues in the' universitycommon room, most of whomaccepted an unconscious bias forthe Declaration of Independence,which stresses equality, andagainst the Preamble to the Con~stitution, which says nothingabout it. But if Kendall wasn'tliked by his fellow professors, hisfaculty for directing students tothe actual words of our basic documentsmade him a great teacher.In his essay on "The Two Majorities"Kendall speaks of the"bias toward Quixotism inherentin our presidential elections" andthe "corrective" of "Sancho Pan~zism" as applied by the off-yearand staggered elections for Congress.He himself was Don Quixotein his hopes that universitiescould actually provide for real confrontationof issues and SanchoPanza in his willingness to undercutthe modern liberal orthodoxy.His bloodiest fights came over hisinsistence that "equality of oppor~tunity" is the ignis fatuus, thelight of fools, of modern politicaldiscourse. To get "equality of opportunity,"one would first have to

256 THE FREEMAN Aprilabolish the family, which wouldbe wrong. Secondly, one wouldhave to level off incomes and acceptsome form of socialism. Thiswould not only be morally wrongin Kendall's opinion, but itwouldn't work.Kendall trusted the "second m,ajority,"that of Congress, to resistthe attempt to legislate "equalityof opportunity." He didn't live tosee what our judges are doing toconfuse our educational scene, buthe would, if he were still around,almost certainly make the pointthat it must hurt everybody, thepoor included, if superior mindsare to be kept by a leveling processfrom getting a superior education.If it hadn't been for inequality,the poor would never have hadthe benefits resulting from suchmodern commonplaces as vaccina,­tion, pasteurization or, indeed, theelectric light bulb. We all have astake in letting the uncommon manget all the opportunity that hisgenes, his family or the pure luckof an unequal draw can give'him.This doesn't mean that when compulsorilyseized tax money is beingspent it shouldn't be disbursedin accordance with a sense of equaljustice. But it does mean that nongovernmentalagencies, such asthe family, the corporation, thefoundation and the private school,should be left alone to favor individualsand causes as theychoose. Out of the variety of inventions,discoveries and goodworks that come from letting individualspush their unequal facultiesas far as they can, we geta far better quality of life foreveryone than would otherwise bethe case.Kendall was always delightfullyalive to paradoxes. He multiplieddifficulties for himself by his refusalto allow people - such as myself- to ground their assertion ofrights on feelings that we mustassume are fairly common to hu'­man beings everywhere. JohnLocke, I take it, based his claimthat governments are instituted toprotect the individual in his rightto life, liberty and property notonly on what he took to be historicalevidence but also' on his owninterior feelings. Those feelingshappened to be in accord withwhat is asserted as Revelation("Thou Shalt Not Steal" and"Thou Shalt Not Kill"). In hisown thirst for both divine sanctionsand human delaying agencies,Willmoore Kendall couldn'tadmit that Locke was doing thebest he could in a pre-Madisoniansituation. If Locke had had tocorral thirteen separate coloniesunder one Constitutional roof, hemight have done more to eliminatethe dangers inherent in a puremajorita:danism as practiced by asingle arm of government. t>

tt1eFreemanVOL. 22, NO.5. MAY 1972ANew Agricultural Revolution George B. Mueller 259Examining the implications of the recent movement among farmers toward collectivebargaining.Welfarism Gone Wild Henry Hazlitt 265Social welfare expenditures exceed $170 billion in 1971, with no end i'n sight.Th'e Founding of the American Republic:10. The Declaration of IndependenceExamining it in context, for its relevance then and today.Clarence B. Carson 273The Causes of Inflation Hans F. Sennholz 284Welfare and redistribution programs inevitably lead to a government monopoly ofmoney and inflation.To Be Free and Equal Ray L. Colvard 293If we must err concerning our differences, may it be on the side of freedom.Status: End Product of Welfare Morris C. Shumiatcher 297A review of a century of welfarism among the Indians of Canada, with lessons for allof us who may be tempted onto that backward path to a feudal society.Book Reviews:"Power Through Subversion" by Laurence W. Beilenson"Man, Economy and State"by Murray Rothbard316319Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tt1eFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,000-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printed inU.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also Isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Michigan48106. permission granted to reprint any article from this issue,with appropriate credit, except "Welfarism Gone Wild/' and "Status: EndProduct of Welfare."

259EVERY AMERICAN school boy andgirl is familiar with the agriculturalrevolution. It was this revolutionthat enabled Americanworkers to leave the farm andbuild a great nation. The· moderntechniques and tools used on ourpresent-day, family operated, commercialfarms are the envy of theworld. Even Premier Krushchevcame over to take a first-hand lookat our tremendous agriculturalproductivity. Our family farms,bigger and more efficient thanever, are putting food on the typicalAmerican's table for less than17 percent of his wages. Certainly,if there ever was asuccessstory, it is America's family farm.Mr. Mueller, of Clifton Springs, New York,owns and operates a family farm specializingin dairying a.nd cash crops.As farmers, we are presently investingtwice the amount industryaverages in capital tools per man.Because of this heavy capital investment,and the fact that mostfarmers still put in a full. day ofproductive work, our Americanfarm products remain competitivein world markets. In contrast, eachyear that passes, we see more andmore of our industries failing tomeet competition abroad. Theshelves in our stores are increasinglystocked with products "MadeinJapan" and elsewhere.In spite of nearly nine billiondollars of agricultural products exportedlast year, the United Statesexperienced a minus balance oftrade for the first time in 83 years.To make matters worse,dockworker strikes have seriously

260 THE FREEMAN Maycurbed agricultural feedgrain exports,.threatening a permanentloss of markets that took years todevelop. Thus, agriculture, one ofour few industries still able tocompete, has been partially shutoff from world markets. Our family-basedagriculture, the strongestin the world, has a tremendousability to compete if only permittedto do so.liThe Farm Problem"Agriculture is over-crowded, asare most other businesses in theUnited States. We have too manydrug stores, too many hardwarestores, too many grocery stores,too many insurance salesmen, toomany barber shops, and so on•.This is the American way. Businessmenare supposed to be freeto enter any field of productionand trade in which they think theycan make a profit. The result iskeen competition in most businesses.The consumer benefits fromcompetition by getting better serviceand lower prices. Competitionalso has resulted in numerousbusiness failures. The typical businessearns a slim profit, if any.Only the best managed firms(those that serve the consumerbest), reap a substantial profit.Such is the nature of our cherishedsystem of competitive enterprise.The·agricultural business is especiallycrowded because it wasthe original and only way of lifefor many Americans. The movementof workers out of agriculturehas not been rapid enough toprevent this over-crowding. Farminggenerally is a wholesome,healthy, and satisfying work, andmany people are willing to accepta lower standard of living ratherthan give up such a way of life.Farming, because of its appeal,will always be crowded, and profitmargins for the "average" farmerwill always be low. Only the wellmanagedfarm, operated with ajudicious amount of modern toolsand the latest know-how, will yielda good profit. This is as it shouldbe, for this type of farm operationis serving the consumer best.Time and again we hear direpredictions of the take-over offarming by corporations. It is truethat the family farm has changedand tends to look more like a factoryevery day. My neighbor usedto be one of the largest poultryfarmers in the county with 3,000layers - and quite successful. Butprogress has left him behind.Those in the vicinity who intendto stay with chickens are building500-foot-long houses to hold 43,000birds in wire cages, wall-to-wall.These are still family-owned and-operated farms, but they are largeand efficient. Likewise, the dairyfarms of 30 years ago with 12 cows

1972 A NEW AGRICULTURAL REVOLUTION 261are now either out of business orhave grown much larger. They,too, are still family-owned and-operated. The only corporate agriculturein my county consists of afew acres of vineyards owned bya winery. The United States Departmentof Agriculture reportsthat corporations account for only1 per cent of our farms, 7 per centof our farm land and 8 per cent ofour agricultural production. Acloser look reveals that ninety percent of these are actually familyfarms that have incorporated toease the transfer to the next generation.It is apparent that thefamily farm that has mechanizedand is under the skillful managementof its owner is still very competitive.Corporations, with theirhigh fixed costs, have found it· almostimpossible to compete withthe American family farm.I think we do not have a "farmproblem." In fact, agriculture, becauseof the private research byfeed, seed, building supply, chemical,machinery, and fertilizer companies,has kept up with modernmethods as well as has any U.S.industry. The development of hybridseed corn is an excellent exampleof how private researchers,competing for a profit, benefit allof us - especially the consumer.The research by Land Grant Collegesand by the U.S.D.A. has sup-

262 THE FREEMAN Ma,yplemen'ted and stimulated this privateresearch. Agri-business salesmen,farm catalogs, advertisingfolders, and numerous farm publications,in addition to governmentsponsoredagricultural extensionservice (county agents), havemade this valuable research availableto all American farmers - bigand small. Use of this modernknowledge has made the Americanfamily farm the most' efficient inthe world. Rather than lookingupon agriculture as a serious problem,we should consider it our biggestsuccess story.The Winds of ChangeA' fundamental change is takingplace in the thinking of the Ameri-'can farmer. We have long been'singled out by politicians as agroup of people to be pitied. Farmpublications keep telling us howmuch we suffer. Our farm leadersare especially sympathetic to our"sad" plight and pledge all sortsof programs to bring- us aid. Wefarmers have heard this so longand so often that we are beginningto believe it.The independent, self-reliant,self-thinking farmer is wavering.So often told that we must cooperatewith others and "set our ownprice," we are beginning to movein this direction. The appeal ofcollective bargaining is gainingmomentum among farm people.Farm editors and farm leaders'would not dare suggest that competitorsin any other business gettogether to set prices; yet, theyboldly advocate a monopoly controlover supply by farmers, using suchterms as "disciplined marketing"or "supply management." Whenexamined closely, their object is amonopoly control over the totalsupply. The result is presumed tobe higher prices and returns forthe farmer at the expense of theconsumer. But let us look at howthis will affect the family farm.The family farm is dominant inAmerica today because it is astrong ,compet·itor. It is'dominantbecause of its ability to survivein periods of low prices. The familyfarmer can let the' hired man goand work harder himself in 'periodsof low prices. The farmer'swife. can even take a job in townin order to help save the farm.These are options not available tothe larger, more heavily capitalizedcorporate farms.Interestinglyenough, manyofthefarmers working the' hardest forcollective bargaining - and the securitythat, the higher and morestable prices will bring - are thelarge operators. Through carefulmanagement and hard work, theyhave built ,large, efficient enterpriseswhich they now wish to protect.In periods of high prices,they prosper. But low prices put

19'72 A NEW AGRICULTURAL REVOLUTION 263the large farms to the test, causingmany to fail. Fluctuating farmprices thus tend to even the score,so that the little fellow. has an opportunityto compete. What willhappen to the small family farmwhen collective bargaining assuresstable high prices for the largefarmer ? Won't this be the openingcorporations are looking for andwon't they come pouring into agricultureonce we assure a higherprofit margin?To limit "over-production" whenbargaining achieves a better pricefor farmers, there will have to besome kind of a quota system. Justas laborers wait in line to workon union jobs, so shall young far-·mers wait in line to farm. In goodgrowing years we will be forcedto let a portion of the crop rotto insure higher. prices.from theconsumer. It will be an entirelynew ball game for the self-reliant,independent, competitive farmer.But he will adjust, once he tastesthe fruits of collective action.As time goes" on, I anticipatethat these quotas will be purchasedby the larger growers; and thelarger growers will merge andform even larger corporations.Once we establish "rights" as towho can farm and how much, weare opening the door to big businessin farming. Just as truckers"rights" are soon purchased bythe larger trucking firms, the farmers"rights" will also flow towardwhere the money is. By turningto collective bargaining, wemay be dooming the family farm.We already have legislation." toprevent buyers from discriminatingagainst us when we sell· cooperatively- The Agricultural Fair.Practice Act. The National AgriculturalMarketing and BargainingAct (Sisk Bill) is about to bepassed in Congress. It would forcethe buyer of farm products to negotiatein good faith with his reg-·ular suppliers and prevent himfrom buying from· other sourcesduring these negotiations.· Thenext logical legislative step willbe a requirement for compulsoryarbitration if negotiations fail.Along with this will have to comea limit on entry and quotas for allexisting farmers.In summary, we are witnessingin a few short years the coming ofa monopolistic type of collectivebargaining for agriculture. Farmersare accomplishing this throughstrong and efficient lobbies inWashington. Farmers may soonhave the collective bargaining powersthat it took labor a century ofbloodshed to obtain. Even theD.S.D.A., after 35 years of all sortsof farm programs that have failed,now suggests that we try farm bargaining.The collective bargainingjuggernaut is rolling in ;high gearand is on a collision cqurse with

264 THE FREEMAN Maythe family farm. There is definitelyan agricultural revolution inprogress.The Consumer Is Still KingThe first priniciple of businessis that the customer is king. Toprosper over a period of years, abusiness must serve the customerwell. Now, as farmers, we find ourselveslooking at our customers asadversaries from whom we shoulddemand better prices rather thanearn them. Like many unionizedwage earners in our society, wefoolishly believe we can raise ourstandard of living -by demandingmore for doing less.The time has come for theAmerican consumer to remind thefarmer that he is a businessman,expected to compete as he producesthe food and fiber that ournation needs. Farmers are nomore-justified in getting togetherto manipulate prices than are oilcompanies, or auto companies, ordrug companies, or any other businesscompetitors. It is time to remindthe farmer that competitionis still the foundation of free enterprise.True, farmers have morevotes and, therefore, more powerin Washington than have otherbusinesses. But does this justifya war against consumers? The consumer,if alerted, has more power- economic or political - than anyconceivable combination of producers.Perhaps it is time forconsumers to take a hand in steeringa course for agriculture. ,

265HENRY HAZLITTWelfarismGoneBOTH SOCIAL SECURITY· and unemploymentcompensation. were proposedin large part on the argumentof Franklin D. Roosevelt andothers in 1935 that they would enablethe government to "quit thisbusiness of relief."Though all the social "insurance"programs he asked for wereenacted, together with a score ofothers, and though all of these supplementaryor "substitute" programshave been constantly enlarged,direct relief, instead ofshowing any tendency to diminish,has increased beyond anythingdreamed of in 1935.Henry Hazlitt is well known to FREEMAN readersas author, 'columnist, editor, lecturer, andpractitioner of freedom. This article will appearas a chapter in a forthcoming book, TheConque8t 01 Poverty, to be published byArlington House.The number of welfare reCIpIentsin New York City alonejumped from 328,000 in 1960 to1,280,000 in October, 1971 (exceedingthe total population of Baltimore)and was still growing. OnMarch 10, 1971, the U. S. Departmentof Health, Education andWelfare reported· that more than10 per cent of the residents of thenation's twenty largest cities wereon welfare. In New York City, Baltimore,St. Louis, and San Francisco,it was one person in seven;and in Boston, one in five. TheMayor of Newark, N. J. told Congresson January 22, 1971 that 30per cent of the population in hiscity was on relief.For the whole country, the numberof people on welfare grew from6,052,000 in 1950 to 7,098,000 in

266 THE FREEMAN May1960, to 9,540,000 in 1968, to 12,­912,000 in September 1970, and to14,480,000 in September, 1971.Because payments to individualskept increasing, total expendituresfor relief grew still faster. Here isa condensed record:FiscalyearAll Funds(000)Federal Funds(000)193-6 $ 349,892 $ 20,2021940 1,123·,660 279,4041945 1,028,000 417,5701950 2,488,831 1,095,7881955 2,939,570 1,440,7711960 4,039,433 2,055,2261965 5,868,357 3,178,8501970 14,433,500 7,594,3001971 18,631,600 9,932,000Sources: U. S. Department of Health, Educationand Welfare, NeSS ReportF·5 July 6, 1971;. and Social· SecurityBulletin, December, 1971.In the fiscal year 1971, relief expendituresof $18.6 billion wererunning at more than four timesthe rate of 1960, more than sixteentimes the rate of 1940, and morethan 53 times the rate of 1936.To economize on figures, I havenot only confined myself to fiveyearinterval comparisons, but Ihave not shown the division betweenstate and local funds. Yetthese comparisons are part of theexplanation of the skyrocketinggrowth of these relief figures. Itwill be noticed that while the Federalcontribution' to direct reliefexpenditures was only 5 per cent in1936, it was 25 per cent in 1940, 44per cent in 1950, and 53 per .centin 1971. Yet.relief was actually ad-ministered at the state and locallevel. In fact, it was for the mostpart administered by the cities andcounties. The localities contributedonly 26 per cent toward the totalcost of the relief they handed outin 1940, only 11 per cent in 1950,13 per cent in 1960, and 11 per centin 1970. When a city governmentis contributing only 11 cents of itsown for every dollar it pays out torelief recipients, it can distributeits political favors cheaply, and haslittle incentive to exercise vigilanceagainst overpayment and fraud.Most of those who discuss themounting cost of direct relief treatthis figure in isolation as if it representedthe total cost of "the waragainst poverty." In fact, it is onlya small fraction of that cost, recentlyrunning in the neighborhoodof not much more than a tenth. Thefollowing figures are from an officialtable of "Social Welfare. ExpendituresUnder Public Programs."lSocial Welfare Expenditures(in millions of dollars)State andYear Total Federal Local1935 $ 6,548 $ 3,207 $ 3,3411940 8,795 3,443· 5,3511945 9,205 4,399 4,8661950 23,508 10,541 12,9671955 32,640 14,623 18,0171960 52,293 24,957 27,3371965 77,121 37,720 39,4011968 113,839 60,314 53,5251970 145,350 77,321 68,0291971 (p.) 170,752 92,411 78,341

1972 WELFARISM GONE WILD 267Revenue Sharing?This gigantic total of $171 billionfor "social welfa.re" is morethan triple the figure for 1960 andmore than 26 times the figure for1935. Yet the 29-fold increase inFederal expenditures for· welfarein the 35-year period, instead ofreducing the burden on the statesand cities, as originally promised,has been accompanied by a 23-foldincrease even in that local burden.A similar result is evident if weconsider the cost of direct reliefalone. Though the Federal governmentwas contributing only 5 percent of that total cost in 1936 com~pared with 53 per cent in 1971, thecost to the States and localities hasincreased 26-fold. So much for thetheory that "revenue-sharing", orincreased Federal contributions, doanything in the long run to reducethe burden of welfare spending onthe states and localities. They leadmerely to a total increase in thatspending.So the tendency of welfare spendingin the United States has been toincrease at an· exponential rate.This has also been its tendencyelsewhere. Only when the economicand budgeta,ry consequences ofthis escalation become so gravethat they are obvious. to the majorityof the people - Le., onlywhen irreparable damage has heendone - are the welfare programslikely to be curbed. The chronic inflationof the last 25 to 35 years innearly every country in the worldhas been mainly the consequence ofwelfarism run wild.The causes of this accelerativeincrease are hardly mysterious.Once the premise has been acceptedthat "the poor", as such, have a"right" to share in somebody else'sincome - regardless of the reasonswhy they are poor or others arebetter off - there is no logical stoppingplace in distributing moneyand favors to them, short of thepoint where this brings aboutequality of income for all. If I havea "right" to a "minimum incomesufficient to live in decency",whether I am willing to work for itor not, why .don't I also have a"right" to just as much income asyou have, regardless of whetheryou earn it and I don't?Once the premise is acceptedthat poverty is never the fault ofthe poor but the fault of "society"(Le., of the self-supporting), or of"the capitalist system", then thereis no definable limit to be set onrelief, and the politicians who wantto be elected or re-elected will competewith each other in proposingnew "welfare" programs to fillsome hitherto "unmet need", or inproposing to increase the benefitsor .reduce the eligibility requirementsof some existing program.No complete count seems to existanywhere of the present total

268 THE FREEMAN Maynumber of welfare programs. The$171 billion expenditure for socialwelfare in the fiscal year 1971 isofficially divided into roughly $66billion for "social insurance", $22billion for "public aid", $11 billionfor "health and medical programs",$10 billion for "veterans' programs",$56 billion for "education",nearly $1 billion for "housing",and $5 billion for "other socialwelfare". But these sub-totalsare in turn made up of 47 differentgroups of programs, and many ofthese in turn consist of many separateprograms. 2A Jungle of AgenciesThe weary taxpayer reads aboutsuch things as food stamps, jobtraining, public housing, rent supplements,"model cities", community-actionprojects, legal servicesfor the poor, neighborhood healthcenters, F AP, Office of EconomicOpportunity (OEO), Medicaid, OldAge Assistance (OAA), Aid to theBlind (AB), Aid to the Permanentlyand Totally Disabled(APTD), Aid to Families with DependentChildren (AFDC), GeneralAssistance (GA), manpowertraining programs, Head Start,VISTA, and on and on, and has noidea whether one is included underanother, whether they duplicateeach other's functions, which, ifany, have been discontinued, orwhich are just about to start. Allhe knows is that there seems to bea new one every month.In 1969, Mrs. Edith Green, aDemocratic Congresswoman fromOregon, asked the Library of Congressto compile the total amountof funds a family could receivefrom the Federal government ifthat family took advantage of allthe public assistance programsthat were available.Taking a hypothetical family ofa mother with four children - onea pre-schooler, one in elementaryschool, one in high school, and onein college - the library informedher of the following:This family could collect $2,800from public assistance; $618 fr.ommedical assistance because of.AFDC; $336 in cash value for foodstamps; and about $200 from OEOfor legal services and health care.The family would also be entitled topublic housing or rent supplementsranging in value from $406 to $636.The preschool child would be entitledto enter Head Start, the averagecost being $1,050 for eachyoungster. The child in high schoolwould be eligible for $1,440 worthof services from Upward Boundand the youngster in college wouldbe eligible for an education opportunitygrant that could be worthanywhere from $500 to $1,000. Healso would be eligible for a NationalDefense Education Act loan,and if he took advantage of the

1972 WELFARISM GONE WILD 269forgiveness feature, he could getan outright grant of $520. Hewould also be eligible for a workstudyprogram costing in the neighborhoodof $475. If the motherwanted to participate in the jobopportunity program, this would beworth $3,000.So this imaginary family, amother with four children, wouldbe able to take advantage of .grantsand services worth $11,513 for theyear.In another hypothetical case, amother with eight children couldtotal an annual welfare income of$21,093. 3In 1968 Congressm'an William V.Roth, Ji and his staff were able toidentify 1,571 programs, including478 in the Department of Health,Education and Welfare alone, butconcluded that "no one, anywhere,knows exactly how many Federalprograms there are."In February, 1972, administrationwitnesses testified before aCongressional committee that therewere 168 separate Federal programsgeared in whole or in partto combating poverty. But as thetotal expenditures of these 168 programswere only $31.5 billion (outof $92 billion of Federal "socialwelfare expenditures") this musthave been an incomplete list.While the Federal governmentkeeps piling up new welfare programs,under Democratic or Republicanadministrations, almostevery individal program shows atendency to snowball. One reason isthat when Congressmen propose anew program, the expenditure setin the initial year is almost alwayscomparatively .moderate, to allayopposition - the "entering wedge"technique; but annual increases inspending are built into the law. Anotherreason is that when a newwelfare program is launched, ittakes people a little while to catchon to it; and then the stampede begins.A still further reason is thatthe bureaucrats who administerthe program - eager to demonstratetheir own vicarious compassionand liberality, as well as theindispensability of their jobs - notonly interpret the eligibility requirementsvery leniently, but activelycampaign to advise potential"clients" of their "legal right" toget on the rolls.There has been a great deal ofdiscussion in the last few years regardingthe extent of fraud andcheating among those on relief.From the very nature of the problemthis can never be exactlyknown; but the evidence indicatesthat it is substantial.In January, 1971, after a doorto-doorcheck on welfare cases, theState of Nevada struck about 22per cent of the recipients - 3,000people - from the relief rolls. TheState Welfare Director reported

270 THE FREEMAN Maythat they had been cheating taxpayersout of a million dollars ayear through failure to report incomefrom other sources, includingunemployment benefits. The directorblamed the frauds on a Federalregulation that permitted welfareapplicants to obtain aid simplyby stating that they met allqualifications.In Michigan, state welfare officialsdiscovered cases of money beingpocketed by welfare clients fordental work which was never per- .formed.In California, a group of SanFrancisco Bay area residents - allfully employed - conducted an experimentto prove to county supervisorshow easy it is to get on relief.They traveled the circuit ofwelfare offices, applying for andgetting on welfare, usually withouteven furnishing identification.Governor Reagan said that "onemanaged to get on welfare fourtimes under four different names inone day - all at the same office."In his message to the Californialegislature, Governor Reaganpointed out: "The same governmentthat requires a taxpayingcitizen to document· every statementon his tax return decrees thatquestioning a welfare applicantdemeans and humiliates him."A spot check of welfare rolls inNew York City by the General AccountingOffice, reported in September,1969, showed that 10.7 percent of all families on relief theredid not meet the eligibility requirements,and that 34.1 per centof those who were eligible werebeing overpaid. 5In 1971, New York City ComptrollerAbraham Beame revealedthat the city was losing $2 milliona year as a result of forged checks.More millions were lost becausepeople on relief falsely complainedthat they had not received theirchecks; they were mailedduplicates.Simply requiring those onrelief to come and pick up theirchecks, rather than getting themby mail, lowered New York City'swelfare lists by about 20 per cent.It is impossible to know howmuch of the blame for the nationaland local welfare mess is to be puton relief cheaters and how muchon loose administration. It is madeso easy to get and stay on relieflegally that cheating hardly seemsnecessary.On January 12, 1969, The NewYork Times ran a front-page storyunder the headline: "Millions inCity Poverty Funds Lost by Fraudand Inefficiency." It reported that"Multiple investigations of thecity's $122-million-a-year anti..poverty program are disclosingchronic corruption and administrativechaos," and quoted an assistantdistrict attorney as saying:"It's so bad that it will take

1972 WELFARISM GONE WILD 271ten years to find out what's reallybeen going on inside the· HumanResources Administration." Thenext day Secretary of Labor W.Willard Wirtz said that New YorkCity had the worst administrativeproblem of any antipoverty programin any city in the country.But the New York situationkept getting worse. In January,1971, a welfare mother and herfour children were assigned to theWaldorf Astoria, one of NewYork's most elegant hotels, at acost of $152.64 for two days. TheCity's welfare agency claimedwith a straight face that therewas no room elsewhere. But manyother routine practices of the Citywere almost as costly, wIth entirehotels "temporarily" filled with relieffamilies at hotel rates. Onefamily was put up at the Broadway-Centralat a cost of $390.50 aweek., Another, a welfare familyof fifteen, was put up at a Bronxmotel at a rental that would addup to $54,080 a year. 6Dependent ChildrenMuch the fastest growing reliefprogram has been Aid to Familieswith Dependent Children (AFDC).In the ten years from 1960 to 1970the number of people aided by thisprogram increased from 3,023,000to 9,500,000. Costs soared from$621 million in 1955 to $4.1 billionin 1970.The nationwide cheating on thisis probably higher than on anyother welfare program. The reasonis that a mother and her ·children,legitimate or illegitimate,become eligible for AFDC relief ifthere is no employed father present.The mothers report that thefather·has "deserted." "The factis,"according to one authority,"that in many cases the fathernever really deserts. He just staysout of sight so the.woman can geton AFDCrolls. In slum areas,everyone knows this goes on. It iswidespread in New York City."Governor Reagan reported that heknew there were 250,000 homes inCalifornia where the father hadrun out.One of the fundamental causesfor the huge and growing load ofrelief cases is that there is noadequate investigation of eligibility.The excuse offered by somewelfare workers is: "It's impossibleto do adequate eligibilitychecks. There isn't time. It's aquestion of helping people whoneed help rather than catchingpeople who need catching."Still another reason why thereis no adequate investigation ofeligibility is that Federal bureaucraticregulations discourage it.As Governor Reagan has put it:"The regulations are interpretedto mean that no caseworker canchallenge or question a welfare ap-

272 THE FREEMAN Mayplicant's statements."7Instead of trying to reform thissituation, the Department ofHealth, Education and Welfareseems mainly concerned to defendit. It has published and circulatedwidely a booklet called WelfareMyths vs. Facts. This turns legitimatecriticisms into "myths" bygrossly overstating them, and thenproduces questionable answers.For example:"Myth: The welfare rolls arefull of able-bodied loafers."Fact: Less than 1 per cent ofwelfare recipients are able-bodiedunemployed males."This figure, implying that itwould have a negligible effect onwelfare to find jobs for these men,is incredibly low. It is apparentlyachieved by treating any physicalimpairment, however trivial, as aqualification for family relief; itignores employable women; and itignores the fact that the averagerelief family consists of 3.7 persons,who would move off the rollsif the breadwin'ner went to work.Another example:"Myth: Once on welfare, alwayson welfare."Fact: The average welfarefamily has been on the rolls for 23months.... The number of longtermcases is relatively small."A 23-month average for familieson relief is hardly something to becomplacent about, even if the figureis accurate. The Department'sown charts show that more than athird of those on welfare have beenthere three years or more. Moreover,the Department's averagedoes not count "repeaters." If afamily were on relief for, say, 23months, off a month, back on foranother 23 months, and so on, itwould not raise the·average. Nordoes any figure based on relief atany given point· in time count theprospective 're~aining period eachcase will be on the rolls. Alreadyfamilies have been found on relieffor three generations. 8Small wonder that PresidentNixon, in his State of the Unionmessage of January, 1971, calledthe existing American relief system"a monstrous, consuming outrage."I)• FOOTNOTES •1 Statistical Abstract of the UnitedStates: 1971, table no. 430, p. 271, andSocial Security Bulletin, December 1971.2 See Social Security Bulletin, December1971.3 Human Events, December 13, 1969.4 New York Times, February 16, 1972.1) These examples were cited in an article"Welfare Out of Control" in U. S.News & World Report, February 8, 1971.By coincidence, Time and Newsweek alsocarried long feature stories on welfare intheir issues of the same date, coveringsimilar material.6 Time, February 8, 1971.1 U. S. News & World Report, March1, 1971.8 An excellent analysis of the HEWWelfare Myths vs. Facts pamphlet appearedin The Wall Street Journal ofJanuary 27, 1972 by Richard A. Snyder,a member of the Pennsylvania Senate.

273CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC10The DeclaraOtionof IndependenceTHE DECLARATION OF INDEPEND­ENCE is a peculiar, unusual, andin many ways, unique document inthe modern world. Of revolutionsthere have been a surfeit, andmore, in the last two hundredyears. And accompanying themhave been pronouncements, directives,statements, proclamations,and declarations enough for a goodstart on papering the walls of thePentagon. Of all such documents,however, one standsout and loomsabove the rest - the Declaration ofIndependence. Not only has it beenrevered usually by the people ofthe United States, provided thegrist for innumerable orations,been memorized - in part- byschool children; it also has beenalmost endlessly quoted in reproachof actual American ways and hasbeen looked to by peoples of otherlands as a standard. SupremeCourt justices have appealed to it,would-be revolutionaries haveclaimed its rhetoric, while those ofa conservative bent have soughttheir principles within it. Formost of the history of the UnitedStates only one national holiday­Thanksgiving - has ranked withthe 4th of July, the day set asidefor celebrating the signing of theDeclaration of Independence.Dr. Carson shortly will join the faculty ofHillsdale College in Michigan as Chairman ofthe Department of History. He is a noted lecturerand author, his latest book entitledThrottling the Railroads.

274 THE FREEMAN MayIt is somewhat strange and amatter for wonder that this documentamong all those of an erarich with elegant statementsshould have attained its uniqueposition. John Adams thought tha.tthe second day of July would becelebrated, for it was on that daythat the resolution for independeneewas adopted. Moreover, helater declared of the Declarationthat "There is not an idea in it, butwhat had been hackneyed in Congressfor two years before."l Thatportion of the document to whichpeople usually refer is exceedinglybrief, comprising, at most, twoparagraphs, the first of which isonly a sentence in length. The remainderof the.document is of historicalinterest only. Moreover, theDeclaration is not now, and neverhas been, a pa.rt of the fundamentallaw of the United States.It lies outside the structure of lawwhich is made up of constitutions,statutes, and the common law.There are, of course, reasons forits position, and they will come outin an· analysis of the documentand discussion of its backgroundand extension.There are three dimensions ofthe Declaration of Independencewhich should be carefully con':'sidered for a clear understandingof it. The first is the contemporarycontext within which it was written,adopted, proclaimed, andserved its purpose. However muchit ma.y have come to belong to theages, the Declaration had a definitepurpose and a particular roleat the time. The second dimensionis its past. The words and phrasesare given their meaning not onlywithin the contemporary rhetoricbut also from historical doctrinesand beliefs. Too, the later applicabilityof anything said is conditionedby the context of a thenpast history. The third dimensionis its future. What men have madeof the document, frequently out ofcontext and with no attention tothe concepts which give it any continuingvalidity, tells us somethingof the reason for its importance.The Declaration in ContextThe story of the compositionand adoption of the Declaration isfairly simple. Richard Henry Lee'sresolution for independence, introducedon June 7,1776, was not immediatelyadopted. On June 10,Congress decided to delay furtherdiscussion of it until July 1, formany delegates awaited instructions,or changes in instructions,from their legislatures before actingaffirmatively for independence.Lee's simple and straightforwardresolution would have been adequatefor the formal declaring ofindependence. But America badlyneeded aid from foreign powers ifthe appeal to arms was to be suc-

1972 THE DECLARATION OF INDEPENDENCE 275cessful. Thomas Paine had suggestedin Common Sense that somesort of manifesto be published inorder to gain friends with othernations: "Were a manifesto· to bepublished and dispatched. to foreigncourts, setting forth the miserieswe have endured and thepeaceable methods which we haveineffectually used for redress; declaringat the same time that ... wehad been driven to the necessity ofbreaking off all connections . . .- such a memorial would producemore good effects to this continentthan if a ship were freighted withpetitions to Britain."2 This wasapparently the origin of the ideafor a declaration. Therefore, followingthe determination to delayadopting Lee's resolution, Congressappointed a committee toproduce such a document. The committeewas composed of BenjaminFranklin, John Adams, Robert Livingston,Thomas Jefferson, andRoger Sherman.Thomas Jefferson was assignedthe task of producing a draft ofthe proposed declaration. HadJohn Dickinson been favorablydisposed toward independence atthis juncture, the task would probablyhave been his. Jefferson hadonly lately acquired a considerablereputation as a writer with hisSummary View of the Rights ofBritish America. In any case, hisselection turned out to have beenone of the happiest decisions evermade by a committee. Some minorchanges were suggested by Franklinand Adams, and these were incorporated·in the document. Congressalso made a few alterations. 3But the finished work was substantiallywhat Jefferson had presentedto the committee. Much ofthe honor which has fallen to theDeclaration should be ..credited toJ efferson's felicity of style, gracefulturns of phrase, .and the evocativepower of words appropriatelyjuxtaposed.Congress acted quickly once theLee resolution came before it againon July 1. The next day it wasapproved unanimously by 12 colonies,though the New York delegationabstained. And then - onthe July 4 date which was to becelebrated by posterity - Congressapproved the Declaration of Independence.The stated purpose of the Declarationwas to declare to "mankind"the "causes which impelthem to the separation." It was addressed,then, to the world at large.It can be conveniently divided intothree parts for purposes of discussion:the first is a theoretical justificationof revolution and independence;the second is an enumerationof the abuses suffered at thehands of the British;· and the thirdis the formal declaring of independence.

276 THE FREEMAN MayA Dangerous ActionThe theoretical justification ofrevolution is contained in the firsttwo paragraphs, which are also themost often quoted parts of theDeclaration. Interspersed throughthese paragraphs runs a litany ofphrases which have become etchedin the minds of Americans: "Lawsof Nature' and of Nature's God,""truths to", be self-evident," "allmen are created equal," "endowedby their Creator," "unalienableRights," and "Life, Liberty andthe pursuit of Happiness." Theideas may have been hackneyed, asJohn Adams said, but the phrasesin which Jefferson caught themelevated above the trite and ordinaryto the sublimity of enduringpoetry.Yet, ideas are dangerous, asevery tyrant knows and even parentsof small children suspect; andthere is no more dangerous contextfor setting forth thoughtsthan the one for which these werewritten. The Declaration not onlydeclares independence but alsoproclaims revolt - revolution.Sages may debate as long as theywill whether the American revolutionwas indeed a revolution - andthe question is important in someof the later meanings of the word- but there can be no doubt thatit was a revolution in the rootsense of the word. That is, it wasa revolt against and a casting offof the governmental authoritywhich had been exercised over thecolonies. Not only that, but it wassuccessful- the basic distinctionbetween a revolution and a rebellion.Nothing more dangerous tothe peace and safety of a peoplecan be imagined than a revolution:the former authority is castoff,whether law and order will bemaintained is gravely in doubt,and man's bent to destruction islikely to be loosed from the ultimatemeans of confining it.The point of emphasizing thedanger of revolution is to enter awarning: the opening paragraphsof the Declaration of Independenceare not something to be casuallytrotted out on any and all occasions.They are a theoretical justificationof revolution, and thosewho intend less than revolutionmay well take care in how they referto them. But the point is alsoto note the qualifying conditionsof the document as to what justifiesrevolt: "Prudence, indeed willdictate that Governments long establishedshould not be changedfor light and transient causes; andaccordingly all experience hathshewn, that mankind are more disposedto suffer, while evils a.resufferable, than to right themselvesby abolishing the forms towhich they are accustomed."The case for revolution, as Jeffersonpresented it, can be sum-

1972 THE DECLARATION OF INDEPENDENCE 277marized in this way. The Creatorhas endowed men with certainrights. Governments exist for thepurpose of securing these rightsto those under them. When agovernmentrather than performingthese ends primarily begins destroyingthem, and· indicates by along term trend that it cannot bebrought back to its purpose, "it isthe Right of the People to alter orabolish it...." This is the nub ofthe argument.A Majority Form of ActionThere is much that is left outof the simple statement of the doctrineof the right of revolutioncontained in the, Declaration of Independence.There was no need tospell it out on this occasion, andmany of the restrictions are implicit.The oppressions must afflictthe people generally; they must,therefore, be by a power alien tothe generality of the people. Andthe right to revolt belongs, at theleast, only to a majority, probablyonly to a consensus, and, ideally,to the people generally. This is tosay that a mino'flity does not havea right to revolution. The wholeidea of a minority having such aright is shot through with contradictions.The minority could onlyeffect this "right" by overcomingthe majority. If a minority had a"right" to alter or abolish a governmentand to erect another inits stead, it would be a "right" toimpose its will on a majority.Do minorities not have rights,then? Assuredly, they do, or soJefferson and many of his contemporariesthought. All men haverights; but the recourse to revolutionbelongs only to the preponderanceof the people. But suppose aminority (or, for that matter, acombination of several minorities)is oppressed and persecuted, whatrecourse do the members have ?The Founders believed that themembers of a minority have rightsas individuals which should be protectedin the system along with therights of those who happen to belongto the majority or consensus.For example, they have the rightto persuade others of the justiceof their cause - that is, to becomethe majority. Freedom of speechand of the press are devices forassuring the opportunity of exercisingthe right of persuasion. Butsuppose all fails within the systemto relieve the oppression? What isthe ultimate recourse of a minority?The ultimate recourse of anoppressed minority is migration.The right to migrate for a minorityis the corollary of the right torevolution for a majority.Metaphysical FoundationsThe right of revolution is metaphysical,not existential (and nonemay logically claim such a right

278 THE FREEMAN Maywho have not a metaphysics onwhich to found their case). Nogovernment can, in practice, admitthe right of its people to revoltagainst it at any time. The momentsuch a right is acknowledgedeffectively, the government abdicatesits former power and anothergovernment takes its place. Nogovernmental system can be contrivedwhich provides for theright of revolution (though, interestingly,the right of migrationcan be established). The matter isas clear as it can be when it isseen that the right of revolutioninvolves the right to take up armsagainst the government. A governmentceases to be the governmentwhen men take up arms against itwith impunity. The United Statesgovernment can decree that the4th of July is a national holiday- Independence Day -, and celebrationscan be held in which thefirst two paragraphs of the Declarationof Independence are read,but the United States Constitutioncould not, and does not, incorporatewithin it the right ofrevolution. (It does, however, providefor turning out of office someof those who govern, at statedintervals, but the discussion ofthis can wait.) That is to say,again, the right of revolution ismetaphysical, not existential, anexplanation of which follows.The right of revolution has itsbeing prior to, outside of, and beyondgovernment. Jefferson wasmaking his case within a traditionwhose groundwork was laid longbefore. The Declaration of Independencehad a past, then, whichneeds to be a little explored. Thetwo main traditions appealed toare theism and natural law. Therights alluded to are said to bederived from "the Laws of Natureand of Nature's God," and oneswith which "they are endowed bytheir Creator." If there were onlyhistory and present existence, noright to revolution could be established,for no government that everdid or does exist could or wouldaccord it. The appeal to right, inthis sense, requires an appeal toright that existed before history.It is an appeal to that which andHe who was before governmentscame into being. Although ourlanguage has no tense for it, it isan appeal to the timeless and theenduring, to that which has notense.In this timeless sphere, J effersontells us, "all men are createdequal," and are endowed by theirCreator "with certain unalienableRights, that among these are Life,Liberty, and the pursuit of Happiness."This has been, no doubt,the most troublesome passage inthe Declaration. What can it meanthat all men are created equal?The most immediate meaning,

1972 THE DECLARATION OF INDEPENDENCE 279within the time context, is thatAmericans are equals of Englishmen.They had been contendingfor this since the dispute betweenthe two had occurred. Americanshad claimed that they had thesame right to tax themselves asEnglishmen, the same right tolegislate, and eventually theyclaimed the same trading privileges.It was the failure of theBritish government to accordthem equal rights which had provokedthe dispute. The justificationfor revolt now became thefact that they had been deprivedof their rights. This needs furtherdiscussion in terms of what menwere to make of the phrase later.Before going into that, one othermatter from the past needs to beconsidered.The· justification for revolt bythe colonies was tied up with theinstitution of monarchy. Whetheror not they would have theirgrievances redressed depended inconsiderable measure upon the willof the king. Hereditary monarchyhad long posed a problem in. politicaltheory, at least for Westernthinkers. Suppose the monarchwere a tyrant? Suppose he imposedhis will, in an arbitrary anddespotic fashion, over the people?It had long been held, by some,that it was the right of the peopleto kill a tyrant. However attractivethe idea might have been. to someAmericans, they never seriouslyconsidered it. And for very goodreason: it would not have settledthe issues in contention. But thefact that they were ruled by amonarch gave the colonists a justificationfor revolution that is deniedto those who live underelectiveexecutives.EqualitySefore the LawReturning to the matter ofequality, it should be stated thatthe phrase "all men are createdequal" had and has a much broaderpotential of application than tothe simple proposition of the equalityof Englishmen and Americans.Its meaning is fairly clear in thecontext: all men have an .equalclaim to certain natural rights.More, the case is implicit forequality before the law, that is,that the law shall deal with actsand not classes of people. Nor isthere any reason to doubt thatJefferson believed this principleapplied to blacks as well as whites,and that there shou~d only be freemen, not slaves.Later in American history, somehave read the Declaration of Independenceinto an idealisticframework. It is from this anglethat some would see the Declarationas calling for continuing revolutionand as a dream for Americathat is yet to be realized. Suchnotions separate the doctrines al-

28Q THE FREEMAN Maymost entirely from the context ofideas behind them as well as thetemporal context in which theywere written. Continual revolutionis a nonsensical notion; withinthis context, at least, it could onlymean a continual warfare overwho is to govern. Jefferson basedhis argument on metaphysicalpropositions, not idealistic ones.The equality upon which he baseshis position is one that has alwaysbeen, not one that might somedaybe achieved. True, he declaresthat the purpose of government isto secure men their rights. It issurely true, also, that governmentshave most frequently not done thiswell. The point may be too abstruseto be readily grasped, butJefferson was not saying that anideal government would establishthis ideal equality; he was sayingthat a government performing itsappropriate function would do so.Of course, the phrases do nottouch upon equality within societyat all; they apply to equality beforethe law.The theoretical justification ofrevolution contained in the firsttwo paragraphs tells us only thatthere can occur situations in whicha people may be justified in revoltingagainst the authority overthem. This is the case, we aretold, when the government hasconsistently abandoned its role ofprotecting the people in' theirrights and become the persistentviolator of them. It is the burdenof the body of the Declaration toshow that the British governmenthad done this to America.The Case Against the KingThe case is summed up in thenext to last sentence of the secondparagraph: "The history of thepresent King of Great Britain is ahistory of repeated injuries andusurpations, all having in directobject the establishment of an absoluteTyranny over these States."It should be noted here that allthe acts are blamed upon themonarch. There was, of course, areason for doing this as a tactic.Loyalty to the king was the tiethat Americans had clung to thelongest. It was the one which nowmust be disavowed and broken ifindependence was to be achieved.Some purport to see in this blamingof all the acts of the governmentupon the king disingenuousnessby Jefferson and those whoconcurred in his formulations. Thecharge has little merit; the tacticis fully justified in British constitutionaltheory. By that theory,the acts of ministers are acts ofthe king. Even the acts of Parliamentare acts of the Crown-in­Parliament. Moreover, the kinghad neither disallowed nor disavowedthe acts in question, whichhe might have done. If there was

1972 THE DECLARATION OF INDEPENDENCE 281disingenuousness to be charged, itshould be about the fact that theyhad delayed so long in laying uponthe king the blame for what washappening. Colonists had, for adecade, blamed Parliament andministers for what was happening.But this, too, is understandable;it was a means of resistingwithout revolt. Now the case couldbe stated bluntly, and the blamecould be placed where it justlyrested, in the final analysis.In any case, the British governmentwas indicted for its acts bya listing of them in the Declararation,acts charged to George III.Even a· truncated version showshow weighty and .damaging wasthe case against him:He has refused his Assent toLaws....He has forbidden his Governors topass Laws....He has refused to pass other Lawsfor the accomodation of large districtsof people....He has called together legislativebodies at places unusual, uncomfortable,and distant from the depositoryof their Public Records. . . .He has dissolved RepresentativeHouses repeatedly....He has refused for a long time,after such dissolutions, to causeothers to be elected. . . .He has endeavoured to preventthe population of these States....He has obstructed the Administrationof Justice. . . .He has made Judges dependent onhis Will alone....He has erected a multitude of NewOffices, and sent hither swarms ofOfficers to harrass our People, andeat out their substance.He has kept among us, in timesof peace, Standing Armies withoutthe Consent of our Legislatures.He has affected to render the Militaryindependent of and superior tothe Civil Power.He has combined with others tosubject us to a jurisdiction foreign-toour constitution. . . . (F or quartering large bodies ofarmed troops among us.For protecting them ... from Punishment....For cutting off our Trade with allparts of the world.For imposing Taxes on us withoutour Consent.For depriving us, in many cases,of the benefits of Trial by Jury.For transporting us beyond Seasto be tried for pretended offences.For abolishing the· free System ofEnglish Laws in a neighbouringProvince, establishing therein anArbitrary government, and enlargingits Boundaries....For taking away our Charters....For suspending our own Legislatures,and declaring themselves investedwith Power to legislate for usin all cases whatsoever.He has abdicated Government here,by declaring us out of his Protectionand waging War against us.He has plundered our seas, ravagedour Coasts, burnt our towns,

282 THE FREEMAN Mayand destroyed the Lives of our people.He is at this time transportinglarge Armies of foreign Mercenariesto compleat the works of death, desolation,and tyranny....He has constrained our fellow Citizenstaken Captive on the high Seasto bear Arms against their Country....He has excited domestic insurrectionsamongst us....A case can be made, of course,that there is some hyperboleamongst the charges listed. Someof the acts were done only againstselected colonies. One or two ofthem may have been mere potentiality.Someof the charges arerepeated in slightly different formulations.Yet everyone of themhas substance behind it. The natureof the Declaration was suchthat an act done against one ofthe colonies could properly be consideredas done against all ofthem. A jury charged with establishingthe facts alleged in theindictment almost certainly wouldhave found Britain guilty of all, oralmost all, of the charges brought,after reviewing the mass of evidencethat could have' been assembled.No AlternativeThe Declaration of Independencewas not suddenly sprung uponBritain and the world. The Americanshad not suffered abuse insilence, only to lash out in a fit ofanger without warning. As J effersonsaid: "In every stage of· theseOppressions We have Petitionedfor Redress in the. most humbleterms: Our repeated Petitionshave been answered only by repeatedinjury." Not only had appealsbeen made to the king butalso to the British people, or, asthe Declaration says, "to our Britishbrethren.'" But "They too havebeen deaf to the voice of justiceand consanguinity."But one course lay open to theAmericans, then, and they weretaking' it. The final paragraph declaresthe independence .of thestates from Great Britain. Thephrases of the concluding paragraphare, if anything, more felicitousthan those of the openingparagraphs. The rhetoric, onceagain, rises above anything remotelypetty or trivial to state thecase for the ages. There is an appeal"to the Supreme Judge of theworld for the rectitude of ourintentions," and "in the Name,and by Authority of the good Peopleof these Colonies." They "solemnlypublish and declare" thatthey are "Absolved from all'Allegianceto the British Crown," andthat they are "Free and IndependentStates." "And for thesupport of this Declaration, witha firm reliance on the Protection

1972 THE DECLARATION OF INDEPENDENCE 283of Divine Providence, we mutuallypledge to· each other our Lives, ourFortunes and our sacred Honor."The Declaration of Independencehas been celebrated but. not becauseit contains a theoreticaljustification of revolution or becauseit indicted George III forthe wrongs done the colonies.Americans have no more generallyvenerated revolution as a goodthan they have clung to an enmitywith the British people. The messageof the Declaration is thatrevolution is a thing to be avoidedso far as can be done, and enteredupon only under dire necessity.The results of revolution are toounpredictable to warrant its encouragement;the destruction itportends too likely for the casualcontemplation of it as a means togood ends. Revolution is negativeand destructive. Far from being athing of great value, it is a devaluationof the political coin of therealm.The Declaration of Independencehas been celebrated for good andsufficient reasons, reasons otherthan those connected with revolution.It has been celebrated, ofcourse, because it marks the beginningof independence. It marks,too, the inception - the birth - ofa nation, though it probably hadnot been conceived at the time. Itwas surely almost accidental thatthe very name by which thisnationwas to be called - the UnitedStates of America - appeared inthe Declaration. It was only thestatement of a hoped-for condition- "the united States of America"- when it was written.The Declaration contains, too, aprincipled statement of the greatpurpose for which governmentsexist ..-:. to protect the people in theenjoyment of their rights. Thefirst two paragraphs of the Declarationmay be read and re-read- as they have been over the. years- not as a justification or call forrevolution but as a reminder ofthe good and proper ends of governmentto a people who have intheir hands the control of the governmentover them. It contains,too, in its main body a list ofabuses to which governments areprone. These United States had agoodly beginning, in spite of therevolution which was made. Thegood beginning was because of thegreat principles which were raisedup before the people in the Declarationof Independence. t)1 Quoted irt John R. Alden, A Historyof the American Republic (New York:Alfred A. Knopf, 1969), p. 243.2 Nelson F. Adkins, ed., Thomas Paine(New York: Liberal Arts Press, 1953),pp.43-44.3 See Alden, op cit., pp. 241-42.Next: The War for Independence.

The Causes ofHANS F. SENNHOLZIT IS NOT MONEY, as is sometimessaid, but the depreciation of money- the cruel and crafty destructionof money - that is the root ofmany evils. For it destroys individualthrift and self-reliance asit gradually erodes personal savings.It benefits debtors at the expenseof creditors as it silentlytransfers wealth and income fromthe latter to the former. It generatesthe business cycles, thestop-and-go boom-and-bust movementsof business that inflict incalculableharm on millions of people.For money is not only the mediurnfor all economic exchanges,but as such also the lifeblood ofthe economy_ When money suffersdepreciations and devaluations itinvites government price and wageDr. Sennholz heads the Department of Economicsat Grove City College and is a notedwriter and lecturer on monetary and economicprinciples and practices.controls, compulsory. distributionthrough official allocation and rationing,restrictive quotas on imports,rising tariffs and surcharges,prohibition of foreigntravel and investment, and manyother government restrictions onindividual activities. Monetary destructionbreeds not only povertyand chaos, but also governmenttyranny. Few policies are morecalculated to destroy the existingbasis of a free society than thedebauching of its currency. Andfew tools, if any, are more importantto the champion of freedomthan a sound monetary system.Inflation is defined here as thecreation of new money by monetaryauthorities. In more traditionalusage, it is that creationof money that visibly raises goodsprices and lowers the purchasingpower of money. It may be creep-284

1972 THE CAUSES OF INFLATION 285ing, trotting or galloping, dependingon the rate of money creationby the authorities. It may take theform of "simple inflation," inwhich case the proceeds ofthe newmoney issues accrue to the governmentfor deficit spending. Or itmay appear as "credit expansion,"in which case the authorities channelthe newly created money intothe loan market. The governmentmay balance its budget, but inorder to stimulate business andpromote full employment it mayinject new credits into the bankingsystem. Both forms are inflationin the broader sense and asisuch are willful and deliberatepolicies conducted by government.Ours is the age of inflation. 1All national currencies have sufferedserious depreciations in ourlifetime. The British pound sterling,the shining example of hardmoney for one hundred years, haslost almost 90 per cent of its purchasingpower and suffered fourdevaluations since 1931. The powerfulU.S. dollar of yesteryear haslost at least two-thirds of its purchasingpower and continues toshrink at accelerating rates. Inthe world of national currenciesthere have been nearly 400 full orpartial devaluations since WorldWar II. Many currencies have suf-1 Cf. Jacques Rueff, The Age of Inflation(Gateway Editions, Henry RegneryCompany, Chicago, Ill., 1964).fered total destruction and theirreplacements are eroding again.Ideas Shape PoliciesTo inquire into the causes thatinduce governments the world overto embark upon such monetarypolicies is to search for the monetarytheories and doctrines thatguide their policy makers. Ideascontrol the world, and monetaryideas shape monetary policies.Several distinct economic andmonetary doctrines have combinedtheir forces to make our age oneof inflation. One doctrine in particularenjoys nearly universal acceptance:the doctrine that governmentneeds to control themoney.Even many of the champions ofprivate property and individualfreedom stop short at money. Theyare convinced that money cannotbe left to the vagaries of the marketorder, but must be controlledby government. Money must besupplied and regulated by governmentor its central bank. Thatmoney should be free is inconceivableto typical twentieth-centuryman. He depends on governmentto mint his coins, issue hisnotes, define "legal tender," establishcentral banks, conduct monetarypolicy, and then stabilize theprice level. In short, he wholly relieson government regulation ofmoney. But this trust in monopo-

286 THE FREEMAN Maylistie monetary authority operatingthrough political processes inevitablygives rise to monetary destruction.In fact, money is inflated,.depreciated, and ultimatelydestroyed wherever governmentholds monopolistic power over it.Government Control of MoneyThroughout the history of civilization,governments have been thechief cause of monetary depreciation.It is true, variations in thesupply of metallic money, due tonew gold and silver discoveries,occasionally affected the value ofmoney. But these changes wererather moderate when comparedwith those caused by governmentcoin debasements or note inflations.Especially since the rise ofstatism and the "redistributive society,"governments all over theworld have embarked upon unprecedentedinflations the disastrouseffects of which can only besurmised. To entrust our money togovernment is like leaving ourcanary in trust with a hungry cat.From the Roman caesars andthe Medieval princes to contemporarypresidents and prime ministers,their governments have thisin common: the urgent need formore revenue. The large number ofspending programs such as war orpreparation for war, care of veteransand civil servants, health, education,welfare, urban renewal, andthe like, places a heavy burden onthe public treasury, which is finallytempted to provide the necessaryfunds through currency expansion.True, government at first maymerely endeavor to· tax wealthand income - tax Peter to payPaul. But this convenient andpopular source of government supportis practically exhausted whenPeter's income tax reaches onehundred per cent. At this point, foradditional revenue, the governmentmust either raise everyone'staxes or turn to currency expansion.But the former is rather unpopularand therefore inexpedientpolitically. To win elections, thetaxes may even be lowered and theinevitable deficits covered throughcurrency creation, I.e., inflation.The Steps Toward MonopolyThe first step toward full developmentof this source of revenuewas the creation of a governmentmonopoly of the mint. To securepossession of the precious metalsthat circulated as coins, the sovereignprohibited all private issuesand established his own monopoly.Minting became a special prerogativeof the sovereign power. Coinseither carried the sovereign's pictureor were stamped with his favoriteemblems. But above all, hismint could now charge any pricefor the coins it manufactured. Orit could reduce the precious metal

1972 THE CAUSES OF INFLATION 287content of the coins and thus obtainprincely revenues throughcoin debasement. Once this prerogativeof sQvereignty was safelyestablished, the right to· clip, degrade,or debase the coinage wasno longer.questioned. It became a"crown right" that was one of thechief sources of revenue. 2An essential step toward gradualdebasement of the coinage was theseparation of the name of themonetary unit from its weight.While the original names of thecoins designated a certain weightand thus afforded a ready conceptionof their gold or silver contents- pound, libra or livre, shilling,mark, and soon-the newnames were void of any referenceto weight. The pound sterling wasno longer a pound of fine silver,but anything the sovereign mightdesignate as the national monetaryunit. This change in terminologywidely opened the door to coin debasement.The next step toward full governmentcontrol over money wasthe passage of legal tender laws,which dictates to people what theirlegal money can be. Such laws areobviously meaningless and superfluouswherever the ordinary lawof contract is respected. But wheregovernmentwants to issue inferior2 Cf. Elgin Groseclose, Money andM(Ln (Frederick Unger Publishing Co.,New York, 1961), p. 55 et seq.coins or depreciated paper notes,it must use coercion in the formof legal tender legislation. Then itcan circulate worn or· debasedcoins side-by-side with the originalcoins, falsify the exchangeratios between gold and silvercoins, .and discharge its debt withthe over-valued coins, or makepayments in greatly depreciatedfiat money. In fact, once legaltender laws were safely established,debt repudiation throughmonetary depreciation could becomeone of the great injusticesof our time. Contemporary jurisprudenceand jurisdiction were utterlyparalyzed in their defenseand administration of justice oncethey accepted legal tender laws. Adebt of a million gold marks thuscould be legally discharged withone million paper marks thatbought less than one U.S. penny.And a government debt of fiftybillion 1940 dollars can now bepaid or refunded with a 1971 dollarissue that is worth less thanone-third of the original amount.With the blessings of the courts,millions of creditors can now beswindled out of their rightfulclaims, their property legally confiscated.3But absolute government controlover money was only estab-3 LudWig von Mises, Human Action(Yale University Press, New Haven,1949), PP. 432, 444.

288 THE FREEMAN MayJished when money substitutes inthe form of paper notes and demanddeposits came into prominence.As long as governments hadto make payments in commoditymoney, inflationary policies werelimited to the primitive methodsof coin debasement. With the adventof paper money and demanddeposits, however, the power ofgovernment was greatly strengthened,and the scope of inflationvastly extended. At first, peoplewere made familiar with papermoney as mere substitutes formoney proper, which was gold orsilver. Government then proceededto withdraw the precious coinsfrom individual cashholdings andconcentrate them in its treasuryor central bank, thus replacing theclassical. gold-coin standard with agold-bullion standard. And finally,when the people had grown accustomedto paper issues, governmentcould deny all claims forredemption and establish its ownfiat standard. All checks on inflationhad finally been removed.The Role 01 the Central BankThe executive arm of governmentthat conducts the inflationusually is the central bank. It doesnot matter who legally owns thisbank, whether private investors orthe government itself. Legal ownershipalways becomes empty andmeaningless when government assumestotal control. The FederalReserve System which is legallyowned by the member banks is themonetary arm of the U.S. Governmentand its engine of inflation. Itenjoys a monopoly of the noteissue which alone is endowed withlegal tender characteristics. Commercialbanks are forced to holdtheir reserves as deposits with thecentral bank, which becomes the"banker's bank" with all the reservesof the country. The centralbank then conducts its own inflationby expanding its notes anddeposits while maintaining a decliningreserve ratio of gold to itsown liabilities, and directs thebank credit expansion by regulatingthe legal reserve requirementsthe commercial banks must maintainwith the central bank. Endowedwith such powers, the centralbank now can finance anygovernment deficit, either througha direct purchase of treasury obligationsor through open-marketpurchase of such obligations,which creates the needed reservesfor commercial banks to buy thenew treasury issues.The final step toward absolutegovernment control over money,and its ultimate destruction, is thesuspension of international goldpayments, which is the step PresidentNixon took on August 15,1971. When a central bank is hopelesslyoverextended at home and

1972 THE CAUSES OF INFLATION 289abroad, its currency may be devalued,which is a partial defaultin its international obligations tomake payment in gold; or, in anoutburst of. abuse against foreignersand speculators, the governmentmay cease to honor any paymentobligations, as in the case ofthe U.S. default. All over theworld, government paper nowforms 120 national fiat standardsthat are managed and depreciatedat will.The decline of monetary freedomand the concomitant rise ofgovernment power over moneygave birth to our age of inflation.Step by step, government assumedcontrol over money, not only as animportant source of governmentrevenue but also as a vital commandpost over our economy. Theresult is continuing inflation. Onlymonetary freedom can impartstability.4Welfarism and InflationEven the noblest politicians andcivil servants can no longer be expectedto resist the public clamorfor social benefits and welfare.The political pressure that is4 Cf. Ludwig von Mises. The T he01"'J1of Money and Credit (FEE, Irvington,N. Y., 1971), pp. 413 et seq.; Murray N.Rothbard, Man, Economy, and State (D.Von Nostrand Co., Princeton, 1962), p.661 et seq.; also his concise What HasGovernment Done to Our Money? (PineTree Press, 1963).brought to bear on democraticgovernments is rooted in the popularr'ideologyof government welfa.reand economic redistribution. Itinevitably leads to a large numberof spending .programs that placeheavy burdens on the public treasury.By popular demand, weakadministrations seeking to prolongtheir power embark uponmassive spending and inflating inorder to build a "new society" orprovide a "better.deal." The peopleare convinced that governmentspending can give them full employment,prosperity, and economicgrowth. When the results fall farshort of expectations, new programsare demanded and moregovernment spending is initiated.When social and economic conditionsgrow even worse, the disappointmentsbreed more radicalism,cynicism, nihilism, and aboveall, bitter social and economic conflict.And all along, the enormousincrease in government spendingcauses an enormous increase oftaxes, chronic budget deficits andrampant inflation. 5The "redistributive" aspirationsof the voting public often inducetheir political representatives inCongress to authorize and appropriateeven more money than thePresident requests. Such programs5 Henry Hazlitt, Man V8. The WelfareState (Arlington House, New Rochelle,N. Y., 1969), p. 57 et seq.

290 THE FREEMAN Mayas social security, medicare, antipoverty,housing, economic development,aid to education, environmentalimprovement, and pay increasesfor civil servants are sopopular that few politicians dareto oppose them.The government influences personalincomes by virtually everybudget decision that is made.Certainly its grants, subsidies, andcontributions to private individualsand organizations aim to improvethe material incomes of thebeneficiaries. The loans and advancesto private individuals aridorganizations have the same objective.Our foreign aid programis redistributive in character as itreduces American incomes in orderto improve the material conditionof foreign recipients. The agriculturalprograms, veteran's benefits,health, labor and welfare expenditures,housing and communitydevelopment, Federal expenditureson education, and last, butnot least, the social insurance andmedicare programs directly affectthe incomes of both beneficiariesand taxpayers. As the benefitsgenerally are not based on taxpayment, but rather on considerationsof social welfare, these programsconstitute redistribution ona nationwide scale. Foreign aidprograms have extended the principleof redistribution to manyparts of the world.Whenever government expendituresexceed tax collections andthe government deficit is coveredby currency and credit expansion,we suffer inflation and its effects.The monetary unit is bound to depreciateand goods prices mustrise. Large increases in the quantityof money also induce peopleto reduce their savings and cashholdingswhich, in the terminologyof mathematical economists, increasesmoney "velocity" and reducesmoney value even further.It is futi,Je to call these people"irresponsible" as· long as thegovernment continues to increasethe money stock.Labor Union PressuresA very potent cause of inflationis the unrelenting wage pressureexerted by labor unions. It is true,labor unions do not directly enhancethe quantity of money andcredit and thus cause the depreciation.But their policy of raisingproduction costs inevitably causesstagnation and unemployment.This is why the union strongholdsare the centers of unemployment.Faced with serious stagnation, thelabor leaders are likely to becomespokesmen for all schemes of easymoney and credit that promise toalleviate the unemployment plight.The democratic government inturn does not dare to oppose theunions for political reasons. On

1972 THE CAUSES OF INFLATION.the contrary, it does everything inits power to reduce the pressurewhich mass unemployment exertson the union wage rates. It grantsever larger unemployment benefitsand embarks upon public worksin the depressed unionized areas.At the same time it expands credit,which tends to reduce real wagesand to encourage employment.The demand for labor is determinedby labor costs.. Risingcosts reduce the demand, fallingcosts raise it. Inasmuch as inflationreduces the real costs of labor,it actually creates employment.When goods prices rise whilewages stay the same, or pricesrise faster than wages, labor becomesmore profitable to employers.Many workers, whose employmentcosts heretofore had exceeded thevalue of their productivity so thatthey were unemployable, now canbe profitably re-employed. Ofcourse, this employment-creatingpolicy is then counteracted by suchunemployment factors as risingminimum wage rates, higher unemploymentbenefits and welfaredoles, and rising union wage scalesand fringe-benefit costs. In manyindustries, the labor unions haveintroduced "cost-of-living clauses"that aim to prevent the decline ofreal· wages through monetary depreciation.Or their wage demandstake into consideration the risingrates of monetary depreciation.Their demands may become "exorbitant,"their strikes longer anduglier, and the economic losses inflictedon business .and the publicever more damaging until businessmenclamor for governmentwage controls. With wage controlscome price controls and the wholeparaphernalia of the commandsystem.The "New Economics"To give "scientific" justificationto the policy of inflation, a host ofcontemporary.economists have developedintricate theories, commonlyknown as the new economics.Basically, they all ascribe togovernment .the magic power ofcreating real wealth out of nothing,of raising the "national income"through minute efforts ofthe central bank and its printingpresses. They are unanimous intheir condemnation of the goldstandard, which to them meansdomination by "external forces"and denial of national independencein economic policies. Ofcourse, the "independence" theyso jealously uphold is tantamountto government control over moneymatters. They want "fiat money,"i.e., government money without restraintby a commodity such asgold. Though some would allow usthe freedom to buy and hold goldcoins or bullion, they know verywell that the legal tender laws

292 THE FREEMAN Maythat support the fiat standarddeny us the right to use gold ineconomic exchanges, which relegatesall coins to hoards and coincollections.Only free money is sound money.This is why one should be suspiciousof any and all proposals thatwould enhance the power of governmentover money. A currencyreform, whether domestic or international,that does not endeavorto dismantle this power, cannotprovide monetary stability. It isdestined to lead to more inflationand depreciation, to· economic upheavaland decline. Sound moneymeans the gold-coin standard; itmakes the value of money independentof government, as thequantity of gold is independent ofthe wishes and manipulations ofgovernment officials and politicians.It needs no "rules of thegame," no arbitrary rules peoplemust learn or government mustobserve. It is born in freedom andfollows inexorable economic law. 66 Hans F. Sennholz, Inflation or GoldStandard, Constitutional Alliance, Inc.,Lansing, Michigan. .. ~-x-*Manifestly nothing is more vitalto our supremacy as a nation andto the beneficent purposes of ourGovernment than a sound and stablecurrency_ Its exposure to degradationshould at once arouse toactivity the most enlightenedstatesmanship, and the danger ofdepreciation in the purchasingpower of the wages paid to toilshould furnish the strongest incentiveto prompt and conservativeprecaution.In dealing with our present embarrassingsituation as related tothis subject we will be wise if weFrugality and Economytemper our confidence and faithin our national strength and resourceswith the frank concessionthat even these will not permit usto defy with impunity the inexorablelaws of finance and trade....Closely related to the exaggeratedconfidence in our country'sgreatness which tends to a disregardof the rules of national safety,another danger confronts usnot less serious. I refer to theprevalence of a popular dispositionto expect from the operationof the Government especial anddirect individual advantages.GROVER CLEVELANDSecond Inaugural address, March 4,1893

RAY L. COLVARDPERCEPTIVE S'fUDENTS of the freedomphilosophy will note the absurdityof my title. Freedom andequality are opposed and contradictorypointsofthe political economy.One extreme is the unshackledand unmuzzled· autonomyof personal independence. Theother is the leveling tit-for-tatsecurity of collectivism. As individualsor as a nation we cannothave it both ways. One extreme isanarchy. The. other is regimentation.The demand for absolutes, forwanting it all, is an earmark ofimmaturity. We who would beadult are not surprised when wesee an ill-tempered preschool childkick his new tricycle viciously,then scream in his tantrum of furythat "the bad thing hurt me." Heis utterly frustrated by the at-Mr. Colvard teaches at Clairemont High Schoolin San Diego~tendant consequence to him; histoe is bruised. His wails of anguishand rage are designed tobring parental compassion and,hopefully, a new toy to offset the"injustice" of his misfortune.During the past few weeks atinstitutions of higher education inSouthern California, a new year'sglut of academic graffiti has appearedwith slight variations inartistry and spelling. This is anexample: I AM A PAWN INTHIS CAPITALIST CHESSGAME. When I see this particularepigram, I invariably think of anunruly child and his tricycle.Doubtless I am biased by age ifnot by maturity. I tend to agreewith Milton Friedman's concept ofeconomics: "There is no freelunch." As a militant middle-ofthe-roadhigh school teacher I mistrustlobbyists for farm subsidiesand advocates for welfare rights.293

294 THE FREEMAN MayEach man's right to be different isa right. James Madison delineatedthis point. Writing in the NationalGazette in 1792 he noted:... as a man is said to have a rightin his property, he may be equallysaid to have a property in his rights.When an excess of power prevails,property of no sort is duly respected.No man is safe in his opinions, hisperson, his faculties or his possessions.Few of our youth, if allowed tochoose individualism, will resignthemselves to the "security" ofmass equality. They, like thegreat Goethe, know "as soon asyou trust yourself, you will knowhow to live." Not only do theysee the satirical paradox in: "Bemy brother or I'll kill you"; theysee it as well in the vaunted revolutionaryconcept of Rousseauthat individuals must "be forcedto be free." The right of the individualto, choose must includethe right to choose unwisely. Itfollows, moreover, that a matureindividual will accept the responsibilitynot only of choosing, butalso of the consequences. In a freesociety each individual does whathe thinks is best for him individually.An acquaintance of mine retiredfrom the Navy as a ChiefPetty Officer in 1960. An uncle ofhis was highly critical. "Twentyyears in the service," the elderkinsman said, "and you're stillonly an enlisted man. My son'sbeen in for just six years and he'sa Lieutenant Commander/'During the ten years which haveelapsed since the incident, the retiredChief has been a high schoolhistory teacher. Recently his unclecommiserated with him againfor his lackluster showing. "Youstill stuck in the classroom?" theold man asked. "By this time youshould be a principal." He is completelyunable to accept the behaviorof his forty-five-year-oldnephew as rational. That thenephew may value· satisfactionover prestige in his work is whollyincomprehensible.Let Each Be Responsible forThe Results of His ChoicesMy professor in an industrialmanagement course described anaccident which occurred in a cornstarchrefinery several decadesago. An explosion in a partiallyfilled railway car caused adjacentcars and loading platforms to bedemolished. Fires spread throughoutthe area. Three workers werekilled in the blast, a dozen seriouslyinjured screamed in painand terror. The manager was inshock, walking about mutteringaimlessly: "What will I do? Whatwill I do?" A dispatcher from theshipping office took charge. He

1972 TO BE FREE AND EQUAL 295quelled the panic about to start, hesent out crews to fight fires, he organizedrescue squads to get aid tothe injured, he put men at workclearing paths for the fire trucksand ambulances which he summoned.The professor concluded his lecturea few minutes early and leftthe room. I followed him to hisoffice. "Look," I said, "I want tohear the rest of the story. Wasn'tthe manager fired; didn't the dispatcherget a promotion?""Of course not," he said. "Thedispatcher,' when it was all over,was still a dispatcher. That washis job. The plant manager wasstill the manager. Why not? Hehad a Ph.D. in chemistry and aMaster's in Business Administra-,tion. He earned his position byten years of university study, tenyears of management training,and 'know-how' that saved thecompany ten million dollars everyyear. Both men were in their economicpositions of their own freechoice. Only in folklore would thedispatcher be jumped precipitouslyto the office of vice-president asthe disgraced manager wasstripped of his executive washroomkey and drummed in disgraceout of the company's gates.In industry prospective managerschoose to become and become highsalaried managers because theytake on a responsibility to drivethemselves toward that ambition.""I doubt that I'm that ambitious,nI told him."Neither am I," he said. "Iknow. it and I'd rather be here inthe university. But there .is animportant point that you and I,the less intensely ambitious people,must remember: it's morallydishonest and intellectually shallowfor us to blame anybody butourselves for the responsibility ofour choices."Self-Respect Comes FirstThree hundred years ago thephilosopher, John Locke, told us:'"He that would have his son havea respect for him and his orders,must himself have a great reverencefor his son." Whenever Ipoint the finger of scorn at myfellows I am acutely aware of thethree remaining fingers pointingback to me. We who have chosento work in the nation's schools areguilty three-fold in denying studentsfreedom to choose. Wearbitrarilydetermine performancelevels for them; we defend ourlegal public monopoly of pedagogicalservices; and we demand compulsoryattendance laws. Perhapswe need a greater reveren~e forthe business we are in and ahealthier confidence in our performance.Although contemporary legal decisionshave weakened the educa-

296 THE FREEMAN Maytional concept "in the place of aparent," the·students who comeinto our classrooms are morallyour sons - or daughters - and eachof them deserves from us an individualacceptance as an independent,unique, and thinking personality.As teachers we must notbeat them down to a placid levelof mediocrity. Hopefully, we can,if we try enough, give each ofthem the elbow room of Illultilateralawareness, of diversifiedchoice, of unlimited scope, of anunequivocal independent responsibilityfor his or her own selfrealization.We can no longer affordthe luxury of blaming an imperfecteconomic system for ourown nonsuccess. As Voltairewrote, "It is not the scarcity ofmoney, but the scarcity of menand talents, which makes a stateweak."Faith in FreedomThe lack of faith o.f so many ofus in schools, educators, and schoolboards, weakens our teaching ofpersonal responsibility by theubiquitous trust we have in anawesome and benevolent governmentwhose panacea is looming forall our ills. Voltaire, the man ofreason, said something also forthose of us who are looking to thispowerful benefactor for support:"In general, the art of governmentconsists in taking as much moneyas possible from one class of citizento give to the other." It is unfortunatelythe commonplace forschool superintendents to vie forthe Federal·bonanza. Their questfor "equality," at the cost of freedom,causes them to bus "Yellow"students to "Brown" neighborhoodsand "Black" students to"White." Perhaps we should askourselves whether equality is alaudable goal or whether freedomof choice might not be more inkeeping with the democratic principlesin which we claim faith.If we must err, please God, mayit be on the side of freedom. ~IDEAS ONLIBERTYThe Fundamental Political PrincipleNow, the cardinal doctrine of any sound political system is, thatrights and duties should be in equilibrium.... Animmoral politicalsystem is created whenever there are privileged classes - that is,classes who have arrogated to themselves rights while throwingthe duties upon others. In a democracy all have equal politicalrights. That is the fundamental political principle.WILLIAM GRAHAM SUMNERWhat Social Classes Owe to Each Other (1889)

297STATUSend product of welfareMORRIS C. SHUMIATCHERIN 1066, William the Conquerorproclaimed himself master of allof the lands of Britain he hadtaken and occupied - all of whichhe declared to be his property aslord, or his fiefdom as king. Feudalculture grew upon the premiseand concept that all life should beordered in accordance with the estatein land given to each man andthe status thus acquired by himand his family.Beneath the monarchial masterwho was king stood the lords, whoacquired their lands from thecrown and were therefore bound inloyalty to their sovereign. Theywere, of course, required to supportthe monarch with money intime of peace and with men andarms in time of war. The rightsand duties of the lord vis-a-vis hisking were fixed and certain. Thelord's knights and men were likewisebound to do service and grantsupport, to receive and swearfealty to the lord and to the king.The lord, in turn, was bound torecognize the status of his knightsand to accord them the benefits ofthat status in the feudal society.The serfs and vassals of the lord'sDr. Shumiatcher is a prominent lawyer inRegina, .Saskatchewan, well known as a lecturer,writer, defender of freedom. This articleis excerpted by permission from his new bookWelfare: Hidden Backlash (Toronto: Mc­Clelland and Stewart Limited, 1971).

298 THE FREEMAN Mayestate in turn swore fealty to theirlord. Theirs was an obligation toserve him in return for which theyenjoyed the right to till the soil towhich they were bound. Thoughtechnically a free man, the serfpassed with the ownership of theland from owner to owner. Hegrew his grain on the lord's soil,ground his-flour at the lord's mill,baked his bread in the lord's oven,and for these rights he paid a feeto the lord in terms of his labor.The lords, the nobles, theknights, the serfs - all had theirplace in society, fixed by the customsof the feudal hierarchy. Stabilitywas the criterion of the societythat William and his successorssought to achieve and which,for five centuries, assured securityto each class according to custom.Every individual had a place - andthere was a place for every individual,but that place was, infact, a prison. The bars of feudalsociety were the multitudinousrules and regulations which governedthe daily life of all people.Each was bound by the invisiblechains of his status that could notbe altered. Each man's estate wasdetermined not by what he did orwhat he was capable of doing orwhat he might wish to do. It wasdetermined by where he was born,and when, and to whom. The clothingwhich each member of an estatecould wear was regulated.The games one could play, the hom·.age to be received or rendered, thespouse one might take in marriage,the rituals one was required toperform - all of these were fixedand determined by rules fromwhich there could be no deviation.Departure from the rules meantloss of status or ostracism, andfailure to abide by the edicts ofthe church might mean denouncement,imprisonment, or death. Allof the minutiae of life, from wombto tomb, were strictly regulatedand religiously enforced by thefeudal society. It might be theking's prerogative to travelthrough the country and enjoy thelord's bed and board, or the lord'sright to sample his vassal's beefor his bride, or the knight's libertyto loot and plunder from anenemy.A Break from FeudalismThe curtain of security that thefeudal· system and the medievalchurch had cast about all membersof society was gradually tornaway. Serfs and vassals andknights broke through that curtainand left the land and moved intothe towns where they became artisansand tradesmen, merchantsand dealers. Gradually, they enteredthe middle-class.professionsand some became members of· anew class of bourgeoisie. Theywere able to work under contracts

1972 STATUS: END PRODUCT OF WELFARE 299which, for the first time, they werefree to negotiate for themselves.Their status was no longer determinedby the accident of birth. Itmattered not who they were. Whatdid matter was what they wereable to do, and as a consequencethey came to be recognized and rewardedfor what they did. Theirproductivity determined the moneyreturn they could expect to receivefor their services from their neighborsand fellow-burghers. Rewardcame not as a result of their statusand the rights and obligationsflowing out of that status, but asa result of what they knew andwhat they produced that was usefuland salable. The free marketreplaced the rigid rules of thefeudal estates. Free contract replacedfealty. Value, openly determined,replaced price arbitrarilyordered. The law of the marketplacecame to displace the law ofthe feudal lord. Free competitioneventually replaced legislated controls.The new society was ~ less secureplace for the individual thanthe feudal society had been. A mansoon found that he ran the risksof failure and starvation. And ifhe did not succeed, he was likelyto be abandoned, and might fallsick and die without so much asa crust of bread or the presenceof a priest. Until there were establishedthe guilds and friendly societiesandbrotherhoods of mutualassistance, this new freedomwas a fearsome thing. Yet it wasa challenging experience as well,and one which was welcomed bythose who, for the first time, werefree to pit their ingenuity andenergies, not against the intransigent.forcesof a system that fixedin advance the limits of their owngrowth and development, butagainst natural forces which theymight succeed in overcoming andturning to their own advantage. Inthe new game, the deck was atleast .not stacked against .themfrom the outset; they had a chanceto win. With knowledge, skill,· persiste~ce,and luck, an amazingnumber of men did succeed.Release of EnergyOut of this new freedom fromthe strait jacket of status whichhad so long limited and strictlydefined ~he rights and obligationsof each class in society, there weregenerated new energies. Originalityemerged, and innovationsthat enlivened an age which, forfive hundred years, had fed onlyon the past. New trades and industriescame into being. Enterpriseand invention appeared. Explorationof new continents began. Science,which had been mired in superstitionand darkness, made itsfirst timorous appearance in Europe.The unyielding barriers that

300 THE FREEMAN Mayfor so long had classified and categorizedall people began to crumble.With the breakdown of thefeudal rigidities, men and womenwere free to move about the countryand to choose occupations thattheretofore had been barred tothem. Literature and the arts entereda new era; with the end offeudalism came the awakening ofthe human spirit. Let loose werethe latent energies of those paintersand sculptors, poets and playwrights,composers and musicians,whose legacy reminds us that theRenaissance was an age not onlyin which the old rigidities ofstatus disappeared, but one inwhich the flowering of man's spiritproduced a great cultural treasurehouse after its long feudal hibernation.What was the one overridingchange that took place when feudalsociety crumbled and gave way toa new approach to life? The greatlegal historian, Sir Henry Maine,in his work, Ancient La,w, statedthat "the movement of progressivesocieties has hitherto been amovement from status to contract."It was the substitution offlexibility for fixed and unyieldinghuman relationships. Primitive societiesimpose on individuals andon classes of people a system oflaw designed to perpetuate thevalues which those having powerto impose it themselves embraceor consider necessary. Such lawsmay not be of general application;as a rule they enunciate no abstractprinciples by which the individualmay be guided in respectto his future conduct. More oftenthe law consists of rules devisedto deal with individuals or groupsof individuals in respect of specificacts or relationships.Three Principles for LawsThere appear to be at least threeessential principles that ought togovern substantive laws in a societyin which freedom of contractand not status governs the relationshipamong men.The first principle: laws should,as far as possible, be general andof general application. They oughtr..ot to be designed for the purposeof regulating the special relationshipsbetween A and B as distinguishedfrom relationships betweenall other persons. Neithershould they attempt to apply oneset of principles to class A personsand a different set of principles toclass B persons. All persons, ofwhatever class or "status," shouldbe treated alike,not only by procedurallaws but by substantivelaw as well. It is in this contextthat the principle of egalitarianismtakes on its most significantmeaning. Laws ought not to makefish of one group and fowl of another.When laws are made es-

1972 STATUS: END PRODUCT OF WELFARE 301pecially applicable to one class ofpersons as opposed to another, itgenerally follows that since the actof legislating is nQt a creative onein the sense that it is capable ofproducing something new - but isonly distributive in nature - whatthe legislature has done is simplyto take from Peter and give toPaul. It is then not long beforePeter will press for a compensatorylaw against Paul to redressthe imbalance and right the injusticehe considers has been donehim.Let us take a simple illustration.If the wages payable to one groupin the community are fixed by law- as, for example, those paid topolicemen or postmen or medicalmen - then injustice in the balanceof the community is bound to result.If the wages of the one groupare inordinately high as comparedto those of other working groups,all persons in the community exceptthe class enjoying the newhigher wage level are penalized. Ifthe wages fixed by law for. the specialgroup are inordinately low,then, of course, it is obvious thatthey are made the special marksfor discrimination and have beenunjustly treated. Or let us supposethat by law all wages are fixed accordingto a master wage plan. Itis possible, though most unlikely,that any legislative body will everpossess the sublime knowledge orwisdom to fairly legislate on sovast a subject. But even if such abody were able to equitably fixwage norms for all citizens, suchlegislation would be meaninglessunless it also fixed by law theprices of all goods andcommoditiesand services. Assuming the existenceof a sufficiently wise andall-knowing legislative or administrativebody to accomplish such anend, is it conceivable that equitycould be achieved for all personsin our own country, dependent asit is upon its trade with a hundredother sovereign states, each presumablypursuing a policy of economiclaw-making designed toachieve the optimum in the fairdistribution of goods among all ofits own citizens by law? Surely,what the closed feudal societyfound it possible to achieve, byrules designed to preserve thestatus of each class only at theprice of personal freedom, a worldof nations dependent upon internationaltrade and exchange israther less likely to create withinthe context of a society committedto maintain some semblance ofpersonal freedom.General Rules,Applicable to EveryoneThe second principle that oughtto govern substantive laws is that,in character, they should be generaland abstract and should deal

302 THE FREEMAN Mayonly with situations that may arisein futuro. Such laws ought to laydown general or abstract principles,and they ought never to operateretroactively. Laws of generalprinciple and of universal applicationare, as the Latin word indicates,the only true leges. Theseare to be distinguished from privileges,or private or special rights,which the Latin privatum-leges orprivilegium describes. Privilegesgranted· in special situations or toparticular groups are bound to resultin the deprivation of rightsin all other situations and to allother groups. Only where virtuallyall members of a society agree thatthe granting of special privilegesor rights to persons holding aparticular status is desirable andin the interests of all groups oughtthey to be granted. If granted,they ought to be clearly defined asa special privilege. For a privateright to one group of necessity imposesnew corresponding burdensupon all other groups who arebound to respect it or give it effect.What is the privilegedgroup's meat may well become thenonprivileged or underprivilegedgroup's poison.To illustrate, discriminatorylaws against the Negro - in education,in employment, in theownership or use of propertyareof a character which cannot besupported in a free society forthey specifically deny to one groupof persons .within the communityrights to which all other groupsare admitted. The white man whoclaims a right to be free from thepresence of black men in his neighborhoodseeks to deny to the blackman the same right which he assertsfor himself. That right is theright to live where he wishes, andit is a right that ought to be enjoyedby all men regardless of theircolor. The determination of whereeach wishes to live ought not to bethe subject of a penal law. If theblack man wishes to purchase ahouse in the white man's neighborhood,it is an abridgment of hisfreedom to prohibit him so doing.If the black man wishes to send hischildren to the school in which thechildren are predominantly white,it is an assault upon the blackman's freedom and, indeed, uponthe freedom of all members of thecommunity to prevent him fromdoing precisely that.But if the black man is to befreed from the shackles of hiscolor status, it cannot be by thecoercion of the white man. Thewhite man, no less than the black,is capable of being enslaved. Thus,it is no less an abridgment of thewhite man's freedom to deprivehim of the right to sell or disposefreely of his property to whomeverhe chooses than it is to prohibitthe black man from purchas-

1972 STATUS: END PRODUCT OF WELFARE 303ing any property from. any personwilling to sell it to him.In the regulation of human affairs,decent human conduct canseldom be successfully underwrittenby penal statutes. The statecan give no guarantees that manwill act understandingly with hisfellow man. At best, governmentscan crystallize the sentiments andstandards of conduct that the majorityof the members of a communityfreely choose to accord toall men. It can provide guidanceand incentives for such conduct.By its own example over a longperiod of time, it can influence theways and mores of the members ofsociety, as for example, by its ownfair employment policies. The roleof government is to open as manydoors of opportunity as it can; itis then for the individual to choosewhether he will enter.Principles 01 Natural JusticeThe third principle to whichlaws in a free society ought to adhere,both as to their substantivecontent and their. application, isthat at all levels those concernedwith making or administeringthem should act in accordancewith principles of natural justiceand not according to personalwhim, the transitory pressures ofpublic outcry, or the conveniencesof administrative officials.It is today a fashion amongsome legal theorists to declare thatthe law consists simply of thestatutes as they have been enactedby Parliament and the legislatures,the municipal councils, andthe great and burgeoning body ofadministrative agencies of government.Hence, it is argued, law iswhatever men, acting as membersof these bodies, declare it to be.Some academicians such as DeanRoscoe Pound and Mr. JusticeHolmes gave this theory great currencyin their writings and judicialdecisions, and these have influencedmany lawyers and judgesin holding that whatever legislatorsstate the law to be ,is, in fact,the law; that "whatever is isright." Theirs has been describedas the positivist theory of law.The positivist takes the positionthat it·is within the sole and exclusivepower of Parliament andthe legislatures to determine thewisdom of the policy of any pieceof legislation. Itis not within theprovince of the courts to strikedown any law or to hold it invalidsimply because it offends thecourt's concepts of what is fairand r'easonable. Parliament andthe legislatures are the sole judgesof the propriety of any statute.Only if legislation infringes thejurisdictional provisions of theConstitution will the courts declarea statute ultra vires. Thepositivist lawyer then seizes upon

304 THE FREEMAN Maythis rule to support his position,since there exists no higher authorityto adjudicate upon thevalidity of any law. Whatever thehigh court states to be the law is,in fact, the law. Of course thepositivist lawyers, though theymay be in vogue today, would notgo so far as to argue that "whateveris is right." They would contend,however, that it is for thelegislature alone to determinepolicy and to write the law. It isfor the courts to apply it.Conformity to Natural LawBut there is a growing body ofthoughtful opinion that takes anotherview. If legislation does notconform to the principles of naturallaw or natural justice, then thejudicial process may operate tohave such nonconforming lawsset aside and declared void and ofno effect. While the principles ofthe common law go some distancein assuring that statutes and regulationsare applied reasonably, itis also a cardinal rule that statutesmust be interpreted to accord withthe intentions of Parliament andnot necessarily with the preceptsof reason or fairness. Yet, wherelaws violate the principles of theConstitution, ample judicial poweris available to the courts to setaside the offending legislation.Why may there not be importedinto the Constitution the power ofa court to testa law according tostandards of reasonableness, or accordingto the law's conformity tothe values that society regards asvital to its preservation? ...Neither the judiciary nor thelegislature, nor indeed the executive,enjoys any monopoly of wisdomor good judgment. The limitationsof each are inherent in thenature of mankind. They are evenmore apparent in the business ofstatecraft than in the private affairsof men. By its very nature,the legislature is primarily concernedwith the state - a corporatebody, separate and distinct fromthe individuals who are apart ofit. As the power of the stategrows, it becomes the chief competitorof the individual for powerand wealth and, of course, for finalautonomy. The executive, as representedby the nation's vast bureaucracy,acts as the arm of thelegislature in carrying out andapplying the body of laws, in natureprohibitory, compulsory, confiscatory- all designed to regulatethe conduct of the citizen. Thelegislators, who are presumed torepresent the individual citizen noless than the executive of thestate, in fact compete with the individualfor such areas of free actionas exist.In the scramble for freedom, theneed for independent arbiters todetermine the boundaries as be-

1972 STATUS : END PRODUCT OF WELFARE 305tween individuals, on the one hand,and the state and its officials, onthe other, becomes vital. Judgessitting in courts of law are capableof providing a forum inwhich the conflicting rights of theindividual and the state may bedetermined with a degree of fairnesslikely to be found in no otherplace. Their decisions may not befree of error, but judges admit toerror (something I have seldomheard any politician publicly do).Error, indeed, is recognized as alikely concomitant of the judicialprocess, hence the right to appealto other courts of superior authority.Judges, by their long tenure,are made as free as it is possibleto make men from extraneousinfluences and improper biases. Onthe other hand, the very raisond'etre of the politician is his biasfor or against policies that heformulated or that were foistedupon him before he was confrontedwith the facts, and often long beforehe entered public office. What,after all, is a party platform excepta bundle of biases and popularpreconceptions? In·a court oflaw, the tyranny of the majorityhas no application. For considerationare only the rights and obligationsof the individuals before it.Imperfect though judges andcourts may be, they constitute theone institution in civilized societythat is designed to seek to adjustthe rights and obligations of individualsamong themselves, andof individuals in relationship tothe state, upon principles that donot seek justification in the weightof numbers (as from an electoralmajority), in the power of sanctions(as from the police power ofthe state), or in the influenceforgood or ill-of status or wealth.Freedom Y5. EqualityA court of law will treat all partieswho are before it equally. Butit will not attempt to make all whoare before it equal. Thus, judges,recognizing realities and in 'noway constrained to do what ispopular - rather than what isright - avoid the politician's penchantto embrace the principle ofegalitarianism when all of the observablefacts belie its validity.The politician today has grownfearful of a free society becausefreedom has a way of encouragingdiversity and compounding the"problems" of administering anypolitical program. The more uniformthe people of any society, thesimpler it is for governments tocontrol them and to maintain fixedstandards of living and establishednorms of behavior. If men are freeto do as they choose, disparitiesamong them are likely to increase.Such a trend would be contrary tothe most commonly expressed slog~nsof politicians that all "dis-

306 THE FREEMAN Mayparities" - regional, class, color,personal - ought to be eliminated.Will Durant stated the propositionclearly enough: "Freedom andequality are sworn and everlastingenemies, and when one prevailsthe other dies. Leave men free,and their natural inequalities willmultiply almost geometrically."lIf equality were the summumbonum of society, restrictionswithout number upon man's freedommight be justified in order torender all men as nearly equal ashuman institutions and devices arecapable of rendering them. But restrictionsupon liberty that areimposed to attain equality do notnecessarily result in achievingthat end. More often, such restrictionsproduce simply a fresh varietyof inequalities. At the sametime, the loss of freedom deprivessociety of its most vigorous catalystfor growth without substitutingany benefit in exchange.Hence the argument in favor ofrestricting freedom to attainequality among all mankind is amere chimera and sham, more attractiveas a rhetorical phrasethan as a viable possibility. Ourexperience and knowledge of therevolutions in Russia and Chinashow that those who justify theabridgment of liberty in the nameof equality end up by themselves1 Ariel and Will Durant, The ~essonsof History, p. 20.monopolizing liberty and declaring,in the words of George Orwell'selite of pigs, that while allpersons are equal some are moreequal than others.Freedom to ContractWe have observed that thestruggle of free men againstfeudalism's concept of status wasa long and arduous one. While itwas underwritten by the naturaldesire of individuals to improvetheir lives by exercising their latentabilities, the concept of freecontract found its rationale andjustification in the principles ofnatural law. Its source was the ecclesiasticallaw. In the upheavalsthat saw the decline and demise offeudal society, the principles ofthe Old Testament and the powerof the clergy played no small role.The appeal to natural law washeard in many places.When Adam delved, andEve span,Who was then a gentleman?Such was the theme of a sermonin Nat Tyler's Rebellion.Traditionally, there are certainbasic "rights" to which a man isnaturally entitled: the right. tosafety of his person, to liberty ofhis body, to his own good name, tofreedom from malicious vexationby legal process, the use and enjoymentof his own property, the

1972 STATUS : END PRODUCT OF WELFARE 307right to pursue ~nmolested histrade or occupation. These are elementsnecessary to the individualin order that he may live as hemay desire. Lord Denning stated:"What matters is that each manshould be free to develop his ownpersonality to the full; and theonly duties which should restrictthis freedom are those which arenecessary to enable everyone todo the same. Wherever these interestsare nicely balanced, thescale goes down on the side offreedom."2"Natural law" has been givenscant recognition by the courts inrecent times save in relation toprocedural formalities which mustbe adhered to by any person whodecides anything that affects therights or liabilities of others. Insubstantive matters, Parliamentand the legislatures are regardedas the sole judgesof what is rightand just and reasonable. It is atheory that has more to commendit in the abstract than in. practice.Nothwithstanding the unwilling~ness of courts of law to enter intothis field, in 1957 the Quebec AppellateCourt did recognize thesubstantive principles of naturaljustice in a case involving a suitagainst a school authority in whichthe right of parents to. educate2 Sir Alfred Denning, Freedom Underthe Law (London: Stevens and SonsLimited, 1949), Pp. 4-5.their children was in issue. In myview, the Chabot case 3 is one ofthe outstanding judicial landmarksof our time because it gave recognitionto the idea that there are,or ought to be, certain areas in humanrelationships that stand outsidethe ambit of the state's lawfulauthority to control. It is alandmark, also, because here thereexists the basis for a true mar..riage of philosophical ideals andlegal principles between the provincesin which the common-lawtradition runs, and the Provinceof Quebec whose dominant legaltraditions are rooted in the FrenchCivil Code. The Chabot case holdsthat the right of a parent to determinehow his child is to be educatedis inviolable; the parentsand not the state have a paramountobligation for the child'supbringing and, accordingly, it isthe parents' right to determine theschool their child should attend. Itis a right of which no governmentmay deprive the parent.Rights Dissolve into StatusMan is as much wronged whenhe is deprived of a society in whichhis natural rights may flourish aswhen he is deprived of an environmentwhich lacks fresh air andpure water and sunshine in whichhis body may thrive. These rights3 Chabot 'V. School Commissioners ofLamorandiere (1957) 12 D.L.R. (2d) 796.

308 THE FREEMAN Mayhave traditionally been expressedas variations upon the basic themeof the individual's right of noninterferenceat the hands of theking or his minions: the right tobe let alone, the right to be free ofthe overwhelming powers of thestate.-,'But in recent times, this conceptof the natural rights of manhas undergone a metamorphosis.The freedom to be let alone hasall but dissolved itself in the demandsof the welfarist to be meddledwith and cared for. The freedomto raise children according toone's conscience has disappearedin the welter of boards and agencies,school hierarchies, and teachers'federations, all of which claimsuch vast expertise and so profounda knowledge of pedagogythat they have succeeded in creatingan educational system moreexpensive and more remote fromthe child's home and family thanany hitherto produced by a civilizedsociety.Natural RightsThe freedom to negotiate andenter into agreements accordingto the best judgment of those whoare parties to such contracts hasdisappeared .in the overwhelmingzeal of politicians to scrutinize,modify, and nullify their terms accordingto the exigencies of politicalpopularity based upon suchesoteric principles as Canadian nationalism.The natural right of thecitizen to deal with his propertywith the same skill and acumen hedemonstrated in acquiring it is deniedhim by a higher, state authoritywhose capacity to produce,innovate, or invent has proven itselfsomething less than outstanding.The natural right to practiceone's profession according to itstraditional tenets, and to be restrictedonly by those rules thatfellow practitioners, likewisetrained and skilled, might impose,is fast disappearing with thestate's aggressive policies againstthe learned professions in.establishingsuch state-directed schemesas medicare. These whittle awaythe quality that, more than anyother, has contributed to successin the practice of medicine - a relationshipof confidence and trustbetween doctor and patient, freeof interference, direction, or controlfrom any branch of government.Some now claim that naturalrights mean the right to be fed,clothed, and housed by the stateand at public expense; the rightto be cured by the state when sick;the right to be entertained whenbored; the right to be sent·awayon vacations when tired; the rightto be protected against one's follyin making contracts; to be relieved

1972 STATUS: END PRODUCT OF WELFARE 309of one's carelessness in the abortionclinic; and to have one's unwantedchildren made wards orone's half-wanted children caredfor at day centers. And for someof the more sophisticated, whoclaim it as a natural right to beamong the new elite, there is theright to spend four years or moreat a university campus to learnhow to malign, with unimaginativeand stereotyped obscenities, thesociety whose duty it presumablyis .to shower all of these blessingslike rain upon the deserving andundeserving alike.Who Are You?Bills of rights and charters ofhuman liberties may go some distancein restraining governmentsfrom zealously pursuing programsfor what is euphemistically calledgeneral welfare at the expense ofthe individual's personal libertyand well-being. But in the lastanalysis, the extent to which governmentswill succeed in stiflinghuman liberties will be determinedby the philosophy of la.w thatjudges, sitting in their courts, areprepared to apply to the laws thatthreaten the individual's liberties.The bulwarks of liberty can onlybe constructed piecemeal andslowly, as individuals appear beforethe courts seeking to assertrights against specific abusive actionsof the state.We have travelled a long distanceinto the kind of society inwhich status plays the major role.Federal and provincial laws dovetailto classify all persons in amanner that freezes the positionof each of us almost as effectivelyas did the feudal system nine hundredyears ago. It is true thatthere exists no legal prohibitionagainst moving from one stratumto another. But the incentives (orlack of them) encourage the individualto clasp, like some magicamulet, the rights (and disabilities)of the particular class inwhich he finds himself. A staticsociety is the inevitable result.That is the kind of society that affordsthe highest degree of "security"for the citizen and causesleast trouble to the state bureaucracy.Let us consider a few examples.Are you an aged person? If so,your status places you in a specialslot that entitles you to pensionchecks, and in certain places youbecome entitled to medical care,reduced public transportationfares, and other special allowances.Are you an unemployed person?This status entitles you to claimupon the state for certain weeklypayments so long as you are notoffered alternate employment thatsuits you. If you follow the practicethat the scheme in fact encourages,you will build up suffi-

310 THE FREEMAN Maycient reserves in the plan to takea holiday at the expense of theUnemployment Insurance Commission,whether or not you are actuallyunemployed and unable tofind a job.Are you an employee in a plantin which there has been certifieda particular trade union? Thenyour status is strictly prescribedby the labor legislation underwhich the certification order wasmade. The ternls and conditions ofyour employment will not be determinedby you in your own personalcapacity, or according toyour own abilities, or even by thecontract which you, personally,may have entered into with youremployer. Neither is your productivity(unless you are paid upona piecework basis, a principle rejectedby most trade unions) thedeterminant factor of your earnings.The established trade unionassumes the role of your agentand representative, and you arebound by the terms and conditionsthat are negotiated for you by itsofficers.Are you a medical practitionerin a province which has adoptedmedicare? If so, your status is determinedby act of the legislature;your schedule of fees is approvedby the government, and every attendanceupon your patient isscrutinized by the governmentcomputer system that is operatedby employees of the state. Your accountsare examined and approvedor rejected by government employees,and your rights as themedical adviser of your patientsare prescribed according to theregulations of the state commission.Privileges ProliferateIf you are any of these, thereare programs for you. And thesecame into being through the activitiesof pressure groups, organizations,and regional agglomerate~which have made demands upongovernments to meet special situations.But more often than not, thepayments and subsidies and grantsand allowances, most of whichcame into being for temporary adhoc reasons, ultimately becomepermanent fixtures built into thefabric of the state that no politiciandare discontinue. They arenow coming to overwhelm citizensby their costliness. Like the proverbialwhite elephant the Emperorof Siam is said to have presentedas a gift to the subject hewas most solicitous to destroy, soCanada's politicians have been providingtheir special gifts in aid ofevery class and category in thecountry - each singled out forbenefactions so expensive to maintainas to ensure its ruin.No doubt, some of the programsin limited form can be justified.

1972 STATUS: END PRODUCT OF WELFARE 311But their proliferation results inthe cre·ation. of privileges andrights based not upon what any individualis doing or has done butrather upon the status that theindividual can persuade legislatorshe is entitled to claim. Not theleast. among the claimants arelegislators themselves. Among themore extravagant in recent timeswas the status accorded Torontoaldermen when they voted themselveslife pensions after fiveyears' service on the metropolitancouncil. The value of each pensionis estimated to total in excess of$50,000.. Their own contributionto the scheme is to be about $3,600.The balance, of course, is to beloaded upon the backs of the dociletaxpayers. Rights and responsibilitiesare based less and less uponwhat a person does and more andever more upon who he is. Thefeudal principle of status has beenrevived unde'r the guise of "progress."In fact, the principle is asretrograde as it is outrageous."50 Long as th'e Sun Shines .. /'Was this not .the very samepremise upon which the Treatiesbetween the Queen and the Indianbands of Canada were drawn ahundred years ago? "So long asthe sun shines and the watersflow," Indians and their descend­;Rnts were promised the government'scontinuous benevolence andcare. The Queen promised thatthey and their descendants wouldbe saved from pestilence and famine;their children would be educated;the medicine chest wouldalways be at the agent's office tocure their ills. A special statuswas thus created not only for theIndians who signed the Treatiesand their families who were'thendirectly affected' by their terms.This special status was to continueforever. In the result, Indianswere reduced to the status ofwards of the great Queen Mother.The legislation creating this sp~cialstatus was regarded as an actof benevolence and kindness. Butin the result, the legislation hadthe effect not only of taking fromthe Indian his lands - this was aloss of comparatively minor dimensions- but also of takingaway his independence, his selfreliance,his chance' to succeed, andthe possibility that he might fail.The status of beneficiary in awelfare state especially designedfor him robbed the Indian of alldesire he might have had to createhis own niche in the new burgeoningsociety that was in themaking everywhere about him. Ineffect, the Indian traded his freedomfor treaty money and thepromise of perpetual care in thewhite man's happy huntingground. Even the hunting becamea thing that the white man was to

312 THE FREEMAN Maycontrol and restrict. He was compelledto surrender suzerainty overthe vast tra.cts of land that hadbeen his. But instead of takingtitle to the new reserved propertiesin order that he might ownand control them, the Indian accepteda hybrid kind of right tolive on the lands designated andto use them collectively withothers. This kind of property rightwas of little value in any practicalsense. Legally, he might claim aright as beneficiary. But his wasthe child's right to use a publicplayground according to the rulesmade by his elders and betters.Just as playgrounds are said to belaid out and supervised in the bestinterests of the children, so it wasthe intention of the white man'sgovernment to designate and controlthe reserves in the best interestsof the Indian. But althoughchildren grow up and leave theirplaypens, and one day reach maturityandmanhood and come tooccupy a place in the world ofgrown men and women, the Indianremained a child, hemmed aboutby the protective fences and thepaternalistic rules of an unrealworld. Protected as a child, heacted as a child. Suspected of immaturity,he remained immature.Sheltered from the risks and adversitiesof the outside world,heavoided the contests of competition,the disappointments 'Of failure,the stimulus of success. TheIndian too often still speaks as achild, understands as a child, thinksas a child. He has not put awaychildish things because he neverhas really matured. Our societycondemns him to perpetual childhood.The Indian's reserve is the feudalestate of our century. Hispresence is an anachronism ofmedieval times. This must be amatter of concern to us all becausethe Indian is our neighbor,and his frustrations and failuresare things in which we all share.But his status has an additionalsignificance for all of us becauseit casts the shadow of the futurefor every man and woman in ourtime and in our children's. His isthe estate into which all of us areentering by virtue of the specialstatus that we either seek as membersof an artificially created classor are assigned by paternalisticgovernments. The result in bothcases will be the same. The qualityof life in the welfare state intowhich we have entered will eventuallydiffer in no significant wayfrom the welfare state in whichthe Indian has lived for a century.Indians AllIf we are concerned over theplight in which the Indian findshimself at this juncture of history,after a hundred yea.rs of state

1972 STATUS: END PRODUCT OF WELFARE 313welfarism, it may be appropriateto consider at the same time thecondition in which the non-Indianpopulation of Canada is likely tofind itself after we have lived justhalf that period in the great welfaresociety that has been designedfor the rest of the people of thiscountry. Are the conditions of thewelfare state in which every citizenhas been enrolled in any significantway different from thosewhich, for a century, have characterizedthe Indian's way of life?If the direction and regulation ofthe daily life of the Indian hasbrought him to his sorry plight,is there any likelihood that thesame kind of policy, pursued nationally,will produce among therest of us the kind of growth thatwe envisage for Canada's secondcentury? This is hardly likely tobe achieved unless there existsboth within and without the reservethe kind of society in whicha man can develop his independenceand grow to maturity ;where he will discover the motivesand incentives that are lackingand that are so necessary to thegrowth of any self-reliant humanbeing.Where Does One Turn?There was a time when such asociety could be found outside theIndian reserves. That kind of societyis now a vanishing phenomenon.The whole of our nation isfast becoming one great Indianreserve in which the agents of thestate are directing our lives anddestinies as certainly and as completelyas they have been dragooningthe lives and destinies of theIndian people for the past hundredyears. It is now not simply a questionof where the Indian can go toregain some self-respect and independence.The question is whetherany of us can maintain his ownself-reliance and identity as viablehuman beings in the face of theassault upon our lives by thepower of the state. The welfarecult, to which almost all politiciansappear to be committed in the mistakennotion that the individualwishes to be treated as a dependentchild, has moved Canadiansbehind the protective shadows ofan all-enveloping, maple-leaf curtain.To some, it may seem a welcomeshelter from the adversitiesof the times. But as surely as itreduced the Indian to a state ofslavish dependence and deprivedhim of his freedom to Iive as aself-sufficient human being, so itwill cause us all to degenerate intomere digits whose only real existencewill be found in the booksand c·omputers, the statistics andreports of the proliferating governmentsof this country.My one hope is that the Indianmay regain his soul and find his

314 THE FREEMAN Mayindependence in a free societywherever he may choose to buildit. My great fear is that governmentswill succeed not only inholding to ransom the Indian;ssoul as it has held his property,but that before many years havepassed it will make Indians of usall. Although the white man hasnot yet been reduced to the statusof the Indian, he is well on the wayto assuming that same status;all of us have become welfareoriented.Little wonder that'almost everyproposal that reaches the publicfrom a political platform, whetherconcerned with Indians or non­Indians, repeats ad nausea,m theneed for more welfare rather thanless, greater money paymentsrather than fewer, more governmentagents to the barricadesrather than their withdrawal,more educational direction ratherthan freer choice. The concept ofwelfare has become so ingrainedin the white man's way· of lifethat it has become his overridingphilosophy of life. It is the panaceafor all ills. If there is 'poverty thennaturally poverty can be cured bygovernment money. If there is illhealth, it can be eliminated bystate-paid medical care. Ifthere is ignorance, it can be dissipatedby government schools.The fact, however, is that povertyand ill health and ignorance cannotbe eliminated simply by attackingtheir symptoms with abarrage of money any more· thana case of measles can be cured byscraping off the pimples. As afever can be fought off and overcomeonly by the body in whichthe illness resides, and only bythe generation in that body of thestrength and will to .grow well, sothe ills of poverty and disease andignorance can only be cured bystrength generated in the body ofthe individual who suffers fromthem. External palliatives,. such asmoney grants, may seem to bringtemporary relief to the patient,and they assuredly give a very substantialcushion of comfort tothose who· administer that relief.But they will not produce a healthy.individual any more than they canfoster a vigorous or viable communityof men.Where Lies the Hope?There may be elaborate schemesproposed for the reparceling oflands or the redistribution ofwealth as a result of which theimpoverished Indian may be givena greater share. But the naturaldifferences among human beingswill reassert themselves, and in theend nothing is genuinely changed.The only way that real change canbe achieved - the only genuinerevolution that can change men'slives - emerges from the acquisi-

1972 STATUS: END PRODUCT OF WELFARE 315tion of new skills, the generationof positive motives, and the enlightenmentof the human mind.The only true emancipation of theIndian can come with his developmentand growth as an individual.This kind of change requires time- many decades of it - and patienceon the part of the Indianand the white man, and the kind ofunderstanding that rejects simplesolutions and instant answers.Because of his own experiencewith the welfare state, no' one inCanada today can testify more eloquentlyto the depressing resultsof that state than the Indian. Attractivethough it might seem, itis the trap that ensnares the unwary.It promises the ideal. ofegalitarianism to the poor; it holdsout the prospect of fair shares forall. The Indian, in his naivete andignorance, succumbed to theseblandishments.The rest of us, however, willhave no excuse for our self-debasement.If we anow the Ministerof National Health and Welfareto ensnare us further into the welfarestate, because it is easier tocomputerize twenty-three millionpeople for' guaranteed incomesthan it is to face up to the need ofexciting Canadians as individualsto the joy of earning their ownincomes and guaranteeing theirown futures, we will be skiddingdown the same sticky, tricky roadthat the Indian started down acentury'ago. We will end up in.thesame morass, the same dreadfuldecay. If this does happen, thewhite man will have walked intothe slough of despond with hiseyes wide open. He will learn thatthe blandishments of the great nationalbonanza can become only thebars of the new national Bastille.The Indian knows this road onlytoo' well. His history is its map,and every trap bears witness tohis suffering. At this juncture inour joint history, it is we whoneed the help of the Indian morethan he needs ours. He canwa,rnus that there will be no good huntingin a country whose governmentofficials multiply faster thanjack rabbits, for it will be foundthat all the cabbages we grow inthis green and pleasant land willnever be enough to satiate them.f)IDEAS ONLIBERTYSecurity May Betray UsAU grants, all subsidies, all rewards for services not rendered havea deleterious effect on character; and if character is not of foremostconsideration, what is?ARCHIBALD RUTLEDGE

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAINLAURENCE W. BEILENSON mustfeel like the man who sees an automobilebearing down on a blindman and suddenly loses his voice.He wrote a book not long agocalled The Treaty Trap, whichtried to tell our statesmen thatnations which depend on treatiesfor safety invariably discover thatpromises in international life onlylast as long as they prove convenient.In spite of Mr. Beilenson'swarnings the quest for writtenassurances of detente, or arms limitation,or defined spheres of influence,goes on.Meanwhile, as communiques areissued and treaties are signed, thenations continue to break theirword in almost routine fashion.Save for those who are w~ak, allof them are guilty, whether theyhappen to be communist, capitalistor "middle way" socialist. In hissecond book, Power Through Sub-vers'ion (Public Affairs Press, $8) ,Mr. Beilenson explores the longand lamentable history of the variousways in which nations havetried to weaken each other as theypursue the game of balancing thepower. Curiously, this is the firsthistory of its kind. But who, as weseek a "generation of peace," willread it? Must Mr. Beilenson'slarynx fail him again as the automobilemoves toward the blindman?Various "Blades" of SubversionMr. Beilenson begins by clarifyingthe ambiguous words he isforced to use. He speaks of thevarious "blades" of subversion. An"influencing subversion" will usethe blades of propaganda, agitationor offensive terror to get anothergovernment to follow certainpolicies without actually trying tooverthrow it. A "decisive subver-316

1972 POWER THROUGH SUBVERSION 317sion" will employ an armed fifthcolumn within an enemy state tochange the government withoutactually using the means of externalwarfare. -"Traditional subversion"is subversion beforeLenin. "Spigot subversion" iswhen you turn it on and off. Thereis "auxiliary subversion," "opportunistsubversion," "spotty subversion,"the "Vergennes Variation,"and the "Lenin Adaptation."The last is the worst, for, as Mr.Beilenson makes plain, it neversleeps and it never ends.Lenin actually developed no new"blade" of subversion. He learnedwithout benefit of Marx, by goingto the history of Bourbon andHapsburg Europe and by studyingthe way Napoleon spread theFrench Revolution. Traditionalsubversion, using such "blades" asbribery and the smuggling ofarms, usually preceded the marchingof armies. Britain employed"spigot subversion" to keep continentalEurope off balance.The Vergennes VariationThe Vergennes Variation wasemployed by France to help America.Vergennes expected no imme~diate benefit by sending arms tohelp the colonists defeat the BritishGentleman Johnny Burgoyneat the Battle of Saratoga. TheFrench foreign minister expectedthat an independent republic inAmerica would follow its own interest,even to the point. of rankingratitude. All he wanted out ofthe deal was to keep the Britishfrom deriving strength fromAmerica in wars still to come.The young United. States fulfilledVergennes' expectation ofingratitude the .moment when itbecame profitable to our FoundingFathers to sign a treaty of peacewith Britain. A century and a halflater Truman, Marshall and Achesonused the Vergennes Variationon their own to help Francethrough Marshall Plan money andthe NATO alliance. De Gaulleproved just as ungrateful asAmerica's John Jay had proved atthe end of the Eighteenth Century.But an ungrateful France,says Mr. Beilenson, is better forthe United States than a CommunistFrance.The Lenin AdaptationThe Lenin Adaptation has madeuse of all the traditional blades.But where "traditional subversion"often ended in open war,Lenin used his own adaptation asa substitute for war. Lenin did notbelieve in an adventurous policy.He had a fanatic's fixation onpreserving his socialist base. Hebelieved that one could recognizea revolutionary situation, but he

318 THE FREEMAN Maymade no pretense to being· aprophet about timing. In 1848there were revolutionary situationsall over Europe. But the revolutionswere either aborted orrepressed.. Since nobody could besure about timing, Lenin believedin the long-term financing of for~eign Communist parties, frontsand secret agents who would beon the spot if a revolutionary situationshould become ripe. Khrushchev,who followed Lenin's strategy,couldn't have known thatCastro would turn the anti-Batistarevolution into a fullfledged Communistrevolution. But the Communistshad their party and their"sleepers" ready to exploit Castro'sdiscovery that he had alwaysbeen a Marxist.What burns Mr. Beilenson up isthat "bourgeois" statesmen cannever seem to realize that Communistnations believe in havingtheir mounts "well shod on all fourfeet" even when the talk is ofdetente, or co-existence, or peace.All Communist agreements arelike· pie crusts, made to be brokenif a revolutionary situation develops.Ho Chi Minh waited fortwenty years to take over in NorthVietnam. Mao Tse-tung was willingto enter a coalition withChiang Kai-shek in 1946, butwhen the Soviets gave him allthose captured Japanese arms hewould settle for nothing less thanthe total defeat of the Kuomintang.Lenin signed the Treaty ofBrest Litovsk with Imperial Germanyto'. take Russia out of WorldWar 1. But when the Sovietsopened an embassy in Berlin, theyused it to spread subversion insidethe country that had permittedLenin to ride to the Finland. Stationin a sealed car. The LeninAdaptation makes no connectionwith gratitude.The Cautious SovietsAs Mr. Beilenson sees it, theSoviets, in using the Lenin Adaptation,err on the side of supercaution.If the United Stateshadn't been obsessed with Suez in1956, Khrushchev would neverhave dared send his tanks intoHungary to suppress the revolt.The Soviet army had withdrawnfrom Budapest in fear that Britainand America might send helpto the Hungarians. But when itbecame plain that Eisenhower andJohn Foster Dulles were givingpriority to their dispute with England,France and Israel, the Sovietarmy returned to Hungary.This does not mean that theSoviets will always be cautious.Lenin believed'in the inevitabilityof war with the capitalist world,and if the Soviets ever thoughtthey could win that war without

1972 POWER THROUGH SUBVERSION 319risk to the socialist base theywould certainly fire off their missilesand send their armiesmarching.The Not-So-Cautious ChineseMao Tse-tung's aphorisms areall paraphrases of Lenin's words."Political power grows out of thebarrel of a gun" is simply Lenin's"supremacy of violence." "Enemyadvances, we retreat; enemy tires,we attack; enemy retreats, wepursue" is Mao's way of expressingLenin's "doctrine of the situation.""Fight no battle you arenot sure of winning" is Lenin's"caution about war" in Chinese.But Mao has been· more adventurousthan Lenin in risking hisforces. After all, the Red Chineseinvaded North Vietnam and havetried to capture Quemoy andMatsu.Mr. Beilenson would like to seethe United States develop an"American Adaptation" to be directedagainst Communist rulerswho are trying to destroy ourform of government. Alas, in ourcurrent state of mind, this won'tbe done. Our "advocates of a goodon-paperworld" would considerAmerican subversion a breach ofinternational law. Our friendswould welcome an American subversion,but we are too soft in thehead to see it. Poor Mr. Beilenson.~ MAN, ECONOMY AND STATEby Murray N.. Rothbard (Los Angeles:Nash Publishing Co., 1971,987 pp., two-volume hard cover $30,one-volume paper $10)Reviewer : Tommy W.RogersTHIS is a welcome reissue of anexcellent treatise which originallyappeared in 1962. Rothbard developsthe edifice of economic sciencein the manner of the old-fashioned"principles" approach - slowly andlogically building an integratedand coherent edifice of economictruth from a few simple and basicaxioms. First, the FundamentalAxiom of a:ction - that men employmeans to achieve ends, followedby two subsidiary postulates: thatthere is a variety of human andnatural resources, and that leisureis a consumers' good.Beginning with the immediateimplications of the action axiom,Rothbard discusses various typesof interpersonal and social relations;the economics of voluntaryexchange, the economics of consumption,the pricing of consumergoods, and production theory. A"radical" feature of Rothbard'sanalysis of production is a completebreak with the "short-run"theory of the firm and its replacementwith dynamic Austrian theoryof marginal value productivityand capitalization.

320 THE FREEMAN MayThe author emphasizes the immensebenefits accruing to all participantsin the system of free exchange,and demonstrates theharmful effects of political interventionsin the marketplace. A centrallyplanned economy, Rothardobserves, is a centrally prohibitedeconomy. The concept of "socialengineering" is a deceptive metaphor,since in the social realm, itis largely people who are beingplanned rather than machinery andresources. Furthermore, bureaucracy,incompetent enough at handlinga stationary system, is vastlymore incompetent at planning aprogressive one.This book frankly takes off fromMises' Human Action, attemptingto spell out some of the implicationsof the earlier work, but alsodevoting considerable space to therefutation of opposing doctrines.It has meat enough to satisfy theprofessional economist, but it isnot beyond the thoughtful layman.A book like this one is indeed abasic instrument of economic education.I)HANDSOME BLUE LEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM: THE FOUNDATION fOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

tIleFreemanVOL. 22, NO.6. JUNE 1972When Men Appeal from Tyranny to God Edward Coleson 323A bicentennial for the men behind the freeing of slaves in England.Pollution and Property Oscar W. Cooley 336Not the socialists but the capitalists have the solution to pollution.The Founding of the American Republic:11. The War for Independence Clarence B. Carson 341Concerning the distinction between declaring for independence and achieving itin practice.The Cure for Poverty Henry Hazlitt 355Those who truly wish to help the poor will save and invest to create more andbetter-paying jobs.The Educational Dilemma Donald M. Dozer 359Identifying the lines of authority and responsibility in educational affairs."I Was a Slumlord ..."An East Harlem owner buys his freedom from rent controls.George Frank 365Business Baiting - 1972 Style Merryle Stanley Rukeyser 367A plea for an attempt to understand the nature and function of business beforedestroying the entire economy.Blood from Turnips Terrill I. Elniff 372Notes toward an understanding of John law's economic errors.Book Reviews:"Welfare: Hidden Backlash" by Morris C. Shumiatcher"Joseph Story and the American Constitution" by James McClellan378381Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tileFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591-7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount~$5.00 to $10,000-as the meansof maintaining and extending the Foundation's work.Copyright, 1972,. The Foundation for Economic Education, Inc. Printedin U.S.A. Additional copies, postpaid, to one address: Single copy, 50cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed In HistoricalAbstracts and/or America: History and Life. THE FREEMAN also Isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Mich·Igan 48106. Permission granted to reprint any article from this Issue,with appropriate credit, except "The Founding of the American Republic,"liThe Cure for Poverty" and III Was a Slumlord ..."

When men appeal fromEDWARD COLESONto GODOPPRESSION is as old as mankindand unfortunately is still with us.A few decades ago we were certainthat we were rapidly outgrowingthis ancient affiictionwith the advanceof civilization, but thesehopes have not materialized. Stillthe quest continues. There arethose who look back to, a golden ageof freedom and brotherhood in thepast, while others seek to find theirearthly paradise with the childrenof nature on a remote tropical islandsomewhere. It may be an interestingexercise of the imaginationto dream up an idyllic state ofnature where "noble savages" aretruly brothers and they all livehappily ever after. Yet, Rousseauand a lot of other romantic visionariesnotwithstanding, there havebeen relatively few Utopias overthe ages.Dr. Coleson is Professor of Social Science atSpring Arbor College in Michigan.Hobbes l much more realisticallydescribed life in this state of natureas "nasty, brutish and short."It is not only that primitive manfinds it difficult to satisfy his needswith his bare hands or crude tools,but that men prey upon each other.To Hobbes men were brutes so lifedegenerated into a perpetual conditionof "war of every managainst every" other in a strugglenot just to survive, as Darwinwould say, but to dominate his fellows.For man is possessed of "aperpetual and restless desire ofpower after power that ceasethonly in death." President Wilsonpressed for "self determination"as a right of all peoples duringWorld War I on the assumptionthat they wanted to rule themselves.According to Hobbes, theywant to rule each other. Nor isthis view unique.Adam Smith 2 suggests that this323

324 THE FREEMAN Junelust for power may be the principalmotive for slavery: "The prideof man makes him love to domineer,... therefore, he will generallyprefer the service of slaves tothat of freemen." In fact Smithcouldn't find much excuse for the"peculiar institution" but thisurge to dominate others. He wasconvinced that "work done byslaves ... is in the end the dearestof any," for the slave "can haveno other interest but to eat asmuch, and to labor as little aspossible." He was certain that "thecultivation of corn degenerated"and became unprofitable underslave labor in ancient Italy andGreece. He observed that "a smallpart of the West of Europe is theonly portion of the globe that isfree from slavery," but that thissmall part "is nothing in comparisonwith the vast continentswhere it still prevails." Smith thuslinked prosperity with freedom.and believed that the human familypaid dearly for the luxury ofpermitting a few to enslave theirfellows. If slavery is immoral anduneconomic, how can \ve banishthis ancient evil from the earth?Total Tyranny andSplit-Level FreedomHistorically, slavery has existedon two levels. Sometimes therehave been slave states where almosteveryone was subject to thewhim of a despotic monarch. Longago the Near East had its rulerswho could execute their subjects,even those about the throne, oncommand without even the pretenseof a trial. Ancient Greecehad its tyrants, too, who wereoften not much more restrained,in spite of all their democratic pretensions.We used to think thattyranny belonged to the dark agesof the past or to some primitivearea of the earth inhabited bycannibals, but Joseph Stalin dem:"onstrated that a ruler today canhold a nation in bondage as noancient despot could have done.We are finding that the tools ofmodern science which we hopedwould liberate us can most effecttivelyenslave us, and perhaps wehave seen only the beginnings ofscientific despotism in the "BraveNew World" of the future. Whetherthe masters who run the apparatuswill get caught in the machineryand will also be enslavedis a good question, but historicallyit has been found that the otherend of the slave's chain also boundthe master.The world has had considerableexperience with societies whichwere presumed to be half slaveand half free. The democraticGreeks attempted to operate atboth levels, and the aristocraticmasters of our Old South claimedall the "rights of Englishmen"

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 325which they denied to their ownslaves while they were fightingGeorge III. Even slaveholders recognizedtheir inconsistency andsought to have the situation remediedas they set up their new government.At the time of the ConstitutionalConvention, ColonelGeorge Mason of Virginia, himselfa slaveholder, condemned slavery,the great evil of his day, inwords that were indeed prophetic:The western people are alreadycalling out for slaves for their newland. Slavery discourages arts andmanufacture. The poor despise laborwhen performed by slaves. They producethe most pernicious effect onmanners. Every master of slaves isborn a petty tyrant. They bring thejudgment of Heaven on a country.As nations cannot be rewarded orpunished in the next world they mustbe in this. By an inevitable chain ofcause and effect Providence punishesnational sins by national calamities.3The Foundations of Our FreedomOur Founding Fathers quiteproperly had a bad conscience becauseof their own inconsistencies,for their claims to freedom werebased on an appeal to a HigherPower, not just to some abstractprinciples as with the French Revolutiona few years later. After all,their ancestors had resisted thetyranny of their rulers for centuriesby insisting that "the Kingis also under God and under theLaw." The Puritans had evenfought a war with Charles I a littlemore than a century and a quarterbefore our Revolution to maintaintheir God-given right to freedom.Patrick Henry later remindedGeorge III that Charles I had hadhis Cromwell just as Caesar hadhad his Brutus, but the figure ofspeech was not appropriate. Itwould have been more fitting toremind His Majesty that Davidhad had his Nathan, Ahab hisElijah, Belshazzar his Daniel, andHerod his John the Baptist, toname a few kings and their prophets;like Byron's "Prisoner ofChillon,"4 the Puritans were wontto "appeal from tyranny to God."This was more than a pious gestureor a political gimmick, morethan high sounding rhetoric withoutany basis in reality. The Puritanswere men of a Book and theyfound principles therein that appliedto the Old Testament eraand to the England of the Stuartsas well.The typical oriental despot ofthe ancient Near East was a godking,head of both Church andState. When religion was a powerfulforce, this gave his subjects noappeal from his authority. TheHebrew prophets resisted. similarpressures from their rulers andnever let them forget that "the

326 THE FREEMAN Junemost High ruleth in the kingdomof men...." (Daniel 4 :25) This\vas the Puritan approach. In likemanner a few hardy Germansmore recently reminded Hitler,"Gott is mein Fuhrer." Suchthinking is so foreign to modernphilosophy and legal theory thatHitler had his way with the Germannation - to its ultimate destruction.But it has not alwaysbeen so.The men who founded our nationwere very conscious of theconcept of a Higher Law. It wouldnot be an exaggeration to say ourgovernment was founded on thisprinciple. Ten years before our"embattled farmers fired the shotheard round the world" at Lexingtonand Concord, William Blackstonebegan the publication of hisfamous Commentaries on the Lawsof England, dedicated to the propositionthat God is the ultimateauthority. The colonists so avidlyseized on his writings that a decadelater Burke told Parliament,on the eve of the American Revolution,that there were more copiesof Blackstone's Commentariesin the Colonies than in England.It has been customary in the"debunking era" of the recent pastto insist that our colonial leaderswere not saints and that those whomay have made any religious pretensionswere more apt to beDeists than Christians. Certainlythere was a considerable' influencefrom the Enlightenment on thisside of the Atlantic, but at leastDeists believed in God's Law.Even such a notorious enemy ofthe "religious establishment" asVoltaire is quoted as saying thatif there were no God, we shouldhave to invent one. By contrast,contemporary philosophers say, accordingto Harvey COX, 5 "If Goddid exist, we should have to abolishHim." We have come a longway since the founding of this'nation and it has not all been uphill.If they did not always live upto the standards set by their ownconsciences, as in the case. ofslavery, they were still painfullyaware of their shortcomings. Theyalso believed in their accountabilityto the Judge of all the earth"God is not dead, nor doth hesleep," as Longfellow tells us inthe familiar Christmas carol.God's Law and Human FreedomA significant but little-knowndevelopment of the pre-Revolutionaryera was the abolition of slaveryin England. In 1765, the sameyear Blackstone began publicationof his Commentaries, an obscuregovernment clerk, Granville Sharp,met an injured slave on the streetsof London near the office of hisbrother, a kindly physician. Theslave had been severely beaten byhis master and cast out into the

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 327street to die. The Sharps eventuallynursed him back to health andstrength, and got him a job. Thatmight have ended it all but the exmasterlater saw his slave, nowrecovered in value, and attemptedto get him back. When the slaveresisted capture, he was throwninto jail; but Granville Sharp gotword of it and had the man releasedbecause he had been arrestedwithout a warrant, contraryto English law. When Sharp tookthe unfortunate man to his homefor shelter, the master prosecutedhim for theft of his slave.In the ensuing litigation andother cases that came up in thenext few years, Granville Sharpbegan pressing for the abolition ofslavery. Although no lawyer andcertainly no part of the rulingclass, his propaganda campaign,largely directed toward the legalprofession at this time, was soeffective that the "King's Bench,"the British Supreme Court, finallyliberated all the slaves in England.This historic decision of LordChief Justice Mansfield was passeddown on June 22, 1772, just twocenturies ago. Said Mansfield,"Tracing the subject to naturalprinciples (the Moral Law), theclaim of slavery can never be supported."Actually, the number ofslaves freed was relatively small,perhaps fourteen or fifteen thousand,mostly servants of retiredWest Indian sugar planters, but itwas a start. Here was a clear applicationof Blackstone's principlethat the Law of God should be theultimate standard.Sad to say, Blackstone had notbeen that helpful in the protractedlitigation: he was also concernedwith previous legal opinions andproperty rights. After all, themaryet value of the freed slavesmay easily have exceeded sevenhundred thousand pounds sterling,6no small loss to the slaveholdingclass.· Nevertheless, it wasBlackstone's doctrine of the MoralLaw which was clearly basic tothe decision, .though the conceptwas neither new nor unique. JohnWesley, the popular preacher ofthe day, said the same thing: "Inspite of ten thousand laws, rightis right and wrong is wrong still."Can it be that the law-abidinghabits of the English people arerooted in the ancient convictionthat there is an ultimate right andwrong which even the king is powerlessto alter? With lawlessnessthreatening to destroy our nation,perhaps it is about time to reexaminethe foundations of ourlegal code. Why should anyone respectlaw when he knows that toomuch of it represents the connivingof pressure groups, seekingto rig the market in their favorand to rook the rest of us ?The next success in the cam-

328 THE FREEMAN Junepaign against slavery was slow incoming and was largely the workof another, William Wilberforce.Unlike Sharp, Wilberforce was anaristocrat, a member of Parliament,and an astute politician. Hewas also recognized as a giftedspeaker, even in an age of greatorators. In spite of his obvioustalents, Wilberforce almost leftParliament when he rather suddenlybecame a Christian convertof the Reverend John Newton, aformer slave-trading sea captainturned preacher and author of"Amazing Grace". Wilberforcenearly decided that politics wasunsuited to a Christian. At thiscrucial point in his career hisfriends enlisted him in the waragainst slavery, and the fight dominatedthe rest of his life.The abolitionists chose first toattempt to stop the commerce inslaves across the Atlantic. Wilberforcegave his first great antislaveryaddress in Parliament in thespring of 1789, introducing hisbill for the abolition of the slavetrade. Two months later, the Bastillewas stormed in Paris acrossthe Channel and the French Revolutionwas on. Unlike EdmundBurke, Wilberforce was enthusiasticabout the changes coming inFrance ("Bliss was it in thatdawn to be alive," said Wordsworth),and had high hopes that"Liberty, Equality and Fraternity"meant freedom for the slaves.The French Revolution and theNapoleonic Wars which followedno doubt hindered the English abolitioncampaign, but finally in1807 Wilberforce pushed the antislave-tradebill through Parliament.The big job then was toenforce it. The Royal Navy policedthe tropical waters of the Atlanticbetween Africa and the Americas,the notorious "Middle Passage,"for the next half century and moreuntil our Civil War effectivelystopped the trade (theimportationof slaves had been illegal herealso for decades but smugglingcontinued as long as there was amarket) .The British naval patrol operatedout of the excellent harbor atFreetown in Sierra Leone, WestAfrica. Here the maritime courtsat, and here captured slaverswere brought for judgment. Ifthey were convicted, they lost theirship and cargo, an assorted collectionof several hundred Africans.The liberated slaves weresettled in villages about Freetownto be civilized, educated and, hopefully,Christianized. English missionarysocieties invested manypounds and many lives in the venture.After all, this was the"White Man's Grave." Since theslaves came from any point alongthe Guinea Coast of Africa wherethey could be obtained, they were

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 329very diverse linguistically and culturally.It was said that a hundreddifferent languages and dialectswere spoken on the streets of Freetownin those days. It was a costlyproject, and often a heart-rendingone too; and the British stood togain nothing in the transaction.Yet, Wilberforce and others continuedto press the battle on everyfront in spite of continuing frustration.The final victory in the Englishabolition campaign came longafter the slave trade was outlawed.The remaining step wasemancipation of the slaves in theBritish colonies, mostly plantationworkers on the sugar islands ofthe West Indies. Wilberforce hadgrown old in the fight. He died in1833 as the emancipation bill wasmaking its way through Parliament,but he lived long enough toknow it would be enacted. An interestingfeature of the law beingpassed was the provision that theslaveholders should be compensatedby the British governmentfor the loss of their slaves. "ThankGod," said the aged Wilberforce 7a few days before his death, "thatI should have lived to witness aday in which England is willingto give twenty millions sterlingfor the abolition of Slavery."Opponents of the bill and thefaint hearted promised dire calamitieswhen the law became effectiveon the first of August thefollowing year (1834). Militaryreinforcements were sent to theCaribbean to maintain order, butthey were never needed. As RalphWaldo Emerson tells us, writingten years later, everything wentoff smoothly:On the night of the 31st of July,they met everywhere at their church­"es and chapels, and at 'midnight,when the clock struck twelve, on theirknees, the silent, weeping assemblybecame men; they rose and embracedeach other; they cried, they sang,they prayed, they were wild with joy,but there was no riot.... The first ofAugust came on Friday, and a releasewas proclaimed from alf workuntil the next Monday. The day waschiefly spent by the great mass of thenegroes in the churches and chapels.The clergy and missionaries throughoutthe island were actively engaged,seizing the opportunities to enlightenthe people on all the duties and responsibilitiesof their new relation,and urging them to the attainment ofthat higher liberty with which Christmaketh his children free. 8Good Works and Laissez FaireThe reformers who abolishedslavery throughout the BritishEmpire are a fascinating group,both for what they did and forwhat they believed. It is standardsocialist doctrine that the menwho made the Industrial Revolutionin England, the laissez-faire

330 THE FREEMAN Juneeconomists and practical businessmenfrom the time of Adam Smiththrough the reign of Queen Victoria,were a money-grabbing lotdevoid of compassion and "socialconcern" (to use the contemporaryjargon). No doubt part of themfit the stereotype perfectly; butthere were many others who wereChristian gentlemen, in the bestsense of that much abused term,and used their wealth and influencefor the good of mankind.A recent writer, Robert Langbaum,9has prefaced his book onthe Victorian Age with an interestingcontrast between the menwho pushed reform in England,including the abolition of slavery,in the decades before and after1800, and their grandchildren whobelonged to the Fabian Society acentury later and l,aid the foundationsfor the British welfare stateas instituted by the Labor governmentof our own time. The formergroup, William .Wilberforce, hisrelatives and friends, were devoutChristians who used their politicalpower - they had an influence outof all proportion to their numbers- to promote worthy causes. Theyalso invested large sums of theirown money in private charity.This "power elite," derisivelynickna~ed the "Clapham Sect" orthe "Saints" by their political enemies,believed, said Langbaum, "inpiety, reform of church and state,moral action and laissez-faire economics."Their posterity a hundredyears later (the famous"Bloomsbury Circle," includingJohn M,aynard Keynes) "disbelievedin religion and moral action,and did believe in governmentregulation or ownership ofindustry. . . ." Thus, too briefly,is described "the century-long migrationof English liberal intellectualsfrom Clapham to Bloomsbury,"from a Christian freeenterprise philosophy to a secularsocialism.It should be remembered that tospeak of the Bloomsbury Circle asthe children of the Clapham Sectis no figure of speech; they cameof the same distinguished f.amiliesand were .in fact the grandchildrenand great-grandchildren ofthe Evangelicals who had beenWesley's disciples and who hadsuccessfully promoted so many reforms.Yet today, a multitude ofAmericans consider socialism asthe moral and ethical alternativeand laissez-faire capitalism as utterlyunchristian. Obviously, someoneis confused, then or now; orthe question is irrelevant.Protectionism AbandonedWhat makes the problem sofascinating is that the next Britishattempt to promote the abolitionof slavery, beyond continuingantislave-trade naval patrol, was

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 331to no small degree the work ofthat arch free trader and freeenterpriser, John Bright of theAnti-Corn-Law-League. Shortlyafter the last slaves were liberatedin the colonies, a new propagandacampaign w,as launched in Englandto abolish protective tariffs.We don't commonly associateslavery and tariffs, but FredericBastiat, a French contemporaryof Bright, connects the two in afamous passage, discussing theproblems of the United States:... look at the United States (in1850). There is no country in theworld where the law is kept morewithin its proper domain: the protectionof every person's liberty andproperty. As a consequence of this,there appears to be no country in theworld where the social order rests ona firmer foundation. But even in theUnited States, there are two issues- and only two - that ~ave alwaysendangered the public peace.What are these two issues? Theyare slavery and tariffs. These are theonly two issues where, contrary tothe general spirit of the republic ofthe United States, law has assumedthe character of a plunderer.Slavery is a violation, by law, ofliberty. The protective tariff is a violation,by law, of property.It is a most remarkable fact thatthis double legal crime - a sorrowfulinheritance from the Old Worldshouldbe the only issue which can,and perhaps will, lead to the ruin ofthe Union. It is indeed impossible toimagine, at the very heart of a society,a more astounding fact thanthis: The law has come to be an instrull1entof injustice. And. if thisfact brings terrible consequences tothe United States - where the properpurpose of the law has been pervertedonly in the instances of slavery andtariffs - what must be the consequencesin Europe, where the perversionof the law is a principle; asystem ?10Certainly Bastiat's words havebeen prophetic. Slavery ne.arlywrecked our nation in the 1860'sand the Smoot-Hawley Tariff of1930, following the Crash of '29,intensified the Depression and precipitatedan international tradewar that helped to bring on WorldWar II. And the problem is stillwith us. John Bright did not helpus rid ourselves of our tariffs,although he did do much to promotefree trade for Britain in1846 and thereafter; but he madea real contribution to our attemptto free the slaves at the time ofour Civil War. We owe him much.John Bright's RoleJohn Bright, a prominent memberof a new generation of reformersthat grew up with the passingof the Clapham Sect, makesan interesting character study. Hewas an earnest Christian, a humbleQuaker who never outgrew the

332 THE FREEMAN Junelittle· Meeting House which he hadattended in his childhood. He wasa self-made man, a successfulcotton manufacturer from theManchester area and long a memberof Parliament; but he tookhis faith into his business andpolitics, and refused to compartmentalizehis religion. WhenBright ll found free trade in theScriptures and proclaimed, "As anation of Bible Christians, weought to realize that trade shouldbe as free as the winds of heaven,"the cynical could smirk that hestood to gain by the Repeal of theCorn Laws and free trade in general;to them he was just usingreligion to bolster his economicposition. The criticism was notfair. It is true that when he promotedthe repeal of the Corn"Laws,he was a national figure and wasexceedingly popular; but when hebitterly opposed the Crimean Wara decade later, England turnedviolently against him. Still, hedid not adjust his conscience tothe whims of the passing moment.The American Civil War wasthe real test of Bright's character.He abhorred war, althoughhe was not a complete pacifist; heabhorred slavery also, but he wasa cotton manufacturer and waswell aware of the dependence ofthe Manchester area on Southerncotton. His good friend RichardCobden, with whom he had laboredso mightily in the days of theCorn Law agitation, tended tofavor the Southern free tradersas against Northern protectionists;but Bright convinced himthere were more important principlesat stake. Many Englishmenopenly symphathized with theSouth and there were enough incidentslike the Trent Affair\ (theeapture by a Northern naval commanderof a British ship carryinga couple of Southern agents)to bring the North and Englandto the brink of war.On the Side of freedomQueen Victoria's husband,Prince Albert, is credited withhaving helped to avert a conflictin this case, but he was fatally illat the time and died soon afterward.It was John Bright who remainedthe constant friend of Mr.Lincoln's government throughoutthe war, although his self-interestas a textile manufacturer wouldhave inclined him in the oppositedirection. The American people expressedtheir gratitude, too, in anumber of ways. Perhaps themost interesting tribute was containedin an address given by adistinguished American to a groupof English school children afterthe war. He told them that, ofcourse, American school childrenloved George Washington first of

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 333all, then Abraham Lincoln, butJohn Bright 12 came third "becausehe is the friend of ourcountry."This' friendship should not beminimized because it is quite obviousthat the North had about allit could handle in defeating theSouth without European intervention.Had Britain gone to theaid of the Confederacy, it wouldno doubt have changed the courseof history. And it was the Englishconscience, the deep-seated oppositionto slavery throughout thenation, that tipped the balance infavor of the North. Once againthe English were prepared to payfor their convictions, this time inwidespread unemployment, particuarlyin the cotton mills, andeconomic distress for the nation.But freedom is more importantthan prosperity, when that is thechoice.Conscience and Laissez FaireThe freedom story is fascinating,but one can read it as a humaninterest story and still missthe point. Present-day scholars\vho know of the mighty labors ofa couple or three generations offree enterprisers who sought torid the world of the blight of slaverylong ago, tend to feel that theEnglish abolitionists were inconsistent.If laissez faire means noninterferenceby government inbusiness, then why should theslave business have been singledout for destruction. Of course,those who raise such questions todayare not defending slavery butquestioning the logic of laissezfaire.This is an exceedingly importantconsideration because it revealsa total lack of comprehensionby our contemporaries of themotives and philosophy of thoseengaged in that earlier effort. IfWilberforce, Bright, and their associateshad been anarchists, thepoint would be well taken; thenall they could have done consistentlywould have been to wait forslavery to wither away of itselfas the Soviet government is supposedto do some day. While it istrue that there are and have beenlaissez-faire anarchists over theyears, these abolitionists cannotbe so classified; nor was AdamSmith, the father of the free enterprisetradition, out to abolishgovernment.Smith did want to do away withthe innumerable and senseless mercantilistrestrictions so characteristicof his age, because he wascertain that they reduced productivity(which they were intendedto do) and hence resulted in needlesspoverty and suffering. ButSmith'sl:~ "obvious and simple systemof natural liberty" was basedon "the laws of justice" (the Mor-

334 THE FREEMAN Juneal Law) ; he was no anarchist. Hebelieved, as did many of his contemporaries,in a natural harmoniousorder; that God had so arrangedHis Creation that "allthings work together for good,"if we but obey Him (Romans8 :28). If this is true, the endlessattempts to rig the market androok the neighbors were unnecessary,immoral, and a cause of needlessconflict. As Bastiatl-! asked,"How could God have willed thatmen should attain prosperity onlythrough injustice and war?"Mercantilism, ancient and modern,is based on the "frightfulblasphemy," that God has so orderedthe world that the right isimpractical, common decency issuicidal, and the oppression of theweak and helpless is good business.This view Adam Smith andhis followers emphatically rejectedon philosophical and ethicalgrounds..While they might disagreeas to how much governmentis necessary and appropriate, theydid agree that slavery is contraryto the Higher Law and should beabolished. To them it was badbusiness ·and worse morals.Christian GentlemenIt may seem preposterous to amultitude of people to speak ofthe laissez-faire economists andpractical businessmen of the IndustrialRevolution as Christiangent!emen much concerned withreform. According to the popularnotion, as T. S. Ashton1;") tells us,"... the course of English historysince about the year 1760 to thesetting-up of the welfare state in1945 was marked by little buttoil and sweat and oppression."There was some of this certainly,but this is only part of the story.A contemporary historian, EarleE. Cairns,16 writing of Wilberforceand the Clapham Sect in thedecades before and after 1800, insiststhat they accomplished moreof a constructive nature than anyreform movement in history andthere were others who followedthem who accomplished much also.Then why the very bad reputationof this era? Certainly fewperiods of history are more notoriousthan the early IndustrialRevolution. Generations of Socialistsblackened the good nameof these men who did have theirfailings and this age which didhave its problems. Some of theirbitterest critics were their owngrandchildren, the BloomsburyCircle. Today, sadder and wiser,we realize that we could certainlylearn much from them, if we wouldforget our prejudices long enoughto· examine' the record. Indeed, acontemporary scholar, Karl Polanyi,17tell us that the four greatinstitutions of the ,nineteenth century- the balance of power, the

1972 WHEN MEN APPEAL FROM TYRANNY TO GOD 335• FOOTNOTES •gold standard, the market economyand lirriited government­"produced an unheard-of materialwelfare" and also "a phenomenonunheard of in the annals of Westerncivilization, namely a hundredyears' peace" (1815 to 1914). He is,of course, aware of the CrimeanWar and the Franco-PrussianWar, for instance, which he regardswith some reason as fairlyminor disturbances (since he isspeaking from a European pointof view, the American Civil Wardoesn't count) . It should be addedalso that Polanyi is a Socialist, accordingto his own testimony, sohis kind remarks about Capitalismtake on additional significance.Perhaps we have come full circleback to our beginnings, as oneEnglishman wrote recently: "Inour own unpleasant century weare mostly displaced persons, andmany feel tempted to take flightinto the nineteenth as into a promisedland. . . ." Retreating to thepast is clearly impossible, if itwere desirable, but we can facethe future with courage, as didour Fathers, and take as our mottoJohn Bright's slogan: "In workingout our political problem, weshould take for our foundationthat which recommends itself toour conscience as just and moral."~1 Michael Curtis (ed.) The Great Po­!itical Theories, Vol. I, from Plato andAristotle to Locke and Montesquieu, pp.296-302.2 Adam Smith, Wealth of Nations(Modern Library edition), p. 365.3 Garet Garrett, The American Story,p.,87.4 Lord Byron, "On the Castle of Chil­Ion."5 Harvey Cox, The Secular City, p. 61.6 Edward C. P. Lascelles, GranvilleSharp and the Freedom of Slaves in England,p. 27.7 Sir Reginald Coupland, Wilberforce,a Narrative, pp. 516-517.8 Emerson's Essays (Modern Libraryedition), Pp. 839-840.9 Robert Langbaum, The VictorianAge, pp. 9-10.10 Frederic Bastiat, The Law, pp.18-19.11 Asa Briggs, Victorian People, p. 207.I:! George Barnett Smith, The Lifeand Speeches of John Bright, M.P., Vol.2, pp. 113-114.1:~ Adam Smith, p. 651.14 Frederic Bastiat, Economic Sophisms,p. 88.15 F. A. Hayek (ed.), Capitalism andthe Historians, p. 32.16 Earle E. Cairns, Saints and Society,p.43.17 Karl Polanyi, The Great Tran.'~formation,pp. 3-5.

ndPropertyOSCAR W. COOLEYIN ALL THE WELTER of worry about"the environment," seldom is propertyand its relevance to pollutionmentioned.To own property is to have ameasure of control over a definableportion of one's environment. Ifone has property, he has a degree ofpower to prevent his environmentfrom being despoiled. Indeed, thepurpose of property, it seems, isto enable man, the owner, to bringenvironment under control andmake it yield up a maximum ofsatisfactions.It has often been noted thatpeople pollute least - that is, takebest care of - that part of the environmentwhich they themselvesown. The householder is more solicitousof the home he owns thanthe renter is of the house in whichMr. Cooley is Associate Professor of Economicsat Ohio Northern University.he is but a temporary tenant. Afamily which, on a picnic, mightleave litter in a public park andbeer cans by the roadside will notdump waste on their own frontlawn.Is it possible, one might ask,for an owner to "pollute" his ownproperty?' To the extent that it ishis to utilize as he sees fit, whateverhe does with it will be, in hisview, its best use. And when aresource is being put to its bestuse, it can hardly be said to be"polluted."If I deliberately pipe sewage intoa pond on my own land, presumablyI consider using thepond as a cesspool to be its optimumuse. Hence, there is noabuse, no pollution. If however,either purposely or inadvertently Iallow my sewage to flow into aneighbor's pond, against his will,336

1972 POLLUTION AND PROPERTY 337I am without question polluting.lam lowering the value of hisproperty. The obvious remedy isfor him to assert his propertyright and ask me to cease; if I donot, he may ask the public authorities,a major function of whichis to protect his and everyone'sproperty rights, to enjoin my action.This is the normal way inwhich property is protected in acivilized society.It does not follow that in thecase cited the neighbor would, invariably,bring an action againstthe polluter of his pond. This depends,on the one hand, on howmuch damage he is suffering orabout to suffer from the pollution,and on the other, on how much itwill cost him to get the mattercorrected. If the damage is trivial,he will not press the matter; or ifhe does, his case probably will bedismissed. Even if the damage isconsiderable, the cost of proving itmight be greater, in which casehe would endure it as an unavoidable"neighborhood effect" orminor externality.A Private Lake Erie?If, now, the pond is Lake Erieand has no specific owner, but issaid to be "social property" or "inthe public domain," people. willtake a quite different attitude. Topollute it is to injure well-nigheveryone in general but no one inparticular. "Everyone" does not goto court and seek injunction. Hence,it seems one may pollute this"pond" with impunity, there beingno owner to object. And so it becomesa public sewer.As such, it is· at first very useful,for the dilution is so greatthat no harm is evident; but asthe sewage content of the waterincreases, injury is done to thosewho would drink the water, towould-be bathers, to fishermenwhose catch dwindles, to huntersof waterfowl, and even to peoplewho live along the banks. None ofthem takes action, however, mainlybecause he does not considerthat he owns that body of water.He does not consider that it is histo utilize and that he can thereforeexclude - and enlist the Stateto help him exclude - all othersfrom its use. In short, Lake Erieis unlike the farm pond, it is notprivate property. That is why it ispolluted. It is public domain, andthe public domain easily becomesa public dump.If, now, Lake Erie were convertedinto private property - letus assume it becomes· the recognizedproperty of the "Lake ErieCompany," which proves itself thelegal heir of those who bought itfrom the aborigines - we wouldhave a quite different situation.The company would want to maximizeincome from the lake, as from

338 THE FREEMAN Junea tract of owned farm land, residentialproperty, forest, coal-bearingland, or other asset. It mightdo so by selling rights to fish, tosail, to bathe, to transport passengersor freight, and by sellingwater to cities. It would undoubtedlyimprove its property by stockingwith desirable species of fish,deepening ship channels, improvingbeaches, and so forth.The owner would naturallystrive to conserve its lake propertyin the most practical ways possible,so that it would reap a generousincome, both now and in thefuture. At the moment, it mightpay to sell to the cities along thelake the right to use it as a sewer;but this would threaten the futureincome to be gleaned year afteryear from the fishermen, bathers,shippers, boaters, drinkers, andother potential users. Only if thecities would pay the company asum greater than the present valueof all the streams of anticipatedfuture income would the lake beturned into a sewer; and that, onemay surmise, would cost suchcities as Cleveland and Toledo apretty penny.In all the voluminous literatureof conservation,l seldom is itpointed out that only under pri-1 An exception is Exchange and Production:Theory in Use by Alchian andAllen (Belmont, Calif.: Wadsworth,1969) p. 563.vate ownership are the resourcesof the earth most fully conserved,since it is the private owner whohas the keenest incentive to maximizehis returns in future as wellas at present. This is because theprivate owner is conscious of havingsacrificed to get his property,a fact which has indelibly impressedupon him that it is a scarcegood, to be carefully husbanded.Public property, on the other hand,is regarded by the public as a"free good," unlimited in amountboth now and forever. Since it belongsto everyone, no one personcan prevent others from using it.Hence, each reasons that he hadbetter get his while the getting i'sgood, that is, now. The result, farfrom conservation, is rapid exploitationand waste. The preventionof pollution is, of course, buta special case of the general principleof conservation.Correction by LawEnvironmentalists are wont tovisualize land, water and air beingprotected and conserved by policeaction. Laws will be enacted - wiselaws, enacted by socially mindedlegislators who somehow are giftedwith the knowledge of just howeach natural resource should beutilized to achieve the greatestgood for the greatest number, bothnow and in the future. These lawswill set the private, profit-seeking,

1972 POLLUTION AND PROPERTY 339polluting entrepreneur back on hisheels. Once such laws are passedand enforced, the problem of pollutionwill melt away. This is thepolitician's solution to what is essentiallyan economic. problem.Undoubtedly, changes in thelaws are needed,. Certainly we needchanges which will spell out anddefine the rights of property ownersmore clearly and specificallythan has been done up to the present.For example, just what arethe property rights in a flowingstream? In a body of shifting air?In the ocean deep? In the fish thatswim, birds that fly, animals thatwander now largely at will aboutthe environment? The present lawsof property are concerned mainlywith the solid land, but this constitutesonly about one-fourth ofthe earth's surface and representsan even smaller fraction of herresources.Gordon Tullock in his booklet,The Fisheries . . . Some RadicalProposals (Columbia, S. C.: Univ.of South Carolina) now out ofprint, foresees the privatizing ofthe ocean fisheries. Once the ocean,at least the shallower parts of it, isdivided into privately owned plots- and Tullock suggests in some detailhow this might be done - itwill be "farmed" much more productivelythan it is at present, hebelieves.There was a time when man allowedthe land to produce what itwould - animals, birds, trees,fruits ,.- and he hunted the product.But it was a laborious andhazardous business, and one mayimagine every family ranging overmany square miles to bag a living.Then, man learned to domesticateanimals and to till the soil andgrow crops. This vastly increasedhis production. But as to fish andother sea wealth, both organic andinorganic, we are still largely inthe hunter stage. We have harnessedonly a small fraction of theearth's resources, yet we are alreadyobsessed with the threat ofover-population.The Origin of Property RightsAs man evolved from hunter toherdsman to tiller, he devisedproperty in land, for only as eachcould exercise control over his littlecorner of the environmentcould he be sure of reaping wherehe had sown. As Harold Demsetz 2puts is: "Property rights arisewhen it becomes economic forthose affected by externalities tointernalize benefits and costs." Hecites Eleanor Leacock's study ofthe Indians of eastern Canada. Inearly days, when they huntedmerely for food and a few furs forthemselves, conservation of wild-2 In "Toward a Theory of PropertyRights," American Economic Review,May 1967.

340 THE FREEMAN Junelife did not pay, and hence theyhunted far and wide, recognizingno property in land. But when thewhite men came and the fur tradebecame profitable, hunting landsand even individual beaver houseswere allotted to families. In thelanguage of economics, they internalizedexternal costs and benefits.The cattle grazing industryacted similarly when the cattlemendiscontinued the "free range" andfenced their individual holdings.Man has been slow to defineproperty rights in water and air,not only because of its seeming inexhaustibility,but also because ofits fluidity. It is recognized, however,that an owner has a right topure ,vater on his land, eventhough it flows from his neighbor'sland. In like manner, a householderhas a property right topure air over his house and lot, forwhat would the latter be worth ifoverlaid with a vacuum? Thegrowing insistence that powerplants, steel mills, and the likecease pollutingtheir neighbors' airis a recognition of this right.To. pollute my neighbors' land,air, or water is to trespass on hisproperty. The rights of propertyneed to be more sharply delineatedand respect for· them intensified.For maximum protection and conservation,resources now said to bein the public domain should be reassignedto the private domain.Not the socialists but the capitalistshave the solution to pollution!,IDEAS ONLIBERTYSocial Reforms,SOCIAL REFORMS which require the citizen to depend too directlyon his government for food, occupation, employment, crops,clothes, and homes, compel abrogation or abandonment of constitutionsand bills of rights .... The false laudation of the strengthof these instruments naturally creates an impression that theyconstitute an unbreakable barrier against oppression. But nothingcould be farther from the truth. They are futile in every respectif the general principles of government are not observed. Theyhave value only in an economic structure of free enterprise andprivate property.From "Liberals" and the Constitution by HENRY PLOW DEEPER

341CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC11The Warfor IndependenceIT WAS ONE THING to declare independence;it was another to acquireit. It was one thing to rebelagainst British rule; it was anotherto bring off a successful revolution.It was one thing to makewar; it was another to win it. Itwas one thing to deny the old authority;it was another to establisha new rule. The pledge whichcloses the Declaration was one tobe taken seriously; those whosigned it committed their "Lives,"their "Fortunes," and their "sacredHonor." True, those whogathered around to sign the documentengaged in some bravado.John Hancock scrawled his namelarge enough that the king couldread it without his spectacles.When reproached with the factthat there were enough people bythe same name in his state to assurehim virtual anonymity,Charles Carroll from Marylandadded "of Carrollton" to his signature,noting that there was onlyone man who would fit that description.But the task that layahead required endurance and tenacityto match the decisivenessjust exercised.The difficulties confronting thePatriots - for so those who favoredindependence have been mostDr. Carson shortly will join the faculty ofHillsdale College in Michigan as Chairman.ofthe Department of History. He· is a notedlecturer and author, his latest book entitledThrottling the Railroads.

342 THE FREEMAN Junecommonly called - were numerousand resistant to resolution. Onesuch difficulty is frequently. ignoredby revolutionists, thoughfailure to deal effectively with itthwarts the purposes for revolt;for the American colonists it wasto see that the revolt against Englanddid not turn into a revoltagainst all authority. The usualcourse of revolution is for a breakdownof authority to follow the repudiationof the old authority.When this happens, there ensuesan often brutal contest for power,accompanied by the disintegrationof society, bloodletting, and the developmentof well-nigh irreconcilabledivisions among the people.Power is usually consolidated onceagain and order restored by anautocratic rule. The object for theoriginal revolt, however noble, iscommonly lost from sight as theyearning for order supersedes thequest for the good society.The deepest source of the disintegrativeimpact of revolution nodoubt lies in the human conditionitself. What man is there whowould not like a fresh start, whowould not like to be free of hisdebts, who would not like to be relievedof the tangle of duties andobligations in which he finds himself,who would not relish the opportunityfor starting over. Revolutionappears to offer such an invitingprospect. As he made hisway home from the First ContinentalCongress, John Adams encountereda man fired by emotionssuch as these. The man said: "Oh!Mr. Adams, what great thingshave you and your colleagues donefor us ! We can never be gratefulenough to you. There are no courtsof justice now in this province,and I hope there never will be another."lJohn Adams understood thatthis was not a laudable opinion,and there were many others whointended to prevent the dissolutionthat would accompany the dominationof events by men holding suchopinions. The Americans were generallysuccessful in avoiding manyof the pitfalls of revolution. But, bythe refusing to arouse the populaceby holding forth visions of beatitudethat would follow from theirefforts, they also forfeited fanaticalzeal in their followers. The AmericanPatriots had quite limitedmeans for achieving their limitedends.Divided Opinion in AmericaA more obvious difficulty at thetime was posed by the Loyaliststhosewho remained loyal to theking and to England. So long asthe colonies retained their connectionwith Britain, most Americansjoined in the opposition to Britishpolicies during the period of risingdiscontent. They sometimes dif-

1972 THE WAR FOR INDEPEDENCE 343fered over tactics and as to thecorrect theoretical position on theconstitution. But once the decisionfor independence was made, somegoodly number of people retainedtheir loyalty .to Britain. Thesethreatened to turn the war into adomestic civil war as well as a waragainst Britain.How many'Loyalists there werewas in doubt at the time and hasremained so ever since. Those prosecutingthe war in Britain wantedto believe that Americans in generalretained their loyalty, especiallythat the sober and substantialinhabitants did. Hence, theywere favorably disposed to exaggeratedacounts of their numbers.Such a view made sense of theidea of subduing the "rebels," forafter such a conquest Britain stillmight rule America if a substantialportion of the population wasloyal. Moreover, British armieswere continually being encouragedto come to this or that province onthe grounds that Loyalists wouldturn out to support them in greatnumber. The extent of loyalismhas been revived as an importanthistorical question in the twentiethcentury by those attempting tomake a Marxist or class-struggleinterpretation of American origins.These historians have resurrectedwhat was once the Britishview for reasons quite differentthan those that would have interestedKing George III. On thisclass-struggle interpretation, menof wealth and position in Americawere usually Loyalists, and thethrust for revolt came from thelower classes.This interpretation is not substantiatedby the facts. A modernhistorian describes the social statusof the Loyalists in this way:"Some came from quasi-aristocraticfamilies, like the Fenwicksof South Carolina, and others werethe humblest folk. They were rich,like Joseph Galloway of Pennsylvania,and they were poor; theywere large landowners, and theywere middling and small men ofproperty; they stood behind counters,and they possessed hands unwrinkledby trade or toil. . . .Truth to tell, the Loyalists wereof every station and every occupation.":!He goes on to point outthat Anglican clergymen and otherofficials dependent upon Britainfor appointment or livelihood werelikely to remain loyal. He alsonotes that some men of'conspicuouswealth were among the Loyalists,3a point that is offset by thefact that there were prosperousmen among the Patriots as well.Textbook lore has it that thepopulation was divided in thisfashion: one-third Patriots, onethirdLoyalists, and one-third neutrals.About the.only thing to commendthis estimate is that it is a

344 THE FREEMAN June. formula easily remembered by undergraduatesfor test purposes.Since no census was ever taken todetermine the number of Loyalistsand Patriots, most evidence ofnumbers is indirect. The mostcritical of such evidence indicatesthat the Patriots generally preponderatedover the Loyalists. Loyalistswere able to achieve militarysuccesses only in conjunction withBritish armies. They could noteven hold territory gained by theBritish. Once the main armymoved on, Patriot militia usuallyswarmed over the Loyalists. Thefollowing estimate of Loyaliststrength may be very near themark: "In New England they mayhave been scarcely a tenth of thepopulation; in the South a quarteror a third; but in the Middle coloniesincluding New York perhapsnearly a half."4There were, then, Loyalists inconsiderable number in Americaafter the Declaration of Independence.They did not, however, succeedin turning the conflict into afullfledged civil war. They were athreat to internal security; theyoffered encouragement to Britainto continue the war; they hamperedthe mustering of the resourcesof the states ~ and they attemptedto undermine the war effort. Itis not surprising, then, that thePatriots dealt with them ferociouslywhen they encounteredthem in battle or that they weresubject to persecution when theywere discovered.Wartime ProblemsThe leaders of the revolt haddifficulty enough without civil war.They had to lead by way of makeshiftgovernments during most ofthe war. The colonial governmentswere no more, once independencewas declared. Indeed, they had alreadybeen replaced with provincialcongresses or legislatures beforethat event in most states.They subsisted for some timewithout formal constitutions, andtheir exercise of authority smackedof extra-legality, to put the bestface on it. Though the states werefaced with the crisis of prosecutinga war, they were under thenecessity of moving carefully inorder to· carry as many peoplewith them as possible. The stateswere hardly united, and their wareffort was plagued by the fact thateach state tended to go its ownway. The only union governmentwhich existed from 1775 into 1781was that provided by the SecondContinental Congress. It had noconstitution, nor any authority exceptthat which derived from thestates. It was not a government inthe usual sense of the word,though it attempted to performthe diplomatic and military functionsof one.

1972 THE WAR FOR INDEPEDENCE 345The most perplexing difficulties,however, were military and financial.To confront the most powerfulnavy in the world, the stateshad only a few ships that could becalled warships; most of the damagethey were able to do againstthe British was done by privateerswhich depended upon speed ratherthan armor. The armies should becalled occasional rather than regularor standing. True, Congressauthorized a Continental Army,made requisitions on the states formen and supplies, appointed generals,and undertook the directionof campaigns. There was a ContinentalArmy from the time of itsformation until the end of thewar; but at times - usually inwinter - it dwindled to the pointthat it more nearly resembled aparty than an army. When someregion was threatened, the armycould be fleshed out with numerousincrements of militia. TheBritish did not usually conductwinter campaigns, .so that an occasionalarmy was nearly enough- for defensive purposes.The Continental forces, duringmost of the war, however, were notsufficient to go on the offensive.The army frequently lacked· mostof the things which make an army:discipline, effective officers forsmaller units, uniforms, blankets,tents, firewood, food, adequateshot and powder, sufficient musketsor rifles and bayonets, andcontinuity. The initial enlistmentswere for one year only: only longenough, as Washington observed,for them to absorb some trainingand come under discipline beforetheir officers had to begin to treatthem with great deference in thehope that they would re-enlist. Themilitia were undependable and unpredictablein combat in the openfield; they were of greatest usewhen they outnumbered the enemy.Financing was so ineptly managedand the consequences were soimportant both to the conduct ofthe war and the founding of theRepublic that it will receive treatmentin a separate chapter.Advantages of the PatriotsIt is appropriate to focus attentionon the difficulties confrontingthe Americans in the War for Independence.It enables us to seehighlighted the sacrifices, bravery,and tenacity of those who did persevereto victory. But it is appropriatealso to note that the Patriotshad advantages as well as difficulties.Americans were fighting,usually, on their own soil. Theyhad the potentiality of supplyingmany of their wants at home.They did not have to conquer Britain,only to drive her forces fromthe states. They had much greaterprospects of gaining friends amongEuropean nations than did Brit-

346 THE FREEMAN Juneain, for Britain's successes in theSeven Year's War had been at theexpense of other major powers.The American Patriots had acause, too, which much outrankedthat of their enemy. They werefighting for liberty and independence;the best that the Britishcould do was appeal to monarchy,empire, and tradition, and theircase for tradition was flawed bythe innovations which had provokedcolonial resistance.Even the method of assemblingand maintaining armies was moreappropriate than is often appreciated.It is true, of course, that thearmy should have been better fed,clothed, shod, munitioned, andhoused. A strong case can bemade, too, that if Patriot commandershad had larger numbersof seasoned and disciplined troopsthey might well have won decisivevictories long before they did. Butit is quite possible that an armycomposed of men with long-termenlistments in resplendent uniforms,who were extensions of thewills of their officers and who hadgarnered a series of brilliant victories,would have endangeredAmerican liberty. Many thoughtfulAmericans feared just the sortof army wanted by any man confrontedwith the military tasksbefore him. Congress was loatheto encourage long enlistments.They feared a standing army, asmight be expected of men of Britishdescent. Americans were consciousnot only of British historybut of Roman history, and of thethreat posed by successful generals.America did avoid the shoalof military dictatorship followingthe revolution, and a plausible reasonwhy is that there was no armywith which anyone inclined to suchexploits could be confident of accomplishingthem.Outstanding LeadershipThe Americans had another advantage,too; they had GeorgeWashington as commander-inchief.Whether he was a greattactician or not is a question thatcan be left to military historians.But there should be no doubt thathe had that peculiar combinationof qualities of a man to whomothers turn in difficult situations.He was dignified, tenacious, farsighted,disciplined, correct, and agentleman. His personal braverywas of the sort that is called fearlessamong soldiers and sometimesfoolhardy for a general. Morethan once he rallied his troops byexposing himself to enemy bullets.A lesser man than he would havecommitted and lost several armies,if he could have assembled thatmany. Washington was sorelytempted to risk his army to rescueand redeem his reputation. Yet heresisted this temptation time and

1972 THE WAR FOR INDEPEDENCE 347again, believing that it was moreimportant to keep an army in·thefield than hazard the Americancause on the chance of gainingpersonal glory. He said after beingdriven from Long Island: "Weshould on all occasions avoid ageneral action, or put anything tothe risk, unless compelled by anecessity into which we oughtnever to be drawn."5 He persevered,persevered when beset bycritics in Congress and the states,by the shortages and inadequaciesof his army, by superior armies,by a war of attrition in the lateryears, and by mutiny of some ofhis forces. He had not only to directhis armies against enemyforces that frequently outnumberedhis, were better equipped,better disciplined, and better supportedbut also to keep up a continualcorrespondence with Congressand with state officials togain support and to get men andsupplies. Small wonder that heoften longed to return to Mt. Vernonand pursue his own affairs.Yet he persevered for more thaneight years, from 1775 to 1783.There were, of course, othergenerals and officers whose leadershipand ability contributed to theAmerican cause. Among themwould be listed: Benedict Arnold(until his betrayal), Henry Knox,Anthony Wayne, NathanaelGreene, and Daniel Morgan. TheContinental Army benefited much,too, from foreign volunteers, notably,Lafayette, De Kalb, and VonSteuben. And there were privatesoldiers, whose names do not adornthe pages of books, but who endureduntold misery to remainwith the Continental Army andprovide the troops without whichgenerals are of no account.The British ForcesOn paper, the British were sofar superior to the Americans thatno contest might have been expected.They had the most powerfulnavy in the world. They had anestablished government, the recognitionof foreign powers, centralizedtaxation, established credit, amuch larger population on whichto draw, much greater productivecapacity, and an existing and disciplinedarmy, though it was small.They hired thousands of Germansto supplement their own forces.Moreover, Loyalists in Americamight support them.But the task of the British wasmuch more complex and difficultthan that of the Americans.Armies had to be transportedacross 3,000 miles of ocean in unpredictablesailing ships. Not onlythat, but the army and navy hadgenerally to be supplied fromhome, and this transport was frequentlyexposed to Patriot privateersalong the thousands of miles

348 THE FREEMAN Juneof coast line of the American continent.Once their armies left theshelter of the supporting naviesand moved inland, they wereamong a generally hostile populationwhich rallied against them,as Generals Burgoyne and Cornwalliswere to learn to their sorrow.They were· always short oftransport for inland maneuvers,and George Washington saw to itthat very little fen into theirhands. If America was divided athome, so were the British, thoughit did not tell much for the firstcouple of years.British strategy was threefold:to isolate the continent from therest of the world by blockade, todivide and conquer America, andto destroy Washington's army.The policy of divide and conquerhad many facets: rally the Loyaliststo the cause, separate the regionsfrom one another, capturethe major seaports, and so on.Patriotstrategy was, above all, tokeep an army in the field, and,hopefully, to drive the Britishfrom· the continent. The Britishaimed to keep down the atrocitiesso as not to turn more of theAmerican population againstthem;in this they were frequentlythwarted by armies which plunderedand raped wherever theywent. Washington's armies wereunder strict orders not to plunder,but.they did engage in confiscationsto gain stores and supplies.Hostilities broke out in Massachusetts,of course, in April of1775, more than a year before thedeclaring of independence. For theremainder of the year and intothe next, the bulk of the Britishforces were concentrated at Bostonand environs. This force wasunder siege and cut off on landby Patriots.The first major battle of thewar took place June 17, 1775. Ithas gone down in history as theBattle of Bunker Hill, though, infact, it was a battle over Breed'sHill. The Americans, some 1,200strong built a redoubt on Breed'sHill, which the British attackedwith 2,200 men against a slightlyreinforced American force. TheBritish· took the hill, but at acost of 1,000 casualties, two anda half times the losses by thePatriots. General Gage observedthat he could ill afford anothervictory like that. Shortly afterward,Washington assumed commandof the Patriot forces, and astalemate ensued for the next severalmonths.Expedition Into CanadaThe scene of action shifted elsewhere.For some time, BenedictArnold, and others, had been promotingthe idea of an expeditioninto Canada. It was hoped thatsuch an undertaking would bring

1972 THE WAR FOR INDEPEDENCE 349 .the Canadians in on the side of thestates, would remove a havenfrom British forces who couldfrom that vantage point launch anattack against the states, andwould show to the British the determinationof America. The planwas the more attractive becauseCanada was lightly defended. Congresswas reluctant to authorizethe expedition because there wasstill hope of reconciliation. Evenso, permission was given for itfinally.Two armies were launched intoCanada in late 1775. The mainarmy which set out byway ofLake Champlain was initially underthe command of General PhilipSchuyler, but he fell ill and wasreplaced by the much more· energeticRichard Montgomery. Thisarmy met with a series of successesby taking Forts Chambly andSt. John's, followed by Montreal.The way to Quebec, the historickey to dominance of Canada, nowlay open.Meanwhile, the second army underthe command of Benedict Arnoldwas making its way towardQuebec by a more easterly route.Arnold set out up the Kennebecriver through Maine along a routethe difficulties of which were onlyhazily grasped at the start. Arnoldand his men braved rapids, unsuspectedwaterfalls, long overlandportages, and some of the mostmiserable weather ever recorded toreach their destination. "So greatwere the hardships that officers ofthe two rear divisions turned backwith 350 men. But the rest plungedon through a forbidding wilderness,overcoming almost incredibleobstacles. Some of them becamelost; some died; all who could,struggled forward. . . . After amonth of desperate effort, 600scarecrows of men straggled intoa camp on· the headwaters of theChaudiere."G This was in earlyNovember; they reached Quebec afew days later.On December 2, 1775, Montgomery'sarmy joined forces with Arnoldoutside Quebec. Althoughthey now had superiority in numbersover the British, they wereunable to take advantage of it becauseSir Guy Carleton chose todefend the city from behind itswalls rather than come out intothe open. An assault upon the cityon December 31 failed. GeneralMontgomery was able to get asmall force within the walls, buthe was killed, and Arnold's menwho were supposed to make a rendezvouswith Montgomery's wereturned back after Arnold, who waswounded, relinquished the command.For several months, Americanscontinued to lay Quebec undersiege, but to no avail. SuperiorBritish forces eventually arrived;though American reinforcements

350 THE FREEMAN Junewere also sent to Canada, theywere driven out in 1776.Washington vs.HoweEarly in the year of 1776, Washingtonsucceeded in placing cannonon Dorchester Heights overlookingthe British positions aroundBoston. Sir William Howe, now incommand of the British army,judged his position to be too exposed,and in March the Britishabandoned Boston. Howe withdrewby sea to Halifax to await reinforcements.Meanwhile, Washingtonmoved his army to New Yorkin the expectation of a British attackthere. It came in August.Howe drove Washington's armyfrom Long Island, from Manhattan,a:nd then from White Plains.It then became a near rout as theBritish under the field commandof Cornwallis followed Washingtonin a retreat through New Jersey.Washington managed to haltthe British advance at the DelawareRiver in early December. Hehad gathered all the boats in thevicinity to transport his armyacross the river; once he had theboats on the·other side, he keptthem there.In any case, Howe did not followup his advantage. He wentinto winter quarters in New YorkCity, leaving much of his armyspread out over New Jersey. Forthe Continentals, it had been ayear of defeats and withdrawals.On the heels of the Canadianlosses had come the ousting ofWashington's army from New·York. The British were now withina few miles from the capitol atPhiladelphia. Washington had onlythe remnant of an army to opposethe military and naval might ofBritain.Howe could retire to the comfortsof New York; he had victoriesenough to sustain himthrough the winter. No such pleasantoption was open to Washingtonwho was faced with the imminentdissolution of his army and,the way things were going, noprospects of another one. If theBritish would not attack, he must.Under the cover of darkness onChristmas night he crossed theDelaware with his army to attackthe Hessian army at Trenton atdaybreak. The Germans surrenderedshortly after the attack began.A few days later, Washingtonengineered another victory atPrinceton. From his base at Morristown,Washington continued todrive the British from their positions.The extent and impact ofthe continuation of this campaignis spelled out by Samuel Eliot Morison:"In a campaign lasting onlythree weeks, at a time of yearwhen gentlemen were not supposedto fight, the military genius ofAmerica's greatest gentleman, and

1972 THE WAR FOR INDEPEDENCE 351the fortitude of some five thousandof his men, had undone everythingHowe accomplished, recoveredthe J ersies, and saved theAmerican cause."7British Occupy PhiladelphiaIn 1777, the British launchedtheir great offensive aimed at dividingAmerica and destroying thePatriot ability to resist. At thebeginning of the year, the massiveforce of British arms was centeredin New York City. Anotherlarge army was in Canada. It wasplaced under the tactical commandof General John Burgoyne. GeneralHowe conceived initially ofthe grand strategy of attackingnorth from New York to make ajunction with an attacking forcefrom Canada. Such a victory alongthe line of Lake Champlain, LakeGeorge, and the Hudson could havecut off New England from the restof the states. However, Howechanged his mind, decided to attackPhiladelphia instead, and putto sea with that destination inmind. He did leave behind anarmy, of sorts, under Sir HenryClinton, but it was insufficient toperform both its tasks of occupationand conducting a major offensivecampaign.For a good portion of the summer,Howe's destination was amystery to Washington. The fleetwas delayed first by an extendedcalm and then by contrary winds.Upon hearing that the fleet hadbeen sighted to the south, Washingtontook the main body of hisarmy to the vicinity of PhiJadelphia,leaving Burgoyne to themercy of the New England militia,as he said. Washington tried toblock Howe's advance with a smallerarmy at Brandywine Creek inearly September, but was defeatedand driven off. Howe moved on tothe occupation of Philadelphia,which Congress had lately abandonedin haste. Washington's. attackearly in October on the mainBritish force at Germantownfailed to dislodge it. He withdrewhis army to Valley Forge afterthis defeat.Burgoyne's SurrenderBurgoyne had about 8,000 menat his disposal, including Loyalistsand .Indians. A detachment underBaron St. Leger was dispatchedthrough the Mohawk valley fromOswego. toward Albany. This detachmentwas dispersed by troopsunder Benedict Arnold. Burgoyneproceeded southward at a leisurelypace, one not entirely of his ownchoosing, since his path was frequentlyblocked by trees newlyfelled by Patriots. Meanwhile, militiabegan to assemble around acore of Continentals whose taskwas to stop Burgoyne. Eventually,so many militia had gathered to

352 THE FREEMAN Juneaugment the Continentals underthe command of General HoratioGates that Burgoyne was outnumberedtwo to one. His supply routewas cut by Patriots. Burgoyne'shope of being relieved from NewYork City did not materialize;Clinton made only a foray up therivel", stopping well short of Albany.Burgoyne was cut off, surrounded;he surrendered his armyintact at Saratoga on October 17,1777. Gates was credited with thevictory, but men such as JohnStark and Benedict Arnold led theaggressive actions which bottledup Burgoyne.France Enters the WarSaratoga was the first greatAmerican victory. Trenton andPrinceton had been important battlesfor keeping up morale, butthey had been won at the expenseof contingents of British forces.Burgoyne surrendered one of themajor armies in America at Saratoga.There had been much sympathyamongFrenchmen for theAmerican cause from the beginning.America had sent emissarieseven before declaring independence.By 1777, Congress had sentto France the best known Americanat the time and America'spremier diplomat, BenjaminFranklin. An alliance was drawnup between France and the statesin February 1778, and shortlythereafter France was drawn intothe war.Not only did Saratoga bringFrance to the side of the AmericanPatriots, but it showed to anyof the British willing to learn theimmensity of the task that lay beforethem. Contemporaries thoughtGeneral Howe was much too cautious,even lazy and indifferent, ifnot a secret sympathizer with thePatriots. Historians of a laterdate have belabored him for unimaginativetactics. Yet Howe wasthe only commanding general whoever put Washington's army torout and administered successivedefeats. But to those who wouldsee, Burgoyne's defeat showedwhat could well happen to anyBritish general who committed hisforces beyond naval support. Farfrom finding numerous Loyalistsin the hinterland, Burgoyne foundthe countryside swarming withmilitia waiting to demonstrate themarksmanship of the backwoods.Nor would the continent succumbto the capture of this or that easternport city, even if one was thecapital. America had no centralcity; it was a land of farmersmainly who knew not the dependence,common in Europe, on asingle city. There was no Rome tofall in America.It is reasonable to conjecturethat the American Patriots shouldhave won the war in 1778. They

1972 THE WAR FOR INDEPEDENCE 353now had an ally who could challengethe British fleet and overmatchthe British army. TheAmericans had shown that theycould defeat a British army. Britainwas not in dire straits, buteven the government was no longerso determined to win. LordNorth got a bill through Parliamentin February 1778 aimed atreconciliation· with America. Apeace commission was dispatcheda little later which was authorizedto offer Americans just abouteverything they had asked forshort of independence. A commandcrisis developed in the Britishforces in 1778. Burgoyne returnedhome· on parole and in disgrace.The Howe brothers resigned commandof the army and navy inAmerica. General Howe may havebeen cautious, but Henry Clinton,who replaced him, was inept.Surely, all it would have taken todrive the British from Americawould have been a decisive musteringof American strength.The Winter at Valley forgeThis was not to be the case,however. Perhaps a better omenthan Saratoga for the immediatefuture was Valley Forge. The warwas to drag on for the better partof five more years, and the conditionof the Continental army atValley Forge in the winter of1777-1778 tells us why, at least inpart. One of Washington's biographershas described conditionsthis way:Thus, at the beginning of 1778, theArmy was witnessing one of thestrangest of races, a contest betweenthe axes of the men building hutsand the harsh wear-and-tear on theremaining garments of those whostill had sufficient clothing to permitoutdoor duty.... Although hospitalhuts were built early and in what wasbelieved to be sufficient number, theysoon were overcrowded with miserablemen who died fast or, if theysurvived, received little attention. Inspite of all exertion, it was the middleof January when the last of thetroops were under roof. Even thenthey did not always have straw totake the chill from the earthen floorof their huts. Thousands had no bedcovering.Food, of course, was the absoluteessential - and food, more than evenclothing or blankets or straw, waslacking at Valley Forge.. , . "Firecakes"frequently were all the halfnakedmen had to eat in their overcrowded,smoky huts. Early in theNew Year most of the regiments hadto be told the Commissary could issueno provisions because it had none,none whatsoever....These were desperate hours. Washingtoncontinued to watch and towarn. "A prospect now opens," hesaid February 17, "of absolute wantsuch as will make it impossible tokeep the Army much longer from dissolution...."8

354 THE FREEMAN JuneIndeed, the army did seem to beon the verge of dissolution. "InDecember 1777, for example, overtwo thousand men went home.Hundreds of officers tendered theirresignations; on one day alone,fifty threw up their commissions."!>Nor are these resignations and desertionsto be wondered at whenthe hardships of the army are contrastedwith the relatively goodlife of civilians. It is generally be..;lieved that about the only peoplein America suffering privationwere in the army. One historiansays, "Civilians·declined to forgotheir pleasures merely because thearmy was in want; at a ball atLancaster, Pennsylvania, in January1778, over one hundred ladiesand gentlemen gathered in alltheir finery to enjoy a 'cold collationwith wine, punch, sweet cakes... , music, dancing, singing ... "which lasted until four o'clock inthe morning."lO These revels weretaking place only a short distancefrom Valley Forge.The incongruities here accountfor the American impotence. Thereason for their existence needsnow to be explained. t)1 Quoted in Merrill Jensen, The Foundingof a Nation (New York: OxfordUniversity Press, 1968), p. 663.2 John R. Alden, The American Revolution(New York: Harper Torchbooks,1954), p. 85.3 Ibid., p. 86.4 Piers Mackesy, The War for America(Cambridge: Harvard University Press,1965), p. 36.5 Quoted in ibid., p. 91.• FOOTNOTES •N ext: The Scourge of Inflation.G John R. Alden, A History of theAmerican Revolution (New York: AlfredA. Knopf, 1969), pp. 203-05.7 Samuel E. Morison, The Oxford Historyof the American People (New York:Oxford UniversIty Press, 1965), p. 244.8 Douglas S. Freeman, Washington,abridged by Richard Harwell (NewYork:Scribner's, 1968), pp. 373-74.9 John C. Miller, Triumph of Freedom(Boston: Little, Brown and Co., 1948),p. 225.10 Ibid., p. 223.IDEAS ONLIBERTYDisciplineCALL it high training, or culture, or discipline, or high breeding,or what you will, it is only the sense of what we owe to ourselves,and it is greater and greater according to our opportunities.From an essay by WILLIAM GRAHAM SUMNER

HENRY HAZLITTTHE THEME of this study is theconquest of poverty, not its "abolition."Poverty can be alleviatedor reduced, and in the Westernworld in the Jast two centuries ithas been almost miraculously alleviatedand reduced; but poverty isultimately individual, and individualpoverty can no more be "abolished"than disease or death canbe abolished.Individual or family poverty resultswhen the "breadwinner" cannotin fact win bread; when hecannot or does not produce enoughto support his family or even himself.And there will always besome human beings who will temporarilyor permanently lack theability to provide even for theirown self-support. Such is the conditionof all of us as young children,of many of us when we fallill,and of most of us in extremeold age. And such is the permanentcondition of some who havebeen struck by misfortune - theblind, the crippled, the feeble-Henry Hazlitt is well known to Freemanreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as the concluding chapter in a forthcomingbook, The Conquest of Poverty, to bepublished by Arlington House.minded. Where there are so manycauses there can be no all-embracingcure.It is fashionable to say todaythat "society" must solve the problemof poverty. But basically eachindividual - or at least each family- must solve its own problemof poverty. The overwhelming majorityof families must producemore than enough for their ownsupport if there is to be any surplusavailable for the remainingfamilies that cannot or do not provideenough for their own support.Where the majority of families donot provide enough for their ownsupport - where society as a wholedoes not provide enough for itsown support - no "adequate reliefsystem" is even temporarily possible.Hence "society" cannot solvethe problem of poverty until theoverwhelming majority of families~have already solved (and in factslightly more than solved) theproblem of their own poverty.All this is merely stating in anotherform the Paradox of Relief:The richer the com,munity, the lessthe need for relief, but the more itis able to provide,. the poorer the

356 THE FREEMAN Junecommunity, the greater the needfor relief, but the less it is able toprovide.And this in turn is merely anotherway of pointing out that relief,or redistribution of income,voluntary or coerced, is never thetrue solution of poverty, but atbest a makeshift, which may maskthe disease and mitigate the pain,but provides no basic cure.Moreover, government relieftends to prolong and intensify thevery disease it seeks to cure. Suchrelief tends constantly to get outof hand. And even when it is keptwithin reasonable bounds it tendsto reduce the incentives to workand to save, both of those who receiveit and of those who areforced to pay it. It may be said, infact, that practically every measurethat governments take withthe ostensible object of "helpingthe poor" has the long-run effectof doing the opposite. Economistshave again and again been forcedto point out that nearly every popularremedy for poverty merelyaggravates the problem. I have an;.alyzed in this study such falseremedies as "land reform," theguaranteed income, the negativeincome tax, minimum-wage laws,laws to increase the power of thelabor unions, opposition to laborsavingmachinery, promotion of"spread-the-work" schemes, specialsubsidies, increased governmentspending, increased taxation,steeply graduated income taxes,punitive taxes on capital-gains, inheritances,and corporations,andoutri.ght socialism.But the possible number of falseremedies for poverty is infinite.Two central fallacies are commonto practically all of them. One isthat of looking only at the immediateeffect of any proposed reformon a selected group of intendedbeneficiaries and of .overlookingthe longer and secondaryeffect of the reform not only onthe intended beneficiaries but oneverybody. The other fallacy, akinto this, is to assume that productionconsists of a fixed amount ofgoods and services, produced by afixed amount and quality of capitalproviding a fixed number of"jobs." This fixed production, it isassumed, goes on more or less automatically,influenced negligiblyif at all by the incentives or lackof incentives of specific producers,workers, or consumers. "The problemof production has been solved,"we keep hearing, and all that isneeded is a fairer "distribution."What is disheartening about allthis is that the popular ideologyon all these matters shows no advance-.and if anything even aretrogression - compared withwhat it was more than a hundredyears ago. In the middle of thenineteenth century the English

1972 THE CURE FOR POVERTY 357economist Nassau Senior was writingin his journal:It requires a long train of reasoningto show that the capital on whichthe miracles of civilization depend isthe slow and painful creation of theeconomy and enterprise of the few,and of the industry of the many, andis destroyed,or driven away, or preventedfrom arising, by any causeswhich diminish or render insecure theprofits of the capitalist, or deaden theactivity of the laborer; and that theState, by relieving idleness, improvidence,or misconduct from the punishment,and depriving abstinence andforesight of the reward, which havebeen provided for them by nature,may indeed destroy wealth, but mostcertainly will aggravate poverty.!Man throughout history hasbeen searching for the cure forpoverty, and all that time the curehas been before his eyes. Fortunately,as far at least as it appliedto their actions as individuals, themajority of men instinctively recognizedit- which was why theysurvived. That individual cure wasWork and Saving. In terms of socialorganization, there evolvedspontaneously from this, as a resuItof no one's conscious planning,a system of division of labor,freedom of exchange, and economiccooperation, the outlines of1 Nassau Senior, Journal Kept inFrance and Italy from 1848-52 (London:Henry S. King, 2nd ed. 1871), Vol. I,pp. 4-5.which hardly became apparent toour forebears until two centuriesago. That system is now knowneither as .Free Enterprise or asCapitalism, according as men wishto honor or disparage it.It is this system that has liftedmankind out of mass poverty. Itis this system that in the lastcentury, in the last generation,even in the last decade, has accelerativelybeen changing the faceof the world, and has provided themasses of mankind with amenitiesthat even kings did not possess oreven imagine a few generationsago.Because of individual misfortuneand individual weaknesses,there will always be some individualpoverty and even "pockets"of poverty. But in the more prosperousWestern countries today,capitalism has already reduced·these to a merely residual problem,which will hecome increasinglyeasy to manage, and of constantlydiminishing importance, if societycontinues.to abide in the mainby capitalist principles. Capitalismin the advanced countries hasalready, it bears repeating, conqueredmass poverty, as that wasknown throughout human historyand almost everywhere, until achange began to be noticeablesometime about the middle of theeighteenth century. Capitalismwill continue to eliminate mass

358 THE FREEMAN Junepoverty in more and more placesand to an increasingly marked extentif it is merely permitted todo so.In a previous article ("FalseRemedies for Poverty," The Freemain,February, 1971), I explainedby contrast how Capitalism performsits miracles. It turns outthe tens of thousands of diversecommodities and services in theproportions in which they aresocially most wanted, and it solvesthis incredibly complex problemthrough the institutions of privateproperty, the free market, andthe existence of money - throughthe interrelations of supply anddemand, costs and prices, profitsand losses. And, of course, throughthe force of competition. Competitionwill tend constantly to bringabout the most economical andefficient method of production possiblewith existing technologyandthen it will start devising astill more efficient technology. Itwill reduce the cost of existingproduction, it will hnprove products,it will invent or discoverwholly new products, as individualproducers try to think what productconsumers would buy if itexisted.Those who are least successfulin this competition will lose theiroriginal capital and be forced outof the field; those who are mostsuccessful will acquire throughprofits more capital to increasetheir production still further. Socapitalist production tends constantlyto be drawn into the handsof those who have shown that theycan best meet the wants of theconsumers.Those who truly want to helpthe poor will not spend their daysin organizing protest marches orrelief riots, or even in repeatedprotestations of sympathy. Norwill their charity consist merelyin giving money to the poor to bespent for immediate consumptionneeds. Rather will they themselveslive modestly in relation to theirincome, save, and constantly investtheir savings in sound existingor new enterprises to createnot only more jobs but betterpayingones ("Private Wealth,Public Purpose," The Freeman,December, 1970).The irony is that the very miraclesbrought about in·our age bythe capitalist system have givenrise to expectations that keep runningahead even of the acceleratingprogress, and so have led to anincredibly shortsighted impatiencethat threatens to destroy the verysystem that has made the expectationspossible.If that destruction is to be prevented,education in the truecauses of economic improvementmust be intensified beyond anythingyet attempted. *

3fi9DONALD M. DOZERFORMAL systems and institutionsof education always represent agift from the present generationto the next generation.The school at all levels is ahighly complicated social phenomenon.It depends, first of all, upona controlling or governing bodyabody of taxpayers in the case ofpublic schools, a body of parentsand financial donors in the case ofprivate schools. This supportingbody forms the principal in theentire educational complex; it isthe base upon which the systemrests.To carryon the actual administrationof the school, this supportingbody selects a committeewhich is called by various namesranging from a board of educationto boards of trustees or regents.Representing the originalconstituent body this board em-Dr. Dozer is Professor of History at the Universityof California, Santa Barbara.ploys the administrators of theschool, namely the principal, headmaster,chancellor, president,deans and instructors, who togetherconstitute the implementingagent of the system and whosupply the technical expertiseneeded to operate it.The· beneficiaries of this systemare intended to be the pupils. orstudents, who are thus enabled tobe brought into contact with personswho are expected to transmitthe skills, amenities, and values ofthe past to present and future generationsand to stimulate in themenlarged visions for the future.This basic structure prevails atall levels of the educational process,from the kindergartenthrough the university, and isgrounded upon certain wen-definedlegal obligations and relationshipswhich are the product of centuriesof educational experimentation.Within this structure have appearedmany delicate nuances of

360 THE FREEMAN Juneadministration and elements ofconflict within recent decades. Perhapsthe most serious of these hasbeen the penetration of politicalpressures and the resulting clashof political forces within the academiccommunity.It is now widely acknowledgedthat the great majority of our collegesand universities have lostthe trust of the public. The waveof public indignation which wasdirected against them after theBerkeley riots in 1964 has beenfollowed by a wave of even moreominous public revulsion. Theseinstitutions are experiencing themost serious crisis of confidencethat they have faced in manydecades. They are no longer respectedas the quality institutionswhich they once were under sucheducator-statesmen as Charles W.Eliot and A. Lawrence Lowell ofHarvard University, David CoitGilman of Johns Hopkins, NicholasMurray Butler of Columbia, RobertGordon Sproul of the Universityof California, and James R.Angell of Yale University.Why the Degeneration?Why has this degenerationoccurred,and what should be doneabout it?One of the major casualties ofthe social and economic upheavalof our times is the principle ofauthority, or more precisely theprinciple of management. In industrythe claims of owners andboards of directors to the exerciseof management responsibilities arebeing repeatedly challenged. Ininstitutions of higher learning inthe United States the growingpressure for unionization of teachingfaculties and staffs and for involvementof students in the councilsof administration raise questionsas to the locus of power andthe right to exercise it.It is a well-known doctrine oflaw that the principal in a legaltransaction controls the actions ofhis agent within the context oftheir agreement and that, if theagent exceeds his authority, hisunauthorized action must be regardedas ultra vires or of nolegal effect.A major reason for the presentplight of institutions of higherlearning is that in the area ofeducation the essential relationshipof the agent to his principalhas been ignored. In many casesthe supporting body, as we havecalled it above, has neither exercisednor defended its responsibilityfor determining the scope ofthe education which it is financingbut has, on the contrary, allowedits agent· to assume by defaultfree-wheeling authority, withoften anarchic results. Similarlythe agents of the supporting body,who are expected to act as execut-

1972 THE EDUCATIONAL DILEMMA 361ingofficials for the supporting bodyand to be accountable to it, havebeen faithless servants. Especiallyin the colleges and universitieswhich are supported by taxpayersthey have yielded to the politicalforce exerted by pressure groupsof race and social class and by militantstudent activists. Higher 'educationhas accordingly been allowedto become a thing of whimsand fads bending before the changingwinds of the moment.Taypayer RevoltIt is asking too much of humannature to expect that the principal,namely, the taxpayer, willindefinitely support an institutionwhich, while professing to contributeto his enlightenment, infact dedicates itself to the destructionof the society which the principalhimself has formed. As ahorde of militant.students werethronging across the campus ofone of the California universitiesand occupying the student center,a local businessman raised hisvoice in protest to the chancellorof the university. The chancellordefended his do-nothing policysaying: "We havebeen teachingthese students for fifteen years tothink for themselves, and now theyare doing it!". A lamentable misconception hasbeen allowed to develop in highereducation as to who is principaland who is agent, who calls thetune and who should dance to it,who pays the bills and who shouldfurnish the services paid for.Dr. Stephen J. Tonsor has statedthe obvious but forgotten truism:"The university does not belong tothe students; it does not belong tothe faculty ; it does' not belong toany special pressure group in thesociety that happens to feel thecall to revolution or a propheticmission. The university belongs tothe whole of the society or thecorporate reality which brought itinto existence and which sustainsit."lThe relationship of taxpayers toeducators in a publicly supportededucational structure is that ofemployer to employee. The samerelationship exists between boardsof trustees of private institutionsand the designated officials ofthose institutions.In the complex of relationshipsat various levels in the educationalstructure it is possible to identifya producer-consumer relationshipin the classroom betweenteacher and student. The studentcan either accept or reject theproduct, but, as the object ultimatelyacted upon by both thesupporting body and the executingbody, he is not entitled to de-1 "Authority, Power and the University,"New Guard, XI, No; 6, September1971, p. 5.

362 THE FREEMAN Junefine the nature of the product. Inother words education in the classroomcannot be successfully organizedaround the democratic principle.If it is organized on the basisof this principle on the assumptionof the existence of an exclusiveproducer-consumer relationshipbetween teacher and taught, thecorollary principle that the consumeris always right must beaccepted. This is to require theteacher to become a classroomdemagogue, an ingratiating salesman,and to elevate the studentinto the position of principal. Underthese conditions education becomesa hopeless exercise andeminent professors who expressunpopular views can be destroyedby immature classroom critics.Conflict of ResponsibilityIn the triangle of conflict whichhas been accordingly created betweenadministrators, faculty, andstudents, administrators, unlesschecked by firm directives fromthe supporting body, will invariablyoffer up the faculty as sacrificeto student demands. Commonly,administrators utilize studentactivism as a lever for suppressingfaculty dissent.These problems have been grievouslyaggravated by the superimpositionof the money and powerof the government in Washingtonupon the great majority of ourinstitutions of higher learning,both public and private, duringthe past quarter century. Bold indeed- and almost unique - hasbeen the educator who could resistthese advances. Increasinglythe central government itself hasassumed the role of principal inthe educational process, dictatingstandards, imposing conditions,and supplying lavish funds,amounting to as much as $23 billionin the higher-education billfor 1972. The old supporting localbodies have therefore largely abdicatedtheir responsibility.To the extent that local supportingbodies, whether public orprivate, still retain any directingauthority over education, they mustbe recognized as principal in theoperation, entitled to exert fullcontrol over the scope, purposes,and actions of the colleges anduniversities with whose responsibilitythey are entrusted. And, inaccordance with the legal rights ofmanagement and the legally recognizeddoctrine of the relationshipbetween principal and agent,whenever government, whetherstate or national, is acknowledgedto be the supporting body it mustbe accorded the full powers ofprincipal in the educational operation.In other words, finalpower cannot be assumed, eitherwillfully or by tacit consent of the

1972 THE EDUCATIONAL DILEMMA 363principal, by the agent, that is bypresidents and deans and least ofall by students. However distastefulthis rule of conduct is, it mustbe respected unless the supportingbody in each case decides to standthe educational system on itshead.The Fallacy in Public EducationBut events in the area of highereducation in the last decade havenewly exposed the essential fallacyin the concept of public education.Government at all levels, beingnecessarily primarily political incharacter and .having police powerat its disposal, has interests whichare antithetical to education in thefullest sense. All that it is interestedin doing and all that it iscapable of doing in the area ofeducation is to train citizens, noteducate them, in the skills of responsiblecitizenship. This is avery limited function, and it maybe seriously doubted whether thestate should involve itself even inthis operation, since, by assumingthis minimal training responsibility,it will inevitably undertaketo impose its political will andrigidified formulas upon the citizenry.Libertarian principles rightlycondemn government control overeducation at all levels. HerbertSpencer·pinpointed the fallacy inhis Social Statics, published inLondon in 1851: "What is meantby saying that a governmentought to educate the people? ...What is the education for?" Andfrom these questions he concluded,"Clearly to fit the people for sociallife - to make them good citizens.And who is to say what are goodcitizens? The government: thereis no other judge." He askedfurther, "And who is to say howthese good citizens may be made?"Again, his answer was, "The government:there is no other judge."Spencer's conclusion is as irresistibleas it is ominous.Jefferson's ViewsThe political uses of institutionsof higher learning to accomplishcertain predetermined nationalpurposes were fully appreciated byThomas Jefferson and have beeenemulated by his successors in government.At a special meeting onMarch 4, 1825 of the Board ofVisitors of the University of Virginia,which Jefferson had foundedand of which he was then servingas rector, the Board, with Jeffersonpresent, adopted the followingresolution:Whereas, it is the duty of thisBoard to the government under whichit lives, and especially to that ofwhich this University is the immediatecreation, to pay especial attentionto the principles of governmentwhich shall be inculcated therein, and

364 THE FREEMAN Juneto provide that none shall be inculcatedwhich are incompatible withthose on which the Constitutions ofthis State, and of the Ul)ited Stateswere genuinely based, ...Resolved, that it is the opinion ofthis Board that as to the generalprinciples of liberty and the rightsof man, in nature and in society, thedoctrines of Locke, in his "Essay concerningthe true original extent andend of civil government," and of Sidneyin his "Discourses on government,"may be considered as thosegenerally approved by our fellow citizensof this, and the United States,and that on the distinctive principlesof the government of our State, andof that 'of the United States, the bestguides are to be found in 1. The Declarationof Independence, as thefundamental act of union of theseStates. 2. The book known by the titleof "The Federalist", being an authorityto which appeal is habitually madeby all, and rarely declined or deniedby any as evidence of the generalopinion of those who framed, and ofthose who accepted the Constitutionof the United States, on questions asto its genuine meaning. 3. The Resolutionsof the General Assembly ofVirginia in 1799 on the subject of thealien and sedition laws, which appearedto accord with the predominantsense of the people of the UnitedStates. 4. The valedictory address ofPresident Washington, as conveyingpolitical lessons of peculiar value.And that in the branch of the schoolof law, which is to treat on the subjectof civil polity, these shall be usedas the text and documents ofschoo1. 2theAs thus envisaged, by Jeffersonpublic education could be convertedinto a powerful apparatusto serve "good" national ends,which were thus defined in theresolution of March 1825. But isthere a, consensus at anyone timethat the current government ofstate or nation ought to be theprincipal educator? When weacknowledge it as such, we assumethat government now is and willforever remain the kind of governmenwhich, in the judgment of amajority of citizens, it ought to be.This situation, if it exists at asingle moment, may change in thenext, but the powers of that governmentin the area of educationwill not automatically diminish.The principles of a free societytherefore demand that politicalgovernments at both the state andnational levels shall retreat fromtheir positions of control over institutionsof higher learning. Thisretreat is rendered especially imperativeby the admission ofyouths between 18 and 21 yearsto the franchise, which can onlyhave the effect of intensifying thepolitical tug-of-war in the classroomwhich was the major causeof the academic crisis of the2 Jefferson's Works, Vol. 19, pp. 459­461, Washington, 1907.

1972 THE EDUCATIONAL DILEMMA 3651960's. Only the divorce of governmentfrom academic responsibilitywill prevent institutions ofhigher learning from becomingcompletely politicized and theirinmates reduced to cogs in atotalitarianized political machine.Education is, largely, the businessof stimulating rigorous intellectualdiscipline. But it mustlimit itself to intellectual disciplineand should not impose thediscipline of any political party, ofany religious group, or even of anynational state unless it is plainlyadvertised as such and is thereforeknown to be serving necessarilyas a part of the indoctrinatingapparatus of that party, group, orstate. I)r WAS A SLUMLORD. Here is how rcame to be one.r was born 69 years ago. rlearned the craft (maybe the art)of cabinet-making in my nativeland, Hungary. This would havebeen my 50th year of workingactively, creating in wood manythings of lasting beauty. My nameis well-known and well-respectedin the trade.About 20 years ago r bought asmall factory building in EastHarlem, at 508 East 117th Street,where r worked together with myteam of 10 to 12 men. Withchanges, improvements and additionalconstruction, the factorycost me about $65,000.A few years after I bought thebuilding, the adjoining building,© 1972 by The New York Times Company.Reprinted by permission from The New YorkTimes, January 30, 1972.No. 510, was offered to me at abargain price because it was inpoor repair. With the idea of expandingmy workshop into it, orusing the lot for parking, I boughtit. For $12,500 in cash r becamethe owner of a four-family house.The four families living in thehouse are all decent working people.To my knowledge they do notneed and never asked for charity,public help or assistance. Yet thelaw forces me to give them shelterand heat at a lower price than myown cost.For several years now my cashexpenses have exceeded my incomeby about 25 per cent, and thiswithout interest or amortizationpayments on the mortgage.The building was in poor repairwhen I bought it. By now it is thefavored hunting ground of everycity inspector.

366 THE FREEMAN JuneThe building needs a new roof,new walls, new ceilings, newplumbing, new wiring, new doorsand a new heating system. It needsabout $15,000 worth of repairs.The building now has a grossincome of $2,600 a year, of whichI am paying for taxes and heatabout $3,000.Why didn't I apply for a hardshiprent increase? My accountanttold me there would be a blizzardof paperwork, and that if he wasable to get me any increase, myfee to him would have taken awaywhatever I gained in the first twoyears.So far I have been fined fourtimes for failure to comply withorders to correct building codeviolations! I was summoned tocourt again only a few weeks ago,and I explained my predicament tothe judge. He assured me of his"sympathy," fined me $40 andpromised that my next fine wouldbe much higher.I did not go home from thecourt. I went straight to the officesof the local Roman CatholicChurch and asked them to acceptthe building as a free gift. Theydidn't. An hour later I made thesame offer to the Protestants.Again the answer was no. Next Ioffered the building free, withoutany money, to the four tenants.They didn't want it.Okay, I will abandon the building,was my next thought. I willstop collecting rents, will not paytaxes or heat. I .will let the citytake over. This sounds like an easyway out, but my lawyer tells meit cannot be done without my beinglegally financially responsible.So, here I am with a buildingassessed by the city at $21,000 - Irepeat $21,000 - that I cannot giveaway, I cannot sell, and I cannotabandon. I am forced by law tooperate it.That is, I was. I am not anylonger.I have sold the building for$30,000.As an extra inducement I threwinto the bargain my good old factory.building, which cost me closeto $70,000, for nothing. In otherwords, I sold real estate that costme $80,000 about 15 years ago for$30,000, to be paid without interestin six years.With the $50,000 that I lost onthe deal - and which is a majorpart of my life savings - I boughtfreedom.At 69 I am too old to start arevolution, or to fight City Hall.On the other hand I do not liketo be summoned to appear in criminalcourt, when my only crime isthat I dared to own a building inNew York.I will badly miss my shop, whereI spent 49 happy years. But .I am no longer a slumlord! I)

MERRYLE STANLEY RUKEYSERIN THE NINETEEN SEVENTIES, businessbaiting, no less virulent thanin the past, has become more subtleand sophisticated. It consistsof efforts to equate technologywith utter disregard for ecology.The new attack is sometimeslaunched in a flood of tears forconsumers. Behind the new ~for national economic backslidingis the runaway expansion of thewelfare state which exalts leanersat the expense of producers. Thenew politics denigrates the systemfor cultivating progressthrough rewards and incentives.Theorists and their youthful adherentsrepudiate concepts of developmentand plump for a zerogrowth in population and materialwell-being. They stigmatize the useMr. Rukeyser is well known as a business consultant,lecturer, and columnist.of electricity in labor-aiding toolsof production as antisocial pollution,and blithely advocate thereplacement of mechanically drivenequipment with the primitive"sweat and groan" of human musclepower.Such academic naivete brings tomind a conversation years agowith an economic minister in India.As we discussed the low levelof living in that sub-continent, Iasked what steps native leaderswere taking to supplement theefforts of the human muscle withadvanced machinery. In a patronizingmanner, he called my attentionto India's surplus of workers,as though it were self-evident thatIndia, in the circumstances, hadno use for "labor saving" capitalgoods. But what the Minister didnot seem to grasp was the fact367

368 THE FREEMAN Junethat continuance of crude techniquesfor using men as drayhorses necessarily condemned Indianworkers to low, productivityand a meager living.Conditions ChangeCritics of business fall into thebooby trap of assuming that everythingis static. More than fourdecades ago, oil authorities wereforecasting that in eight yearsthe supply would run out. Theyproved to be astigmatic, perceivingonly the then known reserves.They overlooked the fact that,with incentives, wildcatters wouldferret out new sources of supply.And when, if, and as we consumeall the known supplies of fossilfuel, the creative side of man willfind substitutes in such newertechnologies as atomic and solarenergy. And in the process, theydoubtless will achieve a measure ofpollution control.The new enthusiasts in ecologycarry a good cause to unreasonableexcesses. They ascribe utterirresponsibility to businessmen.They assume that corporate executivesare solely concerned with"the bottom line" on the profitand-lossstatement, and the deviltake the hindmost. They lack theimagination to sense the opportunitiesfor improvement withinthe system. Earlier in the century,there was in some aspects offarming, for instance, and in theindiscriminate cutting down oftrees in the forests, a seeminglack of concern for the future.But protests were heard; therehas been measurable progress inthe development of scientific agriclJlturein place of the primitive"n1ining of the soil." And in Oregonand elsewhere pioneer effortswere undertaken to avoid the de~nuding of forests with the newconcept of tree farms with newplantings to replace cuttings.In the American system, theguiding motto should be the linefrom the poet Louis Untermeyer,who wrote: "From sleek contentment,keep me free." Progress isnever enough, and the operatingprinciple of topflight business'management is: "Let's seek to dobetter tomorrow what we appearto be doing well today." The con- 'tinuingvigor of the Americancompetitive system depends on theknowledge and courage of the elitewho understand its functioningand have the means of communicatingthe benefits to others.Fear of TechnologyWhat we see today is a recurrenceof the simplistic revolt inthe nineteenth century of menlike Samuel Butler, who decriedthe Industrial Revolution. In hisErehuJon in 1872, Butler appearedas the enemy of the machine.

1972 BUSINESS BAITING - 1972 STYLE 369In this new era ecologists aredecrying technology as a polluter,ignoring the capability of technololgyto develop methods to minin1izepollution. The alarm ringersassume that they alone want aworld of pure air and pure water.They jump to the conclusion thatthe profit motive is the enemy ofNature. Perceptible gains willcome when there is mature recognitionthat technology is a humantool and can be devoted to man'sends. If, by way of illustration,existing methods of burning coalor using gasoline in automobileengines pollute, then it makessense to accelerate research anddevelopment to find ways ofachieving the benefits while controllingthe adverse. effects. Insteadof viewing the problem inthe naive spirit of setting the goodguys against the bad guys, it istime to recognize that leaving theenvironment in the form that menfind it is consistent with goodbusiness. If consumers desire lesspollution, they will need to understandthat devices to avoid pollutionare a cost of producing goodsand services.Thomas Robert Malthus, theeconomist, warned in 1798 of oncomingunavoidable poverty anddistress on grounds that populationincreases by geometric ratioand the means of subsistence onlyby arithmetical ratio. However,his prophecy has been unfulfilled.Methods of cultivating land havenot remained static. Creativeminds in science, invention andengineering have developed newand better means of production,and in advanced economies a spectacularlysmaller ratio of the totalpopulation than in earlier times isproducing vastly more abundantquantities of food and fibers.In light of the contemporary organizedefforts to put a ceiling oneconomic progress, it doesn't makesense for investors, financiers andmanaging directors of great companiesto ignore the impact of thenew-style business baiting. PerhapsI can do no better than torepeat here what I said in 1938in my pamphlet "Sell the Businessas Well as the Product":1mproving the climate of popularopinion would help to remove the barriersto a free circulation of goodsand services from makers to users.... Misstatements and misconceptionsabout business have been sowidely propagated that disseminationof the truth by business wouldbe .enormously helpful. Businesswould not have to gild the lily, fortruth is much more favorable thancurrent rumor.The country needs to escape fromthe tyranny of obscure, weasel wordsand from doctrinaire ideology. Simplearithmetic, in double-entry form,as understandable as the family budget,can be used to photograph for

370 THE FREEMAN Junethe lay mind the essential processesof business. Such new style "candidcamera" shots which give glimpsesbehind the scenes in the businessworld will help to promote friendlycooperation among government, businessand labor. It can make crystalclear that the unwarranted snipingat business is directed at the vital interestsof millions of life insurancepolicy holders, owners of savings accounts,... and of tens of millions ofindividual owners of shares of Americancorporations.These comments made thirtyfouryears ago are a reminder thatbusiness baiting is not a newphenomenon in 1972. Only the rhetorichas changed.In the intervening years, greatstrides have been made in humanizingcorporate reports, and todaysome alert companies, such asStandard Oil (N.J.), U.S. Steeland others, have used TV commercialscreatively to depict the socialusefulness of their enterprises.James M. Roche, who recently retiredas chief executive of GeneralMotors, has in recent monthstaken leadership in urging greaterattention to the attacks on thepremises on which free enterpriserests.The Brave New WorldBasic in this approach is objectiveunderstanding of the significance-of the revolt of somearticulate young people. Sincethey will in due course inherit theearth, their views, including theirmisconceptions, should not be ignored.Noone questions the rightto dissent, but it is important alsoto develop a sense of responsibilityin discussing matters relatingto the well-being of the people.Certainly, the "brave new world"won't be ushered in by escapists.Youths who indiscriminately rejectthe mature as hypocrites havelittle insight into the history ofman. In downgrading their parentsas insincere because theirconduct doesn't always squarewith their professed code ofethics, the young tend to overlookthat through the ages man hasbeen caught in the conflict betweenhis animal instincts and his standardsof civilized procedure. Itwould, of course, be millenary ifeveryone invariably lived up to hiscode; but the remedy for humanfrailty certainly is not the rejectionof standards.Much of the venom against theEstablishment springs from anemotional distaste for the competitivesystem, which calls upon individualsto stand up and be mea­Slued. Much loose talk glorifyingthe "underprivileged" and the"disadvantaged" is really quarrelingwith the Lord for creatingman with an infinite variety ofdifferences in aptitude, skill, moti-

1972 BUSINESS BAITING - 197.2 STYLE 371vation, and LQ. The demagogicstruggle to level down is an effortto replace divine patterns withman-made molds making all personsidentical.Much of the business baitingresults from an emotional biasagainst competition. It takes characterto be willing to be measured,and to face the grim fact that notall of us are topnotchers in everyskill. And it would be a dull worldindeed if we were all cast in preciselythe same mold. Instead ofletting destructive emotions becomedominant, there should benot only a renaissance of respectfor the work ethic, but also newapproval for self-supporting individualswho achieve up to theirown optimum in all categories oftalent. The diligent hewers ofwood and drawers of water deserverespect, which should not bereserved exclusively for glamorouscreative artists, publicists, professionalmen, and chairmen of corporateboards.The threat to economic andother achievement does not comeprimarily from overseas competitors,but from ill-conceived, misguidedtheories developed at home.No investments in growth are attractiveif the "wave of the future"is for home-grown communesin place of competitiveeffort. Prosperity will rest on aslender reed indeed if those whovote and ratify public policy don'tunderstand the factors that makefor better living.Slogans against the Establishmentshould be examined minutelyto determine whether they hiderejection of self-discipline, thriftand industry. In a free society, noone is forced to work for a higherstandard of living than he desires,but none who undermines the systemby circulating misconceptionsshould go unanswered. Just as afreeman is entitled to expresshis views, his neighbor shouldhave the freedom to audit andappraise the other fellow's opinions.Then the validity of conceptscan be tested in the unrestrainedInarket place for ideas. ,IDEAS ONLIBERTYA Precarious LifeANY COMMUNITY which depends for its economic growth up,on thewhims of succeeding Congresses is in economic jeopardy. Someday,the taxpayers mightsay "no," and then where is the life ofthat region which has become wholly dependent upon federal help?From an address in 1955 by CLARENCE A. DAVISUnder Secretary of the Interior

372BLOODfromTURNIPSTERRILL 1. ELNIFF~Notes toward anltnderst~ndingof John Law'seconomlC errorsWHEN JOHN LAW arrived inFrance in 1716, he found Franceon the edge of bankruptcy. Thegovernment debt amounfed to 2.4billion livres plus another 590 millionlivres worth of billets d'etat ­outstanding royal promissory noteswhich were worth about one thirdof their face value. The deficit inthe government accounts for 1715was 78 million livres - a deficit ofnine million livres more than thetotal revenues for that year. 3 Thepeople were overtaxed and starving,and commerce was at a standstill.4Law received a charter for hisBanque Generale in 1716. It wasa private operation, handling allthe normal functions of a bank. Itwas also authorized to issue banknotescalled "bank crowns," whichwere to be redeemable "in moneyof the weight and denomination ofthe day of issue."5 This was soundbanking policy, even though Law'sMr. Elniff teaches American history at theBen Lippen School, a Christian preparatoryschool in Asheville, North Carolina.

1972 BLOOD FROM TURNIPS 373"land bank" had an unsound moneybased on anticipated royal revenuesand landed securities. (WhatLaw was to do later would havedestroyed even a bank with asound money base.) ConcerningLaw's banking methods and policies,one historian of modern bankingwrote: "If the bank had continuedupon the sound basis of abank discounting commercial paperand acting as the fiscal agent ofthe Treasury, France would havebeen under a great debt of gratitudeto Law for introducing intoher commercial relations themethods of the modern businessworld."6 A period of recovery andgreat prosperity followed.But the bank did not continue onthat sound basis. Law's next stepwas to organize the Company ofthe West and combine into it severalother small French tradingcompanies, as well as negotiatingwith the Regent, d'Orleans, for the#farming of taxes, money coinage,the tobacco monopoly, and the assumptionof the entire .nationaldebt. 7 On December 27, 1718, hisBanque Generale was made a publicinstitution - the Banque Royale- and payment of notes in bankcrowns (which required specie)was stopped, making the banknotesof the Banque Royale legal tender.When in May, 1719, the Companyof the West was reorganized intothe Company of the Indies, thespeculation began and the newshares were bid up and up - andthe boom was on~ The price on theshares was 500 livres par, but theybrought a premium of 5000 livres.By the end of November they wereselling for 10,000 livres. By year'send, they brought up to 12,000livres, and by January 6, theywere up to 18,000 livres. 8 But thenthe tide began to turn. As the marketbegan to drop, "the more prudentspeculators were endeavoringto convert their gains into moresolid property by the purchase ofreal estate or by shipping goldabroad."9 On May 1, 1720, a decreefrom Law announced that by December1st all shares in the companywould be· scaled down to 5500livres per share and that all banknoteswould be reduced fifty percentin value. A commission appointedby the Regent to examinethe bank found that it had lessthan ten per cent assets againstits three billion livres of circulatingbanknotes and only 49 millionof that was in gold or silver.10On July 16th there was a run onthe bank, people demanding goldor silver for their banknotes. Tenwomen were killed in the confusion."Repeated riots expressed thefeeling of the public that it hadbeen deceived· by financial tricks,and that the upper classes hadprofited at the expense of the community."l1

374 THE FREEMAN JuneWhat John Law was trying todo for France has been succinctlysummarized by Will Durant:His central conception was to increasethe employment of men andmaterials by issuing paper money,on the credit of the state, to twicethe value of the national reserves insilver, gold, and land; and by loweringthe rate of interest, so encouragingbusinessmen to borrow moneyfor new enterprises and methods inindustry and commerce. In this waymoney would create business, businesswould increase. employment andproduction, the national revenuesand reserves would rise, more moneycould be issued, and the beneficientspiral would expand. If the public,instead of hoarding the preciousmetal, could be induced, by interestpayment, to deposit its savings in anational bank, these savings could beadded to the reserves, and additionalcurrency could be issued; idle moneywould be put to work, and the prosperityof the country would be advanced,1~This was John Law's "system."Law himself summarized it evenmore succinctly when he said,"Money is the blood of the Stateand must circulate. Credit is tobusiness what the brain is to thehuman body."13 When the sameidea was proposed at the beginningof the French Revolution, JacquesNecker, the minister of finance,observed that "They had only toprovide themselves with a papermill and a printing press to makethe nation solvent."14Two Basic Errors Led to failure ofJohn Lawls SystemWhy did John Law's "system"fail? We cannot blame his failureon his motives: there is every indicationthat he was sincerely benton benefiting France. Even hisenemy, Duc de Saint-Simon, admittedthere " was neither avaricenor roguery in his composition."I;)It is common to blame the speculatorswhose speculative frenzyboth made and broke Law's system:"The principles upon whichhe had established his bank weretheoretically sound; they wouldhave made France solvent andprosperous had it not been for theincredible avidity of speculatorsand the extravagance of the Regent."lGBut why did they speculate?If Law's system was basicallysound, why did it cause asituation in which speculationwould be expedient? Why, to putthe issue in its starkest form, didJohn Law think he could get bloodout of turnips? Did the rules ofalgebra fail? Or did Law misapplythem?Involved in Law's system aretwo logically separable, thoughclosely intertwined, economic fallacies:(1) that money must circulate,and (2) that successive

1972 BLOOD FROM TURNIPS 375credit expansions will lead to aspiral of economic prosperity.The error concerning the circulationof money is one of mistakingeffect for cause. Money is amedium of exchange, as Law believed,but it is also a market commoditywhich takes on value inexchange.I 7 Therefore if people donot circulate their money, it canonly be because they anticipatethat it will be worth more in exchangeat a later time. On theother hand, if people believe thattheir money will lose value in thefuture, they will circulate it in thepresent. 18 Thus circulation isneither an index of prosperity, norof adversity: it is not wise to circulatemoney in a deflating market,and the circulation of moneyin an inflating economy is not' asign of prosperity, but rather ofsickness. There are times whenmoney must not circulate.The second error is an extensionof the first: that successive creditexpansions (i.e., lowering the interestrate and loaning moremoney) will lead to a spiral ofeconomic prosperity: that moneycan create business, which wouldincrease production, which wouldresult in greater tax revenues andfoster a new credit expansion,which would create new business,and so on. Law's error may bepointed out with two observations:(a) If the old debt is paid off beforethe new credit expansiontakes place, there has been no netgain for the economy. Consumptionmust be curtailed and savingsinvested in order to finance suchprogress. It is only a question ofwhen one is going to curtail consumptionand invest savings - nowor later. (b) If the old debt is notpaid off, and a new credit expansionis made, the net result is ahigher price level for everyone asprices are bid up with the extramoney available. This bidding upof prices, however, does not affecteveryone equally:While the process is under way,some people enjoy the. benefit ofhigher prices for the goods or servicesthey sell, while the prices of thethings they buy have not yet risenor have not risen to the same extent.On the other hand, there are peoplewho are in the unhappy situation ofselling commodities and serviceswhose prices have not yet risen ornot in the same degree as the pricesof the goods they must buy for theirdaily consumption. For the formerthe progressive rise in prices is aboon, for the latter a calamity. Besides,the debtors are favored at theexpense of the creditors. 19This process may continue for alonger or shorter period of time.How long it lasts depends on psychologicalfactors. It will last aslong as the people maintain con-

376 THE FREEMAN Junefidence in the relative soundnessof the money or faith in the bankor government:Let Ludwig von Mises finish thestory:But then finally the masses wakeup. They become suddenly aware ofthe fact that inflation is a deliberatepolicy and will go on endlessly. Abreakdown occurs. The crack-upboom appears. Everybody is anxiousto swap his money against "real"goods, no matter whether he needsthem or not, no matter how much hehas to pay for them. Within a veryshort time, within a few weeks oreven days, the things which wereused as lTIOney are no longer used asmedia of exchange. They becomescrap paper. Nobody wants to giveaway anything against them.~oThe result of such a breakdownis that people return to barter ordevelop a new kind of money. Theresult in France was that the bankwas closed, the legal tender wassuspended, the company's contractswere cancelled, and the stock wasreadjusted.: n There was an attemptto restore both public andprivate obligations and fortunesto the levels which existed beforethe inflation. But "those who hadfled the country with their winningstransmuted into gold, those. who could command the royal fa­VOl", and those who were a,ble tokeep their gains in hiding werethe only ones who escaped.":.!:.!David Ogg has observed that "Thisdisaster . . . created no diminutionin the amount of nationalwealth but only a change in itsdistribution."~3 But such a redistributionof wealth, of course, alwaysmeans a terrible waste of resourcesand efficiency, and thus,while there may have been no diminutionin the aggregate amountof national wealth, there was certainlyan interruption of economicactivity that is tantamount to adestruction of wealth. This is truebecause human needs and desirescontinue. It is impossible to interrupthunger or to mark time instarvation while an economy recovers.Why did John Law think hecould get blood out of turnips?Because he misunderstood the natureof turnips. John Law's mathematicsof compound interest werenot in error; his "rules of algebra"did not fail. He simply erred inapplying them to human affairs.His system was broken on therocks of reality- one part of whichis the fact that human beingsplace value on that which they exchangefor money.Ludwig von Mises has observed:The body of economic knowledge isan essential element in the structureof human civilization; it is the foundationupon which modern industrial-

1972 BLOOD FROM TURNIPS 377ism and all the moral, intellectual,technological, and therapeuticalachievements of the last centurieshave been built. It rests with menwhether they will make the properuse of the rich treasure with whichthis knowledge provides them orwhether they will leave it unused.But if they fail to take the best advantageof it and disregard its teachingand warnings, they will not annuleconomics; they will stamp out societyand the human race. 24John Law failed because he hadan erroneous understanding ofeconomic concepts. Seventy yearslater the French Revolutionistsmade the same mistake, but it wasnot because they did not know.They chose, for political reasons,to ignore the body of truth. Theydid not annul it; but they verynearly stamped out society and thehuman race. I)• FOOTNOTES •1 Ludwig von Mises, Human Action;A Treatise on Economics, 3rd revisededition. Chicago: Henry Regnery andYale University Press, 1966, p. 177.2 Frederick C. Green, Eighteenth-CenturyFrance: Six Essays, London: J. M.Dent, 1929, p. 28.3 Will and Ariel Durant, The Age ofVoltaire.. A History of Civilization inWestern Europe from 1715 to 1756, withSpecial Emphasis on the Conflict betweenReligion and Philosophy, NewYork: Simon and Schuster, 1965, p. 13.4 Green, op. cit., p. 6.5 Charles A. Conant, A History ofModern Banks oj Issue, New York: G.P. Putnam, 1927; reprinted by AugustusM. Kelley, Publishers, 1969, p. 33.6 Ibid.7 Ibid., p. 35.g Ibid., p. 37.o Ibid., p. 38.10 Ibid., p. 39.11 Durant, op. cit., p. 15.12 Ibid., p. 11.13 Green, op. cit., p. 7.14 J. M. Thompson, The French Revolution,New York: Oxford UniversityPress, 1966, p. 196.15 Durant, op. cit., p. 13.16 Ibid., p. 15.17 Mises, op. cit., p. 401 f.18 Ibid., p. 426 f.19 Ibid., p. 413.20 Ibid., p. 42821 Conant, op. cit., p. 39.22 Ibid., p. 40.:!3 David Ogg, Europe of the AncienRegime, 1715-1783, New York: Harperand Row, 1965, p. 255.24 Mises, op. cit., p. 885.IDEAS ONLIBERTYThe Astonishing SimilarityWHAT CHIEFLY STRIKES today's reader is the astonishing similarityof the arguments put forward by our own contemporary inflationiststo those of the inflationists of eighteenth-century France. Notless striking, of course, is the similarity in the actual consequencesof paper money inflation in revolutionary France and inflationeverywhere in the modern world.From HENRY HAZLITT'S introduction toFiat Money Inflation in France by AndrewDickson White, available at $1.25 in paperbackfrom the Foundation for EeonomicEducation, Irvington, N.Y. 10533.

AREVIEWER'S NOTEBOOKJOHN CHAMBERLAINHIDDENMORRIS C. SHUMIATCHER'S Welfare:Hidden Backlash (Toronto:McClelland and Stewart, Limited,$10.00), is one of the saddest booksI have ever read. The sadness hasa double focus. First, the booktells the story of what the whiteman, through his blindness, did tothe Indian in Canada. But evenmore ominous (for it could carryboth the white and the Indian intothe same bitter trough of degradation), there is the between-thelinesstory of what compulsoryState welfare philosophy threatensto do to everybody in Canada whois within reach of a paternalisticlegislature in Ottawa.The white man in Canada can'tsay that he hasn't had plenty ofwarning. Mr. Shumiatcher, a lawyerwho once served as assistantto the socialist premier of Saskatchewan,was once imbued withthe idealistic notion that the onlything needed to abolish any wrongto an individual was a generousappropriation of money. He livedto learn that the worst thing youcould do to a human being, whetherwhite, red - or, by extension,black - was .to make him a wardof government. A house cat, eventhough fed in a protected kitchenon choicest liver, still manages tomaintain an aura of self-respect.Not so the human animal whenfed by government, as Mr. Shumiatcherdiscovered in the days ofhis socialist novitiate and duringhis subsequent travels as a legalcounsel for. the Indians inJwesternCanada.The Queen's commissioners had378

1972 WELFARE: HIDDEN BACKLASH 379good intentions back in the EighteenSeventies when they embarkedon the idealistic course ofprotecting the Indian. Theythought of him as a potentialwhite man who could become selfsupportingif .settled on the land.The assumption need not havebeen fatal if the Indians had beenpermitted to match their wits inthe market place with the new settlerswho were pouring into westernCanada.The Perils of ProtectionismTrue enough, the Indian was notan agriculturalist. But he couldhave learned the hard way, throughcrop failures. The trouble with theQueen's philosophy (Did you knowthat Queen Victoria was a socialist?)is that it insisted that theIndian be protected against thepossibility of being rooked in atrade with an unscrupulous capitalist.Penned in on his reservedlands, the Indian was not allowedto farm for the market place. Thewhite man who was supposed tobe the Indian's keeper became hisjailer, shutting him behind a buckskincurtain for a wholly questionablegood.With enough welfare money inhis pocket to buy' firewater, theIndian was under no compulsionto take jobs building the railroadsor clearing the forests. Japaneseand Chinese laborers came in todo the strong-arm work and remainedto become self-respectinggardeners and restaurant owners.While strong-backed people fromEastern Europe made farms forthemselves and took their chancesin ,the market, the Indian sankdeeper and deeper into sloth. Hischildren, taken from the wild .andforced to sit in governmentschools, learned little of value to afuture on a reservation or in acity ghetto.The crowning blow came whenthe Northern Indian was forced tobecome a "protected" trapper.Originally, the Indian trappercould sell his furs where hepleased. The Hudson's Bay Companywas the big buyer. To get ", acontinuing supply of furs, theHudson's Bay Company would advancethe Indian enough moneyfor a season's grubstake. The socialistsof Saskatchewan thoughtit demeaning for the Indian tohave to go to a capitalist organizationfor a livelihood. Accordingly,they set up a State MarketingService and made it a punishableoffense for the Indian to sell hisfurs elsewhere.Unfortunately the socialistsfailed to follow through with anyof the capitalist services that theHudson's Bay Company had provided.Where the Indian trapperhad once been able to get $400 incredit and food to go on the trap-

380 THE FREEMAN Juneline for a full season, the socialistsinsisted on pay-as-you-go.They limited the size of the initialamount a trapper c·ould borrow tosome twenty dollars. This meantthat the trapper· could only stayout for a week at a time. When hereturned with his pelts, he had towait around for the MarketingService check. It seldom came ontime. Naturally the Indian's periodsof drunkenness became morefrequent and more prolonged. Butthe wicked capitalist - Le., theHudson's Bay Company-had beendefeated. -A Century of MedicareThe Indians of Canada have hadsocialized medicine for a far longerperiod than their white brothers.But in Saskatchewan, accordingto Mr. Shumiatcher's evidence,the incidence of sickness, particularlyof communicable disease, isgreater among the Indians thanamong the population as a whole.The life expectancy of the Indianhas fallen behind that of the generalpopulation. Tuberculosis andvenereal disease once threatenedto end the "Indian problem" by depletingtheir bands. The deplorablehealth record of the reservationIndian was compiled at a timewhen he had a right to claim medicaland hospital services "withoutmoney and without price." Afterwatching what bureaucratic medicinehas done to the Indian, Mr.Shumiatcher trembles to thinkwhat may happen to the populationas a whole now that all Canadianshave the same medical"rights" that the Indian has hadfor five generations.Looking into the future, Mr.Shumiatcher suspects that thewhole of Canada will become a vastreservation for everybody. Unfeelingpeople have talked about the"seven deadly sins of the Indian."First, the Indian is dirty. Second,he is withdrawn from normal society.Third, he won't work. Fourth,he is unreliable and aimless. Fifth,he is a school dropout. Sixth, he ispromiscuous. And seventh, he escapesfrom reality through alcoholand peyote. These are the sins thatdevelop when one is not forced tocompete in the world. Mr. Shumiatchersees all these deadly sinsrepeated in the white hippie padsthat have been spreading overCanada.Reservations for Everyone?The bloom goes quickly from theflower children. Promiscuity in thepads and communes has increasedvenereal disease among the youngin a terrifying way; one estimateis that the increase has gone ashigh as 1,000 per cent in five years.The hippie is supported in his indolenceby a mixture of panhandling,shoplifting, and r~mittances

1972 WELFARE: HIDDEN BACKLASH 381from spineless parents. This iswelfarism of a sort, especiallywhen the panhandling and shopliftingis condoned. Mr. Shumiatcherhas an uneasy feeling thatthe hippie way of life will moreand more spread to the generalpopulation as the politicians, seekinvotes, offer bigger and betterhandouts, thus emulating thespineless parents who have allowedtheir offspring to grow up withthe impression that affluence is nolonger dependent on dedication,training and work.Though Mr. Shumiatcher's bookis limited to Canada, it could, presumably,have drawn upon "southof the border" material to makethe same points. The U.S. has donebadly by its Indians by followingpractices that are very similar tothose instituted by the Queen'scommissioners in Canada. If ourhippie problem has been mitigated,it is largely because many of ourflower children have gone to Torontoand other Canadian cities toescape the Vietnam War. As forour State Welfarism, it growsapace.Will it soon be "Lo! The poorWhite Man"? Read Mr.Shumiatcherand weep.~JOSEPH STORY AND THEAMERICAN CONSTITUTION byJames McClellan (Norman, Oklahoma:University of OklahomaPress, 1971) xvii, 413 pp, $12.50.Reviewed by Gottfried DietzeTHE GREAT HOPE of the AmericanRevolution was that self-govern-.ment would lead to an increasingemancipation of the individual.Fortunately,the Founding Fathers,in what John Fiske called the criticalperiod of American history,also knew that excesses of democracycould be detrimental to freedomby opening the door to majoritarianismand anarchy. Displayingthe kind of common senseBlackstone hoped would prevailamong the members of Parliament- who would consider themselvesbound by the common law and refrainfrom oppressing life, libertyand property - Americans, in orderto secure free government,adopted a Constitution providingfor a more perfect Union. Impliedin this Union was a balance betweenthe rights and powers ofthe states and the nation, actingas mutual checks upon arbitrarygovernment. Since the new nationwas to be formed out of existingstates and since the powers of thenational government were few anddefined, whereas those of the stateswere many and not enumerated,

382 THE FREEMAN Junethe immediate implementation ofthe federal balance involved astrengthening of the national government.The difficulty of thattask is reflected in AlexanderHamilton's letter to GouverneurMorris of February 27,1802, inwhich he writes that he was "stilllaboring to prop the frail andworthless fabric." Earlier, TheFederalist had left no doubt thatthe more perfect union was a meremeans for securing the rights ofthe individual. In essay 78 of thatcommentary, Hamilton also statedthat the judiciary was to be theguardian of the Constitution andthe free government it created.In the exercise of that guardianshipduring the first decades ofthe new nation, Chief Justice Marshallgenerally is credited withhaving played the major part.However, upon reading McClellan'sattractive, scholarly book, the studentof government may well decidethat at least as much credit isdue to Justice Story. Story wasonly 32 years old when in 1811President Madison named him tothe Supreme Court. At that time,the high bench had been presidedover by John Marshall for tenyears and he was to continue tohead it for nearly another quarterof a century. While this reviewerfeels that the Marshall Court haddistinguished itself before it wasjoined by Story, through such importantdecisions as Marbury v.Madison (1803) and Fletcher v.Peck (1810), Mr. McClellan emphasizesthe importance of Justice.Story for American constitutionaldevelopment, showing the broadrange of Story's interests andachievements.When appointed to the Court,Story had been a member of Congress,a Speaker of the House inhis home state, Massachusetts, theauthor of various books on the lawand a volume on poetry. While onthe Court, he published his classicCommentaries on the Constitutionand became a founder of the HarvardLaw School where he taughtfor sixteen years. The author marshallsevidence that Story was atrue renaissance man. He couldhave added that Story translatedand commented upon Robert vonMohl's work on the American Constitution,a study which indicatesthat the outstanding Germ.an constitutionalistof his time had insightssimilar to those of Tocqueville.The author emphasizes thatStory is unique in that he wasthe first and only disciple of EdmundBurke ever to sit on theSupreme Court. This may be technicallycorrect if discipleship impliesan unequivocal acknowledgmentof influence. There were, ofcourse, many conservatives on thehigh bench who, like Story, felt

1972 OTHER BOOKS 383that the Constitution was no merereflection of temporary whims ofthe American general will but w,asa transmutation of constitutionalistprinciples which had graduallybecome embodied in Western civilization,such as Christian ethics,natural law and the common law.The fact that in recent years theCourt has moved away from theseprinciples must not lead us to forgetthat up to Franklin Roosevelt'scourt-packing plan, the Court generallywas considered a conservativeinstitution and a bulwark forlaissez faire.A strong defender of privateproperty, Story, in the famousCharles River Bridge case of 1837,dissented from the majority of theCourt. "In a powerful, exhaustivedissent, Story proudly excoriatedthe Court in the name of propertyand th.e constitutionally protectedrights of the common law. Thislast great undertaking on behalfof property was his best, a magnumopus which epitomized yearsof study spanning more than threedecades of dedicated effort." Declaringthat he stood behind Marshall'sdecision. in Fletcher v. Peck,a decision which gave broad protectionto property rights throughthe doctrine of implied limitations,Story exclaimed: "I stand uponthe old law, upon law establishedmore than three centuries ago, incases contested with as much abiIityand learning as any in the annalsof our jurisprudence, in resistingany such encroachmentsupon the rights and liberties ofthe citizens, secured by publicgrants. I will not consent to shaketheir title deeds by any speculativeniceties or novelties." There was"no surer plan to arrest all publicimprovements, founded on privat~capital and enterprise, than tomake the outlay of that capital uncertainand questionable, both asto security and as to productiveness."Negating Marshall's doctrineof implied limitationsamounted to an infringement uponthe constitutional provision thatno state shall make laws impairingthe obligation of contractslawswhich had prompted the desirefor the Philadelphia Conventionand a more perfect union.Like Marshall, Story favored astrong national government. Sinceour time had been characterizedby a march of power to Washingtonto the detriment of freedom,it could be argued that Story'semphasis on·national power potentiallyhurt the very values hewas favoring, namely, Christianethics, natural law, the commonlaw and the Constitution withtheir far-reaching protection ofhuman rights, including those ofproperty. Such a verdict would beunfair to Story who wanted national-'power (rudimentary as it

384 THE FREEMAN Junewas at his time) only as a meansfor the protection of those rightsfrom the states, whose power atthat time was considerable. Justas he resented oppression by thestate governments, he also wouldhave disliked a despotic nationalgovernment. Similarly, it wouldbe unfair to blame Story for favoringjudicial review. For~ again,he conceived of that institution asa mere means for the preservationof free government and not as onefor the promotion of social legislationand perverted concepts ofcivil rights.Mr. McClellan is to be congratulatedfor having shed new lighton one of America's greatest jurists- perhaps the greatest of themall. Given the recent publication ofGerald T. Dunne's Justice JosephStory and the Rise of the SupremeCourt, the important role JusticeStory played in the developmentof the American Constitution atlast may well get the recognitionthat has long been its due. ~HANDSOME BLUE LEATHERLEXFREEMANBINDE'RS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

tt1eFreemanVOL. 22, NO.7· JULY 1972Power to the People: the Mask of Despotism Carl A. Keyser 387How the earliest seeds of socialism 'sprouted and grew in the United states in thelate nineteenth and twentieth century.Vouchers: Government Control of Private Schools? John P. Cahill 397"It is hardly lack of due process for the government to regulate that which itsubsid izes."Ownership: Free but Not Cheap Gary North 401The private owner cannot escape the costs of ownership and the obligation to actas steward of his goods for the public's benefit.Off the Beaten Track Leonard E. Read 415There is no way to follow the crowd to a new idea or a better way of life.The Founding of tbe American Republic:12. The Scourge of Inflation Clarence B. Carson 419The early American attempts at deficit financing were "not worth a Continental."The Pine Tree ShillingThe story of the first private coinage in America.Kevin Cullinane 434Zoning Laws: The Case for Repeal David J. Mandel 437The more scarce and valuable a given resource, the more urgent the need forprivate ownership and market disposition.Book Reviews:"Safe Places" by David and Holly Franke"Freedom and the Law" by Bruno Leoni444447Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tileFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYLEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published n10nthly by theFoundation for Econon1ic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the n1ailing list. Donations are invitedin any an10unt-$5.00 to $10,000-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printedin U.S.A. Additional copies, postpaid, to one address: Single copy, 50cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.Articles from this journal are abstracted and indexed in HistoricalAbstracts and/or America: History and Life. THE FREEMAN also isavailable on microfilm, Xerox University Microfilms, Ann Arbor, Michigan48106. Permission granted to reprint any article from this Issue,with appropriate credit, except "Power to the People: the Mask ofDespotism," "The Founding of the American Republic," and "ZoningLaws: The Case for Repeal."

PO~ER TO THE PEOPLEthe naas. of despotisnaCARL A.KEYSERTHERE IS a specially apt paragraphin The First Leftist,l apamphlet by Dean Russell, whichis worth quoting.The rallying cry of this new Left[the Jacobins in 18th century France]was: All power to the people. And asalways it sounded good to the people.But the point that the French peoplemissed is the same point that hauntsthe world today [1951]. It is this:The people can not themselves individuallyexercise the power of government;the power must be held byone or a few persons ... whether theform of government is a kingdom, adictatorship, a democracy, or whatever.If the people truly desire to retainor regain their freedom, their attentionshould first be directed to theprinciple of limiting the power ofgovernment itself instead of merelydemanding the right to vote on whatMr. Keyser is Commonwealth ProfessorEmeritus of the University of Massachusettsat Amherst where he had specialized in materialsengineeringand metallurgy. This articleis adapted from a book manuscript Mr. Keyseris completing on the expanded role the Federalgovernment assumes in our lives.party or person is to hold the power.For is the victim of governmentpower any the less deprived of his life,liberty, or property merely becausethe depriving is done in the name of- or even with the consent of - themajority of the people?According to Elie Halevy2 socialismwas considered by its earlyadvocates as a natural evolutionof liberty, fulfillment of the revolutionof 1789, the end of thesubjection of labor by capital."But on the other hand," wroteHalevy, "it is also a reactionagainst individualism and liberalism;it proposes a compulsoryorganization in place of outworninstitutions destroyed by the Revolution."Thus, old despotismswere to be replaced by new ones.Men were again to surrenderthemselves to the tyranny of thestate.In the years following the Napoleonicwars Charles Comte andCharles Dunoyer founded a peri-

388 THE FREEMAN Jul·yodical called Le Censeur (TheCensor) in France. The observationsmade in 1815 have permanentvalidity."The first way," wrote Dunoyer,"that occurs to man to satisfy hisneeds is to take; plunder was thefirst industry, as it was the firstend of human association; historyhardly knows a society that wasnot first formed for war andpillage."3"The first need of man," statedCharles Comte along the same lineof thought, "is to provide for hissubsistence, and, as we have alreadyseen, he can do so only bythe spontaneous product of nature,or by what he seizes from hisfellows, or by the produce of hisindustry."4Government SubvertedThe justification for peacefulgovernment is to prevent the seizureof one man's life and propertyby another. Today, governmenthas been subverted to perform thevery function the prevention ofwhich justifies its existence: pillage.This occurs when the governmentattempts to fulfill whatare commonly ·called social needs:it takes from some and gives toothers."In their present state," accordingto Dunoyer at the start of thenineteenth century, "the nationscan be compared to swarms madeup equally of hornets and bees,swarms in ~hich the bees agreeto produce torrents of honey forthe hornets, in the hope of keepingat least a. few combs for themselves.Unhappily, there is not alwayseven a small part left forthem . . . Man's concern is notwith government; he should lookon government as no more thana very secondary thing - we mightalmost say a very minor thing.His goal is industry, labor, andthe production of everythingneeded for his happiness. In awell-ordered state, the governmentmust be only an adjunct of production,an agency charged by theproducers, who pay for it, withprotecting their persons and theirgoods while they work. In a wellorderedstate, the largest possiblenumber of persons must work,and the smallest possible numbermust govern."5The same thought was expressedby Count Henri Saint-Simon, abrilliant but somewhat erratic andeccentric philosopher-economist,who was cognizant of the work ofComte and Dunoyer and who ironicallylater became the founder ofFrench socialism."Society," stated Saint-Simon,"needs to be governed as little aspossible, and there is only oneway to accomplish that - to begoverned as cheaply as possible."6Later Saint-Simon and his fol-

1972 POWER TO THE PEOPLE : THE MASK OF DESPOTISM 389lowers forgot this advice and advocateda tyrannical industrialstate ruled by a scientific elite.Dunoyer and Comte divided societyinto two classes: those whowish to plunder and those whowish to produce and exchange inpeace. Dunoyer wrote of the strugglebetween these two classes."We must not forget," wroteDunoyer of the peaceful producerclass, "that its members are stillfew in numbers and isolated fromeach other; that there are fewmeans of communication and defense;in a word it is not organized,while, generally speaking itsenemies are organized."7These and sicmilar thoughtsmade their way via Saint-Simonto Auguste Comte, the founder ofpositivism, to Buckle, the historian,and finally to Herbert Spencer,the economist and philosopher. Thephilosophy was accepted in England,the United States, and elsewhere,playing a major part in thenineteenth-century economic expansionof the American West.By the end of the nineteenthcentury socialism was thriving,claiming to be a new liberalism.It took hold first in Germany, laterin England and the Scandinaviancountries, and then in violentform, in Russia. Finally it evolvedinto the Fascism of Italy, theNational Socialism of Germany,and the welfare state in England'and the United States. T.he strugglebetween the peaceful producersand plunderers still goes on.The peaceful producers are "fewin numbers and isolated from eachother . . . there are few means . . .of defense ... , [the producergroup is] not organized, while,generally speaking its enemies areorganized."Near the end of his book ElieHalevy asked, "Am I going to betold about a future state of thehuman race, when a perfect socialismwill be united with a perfectfreedom? What freedom? Thefreedom to do nothing, as in theabbey of Theleme, or the absenceof obedience to a master, alongwith incessant labor like an ant ora bee? This ultra future ... goesbeyond the limits of my vision.And when I see men giving themselvesup to these dreams, I cannot help but think of Kant's dovetrying to fly in the void or ofHegel's swimmer without water."sLoss of FreedomSocialism ends, although theend may be many years in coming,in tyranny and loss of freedom.The nineteenth-century FrenchSocialists were followed by NapoleonIII, the Socialists of Russialasted a few months and yieldedto Bolshevism, the post-war Socialistsof Italy were followed byMussolini's Fascists, and after a

390 THE FREEMAN Julydozen or so years the Socialists ofGermany succumbed to Hitler'sterror. In Spain, Franco was Socialism'sheir. Once the terrortakes over only a war seems ableto bring about a change, and thereis no assurance that a new terrorwill not replace the old. Undersome forms of terror vestiges ofprivate ownership were allowed toremain, as attempts were made togain social security without completelyextinguishing economicfreedom. But freedom is indivisibleand freedom compromised isfreedom lost.Henry Watterson, the grand oldeditor of the oldtime LouisvilleCourier-Journal was rightly fearfulof unlimited government, evenif it was the choice of the people."We are told by Herbert Spencer,"wrote Watterson, "that thepolitical superstition of the pasthaving been the divine right ofkings, the political superstition ofthe present is the divine right ofparliaments and he might havesaid of peoples. The oil of annointingseems unawares, hethinks, to have dripped from thehead of the one upon the heads ofthe many, and given sacredness tothem also, and to their decrees.""That the Proletariat, the Bolsheviki,the People are on the wayseems plain enough," he wrote in1919 with unusual foresight. "Howfar they will go,· and where theywill end, is not so clear. With akind of education - most men aretaught to read, very few to think- the masses are likely to demandmore and more for themselves.They will continue strenuously andeffectively to resent the startlingcontrasts of fortune which opportunityand aptitude have createdin a social and political structureclaiming to rest upon the formula'equality for all, special privilegefor none'.""The law of force," continuedWatterson, "will yield to the ruleof numbers. Socialism, disappointedby its Utopia, may then repeatthe familiar lesson and reproducethe man-on-horseback, or theworld may drop into anotherabyss, and, after ensuing 'darkages'. . . emerge with a new civilizationand religion."9At another point in MarseHenry, Watterson neverthelesswrote: "As poorly as I rate thereign of majorities, I prefer it tothe one-man power, either electiveor dynastic."loSocialism and MediocrityJames Gibbons HunekeI' was aconnoisseur of music, the arts, andliterature. He lived from 1860 to1921 and witnessed the socialistdrift of the Western world, includingthe Red revolution in Russia.His biographer, Arnold T. Schwab,claims that HunekeI' was "the

1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 391most versatile and one of the mostentertaining and influential Americancritics ..." Huneker's interestsranged far beyond the artsinto political ethics and led himto spend time in the greasy restaurantsof New York arguing communismwith those of the vanguardsuch as Emma Goldman.The last book Huneker wrote,Varia,Uons, was a collection ofessays published posthumously in1921. 11 In his powerful essay,"Socialism and Mediocrity," Hunekerquotes Yves Guyotl 2 : "Thereare three words which socialismmust erase from the facade of ourpublic buildings, the three wordsof the republican motto: Liberty,Equality, and Fraternity. Libertybecause socialism is a rule oftyranny; equality because it is arule of class; fraternity becauseits policy is that of class war."Huneker himself then goes on towrite: "M. Guyot might havequoted Napoleon, a realist, a cynicin politics, for he knew its seamyside, who said: 'Tell men they areequal and they won't bother aboutliberty.' How true - if we are allreduced to the level of slaves andlive in filth and depravity, we shallnot be concerned with ,freeing ourselvesfrom this condition, providingwe all equally enjoy the sameconditions of our non-existence."Guyot ... attacks Karl Marxon his weakest flank, and, incidentally,proves him not to havebeen a proletarian, but the son-inlawof a Prussian Junker. Theselfishness of Marx, his tyrannicalbehavior, his unphilosophicalwrath when opposed by two suchintellectual giants as Bakunin 13and Lassalle 14 ; his jealous attitudetoward Ferdinand Lassalle, especiallyafter his tragic death, areall well known. Able but frequentlyunscrupulous men amuse theidle and attract the multitudessuchare the leaders . . . Theseleaders are plagiarists, with somevariations, of all the communistromances inspired by Plato."The Exploitation TheoryNot only did Marx and Leninplagiarize Plato but, according toHuneker, they "built up theirtheories upon a sentence of Saint­Simon and three phrases of Ricardo's.Our author [Huneker isquoting Guyot] gives these examples:'German socialism is derivedfrom two sources: (1) TheFrench doctrine of Saint-Simon;"The 1vay to grow rich is to makeothers ,work for one,' which inProudhon's mouth becomes 'theexploitation of man by man.' (2)Three formulas of Ricardo, viz.:(a) 'labor is the measure of value',.(b) 'the price of labor is whatprov,ides labor in general with themeans of subsistence, and of perpetuatinghis species without

392 THE FREEMAN Julyeither increase or diminution',. (c)'profits decrease in proportion aswages increase.'" Saint-Simon andProudhon are guilty of viciousdistortions and Ricardo of abjectassininity unworthy of yet anothertiresome refutation."N0 Socialist," Huneker continues,"has succeeded in explainingthe conditions for production,the remuneration, and the distributionof capital in a collectivistsystem. No Socialist has succeededin determining the motives foraction which an individual wouldobey. When pressed for an answer,they allege that human natureshall be metamorphosed, but thatthe individual remains a constantquantity! Rank materialism, allthis, and absolutely without vision..."It may be said that man isready for every form of sacrificesave one: nowhere and at no timehas he been found to labor voluntarilyand constantly from a disinterestedlove for others. Man isonly compelled to productive laborby necessity, by fear of punishment,or by suitable remuneration.The Socialists of today, like thoseof former times, constantly denouncethe waste of competition.Competition involves losses, butbiological evolution, as well ashumanity proves that they arelargely compensated by gain. Furthermore,there is no question ofabolishing competition in socialisticconceptions; the question ismerely one of substitution of politicalfor economic competition.If economic competition leads towaste, and claims its victims, it isnone the less productive. Politicalcompetition has secured enormousplunder to great conquerors suchas Alexander, Caesar, Tamerlane,and Napoleon; it always destroysmore wealth than it confers on thevictors. The Socialist formulatesa theory of robbery and calls it'restitution to the disinherited.'Disinherited by whom? Disinheritedof what? Let them producetheir title deeds ... Georges Bernardsays that 'socialism will be aregime of authority.' On this pointGuyot grimly agrees with him. Inreality it will be the most oppressivespiritual and material systemever invented by man." ... The future - which is saidby some to belong to socialismwillwork out the problem of mediocrity,especially if socialism isinvolved; mediocrity and socialismare not poles asunder. Concretehouses filled with concretepeople who will eat, drink, .andthink alike will cover the land.Everything will be concrete, evenour opinions. In his concrete Capitola concrete President will deviseconcrete laws. Art, music,literature will be so concrete thatour native Gradgrinds, hungry for

1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 393hard facts, will be ravished intothe seventh concrete heaven . . .And this coming age of concrete,wherein all must walk and lookalike, is it not a dream comparedwith which Dante's Inferno wouldbe a Garden of Armida ?"H)Boris Pasternak would probablyhave answered, "Yes."Early Signs of SocialismSocialism, according to theclassic definition, concerns itselfwith the collective ownership ofthe means of producing and distributinggoods, under democraticgovernment control. In practiceSocialism has been expanded tocover government ownership, operationand control of all thefacilities and institutions which,even indirectly, contribute to theproduction and distribution ofgoods. Additionally, Socialist governmentshave assumed responsibilityfor providing those serviceswhich are used by most citizens,and for providing material securityfor all of their citizens. Accordingto this concept the governmentof the United States has beenengaged in Socialist activities eversince it was established.Post-offices and post-roads wereauthorized in the Constitution underArticle 1. Certainly this wouldrepresent ownership and controlof facilities which contribute indirectlyto the production and distributionof goods. Additionally,the provision of a service used bymost citizens is involved. (The.argument is often made that servicesused by all citizens should beprovided by the government sincethis will take the profit out of theactivity. How about breathing, forinstance?) Eventually the Congressmade the handling of mail agovernment monopoly, and after182 years of dismal deficits, theSocialistic postal service has beenchanged to an independent governmentagency which is supposed toresemble a private corporation andwhich is supposed to be self-supporting.It remains, however, agovernment agency, presumablyowned by the people, and it is notless Socialistic than it was before.The big-government liberals,who double as humanitarianswhen they dispense the money theyhave stolen from the thrifty, untilrecently revered Thomas Jeffersonas a near-God, which, of course,he wasn't. Then one of his biographersmade the rather unremarkabledisclosure that Jeffersonhad been a Negro slaveholderand this relegated him to the positionof a latterday leper. Someyears earlier it had been revealedthat Jefferson regarded governmentas "inherently corrupt, oppressive,and malevolent."16 Thisshould have forewarned the liberalsand caused some anguish, but

394 THE FREEMAN Julyit didn't. Perhaps it was because,in spite of Jefferson's mistrust ofgovernment, he was responsible forseveral early American socialistsorties.The first Jeffersonian socialistendeavor was the Louisiana Purchaseof 1803, by which the UnitedStates became a dealer in realestate. This was an atypical socialistactivity in that it provedenormously profitable. The profitsfrom the sale of Louisiana Purchaseland helped to pay the costof running the government for thesecond fifty years of the country'sexistence. Although the internationallegality of the enterprisewas authorized under the treatymakingpowers granted by theConstitution, there is nowhere aclear authorization for the UnitedStates to engage in a real estatedevelopment the size of the Louisianapurchase. Acquisition of territoryon a limited scale for purposesof defense would certainlybe permissible, but it is questionablewhether a big purchase couldbe justified under the general welfareclause. In any event, whowas to question the constitutionalityof such a step? This andlater real estate ventures of theUnited States have proved to bequite generally profitable in spiteof their socialist nature. Perhapsit all proves that even socialistscan make money in real estate.A Federal Surplus!By 1806 the income of the Federalgovernment had grown beyondwhat was needed for thelimited government the nationthen enjoyed. Small amounts ofmoney were needed for service ofthe national debt and for nationaldefense, the major government activity.Unbelievable as it nowseems, there was great concernover what to do with surplusfunds! Handling this problem,Jefferson showed himself to be theeternal politician. Instead of recommendingthat customs duties,the major source of Federal income,be reduced, he sought waysto increase spending. "Congress,"he wrote, "should explore the possibilitiesof Federal appropriationsfor the great purposes of Federaleducation, roads, rivers, canals,and such other objects of publicimprovement as may be thoughtproper."17 It is to Jefferson's everlastingcredit that he was enoughof a constitutionalist to have feltthat an amendment would beneeded to permit such a socialistinvasion of fields heretofore largelyprivate. In this he was unliketwentieth-century politicians whoincreasingly agree with Mr. Dooleythat "th' Constitution iv th'United States is applicable on'y insuch cases as it is applied to onaccount iv its applicability."It is noteworthy that for 82 of

1972 POWER TO THE PEOPLE: THE MASK OF DESPOTISM 395the first 112 years precedingWorld War I surpluses were aproblem.I 8 What a lovely problem!This brings to mind the 1970 rowover federal-state revenue sharing.19 If the states are in need ofmore money and the Federal governmentis so overbu.rdened withcash that it can afford to givesome to the states, why not simplyreduce Federal taxes and allow thestates to raise their own funds?Under this scheme the moneywould be raised where it is spentand the public could keep a bettereye on how it was spent. Underrevenue-sharing the Federal governmentwill parcel out its favorssubject to the influence of politicalpressures far removed from thepeople who fill the till. This ishardly likely to contribute to carefultaxing and spending.The socialist proposal of Jeffersonthat Congress consider Federalsupport of education have ledmany to consider him as the fatherof publicly-supported education.Not until about sixty-five yearslater did Federal support of educationbecome a reality. In 1862 thefirst Morrill Act, known as theLand Grant Act, was passed providingfor the establishment andmaintenance of state colleges.Republican president, RutherfordB. Hayes (1877-1881), later proposedthat Federal grants be madefor public education."Whatever government canfairly do," wrote Hayes, "to promotefree popular education oughtto be done. Wherever general educationis found, peace, virtue, andsocial order prevail and civil andreligious liberty are secure."20Hayes was not a very reliableprophet, as the recent riots, turmoiland general breakdown of thelegal and social traditions of thecountry have proved. Events inthe 1930's in Germany, wherepublic education had long been atradition, also seem to show thateducation isn't the answer to allmen's problems.Republican presidents Arthur(1881-1885) and Harrison (1889­1893) continued pressing for Federalsupport. In 1890 the secondMorrill Act was passed granting$25,000 annually to each of theland grant colleges. In 1971 Congressappropriated 18 billion dollarsin aid to education. Socialistenterprises have a way of growingon you.In spite of all, socialist intrusionsby the end of the nineteenthcentury represented a minusculeportion of American endeavor. Thetwentieth century has been quitedifferent.The Federal government enteredthe field of social security underPresident Franklin Roosevelt. Socialsecurity was not an inventionof Roosevelt nor of his braintrust-

396 THE FREEMAN Julyers, Bismarck having imposed itin Germany many years before.From Germany the idea spread tothe countries north and west ofGermany until it reached theUnited States. In this country thematerial security an individualmight attain was, prior to RooseveltII, largely a private matterattended to by individuals themselvesor by their relatives andfriends, the latter often actingthrough churches and charitableor fraternal organizations. In additionto these private sources ofmaterial security, tax-supportedservices such as local "poor farms"were provided by towns, cities,counties, and states. HerbertHoover and the Republican leadersof the 1920's and 1930~ endorsedlocal tax-supported effortsand private charity as the solutionto helping the needy. Thesocialism represented by taxsupportedwelfare was on a stateor lower level. Roosevelt's contribution.to socialism consisted offederalizing the old-time localsocialist endeavors. Accompanyingthe federalization and wild expansionof these socialist activitiesthere was a simultaneous andenormous transfer of power fromindividuals and local communitiesto Washington.The socialism that has been withus almost since the founding ofthe republic has been sponsoredat times by the political ancestorsof both Democrats and Republicans.Since the turn of the century,and particularly in the middlethird of the century, bothparties have accelerated theirsponsorship. But it must be rememberedthat the politicians donot lead the people. They follow. ~• FOOTNOTES •1 Russell, Dean, The First Leftist whichappeared in In Brief, vol. 7, no. 3, Foundationfor Economic Education, Irvington-on-Hudson,New York, 1951, p. 7.2 Halevy, Elie, The Era of Tyrannies,Essays on Socialism and War, trans. byR. K. Webb, Doubleday and Co., Inc., N.Y.,1965.3 Ibid., p. 29.4 Ibid., p. 29.·5 Ibid., p. 31.6 Ibid., p. 32.7 Ibid., pp. 32, 33.8 Ibid., pp. 313, 314.9 Watterson, Henry, Marse Henry, AnAutobiography, v. II, pp. 289-290.10 Ibid., pp. 158, 159.11 Huneker, James Gibbons, Variations,Charles Scribner's Sons, N. Y., 1921.12 French laissez-faire economist, 1843­1928.13 Russian anarchist, nihilist, and terroristwho believed in anarchy exceptingin organizations he controlled. 1814-1876.14 German socialist and economist.1825-1864.15 See Huneker, OPt cit., PP. 111-120.16 Clinton Rossiter quoted in Kimmel,Lewis H., Federal Budget and Fiscal Policies,1789-1958, The Brookings Institution,Washington, D. C., 1959, p. 3.17 See Kimmel, op. cit., p. 16.18 Ibid.19 Federal deficit sharing, rather thanFederal revenue sharing has yet to beproposed. It might be more apprppriate.20 See Kimmel, OPt ·cit., p. 47.

Government Controlof Private Schools?JOHN P. CAHILLI FEEL rather like the man in thescience fiction novel, who hasstumbled upon a great horror andis not believed until it is nearlytoo late. I have sixteen years ofprivate education under my hatand wish the private schools ofAmerica nothing but prosperity.So how can I be against the"voucher" system? Do I not realizethat this system is designedto save the failing private schoolsand provide them with the neededfinancial assistance; that it is designedto promote the greatestamount of freedom of choice forthe parent regarding the educationof his children?I know what it is designed todo. And I know that what it isdesignetl to do and what it may infact do, are not necessarily synonymous.Mr. Cahill of Lakewood, California, plans toenter Law School in the fall.The scheme is designed to workthis way: The level of governmentwhich has enacted the programwill present to the parents of eachchild of school age a voucher representingan agreed upon amountof money; the parent will presentthis voucher as tuition to theschool, public or private, wherethe child is enrolled; the school inturn will take this voucher to theproper government agency, whereit will be cashed.It is alleged that in this ",'ayeveryone will be satisfied and freedomof choice ,viII be preserved.Parents are happy; they may nowsend their children to whateverschool they choose with no anxiousthought for expenses. The privateschools are happy; they \viIIprosperand grow through the influxof new students and their vouchers.Religious schools are happy;they may now take advantage of397

398 THE FREEMAN Julythe government largesse, and (asit is the parent that is beinghelped directly and not the school)the Supreme Court is not offended.The pa;rish school will once moreflourish throughout the land.Right?Principles and Facts IgnoredWell, perhaps. And perhaps not.As a "conservative" program ofaction, the voucher system ignoressome basic principles and obviousfacts.1. The unwillingness or inabilityof the users to continue to pay thetuition and operating costs of theprivate schools is one reason thatthey are in need of financial assistance.2. This inability to pay is in nosmall part brought about by increasedtaxes and inflation causedby increased government deficitspending.3. No one can give what he doesnot have. If the government is goingto pay the expenses of all thechildren in private schools in additionto those in public schools,it must find a source for the additionalfunds that will be needed.4. The government has twosources for these funds: increasedtaxes or further inflated currency.Not to be forgotten are the additionalhundreds of highly paidbureaucrats who will be needed toadminister such a program. Theresult will hardly be the greattriumph of justice which is predicted:•. The taxes of everyone whopays school taxes will increase.• Some of these taxpayers willnow receive a return for theirmoney which they did not receivein pre-voucher days.• Those with children in thepublic schools will be forced to payincreased taxes with no increasedreturn.• Those with no children in anyschool will pay increased taxes andcontinue to receive nothing in return.How anyone could think thatconfusion and injustice will beanything but compounded withthe implementation of this scheme,I do not know. But let us face theissue squarely: there are few todaywho will permit themselvesthe thought that feeding from thepublic trough is other than a virtuousact. Nevertheless, there areother arguments which may hit.home where economic and moralones have missed the mark.We live in an age in which government,at all levels, is anythingbut disinterested. The bureausand agencies of government arepeopled with men beset with themeddling urge as never before inhistory. Money distributed by thegovernment has seldom had morestrings attached than now. Busing

1972 VOUCHERS: GOVERNMENT CONTROL OF PRIVATE SCHOOLS? 399to achieve racial balance in thepublic schools is a good example.The voucher scheme cries out tobe used as an indirect licensingsystem for the private schools.There are already hints in thepress that certain "modifications"and "safeguards" will have to beintroduced into the program if itis passed. Private schools, for instance,that maintain a racial imbalancewill not be able to cashtheir vouchers.Some Perturbing QuestionsThere are other points uponwhich private, especially religious,schools might do well to meditate.Would a school be permitted tocash vouchers if that school promotedteachings contrary to thegovernment policy, such as artificialbirth prevention or abortion?Could a school with an "inadequate"sex-education program cashvouchers? Given the temper of thetimes, one would think that "accreditation"for participationwould not come cheaply.How could the bureaucrat thinkthat it was other than his duty to"protect" the parent and childfrom the "misuse" of their newfound freedom in a "below standard"school? May a school bedropped from the program becauseits graduates are untrained insensitivity?These thoughts must not beoverlooked. They are discussedevery day in the educational establishments,whether public or private.To think that they will notbe considered by the agencies administeringsuch a program isnaive. After all, someone must administerthe program and it mustbe administered according to someone'snorms; why not the onesprevailing in the educational establishments?When one considersthe intellectual and bureaucraticenvironment, the voucher systemdoes not augur well for the privateschools. In the main, it will serveto make them less private.Let.us suppose that a school'sadministration elects to stay outof the program or, having been infor a while, discovel~s restrictionsthat it cannot tolerate and decidesto withdraw. In the first case,those who elect to stay out of theprogram will not be relieved of theburden of financing it. And theostensible intent of the scheme isto aid those who are not no\v partakersof the public moneys. Thesecond case seenlS highly unlikely.A school \vould have to be verywealthy indeed to survive if it\vere to reject its prevailing sourceof regular income, the government.A school \vhich had grown dependenton the prognlnl could bedealt a mortal blow if it \vithdre\vor was expelled from the program.How many parents \vould continue

400 THE FREEMAN Julysending their children if the "free"tuition vouchers from the governmentwere rendered worthless atthis school, especially in the faceof higher taxation to support theother private schools on the program?Survival through CompetitionBut what of the private schoolsthemselves? Won't they die outwithout some sort of governmentassistance?Good schools will not die out.There is more to the plight of theprivate school than the ability ofthe user to pay. W,illingness is amajor factor. When the religiousschool is "secularized" or the denominationalor other privateschool loses its tradition and becomes,in essence~ no differentthan the public school, the sacrificethat a man must make to "paytwice" for his child's educationloses all reason. Why should a manwho is forced to support the publicschool system pay again for a privateschool education if the productis like that of the public school?A return to the first principlesof their founders may not saveprivate schools. But it is a firststep, and a giant one, in the rightdirection. The voucher system is astep backward and downward intothe mire of government control ofall aspects of our lives.The man who is truly interestedin quality education will look firstto principles of freedom and honor.He may check the governmentschools to see if education basedon compulsion in attendance andsupport can truly inculcate theseprinciples. And then he must decidewhether the voucher systemincreases freedom and yields aneducation based on principle orwhether it leads to dependence ongovernment, government control ofour lives, and education based onforce. ~IDEAS ONL$LIBERTYEducational ResponsibilityTHE PARENT can and should look beyond himself for specializedhelp in a proper education of his child, but neither parent norteacher should be confused about the parent's ultimate responsibilityor the proper role of the school in the upbringing of theyoung. Unfortunately, such distinctions have blurred in our society.The growth of the public school system has been more thanmatched by a bureaucracy to regulate its working.GEORGE ROCHE III, Education in America

GARY NORTHOWNERSHIPFREE BUT NOT CHEAPOwnership of the means of production is not a privilege, but aa social liability. Capitalists and landowners are compelled toemploy their property for the best possible satisfaction of theconsumers. If they are slo'wand inept in the .performance of theirduties, they are penalized by losses. If they do not learn the lessonand do not reforn~ the,ir conduct of affairs, they lose their 'wealth.No investment is safe forever. Hewhodoes not use his propertyin serving the consumers in the most efficient 'way is doomed tofailure. There is no room left for people who would like to enjoytheir fortunes in idleness and thoughtlessness.LUDWIG VON MISES 1THERE IS no more fundamentalquestion in the field of politicaleconomy than that of the ownershipof property. Marx, no .lessthan Adam Smith, saw this clearly.Invariably, the question ofownership must raise the questionof sovereignty. It also raises theMr. North is a member' of the staff of theFoundation. for Economic Education. This articlewill appear as a chapter of his forthcomingbook, An Introduction to Christian Economics(Nutley, New Jersey: Craig Press).knotty question of stew:ardship.The roots of Western Civilizationextend back to the Hebrews.The message of the law and theprophets of the Old Testamentreturned again and again to theissue of ultimate sovereignty. Themessage was clear enough: God issovereign, and not men, nor anyhuman institution. All earthly,human sovereignty is thereforederivative and limited.The advent of rationalist and401

402 THE FREEMAN Julyoutright anti-Christian philosophiesshifted the language of thesovereignty issue, but not the difficulties.If God were removedfrom the day-to-day operation ofthe universe, then sovereigntywould have to be found elsewhere.Eighteenth-century rationalistsfromAdam Smith to Jean JacquesRousseau, from the Physiocrats tothe J acobins - attempted to discoverwhere sovereignty lies, inprinciple, in human affairs, andtheir answers concerning the abstractlocus of sovereignty determinedthe kind of society theyhoped to attain through the useof political action.~Obviously, theyarrived at very different answers.It is possible, of course, toimagine full sovereignty apartfrom organized institutions possessingthe right of legal compulsion.Sovereignty might beclaimed strictly on the basis ofconscience: voluntary tithing toa church, for example, or voluntarytaxation by the state (assome market advocates have argued).As a rule, however, wherewe find any institution whichclaims sovereignty and receivessupport from a majority of thecitizenry, we also find compulsion.In the United States, the classicexample is the shift in sovereigntyfrom the state-established religiousdenominations that once receivedtax funds to support theiroperations to the government educationalinstitutions. The publicschools became the institutionalizedchurches of the local communties,and recent court decisionsindicate that they are about tobecome national churches. 3 Thosewho officially denied that churchand state ought to be linked, inmost cases simply substituted anew.priesthood for the·older one,Le., the one which no longer couldconvince a majority of citizens ofits claims of sovereignty.4In modern, industrialized nations,the conflict over sovereigntyis between the state and the market.In the Soviet Union, and presumablyin the other iron curtaincountries, the conflict is four-way:national state, planning region,market, and Communist Party.GAs Ludwig von Mises puts it, thecontrol of scarce economic resourcescan be handled in two ways: profitmanagement or bureaucratic management.G Both are legitimate intheir own spheres, but in the moderneconomy, statist bureaucraticmanagement seems to be triumphanteverywhere we 100k. 7Our universe operates in termsof the fact of economic scarcity.A t zero price, thE;re is greater demandfor than supply of economicgoods and services. (If there is anequality of demand and supply, oran excess of supply, the goods arenot economic goods, and therefore

1972 OWNERSHIP: FREE BUT NOT CHEAP 403they are not objects of humanaction. S ) Those who possess skillsor resources that are desired bythe public at a price greater thanzero must, by definition, act asstewards for those who are willingand able to purchase thesedesired products. No matter howsecure his legal title to ownership,each owner must face the economicresponsibilities of stewardship.This, in fact, is one of themiracles of market arrangements.The requirements of the many,considered as a collective unit, aremet by the activities of individualmen and women. The philosophicalproblem of the one and themany, which transforms itself intothe problem of the collective andthe individual, is answered in therealm of economics by the operationof the market. The fact thatfew men take the market seriouslyis indicative of the collapseof philosophical inquiry into thiscrucial intellectual problem overthe last century.!)The Mixed-up EconomyThe so-called "mixed economy"is one of the means by which menattempt to avoid the implicationsof the market's solution. "We areneither socialists nor capitalists"is a rallying cry for contemporaryeconomists, theologians, and "practical"businessmen. These peoplethink that they are saying somethingquite profound and verymodern when they promote sucha slogan. What they are saying isin reality quite muddled - theproduct of a lack of seriousthought. To say that you favorneither full collectivization norfull economic anarchy is not sayinganything at all. Noone in aposition of political authority advocatesfull collectivization, as thesurvival of the Liberman reformsand the private farm plots in theSoviet Union ought to indicate.Pure anarchism, while it may findmore vocal and intelligent advocatesthan pure collectivism, hasalways been a tiny intellectualstream in human history. So the"neither socialist nor capitalist"slogan is not relevant as a philosophicallyunique statement.Mises, as usual, has seen the emptinessof such slogans, and hecalls our attention to the crucialcontribution the market makes insolving the problem of stewardship:All attenlpts to abolish by a conlpromisethe contrast between conlmonproperty and private ownershipin the means of production are thereforenlistaken. Ownership is alwayswhere the power to dispose resides.Therefore State Socialism and plannedeconomies, which want to maintainprivate property in name and inlaw, but in fact, because they subordinatethe power of disposing to State

404 THE FREEMAN Julyorders, want to socialize property,are socialist systems in the full sense.Private property exists only wherethe individual can deal with his privateownership in the. means of productionin the way he considers mostadvantageous. That in doing so heserves other menlbers of society, becausein the society based on divisionof labour everyone is the servant ofall and all the nlasters of each, in noway alters the fact that he hinlselflooks for the way in which he canbest perform this service. 10Mixed economies do not standstill. They do not allocate resourcesand tasks according topermanent, fixed definitions. Themixed economy is a battlegroundfor competing ideologies; withoutsolid, concrete definitions ofsphere sovereignty - rules thatspecifically limit, in principle, theoperations of bureaucratic managementand profit managen1ent ­the idea ofthe mixed economy willremain an intellectual monstrosityand, in practice, a very poor meansof getting things accomplished.It is not possible to compromise,either, by putting part of the meansof production at the disposal of societyand leaving the remainder to individuals.Such systems simply standunconnected, side by side, and operatefully only within the space theyoccupy. Such mixture of the socialprinciples of organization must beconsidered senseless by everyone. Noone can believe that the principlewhich he holds to be right should notbe carried through to the end. Norcan anyone assert that one or theother of the systenls proves the betteronly for certain groups of the nleansof production. Where people seem tobe asserting this, they are really assertingthat we must demand the onesystem at least for a group of the111eanS of production or that it shouldbe given at nlost for a group. Compronliseis always only a momentarylull in the fight between the two principles,not the result of a logicalthinking-out of the problem. Regardedfrom the stand-point of eachside, half-measures are a tenlporaryhalt on the way to complete success.llServing OthersIs it really true that the market,as an impersonal mechanism,pressures individual citizens, intheir role as economic actors, tosatisfy the needs of their fellows?A brief analysis should help toanswer this question in the affirmative.Consider the occupationof'the farmer. He owns land andtools. He possesses skills and specializedknowledge. The more productivehe is, the more specializedhis labor and, presumably, histools. These assets constitute hiscapital. The very fact of his legalownership brings the problem ofcost into the forefront: how muchdoes it cost him to own his assets?The doctrine of alternative costs

1972 OWNERSHIP: FREE BUT NOT CHEAP 405tells us that he must forfeit theuse of all those economic goodsand services that he could purchaseif he were to sell or lease hiscapital (including his human capital).He has chosen to remain theowner of these particular assets,but he must forfeit all those assetsthat are lower on his scale ofvalues, but that might be purchasedif he divested himself ofthe ownership of his presentscarce economic resources.There is only one way in whichhis legal ownership, and thereforecontrol, of these scarce economicresources would cost him nothing.If he has absolutely no other desiresthan to be exactly what heis, where he is, controlling justthese economic resources and noothers. This is the ultimate goal ofeconomic perfection toward whichmen strive, of course, but it doesnot describe the conditions of real,acting men. But it is only underthis assumption, that a man hasno other alternative uses for hiscapital or the assets that could begained in voluntary exchange, thatzero opportunity costs would prevail.So long as men have unfulfilleddesires for additional scarceeconomic resources, they will bearthe burdens of opportunity costs.They must choose one goal or setof goals and not another; theymust select the appropriate meansof achieving their economic goals;they must exercise responsiblechoice."Every man has his price." Mostof us believe this to be valid as aregulatory principle, despite thefact that we know that on somepoints in time, some men couldnot be compelled by the whip orinduced by the carrot to respondto the desires of other men. Menare always trying to improve theeconomic conditions. This means"that they must bear the costs ofchange in a world of limited resources.Even a decision to remaininactive is a decision: one forfeitsthe benefits that change wouldhave brought. In short, there isalways a trade-off in economicchoosing, even in decisions not totrade at all.Ownership, a Social FunctionAny resource - human, animal,inanimate - which can commanda price imposes costs on its owner.Each individual must use the resourcesunder his authority inorder to serve others, eitherthrough the mechanism of themarket or the coercive power ofthe state. To the extent that themarket is allowed to function asthe sovereign authority over economictransactions, individualowners must attempt to meet thedemands of other possessors ofscarce economic resources, as registeredon the market in terms of

406 THE FREEMAN Julydiscrete prices. Hence, total humanautonomy is inconceivable.Those who argue that the marketinvolves anarchy are unaware ofhow the market operates. Economicactors must meet the demands ofthe public if they are to survive.The farmer in our original exampleis required to use his land,tools, brains, and skills more effectivelythan do his competitors.If he obstinately or ignorantly refusesto do this, he will lose controlover his resources. Under themarket economy, a man holds hisgoods as a steward for other men;he cannot hold his goods autonomously.Under the free market,ownership is a social function.The meaning of private propertyin the market society is radicallydifferent fronl what it is under asystem of each household's autarky.Where each household is economicallyself-sufficient, the privatelyowned means of production exclusivelyserve the proprietor. He alonereaps all the benefits derived fromtheir employment. In the market societythe proprietors of capital andland can enjoy their property onlyby enlploying it for the satisfactionof other people's wants. They mustserve the consumers in order to haveany advantage from what is theirown. The very fact that they ownmeans of production forces them tosubmit to the wishes of the public.Ownership is an asset only for thosewho know how to employ it in thebest possible way for the benefit ofthe consunlers. It is a social function.l~Is this a denial of the free ownershipof private property? Absolutelynot; it is the necessaryconcomitant of such ownership.It is therefore a denial of thegratuitous ownership of property.Nothing is free from costs undera market economy - not lunches,not talents, not even dreams, fordreams must use up that highlyvaluable and irreplaceable scarceeconomic resource: time.Opportunity CostsMen, in their decision to competefor access to some particularresource, bid up its price. By biddingup the price of an economicgood, they impose higher andhigher costs of ownership on allthose who hold legal, exclusivetitles to the good. These costscome in the form of opportunitycosts. Since the scarce economicresource is now more valuable inthe opinion of the public, it commandsa higher price, and thereforethe value of the resources thatthe owner could gain access to byselling his title of exclusive controlto someone else is continuallyincreased. He pays a price, momentby moment, for his refusalto part with his property; ifhe retains title. to one piece of

1972 OWNERSHIP: FREE BUT NOT CHEAP 407property, he is thereby preventedfrom gaining access to other goodsand services that his propertycould be exchanged for. If somethingcommands a price, it is notgratuitously possessed. Freeownership may command veryheavy costs. It is the right of free,exclusive control over propertywhich makes the economic burdeninescapable; the free market imposesresponsibility with everygrant of economic power.The farmer who does not wishto sell his land, whether for sentimentalreasons, or a fear ofchange, or a commitment to theideals of rural life, or just to keepold Charlie Drackett from gettinghis dirty hands on the bottomforty, is thereby compelled to payfor his use of that land. He has todefend his possession of exclusivecontrol, daily, in the market place.It is not his legal title that is inquestion; it is his economic abilityto defend it against others whothink they could use his propertyin order to better service theneeds of the public. He does nothave to defend it in the way hisgreat-grandfather did - shootingIndians or revenuers or Hatfieldsor McCoys - but by using it tosatisfy the incessant demands ofan unsentimental public. If he failsto do this, he suffers economiclosses. He may have to dip intohis life savings to keep his farmgoing. He may have to go deeperinto debt. Finally, if he continuesto fail to meet the public's demandsfor more food, cheaperfood, better quality food (or evenlower quality food, nutritionally,if that is what the public wants),his mortgage will be foreclosed.The bank will sell it, or the taxcollector will sell it, to the highestbidder. This highest bidder is amiddleman. He is acting on behalfof the public. He thinks he canuse the land and other capitalassets more efficiently than anyoneelse can. If he is wrong, theprocess will start over again.Private property is held in stewardshipfor the public.Title to property is not held by"the public." Titles are ~eld byindividual owners. But the marketcombines the myriad of discretedemands of many individuals andimposes costs on the possessors ofall desired economic resources. Noowner can resist the pressure ofmarket demand without bearingthese costs. Day after day, marketpressures force all owners to askthemselves, "What's it worth tome to hold onto this?" The publicresponds, through the market,"You'll have to meet our price ifyou want to keep it." Day afterday, all those who retain free titleto a particular piece of propertymeet this price. They pay in theforfeited opportunities that might

408 THE FREEMAN Julyhave been: the vacation, the newcar, the shares of IBM, and silencefrom "the little woman" whowants to sell out. This is the lawof survival in the free market.May the best (most efficient) manwin.Ownership Contingent on Right UseDuring the English Reformationthe problem of the j ustificationof ownership came to a headwith the confiscation of the propertyof the monasteries. "TheReformation theorists," writesRichard Schlatter, "failed to solvetheir first great problem. Theywere not able to work out a theorywhich would justify large-scaleconfiscation and at the same timemesh with their other ideas aboutthe nature of private ownershipand its rights. For a consistenttheory they substituted an emotionalattack."1:~ They attackedclerics for their alleged misuse ofwealth. But Sir Thomas More, thegreat Roman Catholic layman, answeredthis argument in A Supplicationof Souls. If this is a validpremise for expropriation, hewrote, then there will be no end ofexpropriation. The King may useit against the church, but then thepeople will use it against the merchants(who bought the land fromthe King). Thus, concludes Schlatter,"The theorists of the Reformationcould-not answer More's' argumentswithout admitting the principlethat all ownership was contingentupon right use. But noproperty owner was willing togrant that that principle shouldbe enforced by any authority inthis world. The theoretical problemwas left unsolved."14Economic vs. Legal ControlThe solution to this theoreticalproblem is found in the analysis ofthe operation of the free market.Yes, ownership does depend, economically,on proper use of resources.The legal title, however,does not rest on economic foundationsbut on historical or formallegal principles. Jt is the magnificentfusion of the right of freelegal ownership. and cost-bearingeconomic control of resourceswhich the free-market commonwealthprovides that overcomes thetheoretical dilemma of medievalproperty theory. Laws against theconfiscation of private propertyinsure the smooth operation of thefree market, and this in turn producesa system of economic organizationwhich requires each ownerof property to assume the costs associatedwith the control of property.Mises summarizes it quitewell:Private property is a human device.It is not sacred. It came intoexistence in early ages of history,

1972 OWNERSHIP: FREE BUT NOT CHEAP 409when people with their own powerand by their own authority appro~priated to themselves what had previouslynot been anybody's property.Again and again proprietors wererobbed of their property by expropriation.This history of privateproperty can be traced back to apoint at which it originated out ofacts which were certainly not legal.Virtually every owner is the director indirect legal successor of peoplewho acquired ownership either by arbitraryappropriation of ownerlessthings or by violent spoliation oftheir predecessor.However, the fact that legal formalismcan trace back every titleeither to arbitrary appropriation orto violent expropriation has no significancewhatever for the conditionsof a market society. Ownership inthe market economy is no longerlinked up with the remote origin ofprivate property. Those events in afar-distant past, hidden in the darknessof primitive mankind's history,are no longer of any concern for ourday. For in an unhampered marketsociety the consumers daily decideanew who should own and how muchhe should own. The consumers allotcontrol of the means of productionto those who know how to use thembest for the satisfaction of the mosturgent wants of the consumers. Onlyin a legal and forn1alistic sense canthe owners be considered the successorsof appropriators and expropriators.In fact, they are Inandatariesof the consun1ers, bound by the operationof the 111arket to serve theconsumers best. Under capitalism,private property is the consummationof the self-determination of theconsumers.l 5The confusion in men's mindsbetween the concept of free legaltitle and gratuitous ownership hasled to numerous injustices in politicaland economic affairs. Mistakesin analysis at this point too oftenlead to cries of political interventionto right some supposed wrong.People want the state to enforcefalse analyses that seem, in theshort run, to benefit some specialinterestgroup.Some men believe that free ownershipis gratuitous, and that thedeviation from such a hypotheticaluniverse is the result of "exploitation."They do not comprehendthat they must defend theirownership in the market, satisfyingthe demands of the public efficiently.An example of this kindof erroneous thinking can be foundin the case of American farmersduring the great depression. of the1930's. It was not uncommon forfarmers to face the foreclosure oftheir mortgages by the local bank,or .else by the solvent bank \vhichhad acquired the assets of thebankrupt rural bank. (Over 9,000banks suspended payments in theyears 1930-33, not counting banksthat merged,vith others and thoseclosed temporarily by the states orthe Federal government during

410 THE FREEMAN July"bank holidays."16) Sometimes taxforeclosures would occur. In anycase, local farmers would occasionallyattend the auction, and agroup of them would surround orthreaten potential bidders, especiallyif they were outsiders to thecommunity. Violence, or the threatof violence, was used directly toreduce the price of the bids, thuslowering the particular farmer'scosts in regaining title to his farm.The true costs of operating thefarm were therefore artificially reduced,thereby lowering the owner'sburden of responsibility to thepublic, as registered on the openmarket.Agricultural LegislationThis, however, was too crude anddirect a form of violence to beused often, even when local law enforcementauthorities permitted it.Violence could be applied far moreeffectively through state legislaturesand the United States Congress.In 1934 three acts werepassed by the Federal government,adding even further interventioninto an already controlled farmmarket (e.g., the Farm Credit Actof 1933) : the Farm Mortgage RefinancingAct, involving Federallyinsured loans; the Farm MortgageForeclosure Act, extending the authorityto the Land Bank Commissionerto enable him to make loansto farmers, allowing them to redeemtheir farm properties priorto foreclosure; the Frazier-LemkeBankruptcy Act, allowing thefarmer who had lost his farmthrough foreclosure to demand a"fair and reasonable" appraisaland to repurchase his propertyover a period of six years at oneper cent interest (interest rateswere fairly low in the free marketin these years, however). Thislast act was declared unconstitutionalin 1935, but a similar act,shortening the repurchase time tothree years, was upheld in 1936.In short, the coercive monopoly oflegitimate power which belongs tocivil government was applied inorder to thwart the operation ofthe free market. Men successfullyreduced the costs of ownershipthrough collective violence or thethreat of violence. Harold UnderwoodFaulkner, no supporter ofthe free market, has commentedon the implications of these earlypolicies of New Deal agriculture:A survey of the farm legislationpassed during the five years 1933­1938 make clear certain facts. Firstof all, "economic planning" was carriedfurther with respect to argiculturethan to any other economic interest.The government took upon itselfthe responsibility of attemptingto determine both production andprices as well as maintaining soilresources and handling most of the

1972 OWNERSHIP: FREE BUT NOT CHEAP 411credit resources of the farmers. Inthe second place, this program wascarried out at the expense of theconsumer. Agriculture was to be afavored industry, with the taxpayerand consumer paying the bill. This,of course, did not disturb the farmer;he insisted that agriculture was nowmerely receiving protection as industryhad long received it through theprotective tariff. Finally, it shouldbe noted that the government enteredso definitely into the programof financing agriculture that by 1937its agencies held about half of thelong-term agricultural paper of thecountry. This was indeed a big stepfrom the laissez-faire policies of aquarter century earlier. 17Exclusive Right of AccessNot only do men erroneously believethat free title to a piece ofproperty ought to bring with itgratuitous ownership, but theyalso err in believing that the rightto bid on another's property is, inand of itself, an exclusive possessionof one bidder or one groupof bidders. Such ~xclusive accessinvolves a legal title, by definition.In' other words, they think thattheir legal right to increase another'sopportunity cost for retainingpossession of his propertyis, in effect, their own gratuitouslyheld prerogative - a titled right toexclusive control of one segmentof the market. Trade unions, forexample, call in the coercive powerof the Federal government(through the Wagner Act and theNational Labor Relations Board)to defend their exclusive right tobid, on a particular labor contract,utterly free from the outside competitionfrom other workers whomight be willing to work for lessmoney. The members of such organizationsassume that they havea legitimate right to hold a job(or gain access to one through theunion) apart from the daily competitionnecessary to defend theirpresence in that particular occupation.They call in the state tocreate by fiat a title to that occupationby arbitrarily excludingothers from bidding.- to a Given JobWhat members of a union dohave title to is their ability towork. But members of such coercivestructures think that becausethey have legitimate title totheir labor they also should havelegal title to an opportunity toexercise their talents in some specificoccupation, apart from outsidecompetition, thus forcing theemployer's costs of operationhigher than a free labor marketwould have permitted. They excludeother citizens who equallyhave title to their own labor, butwho are not permitted to biddown the cost of hiring labor. Bygranting, by fiat intervention, ti-

412 THE FREEMAN Julytles of exclusive bidding rights toone group of laborers, the stateeffectively robs other men of theirright to bid, and therefore oftheir right to exercise their personaltalents.By this confusion of the rightto bid in the market and a title ofexclusive access to that segment ofthe market, the state increases theemployer's costs of operation, reducesthe union member's opportunitycosts (it does not cost himas much to retain his job, for outsidecompetition for that job iseliminated, by state fiat), and itdeprives nonunion laborers oftheir right to exercise their particularcallings before God andsociety. A man's legitimate rightto bargain for his job, continuously(or whenever his labor contractis subject to renewal), istransformed by state fiat and legalizedcoercion into his right toavoid continuous bargaining. Athree-way bargaining structureemployer,union member, and nonunionmember - becomes, throughthe threat of state violence, a two­.way bargaining structure, as thenonunion member is driven toaccept other employment which hewould not have chosen voluntarily.An exclusive title - a propertyright, in other words - is createdby state fiat, where only a rightto bargain in an open market hadexisted previously.- to a Given Market AreaTrade union members are notalone in this confusion, unfortunately.Many, many businessmeninvolve themselves in precisely thesame error. They use the interferenceof state violence to keepoutsiders away from the marketplace. A three-way structureshould exist: the consumer, theAmerican producer, and the foreignproducer. Instead, the Americanbusinessman seeks to makethe structure a two-way arrangement:the consumer and only theAmerican producer. Like the laborunion member, he seeks to transforma right to bid in the marketinto an exclusive title of entryinto the market. The usual meansfor this kind of operation is thetariff or the import quota. Inprinciple it is identical to the activityof the state-supported tradeunion. Ironically, many businessmenwho derive great personalsatisfaction from castigating the"immoral" trade unions involvethemselves in the same "immorality."The game is the same;state "protection" from outsideinterference - the exclusiveness ofa legal title to private property.Instead of a legal title to disposeof their assets and skills as theysee fit, in open competition, subjectto the imposition of the burdensof the responsibilities ofownership, businessmen want title

1972 OWNERS!IIP: FREE BUT NOT CHEAP 413to an exclusive right to dispose oftheir assets, apart from competition,apart from the fun burdens(costs) of responsible ownership.Only the intervention of the statecan grant such an escape from responsibility,so they call for theintervention of the state. Mensimply like to enjoy the fruits ofownership apart from the responsibilitiesof ownership. They giveup some of their freedom (or theirneighbor's freedom) in order toescape from responsibility. Theycall for the creation of legal titleswhere none could exist on a freemarket.ConclusionOn the one hand, the owner ofan exclusive title - a propertyright - cannot escape the costs ofownership and the concomitant obligationto act as a steward of hisgoods for the public's benefit. Hecannot escape so long as politicalintervention into the market doesnot occur. The fruits of ownershipare not separated from the burdensof ownership. On the otherhand, those who seek to make abargain cannot, apart from statecoercion or private violence, transformthe right to dispose of one'sown property (talents) into an exclusivetitle to dispose of thatproperty on a specific market apartfrom entry by other property ownerswho wish to bargain with theirproperty. Titles of ownership referto the control of property andskills by the owner; they do notrefer to reciprocal relationships ofexchange, where two owners seekto dispose of their property in amutually acceptable manner. Infact, if exclusive titles are grantedrespecting the reciprocal humanrelationships, the rights of controlover one's own assets are therebydiminished. The title to property,which involves the right of voluntarydisposal of that property, iscompromised when the state interferesin the market in which menseek to dispose of their property.By granting titles of exclusive accessto certain markets, the statethereby revokes some of the rightsof ownership. The rights of ownershipinvolve both the right tobid and the right to be bid against.Compromise either of the last tworights, and you have compromisedthe original rights of ownership.The right to be bid against isthe provision of the legal structurewhich allows individuals inthe marketplace to have the costsof ownership imposed on themselvesand all other owners. Eachtime any group gets the state toprotect it against the economicbidding of the public, it therebyreduces the efficiency of the marketas well· as the members' ownresponsibility to bear the fullcosts of ownership. The overall

414 THE FREEMAN Julywealth and overall freedom of thecommunity are simultaneously reduced,because without efficiency,wealth is reduced, and without responsibility,freedom is reduced.If men would remain free, theymust demand that they and theirneighbors retain the right of responsibility.They must resist theattempts of men who would seekto escape both freedom and responsibilityby lowering theircompetition from other participantsin the market. Ownership isfree, but not cheap. The same istrue of freedom. I)• FOOTNOTES •1 Ludwig von Mises, Human Action(3rd ed.; Chicago: Regnery, 1966), pp.311-12.2 Cf. Robert A. Nisbet, Social Changeand History (New York: Oxf9rd UniversityPress, 1969), ch. 4; Louis I. BredvoId,The Brave New World of the Enlightenment(Ann Arbor: University ofMichigan Press, 1961).3 The concept of the public schools asAmerica's only establis·hed church isbrought forcefully in Sidney E. Mead'sThe Lively Experiment (New York:Harper & Row, 1963), ch. 4. Cf. R. J.Rushdoony, The Messianic Character ofAmerican Education (Nutley, New Jersey:Craig Press, 1963).4 The separation of church and state,it must be stressed, came to the Americancolonies quite early; Rhode Island acceptedthe principle from the beginning.But orthodox Connecticut was forced toadopt it as a result of the religious tumultcaused by the Great Awakening of themid-eighteenth century; it was broughtinto existence by Christians, not secularistsor the tiny handful of Unitarians andDeists: Richard L. Bushman, From Puritanto Yankee (Cambridge, Mass.: HarvardUniversity Press, 1967), ch. 13.5 Paul Craig Roberts, "The PolycentricSoviet Economy" The Journal of Lawand Economics, XII (April, 1969): HerbertS. Levine "The Centralized Planningof Supply in Soviet Industry," (1959), inWayne A. Leeman (ed.), Capitalism,Market Socialism, and Central Planning(Boston: Houghton Mifflin, 1963); GaryNorth, "The Crisis in Soviet EconomicPlanning," Modern Age, XIV (Winter,1969-70) .6 Ludwig von Mises, Bureaucracy(New Rochelle, New York: ArlingtonHouse, [1944] 1969).7 Gary North, "Statist Bureaucracy inthe Modern Economy," THE FREEMAN(Jan., 1970).8 Murray N. Rothbard, 1\Jlan, Economyand State (Los Angeles: Nash, [1962]1971), p. 4.9 R. J. Rushdoony, The One and theMany (Nutley, New Jersey: Craig Press,1971), surveys the history of this vitallyimportant philosophical problem". Heargues that modern philosophers preferto avoid discussing the issue because theyhave been able to find no secular answerto it.10 Mises, Socialism (New Haven,Conn.: Yale University Press [1922]1951), pp. 275-76.11 Ibid., p. 276.12 Mises, Human Action, pp. 683-84.13 Richard Schlatter, Private Property:The History of an Idea (New Brunswick,New Jersey: Rutgers UniversityPress, 1951), p. 81.14 Ibid., pp. 86-87.15 Mises, Human Action, p. 683.16 Historical Statistics of the UnitedStates: Colonial Times to 1957 (Washington,D. C.: Bureau of the Census,1960), p. 636 (explanation of statisticson p. 619).17 Harold Underwood Faulkner, AmericanEconomic History (5th ed.; NewYork: Harper & Bros., 1943), p. 656.

415THE BEATEN TRACKO_F_F_LEONARD E. "READI HAVE long been intrigued by theseeming paradox that the moreone knows the more he knows hedoes not know. This is anotherway of saying that every gain inknowledge increasingly exposesone to the infinite unknown. 1Another aspect of this intriguingparadox: as a person grows inknowledge he is exposed to a newset of friends - and almost certainlyfaces a dwindling numberof old friends. There are manyways to lose friends, of course,but what I am suggesting is thata dwindling audience is not necessarilya sign of failure; on thecontrary, it may signify personalprogress. This is the point I wouldlike to explore.Ortega presents us with thereality of this problem:1 See "The IFiHdom in Knowing IKllow j\/ot," ]\'OtCH from P/;;E, March.1971. Copy on request.So far as ideas are concerned,meditation on any theme, if positiveand honest, inevitably separates himwho does the meditating from theopinion prevailing around him, fronlthat which ... can be ca:lled "public"or "popular" opinion. Every intellectualeffort sets us apart froni thecommonplace, and leads us by hiddenand difficult paths to secludedspots where we find ourselves anlidunaccustomed thoughts. These arethe results of 111editation.:!Why dwell on this? A simplereason: if you are on the righttrack and gaining in knowledgebut fail to read these signs aright,you may throw in the spongesimply because liRteners are fe\v;you may call it quits just beforethe dawn. In a word, I hope to:! What Is Philosophy? by Ortegoa yGasset (New York: W. W. Norton &Company, Inc., 1960) p. 15.

416 THE FREEMAN Julypresent an antidote for discouragement,a way of viewing mattersthat will help to "keep the chinup." Not only yours, but my own!In the area of our concern, it iseasy to mistake success for failure.Why? Simply because success isoften equated with a growingnumber of adherents, failure witha declining number, as if thequality of ideas and the quantityof better thinkers go hand inhand. We tend to expect that anyimprovement in ideas will automaticallyattract a wider audience;whereas, quite the opposite mighthappen.Popularity Contests ­Not the Path to TruthMy thinking in this matter hasbeen stimulated in part by a slightdrop in FEE's mailing list overrecent months, while at the sametime we are told by others thatour publications and seminars arebetter than ever before - and thatwe must do' something to "reachmore people."Were numbers here and now thesole measure of success,' then therecipe would be (1) a.point ofview consistent with "public" or"popular" opinion; and, (2) charismaticpersonalities. Examplescan be found in the political realm:engaging and energetic copycatsof the current consensus puttingthemselves in the vanguard.Were ours just a numbersgame, then we would attractivelyproclaim "free enterprise" andloudly decry "socialism." And letit go at that! For there are millionspaying lip service to freedomand proclaiming opposition to socialismwho are anxious to allythemselves with those of similarleanings - so long as the specificaspects of these opposed ways oflife are left unexamined. But never,for heaven's sake, go beyondthe generalities and attempt a detailedstudy of these ideologies!To do so assures alienation, amarked dwindling of old friends,perhaps a few new ones.Our meditations .at FEE overthe past quarter century have beenpositive and honest. Even our detractorsconcede that we have sooperated, and with consistency. Inthe beginning our position wasmore or less a generalization: infavor of freedom and opposed tosocialism and other variants ofauthoritarianism. But the morewe meditated, the more did somecommonly accepted practices of"free enterprisers" and "anti-socialists"show up as bearing theseeds of socialism behind the labels.Further, we have never heldthe results of these meditations toourselves for fear of giving offense,that is, we have not bowedto. expediency.For instance, some 20 years ago

1972 OFF THE BEATEN TRACK 417we published The Tariff Idea, acritique of protectionism, the casefor freedom in, transactions. Thecriticisms we received were severe,and several large corporate sup.,.porters dropped FEE then andthereafte;r. Over the years all ofour books and each of nearly 3,000essays have, in one way. or another,affronted the mores, gonecounter to the current trends andaccepted opinions. This is to say,we have upheld the basic principlesof voluntary exchange, privateownership, limited governmentwhile, at the same time, challengingthose flaws of coercive or governmentalintervention paradingunder the name of free enterprise.Such unaccustomed thoughts arenot popular!To Find a Better WayThis is why the serious freedomdevotees may not rely on numbers-popular acclaim - as an objective.For the prime requirement ofsuch an objective is to stay on thebeaten track, to go along withcommonly accepted notions. Butmust we not abandon the beatentrack if we would find a betterone? To "go along" is to go withoutprospect of improvement. Toplay the numbers game is to acceptthe fallacies that ought to beexposed and displaced.The soundness of a philosophycannot be gauged by numbers offollowers. In this respect, the philosophyof freedom is similar toreligion. True, we can count thefinancial supporters of the severalreligions and the church attendees,but these numbers reveal absolutelynothing as to the depth orprofundity of religious convictions.Religiousfaith, so-called, isfounded on diverse forces, rangingall the way from fear and superstitionto cosmic consciousness.We must note, however, that all ofthe significant religions have beeninspired by some one whose purityof thought - meditations, if youwill - provided that rich spiritualinsight which made possible theawakening of others.High Mortality of New IdeasContinuing the analogy, be itnoted that each religion was, initially,an affront to "public" and"popular" opinion, a completebreak with the mores. Each wasborn in an environment more orless hostile to its precepts. Theseinitiators of high ethical, moral,and spiritual ideas have, in everyinstance, presented thoughts unfamiliarto most people at thetime.It is only when we make progressin learning what the ideal is,while standing foursquare therewithin' our proclaimed positions,that we aid the cause of freedom.True, we will never fully compre-

418 THE FREEMAN Julyhend the ideal, let alone realize it,but we can everlastingly strive forthis purity in thought. Be certainof this: the nearer we come toknowing and upholding the ideal,the greater is the probability thatthe good society may emerge.Why? Because men can establishthe good society only upon what isright and true. Upon that alone,and nothing else!Fungus may be spawned by amuck heap; but the good societyis the emergence and flowering ofthe best there is in thoughtfulmeditation. The best flows alwaysfrom one - the one who comesnearest to being the perfect exemplar.Viewed in this manner,the so-called problems of societybreak down to a level a personmight comprehend. One's duty isnot to fall in step with present imperfectionsbut, rather, to strivefor his own perfection. Uponwhom, then, does the solution depend?Upon the world's most importantperson: YOU! f)The Personal Practice of FreedomIDEAS ONL$LIBERTYFREEDOM RESTS, and always will, on individual responsibility,individual integrity, individual effort, individual courage, andindividual religious faith. It does not rest in Washington. It restswith you and me.Two things you and I can do, and two only. First, we can practicewhat we profess. Second, we can each preach, from our ownpersonal pulpit, the principles we practice, whether that pulpitlooks out upon a continent, a country town, or a single cottage.As we thus prove our faith by our works - as we accept withdiligence and devotion the responsibility for areas within ourreach - as we inspire those about us and send them in turn toinspire others - we shall find that we are making an ever-increasingcontribution to the accomplishment of our century's mostchallenging job.Over and above all else we shall find - you and I, individuallythatours have become unconquerable souls.ED LIPSCOMB

419CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC12The Scourgeof InflationA theft of greater magnitudeand still more ruinous, is the makingof paper money,. it is greaterbecause in this money there is absolutelyno real value,. it is moreruinous, because, by its gradualdepreciation during all the time ofits existence, it produces the effectwhich 'Would be produced by aminfinity of successive deteriorationsof the coins. All these iniquritiesa,re founded on the false ideathat money is but a sign.- COU NT DESTUTT TRACYMEN AT EASE and in comfortablecircumstances must find it difficultto comprehend the sufferings ofthe Patriot armies during the Warfor Independence. These armieshad to· suffer, in addition to thosetribulations incident to war, fromlack of clothing, blankets, sufficientfood, drink, transport, andmany other of the necessities oflife. Yet it is the judgment of thegenerality of historians that mostof this deprivation was unnecessaryand unwarranted. There wasfood aplenty in the states, andthere was at least the potentialityof enough clothing. It may beadded that there were enough menof the right age to' have constitutedoverwhelming forces againstDr. Carson shortly will join the faculty ofHillsdale College in Michigan as Chairmanof the Department of History. He is a notedlecturer and author, his latest book entitledThrottling the Railroads.

420 THE FREEMAN Julythose the British actually sent toAmerica, and there was a potentialityfor manufacturing adequatemunitions for the war. (For example:"In 1775 the Union produced30,000 tons of crude irononeseventh of the world's totaloutput.") 1 It is quite probable thatthe war could have been broughtto a successful conclusion long beforeit was had these resourcesbeen devoted to the effort in sufficientamounts. They were not.The main reason why men andmaterials were not brought tofocus adequately on the war effortwas the method used to finance thewar. The successful prosecution ofa war - any war - requires that asufficient amount of energy andresources be diverted from otheruses in order to accomplish theend of winning the war. To acquirethe -necessary goods andservices, government enters themarket. (This is not to denythat a government may acquireservices, and sometimes goods,voluntarily from those who areactuated by principle or othermotives. To the extent that this isthe case, neither force nor themarket may have come into playin the acquisition. But neither theWar for Independence, nor anyother known to this writer, werefought primarily with such resources.)Government may enterthe marketplace in such a way asto take advantage of the servicesoffered in a market, or it may intervenein the market in such waysas to make that instrument virtuallyuseless for its purposes. Themarket is a place where voluntaryexchanges are made, where goodsand services are sold to the highestbidder. When government entersthe marketplace it becomes abidder among bidders for the supplyof goods and services available.What the government acquiresthere, others are denied, or viceversa.Government Takes GoodsBefore government can becomea bidder in the market it must acquiregoods and services, or theirequivalent, for making exchanges.This necessity poses what is themost enduring problem of government:the government, as government,is not a producer of goodsnor provider of services, and hasnone of these to offer in exchange.Before it can operate in the market,then, government must acquirethese, or their equivalent,from those who own or producethem. In effect, government musttake goods and services from thosewho provide and produce them.For this to be done equitably andjustly, experience indicates thatthis appropriation should bespread over and apportionedamong the producing citizenry.

1972 THE SCOURGE OF INFLATION 421Money has afforded a means forapportioning taxes and a way forgovernment to enter the marketplacefor trading without interferingdestructively with the functionof the market. In. short,money can enable a government touse the marketplace asa majorsource of goods and services whichit needs, particularly in war. Forthis to happen, however, governmentmust respect the nature andcharacter of money. Money is amedium of exchange, i.e., it isthat through which are made exchangesof goods for goods, servicesfor services, or any othercombinations of these. What agiven unit of money will commandin goods and services in the marketplaceis a ratio between thequantity of money and quantity of,buods and services, as modified bythe strength of the desires of allwho have any of these in theirpossession or wish to acquirethem. To put the matter concretely,if a bushel of wheat bringsone dollar this means that thequantity of money is such, thequantity of wheat is such, the desirefor wheat is such, and thedesire for money is such, that onedollar is the price that will effectan exchange. If the quantity ofmoney .is increased, and all elseremains the same, the .price ofwheat may be expected to rise inproportion to the increase ofmoney. A money tax enables thegovernment to reduce the supplyof money available to private bidders,and thus to become an effectivebidder for its needs in themarket.Monetary ManipulationIt is theoretically clear, then,what the consequences would be ifthe government attempted to getits needs by simply increasing themoney supply. It would reduce thequantity of goods and services agiven unit of money would command.But why could the governmentnot do this as a means oftaxation, thus avoiding the onerousnecessity of a direct appropriationof money? Of course, itcould do this. Thomas Paine declaredthat this is just what theCongress did during the War forIndependence. It would have costten or twelve million pounds sterling,he estimated, to have financedthe war by ordinary taxation.;"and as while this money was issuing,and likewise depreciatingdown to nothing, there were none,or few valuable taxes paid; consequentlythe event to the publicwas the same, whether they sunkten or twelve millions of expendedmoney, by depreciation, or paidten or twelve millions by taxation;... And therefore ... [the] debt,has now no existence; it havingbeen paid, by everybody consent-

422 THE FREEMAN Julying, to reduce as his own expense,from the value of the bills continuallypassing among themselves,a sum, equal to nearly what theexpense of the war was for fiveyears."2 Thomas Paine was, asusual, an adept pleader of specialcauses, but he was no scholar, andcertainly not an economic historian.His statement that everybodyconsented is simply not true, andhe ignores both the ruinous trainof consequences following uponthe inflation and the question ofwhether or not it was effective inits object of providing for thearmed forces.It is not necessary, however, toexplore the theoretical impact ofthe inflation further; it unfoldsin the story of the financing ofthe war. The 'Congress and thestates did attempt to finance thewar effort primarily by the issuanceof paper money. Congressissued what is known as Continentalcurrency. The notes didnot bear interest, as such currencysometimes did, but they were supposedto be redeemed by the statesat a later date. Just how much wasissued from the first issue in 1775until an entirely new currency wasissued in 1780 is in doubt. Theestimates range from $191,552,­380 3 to $242,100,176 4 • It is commonlybelieved today to have beenover $200 million 5 • Even if an exactfigure could be agreed upon,however, we would still not knowhow much of the currency was incirculation, for it was extensivelycounterfeited. There were domesticcounterfeiters; and the Britishgovernment, as a matter of policy,attempted to destroy the currencyby introducing counterfeit money.()All accounts agree, however,that Congress issued more andmore of the currency over theyears through 1779. A recent estimateof the sums issued goes asfollows :71775 $ 6,000,0001776 19,000,0001777 13,000,0001778 63,500,3001779 90,052,380This process of issuing moreand more set in early. The initialissue was to have been for $2 million,but before it had been accomplishedCongress authorized another$1 million.R Before the endof the year $3 million more wasissued.!) This despite the fact thatCongress had intended only oneissue at the beginning. And, therewere those who attempted to preventthe escalation. BenjaminFranklin said : "After the firstemis-sion I proposed that wesholl1d stop, strike no more, butborrow on interest those we hadissued. This was not then approvedof, and more bills wereissued."loThe process of issuing more and

1972 THE SCOURGE OF INFLATION 423more of the currency and raisingthe amounts of single issues iseasily explained. Once the moneyhad been issued, it fell into privatehands in return for goodsand services. The government nolonger had _.access to the currency.Congress then made further issuesin order to have money to spend.The more it issued, the less themoney was worth; larger andlarger issues were made in theattempt to get the results thatcould be obtained by smaller issuesearlier. Reliance on papermoney has - for these reasons,and more complex ones wherethere are combinations of taxationand fiat money financing - apyramiding effect.Money vs. CurrencyWhy did the government notrecover the money in some way?In general, this could have beendone eithe-r by taxation or by borrowing,or some"combination ofthese methods. The governmentdid not retrieve the money forabout the same reason it was issuedin the first place, namely, toavoid taxes and because the creditof the Congress was not good.Before examining into the questionof taxation and borrowing,however, one justification offeredfor issuing paper money needs tobe explored.Curtis Nettels, a present-dayhistorian, describes the j ustificationfor a Continental currencythis way: "The Union as a wholesuffered from an acute shortageof hard money; all the coin incirculation in 1775 would not havepaid a year's expenses of the ContinentalArmy." Some men at thetime of the revolution held that acertain indeterminate amount ofmoney is necessary to facilitatecommerce. They thought thatmoney could be issued up to thepoint of meeting the need withoutdepreciating, but that oncethe point of sufficiency had beenpassed, the currency would beginto decline in value. It may not bean adequate reply to ProfessorNettels to say that Congresscould have issued $10 trillion inpaper money and it would nothave been enough to pay "a year'sexpenses of the Continental Army,"but the statement is correct.The only way I can make sense ofthe earlier idea is to suppose theybelieved that price is somethinginhering in the item offered forsale rather than being determinedby supply and demand. Some claritymay be brought to the subjectby distinguishing between moneyand currency. Money may be anythingwhich serves as a mediumthrough which some transactionsare made. Currency is that whichserves generally in an area toeffect transactions. All currency

424 THE FREEMAN Julyis money, but not all money is currency.Money becomes currencyin one of two ways: either becauseit is wanted by traders and is insufficient supply to effect transactions,or because it has beenmade legal tender by some government.The only purpose formaking a money legal tender isto force it into currency when itwould not be the currency on itsown merits. The very fact thatCongress relied upon tender lawsand used even harsher measuresto give their bills currency shoulddispose of the argument that theywere issued because of a shortageof hard money.The real reason for the Continentalcurrency issues, then, wasthat Congress and the states wereattempting to finance the warwithout levying taxes directly.They are entitled to some sympathyfor the difficult situation inwhich they were trying to function,but no amount of sympathyalters the consequences of actions.Congress had no authority to levytaxes. With equal validity, it canbe said that Congress had no authorityto issue money. The truthof the matter is that Congresshad as little and as much poweras it could manage to exerciseduring the period under consideration.It had no constitution,hence, no constitutional limits onwhat it could do. Its members,however, were delegates from thestates. It may well be that hadCongress attempted to levy taxesit would have been repudiated bythe states or by the people. At anyrate, Congress did not even attemptto levy taxes. It was notthat the members could see noneed for taxes. Congress declared,on many occasions, that the statesshould levy taxes. Elaborate scheduleswere devised for apportioningthe costs of the war amongthe states. Solemn proclamationswere issued urging the states totax. For example, in 1777 Congressadmonished the states to"raise by taxation in the courseof the ensuing year, and remit tothe treasury such sums of moneyas they think will be most properin the present situation of the inhabitants.. .."11States Under Political PressureAll this was of little·avail. Thestates were not much more inclinedto levy taxes to pay forthe war than Congress was. Onehistorian sums the matter up inthis way: "Before 1780, most ofthe states shrank from collectingtaxes for any. purpose. Massachusettsdid not vote any levy in 1776,and in 1778 resorted to a lotteryto raise $2,000,000. Virginia waiteduntil1781 before making a seriousattempt to obtain revenuefrom taxes. The performances of

1972 THE SCOURGE OF INFLATION 425the other states were not muchbetter."12 There are several reasonsfor this state of affairs. Forone, ~he hold of the state governmentsover the citizenry was sometimesprecarious, particularly instates where Loyalists were numerous.Extensive taxation mighthave jeopardized the tenuous attachmentwhich many had fortheir state governments. For another,the objection to taxationwithout representation by theBritish must have turned into amore general objection to taxation.This appears from thedifficulty of collecting the taxesthat were levied. "In Pennsylvania,for example, from 1778 to1781, less than half the taxes assessedwerecollected; it was notuncommon for citizens to slam thedoor in the tax-collector's faceandget away with it."l;~ But,above all, legislators were curryingfavor with their constituentsby avoiding taxati~n. Sumner saidthat the "governors of the Statescould not urge taxation and zealupon the legislatures without apainful and unpopular contest.The members of a legislature wholaid taxes must expect to returnto their constituents to face grumblingand popular dissatisfaction."HInstead of taxing to retire theContinental currency, the statesissued large amounts of papermoney themselves. "The emission'of all the states exceeded $200,­000,000. Virginia led the way, followedby North Carolina; thencame South Carolina. Georgia,Delaware, and New Jersey exercisedthe most restraint."1;'A minor stream that added tothis flood of paper. currency issuedby Congress and the stateswas provided by domestic loans.Loan office certificates and certificatesof indebtedness were issuedto the extent of $20 million. III Theloan office certificates circulatedgenerally, one writer notes, "effectingessentially the same consequencesas would have attendedthe issue of an equal quantity ofpaper money."17Paper Declared Legal TenderSuccessive interventions weremade in the market, interventionswhich followed logically from theuse of fiat money to finance thewar. The first of these interventionswas to make the paper legaltender so that it would circulateas money. The specific actions todo this were by the states. For example,the Council of Safety ofPennsylvania declared in 1776 thatanyone who refused to accept theContinental currency would forfeitwhatever he refused to selland be subject to a penalty besides- all this for a first offense -, andbe banished from the state for a

426 THE FREEMAN Julysecond offense.l 8 In the same year,Rhode Island made both state andContinental notes legal tender. Inaddition to providing penalties fornot accepting this paper, that stateprohibited the buying of speciewith paper or differentiating inprices of goods when offered goldor silver instead of paper.19Sometimes even more drasticmeasures were authorized to makepeople take the paper money.When he was in command offorces at Philadelphia, GeneralPutnam made this announcement:"In future, should any of the inhabitantsbe so lost to public virtueand the welfare of their country,as to presume to refuse thecurrency of the American states inpayment for any commodities theymay have for sale, the goods shallbe forfeited, and the person orpersons so refusing, committed toclose confinement."2o In a similarfashion, George Washington wasauthorized to take goods fromthose who refused the Continentalcurrency and to arrest and confinethem. 21Rising Prices - and ControlsWith such Draconian measuresto support it, the Continentalpaper money did circulate. But themore of it that was issued, themore it depreciated. The most noticeableeffect of this to the publicwas a general rise in prices.(Prices of particular goods andservices rise and fall as demandand supply fluctuate even if theamount of money in circulation remainsstable. And, given blockadesand the kinds of demands incidentto war, some prices would haverisen inevitably during theseyears., However, the price increaseswere not only general butsome of them are rises in Continentalcurrency in relation towhat they could be bought for inspecie, which indicates that it wasthe currency which occasionedsome of the increases.) Some ofthe state governments intervenedin the market further by attempting·to fix prices. As frequentlyhappens, the legislators sought tocontrol the effect - the rise inprices - rather than the causetheincrease in the money supply.Congress recommended that regionalconventions be held to setprices for particular areas. TheNew England and Middle statesheld such contentions, but theSouthern states south of Marylandsteered clear of price controls.After a convention hadagreed upon the general featuresof prices, it was up to the individualstates to enforce the tariffs.The following is a description ofpenalties adopted by Rhode Islandin 1777:The penalty of demanding morethan the tariff price was set at the

1972 THE SCOURGE OF INFLATION 427value of the article,- half to theState, and half to the informer. Anyone who refused for his commoditiesthe tariff price, and afterward soldthem for any other goods, was toforfeit the value thereof, half to theState, and half to the informer. Ifcomplaint was made that articlesnecessary for the army or navy werewithheld by monopolizers,· the Stateofficers and Judges or any two J usticesof the Peace might issue a warrantto impress and seize the same,breaking open buildings. the goodswere to be appraised by two indifferentmen at prices not to exceedthose of the tariff. Anybody whocontracted to receive for labour orgoods more than the tariff rates wasto be counted an enemy of the country,and fined twenty shillings forevery article sold of the price oftwenty shillings or under, and a sumequal to the value of the article, if itwas worth more than that. 22The price controls, where theywere at all effective, resulted inshortages. John Eliot wrote fromBoston in June of 1777 : "We areall starving here, since this piaguyaddition to the regulating bill.People will not bring in. provision,and we cannot procure the commonnecessaries of life. What weshall do I know not."23 What theydid, of course, is what people everdo: evade the regulations, barter,blackmarket, produce a money thatwill purchase goods, and find a varietyof means to perpetuate themarket, however inadequate theyare compared to the opportunitiesin a free market.Army RequisitionsBy 1778, the armed forces werefinding it increasingly difficult toacquire goods with paper money."Though paper money was taken,with more or less reluctance, inreturn for most things, some serviceswere rendered only uponpromises of receiving specie."24George Washington wrote in 1779that "a wagon load of money willscarcely purchase a wagon load ofprovisions."25 The country was inthe grip of a runaway inflation.Every man of intelligence knewthat the root cause was the increaseof the money supply (muchas this is known in our day),·yetthere was not the will to deal effectivelywith it.To get supplies and transport,the army had to resort to itsequivalent of barter, I.e., impressmentand requisition from thesurrounding populace. There hadbeen some impressment, particularlyof transport, from the beginningof the war; but by thetime of the Yorktown campaignin 1781 this method seems to havebeen relied upon almost exclusively.26There was more and moreof this done before 1781, however.By the latter part of 1779,supplies in general were being

428 THE FREEMAN Julyrequisitioned. On December 11,1779, Congress "voted requisitionson the States for specific suppliesof flour and Indian corn. December14, they established a systemof requisitions and contributionsof this kind, Maryland alone votingno. February 25, 1780, anelaborate apportionment of requisitionsfor such supplies wasmade. . . . Each State was calledupon for the staples which it produced."27The most drastic impact of inflationis that it tends to disintegrateand divide society, to turnemployee against employer, thegoverned against the governors,the creditor against the debtor,the producer against the consumer,the populace against speculators,and so forth. Inflation tends· to reversethe rules of economic behavior:where once it was prudentto save money, it becomes expedientto spend it; where once it wasgood business to supply consumerswith durable goods, it becomesprofitable to delay the sale; whereonce creditors were those whowere better off, it now becomesgood business to borrow moneyand repay it with a currency thatis less valuable than when the loanwas made. The solid citizen who iscautious and prudent can do wellover the years by hard work, carefulinvestments, and saving,when the money supply is stable.His prosperity may well be describedas virtue rewarded. Inflationsets the stage for wealth tobe gained in a different fashion:by borrowing, by holding on togoods for the inevitable higherprices, and by attending closely tothe swift changes in the value ofthe money. Such means of gainingriches are widely resented, particularlyduring a war.Unhappy Consequencesof Rampant InflationMen contemporary with eventsfrequently described the consequencesof the inflation as well ascould be done. Josiah Quincywrote these words to GeneralWashington:I am firmly of the opInIon, andthink it entirely defensible, thatthere never was a paper pound, apaper dollar, or a paper promise ofany kind, that ever yet obtained ageneral currency, but by force orfraud, generally by both. That thearmy has been grossly cheated; thatcreditors have been infamously defrauded;that the widows and fatherlesshave been oppressively wrongedand beggared; that the gray hairsof the aged and the innocent, forwant of their just dues have gonedown with sorrow to their graves, inconsequence of our disgraceful depreciatedpaper currency....28By 1778, John Adams could saythat "every man who had money

1972 THE SCOURGE OF INFLATION 429due to him at the commencementof this war, has been already taxedthree-fourth parts of that money.. . . And every man who owedmoney at the beginning of thewar, has put three-fourth parts ofit in his pockets as clear gain.The war, therefore, is immoderatelygainful to some, and ruinousto others."2DA historian who lived throughthat period has written:The aged who had retired fromthe scenes of active business, to enjoythe fruits of their industry,found their substance melting awayto a mere pittance, insufficient fortheir support. The widow who livedcomfortably on the bequests of a deceasedhusband, experienced a frustrationof all his well-meant tenderness.The laws of the country interposed,and compelled her to receive ashilling, where a pound was her due.The blooming virgin who had grownup with an unquestionable title to aliberal patrimony, was legally strippedof every thing but her personalcharms and virtues. The hapless orphan,instead of receiving from thehands of an executor, a competencyto set out in business, was obliged togive a final discharge on the paymentof 6d. in the pound. In manyinstances, the earnings of a long lifeof care and diligence were, in thespace of a few years, reduced to atrifling sum. . . .That the helpless part of the communitywerelegislatively deprivedof their property, was among thelesser evils which resulted from thelegal tender of the depreciated billsof credit. The iniquity of the lawsestranged the minds of many of thecitizens from the habits and love ofjustice. The nature of obligationswas so far changed, that he wasreckoned the·honest man, who fromprinciple delayed to pay his debts.The mounds which government haderected, to secure the observance ofhonesty in the commercial intercourseof man with man, were broken down.Truth, honor, and justice were sweptaway by the overflowing deluge oflegal iniquity....30Decay of Public VirtueGeorge Washington wrote:"Speculation, peculation, engrossing,forestalling, with all concomitants,afford too many melancholyproofs of the decay of public virtue...."And a writer to a NewJersey paper assessed the blamefor this: "I do not say that theabundance of money is the onlycause of the decay of virtue or increaseof vice, but I say it is avery principal cause, it operatesmore this way than any other,yea, than all other causes put together."31The inflation contributed muchto the ~ss of confidence in theCongress, the state governments,and the very cause they were committedto at the time. The ideawas advanced, when the first issuesof paper money were made, that

430 THE FREEMAN Julyits becoming currency would helpto tie people to the cause of independence.Since the fate of themoney - its eventual redemption- would depend upon the successof the revolt, those who came intopossession of it would be committedto victory. So it might havebeen, I suppose, if the Congresshad been content with one or twoissues, if the states had refrainedfrom issues, and if the governmentshad then turned to directtaxation. But the effect of issuingmore and more was not only to reducethe value of the money butalso to undermine confidence in thegovernments which issued it.In fact, people began to suspectrather quickly that Congresswould eventually repudiate itspaper. To counter this fear, timeand time again Congress reiteratedthe determination to redeemThe Function of Price.THE PRICE SYSTEM is the control board, the regulator, the thermostat- as it has been variously put - by which economic conductis determined in a private-enterprise economy.The guidance provided by prices has two main aspects. In thefirst place, by setting up judgments as to the significance of eachfactor the price system calls forth and allocates the available productiveresources. Under the influence of price each factor flowsinto the channel which - according to the market's evaluationpromisesthe greatest result. In the second place, through the samemarket appraisal that directs the utilization of productive factors,the price mechanism awards shares in output to those who furnishpersonal services of various kinds, to those who - by accumulatingand investing - provide the tools, and to all others who make contributionsin the opinion of the market. Moreover, prices chart thecourse of the consumer as he utilizes the general claim to outputwhich has been awarded to him.From Shirtsleeve Economics: A Commonsense Survey by William A. Paton

1972 THE SCOURGE OF INFLATION 431it and denounced those who saidthat it would be otherwise. In1778, Congress adopted the followingresolution: "Whereas a reporthath circulated in' diversparts of America, that Congresswould not redeem the bills ofcredit issued by them to defraythe expenses of the war, but wouldsuffer them to sink in the handsof the holder, whereby the value,of the said bills hath, in the opinionof many of the good people ofthese States, depreciated ; and lestthe silence of Congress might give'strength to the said report; resolvedthat the said' report is falseand derogatory to the honor ofCongress."~::!One writer notes that"as paper money depreciated more,and more, the pledges of Congressin respect to its redemption weremore frequent and intense in formof expression."33They Tried to StopCongress resolved in September1779 to issue paper money only tothe total of $200 million. "Uponthis mountain of paper," a modernhistorian has written, "Congressresolved to make its finalstand. . . . But . . . the defiantproclamation of September 1779proved the signal for anothersharp selling wave in Continentalmoney. By January 1780, the armywas paying for supplies twicewhat it had paid in September1779; and by March 1780, priceshad risen four times above thelevel of September 1779."34At that point, Congress beganthe outright repudiation of itspaper, though the culmination wasto come later. In March of 1780,Congress devalued the currencyby proclaiming that it should nowtrade at forty to one of gold orsilver. To finance this exchange,new paper money was to be issuedto be redeemed by the states bytaxation. An elaborate plan wascontrived for the retiring of theold currency and replacing it withthe new. The plan did not work.There was no reason why itshould. If the new money wasmore valuable than the old, itwould not circulate, according toGresham's Law, assuming the oldmoney was still legal tender. Infact, the new money quickly fell tothe same value as the 01d,35 andthe whole became virtually worthlessby 1781. In March of 1781,Congress abandoned the acceptanceof its own paper money aslegal tender. It was now to be acceptedonly on a sliding scale thatwas supposed to represent its depreciation.Thereafter, it depreciatedso rapidly that it shortlyceased to circulate at al1. 3G Speciecame out of hiding and replacedpaper money as the currency ofthe land.All these untoward events might

432 THE FREEMAN Julybe accepted as the cost of thewar, but only if the currency hadenabled the Congress to bring theresources of the country to bearon the war effort. That, however,was emphatically not the case. Onthe contrary, the paper moneyplus the absence of significant taxationtended to disperse the resourcesof the country and theenergies of the people. Congressand the states were continuallyshort of money, whereas the populacehad an abundance. In consequence,the production, transport,trading, and provision ofgoods and services were concentratedon the civilian population,and the armed forces receivedshort shrift.Suppliers Refuse to CooperateIn the later stages of the war,as already noted, the army had toabandon the use of the paper moneysubstantially and turn to directmethods to get goods and services.This was not only an inconvenientand inefficient method of gatheringmaterial but also made peopleresent the army. For example, hereare reports of the situation in Virginiain 1781 - at a time when amajor British army was concentratedthere and Washington wasabout to win his greatest victory.An agent sent to impress transportreported: "I have been muchperplexed, for after having impressedthem, the owners of some,by themselves or others, havetaken, in the nighttime, a wheelor something to render them useless;and I don't recollect any lawto punish them, if it could beproved." The Quartermaster wroteto the war office: "Let me entreat,sir, that something may be doneto draw the people with theirmeans of transportation into theservice willingly. I find them soopposed to every measure that isoppressive that it is almost impossibleto effect anything of consequencethat way. Many of the'teamsters upon the late occasionhave deserted with their wagonsafter throwing their loads out atimproper places...."37Nor were taxes in kind a way toget goods where they were wanted.General Washington wrote to thePresident of Pennsylvania in1782: "A great proportion of thespecific articles have been wastedafter the people have furnishedthem, and the transportation aloneof what has reached the army hasin numberless instances cost morethan the value of the articlesthemselves."38 It is not difficult toexplain why this was so. The commoditieshad been taken withoutreference to a particular need, hadbeen stored where no army mightappear, except by accident, andwere often spoiled when they werewanted. By contrast with this poor

1972 THE SCOURGE OF INFLATION 433form of barter, the market is anefficient and felicitous devicewhen acceptable money is in circulation;the market tends tomake the goods available whereand when th~y are wanted, and.moneyis flexible: it can call fortha variety of goods.The American cause was notlost as a result of the inflation.It was won despite the inflation.But victory was almost certainlydelayed for several years; muchsuffering resulted; and the peopIe'sconfidence had been sorelytried. Indeed, we have not finishedyet in this work with the consequencesof the inflation, for theyfollowed into the Confederationperiod. But the lessons of the experiencewere not lost on theleaders of that generation. Intime, they were used to try toprevent a recurrence of the mistakes.Unfortunately, we cannotreport that these lessons are stillremembered to the seventh generation.t)1 Curtis Nettels, The Emergence of aNational Economy (New York: Holt,Ririehart and Winston, 1962), p. 42.:2 Quoted in Albert S. Bolles, The FinancialHistory of the United States, I(New York: D. Appleton, 1896, 4th ed.),p.208.:~ See N ettels, Ope cit., p. 24.-Ie See William G. Sumner, The Financierand the Finances of the AmericanRevolution, I (New York: Dodd, Mead,and Co., 1891), p. 98. Sumner indicatesthat one estimate runs well over $300millions, but that it includes reissues.5 See John R. Alden, A History of theAmerican Revolution (New York: AlfredA. Knopf, 1969), p. 255.G See Bolles, Ope cit., pp. 150-57.7 N ettels, Ope cit., p. 24.8 Bolles, Ope cit., p. 39.!) Ibid., p. 43.10 Ibid., p. 39.11 Ibid., p. 193.12 Nettels, Ope cit., p. 24.13 John C. Miller, Triumph of Freedom(Boston: Litt1e~ Brown and Co., 1948),p.458.• FOOTNOTES •Next: The American Triumph.,H Sumner, Ope cit., p. 274.Hi Nettles, Ope cit., p. 25.16 Samuel E. Morison, The Oxford Historyof the United States (New York:Oxford University Press, 1965), p. 230.17 Bolles, Ope cit., p. 260.18 Ibid., pp. 121-22.II) Sumner, Ope cit., pp. 46-47.~o Bolles, Ope cit., p. 119.:n I bid., p. 121.~2 Sumner, op. cit., pp. 56-57.~:{ Ibid., p. 61.~-Ie Bolles, Ope cit., p. 68.~G Ibid., p. 132.~() See Sumner, op. cit., pp. 142-52.~7 Ibid., p. 239.~8 Bolles, Ope cit., p. 139.:29 Ibid., p. 128.30 Ibid., pp. 176-78.:n Ibid., p. 216.32 Ibid., p. 206.33 Ibid.34 Miller, Ope cit., p. 463.35 See Sumner, Ope cit., p. 86.36 Ibid., pp. 94-95.37 Ibid., pp. 152-53.38 Ibid., p. 243.

ThePineIreeShillingKEVIN CULLINANEBOSTON was a hustling frontiertrading center in 1652 when ayoung goldsmith, at the urging ofhard-pressed merchants and artisans,began minting coins of valuethey could trust. Only 32 yearshad passed since the landing ofthe Mayflower, but already theindustrious frontiersmen sufferedfrom having debased Europeancoinage traded off to them beforethey could learn of the latest currencyinflations being worked bythe rulers of Europe.Dutch ducators, guilders, rixdollarsand ryals; Portuguese j 0­annes, moidores, reis, and crusadoes;French livres; and Spanishdoubloons, rials, dollars and pistolescirculated side by side withEnglish coins in the colony whosemerchants were eager to tradewith all comers.But what to do about the fluctu-Mr. Cullinane is co-founder and AcademicDirector of the Academy of the Rockies, aone-year work - study - adventure prepschool at Bonners Ferry, Idaho.ating values of these varied Europeancoins so unpopular in localtrade? The answer to their coinageproblem came at a meeting inBoston in 1652 when the men ofthe business community agreedamong themselves to purchase,use, and mutually honor coinswhich would be produced by alocal goldsmith. Accordingly thecolony's General Court granted afranchise to Capt. John Hull andhis partner, Robert Sanderson, tomint twelvepenny, sixpenny andthreepenny coins..The early Puritanswere ready to turn to themarketplace for their money,sturdily ignoring the prohibitionsof their English rulers.The twelvepenny coin becamethe famous Pine Tree Shilling.After several modifications it wasstamped with "Masathusets" anda pine tree on one side, and "1652"and "New England" on the other.Today the coin is little mentionedin books, articles or pamphletsdealing with coinage and434

1972 THE PINE TREE SHILLING 435monetary problems and that's toobad, for of all the marketplacecoins produced in America, thePine Tree Shilling was the first,and one which adhered most closelyto the principles of coinage integrity.The particularly soundpolicy of the Pine Tree Shillingminters was their practice ofstriking coins only when a customercame to their shop, bringinghis own silver with him.I What acheck on inflation!Most minters - government orprivate - using their own supplyof metal, mint coins in whateverquantity they think expedient,and assign them a value. Themetal mayor may not be of highvalue; a dollar coin may be mintedof 90t worth of silver, for instance, .or lOt worth of cupro-nickel. Thedifference between the lOt worthof metal and the $1.00 cost to thepublic is kept by the mint. Thatdifference is called seignioralge,implying a lordly right of the rulerto such profit.This system of minting allowsthe minter - in most cases thegovernment - to control and manipulatenot only the quality of thecurrency, but also the quantity1There are a few other instances ofthis minting policy in American history.For an interesting account of post-Revolutionprivate minting see, William C.Wooldridge, UNCLE-SAM THE MONOP­OLY MAN (Arlington House, New Rochell,New York) Chapter 3.which will be available to themarketplace. This is why it is saidthat those who control the currencycontrol the commerce of acountry.Captain Hull and Robert Sandersondid not control the quantityof coinage minted for the marketplace;the marketplace - their customers- controlled the quantity.The two minters limited themselvesto guaranteeing the qualityof the coins. They produced 100shillings for every fifteen ouncesof silver brought in by their customers;each shilling was guaranteedto contain .15 ounce ofsilver. In establishing the silverquality they desired, the merchantsand the General Court purposelykept the content of silver at threefourthsthat of the English shilling.They hoped thereby to keepthe coin in the Boston area andto prevent its moving, a LaGresham's Law, into Europeantrade.~ -~ In this the Bostonians were foiled;the coin did move out into internationaltrade. Because the Pine Tree Shillingcontained the same quality alloy as theEnglish Shilling, it did not matter to theEuropeans that it was a lighter coin. Itsvalue was simply three-fourths the valueof the English Shilling - if the EnglishShilling was valued at twenty cents, thePine Tree Shilling's value was fifteencents. As a result of this internationalacceptance, the General Court attemptedto halt its· natural outflow by imposinga heavy fine upon anyone caught exportingmore than twenty of the coins.

436 THE FREEMAN JulyAn Honest AssayInto Hull's small mint camesilver buttons, tankards, goblets,knives, old sword hilts, spoons andEuropean coins to be assayed,melted down and converted intothe Pine Tree Shilling. Bullionfrom Peruvian mines, sometimestaken by privateers from Spanishgalleons, found its way to theBoston melting pot as well.Often the pieces to be meltedcontained a higher percentage ofsilver than the finished coins,which were alloyed with copper,so an honest assay was important.To determine the silver content ofthe variously shaped family piecesbrought into their shop, the twomen used the technique developednineteen hundred years earlier byArchimedes: the pieces to bemelted were \veighed, then submergedin a tub of water whichwas filled up to an overflow spoutso that the object spilled its exactvolume of water into a measuringvessel beneath the spout. Giventhe volume of the object and itsweight, the minters computed thepercentage of silver it contained.Their fee was handsome - theykept one out of every twenty shillingsminted plus wastage - buttheir risk was great as well, forthough they were providing amuch needed service, they werealso turning their backs on a restrictionimposed by the Englishgovernment which expressly forbadeprivate coinage in the colonies.Risky it may have been, butthe Bostonians were ever an independentlot, and they neededhonest coinage in their commerce.With reliable coins of intrinsicvalue, hard work by the colonistswas more easily rewarded. Merchantsand artisans could sell theirgoods or labors rather than barter,and they could save the coins theyreceived until they wanted tospend them. So useful and popularwas the Pine Tree Shilling thatthe English government chose toignore its existence rather thanattempt to suppress its circulation;an important early steptoward independence was taken129 years before that fateful Aprilmorning in Lexington.After the American Revolution- and both before and after theConstitution - private minterssupplied Americans with coins ofintegrity, and thousands of merchantshave minted private tokensto be used in their transactions.But the proud silver coin - thePine Tree Shilling - was the first.And like so much that emanatedfrom the first generations of NewEnglanders, it was honest, independentand reliable; an importantpart of our free-market heritage.~

DAVID J. MANDELIt is my argument that an analysisof our experience with zoninglaws since the passage of NewYork City's comprehensive zoningcode of 1916, the model for mostof the zoning codes of the UnitedStates, compels the conclusionthat zoning laws do not accomplishwhat they were supposed to accomplish,that their premises arefaulty, that zoning is an irre··deemable failure, and therefore,that zoning laws ought to be repealed.The argument is madewith special reference to NewYork City but without limitationto it or to metropolitan areas.A proposal to repeal any 20thcentury social regulatory legislationis usually greeted with asharp intake of breath and thenMr. Mandel is a practicing lawyer in New~ork City. This article is reprinted by permissIOnfrom the December 1971 issue of TheArchitectural Forum. Copyright 1971 by WhitneyPublications, Inc.the muttered pejorative, "laissezfaire."Zoning codes, an expressionof our desire to act rationallyand to use the tools of modern scienceto respond to human needs,have until quite recently been generallyregarded as immune fromfundamental attack. In the lastfew years even the most passionateadmirers of the idea of zoninghave noticed that zoning laws arenot entirely benign. The time isripe to consider afresh the premisesof zoning and its effects.A modern comprehensive zoningcode draws a map dividing thearea into separate use zones, commercial,residential and industrial,usually further broken down intosubzones. (The latest New YorkCity zoning code, 1960, establishes41 types of commercial zones, 12types of industrial zones, and 13types of residential zones.) Besidesestablishing use zones, zon-437

438 THE FREEMAN Julying codes set formulas regulatingthe bulk and height of structureswithin each zone and subzone.The social value of legislatingseparate use areas is open to seriousquestion. To be sure, separationof land uses is a natural processthat occurs in the absence ofzoning. It is natural for businessesto cluster, for heavy industry tooccupy certain terrain, for singlecharacterresidential areas to developat certain places at certaintimes. To the extent that zoningsimply recognizes the natural process,it changes nothing and causesno loss. Wherever zoning has operationaleffect it mandates a usethat is not natural (i.e., one thatwould not occur in the absenceof zoning) and perforce it mandatesan unnatural allocation ofresources that tends to impoverishthe total community. In contemporaryterms, it is bad ecology.It is bad ecology partly becauseit regards the interest of someproximate land users as the equivalentof "the general interest."The entire organism, the totalcommunity, is thrown out of balancefor what is presumed to bethe interest of a local part. Assume,for instance, that an areais zoned for one-family homes,minimum lot size one-half acre,and that a builder proposes tobuild a highrise apartment buildingon a part of that area. Theproximate land users, or even onlya majority of them, want zoningrestriction as protection for theirinterest in maintaining "the characterof their community." Butprotection of their interest meansa loss to the owner of the land,an injury to his interest; it deprivesworkmen of jobs; it deprivesthe potential apartmentdwellers of the opportunity torent or buy quarters that theymight want and be willing to payfor. It prevents concentrated usewhere concentrated use is indicatedby the willingness of someoneto risk his money and consequentlycondemns a greater quantityof land to development inorder to house the same population.Is It Fair?One may also question the fundamentalfairness of allowing theresidents of subdivisions to usethe political process to insure thattheir neighbors will not live inapartment houses or be less affluentthan they, or will not constructhomes appreciably smallerthan theirs, or build a factory. Ineffect, zoning grants to a local majoritythe right to exclude whichis the essence of ownership.The rationale for allowing B toexercise rights of ownership overA's land ought to be found in the

1972 ZONING LAWS: THE CASE FOR REPEAL 439impact to B of A's proposed useof A's land. Any use that A putshis land to will have some impacton B. On one end of the scale arethose uses that palpably impact onB, those uses that may be thoughtof as "overflowing uses." When Acreates noxious smells that waftover to B's land or A createsnoises that substantially disturbB, A is really using not his ownland but B's. The fairness 'of allowingB or a governmentalagency as representative of B, torestrain A from overflowing useseems clear. Traditionally suchconduct is controlled by the law ofnuisance, civiI and criminal.The case is otherwise whereA's proposed use has "minimal"impact on B's enjoyment of hisland. Then the Common Law isneutral, confessing its inability tojudge, absent overflowing use,whether there is greater meritin A's proposed use or in B's demandthat it be restrained. Sincein this example it is impossible todiscern rationally whether there ismore merit in one course or theother, the basis for zoning's claimto fairness must rest elsewherethan in its ability to balance competinginterests fairly.Restraining the MajorityIt is in the employment of thepolitical process, the will of themajority as expressed· by a fairlyconducted vote, on which zoning'sclaim to fairness must rest. But toequate "majority rule" with "fairness"or "democratic process" isterribly inexact. We may assumethat "majority rule" is fair whenapplied to the political process (althoughits best justification ispracticality, not fairness). But weare bound to conclude that the hallmarkof the democratic state is itsrestraint in applying the politicalprocess to the activities of itscitizens.Since zoning is only one of ahost of forces shaping .land use itis difficult to measure its practicaleffects. There certainly is no evidencethat the introduction ofcomprehensive zoning has improvedthe amenities of cities andsubstantial evidence that it hasreduced them.Changing TechnologyThe draftsmen of the 1916 zoningcode of New York City begantheir work in 1913 and it lastedwithout substantial revision until1939. Like all zoning plans it wasdrawn in the light of technologygenerally available some yearsearlier and it was addressed toproblems set in motion decades orcenturies earlier and then apparent~The decent motives of thosedraftsmen and their competenceare unquestioned but. their forwardvision had to be small. Their

440 THE FREEMAN Julyimage of the ideal city was heavilytinted by their memories of amore bucolic and less populouscity of their youth. They wereconstrained to project the futureas a virtually straight-line extensionof the past. They simply couldnot (nor could anybody else) anticipateand plan for the tumultuousevents of the next 23 years:United States entry into WorldWar I, the virtual cessation of immigration.after 1924, the GreatDepression, the ubiquitous andferocious automobile, airconditioning,the supermarket, penicillin.Clouded Crystal BallThe planners' cloudy crystal ball,focused on the presumed unhealthinessof the towering officebuilding, engendered the zoningziggurats, the wedding-cake buildingsthat mar the horizon withoutlessening congestion in any meaningfulway or adding to the comfortof office workers. The zoners'fondness for and familiarity withrow houses and their evident an..tipathy to tenements promoted theconstruction and the retention ofsmaller houses. Dwellings adequateaccording to the standards of 1919or 1925 but decrepit and dilapidated30 or 40 years later oftencannot be restored to livabilityand economic usefulness becauseof zoning restrictions. Inner cityareas are thus condemned·~to totaldevastation before rebuilding canbegin. Neighborhoods that mighthave survived in changed but recognizableform are totally obliterated,their diversity and theirhumanity trucked away with therubble.Lack of FlexibilityThe consequences of the inherentlack of flexibility of zoningare multifarious. Some land staysidle awaiting industrial use thatnever arrives. The assemblage ofeconomically buildable parcels ismade unnaturally expensive becausebuilders must pay not onlyfor the inherent value of land butalso for the value conferred byzoning. Tax rolls are permanentlymaimed and the economic viabilityof the city endangered because taxconcessions can be extracted forlarge scale development wheresmall scale and piecemeal rebuildingis hampered by zoning restrictions.Long after neighborhoodshave been thoroughly run downand all but abandoned they continuezoned for residential use, thenonresidents thereof protectedfrom industrial incursion. Wherezoning's mortmain prevails, soundresidences now too large for single-familyoccupancy will often decayto total uselessness before anew use as shop, store or multifamilyresidence is permitted bygrant of variance or rezoning. The

1972 ZONING LAWS: THE CASE FOR REPEAL 441hub city stagnates while greenareas at the city's fringe or in .thesuburbs are paved over. Multitudesare condemned to commutertrains who, but for zoning, mighthave lived in comfort close totheir work.Freedom Encourages ExcellenceOne of the goals of zoning wasa better-looking city. Sadly, thegoal remains unrealized. Zoningprovokes monumental errors. Dissatisfiedwith the wedding-cakestructure induced by the previouscode, misled by the fortuitous excellenceof Lever House and theSeagram Building, the 1960 codedraftsmen granted height premiumsfor deep, ground-level setbacks.The result: Sixth Avenue,lined with surly, remote towersdisdaining mere commerce, withouta drug store or a delicatessen,inhullUlnly neat, without shelteror human scale for three-quartersof a mile.Repealing zoning is no guarantyof architectural excellence. Onething is certain, ugly buildingswill continue to be built. But architecturalexcellence is encouragedby· freedom not by conformity tostale committee judgment.Variances and rezoning are insufficientremedies for zoning'srigidity, its basic conservatism.Both do add some flexibility; bothare objectionable. Proceedings forvariances from zoning's rigors,limited in scope to begin with, areexpensive and time-consuming.They are a potent source of graftand. neighborly extortion. Spot rezoningis so patently unfair it isunconstitutional. Comprehensiverezoning has to be so infrequentthat it adds only minimal flexibility."Discretionary zoning" is undisguisedtyranny.A Proper Blend· of UsesHas zoning increased the amenitiesof the city by legislating theseparation of residential, commercialand industrial use zones? Inmuch of New York City an observeruninformed of the existenceof such zoning would be hardpressed to discover it for mostareas exhibit a blend of uses. Inmuch of Manhattan, for instance,the separation is a matter of a fewfeet, around the corner, across thestreet. Even so, Park Avenue between59th Street and 95th Streetis no more pleasant and a lot dullerwithout stores and offices thanMadison and Lexington with them.In mid-Manhattan and for certainpeople, at least, the quality of lifeis not diminished by proximity tocommercial activities and mayeven be enhanced by it. Verticalseparation is sufficient for comfort.Indeed, the City of New York hasrecently begun to encourage theconstruction of buildings with

442 THE FREEMAN Julyoffices and stores below and apartmentsabove, an arrangement thatzoning restricted for 50 years.The minimum conclusion is thata blend of commercial and residentialuses does not by itselfmake for unpleasant living.Residential and IndustrialThe compatibility of residentialand industrial use turns entirelyon the question of overflowing ornuisance use. -There is otherwiReno categorical answer to the questionof whether the operation of afactory at any spot on a map willdiminish the amenities of a nearbyresidential area. Zoning treatsthe problem of overflowing use inthe grossest terms, quarantiningthe patient instead of trying tocure the disease and coincidentallycreating enormous traffic problemsby confining factories to remoteareas. To assert that thisquarantine approach of zoning hascontributed to the intensity of ourpresent pollution problems is notwrong. Governmental coercionought to be directed at compellingfactories to confine their businessto their own land so that they areunobjectionable neighbors whereverthey are. The quality of lifeis not and ought not to be dependentupon legislative separation ofresidential and industrial areas.Zoning's bulk and height limitationsturn out to be equally irrelevantto the quality of life. Peoplecan live and, work in very largebuildings in great comfort and insmaller ones in squalor; the contraryis also true.Old Problems Remain; ZoningBrings New OnesFrom these conclusions one furtherconclusion can be drawn. Theunlovely city is not caused by alack of zoning and is not helped byzoning. Zoning simply creates anew set of problems.No zoning plan can be devisedthat does not exhibit the de'adlydefects of the zoning plans dealtwith here. Zoning plans face theproblems of the future with thefull confidence that they can prevent1915 or 1938 or 1959 fromever coming back. They are andhave to be drawn in the light ofold technology, old resources, oldproblems and old ideas. They areinherently inflexible, unable to adjustto new technology, new resources,new ideas, new needs.Zoning plans can confer order, butthe order is the order of the cemeteryor Williamsburg. Zoning, likeall ecosystem modifications, itselfproduces effects unforeseeablewhen the plan is made. The greaterzoning's scope the greater thechance that these unforeseeableeffects will cause monumental andpersistent harm. To argue that thehuge size and complexity of mod-

1972 ZONING LAWS: THE CASE FOR REPEAL 443ern cities make imperative the impositionof zoning is quite untrue.The larger and more complexthe ecosystem the less likelythat it can be controlled by plansset years before.After a half-century of comprehensivezoning in an era of in­,cT,easing regulation it may besomewhat haTd to accept the ideathat places can flourish withoutzoning, but they always have andthey do so now. 1 For all· these reasonsI conclude that the·most acceptableorder of land use willarise without zoning just as thepublic press will have its most acceptableorder without censorship.1 Though my grandfather warned methat "'for example' is no proof," interestedreaders are directed to examineHouston, Texas, which has never beenzoned and which is the subject of an admirablearticle by Bernard H. Siegan,"Non-Zoning in Houston," Journal ofLaw and Economics, April, 1970. ~Incompatible SystemsIDEAS ONLIBERTYBy DEFINITION, zoning is an interference with the right of ownership.When an owner of a property lnay use such property, consumeit, give it away, exchange it - all as he wi~hes - that isownership. Zoning reduces his latitude of action by politicalrestrictions that prevent certain possible uses and require others.Zoning and owning are different systems of determining land use.Either the land will be privately owned and its use determined bythe owner to his greatest satisfaction from the choices availableto him in the market place, or the land will be used as directed bygovernment.Zoning and owning are incompatible. Since the former is aninterference with ownership, zoning at best is a "respectable"mid-twentieth century form of theft of an owner's right to own.Whenever the right to own is removed, restricted, or eroded in anymanner, society declines toward a lower level of economic goodsthat is matched by a lower level of spiritual and moral values.Fl'om "Zoned 01' Owned'?" by J 0 H N C. SPA R K S

444A REVIEWER'S NOTEBOOK JOHN CHAMBERLAINPLAYING the percentages may letyou down: a well-protected politicalcandidat.e, for example, can beshot in a suburban shopping centerby a kook trailing him from adistant city, which means there isno absolute safety anywhere. ButDavid and Holly Franke, distressedby poll findings that one Americanin eight would like to move abroadto escape crime, drugs and longdistancebusing to poor schools,decided to go by the percentagesanywa,. They got out the FBIcrime reports, looked up the placeswith low rates of homicide andforcible rape, and wrote to a thousandpromising U.S. communitiesfor information about local conditions.Then they set out on an automobiletour of America to havea look at forty-six communitieswhere it seemed that life mightstill be happy, tranquil, profitableand at least relatively free of thefear that the U.S. is doomed to acontinuing steep decline.The result of this unique odysseyis a gigantic volume of 932pages, Safe Places (ArlingtonHouse, $13.95). The book is partnarrative and description, part sociologicalanalysis, and part encyclopedia.The easy reading alternateswith the dry statistics ofreal estate offerings, job opportunities,teacher-pupil ratios, publictennis courts and all the otherthings that one must consider ifone is to pull up stakes and makea move to a new place. Thus thebook makes its appeal to two classesof reader, the person who wantsan answer to the question of

1972 SAFE PLACES 445"Whither America?," and the genuineseeker for' a new life wherehe won't be mugged or murderedif he takes a little stroll afterdark. The first type of reader willskip much of the material thattells of such things as the availabilityof savings banks and theproximity of golf courses; the secondtype, with real commitmentsto make,will want to ponder everyword.Good News -and BadThe good news of the Frankes'book is that there are many spotsthroughout America that retaintheir beauty and their calm alongwith the opportunity to make goodlivings at interesting jobs. Theycan be found in New England, intowns such as Farmington, Connecticut,or Camden, Maine; in theDeep South along the Gulf Coast(Fairhope, .Alabama, sounds absolutelydelightful) ; in Arizona (theFlagstaff area); even in the supposedlyflat Middle West (seeTiffin, Ohio, or Winona, Minnesota.)Surprisingly, there is a safeand lovely town within shoutingdistance of New York, as theFrankes learned by dalliance inNutley, New Jersey. Highland orlowland, desert or four-seasonNorthland, there are good placesfor all tastes in the continentalU.S.There are, nonetheless, disturbingfactors that the Frankes makeno attempt to hide. One particularlydisconcerting thing about thebook is the way the authors haveto squirm to get away from the interweavinghippie and drug problems,which tend to be peripatetic.Our travelers blame the popularizingeffects of TV and the returnof college students for the factthat drugs are almost universallyavailable. Another worry is thespill-back from California, whichmeans that people are buying upthe available properties and localbusinesses in Nevada, Oregon andIdaho, much to the dismay of Oregon'sGovernor Tom McCall whowants to keep his State green andunpolluted. Florida and Californiaboth suffer from being too popular,and the drive of the American populationinto the Sun Belt couldeventually inundate and spoil thesoutheastern corner of Texas,where the humus on alluvial landsruns 1,600 feet deep and the lemonsare bigger than oranges.Then there is the question ofmoney: inflated currency may stillbuy good homes in Ogallala, Nebraska,and pay the one per centcity sales tax in Alpine, Texas, buthow does the average pocketbookfinance the search for safety inCalifornia? To the Frankes, Californiais still a most glamorousState. So' it is with mournful honestythat they feel compelled to

446 THE FREEMAN Julyreport that earthquakes are notthe only things that menace thegood life west of the Sierras. California,'in fact, has replaced NewYork as the symbol of what hasgone wrong with America. Lookinghard, the Frankes singled outas safe places three Californiacommunities - Belvedere on thenorth shore of San Francisco Bay,St. Helena in the Napa Valley, andSan Marino, a southern Californiaenclave just off the ~asadena Freeway.All of these places have lowcrime rates, with no murders orforcible rapes occurring in any ofthem for the year 1969.The Price May Be HighBut to escape from San Francisco,which has a murder rate of17.7 per 100,000 population, to acommuter's heaven in Belvederedemands a bank president's wad.Bayfront property in Belvederestarts at $90,000, "with $125,000a more realistic estimate of whatyou would probably pay." As a realestate agent put it to the Frankes,"Marin County is like a countryclub - if you can afford to pay thedues, it's great." The cost, then, ofgetting one's children out of SanFrancisco, which fathered theHaight-Ashbury hippie culture, tosafe Marin County is· so far beyondmost purses that it won'tbear thinking about. St. Helena inthe Napa Valley is a better homebuyingprospect, but it is morethan an hour from San Franciscowhere the jobs (save for grapesand truck crops) happen to be. Asfor San Marino, near Los Angeles,the citizens have had to be a moststalwart breed to support theirunusual police department. Thereis a constant 24-hour surveillanceof the whole community, with astrict "House Watch" service andtough zoning that prohibits certaintypes of business that mightattract the attention of criminals.The police make checks every dayat incalculable moments of allproperty that is empty. So, thoughSan Marino is safe, it lives undera virtual state of seige.Small Colleges Are SolerMany of the places investigatedby the Frankes happen to be collegetowns. But the rule is that acollege must be small to add to thelivability of a place. Moscow,Idaho, can "digest" the Universityof Idaho because the preponderanceof its 6,000 students are inagriculture, business, engineering,law, mines, forestry, wild life, educationand economics. Unlike theliberal arts students when theyexceed a critical volume, the "aggies"and the business majors areserious types. Grinnell, Iowa, isanother placid college town thathas had no murders, forcible rapesor serious campus disturbances.

1972 SAFE PLACES 447But, again, Grinnell is small and,with a faculty-student ratio of 1to 10, its college is geared torather intensive work.For Freeman readers, theFrankes' sidetrip from Grinnell tothe Amana Colonies forty mileseast of the town points an interestingmoral. The Amana Colonieswere created by an Old World sectknown as the True Inspirationists.Of German, Swiss and Alsatianancestry, the True Inspirationistsheld things in common and handeddown their skills from fatherto son. But in 1932 they switchedto free enterprise and separatedchurch from state. The change hasbrought great prosperity withoutany diminishment of the localcraftsmanship.Safe Places is fascinating reporting,and the riches the bookcontains are far too numerous forcitation in a short review. Whetheryou want to move for good, ormerely want to travel, this is thebook for you, and you, and you.~ FREEDOM AND THE LAW byBruno Leoni (Los Angeles: NashPublishing Company, 1972, 204 pp.,$7.50)Reviewed by Tommy W. RogersTHOSE WHO VALUE individual freedom,suggests the late ProfessorLeoni, should reassess the place ofthe individual within the presentlegal system· which is centered onand almost completely identifiedwith legislation.While many today pay lip serviceto the Romans and to the Britishfor their legal wisdom, fewrealize how limited was the legislationand, consequently, howgreat the sphere of the individualin both Rome and England duringthe centuries when their respectivelegal systems were most flourishingand successful.Both the Romans and the English,Leoni writes, shared the ideathat the law is something to bediscovered more than to be enacted,and that nobody is so powerful,or so righteous, as to insist thathis own will be made the law ofthe land. Today, ordinary legislationand even constitutions andcodes are presented, not as the resultof an orderly historical process,but as a new approach,through unprecedented decisions,to what the law should be. Legislationhas come to resemble a sortof dictate that the winning majoritiesimpose upon the minorities.Leoni decries the current tendencyto identify law exclusivelywith legislation and written statutesto the neglect of common law,custom, convention, tacit rules andprivate spontaneous .adjustment.He deems it questionable that legislationshould be used as a meansof subjecting minorities. "It also

448 THE FREEMAN Julyseems unquestionable that weshould reject the legislative process'whenever it is possible for theindividuals involved to obta,intheir group objectives without depen(Ungupon the decision of a.group and without actually constrainingany other people to dowhat they would never do withoutconstraint."Leoni maintains that blind acceptanceof the contemporary legalpoint of view will lead to gradualdestruction of individual freedomof choice in politics, the market,and private life. The contempo-'rary legal point of view meansthe increasing substitution ofgroup decisions - majority ruleforindividual choices.Leoni notes the semantic confusionin the words "freedom" and"constraint" and examines the relationof freedom to such conceptsas the "rule of law," "equality beforethe law," and "representativegovernment." He discusses suchtopics as rent control, privilegesand immunities granted to laborunio'ns, and the general proliferationof statutory and administrativelaw.Freedom and the Law grew outof Professor Leoni's lectures atthe Fifth Institute on Freedomand Competitive Enterprise atClaremont Men's College in 1958.The current edition of the book(first published in 1961) is sponsoredby the Institute for HumaneStudies, Inc., Menlo Park, California.~HANDSOME BLUE LEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

tileFreemanVOL. 22, NO.8· AUGUST 1972Are We Marxians Now? Hans F. Sennholz 45,1How Marxian views affect American attitudes regarding class conflict, monopoly,and international affairs.Free Enterprise and the Russians Erik von Kuehnelt-Leddihn 461A survey of the prospects for a return toward freedom in the USSR.The Founding of the American Republic:13. l'he American Triumph Clarence B. Carson 471The military victory and the peaceful triumph of freedom that followed.Energy: the Ultimate Raw Material James Wei 486An outstanding Chemical Engineer distinguishes fact from fiction in the continuingsearch for a clean and adequate energy supply. -The Natural History of Governmental Intervention Milton Friedman 497How one intervention leads to another, with effects the opposite of the good intentions.Abortion: a Metaphysical Approach Thomas L. Joh'nson 498Concerning the life process and the stage at which a cell becomes a human being.Book Reviews: 506"To Free or Freeze" by Leonard E. Read"What, How, for Whom: The Decisions of Economic Organization" by Henry N. Sanborn"Imputed Rights" by Robert V. AndelsonAnyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tileFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON-ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,OOO-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printedin U.S.A. Additional copies, postpaid, to one address: Single copy, 50cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.THE FREEMAN is available on microfilm from Xerox University Microfilms,Ann Arbor, Michigan 48106.Some articles available as reprints at cost; state quantity desired. Permissiongranted to reprint any article from this issue, with appropriatecredit, except "The Founding of the American Republic," and "Energy:the Ultimate Raw MateriaL"

HANS F. SENNHOLZ_-..AREWEMARXIANS • NOW~__IDEAS are the forces that lift ordestroy civilization. They bringpeace and prosperity, or breedwars and revolutions. Ideas shapeour laws and institutions, and governindividual action and socialrelations. No wall or boundary canforcibly retain an idea. It sweepsaround the earth like a storm thatspares nobody. Ideas are strongerthan bombs and missiles, they aremightier than an armada withmegatons of explosives.The philosophical, social andeconomic ideas of Karl Marx havebeen more influential than thoseof all other socialists. They havehad, and continue to have, a profoundimpact not only on the livesof billions of people living in communistand socialist societies whoDr. Sennholz heads the Department of Economicsat Grove City College and is a notedwriter and lecturer on monetary and economicprinciples and practices.worship him as their apostle andmaster, but also on the thoughtsand policies of all others. Surely,no one would label the Americansociety as "Marxian,'~ or describeour social and economic policies as"Marx inspired." There are veryfew Americans who would courageouslyconfess allegiance to thedoctrines of Marx. And yet, seriouscontemplation cannot escapethe conclusion that contemporaryAmerican thought on some threemajor issues - the conflict of interestsin society, the concentra.:.tion of business, and our outlookon the world - bears a startlingresemblance to the doctrines ofKarl Marx.At this place we need not investigatewhy and how this similaritycame about, nor ascertain thechannels of education and communicationthat facilitated thesway of Marxian ideas. In fact,451

452 THE FREEMAN Augustin order to demonstrate the resemblanceof contemporarythought to Marxian doctrines weneed not even prove that KarlMarx was the original author ofprevailing American thought.After all, there were many otheroriginators of socialism whose intellectualinterdependence is difficultto record.Economic ConflictMost Americans seem to agreewith the Marxian doctrine of political,social and economic conflict.Their traditional belief in a harmonyof interest has gradually givenway to trust in conflict and force.Americans now agree with Marxthat social groups pursue conflictinginterests that are reflected inantagonistic political and economicprograms. Where in the past theyhad relied on individual initiativeand action, they now depend oncollective measures through legislationor regulation, or collectiveprograms for political and economicpressure groups· or businessand labor organizations. He whostands alone today without theshelter and security afforded byhis interest lobby or union is arare exception.In every session of Congresshundreds of new laws are passedthat aim to confer rights and privilegeson some groups while restrictingthose of others, or grantproperty and income to some atthe expense of others. The politicalprocess has become a wrestlingmatch between ever-changing alliancesof pressure groups fightingover economic privileges and benefits.Just listen to·the daily newscasts.Most of the reports, whethernational or local, deal with themost noisy manifestations of thiscollective conflict.Karl Marx was a forcefulspokesman of the conflict and exploitationdoctrine. Even in theUnited States, this bulwark of thefree world, the doctrine has swayedpublic opinion. It makes its appearancein the popular notion thatthe unhampered capitalistic economydelivers the wage earners tothe discretion and power ofwealthy industrialists. The individualworker is said to be helplessand in need of legal protectionin his bargaining with managementwhose primary concernsare power and profit. The unbridledmarket system with itsprofit motive and unhamperedcompetition as it prevailed in thiscountry before World War I iscondemned for having inflictedhardship and deprivation on manygenerations of workers. Such notions,which are popular versionsof the exploitation theory, haveinvaded our colleges and universities,indeed all channels of educationand communication. They

1972 ARE WE MARXIANS NOW? 453have radically changed our politicalparties and our churches. Theyhave given rise to a gigantic laborunion movement and to the "NewDeal" in social and economic matters.In fact, the exploitationtheory determines our basic "economic"policies at all levels ofgovernment.Labor PolicyThe ever-growing mass of laborlegislation is one of the fruits ofthe exploitation theory. Its advocatescredit modern social policyfor having reduced the work weekto 48, 44, and 40 hours, or·evenless. They applaud labor legislationfor having eliminatedwomen's and children's labor. Andthey ascribe the present rate ofwages to the minimum wage ratesset by authoritative intervention.Indeed, practically all labor fmprovementsare credited to sociallegislation and labor union intervention.Compulsory social insurance, includingunemployment assistance,Medicare and Medicaid, stem fromthe same intellectual roots. Capitalismis said to be incapable ofgiving sustenance to· the unemployed,sick, or aged laborers.Therefore, social policy must assuredecent living conditions to anever-larger part of the population.Also, modern taxation reflectsour adoption of the exploitationtheory. Most taxes aim not only atraising revenue but also at correctingor alleviating the alleged evilsof our economic system. Sometaxes aim at a "redistribution" ofwealth and income. Confiscatoryrates are imposed on entrepreneursand capitalists whose income andcapital are thus transformed intogoods for consumption by the "underprivileged."Other taxes aim atchanging business customs andconduct or at regulating productionandtrade. All presidentialcandidates promise more of thesame.Our labor unions derive theirvery justification for existencefrom the exploitation doctrine.Few Americans would disclaimthe boast of union leaders thattheir unions have raised, and stillare raising, wages for all workersthrough association and collectivebargaining. American public opinionbelieves that recent history hasproved the beneficial nature oftrade unionism without whichworkers would be subjugated tothe greed and arbitrariness oftheir employers. Because of thecommon fear of labor exploitation,the people suffer strikes or threatsof strikes, union coercion and violence,and endless agitation of hateand envy by labor leaders againstthe wicked selfishness of exploiters.To many millions of Americans,membership in a labor union is an

454 THE FREEMAN Augustimportant social duty and strikea holy task.Clash of the GenerationsIn recent years the conflict doctrinehas been broadened to coveryet another area: the relations betweendifferent generations. Itthereby succeeded in pitting millionsof American youth againsttheir elders in a so-called "generationgap." Numerous studentorganizations of the "New Left"are attacking the "establishment"that represents the older generationwith arguments that aretaken without much change fromthe armory of Marx. The era ofcampus violence was ushered inby the Students for a DemocraticSociety (SDS), a quasi-Marxianclass organization. It was followedby such groups as the ProgressiveLabor Party, the Weathermen, theYoung Workers LiberationLeague, the Young Socialist Alliance,the National Peace ActionCoalition, the New AmericanMovement, and many others. Althoughthe members of such militantgroups comprise only smallminorities of students, it appearsthat many millions of young peopleagree with the radicals on theexistence of conflict.· If there iscollective conflict in our social andeconomic spheres, why shouldthere be peace and harmony betweenthe establishment and itsopposition, between the older generationand youth?Racial ConflictOne of the ugliest manifestationsof the conflict doctrine isfound in our race relations. Weare told again and again that itis our capitalistic system that imposesconditions of hardship upona minority of its citizens, and thatfinally the angriest of them havebeen driven to assault the exploitationorder. We are accused ofwicked standards' of white moralityand capitalist middle-class behaviorthat condemns the riotingand looting but lacks human concernfor millions of deprived Negroesin our midst.A .solution to the growing problemsof racial strife is sought inever-costlier government programs,in more public welfare andpublic care. While Newark wasburning, and as twenty-sevenAmericans were losing their livesthere, the Federal Governmenttried to rush through Congress 8bill to provide $20 million a yealfor two years to exterminate thErats that infest the city slums. Iiwas suggested that eradicatin~rats would ultimately help to pre·vent the racial riots, as it woul(indicate to the rioters that some,body really cares.One may agree with the militan"Civil Rights" leaders that, fo:

1972 ARE WE MARXIANS NOW? 455the first time in American history,political and social conditions areripe for open rebellion and revolution.But our explanation differsfundamentally from theirs. Theteachings of conflict and socialism,which for a long time were limitedto white pressure groups, havefinally reached millions of Negroes.In their incredible blindnessour political leaders eagerlysow dissatisfaction and make recklesspromises of redistributionwhile condemning the privateproperty order - openly encouragingNegro protests against thatorder. It is collectivism, not capitalism,which breeds insurrectionand revolution.Sexual ConflictIn the United States the conflictdoctrine finally was extendedto cover sexual relations. Therecan be little doubt that women'sliberation has become a major andmilitant movement.In some of its aspects the movementis hardly new. More than50 years ago it led to the 19thConstitutional Amendment thatgave American women the rightto vote. But in recent years, especiallysince the appearance ofSimone de Beauvoir's The Sec'ondSex and Betty Friedan's The FeminineMystique, it acquired thefamiliar symptoms of conflict andconfrontation. Some of its radicalspokesmen sound like the otherconflict champions although theysubstitute sex for race, class, orgeneration. Their charges are almostidentical: the capitalisticsystem breeds exploitation andslavery and therefore should beabolished. Economic freedommeans freedom for men only, butexploitation and dependence forwomen. Therefore, it must giveway to the political process, tolegislation and regulation, inshort, to a new order.Concentrations and MonopoliesAlthough most Americans woulddisclaim any sympathy for KarlMarx and his teachings, they seemto be in full agreement with himnot only on his doctrine of conflictof interest and class strugglebut also on his theory of industrialconcentration and monopoly.In Das Kapital Karl Marx proclaimedthe inevitable coming ofsocialism on grounds that capitalismcauses a gradual pauperizationof the working classes. Theexploitation profits, which businessmenpocket by means of theemployment contract, are investedin an ever-growing apparatus ofproduction, today called automation,which in turn creates a growing.army of unemployed and underemployedpaupers.In the decades that followed thepublication of Das Kapital, it

456 THE FREEMAN Au,gustproved to be most difficult to inculcatethis doctrine in the mindsof American workers. Every year,wages rose and conditions improvedon account of expandingcapital investments and rising laborproductivity. In fact, thestandards of living of Americanworking people rose to levels thatare unprecedented in human history.And with the rise in laborproductivity and wage rates, theconditions of health, life expectancy,education, recreation, andleisure improved immeasurably.A more plausible theory onwhich the doctrine of inevitabilityof socialism could be based hadto be found. Today, communistpro1Jaganda, whether in the formof arrogant prognostications thatour. grandchildren will live undercommunism or as blaring newscastsby Radio Moscow, proclaimsthe coming of socialism ongrounds that capitalism is degeneratingto dire monopolism. Whatevercapitalism may have achievedin the past, its dreadful degenerationgives rise to vast concentrationsof wealth matched bydismal poverty, automation andunemployment, and other discrepanciesand imbalances. Prosperityunder capitalism, we are told, isonly short-lived and must soongive way to monopolistic exploitation,depression, and unemployment.Many Americans are increasinglyreceptive to this doctrine.Certainly the Founding Fatherswere aware of the inherent dangersof monopoly. Thomas Jeffersonhad even advocated a Constitutionalamendment outlawingmonopolies. But the FoundingFathers were also fully awarethat governments were spawningthe monopolies. Some three hundredyears of European mercantilisticmonopolistic policy hadtaught them that the governmentissue of licenses, franchises, regulations,and controls gives riseto monopolistic restrictions andeconomic maladjustments.The forces of CompetitionUnder the influence of Europeansocialistic thought and Marxianindoctrination, this causal connectionbetween government andmonopoly has been gradually forgotten.Instead, many Americanf:are now led to believe that thecapitalistic market economy breed~monopolies, and that "big busi·ness" tends to degenerate to mo,nopoly. In reality, the unhamperecmarket economy, through the op,eration of free competition, pre,vents anyone businessman froncharging monopolistic prices. Eve]if one should be the only produce:in the field, potential competitionthe competition of substitutes, an4the elasticity of demand, preven

1972 ARE WE MARXIANS NOW? 457him from exploiting the situation.Potential competition exists inall fields of production and commercewhich everyone is legallyfree to enter. Most corporationsare searching continuously fornew lines and items of production.They are eager to invadeany field in which business earningsare unusually high. The invasionof another field by a corporationmay involve no morethan a single retooling or reorganizationthat is achieved in afew weeks or months. Or,brandnew facilities may be employedfor an invasion. Thus, one producer,whether he is a monopolist,duopolist, or a competitor amongmany, always faces the potentialcompetition of all other producers.But even if American enterprisesfailed tq compete with eachother and potential competitionfailed to exert a restraining influenceon monopolists - which isa most unrealistic assumption ­the people would escape monopolisticprices through recourse tosubstitutes. .In many fields thecompetition of substitutes is moreimportant than that of competingenterprises. In· the manufactureof clothing, for instance, adozen different materials vie witheach other for the consumer's dollar.The .monopolist of anyonematerial is powerless because monopolisticpricing would induceconsumers to switch immediatelyto other materials. The manufacturersof suspenders compete notonly with each other and withpotential competitors, but alsowith the producers of belts. Inthe transportation industry therailroads compete with trucks,cars, airplanes, pipelines, andships.Elasticity of DemandThe existence of substitutesmakes for demand elasticitywhich, in turn, makes monopolisticpricing unprofitable; for higherproduct prices would greatly curtailproduct demand, and thussales and income of the monopolist.Therefore, he again must actas if he were a competitor amongmany.All producers, in fact, competewith all other producers for theconsumer's dollars. The manufacturerof television sets competeswith the manufacturer of freezersand refrigerators. If the monopolist.of one commodity - say, televisionsets - should raise his price,the consumer may forego the purchaseof a new set and buy insteada second-hand set or a refrigerator.We consumers do notallocate our income to the satisfactionof categories of wants butto that of specific wants yieldingthe greatest net addition to ourwell-being. This addition, in turn,

458 THE FREEMAN Augustis determined by the urgency ofour wants and by the cost ofsatisfaction.This consideration of some fundamentalprinciples of marketeconomics runs counter to the interpretationsoffered by Marxianpropaganda and, unfortunately,also by many fellow Americans.Our statist politicians and antitrustbureaucrats partially embracethe Marxian explanations.They subscribe to the theory thatour capitalist system breeds monopolies.But then they part withRadio Moscow by proclaimingtheir desire to save this monopolybreedingsystem from its own destruction.They propose to controlthe monopolies through governmentaction. Almost every daynow, the Antitrust Division of theDepartment of Justice chargessome businessmen with monopolisticconspiracy. These charges, beingmade in the limelight of worldwidepublicity, poison the politicalatmosphere and create a badlydistorted picture of our enterpriseeconomy. In fact, the AntitrustDivision is one of the most efficientarms of socialist propaganda.AnticolonialismMany Americans also agree withthe Marx-Lenin doctrines of colonialismand imperialism. In thename of national sovereignty andanticolonialism the United StatesGovernment has promoted nationalismand socialism in all cornersof the world. It has exerted itsgreat influence toward the reductionof European influence andpossessions in Asia, Africa, andLatin America. We urged theDutch to leave Indonesia, we applaudedthe French retreat fromIndochina, we blatantly demandedBritish and French withdrawalfrom the Suez Canal, we urgedthe Belgians to leave the Congo,and the French to surrenderNorth Africa, we censured Portugalfor her African possessionsand imposed sanctions on Rhodesia.The Western retreat from Suezto Panama, from Indonesia to Algeria,from the Congo to Moroccoevidences an ominous weakness ofWestern civilization. Blinded bysocialistic doctrines and prejudices,our statesmen hail retreatas progress and defeat as victory.Their world view is perverted byconceptions of "capitalist colonialism,"which are derived from theteachings of Marx and Lenin.Echoing the communist leaders intheir attacks on the West, theylevel the charge that Europeancolonialism has kept the economicallybackward nations subjugatedfor centuries.This misconception of historyflows from a bad distortion offacts. The European colonies wereacquired during the age of mer-

1972 ARE WE MARXIANS NOW? 459cantilism and nationalism. Thespirit of capitalism with its concernfor individual freedom andprivate property, which shapedBritish foreign policie·s during thenineteenth century, completelytransformed colonial possessions.The British overseas settlers becamevirtually independent - enjoyinga dominion status. All otherterritories dependent on Britishrule were governed according to"open-door" principles. The BritishEmpire was R'vast free-tradearea in which the government undertookonly to maintain law andorder.Laissez FaireCapitalism is the system of individualfreedom and private propertyin production as well as consumption.In both domestic andforeign affairs it implies laissezfaire, which means free trade andan open-door policy that welcomeseveryone and discriminates againstno one. The exploitation of colonialpossessions is inconsistent withthe concepts of competitive privateenterprise and voluntary exchange.An American or Europeanbusiness that invests its capitalin an underdeveloped countrydoes not exploit the natives. Capitalinvestments anywhere raiselabor productivity and consequentlywages. The United Fruit Company,for instance, did not enslavethe people of Latin Americaby creating plantations in wilderness.On the contrary, it raisednative productivity and improvedworking conditions.And yet, most Americans areconvinced that European colonialismis responsible for world povertyand upheaval. Why elsewould the U.S. Government havehelped to liquidate European influencein all corners of the worldand sanction and support revolutionarymovements? Even today itstrongly opposes the white administrationsof Portuguese Africa,Rhodesia and South Africa. ManyAmericans even approve of theconfiscation or nationalization ofprivate enterprises by the governmentsof newly independent countries.They agree with the Marxiansthe world over that. a sovereignstate can legally seize andconfiscate any foreign enterprisein disregard of valid contractsand agreements. This is why thenew states in Africa and Asia canseize and destroy huge Europeaninvestments with impunity. AndFidel Castro could seize more thanone billion dollars of Americaninvestments.During the eighteenth and nineteenthcenturies most Americanswere conscious of the naturalrights of individuals, and thereforebelieved in an idea of statesovereignty that was severely lim-

460 THE FREEMAN Augustited by inalienable personal rights.State sovereignty was encompassedby the individual rights to life,liberty, and property. This conceptof limited state sovereignty,which true friends of freedomcontinue to embrace, denies theright of any government to seizeor nationalize any enterprise withoutthe owner's consent.Are we Marxians now? MostAmericans will indignantly answerthis question in the negative.After all, they neither condonedictatorship with its one-partysystem nor the ruthless suppressionof dissent and brutal treatmentof dissenters, which characterizeall communist countries.They are "civilized" and thereforeabhor all manifestations of inhumanity.But unfortunately, manyAmericans unwittingly share importantphilosophical, sociological,and economic beliefs with Marxiansthe world over. These beliefsgive rise to policies that pleasethe Marxians. Ultimately, they willbreed the very political and economictyranny which Americansso abhor.fJA Useful ProductIDEAS ONLIBERTYTHE BUSINESS GENIUS who makes and markets a useful productand furnishes employment at good wages to hundreds of fathers,serves his community more usefully than a councilman who votesthe appropriation of public funds to build playgrounds.Without the steady production of wealth, the makers of publicbudgets would be helpless. For this reason the man richly endowedwith business sense serves his fellow men best if he continues athis desk to the end of his days.This line of thought does not win easy acceptance because it isonly within recent generations that the social significance of businessprosperity has been properly valued. It is now becomingmore generally recognized that a nation cannot have too manycompetent businessmen. Prosperity is more a matter of men thannatural resources. Poverty and ignorance have cursed and humbledmankind from the beginning. Intelligent direction of businesswill eliminate both.From The William Feather Magazine, April, 1972

461ERIK VON KUEHNELT-LEDDIHNWINSTON CHURCHILL used to saythat Russia is a riddle wrapped inan enigma within a mystery. Butto him who has studied that country,its history, religion, language,mentality, the truth will come moreeasily; the many widespread dangerouscliches will dissolve beforQhis mental eye.One of the most co:n;mon ofthese cliches is to the effect thatthe Russians are "by nature" collectivists,that their souls are achingfor tyranny, all of whichmakes them so susceptible to Communism.Did not the large mass ofthe Russian people consist ofserfs? The truth however is different.In old Russia, in contrastto America, slavery had never beenDr. Kuehnelt-Leddihn is a European scholar,linguist, world traveler, and lecturer. Of hismany published works, perhaps the best knownin America are Liberty or Equality? and TheTimeless Christian.institutionalized; the majority ofthe farming class had consisted offree people. As a matter of fact,serfdom as an institution had onlyexisted in central and westernRussia, but not in the far north,in the south, in the eastern partof the country, and certainly notin Siberia. (The Cossacks livednotoriously a very free life.)It is true that in large areas, asa result of the abolition of serfdomin 1861, the peasants were givenland collectively which resulted ina very poor agriculture with recurrentfamines; but Stolypin, the"arch-reactionary" Minister of theInterior, disestablished the collectiveholdings, the M irs, early inthis century. The subsequent individualfarming, together with asecond agrarian reform, initiatedthe rapid development of Russianagriculture with the ambitious

462 THE FREEMAN Augustpeasants, the kulaks, leading thenation to a new agrarian wealth.(The final goal of the gradual reformwas to have only 11 per centof the arable area covered withlarge estates by 1930.) By 1916only 23 per cent of the usable landwas in the hands of big landowners,whereas in Britain thisshare was 55 per cent! And weought to add to this that Russianever had a ruling nobility. OldRussian titles mean a great dealmore in Hollywood than they evermeant in Russia. Social arrogance,as we know it in the West, wasunknown there; it came into beingonly in recent decades as a resultof Marxist indoctrination with theaccent on class consciousness. Hewho knows the USSR or reads contemporaryRussian plays andnovels is fully aware of this ratherdepressing fact.Russians, indeed, are by naturegreat individualists; they alwaysconstituted a nation of eminentindependent thinkers, poets, scientists,philosophers, artists, musicians,mathematicians and soforth. Edward Crankshaw explainedin a brilliant article in InternationalAffairs (October,1945) how precisely due to herpeople's individualism a purelyparliamentary democracy for Russiais out of the question - nowand forever. This might soundparadoxical to American ears butHarold Laski had previouslypointed out to us that representativedemocracy, in order to beworkable, has to rest on two premises:a two-party system and, moreimportantly, a common frameworkof reference, a common language,the thing which Walter Lippmanncalled a "Public Philosophy." Sucha common framework has neverexisted in eastern or southernEurope where, for a variety ofreasons, intellectual individualityand not a sentimental communityspirit always prevailed. All ofwhich moved the classic Britishliberal Walter Bagehot to the conclusionthat democracy needs arather "stupid people" (Letterson the French Coup-d'-Etat, 1852) .The Russians, in other words, aretoo bright for their own good.They will always have a government-from-abovewhich can bespiritual or materialistic, liberalor tyrannic, benevolent or malignant.Self-government in Russiacan only be local and limited.Degrees of Government InterventionIn the various forms of society,government and economics are admittedlyinterdependent, but notin a crudely automatic way. Thereare provider states which are notsocialistic, there existed liberal aswell as communist monarchies(the Empire of the Incas) andtotalitarian democracies. Spain,

1972 FREE ENTERPRISE AND THE RUSSIANS 463for instance, has a rather limitedpolitical freedom but a great dealof economic liberty. Brazil has amilitary dictatorship but its economyrests on free enterprise. ContinentalEurope before 1848 hada free market economy under royalabsolutism. But the USSR boastsa democratic label and has practicallyno freedom, neither economic,nor intellectual, nor religious.It knows not even the freedomof residence.Old Imperial ("Czarist") Russia,however, had a far-reachingeconomic freedom. Of course, wealways ought to distinguish Russiabefore the liberation of theserfs from the Russia between1861 and the issuing of the Constitution(1905), and the latterfrom the liberal monarchy between1905 and the Revolution. The freedomof expression during this"terminal" period was nearly complete.In 1912 the Pravda" foundedin broad daylight, violentlyattacked the government. Therewere, moreover, Bolshevik delegatesin the Duma (Diet), but noAnarchists ("Social Revolutionaries"),a party which indeed representedtotal individualism, butalso murder and arson. (It wasbanned by law, but Kerenski secretlyadhered to it). As a matterof fact, the government favoredthe Social Democrats, with theirmenshevik and ',:~olshevik wings,over the Anarchists, the latterclaiming not Marx, but Bakunin(a nobleman) and Prince Kropotkin,who died in 1921, as theirfounding· fathers and spokesmen.(Incidentally, the great bolshevikleaders beginning with Lenin werefrequently members of the nobility.)Progress through freedomIt was thanks to economic freedomthat Russian industry, thoughlate getting started, enjoyed afabulous development in the quartercentury before the Red Revolution.The annual increase of Russia'sindustrial output and capacityin those years was far larger thanthat of any other modern nation,including that of the UnitedStates. Evidence may be found, ofall places, in the Illustrated Historyof the Russian Revolution(New York, 1928), a Communistpublication. Obviously, Russianlabor, largely lacking skills, discipline,and the famous "Protestantwork ethics," could not bewell paid any more than in anyother "emerging nation" in thefirst phase of industrializationwhen heavy investments are necessaryand the purchasing powerof the masses is still exceedinglylow. The new class of Russian entrepreneurs,needless to say, werenot members of the old upper layers,but homines novi - industri-

464 THE FREEMAN Augustous blacksmiths, bright peasantboys, aggressive skilled workerswith foreign experience. Smallamounts of capital allowed miraclesto be worked, and soonRussia became Europe's "EasternAmerica," brimming with HoratioAlger stories.One has to admit, however, thatthe newly rich often displayedtheir freshly acquired wealth inrather crude fashion. Thus, todaya foreign embassy in Moscow ishoused in the palace of a sugarking's mistress - but this particularmillionaire was the son of aserf. Yet, we may be sure that hisincome, if .spread· evenly amonghis workers, would not materiallyhave improved their lot, whichsurely worsened after 1917.At the outbreak of World WarII the wages paid to workers werelower than before the Revolution.One has only to read the splendidwork of Manya Gordon, WorkersBefore arnd After Lenin (NewYork, 1940), to get the relevantdata. Of course, the illusion thata radical redistribution of incomefundamentally improves the Iivingstandards of the lowest classes isstill general among loose-thinkingsociologists. Socialism also feedson this erroneous belief. It is,however, the bigger cake, not thereslicing, which improves the lotof the many. And the bigger cakerequires. wise reinvestments, goodmanagement, and a high ethicalconcept of work.With the Communist Revolution,Russian industry and agriculturetook a nose dive. Thepeasant class, at first, did not· resistCommunism, because the remainderof the large and mediumestates was distributed amongthem. Lenin also permitted duringseveral years a minor trade whichquickly started to bloom. These,even to Lenin's mind, were onlytemporary concessions. Stalinliquidated not only the "NewEconomic Policy" (NEP) but alsothe independent peasantry. Firstthe kulaks were expropriated andpartly exterminated; then·the restwere crushed and collectivized.The Five-Year-Plans were put intoaction. Since then, a dark nighthad settled over the Russianeconomy.A Low Standard of LivingToday, we might get impressive(but who knows how. accurate?)statistics about production but wedo know that East German aid tothe space program has been substantial.We also k'now that machineryimported from Czechoslovakiaand Hungary abounds inthe USSR, but we fully realizethat the living standards of themasses, including the professionalclass (other than a tiny top sector),are truly miserable. Assum-

1972 FREE ENTERPRISE AND THE RUSSIANS 465ing that the rouble is US $1.20,the salaries and wages for workers,doctors, factory directors arenot so terribly bad by West.;.European standards. But let usremember that the rouble can bebought in Vienna or Zurich for19 cents, and this gives us a farmore accurate picture of conditionsin.side the Soviet Union.One must admit that medicalservices (of a modest nature) aregratuitous. Also, :rents are verylow, but not so if we consider themin relation to space; then, indeed,they are very high. Only universityprofessors, members of theAcademy of Sciences, directors ofleading theaters, writers, primaballerinas, and certain very highlyplaced civil servants live well; butwe should not believe that therebythey are all "bought" and reallybelieve in Communism. The purelymanagerial class is not at all welloff. A factory director usuallycould not feed his family. His wifewould have to work as well. Yet,socially speaking, he would arrogantlylook down on teachers,engineers and so forth. Status andincome are by no means identical.The "Theory of Convergence"Curiously enough, there is inthe Western world, and especiallyin the United States, a ratherwidely-held belief that the radicaldifferences in social structure andeconomics between East and Westare gradually disappearing, thatthe West is becoming more andmore "socialistic" and the SovietBloc more and more "capitalistic,"thus eventually ensuring peace.This is the famous "theory ofconvergence", a very soothingtheory indeed. Andrei Amalrik,the brilliant (and again jailed)author of Will the Soviet UnionSurvive Until 1984? has rightlyridiculed this notion because heknows only too well that practicallyaU Russians are absolutists,that institutions in the East arenot bent but broken, that dogmatismand revolution, not relativismand evolution, dominateEastern life. English-speaking nations,to the contrary, are enamoredof the notion of evolution,of nice, little, painless, gradualchanges. In addition, they mistakewelfarism for socialism. The lattermeans the ownership of the meansof production by the state. Ofcourse, in practice all socialistcountries are "welfarist" (andstand for the Provider State), butnot all Provider States are socialistic.(In Sweden 90 per cent ofeconomic resources are still privatelyowned, though this mightchange in the near future. Ofcourse, "welfarism" in the Westernworld is on the rise, but thisitself will never close the gap betweenEast and West.) Even the

466 THE FREEMAN Augustundeniable convergence betweenRussia and Red China does notparticularly make for peace.The only socialist country inEurope which has made ideologicalcompromises on the economicfront is Yugoslavia, which fromthe Muscovite point of view is aheretical outsider. It still has afree peasantry and small privateenterprises with up to fifteen employees.But the future of Yugoslavianationally and economicallyis dim. Economically, this is thecase because free enterprise is asystem which walks on long legsand socialism on short legs. Whathappens if one leg is long and theother one short? Such an economywill be prone to fall on its nose.And besides Yugoslavia, onlyPoland has, a non-collectivizedpeasantry.No More Private EnterprisesWhen I first visited the USSRin 1930 at the age of twenty, Iwas even then struck by the factthat the only surviving free entrepreneurswere the watch-repairmen,the bootblacks, cobblers anda few tailors. I saw no privatestores left. At my later visit in1963, "socialization" was total andcomplete. Bootblacks received asalary and that was it. As far asthe Soviets were concerned, therewas and there still is no sign ofan economic "convergence". (Thereis, however, a fair amount of neo­Stalinism in the domains of intellectualand religious life). It is, true that there are a few economictheorists (like Liberman)who, though not dreaming of arenewal of private enterprise, areattracted by the idea of competition.But it is impossible to seehow one could have genuine competitionwhen the economy iscen~trally planned and rests squarelyon state monopolies (draggingalong totally uneconomic industrialenterprises) .A return to private enterpriseand private ownership is, aboveall, ideologically out of the question.It is significant that themicro-elite with their very substantialincomes squander themalmost planlessly because theycannot buy anything of permanentvalue - real estate, houses, preciousmetals, bonds with a fixedvalue. The datcha (country house)which, after a fashion, they "own"stands on state ground and couldbe "removed" any time. Theyspend vast sums on good food,expensive drinks, pictures (alsofrom officially proscribed painters)and - perhaps the only genuinepiece of real estate - on pompousmausoleums in exclusive cemeterysections. There won't be and therecannot be in this domain a genuinechange, because communism'smost fundamental dogma is state

1972 FREE ENTERPRISE AND THE. RUSSIANS 467ownership of the means of production,and the Kremlin's. crucialstrategy is the utter material dependenceof its subjects upon thestate. (That the state one niceday should wither away, nobodywhile of sound mind takes seriously.)Is there a hankering of the Russionpeople for personal independenceand private enterprise? Agenuine yearning? Or is the Russianunderground opposition merelyhostile to the most tyrannicalaspects of the present governmentwhile accepting in its hearta socialist order? There isa widespreadbelief in the West (inAmerica, probably, more than inEurope) that the memory of personalproperty and free enterprisein the USSR is dead as a doornailand that what the Russianstoday desire is merely a bit moreprivacy, freedom of expression,and a chance to read flashy Americanperiodicals. By and large thisview is not true to fact. To thecontrary, the critique of the totalitarianexcesses of the regimeis more and more being supplantedwith a mounting protest againstthe system itself. The once someekly expressed preference fora "genuine Marxism-Leninism" toStalinism or Neo-Stalinism is increasinglyreplaced with violentattacks against Marxism. I thinkthere would be an even more generalattack in the undergroundpublications against all forms ofsocialism if there were a betterunderstanding of the nature andpossibility of private enterpriseon a large scale.A Cruel System of ControlsIn the mid-nineteen-thirties aHungarian Communist writer.Erwin Sinko, settled for morethan a year in Moscow. In hisbrilliant account of that periodpublished in German, Der Romarneines Romans (Cologne, 1962 and1967), he provides us with a greatmany interesting observations andinsights. (Sinko died as a Titoistin Yugoslavia only a few yearsago). He was in the USSR at thebeginning of the Big Purges butshamefacedly admits that he wasnot aware of them.He saw that the USSR was producinggoods far more expensivelythan Western Europe (largely onaccount of poor work ethics andthe frightening bureaucracy) andquotes his Jewish landlord to theeffect that he would never becomea Bolshevik because Socialism isintrinsically cruel. He also offersus a wonderful, lively portrait ofa cobbler who then still was ableto pur,sue his humble trade on astreet corner almost literallycrushed by taxes designed to ruinhis business. But the man held outheroically to keep his precarious

468 THE FREEMAN Augustfreedom and independence. Stubbornlyhe refused to join the stateownedshoe repair workshops.Today, needless to say, nothingof the sort would be tolerated fora moment. All that remains ofprivate enterprise is the gray marketfor agricultural products provisionedfrom the small personalplots of the farmers (always subjectto recall and cancellation), avery limited market without whichthe Soviet population would havedied of starvation years ago.(The misery of a peasantry constitutingover 30 per cent of thetotal population of the country,which in spite of excellent soils isunable to feed the USSR properly,is really the scandal of the century.)Socialism Easy to ExplainDuring my stay in the USSR Ioften talked with people abouttheir country's economic problems.Thanks to a variety of sources(among which Western radio stationsfigure prominently) themasses of the Russians do realizethat our living standards aremuch higher than theirs and manyof them, in a way, are puzzled bythis state of affairs. "Here," theysaid, "everything is carefully calculatedand planned in advance,and you in the West are subjectto the chaos of a free competitiveenterprise. How then is it possiblethat you are so much better offthan we are?" This surprise issimply due to the fact that Socialismis what Tocqueville called une!ausse idee claire, a false, butclear idea.One can explain socialism toanybody in ten minutes, givinghim the essence of that doctrinein a nutshell. Free enterprise,which is far more progressive andsophisticated, needs a great dealmore time and effort for its exposition.(Socialism, one oughtnever to forget, exists in many aprimitive society with very littlestress placed on human personalityand therefore it appeals so stronglyto people in the Third World.)Of course, the value of smallpersonal enterprise was quicklygrasped by my interlocutors. "Butdo you think it to be just if asingle person has millions of roublesor owns a huge factory employinghundreds of workerstheywould then be at his mercy,wouldn't they?" Such argumentsarise because among the Sovietcitizens there no longer exists thememory of a free laboring class(or of collective bargaining) .The real surprise to most of myacquaintances came when I toldthem about the workings of astock company. "Yes, fine, but whois permitted to buy these stocks?What party affiliation must hehave?" The idea that simply any-

19'72 FREE ENTERPRISE AND THE RUSSIANS 469body can buy stocks and thus geta share in the enterprise came asan added shock, but once a manpointed an accusing finger at meand said: "What you tell us can'tbe true arid I'll tell you why. Ifyour representation is correct thena worker could buy shares of hisown factory and get the dividendsof his own labor and thus becomeemployer and employee in oneperson - the boss of his manager- and that's patently impossible."When I explained to him that itwas quite feasible and occasionallydoes happen, everybody was nonplussedand one person declaredthat such state of affairs was"exceedingly democratic" (whichin a certain way it is).Signs of Opposition •Yet "capitalist thinking," withoutthe slightest chance of beingadopted by the government, isgaining growing adherence in oppositioncircles. The excellentwork by Cornelia 1. Gerstenmaier,Die Stimme der Stummen (whichwill soon be published in theUnited States) shows a realchange of mind. The author, whois a serious German scholar andhas spent considerable time inRussia, is the daughter of a formerchairman of the Bonn Diet. Shehad and still has access to thetyped and retyped publications ofwhat one jokingly calls Samizdat,the "Self-Publishing Company".There she tells us, among others, ofthe famous programmatic pamphletof Alekseyev and Zorin, "TimeDoes Not Wait," where these twoauthors - the pseudonyms cover atechnologist and an educator - informus that "the deadly grip ofthe government on economics mustcome to an end." A manifesto ofthe so-called "Democratic Movementof Russia, the Ukraine andthe Baltic Nations" - this labelitself tells a story! - insists thatstate, group, and private enterprisesought to get the samerights in managing the means ofproduction.Growing Appreciation for FreedomProbably the most moving documentin this book is that byBoris Talantov, an outstandingunderground leader who early thisyear died in a Kirov (Vyatka)prison. Talantov was a laymanand a mathematician but the scionof a family of priests. Himself aprofoundly religious person, he denouncedthe Moscow Patriarchatefor collaborating in an abject waywith the Soviet government, anaccusation widely printed in theWest and forcefully repeated byAlexander Solzhenitsyn in an openletter. (Archbishop Nikodim - amost disreputable character as wecan see from Andre Martin's bookon religion in Russia - thereupon

470 THE FREEMAN Au.gustdeclared that Talantov "never existed"but had been invented byanti-Soviet propaganda.)The testimony of Talantov is allthe more valuable because religiousgroups in the Old World (undermonastic influence) have traditionallyshown very little interestin the burning question ofprivate property and free enterprise.But Talantov, in whom wehave to see primarily a religiousmartyr of the Eastern Church, asthe author of a widely circulatedpamphlet entitled, "The CommunistParty of the Soviet Union asRuling Class in Soviet Society,"knew the real nature of the evil.Here he gave us a precise analysiswhy there can be no freedom, norespect for the dignity of the personin a socialist system. He evenstrongly emphasized the economicsuperiority of free enterprise overstate capitalism. The latter insuresthe total enslavement of the workingclass and, incidentally, also theeconomic enforcement of atheismby a methodic discriminationagainst religious workers. Privateenterprise, Talantov insisted, notonly guarantees a minimum offreedom, but also produces goodsof greater quality with fewereconomic inputs.Has the Russian undergroundembraced Adam Smith? It wouldbe premature to answer this questionin the affirmative. It is certain,however, that a chance forsound economic thinking exists,not, of course, within the Sovietgovernment, but among its internalenemies who are all verymuch aware of the West's materialsuperiority. As a matter offact, religious, political and economictruth in the Soviet Unionis engaged in a heroic uphill fight;whe:weas in the West, truth, dueto mental sloth, envy, jealousy,and the masochistic denigrationof one's own traditions, is slippingand sliding, is obscured and forgotton.Under these circumstancesit would be a real shame for us,who had all the breaks, if theLight again would be coming fromthe East. t)IDEAS ONLIBERTYServiceWHOEVER could make two ears of corn, or two blades of grass, togrow upon a spot of ground where only one· grew before, woulddeserve better of mankind, and do more essential service to hiscountry than the whole race of politicians put together.JONATHAN SWIFT

.1'71CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC13The AmericanTriumphTHAT THE AMERICANS were eventually.triumphantin the War forIndependence is a matter of record.The triumph was military,diplomatic, and big with portentfor the future of republics. Thatthe triumph could have come earlier,could have been more decisive,and could have involved the UnitedStates in fewer entanglements, isspeculation. George Washingtonthought that the victory could havecome much sooner. In his circularletter to the governors ofthe statesin 1783, he declared that if he hadsufficient space he "could demonstrateto every mind open to conviction,that in less time, and withmuch less expense than has beenincurred, the war might have beenbrought to the same happy conclusion,if the resources of thecontinent could have been properlydrawn forth. ! ••"1 Speculation isnot history of course, but it doessometimes help to shed light onhistory. The prolongation of thewar due to the failure to musterAmerican resources effectivelybrought in its train a host ofconsequences, some of which entangledAmerica with Europeanpowers at just that time whenthey were effecting their independenceof England.Dr. Carson shortly will join the faculty of HillsdaleCollege in Michigan as Chairman of theDepartment of History. He is a noted lecturerand author, his latest book entitled ThrottlinAthe Railroads.

472 THE FREEMAN AugustThe scope of the war was greatlybroadened from 1778 onward.It spread and extended over muchof the North American continent.There was extensive fighting inthe Ohio valley, in Georgia and theCarolinas (fighting which involvedLoyalists on a considerable' scale,and heightened domestic animosities),in western New York, aswell as elsewhere. Those who fol­19w only George Washington'sarmy during the course' of thewar lose sight of the vast amountof territory being contended for.The war became, also, a world warbefore it was over. France enteredthe fray against Britain in 1778,Spain in 1779, and Holland in1780, though the last two were notallied with the United States. Inaddition, there was a naval Leagueof Armed Neutrality of other Europeanpowers organized againstBritain.American diplomats went toEurope seeking allies, munitions,and, above all, loans, to bolstersagging finances. European monarchswere hardly devoted to theidea of the rise of a republic inAmerica or its independence(though some Frenchmen were) ;most of them did have axes togrind with Britain. Moreover,there was territory they would liketo acquire or protect, and tradethey would like to gain for theirships and ports. The aborningUnited States was caught up tosome extent in the cross currentsof the conflicting interests of Europeanpowers. Some AmericansnotablySilas Deane, Arthur Lee,Benjamin Franklin, John Adams,and John Jay - experienced themachinations of European diplomatsat first hand, an experiencewhich confirmed most of them intheir beliefs about the corruptionof the Old World. However, Americacame out of all this much betterthan might have been expected.Changed British StrategyDespite the French alliance andthe portending entry of other Europeanpowers into the conflict,the American military positiondid not generally improve forsome while. British strategy didchange from what it had been upto 1778. During the early part ofthe war, Britain had focused themajor military effort on the MiddleStates and their seaport cities.This approach was largely abandonedafter Saratoga. Though theBritish continued to hold NewYork City and to concentrate themajor army there, as thingsturned out this was a defensiveposition from 1778 until the endof the war.British strategists at homepushed for the concentration of offensivemeasures in the South.Having failed in their efforts to

1972 THE AMERICAN TRIUMPH 473conquer America by attacking atthe points of the concentration ofstrength, they advocated attackingat the weakest point. Thisstrategy had much to commend it.After all, the key to the effectivecontrol over much of what hadbeen English· America was Virginia.Virginia was the most populousof the states, the oldest ofthe colonies, the one in which theAnglican religion had been longestestablished, the producer ofmuch that was most wanted byBritish merchants for world trade,and the hub of the Southern wheel.If Britain could control Virginiaand the lower South, plus Canada,it might still dominate the vastea5tern Mississippi valley region.Virginia already laid claim tomuch of the territory west of theAlleghenies; the conquest· of Virginiamight vouchsafe it to Britain.The approach to Virginiamight be made from the lowerSouth which was the weakest linkin the colonial chain. Georgia wasthe least populous of the states,and a considerable portion of thepopulation of South Carolina wasslave. North Carolina was knownto have an important Loyalist contingent.Savannah fell to British forcesin December of 1778, and early thenext year they took over·the restof Georgia and installed a·Loyalgovernment. But the British stationedin Georgia had little successduring the next year withtheir forays into South Carolina;the force sent there was not adequateto such a campaign. Earlyin 1780, however, General Clinton,who had been reluctant to undertakethe Southern campaign, fin.ally did so; he was able to takeCharleston May 12, 1780 with avastly superior military and navalforce. Clinton returned to NewYork, entrusting the Southerncampaign now to Lord Cornwallis.Cornwallis was probably the ablestfield commander the British everhad in America. He was daring,courageous, beloved of·his men,could win battles when the oddswere against him by audacioustactics, ana. did win many battles.In fact, he won most of the battlesand lost the war.For the remainder of 1780,Cornwallis see-sawed" back andforth between South and NorthCarolina with his army. Virtuallythe whole Patriot army in thatregion had been surrendered atCharleston, necessitating the assemblyof a new force in the deepSouth. Congress sent General HoratioGates, the victorious commanderat Saratoga, southwardwith a core of Continentals to dothe job. As it turned out, his victoryat Saratoga had given GeneralGates a much greater reputationthan he deserved. Cornwallis

474 THE FREEMAN Au.gustrouted his army at Camden inAugust; Gates fled the scene ofbattle on the fastest horse hecould command, and was sixtymiles away before he consideredit safe to stop. His army was scattered,and his reputation wasruined.Nathanael Greene assumedcommand of the Patriot forces inthe Carolinas late in the year,and· he proved worthy of the calling.He was as successful at maneuveringas his mentor, GeorgeWashington, but Cornwallis didnot tarry overlong to test his talents.Instead, Cornwallis movednorthward into Virginia in 1781,while Greene drove southward intoSouth Carolina. In the courseof the year he was so successfulagainst British posts that theyheld only Charleston by the end ofthe year. Indeed, a pattern emergedin the South similar to the oneelsewhere on the continent. TheBritish frequently won the pitchedbattles, but once the main armymoved on, the post left behindsoon fell to Patriot forces.During the late spring and intothe summer of 1781 Cornwallisrampaged across Virginia with amuch larger army than the Americanscould muster in that state.When the American forces wereincreased, Cornwallis decided toestablish a base accessible to thesea. He decided upon Yorktownwhich is located on the peninsulabetween the York and Jamesrivers. He set up camp there inearly August.Showdown at YorktownVirginians had for some timebeen pleading with Washington tocome with his army to save hishome state. However, Washingtonwas confronting the largestBritish army in America in NewYork; victory over it would mostlikely be decisive; he wanted onlythe help of the French fleet toundertake it, and the French fleetwas rarely available to him. However,he determined upon concentratinghis effort against Cornwallisat Yorktown when theFrench agreed to aid him. Washington'sContinentals were now reinforcedby a major French armyunder the command of the Comtede Rochambeau. Washington tookpains to tie Clinton's army downin New York both by leaving asizable detachment behind and bygetting misleading information tohim.The attacking army usually hasa plan which, if it' works, shouldbring victory, much as each playby the offense in football is conceivedto make a, touchdown - ifit works. In battle, the aim is tobring such force to bear at selectedpoints that it may be expectedto break up the opposing army.

1972 THE AMERICAN TRIUMPH 475Timing and coordination are therequisite conditions and are themost difficult to achieve. Washington'splan depended upon muchg~eater coordination of a varietyof elements than would commonlybe involved. He had to move anarmy several hundred miles, mostof them going over land. Hisheavy artillery was dispatched bysea, but its arrival was dependenton the dispersal of the Britishnavy. The French navy had to beavailable at the right time or Cornwallismight be reinforced or hisarmy transported elsewhere.For once, all went well for thecombined American and Frenchundertaking. Clinton kept hisarmy in New York; Admiral deGrasse, the French naval commander,turned up with the fleet atthe right time, and lured the Britishnavy out to sea after havingsuccessfully engaged it in action.Cornwallis stayed where he· was,cut off by sea from retreat. TheContinentals and the French werejoined by the militia to make aformidably superior force underWashington. Cornwallis did notdeign to attempt daring maneuversto break out in these circumstances;after only a brief. tryagainst the forces, which did noteven bring most of his army intoplay, he surrendered his army intact.The memorable date was October19, 1781.Yorktown was the great victoryof the American War for Independence.It had all, or almost all,of the right ingredients. Washingtonwas in commandof the victorious;after so many years of perseverancein the face of the odds,his hour had come. That Cornwallisshould have been the Britishcommander defeated was as itshould be, too, for no other Britishcommander had routed somany American armies. Even thesurrender was dramatically conducted,though Cornwallis sent asubaltern to do the dishonors.With the French lined up on oneside and the Americans on theother, the .British marched betweenthem to the tune of "TheWorld Turned Upside Down" tothe place where they laid downtheir arms. The British turnedtheir eyes toward the French, as ifin contempt of the Americans.They· were roundly jeered by theAmericans who waited to do so,wisely, until the British hadthrown down their arms. Thusended the last great. battle of thewar.There had·been and· were to beAmerican victories elsewhere,some' with great portent for thefuture, though none so dramaticor decisive for victory in the waras that at Yorktown. Neither theBritish nor Americans had entirelyneglected the western and south.-

476 THE FREEMAN Augusternfrontiers. The British attemptedto dominate the land beyond themountains largely with the aid ofthe Indians. However, in 1778 and1779 George Rogers Clark of Virginiabroke the back of this dominance.Of Clark's victory at Vincennesin 1779, a military historianhas said: "His march acrossflooded Illinois may not comparefor hardship with Arnold's longjourney through the Maine wildernessin 1775, yet the issue washappier, the victory complete andsignificant. British power in theWest was broken, and despite thefailure to take Detroit, Clarkhelped make it possible for thevast area to be included within theboundaries of the United States ofAmerica at the peace treaty."2Less grand in its dimensions butequally important for a smallerarea, Georgia was reconquered bythe Patriots in 1782, the culminationof a long series of exploitsby General Anthony Wayne.Much went on during the Warfor Independence besides militaryand naval battles, of course. Norwas the American triumph, in thefinal analysis, simply a militarytriumph. What Americans woulddo with their independence wassurely more important than whetherthey would have it. One thingAmericans were determined not tohave for very long was arbitrarygovernment. They thought thatthe way to avoid this was to havea written constitution. When RichardHenry Lee made a motion forindependence in the Second ContinentalCongress in June of 1776,he included with his resolution aproposal that some plan of confederationbe devised. Such a plan tobe acceptable, of course, wouldhave to be of the nature of a constitution.A committee was appointedto attend to this even beforeindependence had been formallydeclareu. A few days after theadoption of the Declaration, thecommittee presented what werecalled Articles of Confederation tothe Congress. They were drafted,in the main, by John Dickinson.Congress did not move with suchdispatch to approve them, however,nor the states to their ratification.Some debate was wedgedin from time to time between themore pressing items of businesswhich confronted the Congress.The Articles of Confederationwere finally adopted by Congressin 1777 and sent along in duecourse for the states to ratify.Most of the states acted withinthe next fourteen months, butMaryland withheld ratification forseveral years'. The main issue waswestern lands, particularly the extensiveclaims of Virginia beyondthe mountains. Virginia. wouldhave been huge in comparisonwith the other states if it had con-

1972 THE AMERICAN TRIUMPH 477sisted only of the present states ofVirginia, West Virginia, and Kentucky,which it did; but that parentstate laid claim to vast territoryin the Ohio valley as well.Agreements of the states involvedto yield up their western claimsbrought Maryland into the fold onMarch 1, 1781.On the occasion, the Pennsylvania,Packet editorialized in thisjubilant fashion:This great event, which will confoundour enemies, fortify us againsttheir arts of seduction, and frustratetheir plans of division, was announcedto the public at twelveo'clock under the discharge of theartillery on the land, and the cannonof the shipping in the Delaware. Thebells were rung, and every manifestationof joy shown on the occasion....3Truth to tell, however, it had takenmore than half as long to get theArticles adopted as they wouldserve as the foundation for a union.The Articles of ConfederationThe Articles of Confederationwere born of the necessity for thestates to unite in order to carryon war against Britain and weregiven their content by the reactionto the increasing use of Britishpower which occasioned the war.While men recognized the need forunited action against a commonenemy they were most reluctant tolocate much power in a centralgovernment - or, if Madison wasright in his later analysis, even toestablish such a government.There was considerable ambiguityas to the status of the statesand of the union from the outset.That ambiguity was a productboth of history and the desires ofthe people. On the one hand, thecolonies had never been unitedwith one another before 1776­except by their allegiance to theking of England, which tended toseparate them from one anotherrather than to link them together.On the other hand, they acted togetherboth in their resistance toBritish impositions and eventuallyin separating from England. Therewas no point in time when thestates were independent and sovereignon their own. As John Fiskesaid: "It is ... clear that in thevery act of· severing their connectionwith England these commonwealthsentered into some sort ofunion which was incompatiblewith their absolute sovereigntytaken severalIy."4Yet, the term "state" was earlyused to apply to most -of them, andthe- name has stuck (in generalusage even when the "state" involvedis actually. styled a "commonwealth").The most commonmeaning attached to "state" inpolitical theory and usage is this:"the body politic as organized for

478 THE FREEMAN Augustsupreme civil rule and government."A "state" is also usuallyreferred to as sovereign and independent.The Articles of Confederationdid attempt to clear up any confusionin status; the question wasformally resolved in favor of statesovereignty. The union establishedunder the Articles was styled aconfederation. In common usage, aconfederation is an alliance orleague among sovereign states.The articles appeared to affirmthat this was to be the case. ArticleII says, "Each State retainsits sovereignty, freedom and independence,and every power, j urisdictionand right, which is notby this confederation expresslydelegated to the United States, inCongress assembled." What is impliedhere is a division of powers:some to be retained and exercisedby the states individually, othersto be conferred upon the confederationto be exercised jointly. Butonce such powers were conferred,the states would lose their absolutesovereignty. Could some plannot be devised whereby the statescould retain their sovereignty individually,yet act together incommon concerns? The Articlesof Confederation attempted to dothis.What was tried was to make theCongress continually and completelydependent upon the states.Congress was denied· the power oftaxation, nor did it have any enforcementmachinery of its own,Le., it had neither constabularynor courts. Moreover, the representativesto the Congress wereto be chosen by or under the directionof the state legislatures.Each state was to have only onevote in the Congress, though astate might have from two toseven delegates. Care was takenthat the members of Congress didnot gain personal power. This wasguarded against by havingmemberssubject to recall by the statesat any time and prohibiting thatany person serve more than threeyears in any six year period. Thepicture that emerges from this isof the states resolutely clinging totheir power.With the above restrictions uponit, Congress was ostensiblygranted extensive authority. Itwas empowered to make war andpeace, send and receive ambassadorsand ministers, emit bills ofcredit, borrow money, make treaties.and alliances, establish a postoffice, settle various kinds of disputesarising among the states,appoint high ranking military andall naval officers, :fix the' value ofcoins, regulate weights and measures,and. manage Indian affairswhere a state was not directlyinvolved. Further to cement theunion, the Articles provided that

1972 THE AMERICAN TRIUMPH 479each state was to give full faithand credit to the acts of the othersand that citizens of any statecould naove frona state to state.The Articles also limited statepower in a variety of ways. Stateswere prohibited to carryon diplonaaticrelations with other countriesor enter into treaties or allianceswith them without the consentof Congress. Ina similarfashion, states were forbidden toform alliances or confederationswith one another. States were limitedin the military or naval forcesthey could have and restricted intheir war-making powers to defensiveaction.Although the Articles of Confederationwere soon to be adjudgedinadequate to the needs ofunion - and a further critique ofthem is made in a subsequentchapter -, they are nonethelessimportant for reasons in additionto the fact that they served brieflyas a basis of governing the UnitedStates. First of all, the Articleswere the first United States constitution.They were influential inthe drawing of the Constitution of1787; some of the language wastaken verbatina into the· later document.They provided for a limitedgovernment with specifiedpowers, probably the naost inaportantprinciple of the Constitution.And, the Articles attempted todivide and separate powers anaongtwo different levels of government,a principle which the ·biter documentincorporated much naore effectively.The Articles of Confederationsignify the triumph oflimited constitutional governmentin America,even though they werea. groping toward and a demonstrablyinsufficient realization ofit.The Treaty of Paris, J783The greatest achievement underthe Articles of Confederation wasthe Treaty of Paris of 1783. Byits terms the thirteen states notonly attained their independencebut also acquired an empire beyondthe mountains. The acquisitionof this vast domain was probablythe greatest diplomatictriumph in American history.That a people who had won sofew battles, who had such a weakcentral government, who had nevermanaged to bring naany oftheir resources to bear in theprosecution of the war effort, whowere so dependent on the aid ofother countries, should have suchsuccess at the peace table requiresa little explanation.The American success washelped by the precarious situationof the English. Britainwanted an end to the war, buther leaders were eager to preventgains by European powers. LordNorth's governnaent fell in early

480 THE FREEMAN August1782 in the most humiliating manner.A motion carried to make ita crime to advance the notion thatthe colonies could be restored bywar. Lord North was replaced bythe Earl of Rockingham, "the oldWhig and repealer of the StampAct," who "was recalled to presideover a government committed tothe abandonment of the formerAmerican colonies in revolt andto the liquidation of the world warin progress."5 He died shortly, andwas replaced by Lord Shelburnewho was, if anything, more favorablydisposed -to the Americansthan Rockingham.France had already renouncedany claim to any territory on thecontinent of North America in theFranco-American Alliance of 1778.Even so, France was not eager tosee Canada become a part of theUnited States. Moreover, Francewas allied with Spain and was, inthis way, entangled with Spanishterritorial ambitions. As if thiswere not enough, Congress instructedits peace commission tofollow the guidance of the Frenchin the treaty making.It was left to the peace commissioneither to utilize to Americanadvantage the animosities, jealousies,and rivalries of Europeanpowers or to have American ambitionssubordinated to them. Itwas in the hands, then, of BenjaminFranklin, John Jay, andJohn Adams. A hostess thinkingin terms of compatible guestsprobably would not have invitedthese three at the same time. Jayand Adams could get along wellenough together. Both men weredistrustful of European diplomats;they considered them corruptand devious. Jay's recentexperiences in Spain had fortifiedhim in this opinion. John Adamswas a Yankee - an Americ~n-,and proud of it. Truly one of thegreat men among the Founders,Adams' greatness was circumscribedby a temperament whichtended to alienate others and aphysique more suited to a morticianthan a statesman. It washis fate to labor ever in the shadeof men whose most lauded attainmentshe would hardly have considered·worthy of his best efforts.He lacked Franklin's resiliency,Washington's commanding presence,Hamilton's dynamic drive,and Jefferson's knack for illuminatingphilosophical p

1972 THE AMERICAN TRIUMPH 481and international bon vivant. Agood diplomat is one who yieldseverything to the other party exceptthe substance for which theyare contending. For much of hislife Franklin had devoted himselfto the austere task of learning toget his way by subterfuge. Hisyears in Paris were a fitting epitometo a long life. These threematched and overmatched the bestEurope could send against them.Even before negotiations gotunder way, informal French andSpanish proposals had beenbrought to Jay's attention whichwould have turned the territorysouth of the Ohio over to Spainand allowed _B.ritain to keep theterritory north of the Ohio. "Ifthis French proposal, which sopleased the Spaniards, had beenadopted, the United States wouldnot have secured from Great Britaintitle to the region now composingthe present states of Ohio,Indiana, Illinois, Michigan, Wisconsin,and Minnesota, and wouldhave lost to Spain the westernpart of Kentucky and Tennessee,Mississippi, and part of Louisiana,along with most of Alabama."6 Inview of the fact that Spain wantedGibraltar from Britain and Britainwanted to hold on to Florida,the above dispositions might havebeen made if all interested·partieshad gathered around a table tonegotiate or if France had beenallowed the role of arbitrator.This did not happen. The Americansignored the instructions ofCongress to defer to France, negotiateda settlement with Britain,and saw to it that this settlementwas subsequently made a part ofthe overall treaty. They werefaithful to the terms of alliancewith France, for this was not aseparate peace, but they undoubtedlyexceeded the bounds Congresshad set for them.In the treaty, the United Statesgot all the territory west to theMississippi river, south to the31st parallel, and north to a linebisecting the Great Lakes, orsouth of Ca"nada. The British alsoconceded that the people of theUnited States could use the NorthAtlantic fisheries. The independenceof the states was affirmed,hostilities were to cease, and Britainagreed to remove .her armedforces from the United States"with all convenient speed."There were some concessionsmade by the United States. Bothsides agreed that creditors of eithercountry should have no obstaclesput in the way of collectingdebts owed them by citizens of theother. Most of the creditors involvedwere British. Congress wasto recommend to the states thatthe rights and property of Loyalistsbe restored, and the treatyprovided that the persecution of

482 THE FREEMAN AugustLoyalists should end. Britain andthe United States agreed to thefree navigation of the Mississippi,but Spain, the other country withterritory on it, did not join in theagreement.The Treaty of Paris was trulyan American triumph. GeorgeWashington described its portentin these words: "The citizens ofAmerica, placed in the most enviablecondition, as the sole lordsand proprietors of a vast tract ofcontinent,comprehending all thevarious soils and climates of theworld, and abounding with all thenecessaries and conveniences oflife, are now, by the late satisfactorypacification, acknowledgedto be possessed of absolute freedomand independence."7 Somedecades ago, an American historiandeclared: "On the part of theAmericans the treaty of Paris wasone of the most brilliant triumphsin the whole history of moderndiplomacy."8 A more recent diplomatichistorian has seconded thisopinion: "The greatest victory inthe annals of American diplomacywas won at the outset by Franklin,Jay, and Adams."9Disbanding the TroopsThe greatest triumph of all,however, requires an appreciationof what might have been but wasnot to stand out in relief. Themost critical moment for the successof the American Revolutionalmost certainly came in 1783. Itwas at about the time of the Britishwithdrawal of forces from theeast coast. The Continental army,what remained of it in campsalong with what might have beensummoned again into service, wasnow the only considerable force inthe United States. This was themoment for~a military coup' d'eta,t,if there was to be one, the momentwhen the American Revolutionmight have followed the course ofso many others. Nor was the provocationlacking.. The military hadbeen sorely neglected during thelong years of war. Now that thevictory had been won, the armywas invited to disband and itsmembers return home without beingpaid what had so long beenpromised.George Washington was almostcertainly the key to what wouldand did happen at this criticaljuncture. His prestige had grownduring the years of his command,until at the end of the war he wasthe pre-eminent American. Hiscritics had harmed only themselves;they were chipping atgranite with teaspoons. He wasapproached more than once withthe idea, that he take over thecountry. There is no evidence thathe ever seriously contemplatedsuch a course. On the contrary,he rebuked those who hinted at

1972 THE AMERICAN TRIUMPH 488such things, and persisted in doinghis duty as he saw it. Hisduty as he saw it was, havingfinished his military task to laydown his sword, following thepath he had ever trod of subordinationto the civil authorities, andreturn to his peaceful pursuits atMount Vernon. His every utteranceconfirmed, too, that in thiscase duty was happily joined tohis heart's desire, for he longedfor the leisure to pursue. his privateaffairs. Moreover, the mannerin which he conducted himselfin his resignation and retirementshould leave no reasonable doubtas to his sincerity. A little retellingof some of the events of hislast months of service will underscorethe point.Two events of early 1783 indicatethat there was danger of amilitary revolt. The first of theseis the one known as the NewburghAddress, which was a letter sentaround to Washington's officersexhorting them to take mattersinto their own hitnds to get whatthey thought they I deserved. Washingtonordered his officers assembledand to be presided over byGeneral Horatio Gates who, it isbelieved, had a hand in the Address.When they were assembled,Washington ~ame into the roomand asked to be allowed to say afew words to them. He told themthat he knew well how much theyhad suffered and could sympathizewith their wish to be rewarded.But he bade them to keep theirfaith in and with Congress. Hehad with him a letter from a memberof Congress which he thoughtmight help to restore their faithif he read from it. But when heopened it up to read, he had difficultymaking out some of thewords. He took out his eyeglassesand put them on - he had notworn them in public before -, andlooking up from the letter, hesaid: "I have grown gray in yourservice,' and now find myself growingblind." It is said that the eyesof those gathered round filled withtears, for they knew how sturdilyhe had borne so much for so manyyears. It was hardly necessary forhim to finish what he had to say.Once Washington withdrew, theofficers adopted a resolution affirmingtheir confidence in Congressand declared that they rejected"with disdain the infamousproposals contained in a late anonymousaddress to them."lO Ofless potential for mischief was anevent in June, though it does showwhat might have been. Fewer thana hundred soldiers of the· PennsylvaniaLine regiment descended onCongress at Philadelpnia andthreatened them in such a waythat Congress retired to hold itsdelibe·rations at Princeton. Washingtonsent troops to put down this

484 THE FREEMAN Augustlittle uprising in Pennsylvania.The last major contingent ofBritish forces departed from NewYork City in early December of1783. Just prior to their takingleave the Continental troops movedinto the city to see that everythingwent off in an orderly way. It wasan occasion for great rejoicing asthe Continentals marched in, forthe British had occupied the cityfor more than seven years. A spectatorwrote: "We had been accustomedfor a long time to militarydisplay in all the finish and fineryof garrison life; the troops justleaving us were as if equipped forshow, and with their scarlet uniformsand burnished arms, madea brilliant display; the troops thatmarched in, on the contrary, wereill-clad and weather beaten, andmade a forlo~n appearance; butthen they were our troops, and asI looked at them and thought uponall they had done and suffered forus, my heart and eyes were full,and I admired and gloried in themthe more, because they wereweather beaten and forlorn."llThe time had at last come forGeorge Washington to take leaveof the army he had served foreight and a half years. He notifiedthe officers that he would bid themfarewell at Fraunces' Tavern atnoon of the day of departure. Allwho could make it gathered there.It was a moving occasion. Washingtonwas so filled with emotionthat he could hardly speak. "Witha heart full of love and gratitude,"he said, "I now take my leave ofyou. I most devoutly wish thatyour later days may be as prosperousand happy as your former oneshave been glorious and honorable."So saying, he asked that each ofthem would come by to shake hishand, since he feared he wouldnot be able to make it around tothem. General Henry Knox, whohad served him faithfully for somany years, came fir~t; Washingtonwas so overcome that a· handshakewould not do. He embracedhim as both of them wept. "Oncedone, this had of course to be donewith all from Steuben to theyoungest officer. With streamingeyes, they came to him, receivedthe embrace, and passed on."12Washington hoped to make ithome to Virginia by Christmaswhen he set out from New York.But there were many festive occasionsto be attended along theway, and he had business to dofirst. He journeyed to Philadelphiato turn in his accounts. Then hewent on to Annapolis to resign hiscommission before Congress.This he did just after twelveo'clock on December 23rd. Thegalleries were packed for the occasion,though many members ofCongress were ahsent at this time.As the ceremony began, Washing-

1972 THE AMERICAN TRIUMPH 485ton's biographer says that "a hushof high expectance prevailed."Washington began his address:"Mr. President: The great eventson which my resignation dependedhaving at length taken place ; Ihave now the honor of offeringmy sincere Congratulations toCongress and of presenting myselfbefore them to surrender intotheir hands the trust committedto me, and to claim the indulgenceof retiring from the service of mycountry."13It was a solemn and affecting spectacle....The spectators all wept, andthere was hardly a member of Congresswho did not drop tears. TheGeneral's hand which held the addressshook as he read it. When hespoke of the officers who had composedhis family, and recommendedthose who had continued in it to thepresent moment to the favorable noticeof Congress he was obliged tosupport the paper with both hands.But when he commended the interestsof his dearest country to almightyGod ... his voice faltered andsunk, and the whole house felt hisagitations.When Washington regained hiscomposure, he concluded strongly:Having now finished the work assignedme I retire from the greattheatre of action, and bidding anaffectionate farewell to this augustbody under whose orders I have solong acted I here offer my commissionand take my leave of all theemployments of public life. 14As soon as the ceremony wasover, Washington set out forMount Vernon, and by hard ridingwas able to make it home tospend Christmas day with hiswife and grandchildren. TheAmerican Cincinnatus had returnedto his plow. ~• FOOTNOTES •1 Jack P. Greene, ed., Colonies to Nation(New York: McGraw Hill, 1967), p.443.2 Howard H. Peckham, The War forIndependence (Chicago: University ofChicago Press, 1958), pp. 109-10.3 Quoted in Merrill Jensen, The NewNation (New York: Vintage Books,1950), pp. 26-27.4 John Fiske, The Critical Period ofAmerican History (New York: HoughtonMifflin, 1916), p. 91.5 Dan Lacy, The Meaning of the AmericanRevolution (New York: New AmericanLibrary, 1964), p. 191.6 Samuel F. Bemis, The Diplomacy ofthe American Revolution (Bloomington:Indiana University Press, 1957), p. 219.7 Greene,op. cit., p. 437.8 Fiske, op. cit., p. 34.9 Bemis, op. cit., p. 256.10 Fiske, op. cit., p. 111.11 Quoted in Douglas S. Freeman,Washington, abridged by Richard Harwell(New York: Scribner's, 1968), p. 506.12 Ibid., p. 507.13 Ibid., p. 509.14 Quoted in Samuel E. Morison, TheOxford History of the American People(New York: Oxford University Press,1965), p. 269.Next:· Freeing the Individual.

ENERGY:JAMES WEIJames Wei assumed The Allan P. Colburn Chairof Chemical Engineering at Delaware in 1971,following a distinguished career in industry. Hereceived the B.S. from Georgia Tech and theM.S. and Ph.D. at MIT. At Mobil Oil, he advancedfrom Research Chemical Engineer toSenior Scientist and concurrently held VisitingProfessorships at Princeton and Cal Tech. Uponcompletion of Harvard's Advanced ManagementProgram in 1969 he returned to Mobil as Managerof Analysis. Prof. Wei received the ACSAward in Petroleum Chemistry in 1966 andthe AIChE Professional Progress Award. He isa consulting editor for McGraw Hill and a memberof CHEMTECH's Executive Board. Prof.Wei is best known for his work in kinetics,catalysis, and mathematical analysis, but hisrecent attention has been focused on creating achemical engineering courSe for freshmen.This article is slightly condensed and reprintedby permission from the March 1972 issue ofChemical TechnoloAJ'.THE CIVILIZATION and way of lifewe know are supported by a steadysupply of low cost raw materialsdrawn from farms and forests,from the mines and wells, andfrom the air and water. In historywhen the supply of a raw materialruns low and when there is no substitutein sight, people wonderwhether civilization can survive.William Crooks observed in 1898that intensive farming dependedon the nitrate mines in Chile, andtheir eventual exhaustion wouldbring world wide famine. 1 This didnot take place as the great chemist,Haber, and the chemical engineer,Bosch, rose to the challengeand solved the problem of nitrogenfixation via ammonia synthesisfrom air and water.As the skills of chemists andchemical engineers gradually increase,almost any natural rawmaterial can be synthesized or replaced.Outside of hydrogen, thechemical elements are hardly ever

the Ultimate RawMaterial__lost from planet earth. 2 There isno such thing as "nonrenewableminerals" even though -rich depositsare exhaustible. Everythingthat is "used up" is still with us,but in altered and diluted form.In this closed system of earth, wecan and will recycle everything.Given enough energy, or thermodynamicfree energy, we can separateand· concentrate any materialsand recombine them chemicallyto form synthetic raw material.All of the precious material containedin the refuse. of our civilizationcollects on our lands,floats in our air, or runs off intothe oceans. They can all be recoveredwith sufficient expenditure ofenergy. From the ocean we are alreadyrecovering freshwater, magnesiurn,bromine - it would beeven easier if we could develop· organismsthat concentrate some elements.Thus we realize that energyis the ultimate raw materialwhich can be used to make food,water, other raw material- aswell· as warming and cooling ourhomes and operating all our machinery.Energy Uses in'the Pas,tThe United States has alwaysbeen blessed with an abundance ofcheap energy to augment humanand animal muscle: from the swiftflowing rivers providing waterpower, and great forests providingfire wood, down to the moderncoal mines and oil gas fields. Today,this underpinning of our entireeconomy and way of life consumesonly 3 per cent of our grossnational product. Energy costforms only 31j2 per cent of the costof average industrial products,ranging from 8 per cent for chemicalsto 0.3 per cent for apparelmanufacturing. 3 The consumercost of energy can be divided intothree shares: production cost underthe supervision of engineers,

488 THE FREEMAN Augusttransportation and distributioncosts under the supervision ofmarketers, and federal and localtaxes. Table 1 gives the approximatecurrent prices. Only a smallpart of the cost of refined fuel isin the province of engineers. 4 ,5,6Table 1.Current energy costsProductioncostConsumercostGasoline, regular 12 36¢/gallonNatural gas 16 148¢/thousand cu ftFuel oil, No.2 11 20¢/gallonElectricity 0.7 2.8¢/kWhConsumer cost = production cost + distributionand transportation cost + federal and localtax.VVe use a great deal of energybecause it is very cheap. Our taxlaws are already designed to makeenergy more expensive. For instance,automotive transportationrequires three ingredients: vehicle,fuel, and road. The last item belongsto the public sector and isfinanced mostly from taxes collectedfrom fuel. The excise and salestax on a vehicle is less than 10per cent of the manufactured cost,but on gasoline it equals manufacturedcost. 7 Despite this fact, thec~pital and maintenance cost of apiece of energy-using equipmentis usually 15 to 20 times the annualcostof fuel, for automobiles,air conditioners, and electric powerplants. 5 , 7 As long as fuel ischeap and equipment dear, weburn fuel up prodigiously. VVhenprices go up, we complain but goon burning without a pause. Pastinvestment in equipment is veryexpensive and cannot be changedreadily. VVhen copper is expensive,we can shift to aluminum; whenbutlers are too expensive wephase them out; but when energyis more expensive, we have neitheralternative nor can we do without.If it were not for the fact thatengineers continue to improveequipment to save fuel, our use ofenergy would be even more prodigious.For instance, in 1925 it took25,000 Btu to make a kVVh of electricitybut today it takes only9,000 Btu. 8Historically, the principal determinantsof energy use havebeen number of people and scale ofaffluence. 9 Figure 1 shows the percapita gross national product ofvarious nations against per capitaenergy use in 1961. 10 It can passas a fairly straight line, the richerone is, the more energy he burnsup. If you look at such curveslong enough, you can begin to seean S-curve. As you get richer youwill buy more information andservice, which require less energythan hardware. U.S. commercialenergy use is about 120 timesthe human intake of food energy;while in India it is about 3 times- for all manufacturing, farming,

19'72ENERGY: THE ULTIMATE RAW MATERIAL489200::I 150~CCI....cenc:=...ea! 100os.eau-CD=->-eṉCD C.....501000 2000Gross national productper capita (dollars)3000Figure 1. Nations GNP and energy use, 1961and transport. Figure 2 shows thehistorical U.S. GNP growth inconstant 1958 dollars (where theeffect of inflation is taken out)and energy consumption in Quads(a Quad is a quadrillion Btu, or amillion times a billion BtU).l1 Itappears that of late, energygrowth lags a little behind GNPgrowth. An increase inafHuencewithout corresponding increase inenergy use has never beenachieved in the past and is difficultto see in the future.There may be frivolous uses ofenergy, such as the electric toothbrush;but the bulk is necessaryto our way of life: home firesshould be kept warm, people haveto get to werk, f00d must be delivered,and the wheels of industryhave to turn. The pattern of

490 THE FREEMAN Augustsources and uses of energy today,together with a government forecastfor the year 2000, is given inTable 2. 12 Oil and gas have beenTable 2. U.S. sources and uses ofenergy as % of totalProjected1970 2000SOURCESOil 43 32Gas 31 26Coal 21 16Hydro 4 3Nuclear 1 23USESResidencecommerce22 13Transportation 25 13Industry 31 20Electricitygeneration 22 44capturing markets steadily fromcoal for the last thirty years, sincethey are cleaner, more convenientand cheaper. Nuclear power willrise to capture markets from oiland gas in the future. In the useside, electricity generation hasbeen the fastest growing segmentand will continue to be.The Two New CrisesIn recent years, the e~ergy usesuddenly faces two new crises:shortage and environment. Hardlya day goes by without a black eyefor energy in the mass media:Delmarva Power and Light refusingnew customers in natural gas,a blackout in the eastern seaboard,birds dying in oil spilled at SantaBarbara, opposition to strip miningin WestVirginia, scientists predietingthat the polar ice cap willmelt and flood coastal cities due toaccumulation of carbon dioxide inair, scientists predicting combustiondusts will block out sun lightand cause a new ice age, and aWall Street Journal article declaringthat planet Earth is approachingan· energy ceiling .13,14A year ago, Daniel Patrick Moynihanasked, "When would this insaneincrease in energy use stop?"It may seem that the only way outis to use less energy in the future,save the irreplaceable resourcesfor our grandchildren, and repairthe damaged environment.I would like to advance thethesis that there is no inevitablecollision course between more energyuse and better environment:a cleaner environment would meanmuch more use of energy. Themain flaw of ecologists prophesyingdoom is their failure to appreciatethe ingenuity of scientistsand engineers in inventing technologicalalternatives.A cleaner automobile meansmore use· of fuel, to produce hotter'and cleaner exhaust and to overcomepressure drop in afterburners.Taking lead out of gasolinewould mean a lower compressionratio and less efficient engine,which means more fuel. Cleanersmoke stacks in power plants meaneither cleaner fuel by more refiningof oil and coal, or stack gas

1972 ENERGY: THE ULTIMATE RAW MATERIAL 4911400 1401200 120c:a1000 100Lnen=~...,0-..... 800 80 co0 cen= 600 60 ~.S! ..."Ccam 400 40 d =200 200 01920 1940 1960 1980Figure 2.U.S. energy use and gross national productscrubbing and dust removal, allrequiring more energy. The BiologicalOxygen Demand of wastedischarged into rivers and lakesby residential-industrial-agriculturalactivities would require moresewage treatment and passage ofmore oxygen into water, whichmeans more energy. The recyclingof solid wastes means more energyuse. Provided that society willface the facts and give engineersthe resources and time, all thepollutants can be reduced to anyrequired level by sufficient expenditureof energy - and a necessaryincrease in prices, which will declineas experience grows.At the end, energy is used toremove all other pollutants and avast quantity of waste heat becomesthe ultimate pollutant. Sofar, this is a local dispersal problemrather than a global problem.The fishes are hot in the outlet ofa power plant, and New York Cityis three degrees hotter than thecountryside in the winter. But theman-made waste heat rejection iscurrently only 50 ppm of theearth's heat budget, or the quantityof solar radiation that theearth receives and sends back intospace. 15The supply of some forms ofenergy is short and prices are increasing.The oil price increase isdue to the demands of oil export-_ing countries in the Middle East,Libya, and Venezuela, plus a short-

492 THE FREEMAN Augustage of tankers; the natural gasshortage is due to industry's unwillingnessto explore and to laypipelines under the low existinggovernmeJt regulated prices; thecoal shortage is due to earlier forecastsof its demise, and consequentunderinvestment in opening newmines and manufacturing railwayhopper cars; the nuclear powershortage is due to unforeseen difficultiesin construction. All of theseare short-term problems, many dueto past underinvestment in researchand development and plants,that can be solved later.The costs of mining and extractionof a fuel is divided into twoparts: the technology cost andrent. 16 The technology costs aremanaged by the geologists and engineersin exploration and drillingholes - these costs reflect thebounty of earth and our presentstate of technology, and cannot bechanged except by innovations intechnology or by new discoveries.The rent cost includes royalty andbonuses to the land owners, productionand severance taxes, Federalincome taxes, and windfallsfor the lucky wildcatters - thiscost is negotiable and representsthe bargaining position of variousparties and can be changed suddenly.We read that in the PersianGulf, the technology cost of a barrelof oil is only 10 cents, but therent cost is $1.60 and going up.Despite the engineers' effort to cutcost every year, the rent costs cango up much faster. To affluent nationssuch as Japan and the U.S.,this cost increase is an unwelcomeburden but, to less developed nationssuch as India, this cost increaseis a serious blow.The Arabs have more than twothirdsof the free world oil; canthey obtain indefinite increases inprices? We know that NorthAmerica contains vast fuel resourcesin coal, oil shale, and tarsand - many times greater thanall the oil in the Middle East. Laboratoryand pilot plant runs showthat they can be turned into oiland gas. Given enough money andtime to do research and development,chemists and engineers willfind out how this could be done ingreat scales economically, andwithout damage to environment.Present guesses on synthetic crudeoil prices are in the range of $4-$6a barrel from these solid fuels,while small projects such as theSun Oil process in tar sand in Albertais almost competitive atpresent prices. 17 These vast resourcescan form a price ceilingon oil and other energy sources formany years to come. The publicand our government need to learnthe facts, debate the issues, andpass rules on their exploitation.We do not yet know how to do themining-extracting-refining in the

1972 ENERGY: THE ULTIMATE RAW MATERIAL 493The large-scale generation ofelectricity at remotely located nuclearplants and the burning ofcoal at the mine mouth would removemuch danger and pollutionfrom population centers. (Distancecertainly lends enchantment here.)The increased cost of electricitytransmission could be decreasedby new developments, such as crymosteconomical manner, and withoutdamage to the environment. Ifengineers are given the job andthe resources, they will rise to theoccasion.Table 3. Fuel pricesEquivalent costUnit cost $/million BtuElectricityGasolineNo.6 fuel oil(1% S)Bituminous coalNo.6 fuel oil(High S)O.B¢/kWh12¢/gallon$4/barrel$10/ton$2.50/barrel2.341.000.690.460.43Natural gas 40¢/thousand CF 0.40East Coast wholesale, without taxThe approximate current wholesaleprices of the more importantfuels are shown in Table 3. 4 Theclean and convenient natural gasseems underpriced in this table.Lower sulfur fuel oils are naturallymore expensive than high sulfurfuel oils. Electricity is thecleanest to the consumer, totallyavailable to do useful work, andthe most expensive.Future Energy Usesogenic cables that are super-conducting.I am afraid that after theengineers have d~ne their jobs welland ·technology costs are cut, thedominant cost in electricity transmissionwill turn out to he a rentcost again, paid to land owners toacquire the right of way.Radiation hazards 'in nuclearplants can be minimized to anydesired level by spending moremoney. The final' radioactive hotwastes are· being stored in cavesnow. Eventually, they will be disposedof by some other means,such as being sent into the sun byrockets. The sun is exceedinglyradioactive now - a little bit morewon't hurt. It can be our ultimategarbalge dump.1sWhen it comes to transportation,oil is the dominant fuel. Outsideof a few electric trains andbicycles, almost everything elsemoves by oil on the land, in thesea, or in the air. Its dominance isdue to its ease in use as a liquid,as well as high power density andlow cost. Nature appears to havearrived at the same solution fortransportation fuel much earlier.When nature prepares somethingfor a long journey, such as awalnutfor dispersion, a cocoanut forocean voyage, a salmon travelingupstream to spawn, or a goose migratingto South America, thebody carbohydrates are convertedinto lipid or fat. 19 These fats dif-

494 THE FREEMAN AugustFor intercity traffic on land, andfor long distance travel in the airor in the seas, it is difficult to seehow oil can be replaced. For centercity stop-and-go traffic, itwould be well to switch to vehicleswith stored energy that is lessheat generating. The rubber bandis an obvious energy storage deferfrom petroleum only by thepresence of a little oxygen. In fact,some geochemists believe that petroleumoriginates in animal fatburied in the rocks for eons, andthat the oxygen is removed by catalyticaction of bacteria or of clay.Table 4 gives the comparative powerdensity of a number of fuelsand batteries. 7 It may be a bit unfairto compare gasoline to a batteryin power density, since thebattery carries both fuel and oxidizer,but the oxidizer of gasolineis ubiquitous air that is alwaysavailable except in space and underwater.Table 4.Energy density in storageChemicalenergykcal/gGasoline11.0Lipid9.3Methanol5.2Ammonia4.8Carbohydrate 4.1Protein4.1Sodium-sulfurbatteryConceptual super flywheelLead acid batterySuper fly wheelRubber bandElectricmechanicalenergy watthr/lb(20%heatefficiency)1,15055051038520085401vice, but rather low in capacity.The flywheel was tried in buses inSwitzerland and is capable of tremendousimprovements. One canconceive of a rotor with an exceedinglyhigh speed of revolution,kept inside a high vacuum to minimizefriction, and made of compositematerial of carbon filamentsin epoxy resin to withstand thetremendous centrifugal forces.There is a great technologicalinnovation on the way that cangreatly influence the future patternof population distributionand transportation needs: the videophone.People live in great metropolitanregions for the ease ofcontacting many other people andto use common facilities. Thesegreat concentrations lead to crowdedcities and tremendous transportationproblems. With a technicallyadvanced videophone, one canhave vivid and direct communicationswithout leaving his home.Managers and white-collar workers,scientists and artists can liveanywhere they choose and do alltheir work at home and by videophone;housewives can shop byvideophone; students can talk totheir professors by videophone.There is no need for people to gettogether except when they wantto have fun together. People wouldonly travel for pleasure then. Thiscould result in a great dispersionof people back to the countryside.

1972 ENERGY: THE ULTIMATE RAW MATERIAL 495Future Supply of EnergyThe recoverable resources ofenergy in the world are quitelarge. The solid fuels are muchgreater in quantity than the liquidand gaseous petroleums, based ona study by Hubbert. 2o We knowthey are available, but we do notyet have the technology or agreeduponground rules for their exploitation.Before these tremendousresources can .be touched,there must be research and development,environmental regulations,and ownership and profit rules established.For the nuclear fuels, a dependenceon uranium oxide· oresof $10/lb would mean a ratherlimited future in comparison withcoal. There may be much moreuraniurn to be discovered. If weare willing to pay more, we canuse a great deal of low gradeuranium. Future energy supplieswill be pJentifulbut not necessarilycheap.The truly overwhelming solarenergy is the ultimate energysource when all else is gone. Thisprognostication was recently. enunciatedby Gaucher,21 and Glaser22has proposed a conceptual·schemefor using solar energy. He envisionedsynchronous satellites thatconstantly hover overhead at orbits22,000 miles away, with solarcells 25 square miles in area. Theelectricity collected from the sunis beamed to earth at a safe intensityon microwave and collectedon giant antennas. This is availablenight and day, and goesthrough mist and driving rainwith less than 5 per cent absorptionloss. This idea is not far fromtoday's technological capabilities.For a trial balance, let the worldenergy demand increase by 4 percent a year, compounded, based onmodest population-GNP growth.With fossil fuel alone, we may bein trouble after 2050; addingcheap uranium, we are in troubleafter 2070. After 2100, man-madeenergy release is 1 per cent of naturalsolar influx and the wasteheat disposal problems have to besolved.SummaryThere is no inevitable collisioncourse between high energy useand good environment. The publicshould be informed that there aretechnological alternatives. We readthat after 150 years of fog,whensulfur-containing coal is replacedby clean natural gas, winter sunshineis returning to London.Scientists and engineers cansolve nearly' all environmentalproblems when they are given thetask, the resources and the time.Any combustion waste can becleaned up; radioactive wastes canbe sent into the sun; phosphatescan be removed by tertiary sewage

496 THE FREEMAN Augusttreatments; hot fishes near powerplants can be saved by dry aircooling towers; solid wastes canbe reduced to ashes, and the remainsrecovered and recycled.Many of these solutions are withintoday's technological capabilities.Weare only holding back to seewhich is the best solution, and whoshould pay, before vast investmentprograms begin. Even the wasteheat disposal problem for earthmay eventually succumb to the ingenuitiesof our scientists and engineers,just as the spectre ofworld famine forecast by WilliamCrooks was dispelled by Haber andBosch.All of this may not be cheap,and the cost of using energy mayhave to go up. But let us tell everyonethat a clean and adequate energysupply can be managed if wegive chemists and chemical engineersa chance. But w~ must planahead. ~- Footnotes -1 Kobe, K. A., Inorganic Process Industries(Macmillan, New York, N.Y., 1948),p.230.2 Jeans, James The Dynamical Theoryof Gases (Dover, New York, N.Y.), 1954,p.342.3 Leontief, W. W., "The Structure ofthe U.S. Economy," Sci. Amer., p. 25,April 1965.4 Oil Gas J., p. 100, March 1, 1971;Energy News, 1 (10), March 15, 1971.5 Elec. World, March 15, 1971.6 My utility bill at Princeton, N.J.7 The Autqmobile and Air Pollution, areport of the Panel on Electrically PoweredVehicles, U.S. Department of Commerce,Oct. 1967, pp. 49-99.8 Schurr, S. H., and Netschert, B. C.,Energy in the American Economy 1850­1975 (Johns Hopkins Press, Baltimore,Md., 1960) , p. 728.9 Landsberg, H. H., and Schurr, S. H.,Energy in the United States (RandomHouse, New York, N.Y., 1968).10 Singer, S. F., "Human Energy Productionas a Process in the Biosphere,"Sci. Amer., p. 175, September 1970.11 Dole, H. M., American's EnergyNeeds and Resources, speech by the AssistantSecretary of Interior at StanfordUniversity, January 12, 1971.12 Mills, G. A., Johnson, H. R., andPerry, H., "Fuels Management in an EnvironmentalAge," Environ. Sci. Technol.,p. 30, January 1971.13 Ehrlich, P. R., and Ehrlich, A. H.,Population, Resources, Environment (W.H. Freeman, San Francisco, Calif., 1970) ,Chap. 4 and 6.14 Welles, J. G., "Will the Earth Reachan Energy Ceiling1" Wall Street Journal,January 6, 1971.15 Landsberg, H. E., "Manmade ClimaticChanges," Science, 170, 1265,(1970); Environmental Quality, a reportby the Council on Environmental Quality,August 1970, Chap. V.16 Adelman, M., "The World Oil Outlook"in Natural Resources and InternationalDevelopment (Johns HopkinsPress, Baltimore, Md., 1964).17 Strom, A. H., and Eddinger, R. T.,Chem. Eng. Progr. 67 (3), (1971).18 Gordon, T. J., remark at a conferenceat the Institute of Man and Science,Rensselaerville, N.Y., 1969.19 White, A., Handler, P., and Smith,E. L., Principles of Biochemistry, (Mc­Graw-Hill, New York, N.Y., 1964), p. 282.20 Hubbert, M. King, "Energy Resources,"in Resources and Man, by thecommittee on resources and man, NationalAcademy of Science-National ResearchCouncil (Freeman, San Francisco,Calif., 1969).21 Gaucher, L., Chem. Technol., March1971, 153.22 Glaser, P., Chem. Technol., October1971, 606.

The Natural History of Governmental InterventionMARY PETERSON persuasively illustrates for seven selectedagencies what might be called the ,natural history of governmentalintervention into economic affairs: A real or fanciedevil leads to demands to "do something about it"; a politicalcoalition forms consisting of sincere high-minded reformersand equally sincere interested parties; the incompatibleobjectives of the members of the coalition (e.g., lowprices to consumers and high prices to producers) areglossed over by fine rhetoric about "the public interest,""fair competition," and the like; the coalition succeeds ingetting Congress (or a state legislature) to pass a law; thepreamble to the law entombs the rhetoric and the body ofthe law grants power to governmental officials to "do something";the high-minded reformers experience a glow' oftriumph and turn their attention to new causes; the interestedparties go to work to make sure that the power is usedfor their benefit and generally succeed; success breeds itsproblems, requiring the scope of intervention to broaden;bureaucracy takes its toll so that even the initial specialinterests no longer benefit; ultimately, the effects are preciselytheopposite of the noble objectives of the high-mindedreformers without achieving the more mundane objectivesofthespecial interests; yetthe activity is sofirmlyestablishedand so many vested interests are connected with it that repealof the initial legislation .is nearly inconceivable; instead,new governmental legislation is called for to cope with theproblems produced by the old; and a new cycle begins.From Milton Friedman's Introduction to TheRegulated Consumer by Mary Bennett Peterson(Los Angeles: Nash Publishing, 1971).

ABORT~ON~a Metaphysical ApproachTHOMAS L. JOHNSONTHE ISSUE of abortion has occupiedthe minds of humans for aslong as civilized society has existed.There have been times whenabortion was legally condoned andsocially accepted, and other periodsof mankind's history whenthis practice was outlawed andconsidered to be a criminal act.Today, at a point in time whenthe rights of individuals are beingattacked, ignored or destroyed, weare again witnessing a resurgenceof the debate on abortion, andwithin the past few years, thepassage of laws which removeDr.. Johnson is Associate Professor of Biologyand Professor of Chordate Embryology atMary Washington College of the University ofVirginia.most or all restrictions whichhave, in the previous history ofthis nation, protected the individualrights of the most vulnerable,defenseless and innocent of humanbeings: the unborn child.The abortion controversy is notjust another dispute causing peopleto occupy opposing intellectualand legal camps. It is not a subjectthat can be equated in importancewith other national concerns.Abortion is an. issue whichmust be recognized as one of themost, if not the most importantargument of our times, for it dealswith an attack on the fundamentalright of all humans: the right tolife. When this right, upon whichall other rights depend, can be set49H

1972 ABORTION: A METAPHYSICAL APPROACH 499aside; when, at the whim of anadult, a new human life can bedestroyed simply because anotherhuman does not wish to allow thislife to continue; when it is decidedthat one stage of human life is ofno real value - that its existenceis an inconvenience to others andcan thus be terminated - mankindloses its most precious value.Once the absolute value of eachindividual to his own life vanishes,existence no longer remains as aright, but becomes a privilege tobe granted or denied by those inauthoritative positions, by majorityvote, or by the caprice of anunreasoning mother.The Nature of ExistenceThere is but one approach thatcan be taken in dealing with thesubject of abortion - the metaphysicalapproach. Metaphysics isa branch of philosophy which involvesthe attempt to understandthe nature of existence, to explainand scientifically analyze naturalphenomena, both in the animateand inanimate realms. Since abortionis dealing with the destructionof the human embryo orfetus, it is necessary to examinethe biological nature of these entitiesand apply this informationto another division of philosophy-Ethics -in the attempt to determinethe correct behavior of mentoward these intrauterine stages.Among those who advocate abortion,who state that a womanshould be able to terminate apregnancy simply because she desiresto do so, there are two significantgroups. One group statesthat the entity within the uterinecavity is not a living human being,that the embryo or fetus issimply a cluster of multiplyingcells that could be considered asa part of the mother's body. Theother group considers the embryoor fetus to be human, but arguesthat there is a conflict between therights of the mother and those ofthe unborn child. That the mothermust have full control over herbody, and that if she is denied thisright she will fall victim to therights of the unborn.The Essentials of ReproductionAmong VertebratesWhat is the actual nature of theintrauterine stages and does areal conflict exist between themother and the unborn? In orderto answer these questions it willbe necessary to briefly analyze theknown essentials of reproduction,particularly those factors whichapply to vertebrates, of which thehuman is the most advanced form,and correlate this knowledge withthe issue of the rights of the embryoor fetus, and the mother.Sexual reproduction - reproductionaccomplished by means of the

500 THE FREEMAN Augustproduction of sperms and eggs,and their subsequent fusion - ischaracteristic of most forms oflife, and is the only method ofreproduction possessed by numerousanimal groups (for example,all vertebrates). Once a matureanimal produces the sex cells, theyare released from the organs inwhich they formed (the testis orovary) and usually pass into ductsleading to the outside of the organism.Either the sperms andeggs are released into water, atwhich time fertilization occursimmediately, or sperm cells areintroduced into the female tractand fertilization will eventuallytake place within the body of thefemale. The essential point is, thatat the time of fusion of sex cells,a new generation of a species isproduced.Within each cell of an animalthere are DWO sets of chromosomes(filaments containing genes).When the sex ceUs are formed,each sperm or egg contains onlyone set of chromosomes, but whena sperm fuses with an egg the fullcomplement of chromosomal pairsis re-established. It is at thispoint, at the time of the formationof the zygote (the cell formedby .the fusion of the sperm andegg) that a new organism comesinto existence.In human reproduction, thesperm fertilizes the egg in theupper portion of the oviduct. Anew human life thus begins itsexistence in the cavity of the oviduct,and since it takes severaldays for the new organism toreach the uterus, it is already anembryo by the time it enters thatorgan.The Point of SeparationOne frequently hears the argumentthat the zygote, embryo orfetus is a part of the mother'sbody over which she must havecontrol. Without question, this isnot the case. Once sperms andeggs are discharged from the sexorgans, they are no longer a partof the organism which producedthem. These highly specializedcells, which have been producedby a special form of cell division(meiosis - other body cells areformed by the process of mitosis),are of no value to the organismwhich formed them (as regardsthe maintenance of its own life)- thus they either degenerate orthey are released from the sexorgans and pas~ into a tube ontheir way out of the body. Ultimatelya small fraction of thesediscarded sex cells will fuse. Underno circumstances could oneconsider mature released sex cells,or any subsequent organism resultingfrom the fusion of thesecells, asa part of the individualwhich generated them.

1972 ABORTION: A METAPHYSICAL APPROACH 501(Although the human embryoattaches itself to the wall of theuterus in order to gain neededsubstances from the mother forits growth and development, itdoes not fuse with this organ butremains as a distinct new life existingwithin the cavity of themother's reproductive tract.)Human life therefore has itsbeginning (is viable) at a point intime when the necessary geneticinformation, half coming from thefather and the other half from themother, is brought together by thefusion of the released sperm andegg to form the single-celled zygote.This individual organismcannot be a part of the mother(it has an entirely different setof chromosomes), but is a separateand unique human life.All Vertebrate Life Begins in anAquatic EnvironmentThere is another important, butgenerally overlooked, .aspect of thedevelopment of vertebrates whichis germane to the discussion ofabortion and which would shedlight on the nature of the intrauterineembryo or fetus. It is awell known biological fact that allvertebrate life must begin in anaquatic environment. Fishes andamphibians generally release thesex cells into a body of water andthe zygotes and embryos developthere. In .the land vertebrates,which do not deposit their eggsinto water, a sac forms aroundthe embryo which fills with fluid.Consequently, each vertebrate, includingthe human, must spendthe first developmental phase ofits life in a water medium, andit i.s only after the new organismhas achieved the necessary physicaldevelopment (not accomplishedby fishes and some amphibians),that it is able to continueits life in a gaseous environment.(Even if humans should achievethe technological ability to raisewhat science fiction writers havecalled "bottle babies," these "bottles"would be filled with fluid. Itis only because the human organismbegins its life, not in a glasscontainer·in which one could observethe rapidly changing newlife, but in a dark cavity out ofsight, that older humans find itpossible to pretend that theseyounger humans are not living orare not human. If the growth ofthe unborn child were to be observedby the mother, the issueof abortion would most likelynever have become a matter ofworld-wide concern, for what psychologicallyhealthy mother, seeingthe unborn child within herself,would choose to destroy it.)Metaphysically, by its nature,every new human life must spendthe first months of its existence inan aquatic environment, within

502 THE FREEMAN Augustthe amniotic sac, if it is ever toexperience a later stage of humanexistence. No human life has everbypassed this requirement, or everwill - at least not for many millionsof years, if then, consideringthe present rate of evolution. Everynew human life must also havefirst been a zygote, then an embryoand finally a fetus before itis prepared to live outside thefluid medium. To contend that humanlife is only human at thetime of birth, that the intrauterineentity is not an actual, butonly a potential human being, isuntenable.If Not a Human Being,Then What Is It?For those who insist that humanlife begins only at birth, thequestion that must be asked is:What is this entity developingwithin the uterus if not an actualhuman being? Is it possible thatby some magic, at the time ofbirth, that this alleged potentialbeing is somehow, within a matterof minutes, transformed into anactual human being? To rationalindividuals, in possession of scientificfacts, the answer is incontrovertible.Both the unborn childand the new born child is an actualhuman being, and at the time ofbirth, the child is merely movingfrom one required environment(aquatic) to a new required environment(gaseous) so that itcan continue to develop into thesucceeding stages of its life untilit eventually ends its existence atthe time of death.The biological facts relating tothe reproductive process and thefirst stages of human life havebeen established. It is now necessaryto relate this knowledge tothe issue of rights.Those that contend that the intrauterinebeing is not humanhave no problem in their attemptto settle a controversy over rights,f or if this living "thing" is nothuman, it can possess no rights.Since it is a well substantiatedfact that the zygote, embryo orfetus is a human being, their argumentbecomes meaningless andrequires no further discussion.Those who contend that a humanlife is existing within themother during the period of pregnancydo ascribe rights to thisnew human life, but it is arguedthat the rights of the mother takeprecedence over those of the unbornchild and thus she- has, orshould have, the legal and moralright to terminate the life of thisnew individual at any, or certainlimited, stages of its existence.This latter position requires asuccinct examination.A woman must have full controlover her own body at all times.She must be free to take any ac-

1972 ABORTION: A METAPHYSICAL APPROACH 503tion which is deemed necessaryto sustain her life. For instance,if it can be medically determinedthat carrying her unborn child toterm would probably result in herdeath, she cannot be expected orrequired to sacrifice her adult independentlife for the life of animmature, dependent offspring.(Actually, in many such cases,both the mother and the fetuscould die, resulting in the loss oftwo lives, instead of just one.)Since medical science' has advancedto a point at which such life anddeath situations rarely occur, theargument in favor of abortion inorder to preserve the life of themother has only limited application.Although this is the case,the legal code should specificallygrant abortion if the mother's lifeis seriously jeopardized, which ithas done throughout the historyof this nation.Mitigating CircumstancesAre there other circumstancesthat might arise which would, orcould, legally and morally permitan expectant mother to undergoan abortion? The answer is yesincases of legally proven (whichis sometimes difficult), unwillfullyengaged in acts of rape or incest.When an individual does not commitan act of his own free will, he(or she) cannot be held responsiblefor the consequences of thisact. Although this is true, it doesnot alter the fact that a new lifeis existing and that it will bedestroyed if aborted. The most humaneresponse to such a circumstancewould be to encourage theexpectant mother to carry thechild to term, but no one couldrequire this of the victim.There are' some who insist thatabortion should be allowed forother medical reasons- in the caseof diseased or malformed fetuses.But what individual physician, orboard of physicians, or legislativebody has the ability to determinewhat diseased condition or whatdeformity could warrant killingthe unborn (or the born)? Nosuch judgment is possible, eitherfor the intrauterine or extrauterinehuman."Handbook on Abortion"Dr. and Mrs. J. C. Willke, intheir recently released book, HandbookOn Abortion, emphasize thispoint when they write: "This pricetag of comfort or utilitarian usefulness,called euthanasia whenapplied to incurably ill post-bornhumans, applies equally well tothe pre-born human who is alsojudged to be so deformed or mentallydeficient that he too shouldnot be permitted to live. This criterionand value judgment whichpermits humans to continue tolive only because they are useful

504 THE FREEMAN Augustand independent is an utterly barbaricconcept. Once life has aprice tag on it and is no longeran absolute right, then all life isendangered, all life is only worththe current price tag placed uponit by society, the state, the masterrace, or those in positions ofpower."!Having full control over herown body (having self-determination)is an absolute right of eachwoman, but having full controlover another's body, over the bodyof a new life developing withinher reproductive system is not,and never could be her prerogative.A woman must have the rightto prevent conception - to determineherself if she wishes to have,or not have, a child - to obtaincontraceptive information and materials- but she must also bearthe responsibility for sustainingthe life of a newly formed humanif she willfully engages in intercoursewhich results in pregnancy.(It should be noted that certaincontraceptives do not prevent conception,but preclude the implantationof the embryo in the wall ofthe uterus. The use of such contraceptivesshould be condemned, for1 Handbook On Abortion is a well reasonedand scientifically accurate workcovering all of the primary and secondaryissues concerning abortion. It is availablein paperback for $.95, plus postage, fromHiltz Publishing Co., 6304 Hamilton Avenue,Cincinnati, Ohio 45224.they bring about the destructionof very young lives rather thanprevent their coming into existence.)A Collectivist View: TheIndividual Is ExpendableConsider the political philosophy,and the attitude toward individualrights, of those groupswhich are the most outspoken supportersof abortion - those concernedwith environmental pollution,the population explosion andthe "liberation" of women. Eachof these groups espouses a collectivistview of life and considersthe individual human to be expendableor enslavable as themeans of achieving their ends.They are outspoken lobbyists backinglegislation granting the agencyof force, the government, theauthority to establish a myriad ofprograms which they considernecessary to achieve their aims,and they completely ignore thefact that it is other human livesthat will be sacrificed in this attemptto carry out their masterplan for society. The sacrifice ofthe unborn is just one other aspectof their social engineering whichis completely compatible with theirview of man - the view that theindividual is nothing; the collectiveis all.There is no conflict of rightsbetween the expectant mother and

1972 ABORTION: A METAPHYSICAL APPROACH 505the unborn child. Both she and thenew life within her have the rightto life, a right which must be possessedby all humans at all stagesof their life. And since it is thefunction of government to protectthe rights of all humans, from thebeginning of life to its end, it isright for the government to proscribethe killing of the unborn bymeans of abortion - except to savethe life of the mother or in instanceswhere a woman's self-determinationwas obliterated, as inthe case of forced rape or incest.In her brilliant essay, "Man'sRights," Ayn Rand states: "Thereare no 'rights' of special groups,there are no 'rights of farmers,of workers, of businessmen, of employees,of employers, of the old,of the young, of the unborn.' Thereare only the Rights of Mum-rightspossessed by every individual manand by all men as individuals."The unborn child is a new individualhaving the same rights asall other individuals, and, as withall humans, regardless of their ageor station in life, possesses themost basic of all rights, the rightwithout which all other rightswould cease to exist, the right. tolife. t)When A New Life BeginsThere is perhaps no phenomenon in the field of biologythat touches so many fundamental questions as the unionof the germ cells in the act of fertilization; in thissupreme event all the strands of the webs of two livesare gathered in one knot, from which they diverge againand are rewoven in a new individual life-history....Theelements that unite are single cells, each on the point ofdeath; but by their union a rejuvenated individual isformed, which constitutes a link in the eternal processionof life.F. R. LILLIE, Problems of Fertilization

506A REVIEWER'S NOTEBOOK JOHN CHAMBERLAINSEVERAL YEARS BACK I used toencounter people who spoke of"Leonard Read's freedom philosophy."Now I run into those whosimply say "the freedom philosophy."Leonard Read must be doingsomething right to find his recipesbecoming the common property ofcooks and diners who no longerthink of crediting the pioneeringchef.Mr. Read, of course, woulddeny that he is an originator. Inhis new book, To Free or Freeze:That is the Question (Foundationfor .Economic Education, $3 cloth,$2 paper), he remarks that "practicallyevery idea we espouse andpass off as our own is unknowinglytaken from others." Even so, Ifind Mr. Read an original in theway he combines his ideas and hismethods.Where else in the country willyou find a man who really believesthat the way to reform others is toreform yourself in hopes that theexample will lead to self-discoveryalong similar lines in whoevercares to listen? Max Eastman, thecrusader who became more contemplativein later life, used to referto Mr. Read's Foundation forEconomic Education as "the monastery,"which I am sure Mr. Readwould take-as a compliment. Afterall, it was the monastery that keptthe lamps of learning burningthrough the Dark Ages. "FEE,"says Mr. Read in his essay, "Speakfor Yourself, John," "is not an institutionalspokesman nor an organizationtrying to 'reach' anyone.Rather, ours is, one might say,no more than an agency offeringsuch services as you may think of

1972 TO FREE OR FREEZE 507value in your own search and personalgrowth.... Instead of playingthe utterly futile game of tryingto 'reach' others, we can concentrateon getting enough intoour own mentalities and improvingour services to the point whereothers will reach for us."Emphasis on the IndividualIn keeping with his pHgrim'saccent on first principles, Mr. Readdispenses with the "scientific" jargonwhich tries to make politicaleconomy over into a predictivenatural science like Newtonianphysics. To Mr. Read, everythinggoes back to the individual (no twopeople are alike!) whose free willand unforeseeable subjective valuationsput an aberrant factor intoevery economic equation. It is obviousthat economics does not becomea statistical subject untilafter the fact of choice. The wholequestion of choice leads from considerationsof GNP and chatterabout "parameters," whatever theyare, to moral philosophy, with itsconcern for right and wrong. Mr.Read wants to think about goodand evil, not about the technicalquestions that lead to so muchmanipulation of individuals asthough they were pawns.~ in somedictator's game of chess. 'The good, to Mr. Read, is anythingthat adds to the sum ofcreativity. Force must sometimesbe used to keep one man from injuringanother, but this does notalter the truth that what Mr. Readcalls "viewpoints, evaluations, inventions,insights, intuitive flashes,think-of-that's" do not thrive ina world of controls and governmentseizures. When force, goingbeyond the police power, is usedto transfer wealth, it hurts thesum total of creativity by enfeeblingthe injured person and encouraginglaziness in the supposedbeneficiary. Contemplation of thenature of force leads Mr. Readback to the State-as-night-watchmanand away from the modernheresy of the State-as-quarterback.The State's proper businessis protection against such thingsas fraud, the spread of disease,and attack from abroad.Actions Have ConsequencesMr. Read does not believe incrystal balls. But he does believein "ifs." For example, if we persistin our present course of priceand wage fixing, or "incomes policy,"the "if" will lead to· morescarcities. Scarcities under conditionsof continuing price control,will lead to rationing, to be followedin turn by black markets.The fabric of law will suffer, andthe accompanying growth of cynicismwill make for increased violence.To control the violence, thegovernment will have to use

508 THE FREEMAN Auguststrong-arm means. And, to administerthe strong-arm medicine, atough guy will have to take over.As Hayek said long ago, the goons,in a world of controls, rise to thetop.Now, Mr. Read is not sayingthat the U.S. is bound to persistin its present foolish course; thepoliticians may come to theirsenses when they discover that inflation(a matter of the moneyand-creditsupply) cannot bestopped by price and wage boardsissuing their ukases. All Mr. Readis uttering is a little "if." Thefuture is not to be glimpsed inany crystal ball for the simplereason that it depends on what isbeing done by "our actions now."Change in these actions naturallychanges the "if."A Vicious Circle of SubsidiesThe other day I listened to aplausible plea for State subsidyto the arts. Taken on its ownterms, the argument seemed tome at least morally irrefutable.We have had inflation, whichmeans that people have beenrobbed of· the purchasing powerthey might have spent on goingto plays, or on buying books orvisiting museums. As a matter ofretributive justice, why shouldn'tthe State return some of the stolenpurchasing power to the art-lovingindividual? I put this question toMr. Read. "The trouble," he said,"is that the money is no longerthere. There's nothing to be returned."Of course, there is money therefor the arts - and for a millionother things - on a short-termbasis, provided we are willing tolet our children pay the bills.Meanwhile, the quarrel betweenhundreds of separate pressuregroups, each intent on retributivejustice, puts an intolerable strainon government, which cannot hopeto conjure up the necessary "just"payments out of a top-heavy taxstructure and more inflation. WhatMr. Read was really saying isthat "pretty soon the resourceswon't be there." This is somethingthat our politicians, along withthe people who prod them, havenot yet faced.The Victims of "Help"Mr. Read, "bonded to conscience,"wonders how we are to reversethe drift that is taking oursociety to "all-out" statism. As afirst order of business he insiststhat those who would stop thedownward plunge must "developthe quality of personal incorruptibility."Politically speaking, the"incorruptible" man should "nevergive approval to a law that 'helps'anyone."This is hard doctrine for themodern age, which·believes in so-

1972 TO FREE OR FREEZE 509called ~~positive" action by theState. But Mr. Read says that"pity, unless spiced with commonsense, is what's heartless." Providingpeople with "governmentalfeeding stations" kindles the viceof avarice. Beyond that, it tendsto render people helpless by atrophyingtheir faculties. "Helpingpeople to become helpless,'" saysMr. Read, "is no act of kindness."If you look at what is takingplace in the political and socialarenas, it might seem that Mr.Read and his "saving remnant"are hopelessly out of fashion. Nevertheless,"the freedom philosophy"has many'more adherentsthan it had in the Nineteen Forties,.when I first heard Mr.' Readtalk about tapping the emergentenergy of the ind'ividual. At longlast the intellectual currents arenot all going the same way, whichgives us ground for hope thatwe'll be free before we freeze.~ WHAT, HOW, FOR WHOM: TheDecisions of Economic Organizationby Henry N. Sanborn (Box8466, Baltimore, Md.: Cotter­Barnard, 1972, 356 pp., $5.20)Reviewed by Gary NorthFIVE YEARS AGO, supporters of thefree market who wanted a textbookfor an introductory course atthe college' level in economics hadAllen and Alchian's UniversityEconomics as the one reasonableselection. Now we have ThomasSowell's Economics, a reprint ofRothbard's Man, Economy andState, and Prof. Sanborn's newbook. Things are looking up.Sanborn teaches at TowsonState College in Baltimore. Hisperspective is Chicago oriented,i.e., he follows Milton Friedmanon monetary theory, George Stigleron antitrust laws, and positivistsin general on methodology. Herefers constantly to the MV = PTmonetary equation, and from thishe concludes that a steady increaseof the money supply by .the governmentwill eliminate serious depressions.A teacher would be wiseto assign Rothbard's What HasGovernment Done to Our Money?along with Sanborn's book.Generally he favors the marketas a means of both human freedomand efficiency. He also avoids theuse of the "indifference curve" approachwhich has done so much toconfuse a generation of students.He writes in a folksy, nonpretentious.style, which is probably thebest reason for the book's superiority.His footnotes are not burdenedwith citations from obscureprofessional journals, but aregraphic and illustrative, usingsuch sources as· the Wall StreetJournal, New York Times, Newsweek,Barron's. The inclusion of

510 THE FREEMAN Augustcartoons also makes it lively; theirimpact may remain when the memoryof marginal cost curves haglong faded.This would be an ideal book fora one semester course, especiallyfor nonmajors. It should also be asource of classroom controversy.For example, on page 299, hesimultaneously praises militaryconscription laws and calls for theabolition of laws against prostitutionand narcotics. His basicallypragmatic approach mars the finalchapter especially, where he callsfor various. kinds of governmentintervention to eliminate minor defectsof the market system("neighborhood effects," naturalmonopoly), but on the whole thesedeviations are few. The first halfof the book is exceptionally good.The one major flaw is his explanationof profits: he accepts the entrepreneurialtheory of Frank H.Knight (and Mises), only to abandonit in later pages for a "returnon company inputs" theory whichis distressingly vague, for goodreason. If this is cleared up inlater editions, it will be a verygood introductory textbook.~ IMPUTED RIGHTS by Robert v.Andelson (Athens: University ofGeorgia Press, 1971, 153 pp. $6.00)Reviewed by Edmund A. OpitzIN VIEW of the central importanceof the idea of rights to the philosophyof liberty it is astonishingthat books dealing with the subjectare so few. Professor Andelson'sformidable little volume standsvirtually alone; interest in theidea, either for its own sake or forits significance in our history, hasinspired few researchers and writers.There are other puzzling questions.The doctrine of individualrights is an idea of the first magnitude,to be ranked alongside theidea of gravity or the theory ofrelativity. Why, if the idea is soimportant, did it take Westerncivilization more than two thousandyears to grasp it? Why hasno other civilization even comeclose? Why, having once embracedthe idea of rights, did we abandonit in a fraction of the time it tookthe West to gain it? And afterhaving largely let go of the substance,why do we so patheticallycherish the label of "rights" thatwe now paste on patents of privilegegranted by the state!Things were different in theeighteenth century. Men of thatera echoed Locke when they talkedabout the right to life, liberty, and

1972 OTHER BOOKS 511property. What began with Lockeas a philosophical speculationworked its way into men's bonesand became something they couldalmost taste. Conditions in theAmerican colonies gave eaeh manunaccustomed liberty to live hislife and be responsible for theproperty he produced. And therewere, in addition, religious convictionsabout a protected, privatedomain in each individual whoseinvasion would violate the sacredprerogatives of the person. Monarchybroke itself against theseconvictions, which in turn werestrong enough to generate theideal of a government institutedsolely to secure these rights. It isto the idea of rights in this traditionthat Dr. Andelson addresseshimself, and in a closely reasoned,gracefully written book, he vindicatesthis idea in a masterful way.Briefly surveying the history ofhis subject, the author finds threedistinct theories of human rights,as analyzed in .terms of ground,end, and regulating principle. Hefinds strong reasons for rejectingthe radical-humanist and utilitarianarguments for rights andplaces himself in the metaphysicaltradition which "derives rightsfrom man's place in a purposiveorder." The book's frame of referenceis theological; it is an examinationof "the nature of man inthe light of the distinctive end forwhich he was created." A societywhich maximizes personal libertyfor all and jealously guards individualrights provides the contextin which men and women may bestfulfill their earthly purposes andachieve their transcendent goals.The first half of the book lays thetheoretical groundwork for whatthe author terms "a, rationalizedsoeial structure deduced fromChristian premises," and it is apleasure to watch a carefully articulatedargument unfold. Theauthor's orientation is broadlyCalvinistic, and he views man as"fallen." That is to say, man's natureis out of joint; so an empiricalexamination of human natureas it is does not disclose any suchthing as "rights" organic to manas such. But human nature is morethan natural, which is to say thatrights are imputed to man by hisMaker. Even those who do not acceptthe author's theology will findthis a meaty discussion.So much for the theoreticalgroundwork; now for the practicalapplication. Professor Andelsonproves to be tough-minded and cogent·ashe tests his philosophy ofpersonal rights against a numberof vexed issues. Guided by "theevidence of social data. and therules of logical consistency," theauthor proceeds to spell out insome detail that "structure of mutualnoninterference which pro-

512 THE FREEMAN Augustvides the only rational criterionfor adjudicating competing claimsto personal fulfillment." There isno room in Professor Andelson'sphilosophy for government welfareprograms: H ••• the alleviation ofmisery is not, as such, a right, andought not, as such, be coercivelyenforced. For the use of coercion,other than to guarantee rights, isan infringement upon righ¥s . . ."Beyond this, he would not countenanceany effort to legislate morals;conduct which merely offendssensibilities and is not clearly predatoryis no concern of the law.The author champions the right ofprivate association (and dissociation)and thus comes into conflictwith aspects of current civil rightslegislation. The law should enforcecontracts and protect rightfulproperty. The laborer is not a commodity,the author affirms, but"his labor is. the commodity parexcellence" - a position at variancewith monopoly unionism. Andas for the United Nations, its absurdDeclaration of Human Rights"is proof of its untrustworthinessto wield supreme authority."This brief resume· of some ofthe issues may convey the notionthat Dr. Andelson is forthright tothe point of abrasiveness. Correct!The reviewer dissents vigorouslyfrom several of the opinions expressedbut applauds the candorwhich makes this a cleansing bookand an important one. ,HANDSOME BLUE LEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM : THE FOUNDATION fOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

theFreemanVOL. 22, NO.9. SEPTEMBER 1972Advertising Israel M. Kirzner 515The positive role of advertising in a capitalistic, free-market economy.What Do You Have Against the Poor? Leonard E. Read 528Welfare schemes often backfire and injure most the ones they were supposed to help.ACloser Look at Gold Charles E. Weber 533A historical review of the monetary uses of gold in most nations of the world.Cause and Effect Stanley Yankus 545According to the natural order of the universe, each is responsible for his selfimprovement.The Founding of the American Republic:14. Freeing the Individual Cla,rence B. Carson 550The strengthening of the institutions of freedom in the various states just follow-Ing the end of the war.The Productivity of Freedom C. Lowell Harriss 56,2The general case for reliance on voluntary processes of the market rather thancoercive intervention in most human affairs.Book Reviews: 570"Nine Lies About America" by Arnold Beichman"Hazardous To Your Health" by Marvin H. EdwardsAnyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tt"1eFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON·ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its. publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount~$5.00 to $10,OOO-as the meanl:of maintaining and extending the Foundation's workCopyright, 1972, The Foundation for Economic Education, Inc. Printelin U.S.A. Additional copies, postpaid, to one address: Single copy, 51cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.THE FREEMAN is available on microfilm from Xerox University Microfilm~Ann Arbor, Michigan 48106.Some articles available as reprints at cost; state quantity desired. Pelmission granted to reprint any article from this issue, with appropriatcredit,except "The Founding of the American Republic."

ISRAEL M. KIRZNERADVERTISING has been badlytreated by many scholars whoshould know better. Not onlyMarxists and liberals, but evenconservatives have given advertisinga bad press. Let us examinesome of the criticisms.• First, many advertising messagesare said to be offensive - byesthetic or ethical and moral standards.Unfettered, unhampered,laissez-fairecapitalism, it is contended,would propagate such messages in away that could very well demoralizeand offend the tastes and morals ofmembers of society.• Second, advertising, it is argued,is deceitful, fraudulent, full of lies.Misinformation is spread by advertising,in print, on the airwaves, andthis does harm to the members of society;for that reason advertisingshould be controlled, limited, taxedaway.Dr. Kirzner is Professor of Economics at NewYork University. He is the author of The Ecort0?'licPoint of View, Market Theory and thePrice System, and An Essay on Capital•. This.:lrticle is transcribed from a lecture.• Third, it is argued that whereadvertising is not deceitful, it is atbest persuasive. That is, it attemptsto change people's tastes. It attemptsnot to fulfill the desires of man butto change his desires to fit that whichhas been produced. The claim of themarket economist has always beenthat the free market generates theflow of production along the linesthat satisfy consumer tastes; theirtastes determine what shall be produced- briefly, consumer sovereignty.On the contrary, the critics of advertisingargue, capitalism has developedinto a system where producersproduce and then mold men's mindsto buy that which has been produced.Rather than production being governedby consumer sovereignty, quitethe reverse: the consumer is governedby producer sovereignty.• A fourth criticism has been thatadvertising propagates monopoly andis antithetical to competition. In acompetitive economy, it is pointedout, there would be no advertising;each seller would sell as much as hewould like to sell without having to

516 THE FREEMAN Septemberconvince consumers to buy thatwhich they would not otherwise havebought. So, advertising is made possibleby imperfections in the market.More seriously, it is contended, advertisingleads toward monopoly bybuilding up a wall of good will, a protectivewall .of loyalty among consumerswhich renders a particularproduct immune to outside competition.Competing products, which donot share in the fruits of the advertisingcampaign, find themselves onthe outside. This barrier to entry maygradually lead· a particular producerto control a share of the market whichis rendered invulnerable to the windsof outside competition.• Finally - and this in a way sumsup all of these criticisms - advertisingis condemned as wasteful. Theconsumer pays a price for a productwhich covers a very large sum ofmoney spent on. advertising. Advertisingdoes not change the commoditythat has been purchased; it couldhave been produced and sold at amuch lower price without the advertising.In other words, resources arebeing used and paid for by the consumerwithout his receiving anythingthat he could not have received intheir absence.These are serious criticisms.We have learned to expect them tobe emphasized by contemporaryliberal economists. To Marxistthinkers, again, advertising is essentialfor capitalism; it is seenas a socially useless device necessaryin order to get excess productionsold. They see no positiveelements in advertising at all. Buteven conservative thinkers andeconomists have pointed out someapparent limitations, weaknesses,criticisms of advertising.The Free Economy andHow It FunctionsIt is not my purpose here todefend each and every advertisingmessage. I would rather discussa free economy, a laissezfaireeconomy, pure capitalism. Iwould like to show that in such aworld, advertising would emergewith a positive role to play; thatit would add to the efficiency withwhich consumer wants are satisfied;and that, while the real worldis far from perfect, a large volumeof the criticism would fadeaway were it understood what rolEadvertising, in fact, has to. pIa)in a pure market economy.Let me imagine a world, a freEmarket, in which there are no deceitfulmen at all. All the messages beamed to consumers an

19'72 ADVERTISING 517talk about a world of honest men,men who do not try to deceive.Further, let us imagine a puremarket economy with governmentintervention kept to the absoluteminimum - the night watchmanrole. The government stands tothe sidelines and ensures· the protectionof private property rights,the enforcement of contracts freelyentered into. Everyone thenproceeds to play the game of thefree market economy with producersproducing that which theybelieve can be sold to the consumersat the highest possiblemoney price. Entrepreneur producers,who detect where resourcesare currently being used in lessthan optimum fashion, take theseresources and transfer them toother uses in the economy wherethey will serve consumer wants·which the entrepreneurs believeare more urgently desired, asmeasured by the amounts' of moneyconsumers are willing to payfor various products.We will assume that there isfreedom of entry into all industries.No entrepreneur has solecontrol over any resource that isuniquely necessary for the productionof a given product. No governmentlicenses are required inorder to enter into the practice ofa given profession or to introducea particular product. All entrepreneursare free to produce whatthey believe to be profitable. Allresource owners are free to selltheir resources, whether labor,natural resources, capital goods.They are free to sell or rent theseresources to the highest bidder.In this way the agitation of themarket gradually shuffles resourcesaround until they begin tobe used to produce those productswhich consumers value most highly.Consumers arrange theirspending to buy the commoditiesthey believe to be most urgentlyneeded by themselves. And themarket flows on in the way thatwe understand it.Open CompetitionWe say this is a free. market, alaissez-faire, competitive system.But we do not mean a perfectlycompetitive market, as this notionhas been developed by theneo-classical economists. In a perfectlycompetitive market, eachseller faces a demand curve whichis perfectly horizontal. That is tosay, each seller believes that hecan sell as much as he would liketo sell without having to lower theprice. Each buyer faces a perfectlyhorizontal supply curve andeach buyer believes that he canbuy as much as he would like tobuy of anything without havingto offer a higher price. In such aworld of "perfect competition,"we have what we call an "equilib-

518 THE FREEMAN Septemberrium" situation, that is a situationwhere all things have alreadybeen fully adjusted to one another.All activities, all decisions havebeen fully coordinated by the marketso that there are no disappointments.No participant in theeconomy discovers that he couldhave done something .better. Noparticipant in the economy discoversthat he has made plans todo something which it turns outhe cannot do.In this model of the perfectlycompetitive economy, there wouldin fact be no competition in thesense in which the layman, or thebusinessman, understands theterm. The term "competition" tothe businessman, the layman,means an activity designed to outstripone's competitors, a rivalrousactivity designed to get ahead ofone's colleagues, or those withwhom one is competing. In a worldof equilibrium, a world of "perfectcompetition," there would beno room for further rivalry. Therewould be no reason to attempt to .do something·better than is currentlybeing done. There would,in fact, be no competition in theeveryday sense of the term.When we describe the laissezfaireeconomy as competitive, wemean something quite different.We mean an economy in whichthere is complete freedom of entry;if anyone believes that hecan produce something that canserve consumers' wants morefaithfully, he can try to do it. Ifanyone believes that the currentproducers are producing at a pricewhich is too high, then he is freeto try to produce and sell at alower price. This is what competitionmeans. It does not mean thatthe market has already attainedthe "equilibrium" situation,which goes under the very embarrassingtechnical name of "perfectlycompetitive economy."Non-Price CompetitionNow, economists and others understandgenerally that competitionmeans price competition: offeringto sell at a lower price thanyour competitors are asking, oroffering to buy at a higher pricethan your competitors are bidding.Entrepreneurs will offerhigher prices than others are offeringfor scarce labor. They willoffer to sell a product at lowerprices than the competing store isasking. This is what price competitionmeans. This is the mostobvious form in which competitionmanifests itself.However, we must rememberthat there is another kind of competition,sometimes called "nonpricecompetition," sometimescalled "quality competition." Competitiontakes the form not onlyof producing the identical product

1972 ADVERTISING 519which your competitors are producingand selling it at a .lowerprice, not only in buying theidentical resource which your competitorsare buying and offeringa higher price. Competition meanssometimes offering a better product,or perhaps an inferior product,a product which is more inline with what the entrepreneurbelieves·consumers are in fact desirousof purchasing. It meansproducing a different model of aproduct, a different quality, puttingit in a ditferentpackage, sellingit in.a store with a differentkind of lighting, selling it alongwith an offer of free parking, sellingthrough salesmen who smilemore genuinely, more sincerely.It means competing in .many,many ways besides the pure pricewhich is asked of the consumer inmonetary terms.With freedom of entry, everyenterpreneur is free to choose theexact package, the exact opportunitywhichhe will lay beforethe public. Each opportunity, eachpackage has many dimensions. Hecan choose the specifications forhis package by changing many,many of these variables. The preciseopportunity that he will laybefore the public will be thatwhich, in his opinion, is moreurgently desired by the consumeras compared with that which happensto be produced by others. Solong as there's freedom of entry,the fact that my product· is differentfrom his does not mean that1·am a monopolist.A Disservice to EconomicsThe late Professor Edward H.Chamberlin of Harvard did economicsa great disservice in arguingthat because a producer isproducing a unique product,slightly different from what thefellow across .the street is producing,in some sense he is a monopolist.So long as there's freedomof entry, so long as the manacross the road can do exactlywhat I'm doing, the fact that heis not doing exactly what I'm doingis simply the result of his differententrepreneurial judgment.He believes that he can do betterwith his model. I believe I can dobetter with mine. I believe thatfree parking is more important toconsumers than fancy lighting inthe. store. He gives a differentpackage than I do. Not becausehe couldn't do what I'm doing, notbecause I couldn't do what he'sdoing, but because each believesthat he knows better what theconsumer is most anxious to acquire.This is what we mean bycompetition in the broadest sense,not merely price competition, butquality competition in its manifoldpossible manifestations.Professor Chamberlin popu-

520 THE FREEMAN Septemberlarized a distinction which wasnot original with him but whichowes its present widely circulatedpopularity primarily to his work.That is a distinction between"production costs" and "sellingcosts." In his book of almost fortyyears ago, The Theory of MonopolisticCompetition, Chamberlin arguedthat there are two kinds ofcosts which manufacturers, producers,sellers, suppliers incur.First, they incur the fabricationcosts, the costs of producing whatit is they want to sell. Second,they incur additional expendituresthat do not produce the productor change it or improve it, butmerely get it sold. Advertising, ofcourse, is the most obvious examplewhich Chamberlin cited.But "selling costs" of all kindswere considered by him to besharply different from "productioncosts." In his original formulation,Chamberlin argued that"production costs" are costs incurredto produce the product fora given Demand Curve while "sellingcosts" simply shift the DemandCurve over to the right.That is to say, the same productis now purchased in greater quantitiesat a given price but theproduct is the same.A false DistinctionThe fallacy in the distinctionbetween production costs and sellingcosts is fairly easy to notice.In fact, it is impossible for theoutside observer - except as heresorts to arbitrary judgmentsof value - to distinguish betweenexpenditures which do, and expenditureswhich do not, alter theproduct. We know as economiststhat a product is not an objectivequantity of steel or paper. A productis that which is perceived, understood,desired by a consumer.If there .are two products otherwisesimilar to the outside eyewhich· happen to be considered tobe different products by the consumer,then to the economist theseare different products.Ludwig von Mises gives theexample, which cannot be improvedupon, of eating in a restaurant.A man has a choice oftwo restaurants, serving identicalmeals, identical food. But in onerestal1rant they haven't swept thefloor for six weeks. The meals arethe same. The food is the same.How shall be describe the moneyspent by the other restaurant insweeping the floor? "Productioncosts" or "selling costs?" Doessweeping change the food? No.Surely, then, it could be arguedthat this is strictly a "sellingcost." It is like advertising. Thefood remains the same; but, becauseyou have a man sweepingout the floor, more people cometo this restaurant than to that.

19'i~ ADVERTISING 521But this is nonsense. What youbuy when you enter a restaurantis not the food alone. What youbuy is a meal, served in certainsurroundings. If the surroundingsare more desirable, it's adifferent meal, it's a differentpackage. That which has beenspent to change the package is asmuch production cost as the salarypaid to the cook ; no difference.Another example that.I recallwas the case of the coal being runout of Newcastle and travelingalong the railroad toward London.Every mile that coal travelsnearer the London drawing room,the Demand Curve shifts over tothe right. How shall we describethat transportation cost? "Productioncost" or "selling cost?" Ofcourse, it's "production cost." Infact, it's "selling cost" too. All"production costs" are "sellingcosts." All costs of production areincurred in order to produce somethingwhich will be more desirablethan the raw materials.You take raw meat and turn itinto cooked steak. The act ofchanging the raw meat into cookedsteak is to make the consumerdesire it more eagerly. Does thissimply shift the Demand Curveover to the right? Of course, itdoes that. It does it by changingthe product.Another example supposes thereare two identical pieces of steel,except that one piece has beenblessed, while the other piece issubject to a spiritual taint, whichto the· scientist is not there butwhich is very vivid and vital tothe consumer. How shall we describethe expenditure on the commodities?Shall be describe thedifference between them as nonexistent?Or should we not recognizethat, if something is spirituallytainted to the consumerinhis view, not necessarily inmine or yours or the economist'sor other than in the mind of theconsumer - then he will not buythe tainted item, even though tothe objective laboratory scientistthere's no difference between theitems? The economist has recognizedthese as two different commodities.There'll be two DemandCurves. The fact that the scientistdoesn't see any difference - theylook the same, they smell thesame, if you touch them they feelthe same - is irrelevant. We know,as economists, that what we findin a commodity is not the objectivematter that is inside it, buthow it is received by the consumer.Clearly then, the distinction betweena so-called "selling cost"and "production cost" is quite arbitrary.It depends entirely on thevalue judgments of the outsideobserver. The outside observer

522 THE FREEMAN Septembercan say that this particular sellingeffort does not change theproduct, but in that situation heis arrogating to himself the prerogativeof pronouncing what isand what is not a product. That issomething which violates our fun~damental notions of individualconsumer freedom: that a consumer'sneeds are defined by noone else other than himself. Thismay seem quite a detour from advertisingand yet it is all relevantto the question of what roleadvertising has to play.The Provi$ion of InformationLet us consider how some ofthese notions apply to the matterof information. One of the standarddefenses for advertising· isthat it provides a service whichconsumers value: the provisionof knowledge, the provision of information.People buy books. Peoplego to college. People enroll inall kinds of courses. Advertising issimply another way of providinginformation. To be sure, it wouldseem that the information providedby suppliers comes from a taintedsource, but don't forget that weare imagining for the meantime aworld without deceitful people.We can even relax that assumptionfor a. moment. It may becheaper for the consumer to gethis information from the supplieror the producer than from an outsidesource. In other words, ifyou, a consumer, have the choiceof acquiring information about aparticular product - either morecheaply from the producer or moreexpensively from an outside, "objective"source - you may decidethat,on balance, you're· likely toget a better deal, penny-for-penny,information-wise, by reading theinformation of the producer, scanningit perhaps with someskepticism,but nonetheless relying onthat rather than buying it froman outside source. Technically,this involves what is known as theproblem of transactions costs. Itmay be more economical for theinformation to be packaged togetherwith the product, or at leastto be produced jointly with theproduct, than to have the informationproduced and communicatedby an outside source. Thisis a possibility not to be ignored.Advertising provides information,and this goes a long. way toexplain the role which advertisingand other kinds of selling effortsmust play. Does this not seem'tocontradict the point just made,that there is no distinction between"production costs" and"selling costs"? Surely informationabout a product is distinctfrom the product. Surely the costsincurred to provide informationare a different kind of costs than

1972 ADVERTISING 522the costs incurred to produce theproduct. The answer is clearly,no. Information is produced; it isdesired; it is a product; it is purchasedjointly with the productitself; it is a part of the package;and it is something which consumersvalue. Its provision is notsomething performed on the outsidethat makes people consumesomething which they would nothave consumed before. It is somethingfor which people are willingto pay; it is a service.You can distinguish differentparts of a service. You can distinguishbetween four wheels anda car. But the four wheels arecomplementary commodities. Thatis to say, the usefulness of theone is virtually nil without theavailability of the other. The carand gasoline are two separateproducts, to be sure, and yet theyare purchased jointly, perhapsfrom different producers, differentsuppliers, but they are nonethelessparts of a total package,a total product. If it happens thatthe information is produced andsold jointly with the product itself,then we have no reason toquestion the characteristics of thecosts of providing informationas true "production costs," notproducing necessarily the physicalcommodity about which informationis produced, but producinginformation which is independentlydesired by consumers, independentlybut jointly demanded,complementarily used togetherwith the "product" itself. In otherwords, the service of providinginformation is the service of providingsomething which is neededjust as importantly as the "product"itself.Why the Shouting?There is another aspect of advertisingwhich is often overlooked.Information is exceedinglyimportant. But, surely, it is argued,information can be providedwithout the characteristics of advertisingthat we know, withoutthe color, without the emotion,without the offensive aspects ofadvertising. Surely informationcan be provided in simple straightforwardterms. The address of thisand this store is this and this place.These and these qualities of commoditiesare available at these andthese prices. Why do illustratedadvertising messages have to beprojected? Why do all kinds of obviouslyuninformative matter haveto be introduced into advertisingmessages? This is what rendersthe information aspects of advertisingso suspect. The Marxistssimply laugh it away. They say itis ridiculous to contend that advertisingprovides any kind ofgenuine information. If one rests

524 THE FREEMAN Septemberthe defense of advertising on itsinformative role, then one has alot of explaining to do. One has toexplain why information thatcould be provided in clear cut,straightforw.ard terms is providedin such garish and loudforms, in the way that we know it.The answer, I think, is that advertisingdoes much more thanprovide information which theconsumer wishes to have. This· issomething- which is often overlooked,even by economists. SupposingI set up a gas station. Ibuy gasoline and I have it pouredinto my cellar, my tanks. I have apump carefully hidden behindsome bushes, and cars that comedown the road can buy gas if theyknow that I'm here. But I don't goto the effort to let them know I'mhere. I don't put out a sign. Well,gas without information is like acar without gas. Information is aservice required complementarilywith the gas.Customers Want to KnowWhere to find the ProductSupposing, then, I take a pieceof paper, type very neatly in capitalletters, "GAS," and stick it onmy door. Cars speed down the roadin need of gas, but they don't stopto read n1Y sign. What is missinghere? Information is missing.Don't people want information?Yes. They would like to knowwhere the gas station is, but it's awell kept secret. Now, people arelooking for that information. It'smy task as an entrepreneur notonly to have gas available but tohave it in a form which is knownto consumers. It is my task to supplygas-which-is-known-about, notto provide gas and information.I have not only to produce opportunitieswhich are available toconsumers; I have to make consumersaware of these opportunities.This is a point which is oftenoverlooked. An opportunity whichis not known, an opportunity towhich a consumer is not fullyawakened, is simply not an opportunity.I am not fulfilling my entrepreneurialtask unless I projectto the consumer the awareness ofthe opportunity. How do I do that?I do that, not with a little sign onmy door, but with a big neon sign,saying GAS; and better than thatI chalk up the price; and betterthan that I make sure that theprice is lower than the price atnearby stations; and I do all theother things that are necessary tomake the consumer· fully aware ofthe opportunity that I am in factprepared to put before him. Inother words, the final package consistsnot only of abstract academicinformation but in having thefinal product placed in front of theconsumer in such a form that hecannot miss it.

1972 ADVERTISING 525Free $10 8illslThe strange thing a.bout theworld in which we live is that it isa world in which $10 bills arefloating around, free $10 bills! Theproblem is that very few of usnotice these $10 bills. It is the roleof the entrepreneur to notice theexistence of $10 bills. An entrepreneurbuys resources for $10and he sells the product for $20.He is aware that resources availablefor $10 are currently beingused in less than optimum faShion,that commodities for which consumersare willing to pay $20 arenot being produced, and he putsthese things together. He sees the$10 bill and makes the combinationwhich other people do not see.Anybody might do it - freedom ofentry. The entrepreneur noticesthe $10 bill, gets it for himself byplacing in front of the consumersomething which he had not no~ticed. If the consumer knew wherehe could buy resources for $10and get the product that is worth$20, he wouldn't buy from the entrepreneur.He would do it himself.Since he doesn't know, I, asentrepreneur, have to create thisopportunity and make the consumeraware.It is not enough to buy gas andput it in the ground. The entrepreneurputs it in the ground in aform that the consumer recognizes.To do this requires much morethan fabrication. It requires communication.It requires more thansimple information. It requiresmore than .writing a book, publishingit, and having it on a libraryshelf. It requires more thanputting something in a newspaperin a classified ad and expecting theconsumer to see it. You have toput it in front of the consumer ina form that he will see. Otherwise,you're not performing your entrepreneurialtask.The Growth of AdvertisingAdvertising has grown. Comparethe volume of advertising todaywith the volume of 100 yearsago and it has grown tremendously.More! Consider the price of acommodity that you buy in a drugstore or in a. supermarket. Findout what portion of that price canbe attributed to advertising costsand it turns out that· a much largerpercentage of the final cost tothe consumer can be attributed toadvertising today than could havebeen attributed 50 years ago, 70years ago, 100 years ago. Why isthis? Why has advertising expendituregrown in proportion tototal value of output? Why has advertisingexpenditure grown inproportion to the price of a finishedcommodity? Why has advertisingapparently grown more offensive,more loud, more shrill? It's fairlyeasy to understand.

526 THE FREEMAN SeptemberI give, as ~xample, the lobbywalls of a college building that Iknow very well. At one time thiswas a handsome lobby with wallsof thick marble; you could walkfrom one end of the building to theother and the walls would be clear.SOIne years ago an enterprisingentrepreneur decided to use somefree advertising space. He pastedup a sign. It was the only sign onthe wall; everybody looked at it,saw the message. I don't rememberwhat the message was orwhether it was torn down', but I doremember that soon afterwardthose walls were full of signs. Asyou walked down the passage, youcould read all kinds of messages,all kinds of student activities, nonstudentactivities, student nonactivities.It was fairly easy tolearn about what was going onsimply by reading the signs.At first,. the signs did not haveto be big. But as advertisers sawthe opportunity, the free spacegradually filled up. The Ricardianrent theory came into play; all thefree land was in use. And as thefree land or space was taken, ofcourse, it became more and moreimportant to get up early to pasteup your sign. That was the "rent,"the high price, getting up early.But more than that, it became necessarynow to arouse all kinds ofinterest in me in order to get meto read these signs. In otherwords, the variety and multiplicityof messages make it harder andharder to get a hearing.The Price of AffluenceWe live in a world which is oftendescribed as an "affluent society."An affluent society is one in whichthere are many, many opportunitiesplaced before consumers. Theconsumer enters a supermarketand if he is to make a sensible, intelligentdecision he is going tohave to spend several hours calculatingvery carefully, reading, rereadingeverything that's on thepackages and doing a complete researchjob before feeding all theinformation into the computer andwaiting for the optimum packageto be read off. It's a tough job tobe a consumer. And the multiplicityof opportunities makes itnecessary for advertisers, for producers,to project more and moreprovocative messages if they wantto be heard. This is a cost of affluence.It is a cost, certainly;something that we'd much ratherdo without, if we could; but wecan't.The. number of commoditiesthat have been produced is sogreat that in order for anyoneparticular product to be broughtto the attention of the consumera large volume of advertising isnecessary. And we can expect toget more and more. Is it part of

1972 ADVERTISING 527production costs? Very definitely,yes. It is completely arbitrary foranyone to argue that, whether ornot the consumer knows it,· thecommodity is there anyway, sothat when he pays the price whichincludes the advertising communicationhe is paying more than isnecessary for the opportunity madeavailable. For an opportunity to bemade available, it must be in aform which it is impossible tomiss. And this is what advertisingis all about.One more word about the offensivenessof advertising. Ultimatelyin a free market, consumerstend to get what they want.The kinds of products producedwill reflect the desires of the consumer.A society which wantsmoral objects will get moral objects.A society which wants immoralobjects will tend to get immoralobjects. Advertised communicationis part of the totalpackage produced and made available·to consumers. The kind of advertisingweget, sad to say, iswhat we deserve. The kind of advertisingwe get reflects the kindof people that we are. No doubt adifferent kind of advertising wo~ldbe better, more moral, more ethicalin many respects; but I'mafraid we have· no one to blamebut ourselves, as in all cases whereone deplores that which is producedby a market society.A final word about deceit. Ofcourse, deceitful advertising is tobe condemned on both moral andeconomic grounds. But we have toput it in perspective. Let me readfrom one very eminent economistwho writes as follows:The formation of wants is a complexprocess. No doubt wants aremodified by Madison Avenue. Theyare modified by Washington, by theuniversity faculties and by churches.And it is not at all clear that MadisonAvenue has the advantage whenit comes to false claims and exaggerations.!Take with a Grain of SaltIn other words, we live in a worldwhere you have to be careful whatyou read, to whom you listen, whomto believe. And it's true Qf everything,every aspect of life. If ·onewere to believe everything projectedat him, he would be in asorry state.It is very easy to pick out thewrong messages to believe. Now,this doesn't in any way condoneor justify deceitful messages ofany kind. We have to recognize,however, while particular producersmay have a short-run interestin projecting a message to consumersof doubtful veracity, that1 H. Demsetz, "The TechnostructureForty-Six Years Later," (Yale Law Jour~nal, 1968), p. 810.

528 THE FREEMAN Septemberso long as there's freedom of competitionthe consumer has hischoice not only of which productto buy but who to believe. Andnotice what is the alternative inthis world of imperfect humanbeings. The alternative, of course,is government control - still byimperfect human beings. So thereis no way to render oneself invulnerableto the possibility of false,fraudulent, deceitful messages.It would be nice to live in aworld where no deceitful men werepresent. It would be cheaper. Youcould believe any message re'"ceived. You wouldn't have tocheck out the credentials of everyadvertiser. But that is not theworld in which we live. You checkout the credit standing of individuals,the character of people withwhom you deal; and this is an unavoidable,necessary cost. Toblame advertising for the imperfectionsand weaknesses of mankindis unfair. Advertising wouldexist under any. type of free marketsystem. Advertising would beless deceitful if men were less deceitful.It would be more ethical,less offensive, if men were lessoffensive and more ethical. Butadvertising itself is an integral,inescapable aspect of the marketeconomy. I)WHAT DO YOU HAVETHE POOR-----------LEONARD E. READ-----------WHENEVER he hears someone demanda minimum wage law orany other impediment to freedomin transactions, my friend asks inall seriousness, "What do you haveagainst the poor?" His point iswell-taken. Unquestionably, manysponsors of welfare schemes - thelong-run effect of which is to killthe goose that lays the golden eggs- are well-intentioned. Theirhearts, if not their heads, are inthe right place. The idea that theyare doing offense·to the very personsthey wish to help is a shocker- hopefully, an eye-opener.

1972 WHAT DO YOU HAVE AGAINST THE POOR? 529Perhaps the first shock wouldstem from the thought that aminimum wage law might do injuryto anyone at all. Possibly tothe wealthy employer, but surelynot to the poor!· The fact,· however,is that those who have little to offerin the way of marketableskills are marginal producers atbest; their services are wanted byothers only at very low wages. Indeed,the total disappearance ofsuch marginal producers wouldscarcely affect the over-all economy.So my friend is quite right.It is primarily, if not entirely, thepoor who stand to lose if wagerates are pegged artificially high;those who sponsor minimum wagelaws behave as if they hold agrudge against the poor.The fact that a fair share ofthese sponsors act from motivesof sympathy or pity - that theybear no grudge - in no waychanges the consequences of theiractions..Nonetheless, they victirp.­ize the poor. They hurt most theones they love - and all becausethey fail to recognize these simplefacts:1. The eternal problem of economicsis to overcome seareity.2. Plenitude is achieved by theapplication of human energies tonatural resources and to the exchangeof the numerous specializations.3. The value of anything to anyoneis always a subjective judgment- whatever one is willing togive up or trade for somethingelse.4. Freedom of production andtrade - the free market - is thegoose that lays the golden eggsand all impediments to this process,to the extent of their forceand coverage, are destructive - obstaclesto plenitude.5. Minimum wage laws of say$2.00 leave unemployed all personswhose services are not of thatmuch value to others.6. To the extent of the productivepotential thus unemployed, tothat extent is the number of goldeneggs reduced. But far worse:to that extent is everyone who cannotproduce up to $2.00 an hourdecreed waste and relegated to theeconomic scrapheap.Wage Floors Hurt the PoorNearly all who think of themselvesas professional economists,regardless of their differences onsome matters, agree that minimumwage laws inflict injury firstand foremost on the poor. Eventhe avowed socialist, Gunnar Myrdal,the celebrated Swedish economist,turns thumbs down on thiseconomic monstrosity.! The writingsof economists in support of1 See The American Dilemma (rev. ed.)by Gunnar Myrdal (New York: Harper &Row, 1962).

530 THE FREEMAN Septemberthis point are plentiful, indeed.However, not all sponsors ofminimum wage laws are "goodguys" lacking in economic sense.There are countless thousands,perhaps a majority, whose motivationsare mercenary. The firsttype is to be found in labor union"leadership." The motivationhere is to keep these low-wage,marginal producers off the labormarket, that is, to eliminate themfrom. competition. Permit no oneto wait on table for, say, $1.00 anhour, even if he wishes to do so,and the union gains a monopoly ofwaiters' jobs. Call this crass materialismor what you will, it isnot inspired by sympathy or pity.The second type is to be foundin political "leadership." The motivationhere is to climb on thebandwagon of labor union popularityin order to get elected tooffice. Sympathy? Hardly!As a novelist says of one ofthese characters, "He had learnedto love the poor, profitably!"Minimum wage laws generallycall to mind only those legislativeedicts bearing the label. In 1938the minimum was 25 cents; in1945, 40 cents; and since has risenstep by step to $1.60. Presently,the proposal is $2.00. These edicts,however, are only the obvious.Every arbitrary wage coercivelyimposed by labor unions, over andabove whatever the free marketwage would be, is really a minimumwage. The minimum wagefor a captain of a 747 jet is$57,000 annually. Try to get thejob for less! But stop not here.The tariff and all other restrictionsto free and unfettered exchangesare, in a strict economicsense,minimum wage laws. Thosewho condemn minimum wage laws,so called, and lend support to otherinfractions of the free marketsuch as wage and price controlsare proclaiming their inconsistency.Everyone of these fixitiesand rigidities - these closures ofthe market - wreak their hardshipon consumers; and the poorer theperson, the greater the hardship!A More Helpful ApproachWhat is the alternative? Whatadvice shall we give the personwho earnestly desires to help "thepoor?"First of all, he must recognize:3nd respect as an individual theone he would love - which meansto encourage but in no way to interferewith that person's capacity,will, and effort to help himself.In other words, afford himevery opportunity to earn. his way.How earn it? By serving others,of course. How else does anyoneearn anything! And what is themost likely opportunity for a poorman to earn his way? By sellinghis services to the highest bidder

1972 WHAT DO YOU HAVE AGAINST THE POOR? 531in open competition. Let. buyerscompete for his services - whichmeans, in general, that the highestbidder will be the employer whocan most profitably use that person'sservices. That employer willearn a profit, not because he is exploitinganyone, but because he ismost efficiently using scarce resourcesfor purposes that consumerswant and can afford. And "thepoor" will reap benefits both asemployees and consumers as theymove upward out of poverty.The question is this: how canthese countless thousands in thelabor union and political categoriesso flagrantly abuse the poorand be applauded rather than condemned.for their actions? The answeris that labor union peopleand politicians who sponsor thisnonsense are doing precisely whatmost citizens believe to be right.The overwhelming majority of citizens,operating on good intentions,fail to recognize that impedimentsin the market mustfrustrate their objective. Were theconsensus free-market oriented,the political meddlers would notget to first base with theirschemes; they would be thrownout of office.The next question is, what shallbe done to bring more light intothis darkness? Perhaps it boilsdown to this: more individualsthan now learning to respect thepreferences of others as well astheir own. If I prefer to wait ontable for $1.00 an hour, whyshould not this disposition on mypart be as much honored as thatof another who prefers to bePresident of the U.S.A.? Maybeyou prefer teaching for the sheerjoy of it - psychic gain - to runninga cannery where you mightmake a fortune - monetary gain.I say, blessings on you and on allothers whatever their preferences,so long as you and they are peaceful.This is no more than simplejustice, and anyone who acts tothe contrary dons the robes of adictator, intending to run the livesof others.A Fount of WisdomThis simple justice and theaforementioned simple facts wouldseem to be within the grasp andthe practice of a majority of citizens.It is my contention that theseare attainable achievements inthe moral and economic realm. Byand large, however, they are notattained. Why? What is the impedimentthat hinders us from actuallyattaining the ends which infact are within our power to attain?A priceless answer if it canbe discovered! Let me share athought that is becoming moreand more a conviction. The essenseof this thought was expressed byRalph Waldo Emerson:

532 THE FREEMAN SeptemberWe lie in the lap of immense intelligence,which makes us receivers ofits truth and organs of its activity.When we discern justice, when wediscern truth, we do nothing of ourselves,but allow. a passage of itsbeams. (Italics mine)I have quoted this before, certainthat it expressed an importanttruth. However, it took theremarks of a recent acquaintanceto .help me realize its full meaning.Thisindividual, as we met forthe first time, acknowledged howhelpful my writings had been, andthen added, pointing to the head,"It, is all here. You have merelyhelped me put together and to betterunderstand that which is alreadywithin me." This is an insightthat rivals Emerson's!Emerson's point now seemsclear to me and it helps to explainwhat stands between the attainableand its attainment: a failureto realize one's potential or an un-willingness to discover and to heedthe truths within.As Emerson so eloquentlyphrases it, we do, indeed, "lie inthe lap of an immense intelligence."As with all radiant energy,this intelligence is in constantmovement and it flowsthrough all life. The problem ofgaining understanding is one ofarresting "its beams," of interceptingor appropriating thatwhich already is within us or ispassing through us.We can be helpful to one another,not by posing as this intelligencebut by using, expressing,sharing such of this mysteriousenergy as we may be fortunateenough to intercept. Once this wayto enlightenment is perceived andpracticed - a near reversal ofpresent methods - then we maybefriend the poor, not merely inproclaimed intentions but in reality.Our hearts and heads will beworking in harmony. ~JDEAS ONLIBERTYFrom WithinNo CHURCH has ever gone into politics without coming out badlysmirched. Individual Churchmen may be, and ought to be, if theyare well informed, interested in schemes of social legislation; butto advocate a sloppy socialism~under the name of "Christian politicsand economics" is, in my opinion, an impertinence....Christianity aims at saving the soul- the personality, the natureof man, not his environment. In direct opposition to Marxiansocialism, we are taught that from within, out of the heart of man,comes all that can exalt or de,file him.WILLIAM RALPH INGE

A CloserLook atCHARLES E. WEBERWHEN WE CONTEMPLATE the goldcoins from previous centuries weare painfully reminded to whatextent modern man has lost hismonetary freedom and hence animportant aspect of his economicfreedom. For thousands of years,with only relatively few and briefexceptions prior to 1915 (or 1934in the case of the United States)nearly all nations in the mainstream of human progress haveenjoyed the advantages of the useof gold coinage as a monetary medium.Cowrie shells, stone wheels,rolls of bright bird feathers, salt,bronze ingots and the like wereDr. Charles E. Weber received his Ph.D. fromthe University of Cincinnati in 1954 on thebasis of a dissertation on the incunabula (booksprinted prior to 1501 A.D.) in the Germanlanguage. After military service in World WarII, at times as a member of intelligence units,he resumed his education and started histeaching career at the University of Missouriand the University of Tulsa, where he has beenteaching since 1956. except for four years atLouisiana State University (1962-1966).Dr. Weber is the author of numerous articleson literature, history and monetary questions.generally the monetary media ofonly the least advanced peoples.Restraints on the use of goldas a monetary medium were rarein previous centuries, so rare, infact, that we are tempted to speculatethat many of the social andeconomic problems besetting theworld in recent decades might notsimply be concomitant phenomenaof the decline of the public monetaryuse of gold,' but even the resultsof this decline. In our owncase, it is probably not a merecoincidence that since 1934, whenthe monetary use of gold was prohibitedto U.S. citizens, the publicdebt has climbed to levels thatcould scarcely have been imaginedforty years ago, the purchasingpower of the national monetaryunit has deteriorated so badlythat this decline has become amajor national problem, exporttrade has declined, the centers oflarge cities have been rotting at

534 THE FREEMAN Septemberan accelerated pace and the problemof overpopulation has begunto threaten the very quality of lifeto which we had become accustomed.Prior to 1934 the use of goldas a monetary medium had beendeeply rooted in our economic andlegal traditions. Undoubtedly as areaction to the chaos caused byexcessive issues of paper moneylbefore and during the Revolution,the Constitution provided in ArticleI, Section 10, that "No stateshall ... make any Thing butgold and silver Coin a Tender inPayment of Debts."2 A handsomeU.S. gold coinage was commencedin 1795 to supplement the foreigngold in circulation, which continuedto have the status of legaltender until 1857 on the basis oflaws of 1793, 1816, 1834 and 1843.It was this sort of legal precedentthat was the basis for the mone-1 For a thorough, lavishly illustratedhistory of the paper money issues of ourland from 1690 to 1789 see the brilliantvolume by Eric P. Newman, The EarlyPaper Money of America. Racine, 1967.2 In defending this provision, JamesMadison (The Federalist Papers, No. 10)speaks of "A rage for paper money, foran abolition of debts, for an equal divisionof property, or for any other improperor wicked project...." In No. 44he continues in the same vein: ". . . thepestilent effects of paper money on thenecessary confidence between man andman, on the necessary confidence in thepublic councils, on the industry and moralsof the people, and on the character ofrepublican government ..."tary stability of the country (andprobably its economic progress)down to recent years.Fiat Money in FranceThere is an interesting parallelin French monetary history. Whenthe revolutionary government ofFrance at the end of the 18thcentury tried to substitute papermoney (assignats) supposedlybased on the value of confiscatedchurch properties, economic chaosresulted. 3 Later on, Napoleon Isaw the need of a reform to overcomethe paralysis and reinstatedthe use of the precious metals. Hisintroduction of the twenty francpiece (the "napoleon") in 1803was an act of far-reaching consequences,as we shall see below.Russia had also tried paper money,likewise designated by a similarword, assignashii. 4Although a number of governmentsmake every desperate attemptto suppress the monetaryuse of gold, faith in the sunmetal as a store of value is deeplyingrained in the economic commonsense of human beings allover the world. When I was in3 For details, see Andrew D. White,Fiat Money Inflation in France (Irvington,N. Y.: Foundation for EconomicEducation) .4 See the well illustrated volume onRussian monetary history by I. G. Spasskii.RUSSKAIA MONETNAIA SIS­TEMA, "Aurora" Press, Leningrad, 1970,p. 201.

1972 A CLOSER LOOK AT GOLD 535Russia in the summer of 1970, ayoung man explained to me thatthe old five rouble pieces struckon the standard used beginningwith 1897 are now fetching about90 paper roubles, nearly a typicalmonth's wages in the presentSoviet State. The grimly strictmonetary laws and energetic propagandaof the Soviet State 5 hadnot been able to eradicate a desirefor and a trust in gold. Duringand immediately after World WarII many a family was able toavoid starvation by gradually givingup one gold piece after theother to purchase food that couldotherwise not be obtained in economiesparalyzed by war and postwarcontrols.A Coin at WorkLet us contemplate a half eaglestruck by the young United Statesin 1800. As in the case of the vastmajority of gold coins struck inthe world before 1800, there isalso no designation of value orweight on this piece. Gold coinsneed no designation of value orlegal tender status to function5 Strange to say, during the earlyyears of the Soviet State, gold coins werestruck with the weights of the older tenroublepieces struck as late as 1911. TheSoviet gold gieces were dated 1923 andbore the emblem of the State and a sowingpeasant. There is evidence that thesepieces were struck in very large quantities,but today they are very scarce.Doubtless the bulk of them were remelted.·well. The piece we are contemplatingis worn, so badly worn that itsdesigns are only slightly above thelevel of the fields, but its weightis 8.50 grams, only about 3 percent below its legal weight of 135grains (8.748 grams).Now let us reconstruct the tremenq.ouseconomic task that thisgold piece performed so well' andso long. The wear on this piecewould suggest that it was in circulationat least until the weightreduction of 1834 and perhapsquite a bit longer. If it changedhands on the average of just oncea week over a period of 50 years,it changed hands more than 2,500times and was thus involved in anexchange of more than $12,500.However, the really remarkableaspect of this performance lies inthe fact that every time itchanged its owner, the new ownerwas guaranteed a stable value aslong as he wished to keep thepiece. What were the costs of thisremarkable performance? About15 cents' worth of gold lostthrough wear and the very modest·cost of striking the piece. Tohave printed paper money for thisperiod of circulation would haveapproached or exceeded the mintingand gold loss costs. Far moreimportant, however, is the factthat the costs of the gold loss andminting were a very trivial considerationin relation to the social

536 THE FREEMAN Septemberand economic benefits of the goldpiece. Modern paper money, withouta connection with the preciousmetals, sinlply cannot fulfill thetraditional capacity of gold coinageto function both as a mediumof exchange and a store of value.Not only does gold coinage goback to the early days of theAmerican Republic, but it coverssome twenty-seven centuries ofWestern Civilization. It was, inturn, antedated by an even earlier,specifically monetary use of gold,a use that can be r'eadily documented.Thus, a nlural paintingfrom Thebes, Egypt, assigned tothe reign of Thutmosis III, 1501­1447 B.C., shows the weighing ofgold rings and holed disks. 6 Detailsof this painting reveal thestatus that gold had attained as amonetary medium. The weightson the balance pan are in theform of bovine heads and sheep!This illustrates the fact that atransition had been made from aneconomy in which cattle were usedas exchange to one in which theprecious metals had taken theirplace, but the tradition of the cattleexchange is preserved in the6 For a reproduction of this painting,see Heinrich Quiring, Geschichte desGoldes / Die Goldenen Zeitalter in ihrerkulturellen und wirtschaftlichen Bedeutung.Ferdinand Enke Verlag, Stuttgart,1948, page 48. This book, by the way, isan excellent source of information on thehistory of the mining, refining and useof gold.very shape of the weights. Tomention a later parallel, the earlierLatin word for money, pecunia,developed from pecus, meaning"cattle." In the case of theTeutonic languages, the Germanword for cattle, Vieh, is a cognateof English fee.American Indian civilizationsnever developed a gold coinage asdid the Europeans, but gold wasused as a medium of exchange inthe form of quills filled with golddust. Undoubtedly, too, the manypre-Columbian gold ornaments,often of considerable artisticmerit, played some sort of monetaryrole.Coinage in Ancient GreeceThe very beginnings of Greekgold (or more specifically, electrum)coinage are nebulous. Onetype with two confronted lions'heads is actually inscribed "Alyas,"a variant form of the name ofKing Alyattes, fourth of theMermnad kings of Lydia, whoreigned 610-561 B.C. Far moreabundantly preserved, however,are the electrum pieces of·variousweights (1/12, 1/6 and 1/3 staters)bearing the head of a lionwith a radiate knob on the forehead.The ~·eights of these piecesare astonishingly consistent. Sixspecimens of the 1/3 stater preservedin the Boston Museum ofFine Arts have the narrow range

1972 A CLOSER LOOK AT GOLD 537of 4.66 grams to 4.71 grams, withfracional pieces in a close proportion.7 Other very importantearly series of electrum coinswere those of .Kyzikos in Mysia(started before 550 B.C.), Mytileneon the island of Lesbos (ca.500 B.C. ff.) and Phokaia in Ionia(started before 500 B.C.). Theseearly gold series consisted of electrum,a more or less natural mixtureof gold and silver, such aswas mined in what is now westernTurkey. Later on, more sophisticatedrefining methods wereused to prepare the planchets. Thehuge gold coinages of the kingsof Macedonia, Philip II (359-336B.C.) and Alexander the Great(336-323 B.C.), are notable for thefact that they consisted of nearlypure gold, with specific gravitiesranging around 19 (pure gold:19.3 times the weight- of water).By the time the autonomy of theGreek states had been extinguishedby the expanding Roman Empire,no less than fifty of them hadstruck.gold coins.The Roman Republic and subsequentlythe Roman Empire hadas a gold unit the aureus, whichwas first struck in quantity7 An excellent source for the metrologicalaspects of the earliest electrumcoinage, including the specific gravitiesof many specimens, is the catalogue ofthe holdings of the Boston Museum ofFine Arts published by Agnes Brett in1955.around 46 B.C. At that time ithad' a weight of 1/40 of a Romanpound (8.19 g). Its high puritypersisted hut its weight graduallysank over a period of nearly fourcenturies.The SolidusThe next great gold series, thesolidus, got its start in the earlyfourth century under Constantinethe Great (reigned 306-337 A.D.).The solidus was one of the mostremarkable and enduring of allgold coins. Its weight and finenesswere maintained with only occasionalvariations for over sevencenturies, in spite of all the military,economic and political vicissitudesof the late Roman Empireand its continuation in the east(the "Byzantine" Empire). Duringthis very long period the solidushad little competition in ~heworld except for the gold of theIslamic dynasties which originallystarted as imitations of the Byzantinesolidus during the seventhcentury. The Ostrogoths in Italyalso imitated the solidus in greatquantities during the fifth andsixth centuries, but unlike the Islamicimitations, the Ostrogothicsolidi bore the name and portraitsof the Byzantine emperor and canbe distinguished from the Byzantinepieces only· by subtle stylisticdifferences. So familiar was theworld with the solidus that we

538 THE FREEMAN Septemberseldom find specimens with cutsto test the authenticity of thepieces; forgeries of them wereevidently rare. Hoards of themhave been found as far away asScandinavia. Although we haveno exact mint records from theByzantine Empire, the mintage ofthe solidus was certainly enormous.As late as about 1950, common,worn solidi could be had foras little as about $12., not muchmore than twice their bullionvalue. sAfter the decline of the solidusin the later medieval period it wassupplanted by several importantItalian, Hungarian and Germanseries. Florence struck the fiorinod'oro (gold florin) beginning withthe year 1252. It was imitated ina land with big gold mines, Hungary,in the 14th century andlater. In Germany and the Netherlands,in turn, large quantities offlorins were struck in the 15th8 To illustrate the constancy of thesolidus, specimens in the author's collectionweigh as follows: A solidusstruck in Milan under Honorius (395-423A.D.) weighs 4.47 grams with a specificgravity of about 18. A lightly circulatedspecimen of Constantine VIII (1025­1028) with an inspiring portrait of Christweighs 4.37 grams with a specific gravityof a bit less than 19, nearly pure gold. Inthe subsequent decades the weight andfineness of the solidus declined sharply,but Byzantine gold coinage persisted intothe 14th century. For a detailed analysisof the debasement of the solidus in theeleventh century, see Byzantinische Zeitschrift,1954, pp. 379-394.and early 16th centuries, but theydeclined in weight and finenesswhen the German gold mines beganto be so badly depleted thatthe gold became too dear in relationto the huge supplies of silverflowing from Saxony and Bohemia.(The first large-scale coinageof the predecessor of the silverdollar was done in Saxony,1500 if.) The Rhenish gold florinwas struck in enormous quantitiesin such towns as Frankfurt, Cologne,Nuremberg and Utrecht. Aquarter million of them werestruck in 1418 in Frankfurt aloneand· Basel struck 126,020 duringthe years 1434-5.The Gold DucatOn 31 October, 1284, the MaggiorConsiglio of Venice decidedto mint the gold ducat, one of themost important gold coins of alltimes. It is still being struck fromdies dated 1915 in the ViennaMint nearly 700 years later. InVenice itself, the ducat was struckwith the same design (St. Markand Doge) down to the end of the18th century. The ducat weightand fineness became a favorite inGermany, the Netherlands, Poland,Scandinavia and Russia. Itwas even crudely imitated as faraway as India, where the Venetianoriginals were also in use.England, France, Spain andPortugal had many gold coinages

1972 A CLOSER LOOK AT GOLD 539in the later middle ages, but theywere of great variety. An outstandinglysuccessful Englishcoin of the late medieval periodwas the noble, which was imitatedto some extent in the Netherlands,but the English and French kingschanged their standards too oftento establish gold coins of the greatsuccess and influence of the solidusand the ducat. The Spanishexploitation of the large depositsin Mexico, Bolivia and Peru resultedin the huge escudo coinageof the 16th to 19th centuries. Itsmultiple of eight is familiar to usas the doubloon.As noted above, the gold coinageof the United States wasstarted in 1795, with a modestweight decrease in 1834, afterwhich U.S. gold coinage was continuedfor almost exactly a centuryon the same standard. About3/4 of .the enormous U.S. goldcoinage was in the form of doubleeagles (1850 if.).The Lat;n Monetary Un;onIn France a new gold coinagewas introduced in 1803 that continuedto be of great importanceuntil 1914. Denominations of5, 10, 20, 40, 50 and 100 francpieces were struck at varioustimes but the most important wasthe 20 franc piece. The Frenchstandard was copied in Italy,Switzerland, Belgium, Spain,Greece, Serbia, Bulgaria, Romaniaand other lands, in some caseswith different names. Some goldcoinage on the franc standard continuedeven after World War I,especially in Switzerland. In recentyears the French governmenthas struck considerable quantitiesof gold using dies with olderdates. The prosperous GermanEmpire struck large quantities ofgold on the mark standard (1871­1915), while the huge Englishsovereign coinage (1816 ff.) stilldominates the trade in coinedgold.India had a long tradition ofmonetary gold use before the establishmentof the present Republicof India with its socialisticorientation and hence hostility toprivate ownership of gold. Goldcoinage of the European type wasintroduced to India no later thanthe time when the Bactrian Empirestruck gold in a quite Greekform and with Greek inscriptions(ca. 250 B.C. ff.). Later on therewere other very important Indiangold series. The Kushan gold coinswere fairly close imitations of theRoman aureus, many hoards ofwhich have also been found inIndia. The very abundant Kushangold coinage was at first of highpurity, like the Roman aureus,and it is even assumed that the.planchets for it were preparedfrom remelted Roman gold. Dur-

540 THE FREEMAN Septembering the first and second centuriesthe Roman Empire had a severebalance of trade problem with Indiabecause of the commerce inspices, gems and other Indiangoods desired by the luxury-lovingRomans.Debasement in IndiaWith the decline of the KushanEmpire its gold coinage becameseverely debased, especially afterabout 200 ~.D. After about 320A.D. the Gupta kings also continuedgold coinage in importantquantities. After the decline ofthe Gupta realm, Le., after about450 A.D., a number of Hindudynasties continued gold coinage.The famous uninscribed and enigmaticelephant pagodas of perhapsabout 1300 and later are nowbelieved.! to be the private productsof Indian goldsmiths. In thenorth the Islamic rulers (the Sultansof Delhi and subsequently theMughal Emperors) struck gold inlarge quantities. In the south, theHindu Vijayanagar Empire strucklarge amounts of a very neat goldcoinage between 1377 A.D. andthe disastrous Battle of Tallikotain 1565. Beginning with the 16thcentury, various European powersstruck gold series for their territoriesin India; the Portuguese,the Dutch, the French, the Danesand especially the British, who. first imitated the trusted goldcoinage of the moribund MughalEmpire before striking gold inthe European style.In Japan, which has gold minesthat have been worked since medievaltimes, gold was used in theform of oval plates punched withvarious devices. During the 19thcentury base gold rectangles wereproduced in considerable quantities.Just as the Meiji Erabrought so many other changes toJapan, its earliest years saw theintroduction of a very beautifulgold coinage of occidental stylebased.on the U.S. gold denominations.So highly prized are 20 yenpieces of 1870 (46,139 struck)that they fetch over one millionyen today. With the exception ofa few gold issues in this century,China has virtually no traditionof the coining of gold, although ithas been prized for artistic usesfor many centuries in China.3000 Years of GoldI have surveyed the history ofgold coinage in some detail herein order to show what a greateconomic role it has played innearly every civilization (with thenotable exception of the Chinese),European traditions of the monetaryuse of gold can be tracedback for nearly three millenia inthe form of gold coins alone.The decline of gold coinage wehave witnessed during the last

1972 A CLOSER LOOK AT GOLD 541three to five decades 9 thus representsa radical departure in monetaryaffairs. The coining of goldhad hitherto been interrupted onlysporadically by attempts to substituteother media for the preciousmetals.It is undeniably true that manymodern economists harhor astrong bias against the monetaryuse of gold. This bias is by nomeans difficult to explain, sincethese economists are the ones whosee the most important role forthemselves in governments whichintervene strongly in the economy.Gold strongly restricts governmentalintervention in the economyand the redistribution ofwealth from the productive to thenon-productive components of thepopulation. Perhaps to some extent,too, the bias against the monetaryuse of gold is simply basedon ignorance about the presentand past monetary roles of gold.After all, a new generation hascome onto the scene since 1934.We appreciate the role of goldas an honest, constructive mone-9 The coining of gold has by no meansceased altogether, even in the case ofgovernmental mints. During the last 10to 15 years or so the following governmentshave struck gold in quantity:Austria, Republic of China, DominicanReDublic, Egypt JFrance, Great Britain,Katanga, Mexico, Persia, Peru, SouthAfrica, Spain and Turkey. In some casesolder dies were used. Many other landshave also struck gold in token quantities.tary medium when we considerthe nature of its enemies. Keynes,whom Lenin lauded before the SecondCongres'S of the CommunistInternational, considered gold abarbarous relic. Typically, the peoplewho are shouting most loudlythat gold is a barbarous relic arethe very ones who are most adamentin their demands to suppressthe monetary use of gold by force.(Who, really, are the barbarians?)These "experts" must know fullwell just how powerful gold is inspite of their public denials thatit should play a role in the monetarysystem and in spite of theirclaims that it is worthless exceptfor filling teeth and the like.Private CoinageWhen governments have refusedor have been unable to strike goldcoins in sufficient quantities forcommerce, private persons haveprovided gold coins in many instances.We need only think ofthe many private gold coinages inthe United States alone: theBechtler gold pieces struck inNorth Carolina in the 1830s andlater, in addition to the massiveamounts of gold struck privatelyin California in the 1850s andlater. There have also been manyprivate gold series in India andGermany, for example. A largeprivate striking of gold on theducat standard has taken place in

542 THE FREEMAN SeptemberGermany during the last two decades.In addition, many fogeriesof well-known gold types with fullor nearly full weight and finenesshave been made in large quantitiesin recent decades. The Americandouble eagle, the British sovereignand the 20 franc piece have beenfavorite forms of the counterfeiters,whose activities haveflourished on a vast scale in recentyears because of the need for goldcoinage and the failure of publicmints to perform their traditionalduties of providing gold in convenientform.Because' of the strong biases ofmany economists against the monetaryuse of gold, a number ofmyths and erroneous conceptionshave grown up about gold coinage.Even some libertarian economistsare lacking in sufficientknowledge about the history ofgold coinage to refute the nonsensethat is often deliberatelypropagated.It is an error to assume that allgold coinages were constantly beingeroded in value by debasementand weight reductions. Indeed,the really important gold serieswere struck overlong periods oftime, in some instances for manycenturies, without substantial re­.ductions. One need only think ofthe solidus, the ducat, the escudoand the vast gold coinages of· thenineteenth century; the sovereign,the double eagle and the napoleon.It is also an error to assumethat the frauds committed in connectionwith gold coins were ofvery great importance. Sometimescoins were filed or sweated (frictionin bags in which the gold dustwas collected) and sometimes testcuts were made by which a smallamount of gold was removed.However, such frauds could readilybe detected by gold scales.Forgeries existed and there wereprinted descriptions of them asearly as the 15th century. Still,such frauds are quite insignificantcompared to the vast frauds carriedout in connection with papermoney, which is cheaper to counterfeitthan gold coins. Of vastlygreater importance, of course, isthe fraud carried out against productivecitizens by governmentsthemselves which refuse to coinprecious metals and keep issuingever greater quantities of papermoney.It is still another error to assumethat gold is the ally only ofthe wealthy. In this age of complicatedtax laws and deceptive monetarypolicies it is the wealthy whocan afford the best advice on taxesand investments. For the saver ofmodest means, a Iittle hoard ofgold and silver has often provedto be the best protection againstconfiscation of his savings by devaluationsof currency.

1972 A CLOSER LOOK AT GOLD '543There's Plenty of GoldThe argument that there is "nolonger enough gold for monetarypurposes" is one of the more absurdarguments that has beenmade against the return to themonetary use of gold. The UnitedStates could start minting goldagain within the very short timerequired to prep,are the dies.Plenty of gold could be deliveredto the mints from the mines nowkept idle by governmental restrictions.Any seigniorage chargedshould not exceed the actual mintingcosts. As to the relation of thenew gold coins to the huge heapsof paper money now in circulation,the problem could be easilycircumvented· simply by omittingany designation of value on thecoins and employing the familiarweights and fineness of the quartereagles, half eagles, eagles anddouble eagles. The double eagles,for example, might bear the inscription"516 GRAINS, 900FINE" instead of the erstwhile"TWENTY DOLLARS." As in previousgenerations, the deliverers ofgold to be minted would be chargeda small fee for minting costs andthe gold pieces would be theirs tokeep or put into commerce.Striking gold coins without anydesignations of value on them is aprocedure that was not only usedin previous centuries, but also inrecent decades. Consider the followingexamples: Beginning in1921, Mexico had struck goldpieces so~ewhat larger than theU.S. double eagle. The Mexicanpieces are known as the "centenario"because they originallycommemorated the centennial ofthe Republic. For years thesepieces were struck in large quantitieswith the designation of 50Pesos. By 1943, however, the designationhad become meaninglessbecause of the considerable depreciationof the value of theMexican paper and silver currency.In 1943 the centenario appearedwithout the usual inscriptionof 50 Pesos but with aninscription describing the weightand fineness, the really importantfactors. There are many variationson the procedure. GreatBritain, for example, struck over30 million sovereigns between1957 and 1966 for overseas trade.These continued to bear no designationof value, just as all modernsovereigns (since 1816) had bornenone.Market Sets the ValueIf the government were to resumethe striking of gold pieces,as it should without delay, itwould be easy to determine whatdesignation of value, if any, wereto be put on them after supply anddemand had established a price interms of other media. For purely

544 THE FREEMAN Septembermonetary purposes, however, nodesignation of value would reallybe necessary, since gold coinsneed no legal tender status towork well, both as a medium ofexchange and as a store of value.The lessons of monetary historyare clear. Without the resumptionof gold coinage or at least a freecommerce in all of the preciousmetals, including especially gold,inflation will go on and on and on.Even just the tolerance of a freegold market would inhibit inflationby providing a constant gaugeof the value of other monetarymedia.Those being hurt by inflationshould bear the following in mind:The reason that governments 'witha redistributive economic philosophyfrown on gold coins is becauseof the fact that inflation isa big aid if not, indeed, an ·essentialfactor in the redistributiveprocess. If those persons' ingovernment circles who are talkingabout "fighting inflation" were atall sincere, they would immediatelyremove all restrictions on themining and monetary use of goldand resume a govern'mental functionwhich had been taken forgranted for literally thousands ofyears in western thought, thestriking of gold coins with anestablished weight and fineness.Those being hurt by inflationhave a powerful weapon at theirdisposal if they would only realizeit and act accordingly. They couldrefuse to buy all bonds, public or. private, that did not contain goldclauses. While it is true that goldobligations have been repudiatedin the past,10 the constant demandfor gold obligations would undoubtedlyhave an influence onnational monetary policies. Restorationof the right to own goldand make contracts in terms ofgold would be a major step towardrestoration of the basic principleof economic freedom, a freedomno less sacred than other freedoms.The restoration of our traditionalrights with regard togold should be vigorously supportedby all those who prizeeconomic freedom and abhor theemptiness, stagnation, decay andoppression of the omnipotent socialisticstate. ~10 But not without a loss of face. Therefusal of the United States to redeemgold bonds after 1934 was perhaps thegreatest breach of faith that had beencommitted by it as of then. The exactwording of these bonds is significant. Goldbonds dated May 9, 1918, for example,contain the following clause: "The principaland interest hereof are payable inUnited States gold coin of the presentstandard of value." Although the bankruptcyof an individual may be, in a technicallegalsense, different from the bankruptcyof a nation, the failure to redeemnational obligations in precious metalshas always been an act parallel to thebankruptcy or dishonesty of an individual.

STANLEY Y ANKUSCAU,SEANDEFFECTIN ANY specific community duringany specific period of time, theweather, the water supply, theschools, the customs, the language,the government, and various otherenvironmental factors are nearlyidentical for all persons. In suchsimilar influences and surroundingsit would be reasonable to expectthe lives of the people to beas similar as sardines. But theyare not. It is easy to observe thatthe lives of some men and womenare marred by hatred, scorn, envy,fights, and even murder whileothers live quiet, respectful, honorable,peaceful lives in the samevicinity.This startlin,g contrast makesit evident that some individualsare able to achieve a high degreeof self-improvement while othershave little success.Mr. Yankus moved to Australia from Michiganin protest against government intervention inagriculture, but knows that it is not a sufficientpurpose for his life.The men and women who usuallyfail in their self-improvement seeno rhyme or reason in the eventsthat take place in their lives. Asthey see it, life is a series ofgambles. If something goes wrong,it was an accident; if somethingturns out all right, it was pureluck.Those who are successful intheir self-improvement havelearned that opportunities are aproduct of cause and effectchanceplays no part. Favorableopportunities are produced by theuse of good methods and hardwork.Cause and effect run throughthe entire gamut of human experiences,from one's smallestpleasure to his biggest problem.In order to find the happiness weseek in life, it is beneficial to understandthe role of cause and effect.It is my purpose to examinethe relationship between cause andeffect, self-improvement and free-545

546 THE FREEMAN Septemberdome Let me begin with these twopremises: (1) Cause and effectoperate in the universe. (2) Selfimprovementis the most effectivemeans of creating freedom.A farmer near Crystal Brook,South Australia said, "I will paya reward of two dollars to anyonewho can tell me something thathappened without a cause." Thereward money attracted many wildguesses from people who wereeager to get an easy dollar fromthis farmer. But none of theanswers were valid.After some thought, most peoplewill concede that everythinghas a cause, but the thought ofhaving to accept responsibility forall of their troubles produces fear.So the concession is hedged : "Yes,but I am not in complete controlof all the causes that producetroubles in my life. It is not myfault that other people injure me,lie to me, and cheat me in variousways. Furthermore, my freedomis curtailed' by a socialistic governmentover which I have nocontroL"Put Yourself in ChargeAssume for a moment that youwere in charge of the planet,Earth, and it was up to you toarrange the scheme of things. Nodoubt, you would want to arrangethe affairs of this world so noone could write you a letter ofcomplaint. The only way you couldavoid all complaints is by establishingperfect justice. What isj ustice e~cept to give to each personexactly what he deserves?The means of accomplishing justicewould be to have cause andeffect operate in all things: goodfor good, bad for bad, no worknopay. In spite of appearances tothe contrary, that is how I perceivethe world to be arranged.Our perception of how the worldis arranged is very important becausealmost all of our actions relateto it.One of my good friends believesthat all diseases are caused byharmful living habits and wrongeating instead of contagiousgerms. To prove his belief in causeand effect to an acquantance, hesaid: "Do you think that God getsup in the morning yawning,stretching and saying, 'Gee whiz,I slept badly last night and I amnot in a good mood this morning.So I think I will show the peopleon earth some of my mighty power.I'll give Jack diabetes, I'll giveTom polio, I'll give Robert rheumatism,I'll give Henry a heart attack,and I'll give Sam cancer.' Ordo you think that God establishedperfect laws of cause and effectwhich work unfailingly and justlyat all times and to all people onthis earth?" Without hesitation,the acquaintance decided that

1972 CAUSE AND EFFECT 547cause and effect operated, in theuniverse. The Bible explains causeand effect in this way: "Be notdeceived; God is not mocked: forwhatsoever a moan soweth, thatshall he also reap." (Galatians 6 :7)Freedom Not for SaleDo you really want freedom?Your sincere and eager reply maybe, "Yes, of course. Give it to me."But is that possible? Let us investigatethe means of getting anyand every fragment of self-improvementwe possess. Supposeyou want to learn how to speak aforeign language, or learn how tobuild a modern home, or learn howto repair a radio, or learn anyother skill. Can you go into a retailstore and buy these skills fora thousand dollars, or can yourparents or anyone else who lovesyou give these skills to you as agift, or can the senators and representativesin government enrichyour life with these skills by passinglaws, or could you side-step allthe hard work and steal theseskills on some dark night? Ofcourse, you cannot.Isn't it magnificent the way theCreator arranged the scheme ofthings so no one could cheat onhis or her self-improvement! Youget nothing for nothing; you onlyget exactly what you deserve as areward for your personal effort.This is proof that cause and effectoperate in the acquisition of allself-improvement. And since freedomis obtained by self-improvement,it becomes clear that freedomhas to be earned by each individualwho wants freedom. Letit be emphasized that freedom isan individual affair in self-improvementwhich can begin rightnow. Those who wait until the nextelection to increase freedom, waitin vain. It is a vain hope to believethat freedom can be establishedin a nation by benevolentstatesmen for the perpetual enjoymentof all. If that were possible,it would already have beendone a long time ago.Freedom has never been obtainedby the use of an excuse.Many individuals will admit theimportance of freedom but theyuse this excuse : "It is a full timejob for me to support my family.I haven't got the time or energy toworry about freedom." Fairenough. However, these individualsdo admit they have enoughtime to earn a living. If each familypracticed the virtue of selfimprovementby being self-supporting,it would free more slavesthan the Civil War between theStates. What is more, no warwould have to be fought. To findout who the slaves are, let us tracecause and effect. When a farmeror anyone else accepts governmentsubsidies, medi~al aid, wel-

548 THE FREEMAN Septemberfare, or whatever, he causes a taxpayerto earn part of his livingfor him. The effect of forcing ataxpayer to work without compensationis slavery by taxation.The Pain of SlaveryThere are many men and womenwho believe that the socialisticidea of slavery by taxation is theideal arrangement. How can wetell who is right? The answer isrevealed by cause and effect. Theeffect of harmful causes is painful.A Spanish proverb says: "Godcomes to us without a bell." Painis the silent language used by Creationto tell us we are actingwrongly. There can be no disputethat slavery is a painful arrangement;consequently, the socialisticidea of slavery by taxation is notin harmony with Nature's laws.Time and time again men haveturned to government to securetheir safety and protection bypassing laws. Recently the governmentof South Australia passed alaw to protect car drivers frombeing killed. The law requires cardrivers to wear seat belts; butsince the law has been in effect,the number of deaths due to carcrashes has increased. The governmentMinister of Transport is sincerelypuzzled why the law failedto achieve its objective.Never before in the history ofthe world have there been morelaws in effect than at present. Asmore and more government lawsare enacted each year, it would belogical to expect the governmentprotection to get better. Instead,the daily newspapers report thesad stories of an increasing numberof individuals who are beingharmed and killed.The government laws have failedto furnish protection because almostall of these laws fail to harmonizewith Nature's laws. In anycontest for supremacy, Nature'slaws of cause and effect will alwaysprevail over government laws.After school hours, I deliverednewspapers to earn some moneywhen I was a boy in Chicago. Onecold winter day when it was snowing,three older boys knocked medown in the snow and stole themoney I had collected from mynewspaper customers. This bitterexperience taught me to take moreprecautions for my safety. Actually,no one else is as deeply concernedwith your protection as youare. You have everything to gainby making protection a do-it-yourselfproject because the only genuineprotection you have in thisworld is self-improvement. Onceyou 'grasp the fact that bad effectsare never produced by good causes,the secret of obtaining protectionis yours. The good that you do willreturn to you like an Australianboomerang.

1972 CAUSE AND EFFECT 549Each Experiences the Consequencesof His ActionsCause and effect operate in theuniverse - what does that actuallynlean? It means that everythingthat goes wrong in my life is myown fault. It means that everycomplaint I have made againstothers is my fault. Accepting sucha heavy burden of faults is not asterrible as it seems. It is reallybeneficial. If the faults were allcaused by other people, my safetyand protection would be out of mycontrol. Since the faults are mine,I have the wonderful opportunityof practicing every virtue I canthink of to increase my self-improvement."And who is he thatwill harm·you, if ye be .followersof that which is good?" (I Peter3:13)The men and women who pursuethe ideas of freedom enthusiasticallyare often hampered andfrustrated by all sorts of socialisticcontrols. Under such conditionsit is easy to develop an intensehatred toward socialists inorder to "get even" with them.However, hatred is a harmful indulgencebecause it destroys selfimprovement.Since freedom andself-improvement go hand in hand,freeing ourselves of hatred increasesour freedom' - we are nottied to our enemies.Here is my homemade recipe forgetting rid of hatred: Wheneversomeone harms us in some wayand we are incapable of punishingthe offender, we react to the injusticeby hating the offender.Hatred is a vote of "no confidence"in Creation. The invisible forcesin the universe which are capableof spinning the stars and planetsthrough space are also capable ofseeing that justice is done throughcause and effect. Our help is notneeded by Creation in this particulartask, even though it may hurtour vanity to have our aid rejected.All that is required of us to getrid of hatred is the understandingthat cause and effect are at workin every human situation - nothingis forgotten, nothing is forgiven,nothing is concealed.If you are very skeptical andyou want convincing proof thatcause and effect will, punish thesocialistic offenders for their errors,try this experiment at yourown risk. Insult the first ten peopleyou meet today. Now that youhave produced ten causes - tenangry people - make a brave attemptto escape the effects. Causeand effect always gets its man!You won't be able to escape thepenalty for your misdeeds; neitherwill the socialists be able to escapethe punishment they deserve.Your hatred will be totally unnecessary.I)

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC14Freeing theIndividualSCRIBES are quite often mercilesstyrants in dealing with charactersout of the past, spearing themwith an assortment of verbs andfreezing them in predeterminedcategories with their adjectives,much as a butterfly collector doeswith his helpless insects. There isno surer way to shatter the integrityof an individual or to distorta historical epoch than by the indiscriminateuse of categories. Noman of wit is likely to believe thata category comprehends him, evenwhen it is well chosen. But whencategories drawn from other timesand places are imposed upon menand events which are foreign tothem, the result can only be toconfuse the subject under discussion.Some twentieth-century historianshave done just this to Americanhistory of the late eighteenthcentury. They have called Americansof the time by names, someof which were unknown to themand others which they would havedisavowed; they have categorizedthem as revolutionaries or reactionaries,democrats or aristocrats,nationalists or state's righters,liberals or conservatives, andother such categories. They havetried to thrust the events intoDr. Carson recently has joined the faculty ofHillsdale College in Michigan as Chairman ofthe Department of· History.·He is a notedlecturer and author, his latest book entitledThrottJinA the Railroads.550

1972 FREEING THE INDIVIDUAL 551revolutionary and "social" revolutionarycategories, categoriesdrawn from other revolutions andother circumstances. It is a journalistichabit into which manyhistorians have fallen to attributean absoluteness to the views andthrusts of men which violates bothwhat they intend and do. Debates,even great historical debates, canbe quite misleading. Men often advancepositions with more certaintythan they feel, appear to be unalterablein their determination,yet may shortly yield to the otherside with good humor when theyhave lost. Some historians appearto have no difficulty whatever indiscovering men's motives, butthe fact is that we are not privyto their motives.The subject to be treated belowis the reforms and innovationsmade by Americans mostly in thedecade after the declaring of in.:.dependence. The above prelude wasmade necessary because the presentwriter both wishes to makeknown the fact that he is familiarwith the cross currents of interpretationofthese years by twentiethcentury historians and to disavowmany of the categories thathave been used. After the Americansbroke from England they didmake some changes; they didsometimes differ among themselvesas to what the direction ofchange should be; but there is noneed to question their motives orany solid basis for saying for certainwhat they were. Above all,there is no need to push this oneinto that category and that oneinto this, with the category beingexcessively large for the matter atissue and much too confining forthe man over any period of time.More rubbish has been writtenabout the class positions and interestsof the men of these timesthan any other in American history,so far as I can make out. Thepresent writer has neither thespace· nor inclination to spend energyupon trying to refute whathas not been well established, inany case.The Main Thrust of ChangesWhat is established is that therewere some changes made duringthese years. The main thrust ofthese changes is the freeing of theindividual: freeing him from foreigndomination, from variousgovernment compulsions, fromclass prescriptions, and for greatercontrol of his own affairs. And,in conjunction with these, therewas an effort to erect safeguardsaround him that would protecthim in the exercise of his rights.The thrust to do these things wasmade along several differentpaths, and each of these is worthsome attention.A primary aim of the Ameri-

552 TH.E FREEMAN Septembercans was independence. Theywanted to be independent of England,of course; that was what thewar was fought about. ManyAmericans had come to believethat they could only have the requisitecontrol of their affairs byseparating from the mother country.This was achieved, of course,by terms of the Treaty of Paris.But Americans longed also to beindependent of European entanglements.Time after time, duringthe colonial period, Americans hadbeen drawn into wars that originatedin Europe but spread to theNew World. Americans wanted tobe free of the dynastic quarrels,the imperial ambitions, and thetrade wars which rended Europeand shook much of the rest of theworld. To many Americans, Europewas the symbol and embodimentof corruption, dec.adence,and foreclosed opportunity. To beindependent of Europe was, in thefinal analysis, to be free to followcourses which had not yet, at anyrate, proven to be so laden withdisaster.Independence did not mean, norshould it be taken to connote, therejection of either the English orEuropean heritage. Indeed, therewas little irrational rejection ofeither heritage that comes tomind. Though Americans rejectedEuropean aristocracy they did not,for that reason, change names ofplaces in this country derivedfrom aristocrats.Perhaps, the most extensivethrust of this period was to thefreeing of the individual fromgovernment compulsion. Libertariansentiment had been maturingfor some considerable while inAmerica; it was fostered both bylegal trends and religious andother intellectual development.Once the break from Englandcame, Americans used the occasionto cutaway a body of restraintsno longer in accord withtheir outlook.Religious LibertyReligious liberty was widely securedwithin a decade or so of thebreak from England. Much of itcame by way of the disest~,blishmentof churches. The establishmentmost readily dispensed withwas that of the Church of England.While the Church of Englandwas established throughoutthe South as well as in New York,it was not very popular; many ofits clergy remained loyal to England,and adherents of it were outnumberedby dissenters in moststates. Its disestablishment wasmade even easier because it was anational church; membership in itwas tied to loyalty to the king ofEngland. The Church of Englandwas everywhere speedily disestablished.But these actions were not

1972 FREEING THE INDIVIDUAL 553simply prompted by convenience,for there was increasing belief inreligious liberty. Several stateshad no established churches:namely, New Jersey, Rhode Island,Pennsylvania, and Delaware. Butthey used the opportunity affordedby independence to remove or reducerestrictions. Some of the disabilitiesof Roman Catholics werecut away.The established Congregationalchurch was maintained for severaldecades longer in Massachusetts,Connecticut, and New Hampshire.There was, however, some liberalizationin these states. The Massachusettsconstitution of 1780 affirmedthat every man had theright to worship in his own way,that no church should be subordinated"·to any other, and that taxmoneys could be used to supportministers other than Congregationalists.However, church attendancewas required still, andministers were supported fromtaxes.! "New Hampshire followedin the steps of Massachusetts, butConnecticut held out much longeragainst what its citizens regardedas the forces of iniquity. They alloweddissenters to escape paymentof taxes to the establishedchurch if they presented the clerkof the local church with a certificateof church attendance signedby an officer of the dissenter's ownchurch."2The constitutions of New Jersey,Georgia, North a~d SouthCarolina, Delaware, and Pennsylvania"explicitly provided that noman should be obliged to pay anychurch rate or attend any religiousservice save according to his ownfree and unhampered wilI."3 ButVirginia made the greatest effortto assure religious liberty. Thismight have been a reaction to thefact that Virginia had the longestestablishment and one of themost rigorous. Thomas Jefferson,J ames Madison, and George Masonwere leading advocates of religiousliberty, but they did notsucceed in getting their ideas intolaw until 1786. This was done bythe Virginia Statute of ReligiousFreedom, which proclaimed religiousliberty a natural right. Animpressive preface states the case:Whereas, Almighty God hath createdthe mind free; that all attemptsto influence it by .temporal punishmentsor burthens, or by civil incapacitations,tend only to beget habits ofhyprocrisy and meanness, and are adeparture from the plan of the Holyauthor of our religion....The legally effective portion ofthe statute reads this way:That no man shall be compelled tofrequent or support any religiousworship, place, or ministry whatsoever,nor shall be enforced, restrained,molested, or burthened in his body or

554 THE FREEMAN Septembergoods, nor shall otherwise suffer onaccount of his religious opinions orbeliefs; but that all men shall be freeto profess, and by argument to maintain,their opinion in matters of religion,and that the same shall in nowise diminish, enlarge, or affect theircivil capacities. 4This was the beginning of religiousliberty in America.Freeing the SlavesThe movement for freeing theslaves reached a peak in the 1780'swhich it would not soon attainagain. Even before the break fromEngland, the slave trade was acquiringa bad reputation in America,but such efforts as were m~deto restrict it were negated by themother country. Fiske says, "Thesuccess of the American Revolutionmade it possible for the differentstates to take measures forthe gradual abolition of slaveryand the immediate abolition of theforeign' slave-trade."5 Nor wassentiment against slavery restrictedto states in which there werefew slaves. ,Some of the outstandingleaders from the South duringthis period, most of them slaveholders,spoke out against slavery.Henry Laurens, a leader in SouthCarolina, wrote in 1776: "Youknow my Dear Sir. I abhor slavery... - in former days therewas no combatting the prejudicesof Men supported by Interest, theday I hope is approaching whenfrom principles of gratitude aswell [as] justice every Man willstrive to be foremost in shewinghis readiness to comply with theGolden Rule...."6 Thomas J effersonargued in his Notes on theState of Virginia. that slavery hada bad influence on the mannersand morals of the white people aswell as its devastating effects onthe Negroes. He longed for andhoped to see the day when allslaves would be emancipated. Hewarned his countrymen of the impending'impact on them if thiswere not done: "And can the libertiesof a nation be thought securewhen we have removed theironly firm basis, a conviction inthe minds of the people that theseliberties are the gift of God? Thatthey are not to be violated butwith his wrath? Indeed I tremblefor my country," he said, "when Ireflect that God is just; that hisjustice cannot sleep forever...."7Some states began to act almostas soon as the opportunity arose.In 1776, Delaware prohibited theimportation of slaves and removedall restraints on their manumission.Virginia stopped slave importsin 1778; Maryland adopteda similar measure in 1783. Bothstates now allowed manumissionat the behest of the owner. In1780, Pennsylvania not only prohibitedfurther importation of

1972 FREEING THE INDIVIDUAL 555slaves but also provided that afterthat date all children born ofslaves should be free. Similar enactmentswere made in the early1780's in New Hampshire, Connecticut,and Rhode Island. InMassachusetts, the supreme courtdecided that on the basis of theconstitution of 1780 slavery wasabolished in that province. EvenNorth Carolina moved to discouragethe slave trade in 1786 by taxingheavily such slaves as wereimported after that time. In orderto protect free Negroes, Virginiamade it a crime punishable bydeath for anyone found guilty ofselling a freed Negro into slavery. 8How far sentiment against slaveryhad gone may well be best indicatedby the Northwest Ordinance(1787), an act of all thestates, as it were, 'in Congressassembled. The act provided:"There shall be neither slaverynor involuntary servitude in .thesaid territory, otherwise than inthe punishment of crimes, whereofthe party shall have been dulyconvicted. . . ." This article waspassed, according to one of itsproponents, ,vithout opposition. 9Individual LibertiesThe bills of rights drawn andadopted in the various states containedprovisions intended to assureindividual liberties. Thesebills of rights were usually drawnand adopted along with constitutionsbut were frequently separatedocuments. They were usually castin the language of natural rightstheory. For example, Article I ofthe Massachusetts Declaration ofRights states:All men are born free and equal,and have certain natural, essential,and unalienable rights; among whichmay be reckoned the right of enjoyingand defending their lives and liberties;that of acquiring, possessing,and protecting property; in fine, thatof seeking and obtaining their safetyand happiness.l 0Virginia was the first state todraw both a constitution and a billof rights. Actually, Virginia's Billof Rights was adopted June 12,1776, while the would-be state wasstill a colony. It was the work primarilyof George Mason, was circulatedamong the states, and becamea model for such instruments.The Virginia Bill of Rightsguaranteed trial by jury in bothcriminal and civil cases, prohibitedexcessive bail and fines, declaredgeneral warrants to be oppressive,and acknowledged freedomof the press. The protectionsof a person accused of a crimewere spelled out:That in all capital or criminalprosecutions a man hath a right todemand the cause and nature of hisaccusation, to be confronted with the

556 THE FREEMAN Septemberaccusers and witnesses, to call forevidence in his favour, and to a speedytrial by an impartial jury of his vicinage,without whose unanimous consenthe cannot be found guilty, norcan he be compelled to give evidenceagainst himself; that no man may bedeprived of his liberty, except by thelaw of the land or the judgment ofhis peers.The only specific protection ofproperty, other than the provisionfor jury trial in civil cases, wasthe requirement that men "cannotbe taxed or deprived of their propertyfor publick uses, withouttheir own consent, or that of theirrepresentatives so elected. . . ."11The Massachusetts Declarationof Rights of 1780, the work mainlyof John Adams, was considerablymore thorough. In regard toproperty, it said: "No part of theproperty of any individual can,with justice, be taken from him,or applied to public uses, withouthis consent, or that of the representativebody of the people....And whenever the public exigenciesrequire that the property ofany individual should be appropriatedto public uses, he shall receivea reasonable compensationtherefor."12 Other rights werealluded to than those mentioned inthe Virginia Bill: freedom fromunreasonable searches, the rightto bear arms, the right of peacefulassembly, the prohibition ofex post facto laws, the prohibitionof attainders by the legislature,as well as most of those coveredin Virginia.Northwest OrdinanceThe Northwest· Ordinance sumsup, in Article II, what may well beconsidered a 'contemporary consensusof the protections of therights of the people most needed:The inhabitants of the said territoryshall always be entitled to thebenefits of the writs of habeas corpus,and of the trial by jury; of aproportionate representation of thepeople in the legislature, and judicialproceedings according to the courseof the common law. All persons shallbe bailable, unless for capital offences,where the proof shall be evident, orthe presumption great. All fines shallbe moderate; and no cruel or unsualpunishment shall be inflicted. No manshall be deprived of his liberty orproperty, but by the judgment of hispeers, or the law of the land, andshould the public exigencies make itnecessary, for the common preservation,to take any person's property,or to demand his particular services,full compensation shall be made forthe same. And, in the just preservationof rights and property, it is understoodand declared, that no lawought ever to be made to have force inthe said' territory, that shall in anymanner whatever, interfere or affectprivate contracts, or engagements,bona fide, and without fraud previouslyformed.l3

1972 FREEING THE INDIVIDUAL 557Some recent writers have claimedthat the Founders distinguishedbetween "human rights" and propertyrights in favor of "humanrights." It should be clear fromthe above that no such distinctioncan be discerned, nor has thepresent writer ever seen a quotationfrom the original that couldreasonably be construed to showthat the Founders made any suchdistinction.Property was, however, freedfrom various feudal restraintsduring this period and made morefully the possession of the individualholding title to it. The mostgeneral encumbrance on propertyownership was the quitrent - aperiodical payment due to king orproprietor on land, a paymentthat originated in the late MiddleAges as money payments displacedpersonal servitude. Such claimswere speedily extinguished followingthe break from England, andland thereafter was held in "feesimple." Such royal prerogatives asthe right of the monarch to whitepines on private land were, ofcourse, nullified. States abolishedentail, also, a move which enhancedthe authority of the ownerto dispose of his lands.With the Declaration of Independence,the whole edifice ofmercantilism as imposed fromEngland was swept away. Onehistorian describes the impact ofthis as follows: "As a result ofthe American Revolution, freedomof enterprise, that is, the equalopportunity of any individual toengage in any economic activityhe chooses in order to amass"vealth, and to hold onto his wealthor dispose of it as he pleases, becamea Iiving reaIity in Americato a greater degree than before."14Abolition of ClassesAnother sort of innovation maybe described as anti-class in itscharacter. Fixed classes are supportedand maintained by governmentwhere they exist. Americansof this period wanted to removegovernment support of classesand prevent the growth of specialprivileges by which classes areshaped. Some of the actions alreadydescribed were, in part,anti-class measures. For example,the established Church of Englandwas hierarchical and, in Englandparticularly, a major support ofclass arrangements. Its disestab-'lishment in America struck at theroot of government support ofclass structures. Entailment wasa means of perpetuating greatestates, just as quitrents weredevices for maintaining aristocracies.Other actions were taken thatwere even more pointedly aimedat removing government from itsrole as class perpetuator.One of these was the abolition

558 THE FREEMAN Septemberof primogeniture. Primogeniturewas the rule that the estate of onewho died without a will should goeither whole or in larger part tothe eldest son. States abolishedthis rule and adopted the practiceof dividing the estate equallyamong the children when' thefather died intestate. The tendencyof this was for great estatesto be broken up from time to time.Various sorts of provisions weremade in state constitutions to preventthe growth of aristocraticprivileges. For example, the VirginiaBill of Rights had this provision:That no man or set or men, are entitledto exclusive or separate emolumentsor privileges from the community,but in consideration of publickservices; which, not being descendible,neither ought the offices of magistrate,legislator or judge to be hereditary.l5The Massachusetts Declarationheld:No man, nor corporation, or associationof men, have any other title toobtain advantages, or particular andexclusive privileges, distinct fromthose of the community, than whatarises from the consideration of servicesrendered to the public; and thistitle being in nature neither hereditary,nor transmissible to children, ordescendants, or relations by blood;the idea of a man born a magistrate,lawgiver, or judge, is absurd and unnatural.l6The animus against titles of nobilityfound expression sometimes.So strong was the animus againsthereditary positions that the Societyof Cincinnati, a voluntary associationof officers who had servedin the War for Independence, foundit expedient to abandon the rulethat membership could be inheritedto allay the indignation againstthem. Frequent elections and restrictionson the amount of timeone could serve in office were effortsto prevent the emergence of~ ruling class, at least in part.The kind of equality sought byprohibitions against governmentallyfostered classes was equalitybefore the law. So far as anyother equality was concerned,American opinion of the time accepteddifferences in wealth andsocial station as inevitable and desirableresults of differences inability and effott. Undoubtedly,there were those in that day whowould have liked to have someportions of the wealth and estatesof others - who coveted what wasnot theirs - as there are in anyday, but they were either inarticulateor ashamed to profess theirviews. Some historians have mademuch ado about the confiscationand sale of Loyalist estates duringthe war. This is treated as if itwere a redistributionist scheme,and there is an attempt to givefactual support to this notion by

1972 FREEING THE INDIVIDUAL 559pointing out that large estateswere sometimes broken up beforethey were offered for sale. Thisdid sometimes·happen, but it doesnot follow that it was done withany motive of equalizing holdings.Small parcels attract more biddersthan large ones; hence, the priceattained for large estates waslikely to be increased by dividingthem up. Moreover, large estateswere sometimes formed or addedto by buying several parcels. 17Limitations on GovernmentThere were some general changesin governments during this period,changes in degree from whatthey had been under British rule.The main tendency was to makethe state governments more dependentupon the popular will thanthey had been during the colonialperiod. The new state constitutionsrequired that all state officerseither be chosen by the electorateor appointed by those whohad.The main impetus behind makinggovernments depend moreclosely on the electorate was a profoundfear of government. Thisdistrust of government was mostclearly shown in the distrust ofgovernors and courts, those partsof the government that had notbeen popularly chosen during thecolonial period. The colonistsfeared the legislatures, too, or sothe limitations on them would indicate,but out of their colonialexperience, they feared them lessthan the other branches. In pointof fact, Americans relied ratherheavily on a narrow and provincialcolonial experience in makingtheir first constitutions. Probably,Massachusetts and New Yorkshould be excepted from thesestrictures.The office of governor - or whateverthe executive might be called,for some states abandoned brieflythat colonial title - was strippedof much of the power and most ofthe independence enjoyed by colonialchief executives. Colonialgovernors had usually possessedan absolute veto over legislation.The new executives were strippedof the veto power in all but two ofthe states - Massachusetts andNew York -, and in these the powerwas somewhat weakened. In allthe states but New York the legislaturesor the constitutions governedthe assembling and dispersalof the legislative branch. Ineight of the states, the chief executivewas elected by the legislature,and he was made, thereby,greatly dependent upon it. Histenure of office was usually quitebrief. In nine states, it was onlytwelve months, and nowhere wasit for a longer period than threeyears. To prevent the growth ofpersonal power in the hands of

560 THE FREEMAN Septemberthe governor, most state constitutionslimited the number ofterms he could serve in a givenperiod. 18Courts and LegislaturesThe courts generally were mademore dependent on legislaturesthan they had been formerly. ThePennsylvania constitution describedthe relationship this way:"The judges of the supreme courtof judicature shall have fixed salaries,be commissioned for sevenyears only, though capable of reappointmentat the end of thatterm, but removable for misbehaviorat any time by the generalassembly...."19 Even so, the principleof separation of powers generallyprevailed as between thecourts and the legislature morefully than between governors andlegislatures.The legislatures were subject tofrequent elections, a device formaking them closely dependentupon the electorate. In ten of thestates the lower house was subjectto annual elections; in two statestheir terms were only for sixmonths. The members of the upperhouse usually had somewhatlonger terms, but one state didnot even have an upper house. 2oEven so, the powers of the legislatureswere quite extensive. ThomasJefferson complained that inVirginia:All the powers of government, legislative,executive, and judiciary, resultto the legislative body. . . . Anelective despotism was not the governmentwe fought for, but one whichshould not only be founded on freeprinciples, but in which the powers ofgovernment should be so divided andbalanced among several bodies ofmagistracy, as that no one couldtranscend their legal limits, withoutbeing effectually checked and restrainedby the others. 21What had been generally done wasthis: Americans in establishingtheir state governments hadsought to check them by the electoraterather more than by an internalbalance of powers. The peoplecould, however, use their influenceto abet arbitrary governmentas well as to check it.There w,as also some extensionof the franchise during this period.In addition, several legislatureswere reapportioned to giveinhabitants in the backcountry amore nearly proportionate voicein government. One of the trends,in this connection, was the movementof state capitals inland fromthe coast to make them more accessibleto the back country.Most of these were changes ofdegree r,ather than of kind. Tocall them revolutionary, as sometwentieth century historians have,is a distortion of what happenedand a stretching of the me,aning

1972 FREEING THE INDIVIDUAL 561of revolution beyond reasonableconfines. Insofar as they werechanges from what had prevailed,they were culminations of trendslong afoot. Americans had beentending toward religious liberty inpractice long before they establishedit in fundamental law. Theyhad been ev,ading, so far as theycould, quitrents, primogeniture,and entail. Their new governmentalstructures embodied much ofwhat they had been contendingwith the British for. Bills ofrights, bicilmeral legislatures, andweak executives, were built on theBritish model. The assault on specialprivilege did run contrary torecent British practice to someextent, but it was quite in accordwith what Americans had beendoing almost since they hadreached the New World. If in theirearly enthusiasms in governmentbuilding they did not attend to abroader experience than theircolonial one, this did not maketheir acts revolutionary, only precipitate.They were clear enoughthat they wanted to protect theindividual from government in theenjoyment of his rights; they didnot at first realize how much morethis took than felicitously phraseddeclarations. Weak governmentsdo not make liberty and propertysecure; that is the office of powerfulgovernments internally restrained.Many Americans were tolearn this lesson, and that ratherquickly. But just as their first experimentswere not revolutionaryin character, no more were theirlater alterations a counter-revolution.~Next: The Critical Period.• FOOTNOTES •1 See Merrill Jensen, The New Nation(New York: Vintage Books, 1950), p. 132.:! Ibid., p. 133.3 John Fiske, The Critical Period ofAmerican History (Boston: HoughtonMifflin, 1916), p. 78.4 Jack P. Greene, ed., Colonies to Nation(New York: McGraw-Hill, 1967),PP. 390-91.[) Fiske, op. cit., p. 71G Greene, op. cit., p. 397.7 I bid., p. 398.8 See Fiske, op. cit., pp. 74-75.9 See Robert A. Rutland, The Birth ofthe Bill of Rights (New York: Collier,1962), p. 109.10 Henry S. Commager, ed., Documentsof American History, I (New York: Appleton-Century-Crofts,1962, 7th ed), 107.11 Ibid., p. 104.I:! Ibid., p. 108.13 Greene, op. cit., pp. 472-73.11 Dumas .Malone and Basil Rauch,Empire for Liberty, I (New York: Appleton-Century-Crofts,1960),196.13 Commager, op. cit., p. 103.Hi Ibid., p. 108.17 See Frederick B. Tolles, "A Reevaluationof the Revolution as a SocialMovement," George A. Billias, ed., TheAmerican Revolution (New York: Holt,Rinehart and Winston, 1970, 2nd ed.),pp.66-67.18 See Richard Hofstadter, et. al., TheUnited States (Englewood Cliffs, N. J.:Prentice Hall, 1967, 2nd ed.), p. 160.19 Greene, op. cit., p. 343.:!o Hofstadter, op. cit., pp. 159-60.21 Quoted in Nelson M. Blake, A Historyof American Life and Thought (NewYork: McGraw-Hill, 1963), p. 100.

The Productivity ofC. LOWELL HARRISSFREEDOM is more than an end,something which in itself is ofincalculable value. Freedom is alsoa means for achieving other ends.Among the objectives which freedomhelps man achieve are thoseof his economic life.But what, really, does the term"freedom" mean in relation toeconomics? How does it relate tothe productivity of an economy?Both questions are difficult. Neitherof them am I able to answerto my own full satisfaction. Fewof the many aspects are black orwhite. Gray areas exist. The problemsare complex. The values involvedare not always in harmony.The lack of certainty does morethan compel caution in presentingconclusions. The existence of doubtalso leads to failure to recognizepoints which, it seems to me,should be more nearly clear thandebatable. My university studentsDr. Harriss is Professor of Economics at ColumbiaUniversity. This article is from an essaywritten in honor of Marco·Fanno of theUniversity of Padua in 1966.seem rarely to appreciate the significanceof some major elements.And who has not heard, manytimes and from many sources,statements to the effect that theworld's poor, "emerging" countriescannot afford freedom becauseof their desire to speed economicdevelopment? Economicfreedom, however, can make anincomparable contribution to goodeconomic performance.Freedom -The ConceptFreedom implies the absence ofrestraint. Yet we also think of itas the existence of opportunities ­the more numerous the alternativesavailable, the greater ourfreedom. As related to economicaffairs, freedom often seems tomean less, rather than more, restrictionimposed through· the politicalprocess, i.e., by government.Who will deny the validity and thepertinence of this interpretation?Denial may come from the personwho has been blessed by the op-nll2

1972 THE PRODUCTIVITY OF FREEDOM 563portunity to live where governmentalrestrictions bother himlittle-or by the man who hasbecome desensitized (or never hada chance to develop feelings foreconomic freedom).Freedom in the fullest sense,however, covers more than the absenceof governmental restriction.The freedom that counts economically- and humanely - includesthe absence of privately createdrestrictions whose origin is not insome quid pro quo.! The massingof economic power in various partsof an economy with generally"free" markets can restrict thefreedom of persons not exercisingthe power.Freedom in economic, as well asin personal, life requires gove"rnmentand the restraints it imposes.The preservation of order and the1 By quid pro quo restrictions, I meanthose which result from inability or unwillingnessto meet the terms demandedby others in a generally competitive market:A's failure to get a new auto becausehe was unable to meet the seller'sterms or B's failure to get the better jobbecause he was unwilling to study atnight. These must be distinguished fromprivately erected obstacles to entry bypersons who have the qualifications intoa line of business or occupation. Private(nongovernmental) restriction on freedommay be illustrated: (a) the existenceof producing units so large that potentinlnpW~l)m~l!'S fa~e hUl!'dles which areat times insurmountable; (b) wage agreementsthat effectively exclude from jobsthose persons whose productivity makesthem worth less than the wage set.enjoyment of personal rights cannotexist without curbs on action,curbs which limit opportunity butwhich operate under law. Organizedeconomic life needs "rules ofthe game," a framework withinwhich activity can be carried onwith assurance about rights andobligations.A binding legal obligation-tolive up to the terms of an agreement- in one sense limits freedom.In a broader sense, however,a body of law which compels mento respect their obligations is asource of freedom and opportuni-·ty. The legal system makes possiblethe contracts and arrangementswhich are indispensable forspecialization and capital accumulation.The essentials of advancedeconomic life require the governmentalimposition, and enforcement,of law.Government acts in another wayto create, while also restraining,economic freedom. Governmentcan use the power of coercion toprevent undesirable "neighborhood"or "third-party" effects.Restrictions against the pollutionof air and rivers or inappropriateuses of land provide example. Personaland business activity needto be controlled to reduce adverseeffects on persons who are not partiesto the transactions. In short,"social costs" of private activitymust not be ignored in society's

564 THE FREEMAN Septembereconomic calculations if we are toget best overall results. Curbs onsome freedoms are necessary toassure the existence of others.Yet the government which restrains(participates or intervenes- different terms carry differentconnotations) to make liberty possiblealso restricts freedom. Insurveying the broad scope of governmentrestraint in modern economiclife, one sees many "grayareas." Their frequency and extent,however, ought not to getpredominant attention. The centralissues deserve attention andmost need to be understood. Whatis the relation of freedom to theessential tasks of an economicsystem?What Goods and Services Shallbe Produced?An economic system exists toproduce goods and services forconsumers - today and in the future.2 But not just anything, notgreat masses·of this and nothingof that.~ The nature· and conditions ·of workare no less important than many of therewards we call consumption. Both positiveand negative values lie in work, activity,in the job itself. Here, too, freedomplays a role of paramount significance.The more numerous the opportunitiesto seleGt among alternatives, thegreater the likelihood that one can settleon the best combination of job conditionsamong those available and also inducethe type change which makes for betterjobs.The objective is to produce avast array of goods and services inthe proportions which will bestsatisfy human wishes. The optimumcombination can be producedonly if the public can, and does,reveal personal desires in all theirmyriad nuances. What methods ofshowing desires are available?One method consists of our buyingas individuals and as privategroups --:- voting in the marketplace with our money. We canalso reveal desires in buying collectivelythrough government. Theprocesses of individual and collectivebuying differ - and so mustthe quality of the results. Threedifferences warrant comment.1. When buying in the market,individuals may not always dowhat they really prefer, or wouldprefer if they had more facts, includingthose which will come withexperience. 3 Mistakes are legion.Yet the person who makes an erroneousconsumption choice willalso bear the burden. The effecton incentives will be direct andunrelenting. When we buy collectivelythrough government, however,a considerable minorityperhapseven a majority - willordinarily have preferred someother arrangement. They wouldrather have more of this,less of3 As consumer goods get more complex,the need for information increases.

1972 THE PRODUCTIVITY OF FREEDOM 565that, a different mix of "public"and private goods and services.The direct and indirect expressionof preferences through the processof voting in political elections willleave some of the public gettingless satisfaction of its wants thanthe dollars spent would permit.Compulsion on minorities, therefore,sacrifices human satisfactionswhich would be met undera regime of freedom - except forsuch truly collective wants as nationaldefense and internal policing.42. In getting produced thosethings which are most likely tosatisfy human wants, the freedomof the market possesses two otherinherent advantages over the political,that is, the governmental,process. (a) Governmental decisionsare discontinuous. They aremade at infrequent intervals. Oncemade, they often commit spendingfor months or years, and inamounts which are subject to littlechange. Much private spending,in contrast, shifts constantly.In the market place we can votewith every dollar on a list of can-4 More typically, the family ratherthan the individual is the unit involved.There are, for example, things I as an individualwant rather more than higherprices of food, putting a man on the moonsoon, or subsidizing the development ofnew agricultural land. Yet some of thetaxes I pay to the national governmentgo for these purposes.didates which is long indeed. Alternativesshift from day to day.Prices and qualities are kept onthe move. New opportunities appear.Consumer reaction to theminduces changes with a flexibilityrarely possible in government purchasing.(b) Governmental spendingdecisions are made throughintermediaries, not by the ultimateuser, the citizen beingserved. Elected officials, the civilservice, and the military place theorders. The public served remainssomewhat removed from thechoices.3. New products and new typesof services are most likely to appearin an environment of freedom.Buyer reactions then indicatehow much of each shall beproduced. For many good reasons,government spending patternstend to be largely stable. Ofcourse, innovation does occur ingovernment, while private monopolycan restrict innovation in theworld of business. 5Yet even private monopoliesmay act progressively. And mostof the world of business is freerand more competitive than government.5 Obstacles to innovation in businessare not limited to monopoly in any strictsense of the term. Lethargy, ignorance,lack of capital, and red tape inside a companyare among factors limiting innovation.

566 THE FREEMAN SeptemberHow to ProduceMost goods can be produced, andmost desires for services satisfied,in more than one way. Some methodsare better than others. Thegeneral welfare objective is to usethe minimum of inputs per unit ofoutput. The closer the economycomes to this objective, the greaterthe total output obtainable fromthe productive resources available.In the business world, the hopefor profit" and the fear of loss actpowerfully to compel economizingin production. Freedom providesopportunity - and more. One producer'saggressiveness in cost cuttingis another's challenge orthreat. Governments, however, donot need to meet cost demands inthe same sense as do businesses. Ifthe taxpayer can be compelled topay the bills (including losses incommercial-type activities), whatare the inducements to economizing?They exist, but making thempowerful and effective requiresexceptional imagination, effort,and freedom within government.Efficiency demands smallerrather than greater use of inputsper unit of output. To take advantageof opportunities, to adjustto the unending (and alsouneven) change (a) of the pricesof inputs and (b) of technologicalpossibilities, a producer must befree. He must also be under pressureto do what seems best. Productionpossibilities differ widelyfrom time to time, from place toplace. Any single pattern, no matterhow well adapted to some situations,will be unsuited to others,and definitely bad for some. Freedompermits the public to benefitfrom such variety.Where producers are free toseek better methods - and evenmore certainly where producersare under the" pressure of competitionto reduce costs - the publicstands to benefit. Governmentagencies cannot be expected toimprove efficiency to the extentthat, and as promptly as, permittedby changes in technologyand changes in the prices of inputs.Nor does governmental regulationappear promising as an"encourager" of cost reduction.The governmental agency, whetheras an operating entity or oneregulating private businesses,facesmore than one disadvantage as apromoter of production efficiency.So does the business firm or thelabor union which is somewhat insulatedfrom the free competitionof others. Not the only examples.in America are to be found in themakework policies of labor unionsand obsolete local" laws affectingnew construction.As producers, many of us maynurse a sneaking sympathy for restraintswhich impede the growthof productivity if they seem to

1972 THE PRODUCTIVITY OF FREEDOM 567create demand for our labor orwhat we have to sell. Nevertheless,the result in any "not-solong"period will be some failureto improve the relation of outputto "input. Society suffers. To repeat,protection from the forcesof freedom will result in greateruse of productive resources perunit of output.Who Gets What?For the economy as a whole,there can be no Santa Claus, no"free lunch." Society must payfor what it gets. The paymentsthus made are the incomes of therecipients. Most of us are on bothsides - paying and receiving. Onone side, we want the amount tobe large; on the· other side, wewant it to be small. Each of uspresumably tries to do the besthe can, to make the best settlementpossible with what he has, ingetting income and then in usingit.The greater our freedom tomake the best bargains, the betterin general will be the results.Noone wants to pay others morethan their services are worth, andfreedom to reject demands foroverpayment reduces the likelihoodthat we shall be forced todo so. In turn, the broader ourrange of freedom, the larger ouropportunities to get the most thatour services are worth to others.In contrast, restrictions on freedom- whether imposed by government,the possessors of privatepower, or one's own commitmentsmade earlier-will make the termsfor some of our bargains less satisfactorythan is potentially possible.As a result of such compulsion,we shall pay more than is inherentlynecessary for what we getandget less than our services areworth.The distribution of incomewhich results from complete freedomwould be less than ideal,judging by. the standards to whichmost of us hold. The person. withno productive capacity might beleft out in the cold because privatephilanthropy - a not insignificantfeature of free society in America- might not fill all humanely distressinggaps. Long ago governmentcame to use funds collectedin taxes to meet some needs ofpersons whose income from productionseemed inadequate. Whoamong us does not endorse suchpolicy?Transfer Payments ModifyIncome DistributionModern society goes farther.Transfer payments (such as socialinsurance and aid to farmers)modify income distribution. Theresults differ from those of thefree market. Taxes also redistrib-

568 THE FREEMAN Septemberute income and wealth. The gen.;.eral results may, or may not, suitus better than those from freedom.Nevertheless, in three importantrespects the consequences of freedomhave no small economic merit.1) The kinds of services desiredare most likely to be forthcomingif demanders and suppliers arefree to make the .best deals possible.2) Efficiency in utilizationwill be encouraged. The employerwill not use labor being paid $4an hour on jobs worth $3 an hour.Men capable of producing enoughto justify $4 an hour will rarelyspend their time on jobs worth $3an hour. The· desire for incomeleads free men to "allocate" themselvestoward the work where therewards are highest becauseworker productivity is highest. 3)Men seeking work will not be deniedjobs because someone elsesets conditions - sex, color, age,or creed - which are not pertinentto the task. Nor will a man be deniedwork because his productivitydoes not come up to the lowestlevel of wage rate permitted bylaw, union-management agreement,or custom.Economic progress requires thatthings be done differently. Whatcould be more obvious than thatinnovation, change, the strikingout in ,new directions, all dependupon freedom? Bureaucracy - ingovernment, in large businesses orlabor unions, perhaps even in universities,religious organizations,and private foundations-providesstability without which progressis impossible. Yet bureaucracy andthe slow decision processes of legislaturesget in the way of thechange which makes up the veryessence of economic progress. Perhapsthe greatest contribution offreedom to economic productivitylies in the fruits of progress.Concluding CommentReality cannot compete withdreams, at least not "fairly." Howeasy to romanticize, perhaps aboutfree enterprise, perhaps about possibilitiesof improving the worldby some governmental policy whichwill restrict the freedom of others:Mr. Dooley made a good pointwhen he said, "A man that'd expectto train lobsters to fly in ayear is called a lunatic; but a manthat thinks men can be turned intoangels by an election is called a reformerand remains at large."Government will inevitably influenceeconomic affairs.extensively.One element of the essentialintervention will deal with privatemarket power. Another will involveefforts to meet the problems·of particular "soft spots" - individuals,groups, areas - in exceptionalneed. Let's hope that theresults will be constructive. Yetis it not a bit sobering to look at

1972 THE PRODUCTIVITY OF FREEDOM 569almost the oldest example of governmentalintervention in theUnited States - regulation of railroads- and that which today getsthe most financial outlay - agriculture?The results are less thanbrilliant, scarcely models for the"good society." One reason for thelack of success in these cases isthat governmental activity hasimposed restrictions on freedomrather than enlisting freedomincombination with those thingswhich government has to offer.One advantage of prosperity isthat it frees us from the need toworry about small economic problems.Many details of governmentspending are just that, small andunimportant. But many are not.The quality of the decisions mustinfluence profoundly the quality ofsociety. In the words of one of history'sgreatest economists, AlfredMarshall:Government is the most preciousof human possessions; and no carecan be too great to be spent on enablingit to do its work in the bestway: a chief condition to that end isthat it should not be set to work forwhich it is not specially qualified,under the conditions of time andplace. ®Reprints available, 10¢ eachSupporters of SchemesIDEAS ONLIBERTYTHE HARD-WORKED and over-burdened who form the great majority,and still more the incapables perpetually helped who are everled to look for more help, are ready supporters of schemes whichpromise them this or the other benefit by State-agency, and readybelievers of those who tell them that such benefits can be given,and ought to be given. They listen with eager faith to all buildersof political air-castles, from Oxford graduates down to Irish irreconcilables;and every additional tax-supported appliance fortheir welfare raises hopes of further ones. Indeed the more numerouspublic instrumentalities become, the more is there generatedin citizens the notion that everything is to be done for them, andnothing by them. Each generation is made less familiar with theattainment of desired ends by individual actions or private combinations,and more familiar with the attainment of them bygovernmental agencies; until, eventually, governmental agenciescome to be thought of as the only available agencies.HERBERT SPENCER, The Man Versus The State, 1884

570A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN\As Arnold Beichman, the authorof Nine Lies About America (LibraryPress, $7.95), puts it, thetheme of his trenchant book is"not the 'greening' but rather thelynching of America."The lynch mobs Mr. Beichmanis after include learned Ph.D.s aswell as hippies, experienced NewYork editors and journalists aswell as campus revolutionaries.The lies that this heterogeneousgroup tells about America are byno means' limited to nine, but,after all, if the author had donemore than hit the high spots hisbook would have gone on forever.So, in dealing with what TomWolfe specifies in a foreword as"the modern intellectual's retrogradehabits of mind," Mr. Beich-man picks out the type of egregiousmendacity that would havecome under the heading of thelate Paul Joseph Goebbels's "biglie."Goebbels, a Heidelberg Ph.D.before he became Hitler's ministerof propaganda and public enlightenment,had enough intelligenceto know that he was dealingin evil put-ons, which is a lefthandedcompliment that we neednot extend to some of the "intellectuals"placed on exhibition byMr. Beichma:n. Many of themknow not what they do. But it isthe effect of the "big lie" that isimportant, not the motivatingintent.Constant repetition of Goebbelsianstuff has people believing (1)

1972 LIES 571that America is a Fascist country,(2) that America means genocide,(3) that "the Bomber Left is amoral force," (4) that the Americanworker is a "honky," (5)that our political system is afraud, (6) that our values .arematerialistic, (7) that Americausuallyspelled Amerika - is insane,(8) that the American peopleare "guilty," and (9) thatwhat our country needs is "a violentrevolution." Of course, theave,rage Dayton, Ohio, housewifewho is the unassuming heroineof Richard Scammons's and BenWattenberg's The Real Majoritywouldn't believe even the least ofthe nine big lies, nor would hermachinist husband. But the socalledintellectual betters of theDayton housewife swallow theGoebbelsian bait whole, which isone good reason for withholdingFederal assistance from our institutionsof higher learning. Why,indeed, should the taxpayers becalled upon to subsidize the lynchers?Attention-GettersSpeaking of the intellectualswho .justify bombing and arsonas necessary attention-getters, Mr.Beichman calls it a "terrifyinglogic" as "we move from the oldliterary explosions of small intellectualcoteries to the infatuationof a new young avant-garde withthe power that comes out of thebarrel of a gun." Mr. Beichmansays it is "small wonder" that aweary European visitor was moved"to make the bitter joke, 'When Ihear the word gun, I .reach formy culture.' " But culture, in thisera of the "counter-culture," is aweak shield. Editors who shouldbe defending our cultural heritagesell out merely to be "with it."Anything and anyone can makethe cover of our mass magazines.It's women's lib (the femalechauvinistic kind) one week, gaylib the next, and Yippie JerryRubin or Abbie Hoffman the. weekafter."Ideas," says Mr. Beichman,"no longer 'trickle down' over aperiod of time." Instead, they aregobbled up uncritically by publisherswho, "obeying some editorialtropism," accord the craziestnotion "the most respectfulhearing with color photographs aswell." Says Mr. Beichman, our"literary avant-gardists in Americaare in permanent danger ofbeing overrun by their own eagermiddle-class followers."Raceless GenocideThe lies, however, remain lies.How can you call America aFascist country when anyone init can say anything, no matterhow outrageous? How can our defenseof the right of individuals

572 THE FREEMANin South Vietnam to live withoutbeing overrun by their neighborsto the north be called "genocide"?After all, the South Vietnameseand the North Vietnamese areOrientals together, and our partialityfor the Orientals who preferliberty to slavery has nothingwhatsoever to do with race. Thedistinction is moral and intellectual.The stories of police "genocide"against the Black Panthers wererepeated uncritically in our bestnewspapers. But when one inquiringreporter, Edward Epstein ofthe N ew Yorker, tracked the luridtales of "twenty-eight murderedBlack Panthers" down, the numbershriveled to six incidents inwhich Panthers were killed bypolice, and in four of these incidentsfourteen police were shot orkilled by the Panthers.Ends and MeansDid this constitute a "nationalscheme . . . to destroy the Panthers"?Or was the Panthers' lawyerCharles Garry, who first floatedthe twenty-eight figure, guiltyof indulging in a "numbers game"entirely comparable to SenatorJoe McCarthy's waving of a "listof Communists in the State Department"that came to 146 orthereabouts and was never substantiated?To say, with the Bomber Left,that violence is necessary to makeideological and political points isto say that the end justifies themeans. Some professors (Cornelland Harvard have had their troubleswith them) have made excusesfor this notion, but it ishardly a universal axiom evenamong pragmatists. Mr. Beichmanquotes a covey of academicswho rationalize the work of thebombers by indulging in "fogbanksof nauseating verbiage"that abound in such phrases as"America has spawned the radicalismit deserves." The "kids"are absolved because the "System"is "bad." But our Bomber Leftviolence has lacked "the importantingredient of modern revolutionanapparat." Mr. Beichman saysthe "days of rage" of the NewLeft are little more than Blanquistputschism, the crise de nerfs of"gesture children." The "gesturechildren" get the headlines, butthey are not America.If our political system is a"fraud," how does it happen thata Lyndon Johnson, when President,can lose control of his partymachinery? How can a Nixon comeback after two disastrous defeats?How can a McGovern, moving upfrom nowhere, suddenly win tenprimaries? For better or worse,our party "system" certainly accommodateschange. As for our"materialistic" values, Mr. Beich-

1972 LIES 573man quotes Alfred North Whiteheadon Prometheus, who "didnot bring to mankind freedom ofthe press. He procured fire, whichobediently to human purposescooks and gives warmth. In factfreedom of action is a primaryhuman need."Not Peculiarly AmericanThe final triad of "lies" - thatAmerica is "insane," "guilty" andin need of "violent revolution"­is too surrealistic to demand muchrefutation. It was one man, not amultitude, that pulled the triggeron John Kennedy, and it was theone man, not the city of Dallas,that was mad. And, looking atSoviet Russia, Red China, Cubaand North Vietnam, what doesviolent revolution get you? Comparedto the new tyrants, theKaiser and Czar were liberals, asMax Nomad once pointed out. The"honky" American worker maynot have traveled, but he knowswith Mr. Beichman that "racism,tribalism, communalism, religioushate" are less troublesome inMichigan towns than they are in"India, Pakistan, Nigeria, Sudan,Japan, Ceylon ... the Soviet Unionand China," all of which haverepressed minorities.What distinguishes America,says Mr. Beichman in summingup, is that "Americans happen tobe ashamed of their prejudices,while almost everybody else .isbusy explaining the rationale ofracial and religious discrimination,and why it is impossible toend them overnight." The veryfact that we are an apologeticpeople proves that we are notfascists, not genocides, not honkies,not insane. More than others,we are still seekers, looking for aperfection that nobody will everfind.~ HAZARDOUS TO YOURHEALTH by Marvin H. Edwards(New Rochelle, N. Y.: ArlingtonHouse, 1972, 318 pp., $9.95)Reviewer: Allan C. BrownfeldAMERICANS present a curious spectacleto the world: Citizens of thefreest and most prosperous nationon earth engage in ritual handwringingover the alleged "crises"they find everywhere in their society.Nothing is right, and of thethings that are wrong none hascome under sharper attack latelythan the private practice of medicine.The near unanimity within thebody politic about the existence of

574 THE FREEMAN Septembera health-care "crisis" is frightening.President Nixon has proclaimedit, and the only point atissue in the present debate is"which plan" should· be enacted toalleviate it. A presidential candidatehas proposed a total socializationplan, and even the American·MedicalAssociation has a planin which doctors receive governmentmoney but avoid governmentcontrols. The sickness of Americanmedicine is the common assumption.The hollowness of this assumptionis demonstrated in H aza,rd0 usTo Y our Health, a thoughtful andcomplete analysis of the chargesleveled against American medicine.The author, Marvin H. Edwards,editor of Priva,te Practicemagazine, concludes that, "Thereis no medical crisis in the UnitedStates, but there may be one soon.Experience with governmenthealth programs in this countryand elsewhere makes it ominouslyclear that a national· health insuranceprogram may well result in asevere doctor shortage, overcrowdingof hospitals 'and physicians' offices,long waiting lists for hospitalcare, inadequate facilities, lossof privacy, Federal bankruptcy,and, eventually perhaps, discussionin this .nation of the need formercy killings of the aged to reducethe unbearable costs of governmentmedicine."Mr. Edwards notes that medicalcare is far more costly undera nationalized system than underprivate auspices. If the experiencesof European countries areindicative, people tend to overuseand overcrowd .existing medicalfacilities because they seem free.Germany has more hospital bedsper number of inhabitants thanthe United States, but all hospitalsare overcrowded throughoutthe year. The average hospitalstay is twenty-four days, comparedto six to eight days in America.Part of the reason is thatthere is a lack of interest by thepatient in regaining health assoon as possible, and doctors haveno concrete feeling for the coststhat could be avoided if the hospitalstay were shortened. In addition,the cost of the bureaucraticadministrative machinery that accompaniesevery national healthinsurance system is staggering.The Swedish citizen, for example,pays twenty per cent of his taxesfor health.Nationalized medicine was initiatedin Sweden even though seventyper cent of the Swedish populationwas already covered byprivate insurance programs. Inthe name of equality, these seventyper cent were forced into acompulsory government-administeredprogram in order to providefor the remaining thirty per cent

1972 OTHER BOOKS 575of the population not privately insured.Today there is hardly a singlehospital in Sweden where thereare not long waiting lists for allkinds of hospital care. It is estimatedthat in Stockholm alonethere are more than four thousandpersons waiting to enter hospitals,one thousand for operations.In some cases, waiting periods forminor operations may be morethan half a year. Dr. Dag Knutsson,head of Sweden's medical association,estimated in the firstyears of the medical plan that halfof the patients in Sweden's hospitals"need not be there."Mr. Edwards challenges themyth that there is a doctor shortage.In the United States todaythere are 318,000 medical doctors.With a national population ofroughly two hundred million, thatis an average of one doctor forevery six hundred and forty persons.No other major nation in the'world enjoys anything close tothat ratio.Of these doctors, 169,656 areengaged in full time private practice.The remainder are engagedas follows: 28,105 in governmentservice, 17,725 in full time hospitalstaffs, 10,452 in full time medicalfaculties, 33,247 in residenttraining, 9,102 in internship,4,919 in preventive medicine, and2,653 in 'administrative medicine.The 'remainder are retired or insome type of work other than thepractice of medicine."The problem," Mr. Edwardsdeclares, "is not that there arenot enough graduating doctors,but that too few are in direct patientcare. In fact, it is. governmentinvolvement in the field ofmedicine which is, in large measure,responsible for this situation."Discussing the failures and hugecost overruns of Medicare andMedicaid, Mr. Edwards points outthat the overwhelming majorityof Americans are covered by privatehealth insurance. As of theend of 1969, the Health InsuranceInstitute estimated 164 millionpersons under sixty-five - eightynineper cent of the total - hadsome form of private protectionagainst medical costs. He notedthat "If a national system were tobecome law, the government programwould replace all of theseprivate plans - at a much highercost. Since eighty-nine per cent ofthe group in whose behalf such socializedmedicine" plans are beingsupported are, already covered, theadvocates of such plans have notmet the burden of proving a 'need'for the' program at all.""The choice before us," writesMr. Edwards, "is simple. You andI are now covered by privatehealth plans and we are familiar

576 THE FREEMANwith them; we know what theyprovide and what they cost, andwe know the agent who servicesthem. We know our doctors andmost of-us have confidence inthem. . . . National Health Insurancewill destroy private insurance.In return, its advocatespromise to solve a fictional healthcrisis. . . . Government has madesimilar promises in the past: Ithas promised to solve the problemsof agriculture,. of housing, ofwelfare. Instead, government interventionhas compounded theproblems. Do you and I want tospend from twelve to eighty billiona year to replace private medicalcare with government medicalprograms that have failed whereverthey have been tried?"Marvin Edwards has made apowerful case. Hopefully, it willprovide a new and important dimensionto the, thus far, one-sidedpublic discussion of this truly lifeand death question. ~CORRECTION:Dr. Sanborn's book, What,How, For Whom, reviewed inthe August 1972 issue of THEFREEMAN, does not state specificallythat the author favorsconscription. The author leavesthe question open for the studentto decide.GARY NORTHHANDSOME BLUE lEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

Anyone wishing to communicate with aU,~horsmay sendfirst-class mail in care of THE FREEMA"*,:forwarding.theFreemanVOL. 22, NO. 10 • OCTOBER 1972The Population Question:Limited Government or Limited People? James A. Weber 579Drawing a true perspective on the governmental aspect of 1I0verpopulation."A Vote for MyselfA vote everyone should be able to cast in confidence.Edwa,rd Y. Breese 584Ageless Faith for a Vacillating AmericaFlood ReliefRobert G. BearceAn urgent call for restoration of faith in God, in freedom, in the individual,in our heritage, in ourselves.If a flood destroys my property, am I thereby entitled to yours?Creeping Capitalism:Is Free Enterprise Coming Back?Paul L. PoirotEdward ColesonExamining present prospects for a renewal of freedom as a parallel to Britain'srejection of mercantilism in the century after Adam Smith.50 Above Zero W. A. PatonA preview of the prospects should we be governed entirely by the collectorsof garbage.The Founding of th'e American Republic:15. The Critical Period Clarence B. CarsonThe weakness of governments during the early post-war_ryears of the Confederacygave rise to mounting problems domestically and internationally.Natural Rights Ronald CooneyThe case for the individual as against the all:,erful State.Heads Will Roll ',,;' LeonardF'ranckowiakA dramatic reason why the people should stand higher than the king.Book Reviews:liThe Bewildered Society" by George Charles Roche, IIIliThe Spoils of Progress: Environmental Pollution in the Soviet Union'" byMarshall I. Goldman.586591595612616628632635

t11eFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON-ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a .nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,land limited government.Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,000-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printedin U.S.A. Additional copies, postpaid, to one address: Single cOpy, 50cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.THE FREEMAN is available on. microfilm from Xerox University Microfilms,Ann Arbor, Michigan 48106.Some articles available as reprints at cost; state quantity desired. Permissiongranted to reprint any article from this issue, with appropriatecredit, except "The Founding of the American Republic," and "AVote For Myself."

579JAMES A. WEBERTHEPOPULATIONQUESTIONLimited government or·limited people?WE, the people, founded the UnitedStates of America on the principleof limited government.Now, the government is proposingto operate on the basis of anew principle: limited people.The need for this complete inversionin the relationship betweenthe American people and theirgovernment has been heralded bya seemingly endless outpouring ofpopulation-control propaganda andother "popullution" pap. Yet, thecase for population control remainsunmade. Consider thesefacts:1) Population growth in theUnited States is not a problem.The more hysterical proponents ofpopulation control like to draw"runaway" population growthMr. Weber is a Chicago writer-photographerspecializing in public relations. A graduate ofLoyola University with an M.A. in UrbanStudies, he is doing research for a book on U.S.population.curves that go practically straightup. However, in the real world,population growth follows an "S"rather than a HI" curve.We are nearing the end of this"8" curve which represents thedemographic transition. Consequently,our population growth isnow slowing down and in the futurewill begin to level out, causinga number of noted demographersto bail out of their exponentiallyrising projections.The most prominent example todate is Donald J. Bogue, directorof the Community and FamilyStudy Center at the University ofChicago. In 1963, Dr. Bogue wasamong those shouting from therooftops about the perils of overpopulation.At the time, estimatesof U.S. population at the end ofthe century varied from 300 to400 million.Today, Dr. Bogue is predicting

580 THE FREEMAN Octobera U.S. population in 2001 of about250 million people - only 42 millionor 20 per cent more than in1970. Bogue further predicts thatthere will be no more babies bornannually in 2001 than there aretoday.The President's National GoalsResearch Staff recognized the lackof any population "explosion" inthe U.S. when it stated in July,1971, in a report entitled "TowardBalanced Growth: Quantity withQuality": "One decision which appearsnot to be urgent is that ofover-all size of the populationevenafter the effects of a considerableimmigration are taken intoaccount."2) Population growth in theUnited States is not a major causeof problems. Population growthhas proved to be a boon to those insearch of simple solutions to complexproblems.Pollution, crime, overcrowding,resource depletion, lower livingstandards, reduced governmentalservices, you name it, populationgrowth causes it, according tothese simplistic souls. But the accusationsare not supported bythe facts.Technological ImpactTake, for example, pollution.According to Barry Commoner,the increase in population since·1946 accounts for only about 12 to20 per cent of the various increasesin total U.S. pollutant output.From 40 to 95 per cent of theseincreases were caused by newproduction technologies which resultedin increas·ed output of pollutantsper unit of production.Commoner points out that itwould have been necessary to reduce1946 population by 86 percent in order to prevent the risein pollution which has occurredduring the past 25 years. In otherwords, we would have to have acurrent U.S. population of 20 to25 million people to maintain 1946pollution levels at today's level oftechnology. By contrast, a 30-percent reduction in the environmentalimpact of technology wouldhave accomplished the same result.The conclusion is that U.S. populationgrowth has only a minor effecton the intensification of pollution.Conversely, immense reductionsin population size wouldbe required to materially affectpollution levels.There is at the same time anotherside to the pollution coin,namely, that although people accountfor only 12 to 20 per centof pollution, they form 100 percent of the productive source offunds which must be used in thefuture to reduce many types ofpollution. Lake Erie, for instance,will contilJ,ue to be a problem regardlessof future population

1972 LIMITED GOVERNMENT OR LIMITED PEOPLE? 581trends. But it will be a problemthat can be more easily resolvedfrom a financial point of view bya growing population.Crowding and CrimeAnother favorite "problem" ofpopulationists is crime. A classicexample of this was a full-pageadvertisement in the New YorkTimes sponsored by a group calledthe Campaign to. Check the PopulationExplosion. Under the headline"Have you ever been mugged?Well, you may be" was a pictureof a man grappling with a mugger."Is there an answer [to crimein the cities] ?" the ad copy asked."Yes," it responded, "birth controlis one."Major central cities such asNew York do, in fact, have thehighest crime rates. But thesecities are losing, not gaining,population. Shall we therefore concludethat crime increases as populationdecreases?Of course, juvenile delinquencygoes up disproportionately duringa period of population growth becausethere are more young peoplearound in relation to the rest ofthe population. The ad also callsattention to this fact with thestatement: "City slums - jampackedwith juveniles, thousandsof them idle - breed discontent,drug addiction and chaos."Tongue-in-cheekwise, populationcontrol is sort of, yes, an "answer"to the so-called "youth problem."But an answer which involvessolving problems simply by eliminatingpeople who have or causethe problems hardly meritsseriousconsideration as a legitimate solution.Population DensityWhat about overcrowding? At55 persons per square mile, theUnited States is one of the leastdensely populated countries in theworld. Holland, for example, has975 persons per square mile; England,588; Switzerland, 382.Overcrowding in the U.S. is afunction of population distribution,not population size. And peoplecongregate, Le., overcrowd, inmetropolitan areas for their mutualadvantage. This is what metropolitanareas are all about.But even in these areas populationdensity is decreasing with thecontinuing exodus of people fromcentral cities to suburbs. This decentralizationwas initially madepossible by improvements in transportation.It is now being furtherhastened by revolutionary improvementsin electronic communicationswhich are rapidly minimizingthe need for centralizedpaper-shuffling and face-to-facecontacts.Nobody anticipates that theUnited States will run out of re-

582 THE FREEMAN Octobersources in the next 50 years dueto population growth. Beyondthat, it is difficult to speculate or,to put it another way, it is onlypossible to speculate because weare not sure of the full extent ofexisting resources or what newresources may be developed. Fur-~thermore, many resources now beingconsumed and discarded willincreasingly be reused in the futureshould prices rise due togrowing scarcities and the additionof pollution charges to processingcosts. .Meanwhile, those who weep becauseAmericans constitute only 6per cent of the world's populationbut consume 40 per cent of theworld's annual resource outputshould dry their eyes. Economiesof underdeveloped countriesaround the world are dependentfor their survival on the incomederived from this consumption.Reduce or eliminate it and we willreally find out what problems arelike.It is a rote assertion of populationiststhat per capita incomewill not keep pace, Le., we will beforced to accept lower livingstandards, as population increases.There is, of course, nothing in ourprevious economic history to indicatethat increases in per capitaincome cannot proceed side-bysidewith population growth; theexact opposite is the case. Nor isthere anything in our present circumstancesto support this suppositionor its converse that percapita income will increase as populationgrowth decreases, e.g.,West Virginia whose populationis declining is not noted for boomingper capita income.Per capita income IS a functionof productivity as well as population.A growing population makespossible improvements in productivitywhich are more than amatch for population growth, thusresulting in increasing per capitaincome."Public Sector" ProblemsIt is also said by populationcontrol promoters that growingpopulation will outstrip the capabilitiesof Federal, state and localgovernments to provide servicesto the people. But, if this is reallythe case, it can be more readilytaken as a mandate for more efficientgovernmental operation andgreater concentration on the provisionof essential governmentalservices rather than a rationalefor population reduction. The ideaof eliminating people to makethings easier for government is arather grotesque perversion of theAmerican political promise.The lack of any major causeand-effectrelationship betweenpopulation growth and the problemsit supposedly causes prompt-

1972 LIMITED GOVERNMENT OR LIMITED PEOPLE? 583ed Conrad Taeuber, associate directorof the U.S. Census Bureauand director of the 1970 census,to observe: "Our population problemis one of tackling the agendafor improvement of our total environment.A lowered rate of populationgrowth may facilitate thetackling of those tasks - but itwould be only one small elementin the programs which need to bedeveloped."3) Population control in theUnited States will not solve anyproblems. The purpose of populationcontrol is to reduce populationgrowth. But populationgrowth is not a major cause of anyproblems. Therefore, reducingpopulation growth through populationcontrol will not solve anyproblems.This is another way of sayingthat it is simplistic nonsense tosuggest, as the report of The Com-mission on Population Growth andthe American Future does, thatincreases in the "quality of life"-the Commission's favorite "buzz"phrase - can be achieved throughdecreases in the quantity of people.There is no automatic, inverserelationship between people qualityand people quantity.I t is true, of course, that whereverthere are people there areproblems. But this is a descriptionof the human condition, not a prescriptionfor population control.In a creative, free and rightlyordered society, people solve moreproblems than they make. This isthe source of increasing life quality.It is unlimited government ofthe type required· to achieve thestated goals of population controlthat makes more problems thanit solves. ,IDEAS ONLIBERTYSocialism's Poor RecordSOCIALISM has a poor record when it comes to eliminating problems:its answer adds up to eliminating people. In fact, one ofsocialism's major and chronic problems is simply people. Socialismon the one hand destroys production, and, on the other, breedsup the least desirable elements. Its answer is to find the peopleat fault. Socialism always faces over-population; a free economydoes not.ROUSAS J. RUSHDOONY, The Myth 0/ Over.Population

584FOR MYSELFEnwARD Y. BREESETHERE'S ONLY ONE VOTE I can castthis year· or any year that's ofreal importance to myself or toanyone else -and it won't appearon any ballot.Contrary to what most peoplefeel, the vote I cast in a Presidentialelection doesn't seem veryimportant to me. The sheer weightof inertia inherent in a bureaucracythe size of ours makes medoubt that any Chief Executivecan really make things eithermuch better or much worse. All ofthe cells of the body politic tend togo on pursuing their individualaims of growth in the same oldway no matter who sits back ofthat desk in the White House. Thelegislators and the courts continueto march to their old, familiardrums.It's been some time since politicsexcited me.Still, I can cast the vote thatMr. Breese has taught Industrial Management·at Georgia Tech and headed the Departmentof Humanities at .Embry-RiddleAeronautical Institute in Florida. At presenthe is a free-lance writer.counts. To my mind, it's the onlyone that does count on the local,state or national basis. That's becauseit is an intensely personalvote - so personal and so meaningfulthat I can't just mark aballot or pull a lever and thenwalk away from the voting booth.This one I have to put into action.I have to live with it day byday and even hour by hour. It becomesaction and thought and thenaction again - so it doesn't passaway after one count. It doesn'tdrop back into the record of eventspast and forgotten. This vote Imust cast over and over and over;it remains a continuing force, settingup innumerable chains of actionand reaction, touching thelives of more and more people besidesmyself.I'm talking about my own votefor myself, of course. That's theonly one I can cast, and make itstick.I don't mean voting for myselffor Congress or City Commissionor any other public office. I meanthe vote I cast for myself as amember in full standing of thehuman race - my vote of confidencein myself as a rational,responsible citizen - responsibleamong men and under God. Thatis the all-important vote. My happinessdepends upon it - and myself-respect - and both survivaland victory in the battle of life.

1972 A VOTE FOR MYSELF 585Actually, I have little choice. BecauseI am a sentient being, Ihave to cast that vote of confidencein myself or just cast itaway. If I do the latter, I've abdicateda very large part of mymembership in the human race.I've chosen to accept my statusas a second class citizen - orworse. It's an unthinkable alternative.At least, it's unthinkable tome.Of course, once I've cast thatvote for myself, I'm elected. Inthat particular balloting it's theonly vote that counts. Before I.cast it I have to be willing toassume the responsibilities, therisks, and the duties that go withthe election.I have to be willing to think formyself. Rather than acceptingleadership, command, or even blind·guidance from Authority, I haveto use my rational faculties. Ihave to look behind even the bestintentioned propaganda, and findthe meaning that may underliethe fine words. I must strive alwaysto be Homo sapiens, thethinking man.I mu~t strive to be the moralman - that is, to exercise myfaculty of telling right from wrongas these apply to me in my ownlife and circumstance.Above all, I must strive for thestrength to act upon the knowledgeof these things.Rather then yielding to the impulseto complain or resent thepolitical and economic forceswhich buffet us in the nineteenseventies, I have to be willing todo something within the- only spanof control that is pragmaticallyopen to me - that is, within myown life.I must deal with such menacesas inflation and pollution by relianceon the market forces ofsupply and demand rather thanregulation and control and deficitfinancing by government. I mustcombat creeping monolithic statismby learning to rely upon myown resources of brain and handsand skills and courage, ratherthan upon the benificent "bigbrotherism" of the welfare state.Most of all, the vote I cast formyself is one I also must extendto my fellow man. I must grant tohim the same right and the privilegeof self-reliance that I wouldclaim.I am not afraid of the predicted"collapse by the year two thousand."That song was being sungto the same tune when the firstmillenium was ending.I am going to cast a vote formyself this year, and each year,in the assurance that I am notalone in this, and that we who doso not only will survive but willbuild a world in which we all maylive. ,

Ageless FaithforaVacillating AmgircROBERT G. BEARCEMAN ACTS according to his faith.Even those who ridicule faithin God, in freedom, in the individual- even tyrants - have a degreeof faith in the brute force theyemploy. And, unfortunately, thisfaith in coercion is spreading itscontagion of gloom and doom,causing stalwart Americans todoubt the faith of our Fathers.Robert K. Walker, a Tennesseeattorney, spelled out the problemin 1968:People who think well of themselvescollectively exhibit enthusiasm andmorale. When nations cease believingin themselves, when they regard theirinstitutions with cynicism and theirtraditions with flippancy, they willnot long remain great nations.If America is the world's "lasthope," contemplate the worldwideMr. Bearce is a free-lance writer in Houston,Texas.oppression and human degradationif we cannot rejuvenate our faith:• Faith in God• Faith in Freedom• Faith in the Individual• Faith in our Heritage• Faith in OurselvesIf we can revive a profoundfaith in God we will have takenthe first step toward revitalizingthe moral, economic, political, andsocial fabric of the United States.Faith in God gives man a properperspective of his place on earth.Weare imperfect mortals, whileonly God is omnipotent, omnipresent,and omniscient. Belief inthe Creator also demands an adherenceto certain absolute, enduringvalues and principles. Thesestandards and laws may be brokenby man but never changed. Whenindividuals and nations acknowledgeGod and His laws, they createan atmosphere where prosper-

1972 AGELESS FAITH FOR A VACILLATING AMERICA 587ity, peace, harmony, and freedomare nurtured. When man transgressesthe eternal laws, he enslaveshimself.Faith in God was early reflectedby our forefathers. In their rigorousway, the Puritans and otherfundamentalist sects were acknowledgingthe supreme power ofthe Creator and their need for Hisguidance.Thomas Jefferson expressed itthus in 1785:And can the libel,ties of a nation bethought secure when we have removedtheir only firm basis, a convictioni.n the minds of the people thatthese liberties are the gift of Godthatthey are not to be violated butwith His wrath? In'.leed, I tremble formy country when I reflect that God isjust; that His justice cannot sleepforever.Benjamin Franklin also echoedthe early faith:I have lived, sir, a long time, andthe longer I live, the more convincingproofs I see of this truth: that Godgoverns in the aftairs of men. And ifa sparrow cannot fall to the groundwithout His notice, is it probable thatan empire can rise without His aid?Faith in God was written intothe Declarabion of Independence."We hold these truths to be selfevident.That all men are createdequal. . . ." The signers were expressingtheir belief in two truths.First, they believed that certaineternal wisdom existed for all menand all posterity. These laws were"self-evident." Secondly, man'sequality was the gift of a supremeCreator. Men were "created"equal in the sight of God. Government,or "society," had nothing todo with bestowing equality.Those who said: "That they[men] are endowed by their Creatorwith certain unalienablerights; that amo,ng these are life,liberty, and the pursuit of happiness,"were again stating theirfaith in God. They were sayingthat God - not government, or society,or the State - should be theultimate object of man's allegiance.These rights were entrusted toman by God, not privileges bequeathedby any government.Faith in FreedomBecause the Founding Fathershad a resolute faith in God, theyalso had a perceptive fa,ith infreedom, Le., confidence in and dependenceupon individual choice.They recognized that God coercedno man to love and follow Him, sothey, too, put their trust in individualfreedom and accountability.Men like Jefferson and JohnAdams observed that individualfreedom and personal responsibilitywere inseparable. If man hasthe· inherent, God-given right to

588 THE FREEMAN Octobervoluntarily make choices and toorder his own life as he pleases,then he also must accept the consequencesof his personal conductand choice. He must be personallyaccountable for his use of the freedomwith which he is entrusted.This tenacious faith in freedomwas expressed in their determinationto create a constitutional republic- not a democracy - whichwould provide a maximum of freedomfor the individual and a minimurnof coercion in the hands ofthe government, only that amountneeded to prosecute the abusers offreedom. In this atmosphere of aminimum of force against men anda maximum of voluntary action, atremendous outburst of individualcreativity, ingenuity, and energyblessed America. The FoundingFathers adhered to the eternallaw that the blessings derivedfrom individual creativity andvoluntary association can never beharnessed by or replaced by governmentintervention.Freedom is for the individual.Freedom for government meansoppressive taxation and servitude.Freedom centers upon the individualand his inherent right topursue his own life without interferenceor coercion. If America isnot to deteriorate, we too mustplace the burden for constructivechange and harmony in our communitiesupon the freely-givenand.spontaneous love of the individual.Consider the followingmaxim: To the extent that wemake the State the mechanism forsocial and economic stability, wewill see a proportionate erosion ofthe political, economic, moral, andspiritual foundations of theUnited States.Coercive Reform MeasuresRather than Voluntary ActionRegrettably, the notion isspreading that government canalleviate social ills more effectivelythan can individuals workingspontaneously and voluntarily.Imagine the consternation at thefollowing proposition:Resolved: That the care of allAmerica's needy will be placed in thehands of private charity groups, thechurch, and the family - terminatingthe present governmental responsibilityand thus freeing the Americancitizen of a portion of his tax burdenpresently created by "welfare" programs.Such a proposal to abolish government-sponsoredwelfare wouldinvoke howls of righteous indignationand disbelief from thefaithless. Ask such a person if hewould willingly contribute to thesupport of his own parents in theirold age or contribute to a responsiblecharitable organization orhis church for the aid of those

1972 AGELESS FAITH FOR A VACILLATING AMERICA 589honestly in need. His answer willbe a sincere and enthusiastic"yes." He believes himself to becompassionate and charitable, buthe won't say the same of his fellowman; unless the Federal governmentintervenes and coercesthrough taxation and economic redistribution,people· will starve!His faith rests in coercive legislationand taxation rather than inthe voluntary love and charity ofindividuals.What is worse, it can be seenthat the cynic's faith in God andfreedom ends where his confidencein and dependence upon the benevolentState begins. Although Godloved man and had faith enoughin His creation to give the individualfreedom to choose and re:..ject, our modern state-interventionistsbelieve that individualscan not be left to their own personalfreedom and accountability.A Proud HeritageFortunately, these people whohave lost faith in the enduringstandards must fight a well-establishedtradition. America has aprofoundly-rooted faith in freedom,in the dignity of the individual,andin the laws of God whichgovern human nature. Traditionmay be scorned by the avantgarde"progressives" in political,economic, religious, and educationalinstitutions, but its hold in thehearts of Americans in general isnot easily broken.We have a proud heritage, onewhose milestones are inscribedwith toil, dignity, courage, andfaith - faith in the works of previousgenerations. Our heritageand our history attest to the absolutelaws and principles to whichman must always adhere if he aspiresto dignity and prosperity.The corrupters of our heritagethreaten to create a fatal vacuum.Our history holds our mistakes,our successes, our hopes anddreams, and our hard-won knowledgeof the paths which must befollowed if our country is to survive.Our heritage should be studied,cherished, and its meaningpassed on to future generations indefiance of those who are nowmaking a profession of floggingAmerica.Men will continue to reject freedomand the worth and accountabilityof the individual. They willdefy God and debauch· our heritage.But the inspiring story ofour heritage can never be destroyed,only belittled and dishonored.The seeds of freedom havebeen sown. It is our task to reapthe harvest, to preserve· the seed,and to prepare the soil for futureharvests.Ultimately, we arrive at theneed for faith in ourselves.Though the Pilgrim fathers en-

590 THE FREEMAN Octobertrusted their lives to God, theymust have had faith in themselvesas God's earthly tools. They recognizedthat, like all men, theywere special creatures in the sightofGod. They were men of individualworth and dignity. And theyacted as such! Throughout thecolonization and settlement ofAmerica, their posterity exhibitedthe same individualism and selfrespect.They sweated over theplow, toiled with the harvest,hacked roads through the wilderness,trudged thousands of milesacross the desert, and prayedandthey built a land of freedomand human dignity.None of this progress was distributedon golden saucers for theasking; it wasn't accomplishedovernight by blissful theorizing;and it was not masterminded byany politician who wanted to administerwelfare tonics and pablumto the American populace.Signs of DespairToo many of our fellow citizensare quitting in despair. They havelost faith in themselves, forgottenour heritage, refuse to trust theindividual to make his own choice,and lack faith in God. This sullenapathy and mood of defeatism islike a cancer on America, deadlyif not removed.Most folks still believe in thefoundations of our Faith, but theyare woefully short on physical,mental, and spiritual enthusiasm.They lack the enthusiastic commitmentto give that faith meaning.To believe in freedom is admirable,but faith without worksis dead. The optimistic attitude isa part of faith, a key to successfulpractice.Our personal commitment to theeternal ideals of our Faith mustbe contagious. The demand of thishour in history is for men whowill respond to that trust in God,freedom, the individual, our heritage,and ourselves. Today weread a dateless, ageless "want ad"for men who will be articulate,sincere, dedicated, forthright, andvibrant in expressing that Faith.The fire of human endeavor iscontinually subjected to water andoil- the water poured on it bythose who through ignorance ordesign seek to extinguish humandignity - and the oil of·Faith ofthose who have dedicated themselvesto replenishing the fire ofman's, integrity through confidencein individualism, freedom, theirheritage, and God. ~

1=;.01PAUL L. POIROTASIDE from lives lost, early estimatesof flood damage when tropicalstorm Agnes moved up theEast Coast in June 1972 approached$2 billion, two-thirds ofit in Pennsylvania.Hours of steady, heavy downpour.Rivulets turning to ,torrents.VVarnings and a rush to evacuateknown flood plains and other lowlyingareas. Bridges out. Carsstalled on flooded and debrisstrewnhighways. Daring boat andhelicopter rescues of hapless victims.Trees uprooted, lawns andfields eroded, homes and cabinsand trailers inundated if not upsetor washed away entirely. Basementsfilled, motors and transformersand electrical appliancesruined, wells polluted, broken gasand water mains - and the fires,burning to the waterline with noway to get fire-fighting equipmentto the scene. VVater rising inthe street, into the lower andsometimes the upper stories ofhomes and places of business.Services swamped, or entirely outof business. Rescue and relief stations.Emergency hospitals, housing,feeding, clothing, pumping,water testing, vaccinations.Then the crest passes. Owners-and probably some looters-wadeback to survey the damage andcarryon the salvage, repair, restoration- or further destruction.VVha t does one think as hesloshes and scoops and picks

592 THE FREEMAN Octoberthrough the rubble and slimeand stench, sorting what mightbe saved from what can't orshouldn't? Give thanks that somany lives were saved, that notall property was destroyed? Praythat the sun may shine! Regretthe hours and funds expended tobuild what is gone! Wonder whatpart of the loss, if any, mighthave been covered by insurance!How to deduct the rest from hisincome tax! How to obtain a grantor loan! How to· build or hedgeagainst future flooding! Feelsorry for all victims, but especiallysorry for himself!$2 Bil/ion in PerspectivePerhaps it might take sometime, perhaps it might never occurto most victims of the flooddamage to view the $2 billion inperspectivee The toll taken byAgnes in lives and property inthe United States is roughlyequivalent to the cost of one Apollomission to the moon - or twoweeks of U.S. involvement in Vietnam- or 4 days of government expenditureson domestic welfareprograms - or 30 hours of totalspending of taxpayers' propertyin the U.S.To be sure, it is no way tomeasure the total loss of one man'sbusiness, his home, his life savings- say $100,000 - as amountingto an average of half a millfor each person in the UnitedStates, or the $2 billion total floodloss as an average of $10 per person.Any loss of private propertyfalls entirely upon the owner ofthat property, just as a lost lifeis always that of some one individual.And any loss of "public"property, such as roads, streets,parks,· schools, post offices,. libraries,. sewers, water systems, firestations, and the like, falls proportionatelyupon the taxpayers ofthe. unit of government involved.Yet, the real loss, wherever theburden falls, is not in the disappearanceof $2 billion of money orcurrency. Rather, it is a removalfrom the market of $2 billionworth of scarce and valuable resources- materials and 'servicesno longer available to help meetcurrent demands. And in thissense is a storm like Agnes equivalentin destructive power to anApollo moon shot. It destroys orremoves from the market $2 billionworth of scarce and valuableresources for which willing customersand·property owners hadin mind, and in fact, other uses.The fact that a moon shot assessesthe $2 billion damage against abroader group of property owners- at an average of $10 per man,woman, and child - does not renderit less destructive on the wholethan storm Agnes which hit Pennsylvaniahardest. The toll in prop-

1972 FLOOD RELIEF 593erty, and lives and livelihood dependenton that property, is aboutthe same in both of these catastrophes.When Federal, state, and localgovernments spend well over $200billion a year waging various warsagainst communism, famine, pestilence,ignorance, poverty, thismeans that property, lives, andlivelihood are being withdrawnfrom the open market of willingbuyers and sellers at the rate ofa storm like Agnes about twice aweek. And recent flood victims cantestify, that's a lot of resourcesdown the drain.It may be argued, of course,that space exploration is wellworth $2 billion a shot. And whois to say him nay if any individualwants to risk his own life and investhis own scarce and valuableresources in such research and exploratoryventures? Or to fightcommunism in Vietnam? Or tosupport the prices of farm products?Or to carry out variousother welfare programs? Or whateverelse an owner voluntarily doeswith his property in ways not injurious to other peaceful persons?What is deplored are devastatingforces raging out of control- coercive power that destroys thelives and the property of innocentand unwilling victims: a violentstorm like Agnes, a moon shot orany other government project thatis not essential to the defense oflife and property and that mightnot be done if the doing dependedupon willing buyers and sellers.Violent Recovery?How do individuals, how does aneconomy recover from an Agnestypedistaster? According to theWall Street Journal, July 13, 1972,"Flood relief funds exceeding $1.7billion were requested by thePresident .. . to meet fully therequirements of some 115,000homeowners and 6,000 businessmenin six states who sustainedflood damage ... 30-year loans at1 per cent interest, and repaymenton the first $5,000 wouldn't be required. . . the largest singleamount [$1.7 billion] ever allocatedfor a recovery effort."One's heart bleeds for the victimsof Agnes, especially if hehappens to be one of them. Butthe harsh fact is that neither thePresident nor the Congress possesses$1.7 billion worth of scarceand valuable resources to give toflood victims..The proposal is totake that additional amount of resources,by the coercive power oftaxation, from present owners, atan average rate of $8.50 per man,woman and child - at a substantiallyhigher rate, of course, fromthe smaner number who pay taxesdirectly: the producers, savers, investors,workers and providers of

594 THE FREEMAN Octoberjobs and goods and services. Butwhere does the brunt of this $1.7billion burden eventually come torest? It rests upon the jobless, thehomeless, the hungry, the sick, theaged and feeble - upon the victimsof inflation! For the fact isthat the U.S. Federal governmentwill resort to the printing pressto extract an additional $1.7 billionof scarce and valuable resourcesfrom the market. And theresultant higher prices and costswill, in effect, bar from the marketthe least affluent among prospectiveconsumers.The proposed program of ·coercedrelief from Agnes is simplyanother disaster of almost thesame proportions. And this, bearin mind, does not begin to encompassthe demands that will arisefor dikes, diversion dams, andcountless other flood control measuresin areas subject to chronicor occasional flooding - all at taxpayerexpense.The Voluntary WayAdmittedly, this is no simple,'easy problem to resolve. And ofonly one thing may anyone be certain:There is no possibility of asolution unless the owners of privateproperty stand ready toshoulder full responsibility for theuse of such property, includingany loss as well as any gain accruingfrom such use. To help aman build - or rebuild - on a floodplain, if he cannot bear to beflooded, is no service to him or tosociety.To cite facts and principles inthe face of perhaps the worstnatural disaster in American historymay seem unrealistic. Thevoters of America, generous to afault, are far more apt to applaudthan oppose in the wake of Agnesa major government relief program.Indeed, individuals mightvoluntarily contribute $2 billionof scarce labor and other resourcesto such· an effort. But, of·course,we shall never know, in our presentstate of dependence on governmentforce to satisfy humanwants.Nevertheless, one is bound tocall attention to .the inescapablefact that government is force, andthat unlimited force is unbearabletyranny. Somewhere, sometime,somehow, each of us must facethe issue and draw the line if hewould perserve his freedom andhuman dignity. The tide of welfaristprotectionism and governmentregulation and control of ourlives is at flood stage. Will theAmerican people build and manthe dikes, and do so voluntarily?Or will we continue to build houseson sand, in the flood plains, in thenaive faith that the flood will curbitself and care lovingly for us.from cradle to grave? t)

'"""_''''"~~~h·''''',4!e::::"">,f'''*k;~~~l····'''~''A~t€{:',,",.,",'"Creeping Capitalism:I FrEDWARD COLESONMANY of our disillusioned contemporarieshave given up on thepresent. If they have not "droppedout" so completely that they havequit thinking altogether, they arewont to retreat to the past. Theylike to imagine some golden agelong ago when life was lovely andthings worked out as they should.If they had just lived back then,think what they could have accomplished.But not today! The presentis hopeless. Sad to say, todayis all we have. Sad to say also, yesterdayhad its problems too.Perhaps the classic example ofthe "displaced.person" in historywas Madame Roland who, saysCarl Becker,l often "wept to thinkshe was not born a Spartan or aRoman...." There were no opportunitiesfor heroic action in herlittle world, "the stuffy apartmentDr. Coleson is Professor of Social Science atSpring Arbor College in Michigan.of an engraver doing a small businesson the Pont Neuf" in theParis of 1788. But wait - July 14came next year, the Bastille wastaken and she had an opportunityto be part of as stirring events asthe world has ever seen. She wasunjustly thrown into prison. and,as she awaited her turn at theguillotine, she recalled that Socrateshad also been a martyr. Onher way to the place of execution,as she passed a statue of Liberty,she exclaimed, "Oh Liberty, whatcrimes are committed in thyname!" Let's hope that you and Iare more fortunate than MadameRoland, but the point is obvious:her age was the "best of timesand the worst of times," just asCharles Dickens tells us in theopening lines of his Tale of TlwoCities. So was the age of Socratesand that much-maligned era calledthe present - more precisely, today.

596 THE FREEMAN OctoberNo Instant AnswersA lot of good conservatives havebeen quite overwhelmed by developmentsin the last few decades.If they are ancient enough to rememberthe election twenty yearsago - the strong feeling on thepart of many that now we coulddrastically reduce the vast Federalbureaucracy, liquidate the farmprogram, reduce welfare expendituresto a reasonable figure andget people back to work again,trim the national budget so thatno one would recognize it, all thisand Heaven too, if we just electedthe right president come November- well, such a voter may havegiven up on the political processsome while ago. If the frustrationsof the 'Fifties didn't do it,surely the conservative debacle of1964 did. But such a political dropoutfails to understand the historicalprocess. There are no instantproblems or instant solutions.As Walter Lippmann 2 wroteduring the Second World War,"the movement of history is massive,and the mills of the godsgrind slowly. . . ." We need tolearn to look far in the past to see'the beginnings of the present, andto peer down into the tomorrowsto try to see where we are going.Free enterprise did not spring full,blown from the mind of AdamSmith in 1776, nor did the "NewDeal" arise by spontaneous generationin the spring of 1933: bothhad their roots far in the past. IfSocialism has been creeping up onus as far back as any of us canremember, this is the way Capitalismcame into being in the earlydecades of the last century. Theseeds of tomorrow are sproutingtoday, but it isn't easy to guesswhat the flowers and fruit will belike afterward. We human beingsare notoriously poor prophets.One reason why the best laidplans of mice and men go awry isthat history has a way of doinga dramatic about-face every oncein a while and often even a doubleswitch, like the surprise endingsof O. Henry's short stories. Fewpeople could see the threat thatHitIer posed even years after hecam~ to power in 1933; and whenthe Nazi blitz was overwhelmingEurope a little later, few couldsee the possibility of stemmingthe tide. In the .postwar treasontrials in France Pierre Lavalasked the court how anyone in1940 could have guessed that Hitlerwould not win the war. Menlike Winston Churchill and Generalde Gaulle walked by faith,while the quislings and other appeaserswalked by sight. If onecannot outguess history, ,at leasthe can try to be on the side ofright and leave the outcome tothe One who inhabits Eternity.

1972 IS FREE ENTERPRISE COMING BACK? 597Laissez FaireObviously, there was no use intrying to straighten out thechaotic and decadent world of theOld Regime in France in the middleof the Eighteenth Century,when a few free enterprise philosopherscalled Physiocrats coinedthe phrase "laissez faire" andsought to bring order out of chaos.While Adam Smith was visitingFrance (1764-'66), he got acquaintedwith the Physiocrats,spent a considerable amount oftime with them, and seems to havebeen influenced considerably bytheir thinking. But what is incomprehensibleis the fact that a handfulof French intellectuals and arelatively unknown Scottish professorof moral philosophy shouldstart a revolution which wouldeventually - long after they weredead - change the whole destiny ofthe Western World and point theway to freedom.As is well known, Adam Smith'sWealth of Nations appeared thesame year that Thomas Jeffersonpenned the "Declaration of Independence."The two were of akindred spirit too. Both advocatedlimited government and the rightsof the individual. Jefferson's masterpiecebore fruit rather immediately,but The Wealth of Nationscame into its own much moreslowly and rather hesitantly too.The book became a best seller andwas widely read and .highly acclaimedby distinguished people.Edmund Burke 3 insisted that Hinits ultimate results" the Wealthof Na,tions "was probably the mostimportant book that has ever beenwritten." Since Burke died in 1797and did not live to see any verytangible results (although PrimeMinister Pitt was strongly committedto Smith's ideas and wasseeking to implement them) onewonders what he meant. Perhapswe may regard this as another ofhis prophecies, like his premoni- 'tion that the French were in forreal trouble. Burke 4 was alreadydeeply concerned about the conditionof France, the danger of"some extraordinary convulsion,"as early as 1769, although theFrench Revolution did not comefor another twenty years. Did healso foresee what would reallyhappen when men had the courageto actually put Smith's theories tothe test? That day was long incoming and conditions got worsebefore they got better. No doubtpart of the delay was due to thecoming of the French Revolution.According to JohnChamberlain,5"If the shadows of the FrenchRevolution and the long Napoleonicstruggles had not intervened,the full Smith doctrinemight have become English governmentalpolicy long before 1835or 1848."

598 THE FREEMAN OctoberThe Complex World ofEarlier Periods in HistoryBefore considering the. verygreat impact of the French Revotionand the Napoleonic Wars onthe political and economic developmentof Europe, let us examinebriefly what Adam Smith was rebellingagainst. Since many Americansremember, at least secondhand, the rather simple days ofthe late Victorian period, the "Gay'Nineties," it is customary forthem to extrapolate backward toeven simpler days in the 1790's orthe 1690's. This view, of course, iscompletely fallacious. The worldthat Adam Smith and the Physiocratsknew' was an exceedinglycomplicated affair and had longbeen that way, although the industrialage, which is supposed to beresponsible for our nlodern complexitiesand perplexities, was stillin its infancy.Indeed, nearly two centuries beforeWatt perfected his steam engineand Smith wrote his protestsagainst interfering with the market,the Spanish were developinga very complicated economic codefor the m-anagement of their newcolonies, even before they knewwhat they had over here. Tenyears after Columbus returnedfrom his first voyage, Ferdinand~. and Isabella .created the House ofTrade at Seville and put it incharge of the commerce of thecolonies. Ultimately every aspectof life in the New World was controlled,presumably to promote theprosperity of the Mother Country.This system, known to history.asmercantilism, should not be toohard for us to understand, sinceit is back with us again.This Spanish version of themanaged economy should also beof great interest to those whoquestion the wisdom of similar attemptstoday. A few examplesshould illustrate the nature of theregulations and the severity of thepunishment for disobeying them.Vineyards were forbidden in theNew World on pain of death. (Thiswas not an early try at "Prohibition"but was an attempt to helpthe Spanish wine producers athome.) The death penalty was alsodecreed for anyone in the coloniescaught manufacturing any ofa long. list of articles, includingartistic workings of gold and silverby the Indians. Trade with thecolonies was strictly controlledalso. Only one port in Spain wasopen to commerce with the NewWorld and only two or three wereallowed on this side of the Atlantic.The easy assumption that freedomgrew spontaneously in thevirgin soil of the New World doesnot bear close scrutiny. Certainlythis was not true in the Spanishcolonies. Freedom is a world view

1972 IS FREE ENTERPRISE COMING BACK? 599but not a geographic location; wefind it in the philosophy book, notthe atlas.Nor was this economic folly confinedto the Spanish. The Frenchsystem of economic controls, wellknown to Adam Smith throughthe Physiocrats and his own observationswhile traveling inFrance, was also a labyrinth ofcomplexity. It required more thantwo thousand pages to print thetextile regulations alone and, likeDraco's Code, they could be saidto have been written in blood. Forinstance, sixteen thousand peopledied as the result of the laws governingthe production of printedcalicoes, either e~ecuted by thecourts or killed in being apprehendedfor the violation of theseregulations.The English rulers had neverdone as badly as those of Spainand France because the politicalsituation was rather insecure duringmuch of this period (CharlesI lost his head in 1649 and JamesII his throne in 1688), but theyhad done enough to arouse Smith'swrath. He had a special grudgeagainst monopolies. As Chamberlain6 says, "... his treatment (inthe Wealth of Na,tions) of themonopolies granted to single companiesfor trade with the Orient- the East India company, for example- are masterpieces of restrainedrage." It cannot bestressed too strongly, however,that Adam Smith was no anarchist;he was not out to abolishthe Ten Commandments, the lawsagainst murder and theft, but justthe innumerable petty economicregulations that kept goods unnecessarilyscarce and the mass ofthe people needlessly poor.Retreat from FreedomThe French Revolution and theensuing Napoleonic Wars seemedto push England and Western Europefarther and farther from thelaissez faire economic policies advocatedby the French Physiocratsand Adam Smith. Part of thisseems almost inevitable in wartime, at least, the way modernwars are fought. Most of us probablyhave forgotten both the durationand extent of this conflict:from the Fall of the Bastille onJuly 14, 1789 to Napoleon's defeatat Waterloo on June 18, 1815 isalmost twenty six years; and,

600 THE FREEMAN Octoberwhile the war was not continuousduring this period, it was alwaystoo close for comfort. Furthermore,it was a global conflict, (Wesometimes forget that our ownWar of 1812 was just an extensionof the one in Europe.) Needless tosay, a war of this ferocity andduration impoverished the participantsgreatly, and the postwar depressionwas very severe. Nor isit necessary to point out that freedomwas severely curtailed duringthis quarter-century of conflict, inspite of the early French slogan,"Liberty, Equality and Fraternity."Both the English and Napoleonwhose Empire included most ofWestern Europe - and even Russiawith the Czar's cooperation fora time - blockaded each other'scoastline, although much of it wasa "paper blockade," particularlyfor the French who lost control ofthe seas after Lord Nelson's victoryat Cape Trafalgar in 1805.The United States, a young nationheavily dependent on foreigntrade, found herself in a mostawkward position with both sidespreying on her commerce.With Napoleon his ContinentalSystem, as he called it, was a "CoprosperitySphere," a managed"European Market" with Englandexcluded, not unlike Clay's "AmericanSystem" for the United Statesa couple decades later. While theseblockades can be passed off as warmeasures, Napoleon's commitmentto his brand of mercantilism seemsto be more than mere expediency.After all, an important reason forhis costly expedition into Spainwas to put down opposition to hisContinental System and even hisdisastrous invasion of Russia wascertainly in part to compel theCzar to continue to adhere to hisprotectionist policies. As an Englishwriter 7 of the last centurytells us, "It is well known thatNapoleon Bonaparte... entertaineda rooted antipathy to politicaleconomy. It was a saying ofhis that 'if an empire were madeof adamant, the economists couldgrind it to powder.' "In the meantime, the Englishwere not doing much better. Gettingone's daily bread had alwaysbeen a great problem for ordinaryworking people. In 1770 a bushelof wheat cost an English laborerabout five days' pay, but the warwith Napoleon and bad harvestsdrove the price to the equivalentof nearly two weeks' wages in1813. With famine upon themParliament 8 met and - you won'tbelieve it - they increased the importduty on grain even more. Theargument of the landed aristocratswho then ran England was thatthis increase would stimulate domesticproduction. Evidently, theEnglish ruling class was as far

1972 IS FREE ENTERPRISE COMING BACK? 601from Adam Smith's free tradedoctrines in practice as Napoleonhad been, whatever the formermight think of the Wealth of Nations.Speenhamland Poor Law of J795The English also stuck them~selves with a disastrous poor lawin 1795, a half dozen years afterthe Fall of the Bastille in Parisand just as Napoleon was emergingas one of the greatest militarygeniuses of all time. This newwelfare arrangement lead to difficultiesbeyond the maladjustmentsgrowing out of the protractedwars. England had had a problemof poor relief ever since the breakupof the medieval manors centuriesbefore (it was local and lessobvious then). The Church hadtried to care for the needy untilthe Reformation and then theState was saddled with the responsibility.Elizabeth, whose fatherHenry had started the English Reformation,made the first systematicattempt to cope with the problem.New poor laws were passedfrom time to time to correct themaladjustments created by the lastones. One writer in 1622 thoughtthe root of the difficulty was theprevalance of monopolies:This engrossing of Trade intofew men's hands hath caused ourhome trades to decay, ... to the utterundoing of all sorts of poor people inEngland, and the great damage of allhis Majesty's loving subjects. 9A common explanation for thewoes of the poor of England fromthe Sixteenth Century to the Victorianera is the enclosure movement,the change from a peasantvillage-communaltype of ownershipto the landed estates of thearistocracy. The classic literarywork growing out of this socialand economic revolution was Goldsmith'sDeserted Village, publishedin 1770. But there have been dissentersfrom this view, then andmore recently. Probably few knewEngland at this time as well asJohn WesleylO (he is said to havetraveled the equivalent of ninetimes around the earth during hisministry and mostly on horseback),but he ridiculed Goldsmithand saw considerable progress allaround him. It fascinated him.Chamberlain,ll drawing fromAdam Smith's experience, empha-

602 THE FREEMAN Octobersizes the advantages of enclosure:no one can or will improve his landor livestock until he has a deed tothe property and a fence (hedge)around it. These are simply thefacts of life. By contrast, the lateWilhelm Roepke 12 seems to haveregarded the loss of England'speasantry as a misfortune and anunnecessary one at that. Comparingthe decline of English agriculturein the last century with thephenomenal rise of Danish farmingduring the same period, hecomments: "This decay overcamean agricultural system which hadlost its strength, its vitality andits social soundness because it hadlost its peasantry."Whatever the cause of widespreadpauperization - monopoly,enclosures, or even the rising factorysystem, as has often been suggested- the English had problems.With the Terror in Parisrising to new heights of ferocity,the English ruling class was profoundlyuneasy and looking for instantanswers. They thought theyhad found their panacea in an arrangementworked out by the justicesof Berkshire in May, 1795,and generally adopted by the othercounties of England, althoughnever enacted by Parliament. ThePoor Law of 1795 became knownas Speenhamland, because the initialmeetingwasheld in a villageof that name.The Right to LiveThe new welfare system was awage-supplement plan based onthe "right to live" principle. If afamily man could earn half a living,the government supplied theother half. If he earned nothing,he was completely on the dole. Ifhe made enough to survive, he gotnothing from the government. Detailsvaried across the nation, butit was a comprehensive schemewith a "cost of living" escalatortied to the price of bread, additionalbenefits with more dependents,and all the rest. It sounds'quite modern. As Karl Polanyjl3says, "No measure was ever moreuniversally popular."The "war on poverty" was won- all they needed now was to conquerNapoleon. Actually, the latterproved· the easier foe to vanquish.He was defeated at Waterloo in1815 and sent to Saint Helena. Asevere postwar depression thenadded to the misery and havoc ofthe war. Poverty was still verymuch with them. Even thoselanded aristocrats, who had donewell on the high food prices of thewar era, now found they were landpoor. No small part of the blamefor the misery of this period, traditionallyheaped on the manufacturersof the early Industrial Revolution,properly belongs to Napoleon- if he was responsible forthe war with its destruction and

1972 IS FREE ENTERPRISE COMING BACK? 603its subsequent economic crISIS.Part of the problem also was thisunfortunate Poor Law, as will beobvious as we examine its economicconsequences.Renewed Interest in FreedomPerhaps it .was too much to expectanything very constructiveto come out of those long wearyyears of war; but with the returnof peace Adam Smith's ideas beganto be taken seriously oncemore, not just by intellectuals butby practical businessmen, too. In1820, groups of merchants andmanufacturers in both London andEdinburgh petitioned Parlia~entto remove the many restrictions ontrade. A special committee appointedby the House of Commonsto study the problem found elevenhundred regulations which hamperedtrade in various ways andrecommended that they be abolished.While this was not doneinstantly, there were several reciprocaltrade agreements negotiatedwith the neighbors in thenext few years. Western Europewas definitely moving in the directionof greater freedom.Another problem that sorelyneeded attention in the postwarera was the hopelessly tangledlabor situation. Ever since theSpeenhamland welfare programwas devised in 1795, England hadsunk deeper and deeper in a hopelessquagmire. I have found nowriter, left or right, who has hadanything good to say for this PoorLaw, although most everyoneseems to have favored it at its inception.Polanyi, an avowed Socialist,expresses amazement thatany laborer would work at all whenhe could get along quite as wellwithout doing so. Evidently, someoneworked a little. In practice,great numbers of laborers did alittle work for an inadequate· paycheck which was supplemented bywelfare payments, as we wouldcall them. In fact, the employerexpected his help to be on the poorrates because he didn't expect topay them a living wage; neither didhis laborers plan on doing a fairday's work for. him.The consequence of such a systemwas almost .universal pauperization.Says Polanyi, "In the longrun the result was ghastly," andhe allows that at least part of thehuman and social degradation of

604 THE FREEMAN Octoberearly capitalism should properlybe attributed to the devastationwrought by the SpeenhamlandPoor Law of 1795. If it was thatbad - and even the liberal Encyclopaediaof the Social Sciences 14insists that it "demoralized bothemployer and employed" - surelyit should have ~been no problem toabolish it. Actually, laborers weresure they couldn't live without it;and employers who were payingtaxes to support the system wereloath to have the law repealed because,after all, it did help to paythe hired man. Although neverestablished by Parliament, it wasfinally abolished by Parliament in1834, after the First Reform Billhad established a more democraticand responsive legislative body.If people couldn't live with thePoor Law, they couldn't live withoutit. Hardly anyone had eversaid a good word for the Speenhamlandwelfare arrangement,once they had seen it in operation;yet, there were anguished wailsthat its abrupt termination causedgreat hardship and unnecessarysuffering. Perhaps the testimonyof one who was close to the situationat the time may help us understandthe problems of transition.Herbert Sp~cer, whose unclewas deeply involved in the reliefproblem, before and after repeal,tells us how the change came aboutin his uncle's parish:A late uncle of mine, the Rev.Thomas Spencer, ... no sooner enteredon his parish duties than heproved himself anxious for the welfareof the poor, by establishing aschool, a library, a clothing club, andland-allotments, besides buildingsome model cottages. Moreover, up to1833 he was a pauper's friend - alwaysfor the pauper against the overseer....however, the debates on thePoor Law ... impressed him with theevils of the system then in force.Though an ardent philanthropist hewas not a timid sentimentalist. Theresult was that, immediately the NewPoor Law was passed, he proceededto carry·out its provisions in his parish.Almost universal opposition wasencountered by him.... My uncle,however, not easily deterred, faced allthis opposition and enforced the law.The result was that in two years therates were reduced from £700 a yearto £200 a year; while the condition ofthe parish was greatly improved."Those who had hitherto loitered atthe corners of the streets, or at thedoors of the beer-shops, had somethingelse to do, and one after anotherthey obtained employment;" so thaiout of the population of 800, only 15had to be sent as incapable paupersto the Bath Union ... in place of the100 who received out-door relief ashort time before.... some yearslater ... , having killed himself byoverwork in pursuit of popular welfare,. . . the procession which followedhim to the grave included notthe well-to-do only but the poor.Several motives have prompted this

1972 IS FREE ENTERPRISE COMING BACK? 605brief narrative. One is the wish toprove that sympathy with the peopleand self-sacrificing efforts on theirbehalf, do not necessarily imply approvalof gratuitous aids. Another isthe desire to show that benefits mayresult, not from multiplication ofartificial appliances to mitigate distress,but, contrariwise, from diminutionof them. [When the Speenhamlandsystem was set up in ·1795] ...it was not expected that the poor rateswould be quadrupled in fifty years,that women with many bastardswould be preferred as wives to modestwomen, because of their incomesfrom the parish, and that hosts ofratepayers [taxpayers] would bepulled down into the ranks of pauperism....the larger becomes its extension[the involvement of the State]the more power of spreading it gets.The question of questions for the politicianshould ever be - "What typeof social structure am I tending toproduce?" But this is a question· henever entertains,15What makes this quotation sointeresting is the fact that, withminor editorial changes, one wouldassume it had been written lastweek - except that we haven'tsolved our problem yet. For thepurpose of the present discussion,it is obvious that England couldnot have risen to the heights ofprosperity and power a little laterwith a demoralized and pauperizedlabor force as the foundation of itsnational life. Certainly not theleast of the reforms which led toVictorian greatness was the liberationof the English laborerfrom a vicious system which destroyedall incentives to work andany reward for so doing. While nodoubt the intentions of those whodevised the Speenhamland PoorLaw were the best, the results overnearly forty years had been, asPolanyi tells us, "ghastly."The Anti-Corn Law LeagueThe next chapter in the story ofEngland's economic liberation wasthe famous "Repeal of the CornLaws" in 1846. The Corn Lawswere England's "farm program,"a very ancient and miscellaneouscategory of laws passed from timeto time to encourage the productionof grain. Since bread is· the"staff of life," the promotion of asound agriculture took on the auraof a sacred duty, although opponentsof the laws regarded themas a national swindle and insistedthat people in general would bebetter off without them.In his Wealth of Nations AdamSmith had a lengthy "Digressionconcerning the Corn Trade andCorn Laws" attached to the end ofChapter V, "Of Bounties." In fact,his digression is longer than therest of the chapter. As might besurmised, he was opposed to thoseassorted interferences with themarket. Early laws, he said, for-

606 THE .FREEMAN Octoberbade the activities of what we callthe "middle man," still the bane offarmers today, according to. popularnotions. There was deep publicconcern lest speculators shouldtake advantage of the hungrymasses in times of famine, so officialattempts were made to keepthis from happening. Smith 16 wassure that such misguided effortsonly made the crises worse: ". . . afamine has never arisen from anyother cause but the violence ofgovernment attempting, by impropermeans, to remedy the inconveniencesof a dearth." Whateverhe thought, the governmenthad been busy for centuries withits panaceas and would continueits efforts for· decades after hispassing; the remedy of his dayand the next half-century was animport duty on grain.In the years following the publicationof The Wealth of Nationsthe protection of English agriculturefrom foreign competition becameincreasingly unpopular. Thelanded aristocrats created a nationalscandal during the faminetimes of the later Napoleonic Warperiod by .increasing the tariff ongrain when the price was alreadyprohibitive, as has been mentioned.One would suspect that thegeneral public never quite forgavethem for that, and anti-corn lawfeeling continued in the early decadesof the last century. In 1827Colonel Thomas Perronet Thompson17published his famous Catechismon the Corn Laws, a seriesof questions and answers whichproved most revealing. Threeyears later Ebenezer Elliott, "theBard of Free Trade," came outwith his Corn Law Rhymes inwhich he contrasted the plight ofthe poor and hungry with the luxuryof the "wicked monopolists"who conspired to hold up the priceof bread by keeping out foreigngrain. As trade was loosening upover those years, the tax on foodbecame more and more odious toa lot of people. Organizations beganto be formed to combat thetariff on grain. When a severe financialcrisis made a chronic ailmentinto an acute affliction, thelong-standing opposition to thegrain duties began to snowballinto. a national movement: the famousAnti-Corn Law League· wasfounded in Manchester in 1839.JohnBright and Richard Cobdenswiftly emerged as the leaders ofthe movement and England wasoff on another exciting crusade.To understand the Anti-CornLaw agitation of the next sevenyears one must know something ofthe context in which it happened.On the intellectual side it can besaid that the seed planted by AdamSmith and nourished by a host oflater disciples - scholars, statesmen,the clergy, businessmen,

1972 IS FREE ENTERPR!SE COMING BACK? 607schoolteachers and ordinary citizens-had grown, matured, andwas now ready to blossom andbring forth fruit. While a givenpolitical or economic arrangementcan be imposed by force or fraud,people tend to· get about the systemthey deserve.Britain had been moving in thedirection of laissez faire economicsfor decades, because a lot ofpeople felt that this system wasright in the absolute sense, thesame as· the multiplication tablesor Newton's Law of Gravity. Still,man tends to let things go if hecan and not change unless the situationgets out of hand so thatsome sort of readjustment mustbe made. In the next several yearsa series of calamities provided themotivation for change, and thefree traders were there to capitalizeon the situation.The first of these crises was aserious and widespread economicdepression. We in America had ourshare of it too, the famous Panicof 1837, and no doubt we helpedto make it happen. Our "wildcat"financing of a host of internal improvement.]before the crash, projectsin which a lot of foreign capitalwas invested, resulted in severelosses for English investorswho bitterly resented the repudiationof American bonds. After thestate of Pennsylvania defaulted onher obligations, one wit writing inthe Edinburgh Review,18 "... remarkedthat whenever he met, aPennsylvanian at dinner in Londonhe wondered that, nobodycarved him up and served' him· inslices to every Englishman present."Of course, the depression resultedin widespread unemploymentand much suffering, butJohn Bright, a textile manufacturer,seems to have blamed theEnglish Corn Laws for much ofthe distress. Even the drastic declinein the sale of flannel toAmerica, which put a lot of Englishtextile workers out of work,Bright blamed on British policy.He said the Americans were justretaliating against British discriminationagainst grain fromthe United States. While he allowedthatthe Corn Laws were notto blame for everything, he insistedthat their repeal would gofar in solving a lot of other problems.A host of people across the

608 THE FREEMAN Octobernation shared his views. The problemnow was to .change the law.Before this was done, however,even worse calamities were tocome.liThe Battle of the League"What Bright's biographer 19 hascalled the "Battle of the League"is an interesting study in how towin political friends and influencelegislators. They tried every legitimatetechnique known to politicsand then available. They distributedliterally tons of tracts: "... asmany as three and a half tons oftracts were delivered from Manchesterin a week."20 The ladies.had tea parties, and Anti-CornLaw League bazaars were heldwhich were more of "the characterof a great art Expositionthan of a mere bazaar;" here customerscould buy "free tradehl!ndkerchiefs, anti-corn lawbreadplates and teapots and antimonopolypin cushions." A greatconference of the clergy was heldat Manchester and many ministersbegan to preach that the corn lawswere "anti-scriptural and anti-religious,opposed to the law ofGod."Since Bright himself was a devoutQuaker and thought in Biblicalterms, this is just the way hewanted it. It was easy for cynicsthen and since to see in Bright'sefforts a thinly disguised effortto promote his own interests andthose of the business community,but this is hardly fair to him. Hewas no hypocrite. He could be asstaunch for what he believed wa.sright when he had nothing to gainand everything to lose. For instance,he was bitterly opposed tothe Crimean War a decade laterand on principle, although hisstand made him enormously unpopularand caused him to lose hisseat in Parliament. He was quiteprepareQ. to suffer for his beliefs.When Bright found free trade inthe Bible - "As a nation of BibleChristians, we ought to realizethat trade should be as free as thewinds of heaven" - he meant it,and his own' sincerity and deepconvictions were convincing:. . . he refused to separate thespheres of morality and politics.Moreover, he did all this at a timewhen the mood of the informed menof the age disposed them to prefersubtle calculations of political expediencyto adherence to general principlesof conduct. 21The Biblical and moral argumentscarried great weight witha lot of people who had helped toabolish slavery throughout theEmpire a dozen years earlier, butthose who were not swayed by theethical approach found RichardCobden's facts convincing. He alsowas in Parliament and, if less elo-

1972 IS FREE ENTERPRISE COMING BACK? 609quent than, his friend, he was stilla formidable foe of protectionism.In March, 1845, Robert Peel, thenPrime Minister, was listening toone of Cobden's long factualspeeches when he crumpled up hisnotes and remarked to a. colleaguesitting next to him, "You mustanswer this for I cannot."Although Peel had greatly liberalizedtrade three years earlier,this was not enough to placate theLeague, particularly since theCorn Laws were still on the books.Cobden was now certain that thePrime .Minister was quite readyto go the whole way, if he couldjust find a suitable opportunity.His chance came swiftly in theform of a natural calamity, thetragic Potato Famine in Ireland.That country was seriously overpopulated,desperately poor andexcessively dependent ·on potatoesso when the crop blighted androtted in the ground in August of1845, famine was upon them. Estimateshave placed the loss oflife 22 as high as two and a halfmillion people over the next fewyears. Clearly, limitations on foodimports were indefensible in sucha situation. Parliament met in specialsession in January, 1846, andRobert Peel recommended the repealof the Corn Laws. Aftermonths of bitter debate, the billbecame a law in June of the sameyear. As John Bright said, "Famineitself, against whom wefought, took up arms in our behalf."At long last the duty ongrain - the tax on bread as theLeague was wont to call it - wasabolished.While the repeal of the CornLaws did not result in .completefreedom of trade, Britain continuedto move in that direction sothat by 1860 she had arrived. TheNavigation Laws and Usury Lawshad also been repealed. "Laissezfairehad reached in Great Britainthe culminating point," wroteG.D.H. Cole,23 the Fabian Socialist,and he then proceeds to describethe rapid growth of Britishtrade. Freedom was the fashionand it proved profitable too.Even Lord Keynes 24 speaks of thelate Victorian era as an "economicEldorado," an "economic Utopia."Another writer says,25 "In ourown unpleasant century we aremostly displaced persons, andmany feel tempted to take flight

610 THE FREEMAN Octoberinto the nineteenth as into a promisedland, and settle there like illegalimmigrants for the rest ofour lives." While returning to thepast is clearly impossible, if desirable- they had their problemsand we have some very real advantagestoo - still the questionremains whether we could regainthe best of their world and graftit on to the best of our own. Letus examine this possibility.Return to FreedomI shall not attempt to predictjust how we -are going to straightenthings out; like Amos of old,I'm "no prophet, neither a prophet'sson." Nevertheless, I think wecan get some idea how it mighthappen from the British transitionto free enterprise as describedin this article. Of course, it is notoriouslyhard to turn a nationaround once it is launched in agiven direction - particularly if itis down hill. Tocqueville 26 commentson this tendency: "The machineonce put in motion will goon for ages, and advance, as ifself-guided, towards a point indicatedbeforehand." AnotherFrenchman a little earlier, LouisXV, remarked cynically as theOld Regime of France was hasteningto its fall, "Let the good machinerun itself. It will last ourtime. After us, the deluge." LouisXVI was swept away by that deluge,but freedom did not cometo France in spite of the slogansof the Revolution. Chamberlain 27remarked a few years ago that,since "politics tends to go byratchet-action" in a democracy, thetime may come when the situationbecomes so snarled and tangledthat a nation "may be lucky ...to lose a total war totally," providedthey are conquered by amagnanimous foe and have "aRoepke serving as advisor to theMinistry of Economics, not a JohnMaynard Keynes." That is a longstring of "ifs" and the· hazardsare greatif you are not that lucky.The English escaped the equivalentof the French Revolutionnearly two centuries ago butfound their way, falteringly butsurely, toward the desired goal, apeaceful revolution of freedom.Judging by the British experience,a nation needs an intellectualelite which believes in liberty(let's hope we are building thatnow) ; a general population whichis weary of the endless and stiflingrestrictions of mercantilism(many of our people are gettingtired of the pretensions and highcost of big government) .; .andcrises which afford the possibilityof a choice (and all nations havethose, particularly the omnicompetentstate which attempts morethan anyone can accomplish).Actually, setting up the free

1972 IS FREE ENTERPRISE COMING BACK? 611system is remarkably easy, whenthe opportunity comes. Communistsadmit they have never evenapproximated the Marxian blueprintand their government isn't"withering away" today any fasterthan ours is. No such difficultywas experienced after 1846 for,as Adam Smith 28 says, "All systemseither of preference or ofrestraint, therefore, being thuscompletely taken away, the obviousand simple system of naturalliberty establishes itself of its ownaccord" - if people are just wiseenough to let it happen. Let us,therefore, be busy at the educationaltask as our first priority. Itis well to remember that it was afamiliar maxim in England fortwo decades before the Corn Lawswere repealed that "the schoolmasternow walks abroad in Englishpolitics." We then need toseize every opportunity whichcrises afford and, most importantof all, ". . . let us not be weary inwell doing: for in due season weshall reap, if we faint not." (Galatians6: 9) ~• FOOTNOTES •1 Carl L. Becker, The Heavenly Cityof The Eighteenth-Century Philosophers,pp. 151-154.2 Walter Lippmann, U. S. ForeignPolicy: Shield of the Republic, p. 138.3 George Soule, Ideas of the GreatEconomists, p. 40.4 Peter J. Stanlis (ed.), EdmundBurke, Selected Writings and Speeches,p.418.5 John Chamberlain, The Roots of Cap_italism, p. 23.6 Ibid.7 Henry M. Hoyt, Protection versusFree Trade, p. 72.8 Robert L. Heilbroner, The WorldlyPhilosophers, p. 73.9 Vernon A. Mund, Open Markets, p.79.10 Umphrey Lee, The Lord's Horseman:John Wesley the Man, p. 172.11 Chamberlain, pp. 12-14.12 Wilhelm. Roepke, The Social Crisisof Our Time, p. 245.13. Karl Polanyi, The Great Transformation,PP. 77-79.14 Encyclopaedia of the Social Sciences,Vol. 12, "Poor Laws," pp. 230-234.15 Herbert Spencer, The Man versusthe State, pp. 24-32.16 Adam Smith, The Wealth of NationsModern Library edition), pp. 492-493.17 Asa Briggs, The Making of ModernEngland (1784-1867), The Age of Improvement,p. 313.18 John Chamberlain, The EnterprisingAmericans: A Business History ofthe United States, PP. 70-71.19 George Barnett Smith, The Life andSpeeches of the Right Hon. John Bright,M. P., Vol. I, p. 122.20 Briggs, pp. 317-318.21 Asa Briggs, Victorian People, p. 202.22 Cecil Woodham-Smith, The GreatHunger, Ireland, (1845-1849), p. 411.23 G.D.H. Cole and Raymond Postgate,The British Common People, 1746-1946,pp. 336-337.24 John Maynard Keynes, The EconomicConsequences of the Peace, p. 10.25 Briggs, Victorian People, p. 7.26 Alexis de Tocqueville, Democracy inAmerica (Mentor edition), p. 50.27 Chamberlain, Roots of· Capitalism,pp. 207-208.28 Smith, p. 651.

5°AboveZeroW. A. PATONTHE CITY GOVERNMENT in my hometown took over the chore of collectinggarbage and trash severalyears ago. Previously this chorewas largely taken care of by scoresof small operators, keenly competitive.I never had any difficulty inhaving my garbage, ashes, wastepaper, brush from tree trimming,leaves, and other refuse removedpromptly and efficiently. The privateoperators had no special requirementswhatever as to packaging,arranging, or locating therubbish to be carted away. Therewas no rigid schedule of removaldates; the operator came when theindividual householder asked himto come, .and where a time of col-Dr. W. A. Paton is well enough known in theUnited States and abroad for his work in Accountingand Economics-and well enoughknown among local garbage collectors-thatthere's no need to mention hi. home town.lection had been agreed upon itcould be altered by a telephonecall.When the City took over wastecollection there was an immediatedecline in the quality of the service.The fixed schedule set by theI)epartment of Public Works providedless frequent service thansome families desired, but ofcourse no special collection timescould be arranged. Moreover, fromthe outset there have been frequentdeviations from the announcedschedule. Requirements asto the householder's procedure becamemore complex and rigid astime went on. Under one earlyrule ashes had to be sacked andplaced in the garbage cans, insteadof being left on the backporch in cartons or other disposablecontainers. Branches and612

1972 50 ABOVE ZERO 613other brush must now be cut upand placed in sacks of specifiedsize (a very inconvenient, timeconsumingprocedure) . Pebblesand stones will· not be removedunder any circumstances.. Burningpaper - or anything else - on thepremises is now prohibited, regardlessof care and safety precautionstaken. The fancy trucksused by the City are large andcostly, and equipped with lifts tospare the backs of the accompanyingstaff. The lifting apparatus isvery noisy, being easily heard fora quarter-mile or more. Recentlyall citizens received a printed documentwhich set forth the rulesand directives of the "new refusecollection system" as follows:NEW PROCEDUREOn the day of collection a two manset-out crew will bring your refusecontainers or tied plastic bags fromthe back yard to the curb.Several hours later a drive-collectorwill come by and place the refuse inthe truck. He will serve one side ofthe street at a time.After collection, the resident mustbring his containers back from thecurb to the back yard. If the residentuses tied plastic bags, only the bagswill go to the curb and he will haveno containers to retrieve.Plastic bags should be a 2 mill bagsuch as the Fire Department has forsale.On the day of collection the containersor tied plastic bags should bein one location, either behind thehouse, along the side of the house,outside the garage, or at the curb.Keep your driveway clear!The combined weight of each individualcontainer and its contentscannot exceed 50 pound5.Refuse should be available for collectionby 7:00 a.m. If your refuse isNOT collected· by 4:00 p.m. on yourassigned day, please call City Hall,761-2400 extension 257 so provisionsfor pickup may be made.No animal waste will be picked up.When a collection day falls on aholiday, the schedule for the remainderof the week will be one day late,and the extra day will then be madeup on Saturday.These requirements, with the newfeature of a "set-out crew," willobviously make the collection processmore complex, more drawnout, and will justify more staff.Note the preemptory "Keep yourdriveway clear!" No private concernissues such orders, and noteven the U.S. Post Office has gonethat far. For how long, one wonders,must this be done on thespecified day, and must the householderstand guard for hours tomake sure the driveway is completelyfree of cars or other obstacles?Note, too, the arbitraryweight requirement. To be surethat this rule is observed mustthe householder acquire scales

614 THE FREEMAN Octoberand weigh all cans and sacks used,and perhaps leave some half-filled,where heavy materials are involved?And what is the homeowner.supposed to do with thedog dung littering his yard, depositedby roving animals thatfind the location attractive for thepurpose? A side effect of the newrules, already much in evidence,is a marked increase in can$ andbags along our streets for lengthyperiods, as a result of the difficultymany find in meeting the7:00 a.ln. deadline plus the hoursof delay before the truck arrivesto make the collection plus the delay- oftel]. for several days -:- beforethe resident gets around toremoving the empty cans from thecurb area. The net result·is unsightlystreets, all over townvisualpollution, to say the least.And empty garbage cans leftstanding in driveways by the collectorsare a nuisance, and may bea hazard, especially after dark.Like It or Lump ItAs almost goes without saying,the city government took over thewaste collection business withoutasking for any advice from individualcitizen customers. Moreover,in establishing rules, includingthose of the "new system,"the people served were given noopportunity to express· their opinions.I should add that we. are notas yet prohibited from engaginga private rubbish collector, if wecan find one - but such action willnot reduce the levy for "utilities"service, or the bills for taxes.The winter of 1971-72 in southeasternMichigan was not characterizedby extremely low temperatures,but we did have quite alengthy spell when the thermometerregistered from a bit belowzero to 5° above. During this periodthe refuse collection staff ofour Public Works Departmentcalmly announced that they wouldnot report for work on days whenthe temperature was "5° abovezero" or less at the regular reportinghour. And the gang maintainedthis position all winter, de- .spite a few mild protests fromcitizens here and there. In myown case my garbage was nottouched for one stretch of threesuccessive weeks. 1 was remindedof the times on the farm whenwe attended to the chore of milkingthe cows when the outdoortemperature stood at 20° below,with the thermometer inside thestable door hovering around thezero mark. I suppose this was notin line with good modern.practiceregarding working conditions.Why the Popular Support?One .of the signs of the timesthat continues to puzzle me is theattitude of some people in· my

1972 50 ABOVE ZERO 615neighborhood regarding thesphere of government activity.Despite their personal, first-handexperience with the very ohjectionablesystem of municipal garbageand trash collection, manystill clamor for more and moreinterference by government, at alllevels, with private business operation,including outright takeoverin some fields, and are vociferousin their support of the programsof nationally known "consumeradvocates" and other·criticsof the automobile companies·and .business corporationsgenerally.They also tend. to applaudthe continuing harrage of attackson business - in and out of thelegislative halls- by office-holdersand candidates with strong socialisticleanings.Another,. and more widespread,attitude to be observed is the indifference,and lack of complaint,regarding the inefficiencies andfailures clearly in evidence infields where government· has longbeen in complete charge. This posture.is found among those somewhatsympathetic to private enterprise,as well as among themuddled critics of business andthe outright socialists. The realizationthat it is well-nigh uselessto try to induce government officialsto mend their ways probablyhas a bearing. Here I'm remindedof the history of our local waterservice. Years ago this service wasprovided by a quasiprivate concern,.and there was no lack ofcriticism and complaint. And thatthe water company took considerableheed of dissatisfaction, evenin the case of the specific patron,was obvious. Finally, in line withthe trend across the country, themunicipality acquired the company'sfacilities. From that timeon the desires of the individualcustomer have been completelyignored with respect to watersources, softening, additives, temperature,extensions, and·so on, aswell as the important matter ofrates charged. And the tendencyto complain, ask for improvedservice, and urge .lower rates, hasgradually faded to the vanishingpoint.From time to time, in contemplatingthe current scene, I get towondering what it will be like ifand when we abandon the freemarket entirely, and adopt thecomplete socialist program. Whatwill the Naders and other maleontentsdo when there are no privatebusiness activities left for themto bedevil? ~

616CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC15The CriticalPeriodAMERICANS established weak govermentsafter they separated fromEngland. Indeed, the governmentswere weakest at the points requiringgreatest strength, namely, inthe conduct of relations with foreignpowers and in the executivebranch. It is easy to understandand sympathize with their reasonsfor establishing weak governments.Government, any government, hasthe potential for tyranny. Its monopolyof the use of force withinits jurisdiction tends to makethose under it impotent in conflictwith it. Men are drawn to it by theopportunity it offers for the exerciseof power, and the likelihoodof the abuse of power is almost ascertain as death and taxes. Whynot, then, guard against these potentialitiesbecoming actualitiesby keeping government weak? Letthe power reside mainly in thepeople, and make those in governmentcome hat in hand frequentlyasking for what they need. Whynot, indeed?Because, in the first place, theattractiveness of a weak governmentto the law abiding is basedlargely on illusion, the illusion thatweak is synonymous with limitedand restrained. It is not; it is synonymouswith impotent, frail,Dr. Carson recently has joined the faculty ofHillsdale College in Michigan as. Chairman ofthe Department of History. He is a noted lecturerand author, his latest book entitledThrottlin4 the Railroads.

1972 THE CRITICAL PERIOD 617and lacking power to perform allottedfunctions.Government maintainspeace by having the respectof the decent, holding the irrationalin awe, and intimidating thelawless. A weak government ismore likely to be arbitrary, capricious,and even despotic than astrong one, for the uncertainstatus of its ability to use forceleads to unpredictable usages. Itwas the weakness of the Congresswhich set the stage for its inflationarypolicies. The weakness ofstate governments resulted in arbitrarypractices for raising suppliesfor the army duripg the war.A weak government .is prone topreying on the weak - those whomost need its protection - and thispenchant is probably aggravatedby popular governments which arecontinuously seeking popular support.The treatment of Loyalistsby the state governments duringand after the war is probably acase in point. Above all, weak governmentsinvite challenges to theirauthority which, when broughtforth, result in war or revolution.How critical the situation was inAmerica in the mid-1780's is andwill remain in doubt, but the portentof crisis follows necessarilyfrom the condition of the governments.That the state governments wereweak as well as the Congress isrevealed by analysis. Governorswere made nearly impotent bytheir dependence on the legislatures.Legislatures had considerablepower of making laws, butthey were not charged with executingthem. The Congress establishedby the Articles of Confederationhad little power at all. Itwas charged with major responsibilities,yet it had no independentexecutive, no courts of itsown, nor any direct sources ofrevenue. Moreover, the membersof Congress were made so dependentupon state legislatures fortheir tenure that they were mostreluctant to act.A Lack of ContinuityThe bane of republics is a lackof continuity of government becausethe government changeshands so often. Each election maybring a new set of rulers. Monarchydoes not suffer much fromthis defect, but it has others whichdisqualified it for Americans. Theconstitution-makers of the revolutionaryperiod aggravated thediscontinuity attendant upon republics.Not only did constitutionsfrequently call for annual electionsbut also there were sometimeslimitations on how frequentlywithin a period an individualcould serve. Members of Congresshad no assurance of continuationfrom one session to the next oreven that they might not be re-

618 THE FREEMAN Octobercalled during a session, and wereprohibited to serve more than aportion of a given period. It wasdifficult, in these circumstances,furilie~v~nm@~~~~~@that continuity which they canhave in republics. It is true, ofcourse, that it was virtually impossiblefor one man to gain muchpower, but it was equally difficultfor him to exercise governmentalauthority.Foreign RelationsThe greatest weakness of governingpower was in conductingrelations with foreign countries.The responsibility devolved uponthe Congress for carrying on theserelations, but that body did nothave the power to compel the acceptanceof its decisions. It hadno courts dependent upon it withauthority to act· upon the people.There was talk that Congressmight use force upon states, butsuch a measure would have beenwar. The states had more powerfulgovernments than did the Confederation,but they lackedauthority to conduct foreign relations.By their grants of power totheir governments, it is clear thatAmericans did not sufficiently appreciatethe necessity for somegovernment exercising the powersthat the British had during thecolonial period. A good case couldbe made that this was true regardingtrade restrictions, but the failureto empower a government todeal effectively with foreign nationswas like burning down thebarn to get rid of the rats if whatthey opposed was mercantile regulations.That Congress was almost impotentin dealing with other nationsdoes not have to be concludedfrom theory alone; historyaffords examples enough. Nowherewas the weakness clearer than inrelations with England. JohnAdams became minister to theCourt of ~t. James in 1785. Hehoped to .obtain a commercialtreaty with Britain that wouldopen British colonial ports toAmerican ships. But he found thegovernment there unwilling tomake any concessiQns,almost contemptuousof the usefullness ofany agreement with the Confederation,and well satisfied withcommercialrelations as they stood.Instead of being able to make newagreements, Adams found himselfoccupied with questions surroundingthe terms of and compliancewith the Treaty of Paris of 1783.Enforcement of TreatiesTheBritishreproachedtheUnitedStates through Adams with notcomplying with the terms of thetreaty. The treaty required Congressto recommend to the states

1972 THE CRITICAL PERIOD 619that the rights of Loyalists be restored.(This had been a concessionby the United States, sincethe British were not committed tonor did they make reparations fordamages done by their armies orLoyalists in the United States.)Congress did, indeed, make sucha recommendation to the states,but some of the states were moreinclined to further retaliation, andnone of them was favorably disposedto full restitution for Loyalists.Technically, Congress hadcomplied with the terms of thetreaty, but the .failure of thestates to heed their recommendationpointed up the weakness ofthe Confederation. The treaty alsospecified that the states would nothamper or impede the collection ofdebts by British citizens. One historysays: "There is no doubt thatthis article was violated· both inletter and spirit. Virginia, wherethe debts were heaviest . . . , ledthe way in passing laws hamperingthe recovery of British debts."1Congress was, of course, powerlessto do anything about the· staterecalcitrance.American compliance with thetreaty was made the more pressing,because the British used it asan excuse for failure to complyin the Old Northwest. They hadseveral miIitary posts on the Americanside of the Great Lakes. Contraryto the treaty provisions, theydid not evacuate them; instead, asecret order to hold them indefinitelywent out in 1784. Thoughthe posts themselves were peripheral,they provided bases for theBritish to exercise influence onIndians in American territory andfor carrying on a lucrative furtrade. 2 This increased the difficultyof making white settlementsin the area and, thus, of the saleof lands by the Confederation.Difficulties with SpainDifficulties with Spain were, ifanything, more pressing thanthose with Britain. Trading privilegeswere not at issue, for Spainhad opened up her most importantcolonial ports to America. Themajor issues were the location ofthe boundaries between the UnitedStates and Spanish territory tothe south and west, and navigationand use of the Mississippiand ports on it. The difficultyarose out of differences in claimsand designs on the old Southwestbetween the United States andSpain. Spain had lately reacquiredFlorida, which included at thattime a West Florida extending allthe way to the Mississippi. Spaincontinued its historic claim· to thevast territory west of the Mississippi.These territories gave Spaincontrol over the gateway to theGulf of Mexico. The fact that Britainhad ceded territory to the

620 THE FREEMAN OctoberUnited States did not greatly impressthe Spanish, particularlywhen these same British wereclinging to their own posts to thenorth in defiance of the treaty.In 1784, Spain concluded treatieswith Indians within the territoryof the United States. Moreover,Spain held onto a militarypost at Natchez which had beenacquired during the war but whichwas now within the treaty territoryof the United States. Spainalso made private agreements withAmericans· for the use of the Mississippiports and was working toundermine the allegiance of thosewest of the Appalachians to theUnited States. It was the positionof both Britain and the United.States that navigation of the MississippiRiver was free to all, butSpain did not recognize this position.Nor would Spain grant theright of deposit of goods in NewOrleans - a right essential to theeffective use of the Mississippitothe United States.The Mississippi and TradeOf course, the use of the Mississippiwas an absolute requirementfor the commercial developmentof the trans-Allegheny region ofAmerica. The expense of transportingfreight from the west tothe east overland was prohibitive;only lightweight cargo of veryhigh value could even be consideredworth transporting in thisfashion. Even so, settlers pouredinto this area in increasing numberin the 1780's from the olderstates despite the fact that, asmatters stood, they must eitherswitch their allegiance to Spainor be denied the opportunity ofdeveloping the country. John Jayconducted negotiations over aconsiderable period with the Spanishdiplomat, Diego de Gardoqui,but the United States had little tooffer and the Spanish little to fearfrom the continuation of the deadlock.Jay saw little hope for settlingthe dispute favorably to theUnited States by negotiation andwas entirely unenthusiastic abouta recourse to arms. "For," hesaid in 1786, "unblessed with anefficient government, destitute offunds, and without publick credit,either at home or abroad, weshould be obliged to wait in patiencefor better days, or plungeinto an unpopular and dangerouswar with very little prospect ofterminating it by a peace, eitheradvantageous or glorious."3Barbary PiratesNot all the difficulties of theConfederation were with Europeancountries; those people commonlycalled the Barbary Piratesalong the African coast of theMediterranean disrupted trade ina particularly distressing way.

1972 THE CRITICAL PERIOD 621Several Moslem principalities, orwhatever they should be called,had long preyed on shipping in theMediterranean. Countries whowished to avoid their depredationswere expected to pay bribes. Oncethe Americans cut themselves loosefrom British protection, they wereexposed to these pirates. Algeria.went to war with the UnitedStates, or so rumor had it, seizedtwo American ships, and enslavedtheir crews. The enslaved Americans"were forced to carry timberand rocks on long hauls overrough mountainous roads."4 Congressoffered to ransom the sailors,but the amount they couldand did offer was too small. A"diplomat" from another principalityapproached the UnitedStates with the proposition thatthe harassment of shipping wouldcease if tribute in sufficientamount were paid. As thingsstood, however, the United Statescould neither afford to pay tributenor assemble the necessaryforce to suppress the pirates. 5financial ProblemsMany of the troubles of theConfederation can be traced to financialdifficulties. These were frequentlytied in and contributed tothe ineffectiveness in dealing withforeign nations. A country thathad repudiated its currency at theoutset and whose diplomats had togo cup in hand, as it were, toother nations seeking funds washardly in a good bargaining position.There were, of course, domesticas well as foreign consequencesof the financial shamblesof the Confederation.The methods used to finance thewar had left not only a debt (despitethe repudiation of the currency)but also a legacy of consequenceswhich many do notascribe to the inflation. Inflationthrough the· year of 1780 was followedby a drastic deflation. Thereis no mystery about the cause ofthe deflation; when the tenderlaws were removed the Continentalpaper ceased to circulateas money. Much the same thinghappened to the paper money thathad been issued by the states duringthe war. Specie replaced thepaper as currency, but there wasmuch less of it than there hadbeen of the other. Prices thenhad to be adjusted downward tomake trade feasible in the newcurrency. The supply of currencywas further depleted· when tradewith Britain was resumed, for theUnited States had an unfavorablebalance. Americans still showed amarked preference for Britishgoods andlarge quantities of themwere imported, but the British didnot buy goods of nearly the samevalue from Americans. There hadlong been an imbalance between

622 THE FREEMAN Octoberthe two, but it was worse nowbecause the British would not· allowAmericans to make up thedifference by carrying goods toBritish possessions. "The resultwas that within a year or twoafter the war, . . . there was adearth of both paper money andhard money."6Consequences o/InflationA drastic deflation produces, oris, what is most commonly calleda depression. The deflation itselfcan be correctly described as ahealthy corrective to the inflationthat preceded it, a return to·soundvalues from the grotesquely .inflatedsituation that disrupted themarket. Depressions, on the otherhand, are universally deplored, atleast in our time. Nor is this sostrange, for although prices canbe adjusted to the monetary situation,the same can hardly beaccomplished regarding obligationscontracted during the inflation.Prices fall, money is hardto acquire, yet debts remain tobe paid. As an historian writingabout these times said: "Hard isthe lot of one who, burdened withtaxes and debts and destitute ofcash, is· beset by falling prices ofthe things he makes and sells."7Historians differ as to the extent,depth, and impact of the depressionof the 1780's. Some holdthat it deepened and worsened inthe latter part of the decade. 8 Onehistorian, at least, cites considerableevidence that economic conditionsweregreatly improvingafter 1785. 9 For example BenjaminFranklin wrote in 1786:"America never was in higherprosperity, her produce abundantand bearing a good price, herworking people all employed andwell paid, and all property inlands and houses of more thantreble the value it bore before thewar;. and our commerce being nolonger the monopoly of Britishmerchants, we are furnished withall the foreign commodities weneed, at much more reasonablerates than heretofore."lo GeorgeWashington wrote in a similarvein in 1787: "In the old states,which were the theatres of hostility,it is wonderful to .see howsoon the ravages of war are repaired.Houses are rebuilt, fieldsenclosed, stocks of cattle whichwere destroyed are replaced, andmany a desolated territory assumesagain the cheerful appearanceof cultivation."llSuffering DebtorsThe truth seems to be that somepeople were in distress, and somewere prosperous. That is not anearthshaking conclusion, becausemuch the same can be said at anytime. But those not doing well atthis time were frequently hurt in

1972 THE CRITICAL PERIOD 623one way or another by the legacyfrom the war. Those who had goneinto debt to buy real property onlong terms during the inflationwere undoubtedly often hard. putto payoff in the much scarcermoney that was now being used.For example, in Worcester Countyin Massachusetts, there were over2,000 suits taken to court for recoveryof debt in one year.12Americans had not only to adjustto a reduced money supply butalso to a new trading situationafter the break from England. Tomany, the new situation providednew opportunities, but others triedto cling to and make a go of theold relations (particularly wasthis true of trade with England).The states were generally deeplyin debt from the war, and some ofthem ·attempted to begin to retiretheir obligations by levying taxes.This could be particularly hard onthose' who owed debts for theirland and had to pay high propertytaxes as well.These things are relevant to amounting crisis in the UnitedStates because they were the occasionfor pressures on the governmentsto do something aboutthem. Some of the functions peoplewere accustomed to have governmentperform were either notbeing performed or were irregularlyperformed. Americans hadnot only a legacy of mercantilismbut also of monetary manipulations.Debts, taxes, and trade regulationsplagued the new governments.There was not even astandard currency throughout theUnited States.Coinage and ExchangeWhen the Continental and statecurrencies were repudiated,peopleused coins primarily for a mediumof exchange. There were few mintedin America during this period,so that foreign coins circulatedmostly: "English, French,Spanish,and German coins, of variousand uncertain value, passed fromhand to hand. Beside the ninepencesand four-pence-ha'-pennies,there were bits and half-bits, pistareens,picayunes, and tips. Ofgold pieces there were the johannes,or joe, the doubloon, the moidore,and pistole, with Englishand French guineas, carolins, ducats,and chequins."13 In additionto the difficulty of calculating therespective value of each of thesecoins, there was the complicationthat coins were frequently wornor clipped. A man who acceptedone of the latter at full valuemight have it discounted when hetried to use it. Americans did nothave a medium of exchange; theyhad media through which exchangesof money for money werealmost as precarious as exchangesin goods and were using coins

624 THE FREEMAN Octoberwhose sovereigns could not regulateand over whom Americanshad no control.There was hardly any reason,however, for the citizenry to haveany confidence in the monetaryactions of the Congress, nor, forthat matter, of the legislatures ofthe states. Not only had the Confederationrepudiated its currency,but the debts which it stillrecognized were poorly serviced.The total debt of the United Statesat the end of the war, foreign anddomestic, was about $35,000,000.Far from being retired, it continuedto grow. By way of requisitionsfrom the states, Congressreceived $2,457,987.25 in the periodfrom November 1, 1781 to January1, 1786. This was barelyenough to pay current expensesfor the government. 14 Robert Morrissent along this comment whenhe resigned as head of the treasuryin 1783: "To increase ourdebts while the prospect of payingthem diminishes, does not consistwith my ideas of integrity. Imust, therefore, quit a situationwhich becomes utterly insupportable."15Those who succeeded himmay have had less integrity thanhe professed, but they were hardlybetter supplied with money.Inadequate Power to TaxIt was commonly held that thegreatest deficiencies of Congressunder the Confederation were thelack of the power to tax and theinability to regulate trade. Thereshould be no doubt that the lackof the power to tax made theCongress almost impotent to per-. form the functions allotted to it.As to trade, Congress was almostpowerless either to regulate or toprevent the states from doing so.Whether trade needed regulatingwas debatable, but if it did, astrong case could be made againstthe states doing it. Indeed, somestates undertook to set up tariffsand to discriminate against shipsof other lands, particularly thoseof England. But it was exceedinglydifficult for states to set rateswhich would accomplish even thosedubious advantages supposed tofollow from them. If the tariffswere too high, in comparison withthose of surrounding states, goodsmight come into the state fromports of entry located in otherstates. If imported goods werefinally consumed in another statefrom the one imposing the tariff,the state was actually levyingtaxes on citizens of other states.State Barriers to TradeThe regulation of trade by thestates worked against a commonmarket for all the United Statesand threatened to turn some statesagainst others. John Fiske describedthe situation this way:

1972 THE CRITICAL PERIOD 625Meanwhile, the different states,with their different tariff and tonnageacts, began to make commercialwar upon one another. No sooner hadthe other three New England statesvirtually closed their ports to Britishshipping than Connecticut threw herswide open, an act which she followedby laying duties upon imports fromMassachusetts. Pennsylvania discriminatedagainst Delaware, andNew Jersey, pillaged at once by bothher greater neighbours, was comparedto a cask tapped at both ends.l 6Trade discriminations sometimeslead to war. Not only was therethe possibility that one Americanstate might go to war against itsneighbor but also that discriminationsagainst or by foreign countriesmight lead some country togo to war against a state. In sucha case, the United States wouldbe drawn into the war, for theauthority to make war was vestedin Congress. To say the least,·thesituation was anomalous.It is strange, but true, that theevents which finally provokedAmericans to do something aboutthe union did not directly involvethe Congress and its ineffectiveness.Perhaps it is not so strangeon reflection, for Congress rarelydid anything. The failure to actmay·be indictable, but I think itwould be .hard to get a jury toconvict. Congress presented a lowsilhouette to its critics. True, itrepudiated its currency, could notpay its debts, could not force thestates to meet their quotas, couldnot protect its citizens abroad, anddid not ·do most of the things itwas authorized to do with muchenergy. But, then, it seldom gaveoffense, and. people spread overa vast land were more used toopposing government action thanseeking it. It is most probable thatif some crisis had swept the Congressaway it would have gonewith a whimper rather than abang. In- our day, we have seenexile governments seeking a countryto govern; the United Stateswas an exile country awaiting agovernment.Trouble in Rhode IslandIt was trouble in New Englandin 1786-87 that aroused fearswhich prompted men to action.Paper money, taxes, and debtswere the occasion of challenges tosome state governments. Moststates were under pressure tomake paper money issues. Sevenhad done so by 1787 but, as mightbe expected, there was considerableopposition to such actions.Rhode Island not only issued papermoney but revived harsh methodsto try to make it circulate.Faced with fleeing creditors andmerchants abandoning the state,the "legislature passed an act de':'claring that anyone refusing to

626 THE FREEMAN Octobertake the money at face value wouldbe fined £100 for a first offenseand would have to pay a similarfine and lose his rights as a citizenfor a second."17 When the actwas challenged, the court declaredits opinion that the act was Unconstitutional.The judges were calledbefore the legislature, interrogated,and some of them dismissed.Rhode Island's government wasviewed with contempt by manyAmericans.Shay's RebellionRhode Islanders would probablyhave been left to suffer the disadvantagesof their own governmentor get out - the latter was'becoming an attractive optionbutit was not easy to take so sanguinea view of events in Massachusetts.There was widespreaddissatisfaction with the foreclo'sureson farms and imprisonmentfor debts. Some of the discontentedwanted a moratorium on the collectionof debts and/or paper moneyto be issued. Taxes were alsolevied in such a fashion as toarouse resistance to their collection.The discontent may havebeen agitated by British agents;certainly, money was made availablefor the discontented to use totake action, though who was behindthis was never definitely established.Overt action came when mobsbegan preventing courts from sitting.Beginning in early Septemberof 1786, a succession of courtswere disrupted and preventedfrom conducting business by largegroups of armed men: at Worcester,at Concord, at Taunton, atGreat Barrington, and at Springfield.The legislature did not takethe desired action, and a rebelforce was organized. The climaxof these events came in Januaryof 1787. It is known as Shays' Rebellion,taking its name from oneof its leaders, Daniel Shays. Massachusettsauthorized an armedforce to put down the rebellion,and the rebel force was dispersedon January 25. New Hampshirewas threatened by a rebel force,but the movement was quickly putdown by decisive action by, GovernorJohn Sullivan who had beena general during the late war.Constitutional Convention CalledThe call for a convention to dealwith constitutional matters hadbeen issued prior to these events.It came from some delegates towhat was supposed to have been aconvention at Annapolis in 1786.The convention was supposed tohave dealt with commercial matters,but it lacked a quorum ofstates, so a call was issued for amore general convention for nextyear. It did not take Shays' Rebellionto awaken some Americans to

1972 THE CRITICAL PERIOD 627the need for constitutional revision.Anyone who wanted a governmentfor the United States couldsee that Congress was not supplyingit. "Between October 1, 1785,and January 31, 1786, Congresshad a quorum on only ten days,and never were more than sevenstates represented. Between October1, 1785, and April 30, 1786,nine states - the mInImum requiredto do any serious business- were represented on only threedays."18 As mobs began to intimidatecourts in Massachusetts, onehistorian notes that "the Congressof the United States had likewiseceased to function."19 As the riotousevents moved to their culminationin early 1787, one stateafter another elected delegates tothe Constitutional Convention. Finally,even Congress acted by recommendingto the states that theysend delegates. The fear of therebellion spreading had apparentlytipped the scales.The site of the convention wasPhiladelphia, the time appointedto convene May 14, 1787, and theobject was to contrive a governmentadequate to the' commontasks of the United States. . ~• FOOTNOTES •1 Samuel E. Morison and Henry S.Commager, The Growth of the AmericanRepublic, I (New York: Oxford UniversityPress, 1942, 3d ed.), 265.2 See Andrew C. McLaughlin, The Confederationand the Constitution (NewYork: Collier Books, 1962), pp. 77-78.3 Ibid., p. 75.4 Curtis P. Nettels, The Emergence ofa National Economy (New York: Holt,Rinehard and Winston, 1962), p. 67.5 Ibid.6 Merrill Jensen, The New Nation(New York: Vintage Books, 1950), p.303.7 Nettels, Ope cit., p. 65.8 Ibid.9 Jensen, Ope cit., pp. 247-48.10 Ibid., p. 249.11 Ibid., p. 250.12 Ibid., pp. 309-10.13 John Fiske, The Critical Period ofAmerican History (Boston: HoughtonMifflin, 1916), p. 165.14 McLaughlin, Ope cit., pp. 64-65.15 Ibid.. p. 51.16 Fiske, Ope cit., p. 145.17 Jensen, Ope cit., p. 324.18 Forrest McDonald, The Formationof the American Republic (Baltimore:Penguin, 1965), p. 140.19 Ibid., p. 147.Next: The Making of the Constitution.

oturoightf RONALDCOONEYTHE CONCEPT of natural rights nodoubt has its origin in the RomanStoic idea of a "law above thelaw," of an unwritten law whichprecedes and is superior to manmadelaw. Christian philosophy, inthe persons of St. Augustine andSt. Thomas Aquinas, developedand refined the natural law idea,and it was a significant tenet ofthe eighteenth century Enlightenment.The doctrine has come downthrough the centuries as one of themajor' arguments against arbitraryand unrestrained governmentalpower.In much the same way is the beliefin the natural rights of mana belief in "rights above rights."Likewise, natural rights have beenused in the resistance to unjustauthority. Natural rights werepartial justification for the Glori-Mr. Cooney is a free-lance writer .-ecently graduatedfrom the University of Nevada.ous Revolution of 1688, for theAmerican Revolution (the Declarationof Independence cited man's"unalienable rights"), and for theFrench Revolution and the Declarationof the Rights of Man. Allof the revolutions since the eighteenthcentury have drawn at leastsome of their power from appealsto natural rights.The connection between naturalrights and natural law is instantlyrecognizable. Both exist prior tothe State, and both transcend it.Natural law, like the law of theState, provides protection for theindividual's rights from violationby another individual, or - andth.is the State does not do --" by theState. itself. Natural rights andnatural law are the final arbitersof liberty. Finally, natural rightsand natural law are both deniedby those who exalt the State overthe individual citizen. those who628

1972 NATURAL RIGHTS 629make the State all and the individualnothing. It is to this, asit is to all forms of Statism, thatnatural rights make a direct andimplacable challenge.A Dictatorial DelusionThe common delusion of the defendersof unlimited governmentaldominion is that the State confersupon the individual whatever politicaland economic rights he mayenjoy. This was certainly the viewof Thomas Hobbes, the defenderof absolute monarchy and theauthor of the Leviathan. Hobbes,in 1651, argued for the completesovereignty of the king as rulerand lawmaker. Hobbes sought torepudiate natural law by placingit on equal terms with the civillaw. He states in the Levia,thwn,"The law of nature and the civillaw contain each other, and are ofequal extent." In other words,natural law (and by extension,natural rights) is as high as, butno higher than, civil law. Thesovereign makes civil law, and inHobbes' kingdom there can be nolaw higher than the decrees of thesovereign. He, in effect, is the law.Whatever the political repercussionsof a system like that whichHobbes postulates, there arecertainmoral and ethical questionswhich it poses. Hobbes' felt thatmorals and ethics had no place indetermining whether or not a systernof government was good orevil. Such a judgment, accordingto Hobbes, could not be made, orif made, could not be proved. Thecorrelation between Hobbes disavowalof natural lawjnaturalrights and objective morality ispalpable and direct. Hobbes realizedthat the acceptance of unalienablerights of life, liberty,and property would compel one tomake a moral judgment of a politicalsystem which violated thoserights. Having given the sovereignabsolute authority to make laws,Hobbes goes on to say that noethical determination can be madeabout the sovereign's action, aboutits goodness or evilness. Ethics, toHobbes, are purely subjective andinapplicable in political affairs.The sovereign, it would seem, isabove both law and morality; or,like Nietzsche's superman, "beyondgood and evil."Hobbes wrote in defense of authoritarianrule by one man, themonarch. Monarchy was, inHobbes' day, the most widespreadform of government. With thegradual decay of the monarchicalform, and the general democratizationof governments, came thebelief that it was not the leader ofthe nation who was sovereign, butthe people themselves. The divineright of kings had become, asHerbert Spencer observed, the"divine right of majorities." But

630 THE FREEMAN Octobervvhether they represented the interestsof monarchy or democracy,the enemies of natural rights hadthe same intention - to deny theindividual any rights but thosegranted by the State.Bentham's Faith in DemocracyOf the type of thinker who spokefor democracy and against naturalrights was the great utilitarian,Jeremy Bentham. No statist ineconomic concerns, Bentham wascuriously inconsistent when itcame to limiting, or not limiting,the State's sphere of influence.Government's function, as Benthamsaw it, was "creating rights."He considered natural law andnatural rights "fictions," and inhis first work, the Fragment onGovernment, he castigated Blackstonefor a contrary belief. Bentham'santipathy to natural rightssprang from the conviction thatnatural rights were obstacles to reform,and he was against checksand balances and a system of separationof powers for the samereason.Bentham thought, with the faithof the statist in the ability of governmentto solve all human problems,that by making the act oflegislating as easy as possible, theState could deal more readily withsociety's dilemmas. Bentham didnot see what others, most notablythe Framers of the Constitution,savv so penetratingly: that thepower of the State to achieve goodwas equaled by its power toachieve enormous harm, that inseeking the former one necessar·ily braved the latter. Bentham didnot perceive the difficulty inheren1in placing all right-giving poweIin the State's hands. He failed tcunderstand that the capacity fOlbestowing rights could become thEcapacity for withdrawing rightsFinally, Bentham, like Hobbes be·fore him, was incorrect in assum·ing that the State could creatErights out of nothing. The State ifa delegated authority, and wha1power it has derives from the individuals who comprise it. Sue}being the case, it is absurd to assume that the State can bestovrights. on its own creators. Th4State may give order to rightsdefine them more clearly, and proteet them with laws; but it can n4more grant rights to the member:of society than a child can granrights to his parents.The Ethical CaseThe ethical arguments in favo'of natural rights are perhaps eve]more telling. If it is true that melhave only the rights the State haseen fit to give them, what is t,stop the State, at any time and foany reason, from taking bac:those rights? Furthermore, hO'~can we say that the State act

1972 NATURAL RIGHTS 631wrongly if it chooses to take thataction? By the logic of the opponentsof natural rights, the Naziregime had a perfect justificationfor recalling the rights, includingthe right to life of 6,000,000 humanbeings, and should not be condemnedor thought of as evil forsimply exercising the prerogativeto which, as a state, it was clearlyentitled. Thus, the denial of naturalrights quickly resolves itselfinto a rejection of the ethical differencesbetween governments,making a slave-state the moralequal of a republic.We now arrive at the final question,"What are the naturalrights?" Although it cannot beanswered precisely, that does notmean it is unanswerable. As hasbeen said before, natural rightsprecede the State and hence area prio'f'li in character. Naturalrights are every man's at birthand are not State-granted. If eachman has an equal claim to liberty,that is, the use of his rights, hecan be limited in his freedom onlyby the claims of other men to anequal share of liberty. The circleof rights around every man extendsas far as it may without intrudingon the rights of othermen. For this reason are the"rights" granted by the State bogusrights. A right to receive welfare,for example, is invalid sinceit requires the abridgment, howeverpartial, of the rights of thecitizen who is compelled to pay forthe welfare benefits given to someoneelse. Natural rights, by contrast,require no abridgment ofanother individual's rights to exist,but are limited only by thesame natural rights of anotherperson. I)Nature's WayIDEAS ON'LIBERTYIN MAKING his ethical choices, man is guided by a code believed tohave the sanction of God; and experience has shown that the goodlife to which his instinct impels him can be achieved only if hemakes his decisions accordingly. The Ten Commandments havebeen called the Word of God; they can also be described as naturallaw, and natural law has been described as nature's way of applyingmeans to ends.FRANK CHODOROV, "Free Will and the Market Place"

632LEONARDFRANCKOWIAKIN THE SOCIETIES of yesteryear,the king ruled supreme. The sayingthat· "heads will roll" was noidle comment but a probabilitywhich struck fear in the hearts ofthe people. When Henry VIII ofEngland said "heads will roll,"roll they did! Whenever and whereverthe king was displeased, theshockwaves of his fury wouldreverberate throughout the dynasty,and the poor citizen wouldshudder in fear. The king was almighty;and people, at best, werehumble servants of the king. Theking's word was law; his wordwas justice; he was the absoluteruler; all property was his to control;all people were his to control.The king was the government, andthere 'was no such thing as indi-Mr. Franckowiak is a businessman in Chicago.His business includes a weekly radio programin behalf of freedom, entitled We StiII Have57 Per Cent (referring to the portion of personalearnings not taken by taxes). "HeadsWill Roll" is from his script for April 10, 1972.vidual freedom for people. Eventhe democracy of Athens and theRoman Empire, which were whatwe call representative governments,were based upon the principlethat government is almightyand man's right to live or die isdecided by the state.In days of old, governmentswere always first and the peoplesecond. Then, along came theUnited States of America andthings were different. Man was toenjoy freedom, of which we stillhave 57 per cent.In other societies, people suchas you and I were absorbed by thestate. It was as if the governmentwas God on earth. Governmentswere at the top and people werethe servants of government. Butwhen the United States of Americawas formed, a dramatic thinghappened. In terms of setting upa country, our forefathers did a

1972 HEADS WILL ROLL 633complete flip-flop. While everyother country had governmentfirst and people second, the UnitedStates was founded in reversepeoplefirst and government secondas servant of the people. Howdramatic that was - a bold, newprinciple - people first and governmentsecond. The people wereto be at the top rung of the ladderand the government at the bottom.People were to be free to enjoylife; people were to be free to dotheir own thing in any way thatwas peaceful; and the governmentwould serve all men, preserve thefreedom of all men through lawand through order, through justiceand through the punishment ofcriminals. This was a fantasticachievement in the history ofmankind - and still is! The miracleof America is man's preciousindividual freedom.Freedom with ResponsibilityOf course, with freedom comesresponsibility. If man is to enjoythe blessings of freedom on thetop rung of the ladder, then healso has to be responsible - responsiblefor his own welfare, forhis own housing, for his own security,for his own employment,responsible for his own existenceand for his own happiness. Thatwas and always is the price offreedom. If man is to enjoy freedom,and the spirit of freedom todo his own thing, then he mustalso bear the burden of responsibilityfor the consequences ofhis actions. Man, enjoying thefresh, brisk breezes of freedom,must also be the master of his ownfate and destiny. Rich or poor,good or bad, the fortunes of successor the consequences of failure,to enjoy freedom is to acceptresponsibility. This was the foundationupon which the UnitedStates was built: free and sel£'­responsible men at the top rungof the ladder and government secondas the keeper of the peace.America Is ChangingNow, Iittle by Iittle, America ischanging. Men began·to abdicatetheir individual responsibility andthey turned to "benevolent" government.Housing is now a functionof government; education isnow a function. of government;Medicare is now a function of government;Social Security is afunction of government; so isbanking, transportation, electricity,water, busing, farming, pricesand wages, employment and nonemployment.The war on povertyis now a function of government.And so it goes; man, in his abdicationof responsibility, hasyielded to government - and therungs of the ladder are no longerclearly defined. Where once theman of America stood proudly at

634 THE FREEMAN Octoberthe top and government was a farremovedand far-distant second,they now crowd together on theladder: individual freedom andself-responsibility - 57. per cent;government responsibility andgovernment control - 43 per .cent,and rising. America is shiftingpriorities so that the governmentwill be on top and people second ­calling to mind the divine rightof kings of yesteryear, the Russiaand Red China of today, where, infact, "heads still roll."To abdicate responsibility, toseek welfare from government, isto give up in exchange man'sprecious freedom because the twoare interrelated. To obtain housingfrom the government is to placehousing in control of government.To obtain education from govern-ment is to put government in controlof education. The price ofwelfare from government is controlby government - and controlis the opposite of the freedom thatwas the miracle of America.For man to enjoy his rightfu1place at the top of Nature's laddeIin the sunshine of human dignityhe must first accept his responsi.bility and thereby keep govern·ment beneath him as his servantThe divine right of kings and gov·ernments is the principle of yes·teryear. Now is the time fOldramatic reaffirmation of mankind's greatest discovery: man'~right to life, man's right to th,pursuit of happiness, and man':right to liberty. Otherwise, "head:will roll."@Misplaced ControlsIDEAS ONLIBERTYTHEY ARE EXPLOITING public ignorance, these politicians whwould put price controls on meat and other food prices. Thesprices have not soared as have the costs of government, and iis the costs of government which need to be controlled.If the costs of government hadn't risen any more than havmeat prices, there wouldn't be enough inflation to make itproblem.The fact is that well over a third of consumer payment fomeat and other voluntary purchases goes to cover costs of thingthe government has decreed more important.J. KESNER KAH

A REVIEWER'S NOTEBOOKJOHN CHAMBERLAINTHE BEWILDERED SOCIETYSOMEWHERE, so Geor~e Roche IIIbelieves, the American people tooka wrong turn. It was not that theirvalues were wrong - their forebearshad come to the N ew Worldin order to find space for individualdevelopment.. The Americanwanted to be "his own man," tocarve out a business, or to develophimself culturally, morally and professionally,without having to askpermission from those who hadbeen placed above him in a socialenvironment that enforced status.But, in coping with a big conti:­hent, the American somehow percnittedtechnology to creat whatDr. Roche calls "enmassment."The big organization bred collecsivism,with all its corroding effectson the freedom of· the individualto be himself.What was the nature of the mis­.:ake that led to "enmassment"?[n The Bewildered Society (ArlingtonHouse, $8.95) ,a book whichthe author describes as a strangemixture of "puffs and pans," Dr.Roche tends to blame everythingon the propensity of baffled humanbeings to try to fight fire with fire.His description of what happenedis compelling. The genius of a freepeople unleashed tremendous creativeforces in an open environment.Seeking the advantages of"economies of scale," our Rockefellers,Carnegies and J. P. Morgansturned little companies intobig companies, using the speciallegal advantages accorded to thecorporation to gain ends that hada tremendous potential both forgood and for bad. If men had onlybeen willing to tackle their environmentwithout asking for specialfavors from government, soDr. Roche avers, the railroads, thesteel companies, the oil refiningcompanies and the real estate op-

636 THE FREEMAN Octobererators would have developed inan orderly way t:tIat would nothave hurt the little man. But thetemptation was too great: theState, throughout the nineteenthcentury, had too much to give,and it was in the cards that forcefuland adaptive men would combineto conjure special advantagesout of the Great Benefactor inWashington.Men Are KnownBy the Company They KeepDr. Roche is ambivalent aboutthe men whom Matthew Josephsoncalled the Robber Barons. Theyare to be blamed, so Dr. Rochesays, for courting government togain such special privileges as tariffsand grants of land. But in actingas a pressure grol;lp the nineteenthcentury tycoonery was behavinglike everybody else. Thegovernment owned title to most ofthe empty continent. Settlers insearch of a good quarter sectionof land rallied to the slogan, "Voteyourself a farm." Everybody wasin on the take, as was perhaps inevitableunder the circumstances.When "society" as a whole is toblame for a state of mind, thereis little point in .making specialvillains out of those who provedmost efficient in providing whatpeople wanted. The "robber baron"enriched himself, but in many instanceshe also enriched eventhose who were forced to sell outto him.What Dr. Roche seems to betelling us is that the Americanpeople in the latter half of thenineteenth century should havefound some nongovernmental wayof protecting themselves againstthe "enmassment" called into beingby the corporate form. Afterall, nobody compelled farmers tomake themselves dependent oncash crops and monoculture agriculture.Producer and consumercooperatives might have beenformed to bring the benefits of"economies of scale" to the littlefellow. When Edison developed thepower plant, farmers might haveavailed themselves of small-scaleelectrical power components, as"Boss" Kettering of GeneralMotors originally suggested. If individualshad formed associationsto buy tracts of land and then subdividedthe acreage to suit themselves,we could have avoided someof the uglier results of urbansprawl. When Henry Ford startedmaking his Model T, he hoped thatpeople would divide their time betweenworking for employers andraising their own vegetables ontheir own acres. The car mighthave enabled a man to take industrialemployment in prosperoustimes without quitting a base onthe land that could tide a familyover periods of depression.

1972 THE BEWILDERED SOCIETY 637Turning to GovernmentInstead of trying to solve theirproblems by voluntary associationand individual ingenuity, however,the American people allowed themselvesto be seduced by the ideathat Big Government could beutilized to control and regulateBig Business in such a way thatthe little competitor would have achance. For a time, "trust-busting"beguiled the common man. Butthe Populists, the Mugwumps andthe Progressives discovered totheir chagrin that business had anuncanny way of dominating thevery State machinery that wassupposed to give protection to the"public" or to the "consumer."Theodore Roosevelt tried to distinguishbetween "good" and"bad" trusts and wound up in thearms of George Perkins of theHouse of Morgan. To fight WorldWar I, Woodrow Wilson had tocall Bernard Baruch and otherWall Street tycoons to Washingtonto head up the war productionagencies. The bankers soon learnedhow to make use of governmentcreatedpaper to enrich themselves.As Dr. Roche tells the story,"reform" could not stay the processesthat led to ever greater "enmassment."The New Deal attemptsto save the small farmerended by giving superior help tothe big farmer, who used the universalizedbenefits of the AAA tobuy machinery that his little competitorcould not afford. Insteadof halting the movement to thecentral city, our "progressive"agriculture reforms hastened it.Wartime InterventionsTwo big wars and a couple ofsmall ones .completed the centralizingprocess. Education wasforced into line when the government,in order to fight the wars,had to subsidize the universitiesto provide research and developmentfor the so-called militaryindustrialcomplex.In spite of everything, Dr.Roche has not lost his nerve orhis sense of proportion. His historicalchapters are enough tomake anybody a pessimist, but, ina sudden right-about-face, ourhitherto gloomy analyst discoversthat only some "twenty-five percent of all goods and services areproduced by the 500 largest industrials."Controverting ProfessorGalbraith, Dr. Roche says thismust mean that "seventy-five percent of our goods and services arenot produced by 'the technostructure.'" Continuing his explorationof the factors that are currentlyworking to halt the processes of"enmassment," .Dr. Roche notesthat the big producers need thesmall producers just as much asthe small businessman needs the

638 THE FREEMAN Octoberbig. Western Electric, for example,has 40,000 suppliers. And the smallbusinessman provides the majorsupport to America's 6,000 nonprofitorganizations, 320,000churches, and 100,000 private welfareorganizations. We don't, inshort, need the Big State to solveour problems. "Enmassment" neednot grow if individuals have thewill to do things either alone or involuntary groups.Softness at the TopWill enough people read Dr.Roche to rekindle an old faith inthe individual? This is, indeed, thequestion. The day I finished readingThe Bewildered Society Ipicked up The New York Timesand opened it to a story of a survey"of 456 of the richest, mostpowerful and most influential personsin the United States." Whatthe survey reveals is "a high levelof acceptance of Government interventionin the economy, approvalof most of the. things thatmake up the welfare state, andrejection of hard-line anti-communismin foreign policy."With such softness at the top,has Dr. Roche a chance of makinghis gospel stick? We can only hopethat his still, small voice willsomehow reach 456 "leaders" whoknow not what they do.~ THE SPOILS OF PROGRESS:Environmental Pollution in theSoviet Union by Marshall I. Goldman(Cambridge, Mass.: MITPress, 1972), 372 pp., $7.95.Reviewed by Gary North.ONCE AGAIN, Professor Goldmanhas demonstrated his remarkablegrasp of the· economics of the SovietUnion (see the review in theNovember, 1968 issue of THEFREEMAN). This time he focuseson the whole problem of pollution:ownership, social costs, pricing,responsibility, legislation, and soforth.First, he demolishes the mythof "clean socialism." There is noguarantee that the state ownershipof the means of productionwill result in cleaner skies, purerwater, and rational allocation ofclean resources. The actual practiceof the Soviet Union indicatesthe reverse: "One of the majorarguments throughout this studyhas been that the concentration ofeconomic and political power inthe hands of the Soviet state canbe and has been a major factor inthe creation of environmental disruption.In the .Soviet government'sdrive toward industrializationand economic growth all toooften there has been no person orgroup around with any power tostand up for the protection of theenvironment."

1972 OTHER BOOKS 639State power, in theory, may bea tool for doing good, but in practicewe measure the results. Thequest for aggregate economicgrowth - a mania, says Goldman,which was first given to the modernworld by the Stalinist FiveYear Plans - has granted bonusesto managers for minimizing factorycosts at the expense of theenvironment. Fines for damagingthe environment seldom matchbonuses for reaching quotas. Andeven these fines are seldom imposedon factory managers. "Sofar it is the poacher (that is, individualcitizens) that [is] beingharassed, while governmental institutions(factories and municipalities)are frequently left tothemselves. The real polluters forthe most part are not rigorouslyregulated or penalized.... Yet itis the government institutions(municipal, service, manufacturing,and agricultural) that are responsiblefor damage hundreds oftimes more destructive than thatof the poachers."Marxism propounds two economictheories that are almostguaranteed to produce environmentaldisruption: the abolition ofprivate ownership and the free(yr~tuitous) cost of SCllrce economicresources."In a socialist society it wouldseem that it would be more difficultto stimulate preventive actionin both the case of public and privatesocial costs. Because privateland .ownership is prohibited inthe USSR, the individual has lessof a vested interest in fighting theconstruction of a new factory inhis neighborhood or the mining ofsome raw material in the area."The best motivation, operationally,is simply "the fear of privateloss." Thus, the USSR has eliminatedwhat Goldman calls the firstline of defense against pollution.By regarding natural resourcesas free goods, managers have beenled to underestimate costs, wasteresources, locate factories uneconomically,and destroy valuable assets.Developers of· Black Sea resortsused sand from the beachesto make cement. This removed theprotection from the pounding winterwaves. In 1968 all the trucksin the Abkhazia Republic had tobe used in order to bring in materialsto save collapsing hotelfoundations. The erosion in somecases cannot be reversed, andwhole sections of the beaches aredisappearing.Lake Baikal, the largest mass ofpure water on earth, is steadilybeing polluted. Kislivodsk, themountain resort protected fromthe weather by a ring of mountains,has had its mountain covercut away by a limestone quarry,and the winter is now getting in.The Caspian Sea is being lowered

640 THE FREEMAN Octoberrapidly. Dust storms now hit theUkraine every other year. Yet theonly successful protest against onegovernment agency is a protest bysome other agency.Lying managers, rigged costbenefitanalyses, bureaucratic intransigence,impotent national legislation,utopian schemes, and pollutionof all kinds are the spoils ofSoviet progress. Expenditures tocurb air pollution in the SovietUnion are only one-tenth of expendituresin the United States.Their spirit may be willing buttheir price system is weak. Goldman'sbook is a ringing refutationof all those who would argue thatcapitalism is the primary cause ofthe "environmental crises." ~HANDSOME BLUE LEATHERLEXFREEMAN BINDERS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-ON-HUDSON, NEW YORK 10533

theFreemanVOL. 22, NO. 11 • NOVEMBER 1972Six Ideas to Keep Us Human Edmund A. Opitz 643The first of two articles on six humanizing concepts that might save us from the"new materialism."You Rascal, You! Leonard E. Read 652The domineering habit that leads to war begins in our most intimate relationships.The Roots of "Anticapitalism" Erik von Kuehnelt-Leddihn 657A scholarly look at the forces of envy and reform which would deny the freedom anddignity of man.The American Economy Is NOT Depression·Proof Hans F. Sennholz 666The natural consequences of inflation and malinvestment are still painful, despiteevery assurance to the contrary.Social Inflation Pa,ul l. Poirot 674Would you believe there's now a new kind of inflation, caused by excessive governmentspending!I Visit a Managed Society Orien Johnson 676"I am determined," he said, "not to be conditioned to apathy."The Founding of the American Republic:16. Making the Constitution Clarence B. Carson 684The background of the men and the miracle they wrought at the convention inPhiladelphia.Book Reviews: 700"Eliot and his Age" by Russell Kirk"The Ideological Imagination" by Louis J. HalleAnyone wishing ~o communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tt1eFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON-ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic EducationManaging EditorTHE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a nonpolitical,nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.Any interested person may receive its publicationsfor the asking. The. costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are invitedin any amount-$5.00 to $10,OOO-as the meansof maintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printecin U.S.A. Additional copies, postpaid, to one address: Single copy, 5(cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.THE FREEMAN is available on microfilm from Xerox University MicrofilmsAnn Arbor, Michigan 48106.Some articles available as reprints at cost; state quantity desired. Pelmission granted to reprint any article from this issue, with approprlat lcredit, except "The Founding of the American Republic."

EDMUND A. OPITZas to make us humanMOST PEOPLE live lives of quietdesperation, Henry David Thoreautold us. If there was truth in thatobservation, in the pleasant, spaciousold New England of Thoreau'sday, how much more truthis packed into those words in thesemelancholy days! Events have gottenout of hand and the worldlurches into chaos.Things have fallen apart tasterthan any of us would have daredpredict, and we are seized bypangs of guilt and self-doubt. Somany promising experiments havegone sour, from the New Freedomof Woodrow Wilson to the latestukase of the present administration.The statesmen of this eratalked peace and sought to outlawwar, but they let the twentiethThe Reverend Mr. Opitz is a member of thestaff of the Foundation for Economic Education,a seminar lecturer,and author of thebook, Religion and Capitalism: AWes NotEnemies.century break down into thebloodiest period of all the twentyfivehundred years of warfarestudied by Pitirim Sorokin. "Welive," wrote this great scholar, "inan age unique for the unrestraineduse of brute force in internationalrelations."The threat of protracted internationalconflict is bad enough, butthere is also the well-founded fearof domestic violence and crime.And even if we are lucky enoughto escape actual robbery, we knowthat inflation is steadily drainingour wealth. We've seen the raceissue go from integration to BlackNationalism; we've witnessed theemergence· of the sex and' drugcult, the rise of astrology, witchcraftand voodooism; V.D. hasreached epidemic proportionsamong the young ; and then thereis abortion, homosexuality, thecampus crisis, the environmental

644 THE FREEMAN Novembercrisis, the inner crisis in man himself.For is it not true, as Yeatssays in a famous poem, that "Thewicked act with dreadful intensity,while the good lack all conviction."Youth Seeking IdentityIt is a time of troubles for all,but perhaps it's easier for the oldwhose habit patterns firmed up ina healthier era than for the youngwho are searching for a value systemand cannot find one. Depression,in the vocabulary of manyyoung people, does not mean theeconomic malaise which this countrystaggered through during theNineteen Thirties; it means thesomber mood in which they hangquestion marks around life, wonderingif it really is worth living.They are trying to find meaningfor their lives in terms of thevalues their elders lived by - or onany other terms - and they arenot having much luck. We sometimesfind their behavior ratherbizarre; the long hair, the weirdclothing, the haphazard life styles.But perhaps these symbolize amessage they are trying to getacross to us. Some of the so-calledhippies, by deliberately being i11­housed, ill-clothed and ill-fed, maybe practicing a charade whosemessage is that the More AbundantLife, as defined in New Dealterms, is not a proper goal forman. Perhaps they have a suspicionthat reality is wider anddeeper than the physical universerevealed to common sense - as religionhas always maintainedandso they experiment with mindexpandingdrugs. They grope aftersome form of religious expression,but still they drift.Now, we know something aboutthe rise and fall of civilizations.In our schoolbooks we read about"The glory that was Greece, andthe grandeur that was Rome."Toynbee, Spengler and Dawsonhave made· us aware of dead civilizationson other continents. Acivilization comes into existencecradled in dominant ideas,launched by deeds of heroism andself-sacrifice, and it maintains itselfin a tonic condition only selong as it has solid grounds fOlbelieving in itself and its destinyBut civili~ations wane; Rome fell;Spengler predicted the decline ojthe West. We need not buy ~single one of Spengler's theoriesbut it is hard to argue against hilphrase: The West is in declineGreat numbers of people in thi:favored land no longer believe i1the things that made Wester]civilization unique.An animal species which haflourished in a given area may bwiped out by a disease, or it rnabe decimated by a predator, orclimatic change may destroy itfood supply. Everyone of thes

1972 SIX IDEAS TO KEEP US HUMAN 645afflictions has beset primitive peoplesin times past, but a civilizationdoes not founder for any ofthese reasons. A civilization goesunder when its people, for onereason or another, lose contactwith the big keynote ideas of theirculture.Ideas Make Us HumanWherein lies the great differencebetween the human speciesand every other? We have muchin common with other forms oflife, especially with the warmbloodedvertebrates. In structurewe bear some resemblance to themanlike apes, but the critical differencein the domain of ideas faroutweighs any resemblances. If achimpanzee has any thoughts atall about what it means to be anape, they are rudimentary; he's apretty good animal without eventhinking about it. But no man isfully human unless he maintains alively contact with a set of ideasas to what it means to be a person.This is where our disease hasset in, in the realm of ideas. Theperilous days we are livingthrough are not the result of adrying up of the food supply,which is more abundant than ever.There's been no marked change inthe physique of modern man, anddisease·· is not a menace. Nor arewe beset by predators. The malaisefrom which we suffer has impairedthe ideas which instruct us whatit means to be men and women,and we function poorly in consequence.The people of our racebuilt the Parthenon, constructedthe great systems of philosophy,painted the ceiling of the SistineChapel, wrote the plays of Shakespeareand the music of Bach;and we can't figure out how toteach our kids tolerance and mutualrespect without busing themall over town! Something is definitelywrong with us, and it won'tbe right with us until we come toterms with six big ideas .. I'll mentionthem briefly now and dealwith them at greater length lateron. They are the right convictionsabout free will, reason, selfresponsibility,beauty, goodness,and the sacred. We have "blownit" at everyone of these points,and that's more than enough toaccount for the sorry spectaclemodern man has made of himself.It also points the way to recovery.Let's, first of all, hear a portion ofthe indictment leveled at us bycontemporaries.Downgrading ManThe human race is getting abad press these days, and we loveit. Norman Cousins told us a whileback that "Modern Man is Obsolete,"and we confer a couple ofdistinguished editorships on himin a frenzy of approval. Robert

646 THE FREEMAN NovemberArdrey writes a book to demolishwhat he calls The Romantic Fallacyand argues that our forebea.rswere killer apes, whose bloodlust still surges in our veins. Andso great is the demand for preachmentsof this sort that the bookhas gone through seventeen printings!The creature we used torefer to as the glory of creationis, when you scratch the surface,little more than a Naked Ape,Desmond Morris tells us. Thisbook has gone through six printingsand there are two paperbackeditions. Knowing a goodthing when he sees it, Morriswrites a second book, The HumanZoo. The Nobel Laureate in biology,Albert Szent-Gyorgyi, goesMorris one better with a bookentitled The Crazy Ape. And it iscommon knowledge that this odiousrace fouls its own nest, pollutesthe environment of its neighbors,wars ceaselessly on its ownkind, destroys wildlife, watchesLawrence Welk 'and votes Republican.The creature Dnce· regarded asIittle lower than the angels is nowranked several degrees below thebeasts!The books whose titles I havelisted above purport to be in therealm of science. In the realm ofthe admittedly fictitious there isa new school of novelists who aim,in their stories, to reveal man asthe pitiable slob he really is. Acritic comments that "From Cervantesto Hemingway, storytellershave assumed that man has hopesand aspirations, and that theycould be expressed meaningfully.Bosh, says the new school. Man isa blob, creeping and leaping aboutin a. world he cannot control, hiswords meaningless or hypocriticalor both."!Immortality of the SoulHow different the outlook of agreat writer like William Faulkner,in these words from hisspeech accepting the Nobel Prizein 1950: "I believe that man willnot merely endure; he will prevail.He is immortal, not because healone among creatures has an inexhaustiblevoice, but because hehas a soul, a spirit capable ofcompassion and sacrifice and endurance."Brave words such as these arein danger today of being drownedout by the sheer bulk of the othermessage, which, through the numerousoutlets it has contrived, producesthe enervating atmosphereof misanthropy in which we strugglefor survival. Take the movies.We are given films which degradeour species by focusing on thesordid, the silly, the ugly, thecowardly, the disgusting; as if allelements of the dramatic were1 Time, October 13, 1958.

1972 SIX IDEAS TO KEEP US HUMAN 647lacking in characters who exhibitnobility, heroism, kindness, oreven common decency. Anothertack is taken in such a, film as"The Hellstrom Chronicle." Themere ability to film those astonishingpictures of the insect worldrepresents the culmination of thework of many geniuses, but thisheartening thought is squelchedby the narrator who tells ustoward the end of the film thatthey really do organize thingsbetter in the insect world, andhuman beings should learn fromwasps and ants to submerge theirindividual talents for the greaterglory of the hive and termitary!The examples I have cited fromworks of popular science and therealm of entertainment might bemultiplied many times, and theyrepresent no more than the fractionof the iceberg that pokes itselfabove the surface of thewater. The huge mass below thewater line represents the mood,outlook, trend or, drift that swaysthe multitude.In many previous ages lonelythinkers and poets sounded thenote of pessimism, voiced theirdespair, and vented their hatredof life. But they were read andheard by only a handful of theircontemporaries; they did notreach the multitudes. The massesof men in previous ages were comfortablyinsulated against ideas ofany sort; most of them couldn'tread and the range of' the humanvoice limited the size of the audience.The traditional religious beliefgave men's lives meaning andeven dignity, and most humanenergy was used up in producingenough to live on.Catering to the MassesThings are different now. Antihumansentiments, dislike of humanity,hatred of life, are epidemicamong present-day intellectuals,and the idea that lifemay not be worth living has percolateddown to the masses of people.This is a new situation inhistory. The masses of men arerelatively inarticulate but only amass audience can make a book abest seller, or award a goldenrecord to some singer, or enable afilm to gross ten million dollars.The people, books, songs, ideaswhich ride the crest of fashiontoday are held there by popularsupport; whereas, formerly, theartist and composer wrote forwealthy patrons. Joseph Haydencomposed magnificent music forthe Esterhazys; but LeonardBernstein writes his Mass for themasses. We are dealing with aperverse attitude toward lifewhich has infected major sectorsof Western culture at every level.In the year 1929, Joseph WoodKrutch wrote a stunning little

648 THE FREEMAN Novemberbook entitled The Modern Temper,using the word "temper" in thesense of frame of mind, or outlook.His major point was thateducated people had come to assumethat science had exposed asdelusions the values and standardsupon which Western Civilizationhad been founded, and thatthe decline of the West was dueto Western man's loss of faith inhimself. The prevalent belief, heargued, is that men are animalsand animals are machines.What men believe about themselvesis an important factor inthe success or failure of theirefforts. A golfer who firmly believeshe can sink a putt is morelikely to do so than one who believeshe'll miss the cup. A swimmerlike Don Schollander tells howhe gets himself "psyched up" beforea race and tries to make hisopponents feel like losers in a warof nerves. It is a notorious fact inbaseball that certain pitchers havethe "Indian sign" on a particularbatter; he's a dangerous hitterexcept against this one pitcher.The right beliefs, in short, inspireright action.I don't know what an elephantbelieves about himself; I suspectthat he doesn't believe anythingabout himself, one way or theother. I think it would not matter;he'd go. on being the same oldelephant he always was. Sometimeswe say of a pet Saint Bernardwho tries to crawl up intoour lap that "Bozo thinks he's akitten." But we know we're joking;and even if this was saidseriously, we know that Bozo remainsa dog no matter what hethinks he is.With the human species it isdifferent: Human beings do notattain their full stature as personsunless they are reinforced by theproper ideas and beliefs about themeaning of being a person. Weshare our physical being withother mammals; biologicallyspeaking, we are anthropoids. Byvirtue of our genetic equipmentwe are clever, adaptable hominids;but no one of us realizes his fullpotential as a man or woman unlesshe knows what it means to behuman. If we so misread humannature as to regard our species asnothing more than the fortuitousproduct of natural and socialforces, then we have impaired ourchances of achieving the mostuniquely human qualities withinour capacity.EnvironmentalismIf it is generally believed thatman is merely the product of hisenvironment - the individual apassive outcome of the time andplace into which he was born, thehuman race a consequence of accidentalchemical and physical

1972 SIX IDEAS TO KEEP US HUMAN 649events of a few million years ago- when· such beliefs pervade aculture, the result is pessimismand resignation. The sense of individualresponsibility is dead ina man who regards himself as apassive creature of his circumstances.The only people who provesuperior to their circumstances,who surmount environmentalhandicaps, are those whose beliefsabout the human species endowmen and women with the creativeenergy to overcome life's difficulties.It may sound as though I amendorsing a "think and grow rich"formula, or the like. Actually, Iam talking about the big picture;the dominant world view entertainedby a culture, the prevailingideology, the real religion. Thedominant world view today is someform of materialism; explicitwhere Marxianism has taken ·hold,implicit elsewhere. Let me documentthis assertion from a statemententitled "What I Believe"by C. P. Snow; novelist, scientist,member of the peerage, 'writing inthe current issue of the BritannicaRoundtable (Vol. 1, No.3).A publication such as this is novehicle for publishing radical departuresfrom orthodoxy; BaronSnow's statement is printed becausehis point of view is commonplaceamong people who regardthemselves as being in stepwith up-to-date ideas. Snow writesas follows: "I believe life - humanlife, all life - is a . . . flukewhich depended on all manner ofimprobable conditions happeningat the same time." But if all lifeis a chance occurrence, so is BaronSnow's life. And if Snow's life isa fluke how can his thinking beanything but a series' of flukes?His thoughts then are randomevents,without rational foundation."All that happened," he continues,"is within the domain ofthe laws of physics and chemistry. .. it was a completely materialprocess. . . . A few million yearsago, subject to the laws of statisticalchance, the creatures thatwere our direct' ancestors cameinto existence.... Speech andwhat we call conscious intelligenceaccrued.... We are still an animalspecies, but much cleverer than allothers." Snow goes on to add,rather wistfully it seems, "It hasbeen a very unlikely process, withmany kinds of improbability alongthe way."Nature1s Passion for OrderNow, old Mother Nature has apassion for order. She has an aversionto disorder, and the Laws ofProbability simply record MotherNature's gyroscopic tug to keepthings on course. The Laws ofProbability record that the numberof male and female children

650 THE FREEMAN Novemberborn is roughly equal. Flip apenny fifty times and it will comeup heads on the average of aboutevery other throw - twenty-fivetimes out of fifty. Make a thousandrandom throws of a pair ofdice and the Laws of Probabilitycan tell you approximately howmany times they'll come up snakeeyes,and how many times you'llget box cars. Numbers betweentwo and twelve are within thesystem, and each of the eleven possiblenumbers will appear a certainnumber of times according tothe laws of statistical chance.But let's pose this question: Ina thousand random throws of thedice how many times will we getseventeen? How many times willthe dice turn into a rabbit? Theanswer is that this would neverhappen; spooky questions like thisimply belief in magic. Now supposewe ask the same question,but say that the dice have beenthrown once a second for a billionyears. Now how many seventeensand how many rabbits? The answerof any sensible person is"None!" to both questions. Thenumber seventeen and rabbits areoutside the system of the littlespotted cubes called dice.When a man like C. P. Snow declaresthat nonlife becomes lifedue to the operation of the Lawsof Probability over immense time,he attributes magical properties tomere duration. He assumes thatdice do turn into rabbits if thetime span be measured in billionsof years. And when he invokes anotherhuge block of time to accountfor the transformation ofthe nonmental into the mental andthe nonrational into the rational,he is endowing the mere sequenceof days, centuries, and milleniawith miracle-working efficacy.Monkeys vs. ShakespeareWe've all heard the assertionintendedto illustrate what merechance and time can accomplishthatif a thousand monkeys wereseated at a thousand typewritersand banged away for a thousandyears they would reproduce everyone of Shakespeare's sonnets. Thepremise upon which this wild illustrationis based is that a Shakespeariansonnet is nothing but amechanical arrangement of blackletters on white paper. There areindeed letters on paper, but thereis one other special ingredient inthese sonnets: Shakespeare's genius.There is no place for geniusin the world view ,of the materialistwho professes to believe thatmind is an offshoot of matter. Apoet simply marks the locationwhere a-poem occurs, according toB. F. Skinner: "The poet is also alocus, a place in which certaingenetic and environmental causescome together to have a common

1972 SIX IDEAS TO KEEP US HUMAN 651effect."2 And besides, the geniusis a salient individual who standsout above the crowd when reallyhe should be content to seek "so~cial gains!"What men believe about themselveshas a great deal to do withdetermining the success or failureof their efforts in the several departmentsof life, and when influentialsegments of the literatepopulation embrace notions aboutthe universe which demean manby depriving him of his most distinctivecharacteristics the cultureis thrown off base.Let me now probe a little deeperalong this line. I shall argue thatsix major ideas, together withbody, brain and nervous system,transform what Snow calls "ananimal species, but much clevererthan all the others" into a fullfledgedmember of the human species.A creature with anthropoidfeatures who completely lacksthese ideas is not of our specieseven though he walks, talks, anddresses like a man. Fortunately,in consequence of the animalhealth and grace in even the worstof men, it is almost impossible forany person to eliminate from hismake-up all traces of. these ideas;2 Saturday Review, July 15, 1972.some influence remains to keep usreachable.Now then, six big, potent, interrelatedideas, without which manis not man.• 1. Free Will. Man's gift offre:e will makes him a responsiblebeing.• 2. Rationality. Man is a reasoningbeing who, by takingthought, gains valid truths abouthimself and the universe.• 3. Self-responsibility. Eachperson is the custodian of his ownenergy and talents, charged withthe lifetime task of bringing himselfto completion.• 4. Beauty. Man confrontsbeauty in. the very nature ofthings, and repI:oduces this visionin art.• 5. Goodness. Man has a moralsense, enabling and requiring himto choose between good and evil.• 6. The Sa·cred. Manparticipatesin an order which transcendsnature and society.Each of these big ideas is introuble today. The attack on themhas been gathering momentum fora couple of centuries and the caseagainst has just about carried theday in influential circles. We'llfurther examine these ideas in aconcluding article next month. .~

.652LEONARD E. READr~~'-'~'-"-'lIll---------.-......~.~.~.~..~.~~'--------lIFrom whence come wars and fighting among you?come they not hence, even of your lusts that war inyour number? James 4:1As WITH ALL of my "original"ideas, this one turns out to be"old hat." Upon reading the firstdraft, an associate remarked,"Why, that is precisely what theBible says." That accounts for theopening quotation. There thencame to mind an .essay by E. W.Dykes entitled "Big Wars fromLittle Errors Grow." (The Freeman,January, 1964.) Old hat ornot, the theme needs constantrepetition; it is so easily forgotten.As I view the societal scenefrom my modest place in it, fourcurrent phenomena are outstandinglyimpressive:1. Things on the surface, atleast, appear to be amiss, notonly in the U.S.A. but worldwide:wars with guns, warswith words in religion, education,business, politics,brutishness on the campusesas on the streets. Never in mylifetime have the confrontationsbeen more pronounced.2. An amazing awakening to thefact that things are amiss:countless admissions by personson all sides of the politico-economicargumentscholarlyintellectuals, columnists,politicians, and others- many of whom have had ahand in bringing on the verycalamity they now decry.3. A frenzied search for explanations,causes, reasons - of themost diverse nature. Theserange from an incompetentbureaucracy to tax loopholesto inequality of income to excessiveor inadequate.welfarismto economic growth tolagging GNP - you name it!Never have the assigned rea-

1972 YOU RASCAL, YOU! 653sons been more at odds and,as I see it, more astray.4. A widespread acknowledgmentof trouble but withoutany noticeable confession ofpersonal shortcomings. Nearlyevery finger points at someoneelse; it is impressivelyyou; there is hardly an I inthe population.Imagine! All of this rascalityand not a professed rascal amongus! Why? It is simply because thereal evil, the cause of our waywardness,is rarely suspected.Thus, self-identification is impossible.People do not link themselvesto error about which theyare unaware.What is this rascality? It is thedomineering habit, the insistencethat others act in accord withone's own shadowy lights. Perhapsno one has shaken this habit completely,so common is its practice.This habit has its inception in theclosest relationships, as in thefamily, one parent lording it overthe other or both of them assumingan authoritarian as distinguishedfrom an exemplary relationshipwith their children. Ittakes such seemingly innocentforms as do-as-I-say - a carboncopy way of·life.This tendency, once rooted,spreads by unseen degrees toneighbors, the classroom, the· pulpit,and other associations. Sooneror later, it begins to grow tee.thand takes the form of do-as-I-sayor-else,that is, it explodes intoout-and-out coercion as in countlessthousands of unprincipledgovernmental compulsions. Whennot recognized as evil and thusunchecked, it brings on dictatorshipsand finally reaches its apogee,its most vicious manifestation:mass slaughter.I am unaware of any evil morepronounced than man lording itover man. Not even God does this.Indeed, He has given us a freedomso radical that we may deny ourMaker or otherwise make fools ofourselves. As I see it, thedomineeringhabit is the root of allevil 1and unless there is some realizationthat it is, we will continue toascribe nonreasons for ourtroubles·and without anyone faultinghimself. We will go on exclaiming,"You rascal, you!"A Record of FailureEnough of my theorizing. Letus reflect on an observed fact: an1 This is close to the idea of OriginalSin, as many theologians define it: thetendency of the creature to try to usurpthe role of the Creator. That interpretationappears to be in accord with theBiblical account which describes thetempter as telling the human creaturethat if he will eat the forbidden fruit hecan become like God. Genesis 3: 5. Seealso. Nature, Man and God by WilliamTemple (London: Macmillan & Co., Ltd.,1934), p. 496 ff.

654 THE FREEMAN Novemberexample cannot be found wheredomineering in practice - manlording it over man - has resultedin success. 2 The record is failure,without exception. It has to be. Acarbon copy is never as good asthe imperfect original.Markedly on the increase arethe complaints I hear from fathersand mothers about the waywardnessof their children. In some instances,drugs. But most of themgo like this: "She is brilliant, astraight A student in college, butshe has bought the whole socialisticdoctrine. She won't do as I say.How do I solve this problem?" Ihave yet to hear one of these doas-I-sayparents confess, "Thefault is mine." In far too manyof these relationships an unsuspecteddomineering attitude hasbeen substituted for parental cooperationand guidance.Take two cases of domineeringthat have "teeth": governmenteducation and the governmentpostal service.Government education has threeforms of domineering: compulsoryattendance, government dictationof the curricula, and the forciblecollection of the wherewithal to2 Success is composed of gains, notlosses. Sputniks, moon ventures, theGateway Arch, and the like-ambitions ofa few - are made possible by enormouslosses on the part of millions of people.With justice or fairness as the premise,these are failures.pay the bills. That education inAmerica is in a mess goes withoutsaying. It is generally conceded,even by many educators. Show meone person who says, "The faultis mine." Yet, it is the fault ofeveryone who has had an.y part inendorsing or supporting or practicingany form of domineering!3The government postal servicenever, even remotely, matchedwhat a free market operationwould have accomplished. And itis getting worse day by day. Canyou name one person during thepast century who confessed thefault is his? No one makes suchan admission because he does notrecognize the domineering trait asthe root of the failure.The railroads have been subjectedto domineering with "teeth" fordecades. They are failing. Not aperson takes the blame; it is nowand always has been, "You rascal,you!" There is no end to the illustrationsthat could be given.When Growth CeasesAs already stated, the domineeringhabit has its inception in theclosest relationships. Correct ithere and it will cease to be a men-3 This is not "collective guilt" as somewould have it but individual error piledhigh. Al1d, critics to the contrary, each ofus is to some extent shaped by the environmentin which we find ourselves. Inanother kind of world, you and I wouldbe in another kind of endeavor.

1972 YOU RASCAL, YOU! 655ace elsewhere. Let us return, forillustration, to those parents whosechildren refuse to sha:r.e parentalviews, conform to parental dictates.True, these parents are unawarethat they have been domineeringand such recognition is indeed difficult.As parents, we tend to forgetthe growth we ourselves experiencedduring childhood andadolescence. By the time we reachparenthood, our own growth mayhave stopped. We have arrived,that is, we no longer feel thatneed to learn which we want ourchildren to feel. If they would onlydo as we say - think as we dothatwould be good enough! Theinsistence that our children dowhat we ourselves refuse to·do iswhat destroys the proper relationships;th~re is no longer a learningpartnership. Our failure tomaintain this kinship in learningis a form of domineering. Lookedat from the child's point of view,he is a know-nothing and the parentthe know-it-all. Conflict!Teacher-Student RelationsPerhaps the best way to shedlight on the proper relationshipbetween you and me, husband andwife~ parent and child- all closerelationships - is to cite an actualcase between a teacher and one ofhis students. My introduction beganwith a letter from the student,a stranger to me. Here it is,abbreviated:"Sir, I am a freshman at a collegein Florida. Seven shortmonths ago I came here believingin Keynesian economics. That iswhat I had been taught in highschool and I had accepted it withoutquestion. Since coming here Ihave been made aware of thesefallacies, and due to my teacher,............................. It is like I havebeen blind and suddenly recoveredmy sight."A few days later, the teacher,also a stranger to me and unawareof the student's letter,wrote in part:"I am a Social Science professorat a private, small liberal arts college.I am very much interested inthe freedom point of view and, forthe last few months, have spenttime trying to understand theview". (Italics mine)Fascinated with these. two letters,I invited the professor toone of our Seminars. In getting toknow· him, I discovered whatturned the student from socialismto a free market point of view.This professor is trying to understand;he and his students are partnersin the learning process. Theyhave a common goal: enlightenment!Contrast this with the parentwhose goal is to make thechild a carbon copy of himself.The parent may not think of this

656 THE FREEMAN Novemberas domineering, but he gives thatimpression to the youngster. Inthis circumstance, the parent andchild are not in partnership butin conflict. This matter of postureapplies in all close relationships.If we wish to put an end to themore horrible consequences of thedomineering habit such as statesocialism and eventually massmurder, we can do so by nippingit in the bud. This is to say, ridourselves of the habit where it isborn, namely, in our close relationships,whatever they happento be.Riddance requires no more than(1) an awareness that the domineeringhabit - freedom's opposite- is the root of all evil, (2)an ability to recognize domineeringin ourselves and to be donewith it, (3) an appreciation thatlearning is just as much a requirementfor the parent as the child,for the teacher as the student, forme as you, as much needed ateighty as eight, and (4) a strictobservance of the Golden Rule.Once we recognize that the viciousdomineering of dictators isbut the political extremity of thedomineering habit that lurks inthe mill run of us, we should exclaim,"You rascal, you 1" only tothe. image we see in the mirror.Breaking ourselves of a bad habitis the way to destroy its most maliciousmanifestation. Remove thesource - that's all. ~IDEAS ONLIBERTYAggression Is Always Wrong"LIBERALS" suffer a myopia, an inability to see that aggressiveforce is used to build the welfare state. True, there is considerablyless outright violence in tax collections for interventionism thanin full-scale war. Big Government relies much more on the threatof force, rather than on its actual employment, to promote thepayment of taxes. But anyone could easily witness the transformationof potential energy into kinetic energy - the threat intothe- reality - by trying to spend for himself the portion of histaxes which would go for, say, farm subsidies. Not surprisingly,few citizens have made this interesting experiment.CRAIG HOWELL

657KUEHNELT-LEDDIHNIN MANY MINDS, "capitalism" hascome to be a bad word, nor does"free enterprise" sound much better.I remember seeing posters inRussia in the early nineteen-thirtiesdepicting capitalists as Frankensteinmonsters, as men with yellow-greenfaces, crocodile teeth,dressed in cutaways and adornedby top hats. What is the reason forthis widespread hatred for capitalistsand capitalism despite the overwhelmingevidence that the systemhas truly "delivered. thegoods"? In its mature stage it indeedis providing, not just for aselect few but for the masses, astandard of living cordially enviedby those bound under other politico-economicarrangements. Thereare historic, psychological andmoral reasons for this state of affairs.Once we recognize them, wemight come to better understand-Dr. Kuehnelt-Leddihn is a European scholar,linguist, world traveler, and lecturer. Of hismany published works, perhaps the best knownin America are Liberty or Equality? and TheTimeless Christian.ing the largely irrational resentmentand desire to kill the goosethat lays the golden eggs.In Europe there still survives aconsiderable conservative oppositionagainst capitalism. The leadersof conservative thought andaction, more·often than not, camefrom the· nobility which believedin an agragian-patriarchal order.They thought workers. should betreated by manufacturers as noblementreated their· agricultural employeesand household servants,providing them with total securityfor their old age, care in the caseof illness, and so· forth. They alsodisliked the new business leaderswho emerged from the middleclasses: the grand bourgeois wastheir social competitor, the bankertheir disagreeable creditor, nottheir friend. The big cities withtheir smoking chimneys wereviewed as calamities and·· destroyersof the good old life.We know that Marx and Engelsin the Communist Manifesto furi-

658 THE FREEMAN Novemberously attacked the aristocratic socialmovement as a potential threatto their own program. Actually,most of the leading minds ofChristian anticapitalist thought(equally opposed to socialism)were aristocrats: Villeneuve-Bargemont, de Mun, Liechtenstein,Vogelsang, Ketteler.Bias Against CapitalismNot of Worker OriginArmin Mohler, the brilliantSwiss-German neo-conservative,has recently explained that one ofthe weakest points of contemporaryconservative thought, stillwrapped in the threads of its ownobsolete agrarian romanticism, isits hostility against modern technology.How right he is! The exceptionmight have been Italy withits tradition of urban nobility andof patricians who, even before theReformation, engaged in tradeand manufacture. Capitalism, indeed,is of North-Italian origin. Itwas a Franciscan, Fra Luigi diPacioli, who invented double-entrybookkeeping. Calvinism gave anew impetus to capitalism but didnot invent it. (Aristocratic entrepreneursin Italy? Count Marzottowith his highly diversified businessempire of textile plants, papermills, hotel· chains and fisheriesis a typical example. His laborrelations are of a patriarchal natureinvolving substantial fringebenefits which also characterizeJapanese business practice.)The real animosity against freeenterprise did not originate withthe laborers. Bear in mind that inthe early nineteenth century theworking class was miserably paid,and this for two reasons: (1) theincome from manufacturing wasquite limited (true mass productioncame later) and (2) the lion'sshare of the profits went into reinvestmentswhile the typical manufact~rerslived rather modestly. Itis this ascetic policy of early Europeancapitalism which madepossible the phenomenal rise ofworking class standards. Seeingthat the manufacturers did notlive a life of splendor (as did thebig landowners) the workers atfirst viewed their lot with surprisingequanimity. The Socialist impetuscame from middle class intellectuals,eccentric industrialists(like Robert Owen and Engels)2nd impoverished noblemen witha feeling of resentment against theexisting order.As one can imagine, the artificiallycreated ire then was turnedfirst against the manufacturerwho, after all, is nothing but somesort of broker between the workerand the public. He enables theworker to transform his work intogoods. In this process he incursvarious expenses, such as for tools,and a part of the costs of market-

1972 THE ROOTS OF /"ANTICAPITALISM" 659ing. He hopes to make a profitfrom these transactions in orderto render his efforts worth while.Curiously enough, his responsibilitytoward the enterprise is offar greater scope than that ofmany workers. No wonder that theinterest, once centered on accidentsin the factories, is shiftingmore and more to the managerdiseases. The entrepreneur sacrificesnot only his "nerves" but alsohis peace of mind. If he fails, hefails not himself alone; the breadof dozens, of hundreds, of thousandsof families hangs in the balance.The situation is not verydifferent in a stock company.There, the stockholders sometimesmake profits in the form of dividends- and sometimes they donot. The worker always expects tobe paid. The bigger risks are thusatthe top, not at the bottom.Yet, how well the worker is paiddepends on several factors, thefirst of which is the. readiness ofconsumers to pay for the finishedgoods a price high enough to warranthigh wages. Here we come tothe brokerage side of the capitalist.Secondly, there is the decisionof the entrepreneur (sometimesthe stockholders)· how much· of thegross. profits will be distributed(as dividends,. bonuses, and·thelike) and how much should be reinvestedor laid aside. It is evidentthat·the enterprise, being competitive,has to "look ahead" in a farmore concrete way than does theoften improvident worker. Thebusiness usually must be plannedyears ahead. It not only has toadopt the best means of production(which means the purchase ofnew expensive machinery), butalso needs ,financial assets as reserves.Finally, the wages have tobe in a sound relationship to themarketing possibilities; and alsoto the quality of the- work done,the sense of duty of the workersand employees. Virtue enters thepicture. Even the net profits paidout are not necessarily a "loss" tothe workers, because· a profitableenterprise attracts investors; whatis good for the enterprise obviouslyis good for its workers.There is a commonalty of interestswhichcan be gravely upsetby either side.· Needless to say, themost· common way to upset theapplecart is through excessivewage demands which, if yielded to,tend to eliminate. the .- profits andto make the merchandise unmarketable.Politically organized workersalso may pressure governmentsinto inflationary policies.Strikes cancel production for agiven period and mean economicloss. The inability to sell due toexcessive wages and prices or toprotracted strikes can bankruptthe economy.This mutual relationship be-

660 THE FREEMAN Novembertween costs of production and purchasingpower is frequently overlooked- especially in the so-called"developing nations." The insistenceon "a living wage," often bywell-meaning Christian critics, inmany cases cannot be met withoutpricing the products out of themarket. Such critics forget thatworkers might prefer to work ata low wage rather than not towork at all.Saving Begins at HomeOne thing is certain: nascentindustrial economies have to starton an ascetic, a, Spartan level. Thisis true of all economies, free or. socialistic. .The apologists of theUSSR can well use this argumentin the defense of Soviet economiesin their initial stage, but only upto a point: the introduction of socialismin Russia effected immediatelya tremendous decline ofworking-class, peasant-class, andmiddle-class living standards. which,compared with 1916 levels,have improved only in spots.Largesectors still are worse off than beforethe Revolution. A microscopicminority, however, lives very wellindeed.! In the meantime, freeeconomies have made such enormousstrides that the gap betweenRussia and the West is greaterthan in 1916. There are two rea-1 See "Free Enterprise and the Russians,"The Freeman, August, 1972.sons for this state of affairs.First, the Eastern Bloc with theexception of Soviet-occupied Germany,Latvia, and Estonia, completelylacks the famous "ProtestantWork Ethic." Secondly, freeenterprise is basically more productivethan state capitalism becauseof: (a) the snowballing ofmillions of individual ambitionsinto a huge avalanche, (b) the elementof competition based on freeconsumer choice which improvesquality and efficiency, (c) thestrictly non-political managementbased on efficiency and responsibility.So, whence comes the wave ofhatred directed against free enterprise?Dissatisfied intellectualsdesigning utopias and decadentnoblemen do not account entirelyfor the phenomenon. Though nascentcapitalism has not yet "deliveredthe goods" (children canonly show promise, no more) maturecapitalism has proved that itcan provide. Empirically speaking,capitalism has justified itself incomparison with socialism (forthe existence of which we have tobe grateful in this one respect).The assaults against free enterpriseare launched with the helpof theories and of sentiments,sometimes working hand in hand.Frequently these attacks are madeindirectly, for instance, by criticizingtechnology. This critique

1972 THE ROOTS OF "ANTICAPITALISM" 661might be genuine, but often servesas a detour. Much of the currentantipollution campaign is subconsciouslydirected at capitalism viatechnology. (This particular problemis less acute in the SocialistWorld only because it is less industrialized;it is neverthelessamusing to see the Left embracingall the idle dreams of the oldconservative agrarian romanticism.)However, if we examineclosely the attack against free enterprise,we find the followingelements:• (1) The charge that businesscycles are the consequence of freedomrather than political intervention,though proof to the contraryis well established.• (2) The attack against theman-consuming, soul-killing, slavedrivingforms of modern production.In this domain, however, themain culprit is the machine ratherthan the human factor. Technologyper se is strictly disciplinarian.In this respect, socialism orcommunism would not bring theslightest alleviation. On the contrary!Let us remember the idealof the Stakhanovite, the absencein socialist countries of genuinelabor unions, the limitless meansthe totalitarian state has for coercion,regulations, and controls.We must bear in mind that thefree world also has a competitivelabor market. Man can choose theplace and conditions of his work.• (3) The critique of "monopolycapitalIsm," shared in a milderway by the "Neo-Liberal" school,is opposed to all forms of bigness.Still, in the free world we findthat most countries have legislationagainst monopolies in orderto keep competition alive, to givethe consumer a real choice. Anycriticism of monopolies by a socialistis hypocritical, because socialismmeans total monopoly, thestate being the only entrepreneur.Deeper ResentmentsYet these attacks are frequentlyonly rationalizations of much deeperresentments. At the very rootsof anticapitalism we have the theologicalproblem of man's rebellionagainst Original Sin or, toput it in secular terms, his vainprotest against the human condition.By this we mean the curse towhich we are subject, the necessityto work by the sweat of ourbrow. The worker is in harness,but so is the manager and so iseverybody else. For this uninspiring,sometimes unpleasant state ofaffairs, the average man will stickthe guilt on somebody; capitalismserves as the convenient scapegoat.Of course, work could begreatly reduced if one were willingto accept a much lower living

662 THE FREEMAN Novemberstandard - which few people wantto do. Without the opportunitiesfree enterprise provides for highlyprofitable work, the living standardswould go down to early medievallevels. Still, the resentmentagainst this order is directed notso much against an abstractionsuchis human nature - as againstpersons. Thus, the culprit is takento be the "Establishment"- of the"capitalists."This gives us a hint as to thenature of the anticapitalism whichhas more and more surfaced sincethe French Revolution and the declineof Christianity: envy. Eversince 1789, the secret of politicalsuccess has been the mobilizationof majorities against unpopularminorities endowed with certain"privileges" - particularly financhilprivileges. Thus, in the nineteenthcentury, the "capitalist"appeared to be the man who enjoyedconsiderable wealth thoughhe apparently. "did not work" andderived a vast income from thetoil of the workers "who have toslave for him." Apart from the incontrovertiblefact that they mostly"slave for themselves," there issome truth to this.The Entrepreneurial RoleAlmost every worker will usuallycontribute in a minor way tothe income of.the entrepreneur orof the stockholders. This is perfectly·natural because a brokermust always be paid; and an entrepreneur,as we have said before,is actually a broker between theworker and the consumer by providingthe former with the necessarytools and guidance in production.(The merchant is a subbrokerbetween the manufacturerand the public.) It is also naturalto pay for borrowed tools for thesimple reason that their value isdiminished by use. (Thus the travelingsalesman will have to payfor a rented car, the commercialphotographer for a rented camera,and so forth.) Beyond; this, theentrepreneur (who is, as we haveseen, a broker as well as a lender)takes the risk of failure and bankruptcy.This situation also may beencountered in the USSR whereanyone can get an "unearned income"for money he puts into asavings bank or where he can buya lottery ticket.. The purchase ofsuch a ticket is based on an expectation(i.e., to make a profit)but also entails a risk (Le., not towin anything).Risk characterizes all of humanexistence: to make an effort withoutexactly foreseeing its success.Thus, a writer starting a novel ora painter putting the first lines onhis canvas is not sure whether hecan transform his vision into reality.He might fail. Often he does.The farmer with his crop is in the

1972 THE ROOTS OF "ANTICAPITALISM" 663same boat. But the typical workerentering the factory can be certainthat he will be paid at week'send. It should be noted here thatin Austria and Germany, for instance,the industrial laborerworks an average of 43 hours aweek (the 40-hour week is in theoffing), while the self-employedput in an average of 62.5 hours aweek. In other words, the rulewithin our mature economy isthis: the "higher up," the greaterthe work effort - and the higher,too, the work ethics; the slack employeecheats the employer but theslack employer only cheats himself.Facts and FictionThe trouble, as Goetz Briefsonce pointed out, is that the currentnotions about the profits ofthe capitalists are totally out oftouch with reality.2 The reason forthese wrong ideas is partly mathematical!Let us look at some statistics.Too many people think thata radical redistribution of profitswould truly benefit "the littleman." But what do the figures tellus? According to the E conom,icAlmanac, 1962, published by theNational Industrial ConferenceBoard, (page 115), of the nationalincome in the United States, the2 Das Gewerkschaftsproblem gesternund heute. (Frankfurt am Main: Knapp,1955), p. 98.compensation of employeesamounted to 71 per cent; the selfemployedearned 11.9 per cent, thefarmers 3.1 per cent. Corporationprofits before taxes were 9.7 percent of the total national income(after taxes only 4.9 per cent) anddividends paid out were 3.4 percent. Interest paid to creditorsamounted to 4.7 per cent of thenational income. Yet, were the recipientsof these dividends and interestpayments all "capitalists"?How many workers, retired farmers,widows, benevolent associations,and educational institutionswere among them? Would thissum, evenly divided among allAmericans, materially improvetheir lot? Of course not.In other parts of the world thesituation is not much different.According to earlier statistics(1958), if aU German incomeswere to be reduced to a maximumof 1000 Marks (then $250.00) amonth and every citizen given aneven share of the surplus, thisshare would have amounted to 4cents a day. A similar calculation,expropriating all Austrian monthlyincomes of 1000 dollars or more,would in 1960 have given eachAustrian citizen an additional 1 1 41:cents a day!But, let us return to corporateprofits. The 13 largest Italiancompanies composed in 1965 afull-page advertisement which

664 THE FREEMAN Novemberthey tried to place in the leadingdailies of the Peninsula. Thisstatement told at a glance whatthe dividends had been in 1963,what they were over a lO-year period,what salaries and wageswere paid, how much industry contributedto social security and oldagepensions. The relationship betweenthe dividends and laborcost was roughly 1 to 12. The companiesadded that the estimatednumber of shareholders (obviouslyfrom many walks of life) wasover half a million - double thenumber of the employees. Interestinglyand significantly enough,two of the dailies refused to carrythe paid advertisement: one wasthe Communist Unita, the otherthe Papal Osservatore Romanowhose excuse was that it was publishedin Vatican City, whichmeans outside of the Italian State.Rooted in EnvyTo the advocate of equality, thefact that certain individuals livemuch better than others seems tobe "unbearable". The internal revenuepolicies which try to "soakthe rich" often have their roots inman's envy. It seems useless todemonstrate that a redistributionof wealth would be of no advantageto the many or that an oppressivetax policy directed againstthe well-to-do is self-defeating fora country's economy. One usuallywill get the reply that in a democracya fiscal policy which mightbe economically sound could bepolitically unacceptable - and viceversa. Pointing out that the spendingof wealthy 'persons is good forthe nation as a whole may bringthe snap reaction that "nobodyshould have that much money."Yet, people who earn huge sumsusually have taken extraordinaryrisks or are performing extraordinaryservices. Some of them areinventors. Let us assume thatsomebody invents an effective drugagainst cancer and thereby earnsa hundred million dollars. (Certainly,those who suffer from cancerwould not begrudge him hiswealth.) Unless he buries thissum in his garden, he would helpby lending to others (throughbanks, for instance) and by purchasingliberally from others. Theonly reason to object to his wealthwould be sheer envy. (I would addhere that had it not been for theliberality of monarchs, popes,bishops, aristocrats, and patriciansit would not be worthwhile for anAmerican to pay a nickel to seeEurope. The landscape is moregrandiose in the New World.)Still, it is significant that one ofthe few outstanding Christian sociologistsin Europe, Father Oswaldvon Nell-Breuning, SJ, notnoted for conservative leanings,has recently (Zur Deba,tte, Mu-

1972 THE ROOTS OF "ANTICAPITALIS"M" 665nich, February 1972) taken a firmstand against the myths of thebeneficient effects of the redistributionof wealth. As one of thearchitects of the Encyclical QuadragesimoAnno he emphasized thatPius XI was thoroughly cognizantwith this incontrovertible fact butthat, in the meantime, this knowledgehas been nearly lost and thattherefore demagogical ideas havelargely invaded Catholic sociologicaland economic thinking. Especiallyin the domain of "ThirdWorld" economic problems, thelearned Jesuit hinted, the hue andcry for "distributive justice" hasdone a great deal of mischief.It has become fashionable to attackfree enterprise on moralgrounds. There are people amongus, many of them well-meaning,idealistic Christians, who freelyadmit that "capitalism deliversthe goods," that it is far more efficientthan socialism, but that itis ethically on a lower plane. It isdenounced as egotistic and materialistic.Of course, life on earthis a vale of tears and no system,political, social or economic, canclaim perfection. Yet, the meansof production can only be ownedprivately, or by the State. Stateownership of all means of productioncertainly is not conducive toliberty. It is totalitarianism. It involvesstate control of all media ofexpression. (In Nazi Germany privateownership existed de jure,but certainly not de facto.) Theremark of Roepke is only too true,that in a free enterprise systemthe supreme sanction comes fromthe bailiff, but in a totalitariantyranny from the hangman.The Christian insistence onfreedom - the monastic vows arevoluntary sacrifices of a select few- derives from the Christian conceptthat man must be free in orderto act morally. (A sleeping, achained and clubbed, a druggedperson can neither be sinful norvirtuous.) Yet, the free worldwhich is practically synonymouswith the world of free enterprise,alone provides a climate, a way oflife compatible with the dignity ofman who makes free decisions, enjoysprivileges, assumes responsibilities,and develops his talentsas he sees fit. He is truly the stewardof his family. He can buy, sell,save, invest, gamble, plan the future,build, retrench, acquire capital,make donations, take risks. Inother words, he can be the masterof his economic fate and act as aman instead of a sheep in a herdunder a shepherd and his dogs. Nodoubt, free enterprise is a harshsystem; it demands real men. Butsocialism, which appeals to enviouspeople craving for securityand afraid to decide for themselves,impairs human dignity andcrushes man utterly. ~

The American EconomyIHANS F. SENNHOLZDepression -ProofMOST contemporary economists arefully convinced that a major depressionof the 1929-1941 varietycannot happen again. It is inconceivable,they say, that the Americaneconomy should fall again intosuch an abyss of despair' whenmore than 13 million Americanswere unemployed, when banks andbusinesses failed by scores andcountless farmers lost their land,when nearly everyone sufferedpainful losses of wealth and income.The tragedy of the GreatDepression lives on as a nightmarethat frightens everyone especiallyduring periods of recession or stagnation.But our politicians andtheir learned advisors, the economists,assure us almost in unisonthat they will not let it happenagain. They are solemnly pledgingthe awesome power of governmentto prevent another depression.Dr. Sennholz heads the Department of Economicsat Grove City College. and is a . notedwriter and lecturer on monetary and economicprinciples and practices.The sincerity of their intentionsis no more to be doubted than thegood will of the policymakers ofthe Hoover and Roosevelt era whowere engulfed by the Great Depression.But it may be questioned thatwe have learned to avoid the dreadfulerrors of policy that caused andprolonged the disaster. If we repeatthe errors that generated theGreat Depression, inexorable economic.law assures that it musthappen again.Have our policymakers learnedthe lessons of the Great Depression?Their explanations and intrepretationsof economc declinediffer little from those offered bythe politicians of the 1920's and1930's.And contemporary economicpolicies, although far more comprehensiveand massive in scopeand import, are similar to thoseconducted by the Hoover andRoosevelt Administrations.Most economists echo the explanationgiven by the most famous

1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 667and influential economist of ourcentury, John Maynard Keynes.Unemployment and depression arethe inevitable resultof inadequateeffective demand, according toKeynes. Therefore, monetary andfiscal policy should be employed toincrease aggregate demand. Thenominal amount of money shouldbe increased, which in the shortrun would cause interest rates tofall, investments to increase, andincome to rise. But in case monetarypolicy would be ineffective,because falling money velocitymay counteract an increase in thequantity of money, he recommendeddirect government investmentthrough government tax cuttingand deficit spending. 1Influential Keynesian disciples,such as Alvin H. Hansen 2 , Paul A.Samuelson 3 , and Abba P.Lerner 41 John M. Keynes, General Theory ofEmployment, Interest and Money (N.Y.:Harcourt, Brace & World, Inc., 1936),p. 250; also Alvin H. Hansen, A Guideto Keynes (N.Y.: McGraw-Hill, Inc.,1953), pp. 21-22.2 Monetary Theory and Fiscal Policy(N.Y.: McGraw-Hill, Inc., 1949); BusinessCycles and National Income (N.Y.:W. W. Norton & Co., Inc., 1951).3 The Collected Scientific Papers ofPaul A. Samuelson, ed. Joseph Stiglitz(Cambridge: M.LT. Press, 1966); Economics,8th ed. (N.Y.: McGraw-Hill,Inc., 1970).4 "A Program for Monetary Stability,"in Proceedings, Conference on Savingsand Residential Financing (Chicago,Ill.: 1962); The Economics of Control(N.Y.: The Macmillan Co., 1944).played a major role in brIngingthe Keynesian system to America.They recommended that the governmentimplement a continuouspolicy of full employment regardlessof the state of the budget,which became the law of the landin the Full Employment Act of1946. And all ·Federal administrationsfromTruman to Nixon havesince then followed the policy recommendationsof the "new economics."Spendthrift PoliciesMost of the "new policies" werealready being implemented duringthe 1920's and 1930's. The spectacularcrash of 1929 followedfour years of considerable creditexpansion by the Federal ReserveSystem under the Coolidge Administration.But it is futile to lookback in history without the propertheoretical framework that explainscauses and consequences.The Keynesian historian viewspast experiences in his peculiarlight and therefore quickly rejectsall other interpretations. To him,the200-year history of businesscycles is a long record of economicdisequilibria that are caused byinadequate effective demand.This explanation, which has. elevatedinadequate demand or "underconsumption"to the guidingprinciple of contemporary economicpolicy, has been the battle cry

668 THE FREEMAN Novemberof the spendthrifts of all ages.And countless monarchs andprinces rallied in ready acceptanceof such doctrines that seemed tojustify conspicuous consumptionand deficit spending. But unfortunately,their policies always resultednot only in greater miseryand poverty of the populace butalso instability of state and society.The major political and socialupheavals in Western history normallyfollowed years of generalimpoverishment through wastefulconsumption by the monarch or expensivewars staged by the state.Booms and depressions do notspring from economic freedom andthe individual enterprise system.On the contrary, they inevitablyresult from government disturbancesof a peaceful market society.In particular, they follow policiesof inflation and credit expansionthat are designed to finance governmentdeficit spending or to facilitategreater business expenditures.Ludwig von Mises has clearlyshown how the creation ofmoney and credit by our monetaryauthorities falsifies interest ratesand thus misguides businessmenin their investment decisions. Theboom phase of the trade·cycle is aperiod of maladjustment in whicheconomic resources are wasted andmisused becau8e of false interestrates. Consumer choices and preferencesare ignored because thegovernment, instead of the people,is giving the signals in the capitalmarket. 5When the economic boom finallycauses business costs to soar andcapital returns to fall until greatlosses are suffered, a recession inevitablysets in. It is unavoidableonce monetary authorities havegenerated the maladjustmentthrough deficit spending or creditexpansion. The unemployment oflabor and capital must continue aslong as the economic structure remainsmaladjusted through governmentintervention in the capitaland labor markets. The. GreatDepression taught us this verylesson at a horrendous price. 6Booms Applauded,Recessions DeploredRepresentatives of the "new economics"never object to the boomphase of the cycle. In fact, theymay applaud it as "great years ofuninterrupted economic growth,"or as a "new plateau," or "newstability." But when the economyfinally begins to sag and unemploymentquickly rises, they re-5 Cf. Ludwig von Mises, Human Action(New Haven, Conn.: Yale UniversityPress, 1949). p. 538 et seq.; also TheTheory of Money and Credit (New Haven,Conn.: Yale University Press,1953), p.339 et seq.6 Cf. Murray Rothba'rd, America'sGreat Depression (Princeton, N.J.: D.Van Nostrand, 1963).

1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 669member their Keynesian recipes:spend more and inflate more.Obviously, the maladjustmentthat was generated by governmentinterference with the capital marketcannot be alleviated by moresuch interference. The drug addictvlho·is suffering painful withdrawalsymptoms cannot be cured byprescribing larger doses of thesame drug. But this is preciselythe kind of advice Keynesian economistsgive to their governments.When the national economy beginsto falter, they call for moreinflation and credit expansion, thevery cause of the dilemma. True,the -creation and injection of newfunds may temporarily prolong theboom by supporting the maladjustmentsand generating newones, as the injection of harderdrugs in the human body may atfirst reduce the pain. But to administerever harder drugs mustfinally kill the patient, as the injectionof ever larger quantities ofnew funds must destroy the currencythrough hyperinflation andeconomic disintegration.In fact, after several decades ofKeynesian policies, we seem tohave reached the .point where onlymassive doses of inflation stillstimulate-the economic patient.Previous rates of inflation, towhich we have :grown ,·accustomedand 'learned to·a(ljast, no longerwork as stimuli; businessmen immediatelyadjust to the rates theyanticipate. A five per cent ratethat has been foreseen well in advanceno longer stimulates theeconomy when it is finally administered.Only higher rates than anticipatedstill have such an effect.This is also why the Federal deficitsmust get bigger and bigger.But while the rate of inflationmust accelerate in order to providethe Keynesian stimulant, themonetary destruction also accelerates.In the end, government faces aninescapable alternative: to accelerateits spending and inflating tototal monetary destruction, orabandon its policy and therebysave the currency. If it choosesthe former, it precipitates a depressionthrough economic disintegration;if it chooses the latter)the depression that was delayedfor so long finally will erupt in fullseverity. No matter which coursethe government eventually chooses,the contra-cyclical policies arebound to fail. The Keynesian recipedoes not make the economy depression-proof.It merely postponesthe depression through monetarydestruction and therebymakes it worse.Government Safegutmls are ·llIu,OIVTbe followers of K-e'ynesare nottfte6~ly.economists who are convincedthat a depression can never

670 THE FREEMAN Novemberhappen again. The monetarists,while rejecting .the contra-cyclicalrecipes of the "new economics,"deny the possibility of economicdepressions on other grounds."There have been fundamentalchanges in institutions and attitudesin the United States sincethe Great Depression," Prof.Friedman reassures us. 7 They arerendering a. major depression inthe United States "almost inconceivable."Establishment of the FederalDeposit Insurance Corporation in1933, we are told, was a basicchange in American banking thatmade bank failures "almost athing of the past." By convertingall deposit liabilities of privatebanks into a Federal liability, theF.D.I.G. eliminated the basic causefor. runs on banks, which was thed.epositors' attempt to converttheir claims into Federal currency.Since· both deposits and currencyare now Federal liabilities, an importantcause of credit contractionsand economic depressions issaid to have been removed.These· economists err·.· in theirbasic assumption that a depressioncan be, avoided if only monetarycontractions can be avoided. Oncethe malinvestments havebeenmade7 "Why the American Economy is Depression-Proof"in Dollars and Deficits(Englewood Cliffs, N.J.: Prentice-Hall,Inc., 1968), p. 74.and the boom has run its course,the readjustment must necessarilybe painful. The depression is anunavoidable phase of the tradecycle once it has commenced. Forthe central bank then to embarkupon credit expansion, in an attemptto prevent the liquidationof malinvestment, can only delaythe recovery and thus prolong. thedepression.The Federal Deposit InsuranceCorporation that, in effect, makesevery bank deposit a governmentliability is designed to prevent theneeded liquidation. Of course, itcan do this successfully and thusdelay the readjustment if newlycreated funds are used for therescue action. But where wouldthe government obtain the fundsnecessary to prevent massive liquidationof bank credit? Fromits central bank, of course. Thestabilizing power of the F.D.I.C.,in final analysis, is nothing butthe government power to createand emit new money. Therefore,itis necessary to repeat the answergiven to the Keynesian. spenders:more inflation can merely postponea depression through monetarydestruction and ultimatelymake it worse.Deficit financingAnother change in bankingstructure that is said to assureeconomic stability has been the in-

1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 671creased importance of governmentobligations; the phenomenalgrowth in government debt hasmade government liabilities an importantpart of bank assets, whichafford greater stability to thestock of money and credit.This increased importance ofgovernment obligations as bankassets imparts such great confidenceto some economists. Toothers, however, it is a cause foranxiety. It is indicative not onlyof the changing role of Americanbanking from mediators of creditto fiscal agents of the Federaltreasury, but also of the great relianceon the inflationary powersof government. What would be thestatus of government obligationswithout the inflation powers tosupport them? Every budgetarydeficit would send U.S. Treasuryobligations to new discounts if itwere not for the open-market purchasesby the Federal ReserveSystem. But this very supportthrough monetary expansion,while it may succeed in the shortrun, tends to be self-defeating inthe long run as it raises interestrates and thus reduces the marketprices of fixed-income obligations.This is why government securitiesin bank portfolios have been verypoor investments ever since WorldWar II, which banks endeavor toavoid wherever possible. In fact,long-term U.S. Treasury obligationshave at times, when interestrates rose significantly, inflictedcrushing losses on American banks,losses which dubious accountingpractices endeavor to hide. Thebanking losses then provide an importantmotive for early resumptionof credit expansion.The Dethroning 01 GoldFinally, many of the monetaristeconomists rejoice about the severingof all links between gold andthe internal supply of money. The"dethroning of gold" is said toreduce the sensitivity of the stockof money to changes in externalconditions. Removal of gold frompublic circulation has made us independentat last from the vagariesof foreign influence. Therebywe would avoid monetary contractionwhich is "an essentialconditioning factor for the occurrenceof a major depression."What these economists call the"dethroning" of gold is rather·a"default" of paper. After all, itwas the creation of massive quan.:.tities of money substitutes thatcaused central banks to default ontheir obligation to .. redeem theircurrencies iIi gold. But this defaultdid not bring stability andprosperity. On the contrarY,itopened the gates for massive inflationand economic·instability.The fiat standard is more unstablethan the gold-exchange .standard,

672 THE FREEMAN Novemberwhich afforded less· stability thanthe gold-bullion standard, whichin turn was less stable than theclassical gold-coin standard. It istrue, the default in gold paymentsdid stop the runs on banks; noone in his right senses would wantto run for paper money the supplyof which is potentially unlimited.But the fiat standard does notmake us independent of the vagariesof foreign influence. It hasmade the international money marketmore vulnerable than ever before.The U.S. dollar is stumblingfrom crisis to crisis, with gravedangers to international trade andcooperation and, ultimately, to thestability of the American economyitself.It is not alone the new monetarystructure that affords some economistsso much confidence in thelasting stability of the Americaneconomy. There is also the fiscalstructure. "There can be no disagreement,"Professor Friedmanasserts, "that the fiscal structureis now an exceedingly importantand' powerful 'built-in stabilizer'."8Government expenditures, bothnational and local, now amount tomore than one-third of the nationalincome. Although the relativegrowth of government casts somberprospects for political free-­dam, it is argued that the changein the character of both expendi-8 Ibid., p. 86.tures and receipts has stabilizingeffects on the business cycle. Abroad program of social security,unemployment insurance, and afarm program that supports productprices, all tend to increasegovernment expenditures in depressionand to reduce them inprosperity. The same contra-cyclicaleffects are derived from personaland corporation income taxation,which in boom or recessionautomatically creates budget surplusesor deficits and thereby offsetsfrom 30 to 40 per cent of anynational income change. So goestheir theory.Loaded for StabilityThis doctrine of the built-in stabilizerscalls to mind the story ofthe farmer who, before leavingfor the market in town, loaded hispack mule with an exceptionallyheavy load of potatoes. When hisneighbor inquired about the reasonfor the heavy load the farmerretorted with a gesture of greatlearning: "On the muddy road totown the beast needs stability. Theheavier the load the greater the. stability!"A bit of plain horse sense oughtto tell us that the growing costs ofgovernment do. not afford stability;on the contrary, they aremaking the "private sector" that'is carrying the growing burden ofthe "public sector" ever ~ore ane-

1972 THE AMERICAN ECONOMY IS NOT DEPRESSION-PROOF 673roic and unstable. True, the heavyburdens can be lightened throughmassive monetary depreciation.The automatic deficits, from risingexpenditures .and decliningtax revenues during recession, canbe financed through currency expansion.But as the Keynesian contra-cyclicalpolicies fail to impartstability to the American economy,so do the automatic fiscal stabilizers.Finally, we are told that therehas been an important change inthe psychological climate of America.Before the Great Depression,according to this view, we weremore afraid of inflation than ofdeflation; we wanted "hard money"at all costs. But the GreatDepression has changed all that.It has caused public opinion toswing from one extreme to theother. That is why today, afterdecades of rising prices and monetarydepreciation, the public isstill seized by a real fear of depression.What the people may notrealize, warn the monetarists, isthat the ultimate destination ofthose who follow the path of inflationis destruction of the currency.One may fully agree that theultimate effect of these built-instabilizers is monetary destruction.But what is one to make ofthe swinging theory? The Americanpublic has approved inflationand credit expansion ever sincethe Coolidge Administration,clung to easy money throughoutthe 1930's, endorsed rampant wartimeinflation during the 1940's,heralded the contra-cyclical policiesduring the 1950's, applaudedthe accelerator policies of the1960's, and still continues to relyon massive deficit spending. The feverof inflation that has infectedAmerican economic thought andpolicy is rising steadily and dangerously.And while it rages, neitherthe body politic nor the Americaneconomy is depression-proof.I)IDEAS ONLIBERTYThe Consumer Theory oj ProsperityTHE USUAL effect of the attempts of government to encourage consumptionis merely to prevent saving; that is, to promote unproductiveconsumption at the expense of reproductive, and diminishthe national wealth by the very means which were intended toincrease it.JOHN STUART MILL, Essays on Some Unsettled Questionsof Political Economy.

PAUL L. POIROTA PECULIAR tendency of thinkinghuman beings is to behave, notnecessarily in response to the factsof a given·· situation, but in responseto what they believe is thesituation.Men who believe there are differentkinds of inflation may beconvinced that different cures areneeded. For instance, if it is a"cost push" inflation, and highwages are believed to be the costof production most responsible forthe extra push, then the obviouscure would seem to be a rollbackor other control of wage rates.Or, if high profits are believedto be responsible for pushingprices upward, then the most likelycure would be an "excess-profits"tax or some such limitationof profits.The latest new kind of inflationis alleged to be "social inflation"- due to the extra expense ofcleaning up air and water, fostering"consumerism,"· meeting othersocial goals. And when the doctorsof the sick body politic get aroundto it, they might possibly come tobelieve that the cure for social inflationis to clamp a lid on Federalspending.In view of the widespread disagreementabout the facts concerninginflation in the UnitedStates of America in 1972, let usimagine a comparable situation atsome other time and place. Let'ssay it's the year of the millenniumin Utopia and see if we can visualizethe facts. Let's furtherimagine that the residents ofUtopia are as bright on the wholeas weare, living under what isgenerally described as a free marketeconomy with quite a lot ofgovernment intervention.For the sake of simplicity let'ssay that about a. third of the laborersin Utopia are members of aunion under the leadership of Mr.

1972 SOCIAL INFLATION 675Goody. And Mr. Goody says to theboys, "Let's have some inflation;instead of the going wage of $3.00an hour, we'll demand $6.00." Butin Utopia there is no way to forcean employer to hire anyone at$6.00 an hour if' he doesn't wantto; ther'e's no way to force a consumerto buy labor or its productat $6.00 an hour. So Mr. Goodymight have some $6.00 unemployment,but no $6.00 labor; andthere's practically nothing laborerscan do to bring about wagepushinflation.In Utopia, when a businessmandecides to have a little inflation,rai~e his prices 5 per cent to doublehis: profits, a funny thing happens.Consumers decide they'll buy fromother suppliers instead, at the oldprice; and some businesses changeownership, but there isn't any' inflation.However, when the people ofUtopia ask the government to provideadditional services withoutincreasing taxes, and the governmentfinances its deficits by printingadditional money, then thereis inflation in Utopia, "social inflation"caused by pumping nothingbut money into the market.Inflation in Utopia is strictly amonetary phenomenon. If the governmentprints the money, it iscalled social inflation. If anyoneelse prints it, it is called counterfeiting.And that's the fact, theonly relevant fact pertaining to inflation- in Utopia, that is.We mentioned earlier the possibilitythat once we've identifiedthis new kind of "social inflation"that plagues the United States in1972, then pe'rhaps one' of the doctorsmight find a workable cure.Not bad for a, start is advicefrom Andrew F. Brimmer, memberof the Board of Governors ofthe Federal Reserve System:"Despite our obvious affluence as anation, we do not have the capacity toproduce enough so that' householdscan 'maximize their consumption ­while minimizing taxes; so that anadequate volume of housing can bebuilt; so that businesses can expandtheir production facilities, at a maximumrate - and also make the investmentneeded to abate pollution; sothat governments can meet the increasingdemand for public services ­while tax revenues lag behind spending."!What the good doctor seems tobe prescribing is exercise - ofself-reliance and will power. If wedon't like inflation then ask thegovernment to stop pampering usand tampering with the moneysupply and stick to its more appropriategovernmental functionof policing the market; otherwiseleave us alone. ~1 Quoted in U. S. News and World Report,June 12, 1972, p. 39.

I Visit aManagedSocietyORIEN JOHNSONI HAD HEARD of a Iittle town inCalifornia wh'ich was creditedwith being an example of efficientgovernment, and one which did anadmirable job of providing for theneeds of its citizens. I determinedto go there some time and see formyself if these things were true,and if so, to bring back some ideasthat might prove helpful to citizensof other communities.This small town of Tarnal, witha population of about 2,000 people,was established in 1852 on theshore of beautiful San FranciscoBay, just 20 miles north of theCity of San Francisco. In the earlydays the chief industry was themanufacture of gunny sacks andother rough cordage productsmade of jute. In April, 1951, adisastrous fire burned the hugemill to the ground at an estimatedMr. Johnson, of Mountain View, California,i$a counselor in public relations and fund raising.loss of $3,000,000 which left 1,000men without a job. Gradually otherindustries were begun. A mattressfactory, a cotton textile mill, alarge laundry, a detergent plant, aclothing factory, a large furniturefactory and several other industriesnow provide most of the employableresidents with jobs.An official publication describedsome of the services provided forresidents of this unusual communitywhich made me even moreanxious to visit the place and totalk to someone who might be enjoyingthese benefits.I read that three-fourths of theresidents are presently engaged insome aspect of·education in a'freeschool system beginning with elementarygradeson through juniorcollege level. Half of the studentsattend classes in the evenings. Inaddition to teaching skills and vocationaltraining, tbe ,instructors

1972 I VISIT A MANAGED SOCIETY 677are "skilled in group behavior."They train students in "terminusg'oals, inter-personal relationships,prop~r acceptance of job, work,completion of goals, and to operatecooperatively under supervision."There are no unions in thistown. Instead, a Trade AdvisoryCommittee, representing bothmanagement and labor, works to"aid in defining training standards,establishing completion criteriaand assistance in job placement."They are concerned withboth H vocational competence andthe development of constructivesocial attitudes."An extensive free recreationalprogram includes several wellequippedplay fields and courts forindividual and competitive sports,and facilities for staging musicand variety shows by resident orvisiting talent.I was amazed to note that noneof the residents ever apply forMedicare simply because all of themedical facilities of a I50-bed fullyaccredited hospital, an outstandingtherapy X-ray unit, and servicesof well-qualified consultantsand specialists of the San FranciscoBay Area are readily available,and all at no cost to any ofthe patients.In spite of these many benefits,I noticed a paragraph describingthe work of the Narcotic TreatmentControl Unit which is a liveinsituation treating a large numberof persons with drug abuseproblems. A copy of the weeklynewspaper lists the regular meetingsof an Alcoholics Anonymouschapter. Serious crimes also makeheadlines in this newspaper fromtime to time, mostly of a violentnature such as stabbings, clubbings,fights, riotings and murders.Evidently, not all is as idyllicas one would presume in this managedsociety.Meet Lamar KnightonI finally got a lead on a manwho worked as a linotypist on thelocal newspaper and found out hewould be glad to meet with me andanswer any questions I mighthave about life as he saw it in thiswelfare city. I found also that thisman was a reader of The Freemanmagazine and that he subscribedfully to the libertarian philosophiesof its articles.I arranged a time to go to Tarnaland to look up my new friend, LamarKnighton, to determine, ifpossible, how he squared his philosophieswith his life.The fog was just beginning tolift as I drove into town. Seagullswere wheeling in circles above theshore as I slowed my car to enjoythe view of the islands in the Bay.A row of small, run-down houseslined the street overlooking the

678 THE FREEMAN Novemberwater. The other side of the streetdropped off in a. gra.ssy meadow tothe shore.After 1'd driven about threeblocks the street was completelyblocked with a huge iron gate. Asign pointed to a parking lot; Ifound a place to park my car, and'walked back toa small building atthe gate.A large, muscular guard, dressedin an olive-colored uniform askedme who I wanted to see."L,amar Knighton," I said.He shuffled through some filesin a cabinet and asked for someidentification. I showed my driver'slicense, and he asked me tosign in ona large register book.A buzzer unlocked the door and Iwalked about 100 yards to anothersmall building. Here I was askedto empty my pockets into a trayon a counter and step through ametal-detector gate.My next stop was a waitingroom where I was told I might sitto wait while Lamar was locatedand paged. In about thirty minutesa voice sounded over thespeaker system, "Knighton visitor."A man nodded toward a door.I walked up two steps andthrough the door into a largeroom. There I saw several rows oflong tables running the· length ofthe room with people sitting oneach side. On one side sat men,women, and children. On the otherside sat only men dressed in bluejeansand blue shirts.A voice said, "Mr. Johnson1" Isaw a handsome man about 35years old who introduced himselfto me. "I'm Lamar Knighton," hesaid. "Glad to see you, neighbor."1 said, "Wen, I'm glad to seeyou finally. I had to go through alot of red tape, but here I am."We started talking and I learnedthat Lamar was a native of Texas,had once been a meatcutter, hadserved a hitch in the Army, andwas now operating the linotypemachine in the newspaper office.We started talking about libertyand Lamar told me of his specialinterest in the subject and how hespends most of his spare timewriting essays which he sends toanyone who will read them.What Is Liberty?I had to attend to some businessin San Francisco, but promised towrite and to come back for othervisits. I signed out and walked tothe parking area. The gulls werestill tracing lazy· freedom circlesin the breeze. A few sailboatsdotted the Bay. The wind whistledthrough the tall pine trees on thepoint. "What is liberty?" I askedmyself as I looked back at a stonetower manned with armed guardswho would shoot to kill any unauthorizedperson who attemptedto escape from that managed 80-

1972 I VISIT A MANAGED SOCIETY 679ciety. Surely I could -answer thatsimple question after such a visit.But my thoughts refused to focus.I wanted only to experience theliberty I now enjoyed. My eyesturned again to the free-flyingbirds. My ears caught the sighingin the trees. I breathed deeply ofthe fresh salt air.' I picked up astone and ,splashed it into thewaves. These were the symbolsthat translated all my philosophiesinto experiential realities. This Iknew. as freedom. I needed nowords. They would come later as Iwould challenge Lamar to interprethis freedom concepts as aprisoner in San Quentin penitentiary.Permission was granted to meto visit this man in the famous120-year-old institution throughthe courtesy of a new nonprofitgroup known as Job Therapy ofCalifornia. Part of its service isthe man-to-man (M-2) visitationprogram in which citizens volunteerto make one visit a month toa prisoner. I had signed up as asponsor and was matched withLamar Knighton, who also hadvolunteered for the program. Myonly other commitment is that Iwill· meet Lamar at the gate ofSan Quentin on the day of his release,and spend the day with himas he begins a new life on the outside.I am not to give or lend himany money, nor take him to stayin my home. I serve only as afriend, to encourage him to earnhis own· way and build the kind oflife that will be most helpful tohimself.Doing an Article ...After several visits in which weexchanged ideas we had discoveredfrom .books .and periodicals, ourfriendship began to grow. Betweenvisits we would write essays onvarious aspects of freedom. I res,olvedon my next· visit to getLamar's view of the managed societyin which he lived. On thisparticular day I took the freewaythat runs along the beautifulcoastal range that extends fromSan Francisco down the Peninsula.Patches of fog were clingingto the top of the redwood hills anda brisk wind tossed whitecapsacross the Bay and under theGolden Gate Bridge.The same guard in the gatehouseasked the same familiarquestion: "Who do you want tovisit?""Lamar Knighton," I replied."Please show your identification."I produced my driver's license."Sign in, please." I signed myname in the visitor's register andthe time (9 :40 A.M.) in the appropriatespot."What do you have in the bvief·case?" he asked.

680 THE FREEMAN November"Some papers," I said. "I'm doingan article for a magazine andwant to ask Lamar some questions.""That's really not supposed tobe done," he said. "Tell the guardat the desk in the visiting roomso he'll know what you're doing.""Okay," I promised and beganthe walk to the next building. Iwonder what that rule is for, Iasked myself. I'm not the prisoner.Why do they put such restrictionson me? I'm getting a real taste ofthe managed society. A man infront of me was having difficultyclearing the metal detector. Everytime he walked past the machineit blinked a red light and emitteda sharp buzz. Everything was removedfrom all of his pockets;still, the machine was picking upsome metal object on his person."Take off your belt," the guardsaid.The man pulled off his belt andheld his pants up as he walkedthrough the space. By this timeseveral other visitors were waitingin line, including wives and girlfriends of prisoners, which addedto the man's embarrassment as hefinished dressing in front of us. Iwas next and cleared the machinein my first attempt.Official DelayAt 9 :50 I deposited my pass onthe desk of the guard in the waitingroom and was told to take aseat on the hard oak benches. At10 :50 I was still thumbing throughsome old magazines, but my visitorhadn't arrived. I waited another20 minutes and asked the guard ifhis call for Knighton had gottenthrough. He picked up the phoneand spoke to another guard station."He's just cleaning up and ison his way in," he said.At 11 :40 - two hours from thetime I signed in at the outer gate- a voice came in over the amplifyingsystem, "Knighton visitor."I saw Lamar sitting at the tableand nodded to him as I walked tothe elevated guard desk. "I've gotsome papers with me," I told theguard. "I'll be interviewing myvisitor and thought I'd tell you soyou'll know what I'm doing."He shook his head. "I'd bettercall the Captain," he said. In afew minutes the Captain came inand said, "What's going on here?"I told my story to him, and gavehim a weak smile, but it didn'tbreak the ice. He stared at me amoment, then without a wordturned and walked off. I took thisas some sort· of reluctant approvaland arranged my pad of papers onthe table and started talking toLamar."When did they call you?" Iasked'."Just about ten minutes ago. Icame right over."

1972 I VISIT A MANAGED SOCIETY 681When I told -him 1'd been coolingmy heels almost two hours, hesmiled knowingly -and said, "Nowyou're beginning to experience alittle of what I run into every day.It's all part of the system.""But don't any of the inmateshave anything to say about issueslike this ?""Oh, sure, we can complain, andI will; but they won't pay any attention.""Surely the inmates have someofficial avenue of communicationto the top," I suggested."We have the MAC (Men's AdvisoryCouncil) ," Lamar said, "buttheir main hassle is trying to decidewhich radio station we canlisten to. We only have two stationswe are allowed to listen to.I would like to get some classicalmusic once in a while, but neverget to.""What about other leisure activities?"I asked."We can watch television, read,or talk during Honor Block, but allof our other time is supervised.""What is your work schedule?""Seven hours a day for 5 daysa week.""How much are you paid?""$7.50.""An hour?""N0, a month," he said. "Andthis is based on your seniority inthe job training program.""Can you strike?""Are you kidding?"Hean you shop around for abetter job and compete for higherwages?""No. I might apply for anotherjob-training course but wageswould have nothing to do with it."Other RestrictionsHe knew what I was doing andbegan to think of other aspects ofhis life which might compare witha managed socialist government."My travel is of course rigidlyrestricted and supervised. I haveno choice of doctors or hospitalsif I get sick. The education is asbad here as· it is in any state-controlledsystem - teachers runthrough their prescribed coursesjust to draw their salaries. Wehave no right to assemble in meetingsto hear any views contrary tothose of the administration. Wehave no elections. We couldn'tstart a new religion of our own,but must take what is providedfor us.""There's another question Imust ask," I said. "Do some menget used to this form of life wheretheir physical needs are providedfor and everything is managedfor them?""That's the sad truth;" he said."Some dudes simply don't like tomake decisions. They are perfectlywilling to have this parent-childrelationship for the rest of their

682 THE FREEMAN Novemberdays. They get released and in afew months back they come. It's avicious circle. The mana.ged society,as you call it, is devastatingto our initiative. Being dependentupon the system for our basicneeds makes us like children, notmen. Then when we get out incompetition we can't cut it, so backwe come to the parental nest.""What does that do to you, as astudent of liberty and independence?""I have to fight it all the time,"he said with a sad note in hisvoice. "It's like a dark blanket ofgloom. Most of the guys are shotthrough with negative thoughts. Icome on trying to be cheerful andoptimistic and they look at me likeI'm a kook. It finally got to me thelast couple of weeks. I was hitwith a bad case of depression." Itoccurred to me then that I hadn'treceived a letter from him and Ishould have known something waswrong.Destroying InitiativeDr. Karl Menninger, in his book,The Crime of Punishment, quotedGresham Sykes (The·· Society ofCarptives) as saying, "Thefrustrationof the prisoner's ability tomake choices and the frequent refusalsto provide an explanationfor the regulations and commandsdescending from the bureaucraticstaff involve a profound threat tothe prisoner's self-image becausethey reduce the prisoner to theweak, helpless, dependent statusof childhood . . . . The imprisonedcriminal finds his picture of himselfas the self-determining individualbeing destroyed by the regimeof the custodians."On my way home I drovethrough the old Haight-Ashburysection of San Francisco. A fewyears ago this was the mecca ofthe "flower children" - advocatesof the completely undisciplinedphilosophy of life. Their utopiandream soon collapsed. The buildingsare even more run-down thanever. A few miserable heroin addictsshuffle through the streets orsit in a stupor .on the steps. Thesame pallor of gloom that afflictsLamar in San Quentin hangsheavy over this blighted area. Whydid the experiment fail at Haight­Ashbury? Because the flower childrenwere dependent for their' existenceupon food stamps, welfarechecks, the largesse of.a few socialagencies, and upon drugs togive them a feeling of euphoria tobe able to endure such a miserablelife..Dependency kept them boundin perpetual .. childhood just as dependencykeeps citizens under thecontrol of a managed government.Children,- you know, are muchmore easily managed than adults.Before T· arrived at my home Ibegan to cool my resentment to-

1972 I VISIT A MANAGED SOCIETY 683ward the unknown guard whoneglected to put my call throughwhen he should. After all, I wasnot a paying customer. His jobdoes not depend upon service, butonly upon compliance with regulations.He is paid by the state. Underthe same situation I might actwith similar discourtesy. And theCaptain? He probably deals constantlywith lawyers trying to digup "social injustices" to keep himin eternal hot water. Under similarcircumstances my own milk ofhuman kindness might curdle, too.I do not blame these men, nor anyof the San Quentin officials. Theyare doing a thankless job which,under our present system of dealingwith criminal offenders, hasto be done. But they, too, mustresist the pallor of gloom that resultsfrom the debilitating effecttheir managed society producesupon their charges and upon themselves.I came through this experienceresolved to double.my efforts .toresist a growing climate ofopinionaimed at making all men dependentupon a custodial government.The admirable struggle of my newinmate friend was aptly stated inhis closing remark during mylatest visit. "I am determined notto be conditioned to apathy." ~There Must Be FreedomIDEAS ONLIBERTYTHE MOST DRASTIC deprivation which any person can suffer is thatof the freedom to utilize and enjoy the faculties which nature hasgiven him and which his will and desire have developed. Keep aman from exercising his mind, his body, his faculties in the pursuitof his own wishes and delights, keep him from enjoying thefruits of his efforts ""7" and you have done everything evil to himthat you can. The greatest desire of each person, in short, is to befree to get the most· he can out of life. There is no other wayobjectively to define social goals than to call them the sum of thoseindividual goals which can be harmonized in society.SYLVESTER PETRO, The Labor Policy of the Free Society

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC16Making theConstitution... I feel it a duty to expressmy profound and solemn conviction... that there never was anassembly of men charged with agreat and arduous trust, who weremore pure in their mot,ives ormore exclusively or anxiously devotedto the obiect committed tothem to ... best secure the permanentlib erty and happiness oftheir country. - James MadisonIt is too probable that no planwe propose will be adopted. Perhapsanother dreadful conflict isto be sustained. If to please thepeople, we offer what Iwe ourselvesdisapprove, how can we afterwardsdefend our work? Let us r(J)ise astandard to which the wise andhonest can repair. The event is inthe hand of God.- George WashingtonEVEN THOUGH this was an era studdedwith felicitously worded documentsand momentous pronouncements,all of these pale beside theConstitution of 1787 - the UnitedStates Constitution. It standsalone among them in the impactit has had, in its imitability, andin the role it has had in the livesof generations that were then yetto come.Dr. Carson recently joined the faculty ofHillsdale College in Michigan as Chairmanof the Department of History. He is a notedlecturer and author, his latest book entitledThrottling the Railroads.684

1972 MAKING THE CONSTITUTION 685All this is quite remarkable.Certainly, Congress envisioned nosuch document when it sent out acall for a convention. Nor couldmost of those who assembled inconvention see how, at the outset,they could overcome the difficultiesin the way of drawing a satisfactoryconstitution. Even were amasterpiece produced, it appearedmost likely that it would be rejectedby the states. Few haveever remarked it, yet it may wellbe that the most amazing thing ofall is that the Constitution wasnot the work of a single man, oreven of two or three, but of a convention.It is a commonplace thatcommittees produce little of value ;but here, by a group larger thanmost committees, the exceptionwas made to happen.Some have described what happenedas more than remarkable;it has even been called a miracle.George Washington wrote to Lafayettethat it was "little short ofa miracle that· the delegates fromso many different States (whichStates you know are differentfrom each other), in their manners,circumstances and prejudices,should unite in forming asystem of National Government, solittle liable to well-founded objections."IMiss Catherine DrinkerBowen's recently published bookon the convention is called Miracleat Philadelphia. Whatever it was,or should be called, all who areopen to an examination of the evidencewill admit that it was an extraordinaryevent.Off to a' Slow StartEven so, the convention did notget underway any more auspiciouslythan did most other assemblagesin that age; it was calledfor May 14,but there was not aquorum to do business until May25. It was no easy matter to assemblemen from over the lengthand breadth of the United States;delegates from Georgia, say, hada formidable distance to travel,and even an early start did notnecessarily lead to a prompt arrival.In any case, promptness was.better calculated in weeks than inhours.The Virginia delegation was thefirst appointed by a legislature,and its members began to arrivein Philadelphia before other outof-staters.It was an impressivedelegation, including among itsmembers some of that state's leadingcitizens; George Washington,Edmund Randolph, George Mason,and J ames Madison. (GeorgeWythe, one of the best legal mindsin America, put in an appearancebut left shortly to attend his dyingwife.) Most of the Pennsylvaniadelegates did not have tomake a journey to get to Philadelphia,so that they were· avail-

686 THE FREEMAN Novemberable from the beginning. It wasan impressive delegation, for itincluded Benjamin Franklin,RobertMorris (who, if he was there,remained silent during the debates),Gouverneur Morris, andJ ames Wilson.The New England states werenot only the slowest in appointingdelegates but also theirs wereamong the last to arrive. RhodeIsland rejected the invitation toappoint delegates. (The absenceof Rhode Islanders was not considereda handicap during theconvention, for that state's behaviorwas so universally deploredthat men did not gladly seek thecounsel of her citizens.) The NewHampshire delegates were exceedinglylate; two of the four appointedfinally arrived on July 23.(They could not come earlier becausethe state had not providedfor their expenses.) New York appointedthree delegates - AlexanderHamilton, Robert Yates, andJohn Lansing-, rather reluctantly,we gather, for Yates and Lansingwithdrew after a short period ofattendance and Hamilton was absentfor an extended period. Overall, twelve states had·55 delegatesin attendance at one time or another.From most indications, thegreatest concern for a strongergeneral government was amongthe delegates from the states locatedfrom New Jersey southward.The. leadership in the conventioncame mainly from four states, andin this order: Virginia, Pennsylvania,Connecticut, and SouthCarolina. Two other state delegationsplayed some considerablerole: NewJersey and Massachusetts.Delegates from other stateswere generally less conspicuousduring the debates, though LutherMartin of Maryland and GeorgeRead of Delaware would have ledif they could have attracted followers.Qualifications 01 DelegatesThe delegates were as well qualifiedas could have been assembledin America, qualified both by experienceand training. Amongthem were thirty-nine who hadserved at one time or another inCongress, eight who had signedthe Declaration of Independence,eight who had helped draw stateconstitutions, one, John Dickinson,who is credited with the firstdraft of the Articles of Confederation,seven who had been chiefexecutives of their states, andtwenty-one who had fought in thewar. Thirty-three were lawyers,and ten of these had served asjudges. About half of them werecollege graduates, more fromPrinceton than from any other institution.2Both youth and advanced agewere represented at the conven-

1972 MAKING THE CONSTITUTION 687tion. The youngest delegate wasJonathan Dayton of New Jerseyat twenty-six; the oldest, BenjaminFranklin, who was, as he said,in his eighty-second year. The average.age was in the low forties.Some of the leaders, however,were rather young: Charles Pinckneyof South Carolina was only29, Gouverneur Morris 35, andJames Madison 36. They werecounterbalanced by men of middlingyears and extensive experi..ence, for example; John Dickinson54, Roger Sherman 66, andJohn Langdon 67.George Washington CalledGeorge Washington almost didnot come, even though his presenceat the convention was essentialforit was generally agreed thathe was America's first personage.When he was informed of his election,he asked that someone elsebe appointed in his stead. He gavetwo reasons why he should be excused:one that now appears trivial,that he had already declinedan invitation to attend the conventionof the Society of the Cincinnatiwhich would be meeting inPhiladelphia at about the sametime; the other, however, wasgood enough reason in any age,for he was suffering so from rheumatismthat he could turn in bedonly with the greatest difficulty,and men do not gladly leave thecomforts of home when they areill. Friends so earnestly urged himto attend, however, that hechanged his mind.Washington arrived at Philadelphiabefore the convention wasscheduled to begin. It had longsince become difficult for him togo anywhere quietly, and therewas good reason to publicize thistrip. He was met at Chester by atroop of horse which escorted himinto Philadelphia where cannonwere fired and bells rung. 3 Thefact that Washington had arrivedgave notice that the conventionwas important and that laggardsshould make haste to get there.When the convention was organized,Washington was elected, unanimously(as when was he not?) ,to preside, an office which he tookso seriously that he attended each.session, though it was the mostoppressively hot summer in thememory of Philadelphians. IfWashington could endure it, otherscould and did. He was a manof stern visage, impressive physique,and high seriousness; withhim in the chair, the conventioncould hardly be anything but whatit was, a deliberative body whichpursued its business in an absenceof frivolity and without stoopingto personalities. Though Washingtondid not participate -in the debatesuntil the closing days whenhe made a brief speech, there was

688 THE FREEMAN Novemberno doubt where he stood on theConstitution. He signed it gladly,and took care to let men about thecountry know that he approved ofit. The men in the conventionwere aware that when they lookedtoward the chair, they were gazingat the man who would almostcertainly be the first President ofthe United States. This emboldenedthose who wanted a strongPresident to make the office powerful,for they were confident thatWashington would not abuse suchpowers. Gouverneur Morris wroteto Washington a few weeks afterthe convention to describe the importanceof his role:I have observed that your nameto the new Constitution has been ofinfinite service. Indeed, I am convincedthat if you had not attendedthe Convention, and the same paperhad been handed out to the world,it would have met with a cooler reception,with fewer and weaker advocates,and with more and morestrenuous opponents. 4Franklin's RoleBenjamin Franklin was theother most prominent American;his hold on the affections of hiscountrymen was not so great asthat of Washington, but his internationalfame was such that anygathering which had the benefit ofhis counsels gained in reputation.Though he was getting old - infact, was old -, his mind wasstill clear, his vast fund of experiencestill at his command, and hisaccomplishments as a raconteurstill led men to seek his company.He was not only aged but also infirm.He had to be carried in asedan chair to the sessions, and hewrote out any but the briefest ofremarks so that they could be readto the convention by .his fellowPennsylvanian, James Wilson.Franklin contributed most to theconvention by avuncular admonitionsto the delegates to compromise,to compose their differences,and to put aside so much oftheir personal desires as might benecessary to accomplish the objectat hand. When the convention appearedto be so near to breakingup over the question of equal orproportional representation, DoctorFranklin said: "When a broadtable is to be made, and edges ofplanks do not fit, the artist takesa little from both, and makes agood joint. In like manner hereboth sides must part with some oftheir demands, in order that theymay join in some accommodatingproposition."5 At another point,he proposed that the sessions beopened with prayer, for he seemedto think that the influence of religionmight link them together intheir efforts to arrive at a newsystem. At the close of the convention,Franklin made an elo-

.1972 MAKING THE CONSTITUTION 689quent plea to get those who wereholding out to sign what they hadhelped to make. In a speech, readby James Wilson, Franklin said,among other things:I confess that there ~re severalparts of this constitution which Ido not at present approve, but I amnot sure I shall never approve them:For having lived long, I have experiencedmany instances of beingobliged by better information, orfuller consideration, to change opinionseven on important subjects,which I once thought right, butfound to be otherwise. It is thereforethat the older I grow, the moreapt I am to doubt my own judgment,and to pay more respect to thejudgment of others....On the whole, Sir, I can not helpexpressing a wish that every memberof the Convention who may stillhave objections to it, would withme, on this occasion doubt a littleof his own infallibility, and to makemanifest our unanimity, put hisname to this instrument. 6His advanced age may have increasedthe influence of his spiritof accommodation, but he hadbeen adept at the arts of politicsand diplomacy long before the contentionsof young men tired him.Though the convention was nota large body, a few men did mostof the speaking and a great dealof the other work of hamm"eringout the Constitution. The leadersincluded: Madison, Mason andRandolph of Virginia,. GouverneurMorris and Wilson of Pennsylvania,Charles Pinckney andRutledge of South Carolina, Ellsworthand Sherman of Connecticut,King and Gerry of Massachusetts,and, perhaps, Patersonof New Jersey. According to onetabulation, Gouverneur Morrisspoke on 173 different occasions;Wilson, 168; Madison, 161; Sherman,138; Mason, 136; and Gerry,119. 7 .James MadisonJ ames Madison has frequentlybeen described as the Father ofthe Constitution. Certainly, he wasone of its principal architects. Hewas not impressive to look at;judging by his appearance it wouldhave been easy to have mistakenhim for a clerk. He was quiteshort and thin, "Little J emmy,"they called him, "no bigger thana half cake of soap." Nor was hean orator; he spoke in such a lowvoice that those keeping journalsoften missed a part of what hesaid. He made up for these shortcomings,however, with intellectualacuity, sharp insight, and tenacityin the pursuit of his object.Moreover, he had prepared himselffor the task of making a new constitution.Much of his time in themonths before the convention hadbeen spent in reading, and mas-

690 THE FREEMAN Novembertering, the literature on government.A plea to Jefferson in Parishad brought a plethora of books toaugment the supply at home. TheVirginia Plan, from which theConstitution emerged, was presentedon the floor by GovernorRandolph, but Madison had undoubtedlydone much of the workon it. He might be said to havemothered the Constitution, too, becausehe devoted himself to it exclusivelyduring the months of theconvention. His recollection wasthat he not only attended everysession but that he was never absentfor more than a few minutes,and he was certain that he couldnot have missed a single speech ofany duration. He kept copiousnotes of the speeches, and theyare judged to be the most reliablerecord of what was said. This wasa marathon undertaking itself,but he also spoke frequently, andat length, with a masterful showof erudition.Gouverneur MorrisGouverneur Morris was, however,the most dazzling speaker inthe convention, an orator whoselearning and close reasoning gavean irresistible thrust to his forensicskill. He had been maimed bothin arm and leg, stumped about ona wooden leg, but it is difficult tothink of him as a cripple, for hewas reputed to be quite a lady'sman and known for being a bonvivant. Madison and Morris weremen who knew what they wanted,who pressed the convention stepby step in their direction, whotook care to see that what theyhad won by their reasoning wasnot lost in the maneuvers over detail,but who yielded gracefullywhen they were outvoted.There must have been manymoments of high drama duringthe convention, but I think themost eloquent speech fell fromGouverneur Morris. The occasionwas the discussion of the countingof slaves for purposes of representation."He never would concurin upholding domestic slavery,"Morris said. "It was a nefariousinstitution. It was the curse ofheaven on the States where it prevailed.. . . Proceed southwardlyand every step you take throughthe great region of slaves presentsa desert increasing, with the increasingproportion of thesewretched beings. . . . The admissionof slaves into the Representationwhen fairly examined comesto this: that the inhabitant ofGeorgia and South Carolina whogoes to the Coast of Africa, andin defiance of the most sacred lawsof humanity tears away his fellowcreatures from their dearest connectionsand damns them to themost cruel bandages, shall havemore votes in a Government insti-

1972 MAKING THE CONSTITUTION 691tuted for the protection of therights of mankind, than the Citizenof Pennsylvania or New Jerseywho views with a laudablehorror so nefarious a practice....And what is the proposed compensationof the Northern Statesfor a sacrifice of every principleof right, of every impulse of humanity.. .? He would soonersubmit himself to a tax for pay~ing for all the negroes in theUnited States, than saddle posteritywith such a Constitution."8It is generally believed, too, thatMorris did much of the work ofthe committee on style whichtransformed the disparate elementswhich had survived the debatesinto the congruous wholewe know as the Constitutionspare,brief, and potent withphrases that have since beenetched into American consciousnessby court decision and otheraction or inaction.Giants Among MenImpressions tumble over oneanother of the men during thesessions of the convention: ofGeorge Washington presidingfrom his high-backed chair, leaningforward to try to discern theorder of the proposals from amidstthe welter of. motions made fromthe floor, forbearing to speak onthe issues because it would not beproper; of James Madison, scribblingaway at his notes, takingthe floor to make a point, retiringto his quarters at the end of theday to flesh out his notes and reviewwhat had been done; of theproud and passionate EdmundRandolph, a young politician alreadyin mid-career, presentingthe Virginia Plan to the convention,vacillating on issues as theConstitution took shape, unwillingat last to sign the handiwork ofthe convention which had beenshaped from his proposals; ofJ ames Wilson, tenaciously pressingfor a national government,rising yet once again to speak forgiving the people a more directrole in the government; of GeorgeRead, difficult to listen to but determinedto be heard, singlemindedlyarguing for a morepowerful executive; of craggyRoger Sherman, whose face wouldstop a clock but whose argumentsmoved the convention toward theaccomplishment of its task; ofCharles Pinckney, young, brash,but sufficiently brilliant in debateto command the attention of theothers; of George Mason, earlyand late a defender of the rightsof man, working with an obviousgood will to shape the Constitution,but at last unwilling to signit; of John Dickinson, theoreticianof resistance in youth, comingto fame with his daring employmentof reason, now grown

692 THE FREEMAN Novemberolder declaiming: "Experiencemust be our only guide. Reasonmay mislead US."9; and of J onathanDayton, the youngest manthere, rising to second what hadnot clearly been a motion byGouverneur Morris on the evils ofslavery and saying: "He did it ...that his sentiments on the subjectmight appear whatever mightbe the fate of the amendment."loAmong the MissingThough the convention wascomposed of as impressive an ~ssemblageof men as could havebeen got together at any time, therewere some prominent Americansnot there. John Adams was out ofthe country, doing his best to representthe Congress before theroyal court in London. Adams hadlately published a book which surveyedthe constitutional arrangementsof various countries, a bookwhose influence might have beengreater if its author had beenpresent at the convention. ThomasJefferson was in Paris as Ministerto France. Any gathering withouthim was missing one of theAmerican luminaries. Several ofthe firebrands of the Revolutionwere missing, if not missed, forthey were better known for heatthan light. Among them were:Samuel Adams who was not chosen,Richard Henry Lee and PatrickHenry who did not choose toattend, and Thomas Paine whowas in Europe trying to promote aproject for steel bridges in theinterlude between revolutions.Probably if some of these men hadbeen there they would have givensuch vociferous support to theidea of including a bill of rightsthat it would have been done, thusremoving what turned out to bethe major objection to the Constitution.Rules of OrderThe convention was organizedso as to proceed about its businesswithout interference from outsidersor without inhibiting fulldiscussion. The sessions were heldbehind closed doors; no record ofwhat was said or being consideredthere was to be released withoutthe approval of the convention.There were no galleries to beplayed to, no press to be placated.Strict rules governing the behaviorof members were adopted.For example:Every member rising to speak,shall address the President; andwhilst he shall be speaking, noneshall pass .between them, or holddiscourse with another, or read abook, pamphlet or paper....A member shall not speak oftenerthan twice, without special leave,upon the same question; and not thesecond time, before every other, whohad been silent, shall have beenheard, if he wish to speak. ll

1972 MAKING THE CONSTITUTION 693The convention operated on therule that no decision on any particularof the constitution shouldbe considered final. This enabledthe convention to adjust the partsto one another as alterations weremade.The convention was remarkableboth for its orderliness and forthe absence of rancor among themembers. On the one or two occasionswhen tempers flared, thestrong feeling quickly subsided.There did appear to be some impatiencein the last few days withgoing over ground already covered.Even so, an effort was madein the last days to make changesthat might satisfy the few· holdoutsfrom signing. It is necessaryto read but briefly into Madison'snotes to get the feeling that thesemen were taking very seriouslywhat they were doing, that thoughtheir task was urgent everythingmust be considered with greatcare. Above all, many were determinedto stick with the undertakinguntil something had been completedto present to the public.Doubts and DifferencesIt was well that they were, fortheir object lay on the other sideof a thicket of uncertainties,doubts, and differences.· Even whatthey were supposed to do at theconvention was in doubt. Theresolution adopted by Congresscalling the convention declaredthat it was to be for the "solepurpose of revising the Articles ofConfederation." It was clearenough what Congress had said,but these men were gathered torepresent their states and weresupposed to act under their instructions,if any. The instructionsdiffered enough one fromthe other that a good case couldbe made that the conventioncould do what its membersthought best. Most of those gatheredagreed with the idea thattheir task was to construct a planfor a new system of government,or accepted it without favil. Thefew who did not could leave, andsome did.It was only with some difficultythat they a"greed on how theywould vote. Delegates from severalstates were bent on havingrepresentation in the new governmentbased on population orwealth, as the Virginia· Plan provided.They would have the bestchance of getting this into a constitutionif the states had votes inthe .convention proportionate totheir populations. There was nolikelihood, however, that the smallerstates might agree to this, sothe convention votes were bystates, each state having one voteregardless of how many delegatesthere were, just as in the case ofthe Congress. If a state's delega-

694 THE FREEMAN Novembertion was tied in a vote, that state'svote would not be counted. A majorityof the states present andvoting was sufficient to any decision.States' RightsSentiment had been building forsome time that, if there was to bean effective union of the states,the general government must havethe power to use force on individuals.This, as many saw it, wasthe only way to "render the constitutionof the Federal Governmentadequate to the exigencies of theUnion ... ,"12 as the declarationdrawn at the Annapolis Conventionthe year before had describedthe need. A man named StephenHigginson had written to GeneralKnox earlier in 1787 describingprecisely what needed to be done:"The Union must not only havethe right to make laws and requisitions,but it must have the powerof compelling obedience thereto.. . ."13 Washington had writtento Madison in March: "I confess... that my opinion of publicvirtue is so far changed, that Ihave my doubts whether any system,without the means of coercionin the sovereign will enforcedue obedience to the ordinancesof a General Government; withoutwhich every thing else fails....But what kind of coercion, youmay ask. This indeed will requirethought...."14 Washington wroteto John Jay in the following vein:"I do not conceive we can existlong as a nation without havinglodged somewhere a power whichwill pervade the whole Union inan energetic a manner, as the authorityof the State Governmentsextends over the severalStates...."15There was no way, however, ofcontriving a general governmentwhich could compel obedience withoutencroaching on the powers ofthe states. Indeed, any attempt towork out such a plan had majorobstacles in the way. Both theoryand history militated againstdivided sovereignty. Theory saidit could not be done; history affordedno clear-cut examples ofits having been successfully done.If sovereignty could not be divided,if a general government wasto have coercive power, then thegeneral government would have tobe sovereign and the states becomebut districts in a nation. Therewere men at the convention whosaw it this way and were ready tograsp the nettle.Firm Determination to PreserveState SovereigntyBut such a plan had little hopeof ratification, if any. Madisondescribed some of the difficulty ina letter to Edmund Pendleton beforethe convention:

1972 MAKING THE CONSTITUTION 695The necessity of gaining theconcurrence of the Convention insome system that will answer thepurpose, the subsequent approbationof Congress, and the final sanctionof the States, presents a series ofchances which would inspire despairin any case where the alternativewas less formidable.l 6But if Madison had not known beforehandthat the states wouldbe jealous of their powers andprerogatives, he would have foundout soon enough in the convention.George Mason, his fellow Virginian,expressed his determinationto preserve the vitality of thestates in calm but measuredwords: "He took this occasion torepeat, that notwithstanding hissolicitude to establish a nationalGovernment, he never would agreeto abolish the State Governmentsor render them absolutely insignificant.They were as necessaryas the General Government and hewould be equally careful to preservethem."17 Luther Martin ofMaryland said that he agreed withMason "as to the importance ofthe State Governments. He wouldsupport them at the expense of theGeneral Government which wasinstituted for the purpose of thatsupport.... [T]hey are afraid ofgranting powers unnecessarily,lest they should defeat the originalend of the Union; lest thepowers should prove dangerous tothe sovereignties of the particularState which the Union wasmeant to support; and expose thelesser to being swallowed up bythe larger."18 Doctor Johnson incontrasting the· Virginia and NewJersey Plans (the- Virginia Plancalling for representation to beapportioned according to wealthand/or population while the NewJersey Plan called for representationby states), brought some ofthe difficulties out in the open. Henoted that J ames Wilson andJ ames Madison, advocates of theVirginia Plan, did not propose todestroy the states. "They wished,"he said, "to leave the States inpossession of a considerable,though a subordinate jurisdiction.They had not yet however shownhow this could consist with, or besecured against the general sovereigntyand jurisdiction, whichthey proposed to give to the nationaIGovernment."19A Unique SituationSome held that they were departingfrom experience even totry to contrive a government whichdepended upon divided sovereignty.Others argued that theAmerican situation was unique,that history afforded no clearmodel for it, and that they mustinnovate. Charles Pinckney summedup the peculiar situation ofAmerica in vigorous exposition:

696 THE FREEMAN NovemberThe people of this country are notonly very different from the inhabitantsof any State we are acquaintedwith in the modern world; but I assertthat their situation is distinctfrom either the people of Greece orRome, or of any State we are acquaintedwith among the ancients....Our true situation appears to meto be this-a new extensive Countrycontaining within itself the materialsfor forming a Government capableof extending to its citizens all theblessings of civil and religious liberty-:-capableof making them happyat home....20Reason is the sword of the young;experience the shield of age. Someof the young men at the conventionwere for casting a new system,but others wanted no suchheady innovation. In any case, thestates must be preserved.Some of the proponents of anenergetic general government declaredthat there was little dangerto the states to be expected fromit. They appealed to the history ofconfederacies to show that timeand again it was the states whohad intruded upon and broken upthe general government. Othersappealed to a broader experienceto show that where power was confidedin any government it tendedto crush all opposing power.A Government Worth ServingThe general government musthave sufficient power and prestigeto attract able and dedicated meninto its service. The energy ofgovernment proceeds from themen in it, as John Francis Mercerof Maryland argued. "It is a greatmistake to suppose that the paperwe are to propose will govern theUnited States. It is the men whomit will bring into the Governmentand interest in maintaining itthat is to govern them."21 Americansof that time were familiarwith something that their descendantsknow little about: of governmentwith so little of power andprestige that able men would notdeign to serve in it. A seat in theCongress was hardly coveted bythe first citizens, and state governmentsfound it difficult to attractmen of ambition and integrity.Some men in the conventionwere loath to provide muchreward for serving in the generalgovernment, on the groundthat men would be attracted forreasons of personal gain ratherthan service. Alexander Hamiltonanswered the argument this way:"We must take man as we findhim, and if we expect him toserve the public must interest hispassions in doing SO."22 The ideawas vigorously pushed in the conventionof limiting the length oftime a man might serve in thegeneral government as well asmaking those who left office ineligiblefor appointive office for a

1972 MAKING THE CONSTITUTION 697time. James Wilson argued againstthis idea; he "animadverted on theimpropriety of stigmatizing withthe name of venality the laudableambition of rising into the honorableoffices of the Government...."23James Madison said:"The objects to be aimed at wereto fill all offices with the fittestcharacters, and to draw the wisestand most worthy citizens into theLegislative service."24 He doubtedthat this could be done by hedgingthem around with ineligibilitiesHnd disqualifications.Checks and BalancesOnce grant the points that. sufficientpower be authorized to attractstrong men into government andimpart energy to it and to give thegeneral government power to actdirectly upon individuals, however,allwer~ agreed that checks mustbe introduced on this power.Gouverneur Morris thought thefollowing principles must be introduced:... Abilities and virtue, are equallynecessary in both branches. Somethingmore then is now wanted. l.The checking branch must have apersonal interest in checking theother branch, one interest must beopposed to another interest. Vicesas they exist must be turned againsteach other.... 3. It should be independent.25J ames Madison declared that if it"be essential to the preservationof liberty that the Legislative, Executive,and Judiciary powers beseparate, it is essential to a maintenanceof the separation, thatthey should be independent of eachother."26Separation of PowersYet, to accomplish this was amost difficult task. In the Britishsystem there were different classesto be represented, each class providingan independent base for itsrepresentatives. In America, therewas no such actual division of thepopulation. In Britain, themonarchyand the secular members ofthe House of Lords held hereditarypositions, adding another dimensionto their independence.But Americans neither had norwanted hereditary officials. Hence,the problem: functions might beseparated from one another readily,but how could those in the differentbranches have differentsources of their power? Some werefor having the executive chosenby Congress. But others pointedout that, if this were the case, hewould be dependent on that body.Judges might be appointed by theSenate, but if that body mightalso remove them from office wherewas their independence? Probably,more time was spent on thequestion of how the executive

698 THE FREEMAN Novembershould be chosen than any other,though it did not excite the emotionsthe way the matter of whetherrepresentation in Congressshould be based on population orby states did.Above all, there was the questionof how those who were togovern could be made sufficientlyindependent of their electors tomake wise· decisions without posingfatal dangers to the libertiesof the people. Undoubtedly, if thegovernment was to be republicanit must be based on voters fromamong the people. Nor, as som.emen never tired of saying, was itto be doubted that those whoserights were involved were the bestprotectors of them or that theballot box was the place to do it.Some thought that frequent electionswould be the best means· ofprotecting the people. Roger Shermanobserved that "Governmentis instituted for those who liveunder it. It ought therefore to beso constituted as not to be dangerousto their liberties. The morepermanency it has the worse if itbe a bad Government. Frequentelections are necessary to preservethe good behavior of rulers."27Others questioned this principle,for they noted that a too close dependenceof the government on thepeople resulted not in wise andstable government but in the panderingof politicians to the temporaryand changing opinions of thepopulace. Madison had said justprior to Sherman's remarks thatthe objective of the constitutionwas "first to protect the peopleagainst their rulers; secondly toprotect the people against thetransient impressions into whichthey themselves might be led...."A "reflection . . . becoming a people... would be that they themselves. . . were liable to err . . .from fickleness and passion."28Alexander Hamilton pointed outthat lately "the Government hadentirely given way to the people,and had in fact suspended manyof its ordinary functions in orderto prevent those turbulent sceneswhich had appeared elsewhere."29Principles Not CompromisedPerhaps, enough of the difficultieshave been recounted to illustratethe fact that the Founderswere wrestling with real practicaland intellectual problems at theconvention. Some twentieth centuryhistorians have attempted tointerpret their differences in termsof class interests and other factors.It is not necessary to do thisin order to account for the debates;it also drags in matters extraneousto the subjects at issue. Moreover,such an account does not explainthe compromises that were eventuallymade; if men were movedonly by narrow interests they

1972 MAKING THE CONSTITUTION 699would have been expected to clingto their views rather than compromise.Compromise they did, however,in many matters that initially dividedthem. Indeed, some historianshave gone so far as to describethe Constitution as a "bundle ofcompromises." The· phrase hassometimes been used derogatorilyto imply that on issue after issuemen had yielded up their principlesto the expediency of accommodatinga welter of interests.Yet, a compromise need not be ayielding of a principle; it maywell be the result of sacrificingnarrow interest to the general wellbeing. So it was, quite often, atthe convention at Philadelphia;men advanced narrow and limitedviews in the debates put arrivedat great principles through compromise.The stately, but simple,rhythms of the Constitution as itcame from the committee on stylecaptured principle after principlein its verbiage, meshed them togetherinto a symphonic whole,and provided the plan for the governmentof an empire for liberty.That it could be done appearedmost unlikely at the outset. Thatit had been done was not so clearat the time. That it was doneseems now a miracle. It is, therefore,appropriate to examine theseprinciples.• FOOTNOTES •1 Quoted in Charles Warren, The Makingof the Constitution (New York:Barnes and Noble, 1937), p. 737.2 Ibid., pp. 55-56.3. Ibid., pp. 99-100.4 Ibid., p. 730.5 James Madison, Notes of the Debatesin the Federal Convention of 1787,Adrienne Koch, intro. (Athens, Ohio:Ohio University Press, 1966), p. 227.6 Ibid., pp. 653-54.7 Warren, Ope cit., p. 125.8 Madison, Notes, pp. 411-12. The presentwriter has taken the liberty of modernizingthe spelling and using completewords rather than the abbreviations asthey appear in the original.9 Ibid., p. 447.10 Ibid., p. 412.11 Ibid., pp. 25-26.1~ Jack P. Greene, ed., Colonies to Nation(New York: McGraw-Hill, 1967), p.51l.13 Quoted in Warren, Ope cit., p. 38.14 Ibid., p. 44.15 Ibid., pp. 17-18.16 Ibid., p. 50.17 Madison, Notes, p. 159.18 Ibid., p. 159.19 Ibid., p. 163.20 Ibid., p. 185.21 Ibid., p. 455.22 Ibid., p. 175.23 Ibid., p. 177.24 Ibid., p. 178.25 Ibid., p. 233.26 Ibid., p. 31l.27 Ibid., p. 195.28 Ibid., pp. 193-94.29 Ibid., p. 196.Next: Principles of the Constitution.

700A REVIEWER'S NOTEBOOKJOHN CHAMBERLAINELIOTanclHISAGEIT WAS HARDLY the "age of Eliot"when the poet and critic whomRussell Kirk calls "the greatestman of letters in his time" wasalive and active. Shaw, Wells, andHemingvvay, to pick examples atrandom, had much greater names.Nevertheless the title of Mr. Kirk'sbook, Eliot and his Age (RandomHouse, 463 pp. $12.50) has an expost justification: the dominantliterary and philosophical trendsof the earlier Twentieth Centuryare manifestly dying, while Eliot's"moral imagination," which penetratedto the heart of what Mr.Kirk calls "the Permanent Things,"is bound to have more and moreintIuence as time goes on.T. S. Eliot was considered verymuch a contemporary symbol fora few brief years when his TheWaste Land was taken to be thepoetic counterpart of JamesJoyce's Ulysses. The children ofthe "lost generation" accepted TheWa.,ste Land, with its vivid imagesof decay, as the definitive statementof a negative philosophy. Ithad been published in The Dial,which Professor Copeland of Harvardconsidered decadent. Withlovely women stooping to automaticfolly, with hollow men leaningwitlessly together, and withpeople dancing around pricklypears instead of mulberry bushes,Eliot's early poetry evoked a worldwithout values. The contrast withthe literature of the ages of beliefwas painful, even as Joyce's "odyssey"in modern Dublin, whenstacked up against the Homericmodel, was painful. But pain wasdelight in ,those days; we reveledin our agnostic gloom.If The Waste Land set the anarchicmood of the early NineteenTwenties, when all the faiths werequestioned, it can't be said that

1972 ELIOT AND HIS AGE 701Eliot dominated anything when,with the essays of For Lanc'elotAndrewes, he suddenly proclaimedhimself in 1928,to be a classicistin literature, a royalist in politics,and an Anglo-Catholic in religion.The generation that had takenThe Waste Land to be a full statementof an enduring despair feltthat Eliot had lost touch withreality. The new faiths that werea-borning at the end of the Twentiesand in the early Thirties weresecular, the politics of the time acceptedcommissars but not kings.As for "classicism," how could theauthor of Prufrock and The WasteLand have any truck with suchsterile categorizing? He hadbroken a mold, departed from tradition,and now here he was extollingtradition. Eliot's friends inBloomsbury were mystified, if notaghast.Prophet or Anachronism?As a magazine editor and essayistin the Thirties, Eliot was acceptedas a prophet by a few andas an anachronism by the many.Most of his contemporaries inEngland had gone Left; the SpanishRepublicans, manipulated moreand more by the Communists,were all the rage. In America theyoung flocked to the New Deal andthe proletcult took over in the NewYork publishing companies. It wasdistinctly not the "age of Eliot."Russell Kirk, who came of ageas a writer in the Nineteen Fiftieswhen the new conservative movementwas just getting started inAmerica, cannot really believe thatEliot's magazine, The .Criterion,was generally regarded in the pre­World War II period as a futileeffort to put back the clock. But ifKirk can't quite conjure up theanti-Eliot flavor of the Thirties,his very inability to credit thepotency of the socialist and interventionisttrends in politics andthe power of agnosticism in thespiritual realm has enabled himto see Eliot clear. Kirk sees thingsin The Waste Land that wecouldn't see a generation ago. Eliotwas always fascinated by Dante,and Eliot's own career was destinedto have a symbolism thatmight be summed up in Dantesqueterms. The Waste Land and Prufrockwere Eliot's Inferno. Hestruggled out of his earthly hellthrough the purgatory of his AshWednesday. The Paradiso was tocome later, when Eliot, defendingthe idea of a Christian society,found that he could believe in areligion based on revelation andauthority.Going deeply into Eliot's con-. temporary journalism as well asinto his poems, plays, and books ofessays, Mr. Kirk turns Eliot intoa J ohnsonian figure of plain commonsense. Eliot's comments on

702 THE FREEMAN Novemberthe march of the dictators, hiscriticism of Britain's conservativesfor their failure to solve theproblem of the social crisis athome and to arm the empire forthe coming war against Hitler,have the true prophetic ring. Theycan stand reprinting as the contemporaryobservations of theWebbs, the Shavians, the Wellsians,and the writers of theBloomsbury clique cannot. Thewonder is that they had such littleimpact at the time.Bulwark for ConservatismBut if the pre-World War IIEliot was a prophet without honorboth in his native United Statesand in his adopted England, he ishaving his delayed effect. Kirk hasmanaged to turn him into a mightybulwark for Burkean conservatism.The inner order, as both Ed­ITlund Burke and Russell Kirk insist,must· affirm cultural and religiouscontinuity.The outer order,the achievement of a true commonwealth,will take care of itselfif the inner order is based on whatMr. Kirk calls Right Reason anda faith that accepts both themorality and the mystical sense ofan unseen ruler of the universe.Kirk is against what he callsDemon Ideology; human nature,as he sees it, must revolt againstthe effort to force life into patternsthat come from the brain ofa Hegel, a Marx, or even an AdamSmith. Society has an organic continuitythat includes many logicalinconsistencies, and Kirk is willingto accept the organic as againstthe dictates of individual rationalityand private judgment. As apractical matter, I can see why theorganic must be defended againstthose who would abolish inconsistenciesby invoking force; a sanecommonwealth must move slowlywhen it comes to abolishing anythingthat has become dignifiedby tradition. If we don't moveslowly, we end up killing eachother. But the Burkean positionnecessitates a willingness to acceptsome fuzziness at the edges thatmakes critical discourse unsatisfactory.I wish I could be sure I knewwhat Kirk means when he speaksof Right Reason. He leaves megroping fuzzily for definition. Ifreason can be wrong, isn't it asign that it is unreasonable in thefirst place? Again, Kirk speaks ofthe "higher reason," which transcends"neat constructions." IfKirk, emulating Eliot, is merelysaying that there are things wemust take on faith (life is rootedin myste~y), I can follow him. ButI don't know what he gains by thehypostasis that is implied· by theuse of such terms as Right Reason,the Higher Reason, the PermanentThings, and Demon Ideology. They

1972 ELIOT AND HIS AGE 703demand what might become wholelibraries of qualification, and sothey become thought-stoppers insteadof thought-liberators.In general, however, Kirk isplain enough. The Burkean tradition,which he exemplifies, cannotbe reconciled with Five-YearPlans, or with centralized controlsand dictated prices. T. S. Eliot'sBurkean common sense implies ageneral defense of the free market,which makes Kirk's latestbook relevant for readers of aneconomic journal. Incidentally, thebook, which is not a biography,contains enough biographical materialto satisfy those who arecurious about one of our greatexiles. In all, it is a most distinguishedwork.~ THE IDEOLOGICAL IMAGINA­TION by Louis J. Halle (Chicago:Quadrangle Books, Inc., 1972) 174pp., $6.95Reviewer: Edmund A. OpitzTHIS COMPACT book is divided intothirty-nine short, pithy chapters;the style is terse, sometimes aphoristic.It reads like good conversation.A dedicated totalitarianmight not get the message, butthese pages will surely help theearnest student of society tracethe "Gadarene progress" of the nationsfrom 1789 to 1984. The politicaldisasters of this period proceedinexorably from a wrongassessment of human nature andthe human condition, and no improvementis possible except as individualpersons reorder their ownpriorities.It is an observed fact that peoplediffer, one from the other, intheir beliefs, their interests, theirtalents. A free society, such as thenation contemplated by the authorsof The Federalist, seeks toaccommodate this diversity, andto profit from it. Most modern nations,however, are under the swayof an ideology which contends thatstate power should be used to imposeuniformity on the masses;those who differ, those who dissentfrom the ideology are reprogramedor liquidated. In whoseminds were conceived the notionthat human nature is to be madeover? What books argued that thisis the task of politics? What is theorigin of the modern outlookwhich persuades so many to perpetrate,or endure, or acquiesce inthe monstrous evils of the TwentiethCentury?The author touches .upon thestraightforward authoritarianismof Hobbes, devotes a couple ofpages to Hegel, but dwells atlength on the contributions ofRousseau and Marx to the mouldingof the ideological imagination.There is more to Rousseau thanHalle allows, but ideas were

704 THE FREEMAN Novemberlaunched which turn man into asick animal and then offer a curethat compounds the disease. Thetype of man who has emerged inever increasing numbers since theFrench Revolution is less concernedwith people and thingsthan with his own feelings aboutpeople and things; he's foreverfingering his pulse, calculating hisresponses, examining his motives,and as a result he feels estrangedfrom his fellows. He needs thewarmth of the herd to heal thehurt of alienation, and thus isdriven to submerge his individualityand escape personal responsibilityin the Marxist state, whoseclaims on him are total.But the claims are fraudulent;rulers and ruled alike are but falliblemen and the ideas which keepthem in their respective places arephony. Weare men and not gods,and should conduct our lives accordingly."It seems to me," Hallewrites, "that the primary 'concernof any individual who feels he hasa light to live by must be to liveby that light himself; it must bewith the constant improvement ofhis own standards; it must bewith the level to which he is ableto raise himself." I)HANDSOME BLUE LEATHERLEXFREEMANBINDERS$2.50 eachORDER FROM: THE FOUNDATION FOR ECONOMIC EDUCATIONIRVINGTON-aN-HUDSON, NEW YORK 10533

theFreemanVOL. 22, NO. 12 • DECEMBER 1972Back to Basics-Fable of the Berry Pickers W. A. Paton 707An expert recurs to basic principles for light on some of today's complex problems.The Argentine Inflation ,Alberto Benegas Lynch, Jr. 715Another sad chapter in the long list of the failures of fiat money.Six Ideas to Keep Us Human (Part II) Edmund A. Opitz 718How free will, rationality, self-responsibility, beauty, goodness, and a sense ofthe sacred may restore man.Are You Getting Your Money's Worth? W. M. Curtiss 727Questioning the faith that human errors could be avoided if only the governmentwere in total control of our lives.The Founding of the American Republic:17. Principles of the Constitution Clarence B. Carson 734The concepts of federalism, republicanism, separation of powers, limited government,and transformation of empire.APerfect System of Government? Ludwig von Mises 747Government is indispensable because men are not faultless, but it can never beperfect.Book Reviews: 753"The Essential Paul Elmer More -,- a Selection of His Writings" edited by Byron C.Lambert"Enterprise Denied: Origins of the Decline of the American Railroads, 1897-1917"by Albro Martin"The Growth of Economic Thought" by Henry W. Spiegel"The Evolution of Economic Thought" by W. E. Kuhn"An Economist's Protest" by Milton FriedmanIndex for 1972 761Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

tt1eFreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTYIRVINGTON-ON-HUDSON, N. Y. 10533 TEL.: (914) 591-7230LEONARD E. READPAUL L. POIROTPresident, Foundation forEconomic Educationillanaging EditorTHE F R E E MAN is published n10nthly by theFoundation for EconOlnic Education, Inc., a nonpolitical,nonprofit, educational chan1pion of privateproperty, the free n1arket, the profit and loss system,and limited government.Any interested person 111ay receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are n1et throughvoluntary donations. Total expenses average $12.00 ayear per person on the 111ailing list. Donations are invitedin any amount-$5.00 to $10,OOO-as the meansof 111aintaining and extending the Foundation's work.Copyright, 1972, The Foundation for Economic Education, Inc. Printedin U.S.A. Additional copies, postpaid, to one address: Single copy, 50cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.THE FREEMAN is available on microfilm from Xerox University Microfilms,Ann Arbor, Michigan 48106.Some articles available as reprints at cost; state quantity desired. Permissiongranted to reprint any article from this issue, with appropriatecredit, except "The Founding of the American Republic," and "A PerfectSystem of Government?"

Back to Basics-.. :.~FABLE Of THE BERRY PICKE~'.:w. A. PATONACHIEVING and maintaining an intelligentawareness of the economicprocess - the means andmethods by which man makes aliving on this rugged planet - requiresunderstanding, and firmlygripping, a few fundamentals.Only in this way, I've long believed,can even the observing andthoughtful individual develop animmunity to economic nonsense,avoid being hoodwinked and misledby proposals and programs presentedby politicians and pseudoreformers,in bright colors, thatrange from the downright fraudulentto emotional daydreaming.As the first fundamental to beconsidered in beginning the systematicstudy of economics I proposethe truism: The total amountconsumed can't exceed the totalDr. Paton is Professor Emeritus of Accountingand of Economics, University of Michigan,and is known throughout the world for hisoutstanding work in these fields. His currentcomments on American attitudes and behaviorare worthy of everyone's attention.am,ount produced. This is an indisputablefact of life if we rule outmanna from heaven and eithertake in· the whole race or assumea self-sufficient group, large orsmal1. 1 It has the special merit, asan initial stepping stone on thepath to knowledge and understanding,of being applicable to anycommunity or society, howevermade up, whatever the productionmethods and kinds of output,whatever the form of governmentand other institutional arrangements,and without regard to customs,habits, attitudes, religiousviews, and so on. Thus it holds inthe case of a primitive tribe (ignoringthe story-book case of findingfood by merely stretching outa hand ·while lolling comfortably1 Not to deny, of course, the possibilityof a level of consuming in excessof output in a specific time-period, bytapping stores. Some will recall the accountof the seven lean years followingseven fat years in Egypt, long ago.707

708 THE FREEMAN Decemberon a sandy beach or on the grassin the pleasant shade of a palmtree), and is also valid in the complextype of economy, endowedwith an advanced technology, withwhich we are familiar. This propositionshould perhaps be regardedas an adaptation of Say's law,which proclaims the equalityandidentity - of supply and demandin the aggregate, and is likewisea universal truth, not to begainsaid, anywhere, in any economicframework.Basic Proposition One is soplainly in view to any intelligentmind that calling for its stressingmay seem to be hardly necessary.In today's cloudy atmosphere, however,I feel that there is amplejustification for explicit statementand restatement of this inescapablelimitation on the many schemesdesigned to banish poverty - asofficially defined - that are beingcurrently proposed. To puncturethe dreams of pie-in-the-sky with\vhich the air is filled - to counterpolitical promises to provide thisor that level of living for everybody- there is surely need for renewedemphasis on the point thatthe total amount we can eat dependson the size of the pie ratherthan the cutting pattern.Production Is PrimaryHere I come to an importantcorollary of Proposition One: production,not cons10nption, deservesrecognition as the primary sectorof economic activity. This positionconflicts with the widespread andpersistent tendency to be concernedwith the consumer's needsand problems - a tendency thathas currently found expression ina wave of governmental interferencein producing and marketingprocesses, and a lot of popularclamor for more of the same. Theultimate objective of economic activity,of course, is to providegoods to meet consumer needs.This is just as true in an economyequipped with an elaborate structureof factories and machines, andyielding a wide range of consumablecommodities and services, asin a primitive community subsistingon the results of hunting andfishing. We don't use machinessimply to make more machines.But since the level of consuming,in total, depends on the level ofoutput it may well be urged thatmaintaining and enhancing productiveefficiency is the matter ofprime importance, and worthy ofbroad popular support. Thus thelong history of opposition to technicaladvance, and the currentslackening of concern as to diligenceand workmanship on the assemblyline and elsewhere, are atodds with Proposition One, socan't be justified in terms of overallwelfare and progress. Preoccu-

1972 FABLE OF THE BERRY PICKERS 709pation with "consumerism", to theneglect of improved use of availableresources, and expansion ofproductive capacity through capitalaccumulation, does not repre~sent praiseworthy public policy.The campaign to "protect" theconsumer by government actionbecomes especially objectionablewhen it reaches the point - as itnow has - where business firms aresubjected to a degree of harassmentthat clearly impedes operationand increases costs. Indeedthis state of affairs is truly ominous,and should be viewed withalarm rather than acclaim. Thewheels of production don't keep onrolling automatically, without anencouraging overall climate andthe efficient participation of allhands - attendants and operatives,technicians, managers, and fundfurnishers.Opening the Door on ProblemsAcceptance of Proposition One,with the accompanying view ofeconomic activity as a dichotomyof producing and consuming, solvesno problems. But recognition ofthis axiomatic, universally applicable,feature of economic lifedoes provide a useful approach, agood starting point, for furtherstudy; it serves to open the doorto an examination of importantissues and problems.The bare statement of PropositionOne leaves untouched the criteriaof "producing" and "consuming"and further inquiry is neededto ascertain the essential characterof these broad divisions ofeconomic activity, particularly inan economy where specializationand exchange are highly developedand a myriad of consumer commoditiesand services flow from acomplex array of plants and equipment.What are the earmarks ofproductive conduct versus nonproductiveaction? It's easy to saythat producing consists of makinga contribution somewhere alongthe production pipeline but thisdoesn't tell us much. For onething we must distinguish betweeneconomic and noneconomicgoods (the latter being ratherhard to find these days, when eventhe air breathed may not be entirelyfree of cost to the user orsomeone else). And who or whatdetermines the composition of theoutput either in a particular enterpriseor for the whole economy?Proposition One, as such, leavesthis important question unsettled.The problem of drawing a linebetween the producing and consumingstages, and distinguishingresources employed in producing("capital goods") from end product("consumer goods"), is lessimportant, but perhaps deserves afew comments. Where does productionend and consumption begin?

710 THE FREEMAN DecemberFor example, is the housewife's activityin preparing the family mealand setting the table in the producingsector or a step in the processof consuming? Are the orangesin the picker's basket, or in a packageor pile in the supermarket, oreven on a shelf in the pantry, to becounted as resources devoted toproduction? The fussy folks insistthat the true consumable is noteven the glass of orange juice onthe breakfast table but the satisfactionderived from drinking it.This line of inquiry becomes ofsome consequence in periodic economicmeasurement in the case ofconsumer durables such as cars,washing machines, and residences.Proposition TwoThe second underlying propositionthat should be stressed - as Isee it - in launching systematicstudy ·of economics may be phrasedas follows: the indiv'idual (or familyunit) has the inherent right toconsume or otherwise dispose ofwhat he (or the unit) producesarestatement of the old sayingthat the worker is entitled to the"fruits of his labor". This fundamentalcan hardly be regarded asa truism, and certainly is not anarithmetic axiom. Its support mustbe found in human nature andmotivation, with an eye open tothe limitations imposed on consumingby the amount of outputavailable. Undoubtedly there is atleast a trace of a sense of fairnessand justice in most people andsome degree of acquiescence in themerit of this second proposition.It is indeed a dull child who doesn'tpromptly see the distinction betweenhis toys and those of a playmate,and who will fail to protestwhen his sand castle is demolishedby someone other than himself.Close observation of human behavior,moreover, currently andhistorically, brings to light muchevidence of blighting effect on theproductive effort of the individualof the seizure by others of all orpart of the results of such effort.Acceptance of Proposition Twohas always been widespread in theprimitive and simple situation,and we don't need to go back toRobinson Crusoe to bring this factto light. On the current scene, inthe midst of all the confusion andfolly with which we are beset,there are few who would proposeor attempt to justify despoilingsomeone of the product that plainlyresults from his personal effort.Thus we see no campaign to commandeerfor the use of others theproduct of the chap who has plantedand tended a garden patch, orbuilt a raft to use out at his cottageon the lake, or made a coupleof rustic chairs for the porch. Butthe same people· who show a willingnessto go along with this prin-

1972 FABLE OF THE BERRY PICKERS 711ciple in these elemental, clear-cutcases, often become confused andchange their stance completely,when confronting the complex requirementsof a modern economy,with its elaborate structure of divisionof labor and exchange, pouringforth a fantastic variety ofcommodities and services. And itis not difficult to become a bit bewilderedby our intricate networkof methods and techniques andmaze of related markets, with theirmany millions of interdependentparticipants, coupled with an impressivearray of business organizationsand an all-pervasive webof monetary and credit facilities.Indeed, the only way for the intelligentlayman to avoid being befuddled,and victimized by theclever humbug peddlers, is to acquirea solid understanding of afew ever-present fundamentals, asI've already pointed out.Tom and Dick as Berry PickersAs a means of bringing outsharply this familiar lack of insightand consistency of attitude Ioften employed in my classes anexample that I labeled the "Fableof the Berry Pickers" (along withmuch other illustrative material).While a boy on the farm I spentliterally hundreds of hours, overa period of years, picking wildraspberries for my mother, andbecame quite expert as a picker.And this experience undoubtedlyaccounted for my use of this fablein my teaching. I'll outline thestory here, as I recall presentingit in my beginning course in "principlesof economics".Assume a big swamp, with manyacres of wild red-raspberry bushes,to which no one claims title ormaintains any financial interest.On a particular summer day twoneighbor boys, Tom and Dick,equally equipped with pails andboth physically fit, spend ten hoursin the swamp picking berries, asdirected by their respective mothers.Tom is a careful, persistent,systematic picker, with a strongurge to make a good showing.Dick, in contrast, is a carefree andcareless lad, who likes to roamaround among the bushes, pickingsloppily here and there. At day'send Tom has sixteen quarts ofclean, ripe berries, while Dick hasabout twelve quarts of a mixtureof green, overripe, and good berries,with a liberal sprinkling ofleaves and small twigs throughout.With this condition, I'm sure youvlill all agree, Dick cannot reasonablylay claim to a share of Tom'sberries, and I don't believe thatmany of you would object to Tom'sconduct if he should reject theidea of pooling and dividingequally the results of the day's operations,if Dick - or anyone else- should propose such action.

712 THE FREEMAN DecemberTom and Dick in the Berry PlantNow let's move on a few yearswith our berry story. Tom andDick have grown up and both areemployed by a company that hasbeen established in the neighborhoodand is engaged in growingand canning berries for the market.Diligent Tom has moved upthe ladder to the position of operatingmanager of the plant, butDick has not advanced beyond thestatus of sweeper and handyman.Each is paid weekly by check forhis services and the amount ofTom's check is about four timesthat of Dick's. What are the equities,the respective rights, in thissituation? Should a substantialslice of Tom's money income beseized by taxation or other formof coercion for use to supplementDick's earnings, or render assistanceto some other person or personsregarded as needy poor, orexpended in some other way withoutTom's consent? Many peopleseem to be willing to approve sucharbitrary action, including most ofthose who would not support takingpart of the berries Tom pickedas a boy and awarding them to hisinefficient fellow-picker, Dick.If it be assumed that the respectivecontributions of Tom andDick to the output of the plant atwhich they are employed are beingaccurately determined it followsthat Tom is just as fully entitledto spend the money income he receivesas plant manager as he seesfit as he had a right to consume orotherwise dispose of all the wildberries he personally picked in theswamp, years before.~ The twocases, with this assumption, areon all fours, and anyone who holdsotherwise is throwing logic andcommon sense to the winds. Thosewho don't agree with this conclusioneither fail to grasp the basicidentity of the two situations, ordon't mind being inconsistentwhen it suits their convenience oris in line with their prejudices.There is a possible out, however,for persons who give lip service,at least, to the need for fair-mindedness,consistency, in thinking2 The intervention of the money andcredit mechanism, a necessary instrumentto facilitate specialization and exchange,should certainly not be allowedto obscure the basic facts, althoughmany people at times seem to be blindedby fixing their attention on the flowof cash or equivalent rather than servicesor other economic contributions forwhich payment is being made. I'm remindedof a tussle on our city councilone evening years ago,· during my fiveyearexperience as a member, when afellow councilman proposed that one ofour firemen be dismissed because helived in a community outside our citylimits, and spent "his entire salary" inhis home neighborhood rather thanwhere he worked. I had some trouble ingetting support for the point that themain question for us was not where orhow the chap got rid of his cash but thevalue of the services he provided to ourfire department.

1972 FABLE OF THE BERRY PICKERS 713and conduct. They may challengethe assumption that the contributionsof Tom and Dick to the outputof the berry plant are fairlyand accurately determined; theymay urge that in practice - in reallife - the Toms are overpaid andthe Dicks underpaid. In the systemas it stands, they may contend,common labor is exploited andmanagers and owners are on thegravy train. There is certainlywidespread expression of opinionto this effect.(There should perhaps be mentionedhere, parenthetically, theview that the more efficient andproductive individuals should beforced to share the results of theirefforts with their less capablebrethren, and currently this extremeposition has a great deal ofsupport. The advocates of thisstance are of course refusing toacknowledge the validity of PropositionTwo, as well as ignoring orminimizing the probably adverseeffect on total output of largescaleand persistent seizure anddiversion of the contributionsmade by the more energetic andcompetent individuals.)Measuring Productivity and Awards­Major Alternative SystemsVia Propositions One and TwoI have now come to the crucialmeasurement problem and issue:How is the contribution of the individualparticipant to be determinedin a complex economy suchas that in which we find ourselveswhere a host of individuals joinhands, so to speak, in operating anelaborate, highly mechanized, productiveprocess or system? Andshould any limitation be placed onthe right of the individual to consumeor otherwise dispose of theamount of his contribution, validlymeasured?The study of economics consistsessentially in searching for an answerto these questions. It is preciselyat this point that the battlebetween competing isms and ideologiesis joined. In the existingsituation the determination is stilllargely made by. the forces of anintricate structure of markets, andhence systematic economic inquirymust include an intensive examinationof the price-making forcesof the market, and their results,at all levels. Such an examination,including a survey of historicalevidence, will undoubtedly providea substantial backing for the conclusionthat a broad and free marketstructure, registering automaticallyand impersonally the netimpact of the attitudes and reactionsof many buyers and sellersto changing conditions, has longsince proved itself as a truly amazinginstrument for directing productiveactivities and awardingshares of output to participants in

714 THE FREEMAN Decemberthe process. Unfortunately ourmarkets are now so heavily ladenwith interferences and restrictions,especially through governmentalintervention and control,that a free market structure, withstrong competitive pressure presentthroughout, no longer exists,and this condition constitutes anobstacle in analyzing and appraisingthe performance of a marketsystem under more favorable circumstances.In any event, no fair and firmjudgment can be reached, as to themerit and potency of a market apparatusin measuring contributionsto production, slicing up theoutput pie for the Toms and Dicks,without giving careful attentionto the limitations of this instru,..ment at the best, as well as underconditions of substantial interference.The fact that ingrainedsuperstition, traditions, taboos,and other attitudes and traits,may make the development ofa suitable market structure difficultif not almost impossible,should also not be neglected.Some "consideration, moreover,must be given to the proper meansto be employed to relieve acuteeconomic distress in a humane society,even if the market is generallyrelied upon to guide bothproduction and distribution of finaloutput, with adequate recognitionof the inclination of the Toms totake steps - voluntarily - to amelioratethe hardships of the Dicks.The major alternative to relianceon the market for economicguidance, I'm sure we'll all agree,is statism, collectivism, some formof governmental, bureaucratic,compulsion. And I strongly believethat the study of economics, in collegesor elsewhere, should includea careful, thoroughgoing examinationof the case for this alternative,as it has been made by theoutstanding defenders and advocatesof socialistic programs, includingthe dictatorial system representedby modern communism.The route to sound conclusions isnot by way of glorification of themarket and wholesale condemnation- without study - of the socialistapproach. Taking somethingfor granted in this world isseldom advisable.This brief statement, I shouldmake it plain in conclusion, is intendedto do nothing more thanprovide a crutch on which the intelligentand inquiring laymanmay lean, and outline a useful approach- push open the door - tothe crucial measurement problemsand issues which deserve intensivestudy. ~Reprints available, 10 cents each.

715TheArgentine InflatiALBERTO BENEGAS LYNCH, JR.THE ARGENTINE political and economicevolution seems so closelycorrelated with her monetary situ'::ation that it may be said that thehistory of this nation is principallythe history of its currency.The period of national organizationfollowing emancipation fromSpain in 1810 until adoption of theConstitution of 1853 was markedby internal struggles and long periodsof despotism and anarchy,interspersed with times of relativepeace and progress. One of thefirst measures taken by the nationalgovernment was to establishthe gold content of the "hardpeso." Thus in 1812 a "hard peso"weighed almost two grams ofpure gold. In 1822 the first officialbank was founded: the Bank ofBuenos Aires, entrusted with theissue of the first bank notes, calledArgentine pesos, which were exchangedby the public at the rateof 1.8 grams of minted gold. In1823 conversion was suspended byDoctor Alberto Benegas Lynch, Jr. is professorof Public Finance in the Universidaddel Museo Social Argentino and professor ofPolitical Economy in the Argentine NavalIntelligence Service.decr~e';for the first time becausehe/government issue of notes exee'd~dthe stock of gold. ConvertiilJfywas restored in 1825. The',lowing year saw a relapse intothe bad policy of increasing thecurrency without backing and thepeso again became inconvertible.On this occasion, it was mistakenlysaid that in this way the war withBrazil could be financed "morecomfortably." The resultant inflationbrought with it political andeconomic instability and seventeenyears of tyranny and barbarity,demolishing what had been achievedwith difficulty in the immediatelypreceding years.This situation of moral and economicprostration lasted untiladoption of the Argentine Constitutionin 1853, described by oneof its most important authors andproponents, Juan B. Alberdi, asthe document under which respectand guaranties for private propertywere commanded.In a second period we may includealmost a century, from 1853to the rise of Peron in 1943, a periodof enviable economic progress

716 THE FREEMAN Decemberwhich brought Argentina to eighthplace among the civilized nationsof the world. Within the first 75years we enjoyed, almost withoutinterruption, the advantages of theclassical gold standard, a banknote being exchanged for 1.7grams of gold. We say almostwithout interruption because in1876, at the same time as the establishmentof the National Bank,and at intervals until 1890, thecurrency was again issued withoutbacking, conversion being temporarilysuspended as a consequence.In 1891 the finances were againput to rights and convertibilityrestored at a rate of 1.42 Nationalpesos to a gram of gold. In thecourse of time, however, therewere successive devaluations untilconvertibility was prohibited entirelyin 1928, at which time 5.16National pesos exchanged for agram of gold.In 1932, instead of restoring the·Conversion Board and returningto the classical gold standard, Argentinaturned to that sadly renownedbankers' bank: the CentralBank. This period, which lasteduntil 1943, was still one ofprog..ress owing to the strict limitsplaced on the authority of thebank and to the reliability andprudence of the government authoritiesof the time. But evenwith the best intentions, the establishmentof the Central Banklaid the foundations of the Statecontrol of the currency which inevitablyfollowed.From the military coup of Peronin 1943 until he was overthrownin 1955 marked the darkest momentsof Argentine history. Theentire banking system was reformed.The Central Bank wastransformed from a relatively independentbody into the lackey ofthe government, thus allowing capriciouscontrol over currency andcredit. The policy of deficit spendingbecame the rule; open marketoperations were carried out systematicallyin order to inject"fresh money" into circulation;rates of interest were manipulatedat will; bank reserve requirementswere constantly lowered by governmentalaction. In addition tosuch monetary policy, compulsorymembership in trade .unions wasimposed, the level of taxation becameexorbitant, internationaltrade was totally controlled throughhuge bureaucratic organizationswith their various tariffs andquotas and subsidies. To completethe governmental interference inthe market, price controls wereimposed throughout the economy.This suicidal policy provoked anunprecedented economic situation:Argentina was reduced to one ofthe lowest rungs among the socalled"under developed nations."Monetary reserves were sadly de-

1972 THE ARGENTINE INFLATION 717pleted; international trade fell toa quarter of its earlier volume;real incomes and salaries contractedsharply; indebtedness increased;agriculture and cattleraising, so basic to Argentina'seconomy, were largely despoiled;many subsidized and protected industrieswere created as a furtherburden on the people; all in themidst of a terrible moral corruption.Unfortunately, the Peronist economicpolicy of socialistic tendencieshas persisted to a greater orlesser extent up to this day in Argentina.The cost of living indexin 1972 is· 360 times what is wasin 1943! The peso, once one of theworld's strongest currencies, isnow the one which is depreciatingmost rapidly. The cost of livingprobably will double this year.Levels of saving have fallen noticeably,and as a result the rate ofcapital formation is ridiculouslylow. Real income and salaries arealways below the cost of the "familybasket." The distribution ofwealth does not depend on one'sefficiency in meeting the consumer'sneeds but~ to a large.extent,on the favors of bureaucrats andtheir irrational monetary policy.The flight of national and foreigncapital is terrible. Malinvestmentand waste are accentuated in linewith the directives of the plannersof the day. The United States dollarwhich exchanged for 3.50 Nationalpesos in 1943 was selling inSeptember 1972 at 1,400 pesos onthe black market. This, in spite ofthe depreciation suffered by thedollar owing to the tendency of theUnited States government to imitateArgentina's folly-the bastionof the free world also bowing tosocialist policies.Today, perhaps the strongestcurrency is the Swiss franc, althoughcurrencies such as the Japaneseyen have promising prospects.It is interesting that arecent lead article in a widelycirculated Japanese periodical recommendsa return to the goldstandard at a rate of 0.78 gramsper yen. This is precisely what Argentinaoughtto do in currencymatters. The foreign exchange remaining.in the hands of the CentralBank should be used to buygold in the London free marketand add it to Argentina's existingstocks, dividing the total by thenotes in circulation and fixing thecorresponding relationship to gold,restoring convertibility. Theoniyway to put ahrake on :inflation,although it ,may appear tobeatruism, is for governments to stopinflating. For that purpose, amonetary standard is required tomake people independent of thestate manipulation we have heredescribed. ~

718EDMUND A. OPITZas to make us Iluman(Part Two)PART ON;E of this essay presents adiagnosis of the present malaisein terms of a loss of contact withsix vital ideas. The ideas whichkeep us human may be summarizedas follows:• 1. Free Will. Man's gift offree will makes him a responsiblebeing.• 2. RationaMty. Man is a reasoningbeing who, by takingthought, gains valid truths abouthimself and the ·universe.• 3. Self-responsibility. Eachperson is the custodian of his ownenergy and talents, charged withthe lifetime task of bringing himselfto completion.• 4. Beauty. Man confrontsbeauty in the very nature ofthings, and reproduces this visionin art.• 5. Goodness. Man has a moralsense, enabling and requiring himto choose between good and evil.• 6. The Sacred. Man participatesin an order which transcendsnature and society.It is no secret that a great manyphilosophers and scientists denyfree will and affirm determinism;it is also a fact that no one canreally bring himself around to believingthat he is an automaton. Aphilosopher who announces himselfas a determinist presumes tooffer us a conclusion he has arrivedat after observation, aftermarshalling the relevant evidence,after reflection, and as the end resultof a chain of reasoning. Eachof these steps reflects the action ofa free being, and these free actionscan never be pieced together so asto contrive an unfree result. Man'swill is free; it is so free that itcan deny this freedom!Take the case of Baruch Spinoza.If any man ever lived free itwas Spinoza; he was th~ "inner

1972 SIX IDEAS TO KEEP US HUMAN 719directed" man par excellence. ButSpinoza's own experience clashedwith the new world view of Mechanism- the notion that the universeis constructed along the linesof an intricate piece of clockwork.Ideology overcame experience andSpinoza denied that his will wasfree. I quote from PropositionXLVIII of his Ethics:There is in no mind absolute or freewill, but the mind is determined forwilling this or that by a cause whichis determined in its turn by anothercause, and this one again by another,and so on to infinity.The mind is a fixed and determinedmode of thinking, and therefore cannotbe the free cause of its actions,or it cannot have the absolute facultyof willing and unwilling; but for willingthis or that it must be determinedby a cause which is determined by another,and this again by another,etc. Q.E.D.lFree WillIf the individual does not havefree will, then he is not at libertyto reject determinism! But wherewill a man find a position fromwhich he might judge whether hiswill is indeed free, or not. Theanswer is: Only as he looks withinhimself, at the workings of his innerlife; by introspection, in other1 Spinoza, pp. 74-5 of the Everyman'sLibrary edition of Ethics, (New York: E.P. Dutton & Co., 1925).words. Now introspection is ratherfrowned upon today as a means ofgetting at the truth, as not beingin accord with scientific technique.Early science viewed nature fromthe standpoint of the external observer,as a theater goer views aplay. The man occupying the seatin the first row of the balcony isobserving the drama unfold uponthe stage ;he is detached from theaction, is not involved in the play,his standpoint is objective. Theworld view that grew out of scienceis assumed to be the way theuniverse looks to an outsider whois not part of the action, merelylooking in upon it.Once this approach is adopted,what follows? Let me answer byquoting from Jacques Barzun'sgreat book, Science: The GloriousEntertainment: "Pure science wasengaged in sketching, bit by bit,the plan of a machine - a giganticmachine identical with the universe.According to the vision thusunfolded, every existing thing wasmatter, and every piece of matterwas a working part of the cosmictechnology."2 Thus emerged theideology bearing the label MechanisticMaterialism, and human beingsschooled in this ideology cometo think of themselves as merecogs in the world machine. And2 (New York: Harper & Row, 1964)p.21.

720 THE FREEMAN Decemberjust as every gear and cog in .themachine is moved by another, sois every human action the mereeffect of a previous cause, and soon. Observe a man's actions fromthe outside and you see only hisbody and limbs in motion; nothingthat you can see from the outsidegives you any assured knowledgeof what is going on inside him.You cannot observe his will fromthe outside, nor his mind. Youmight guess what's going on, butthat's the best you can do.A HiddenlnnerLHeThere is one region of the universewhich will always be beyondthe ken of the external observer,and that is the region. of the innerlife. Each man's inner life is concealedfrom all the world; healone has access to it. Millions ofpeople can view the same eclipseof the sun, but only one personcan know your inner life, and thatis you. Truth about the will in actioncanbe known by introspectiononly; it will never be disclosedto those who adopt the standpointof the external observer and refuse·to shift their perspective. Ifthere is indeed freedom of the will,this is a truth which, in the natureof the case can be known onlyas each person knows it first handin himself. Let a man look withinhimself and he knows with solidassurance that he is capable ofexerCISIng freedom of choice insituations where real alternativesare open to him. Which of us hasnot wrestled with dilemmas of thetype: "I want to do this; but Iought to do that"? We know, inthis context, that the will is free.There's an old story about Galileo,who assured one of his contemporariesthat the ring aroundJupiter was composed of satellites;"I've seen them through mytelescope; take a look and see foryourself." The friend had figuredout that the ring was solid and refusedto put his eye to the glass,the only posture from which hecould test his theory. The freewill, if it operates at all, operatesonly within, and those who are sowedded to the standpoint of theexternal observer that they refuseto look within, effectively barthemselves from ever obtaining~ny knowledge of the matter.The consequence of this state ofaffairs is unfortunate. It is "unscientific,"the average man is ledto assume, to believe he has freewill, and that decisive .action onhis part can make a real differencein life. He is taught that he is determinedby heredity, or environment,or race, or childhood traumas,or poverty, or by some otherfactor· that limits his capacity forfree choice; and his ability tochoose is impaired because hethinks he doesn't have it! The ini-

1972 SIX IDEAS TO KEEP US HUMAN 721tiative is giv~n over to environmentand man only reacts; hedoesn't act. Adjustments to theenvironment, comfort, and easethen come to be the goals of life.If we accept the dictum of a greateconomist that "the end, goal oraim of any action is always therelief of a felt uneasiness," thenwe have given up on life, for we'llnever rest easy until we're dead!To live is to strive for greater intensityof life, and this means thatwe may choose adventure, heroism,suffering, and maybe evendeath.The issue of free will constitutesa battleline of first importance.A people among whom theflame of life has burned so lowthat their philosophers preach determinismwill be severely handicappedin the game of life. Theywill find it difficult to put theirtrust in reason and, as we mightexpect, reason itself is now underattack from several quarters.RationalityThe second of the big ideaswhich make man man is this: Manis a reasoning being who, by takingthought, gains valid truthsabout himself and the universe.The attack on the rational mindcomes from several quarters. Philosophicalmaterialism and mechanismassumes that the ultimatereality is nonmental; only bits ofmatter or electrical charges orwhatever are, in the final analysis,real. If so, then thought is but areflex of neutral events. "Ourmental conditions," wrote T. H.Huxley, "are simply the symbolsin consciousness of the changeswhich take place automatically inthe organism."Evolutionism, popularly understood,is materialistic and mechanical.So viewed it conveys the ideathat living things began as a stirringin the primeval ooze and becamewhat they are now by randominteraction with the physiochemicalenvironment, moved byno purpose, aiming at no goal.Darwinism offers an account oforganic change which has no needof intelligence to .. guide it.From popular psychology comesthe notion that reason is but rationalization,that conscious mentalprocesses are but a gloss forprimitive and irrational impulseserupting from the unconsciousmind. Psychoanalysis discreditsmind by subordinating intellect tothe id.From Marxianism comes the notionthat class interest dictates aman's thinking. There is one logicfor the proletariat and another forthe bourgeoisie; and the mode ofproduction governs the philosophicalsystems men erect, and theirlife goals as well. The unfortunatelyplaced middle class forever

722 THE FREEMAN Decembergropes in darkness, unable toshare the light revealed to Marxand his votaries.Convictions about the reality ofreason and free will develop in thecontext of our vision of the ultimatenature of things. And here Ibring up again the ideology ofMechanistic Materialism. Thereare several kinds of Materialism,the most prominent today beingDialectic Materialism, the officialreligion of Marxianism. However,the several brands of Materialismdiffer only in nonessentials; theyagree that all forms of consciousnessarise, develop, and disappearwith changes in the materialworld. Every variety of Materialismdowngrades mind; it makesmind an offshoot of matter, a derivativeof material particles, anepiphenomenon.IIMan is but the outcome ofaccidental collocations of atoms"Let Bertrand Russell tell us inhis own words: "Man is the productof causes which had no previsionof the end they were achieving;his origin, his growth, hishopes and fears, his loves and hisbeliefs, are but the outcome ofaccidental collocations. of atoms.... Brief and powerless is Man'slife; on him and all his race theslow, sure doom falls pitiless anddark. Blind to good and evil, recklessof destruction, omnipotentTIlatter rolls on its relentless way."3Of course, if matter is the ultimatereality, mind is discredited.But if this discredited instrumentis all we have to rely on, how canwe put any confidence in its findings?If untrustworthy reasontells us that we cannot trust reason,then we have no logicalground for accepting the conclusionthat reason is untrustworthy!Well, I don't trust the reasoningof people who champion the irrational,and I do know that ourreasoning powers may be - likeanything else - misused. But whenhuman thought is guided by therules of.logic, undertaken in goodfaith, and tested by experienceand tradition, it is an instrumentcapable of expanding the domainof truth. Reason is not infallible,but it is infinitely more to bet rusted than nonreason!Self-ResponsibilityThe third great truth is thateach man is the custodian of hisown energy and talents, chargedwith bringing himself to completionand having a lifetime to dothe job. Gifted with reason andfree will, the human being musttake himself in hand in order tocomplete his development; most:~ From the essay "Free Man's Worship."Reprinted in Selected Papers ofBertrand Russell (New York: ModernLibrary, 1927) pp. 3, 14.

1972 SIX IDEAS TO KEEP US HUMAN 723animals, on the other hand, simplymature, brought to full term byinnate drives. Human beings arenot thus programmed, and occasionallywe have to act against inclinationand instinct and inertiaif we would achieve our goals.This is simply illustrated insports, where the successful performerforces himself to traineven on those days when he'drather be doing something else.The bike club I ride with held acentury run over a six mile course.A couple of youngsters turned upin full regalia and rode off, onepacing the other, looking very professional.Quite a few miles laterI noticed that one of the youngmen had dropped out; so I askedthe other what happened."I train every day whether Iwant to or not," he replied, "hejust goes out when he feels likeit."There you have it on a smallscale, but the same principle appliesto life. "That wonderfulstructure, Man," wrote EdmundBurke, "whose prerogative it is tobe in a great degree a creature ofhis own working, and who, whenmade as he ought to be made, isdestined to hold no trivial place inthe creation."The persistent downgrading oflife, during recent centuries hasreduced man to a cosmic accidentinhabiting a fourth rate planet,lost in the immensities of spaceand time, in a materialistic universedevoid of values. This dubiousvision has not been vouchsafedto the birds and the beasts, butonly to human beings. Only manamong all the creatures of theplanet has been able to take alltime and all space within his purviewand draw conclusions of anysort. And it is a perverse kind ofsilliness for a creature gifted withthe ability to understand and explainto bemoan his littleness inthe face of the unimaginable vastnessof the cosmos. Whose mind isit that comprehends all this? Whatcreature controls an enlarging domain?Man confronting the universeas astronomer, physicist, geologist,engineer, is entitled tostand tall; would that he might doas well in other departments!BeautyIn the area of aesthetics, forexample, to illustrate the fourthvital idea. Here man confrontsbeauty in the very nature ofthings, and reproduces his visionin art. In a materialistic age itcomes to be believed that particlesof matter in motion are the onlyrealities; which means that beautyis unreal. "Beauty," we are told inthe familiar phrase, "is in the eyeof the beholder." How did it getthere? we want to know, unlessloveliness - as every great artist

724 THE FREEMAN Decemberhas taught us - is real, and outthere waiting to be experienced.What shall a painter resort towhen the ideology of the age convinceshim and his potential publicthat matter is the ultimate realityand beauty a mere illusion? LetPicasso answer:When I was young I was possessedby the religion of great art. But, asthe years passed, I realized that artas one conceived it up to the end ofthe 1880's was, from then on, dying,condemned, and finished and that thepretended artistic activity of today,despite all its superabundance, wasnothing but a manifestation of itsagony.As for me, from cubism on I havesatisfied these gentlemen (rich peoplewho are looking for something extravagant)and the critics also withall the many bizarre notions whichhave come into my head and the lessthey understood the more they admiredthem.... Today, as you know,I anl famous· and rich. But when Iam alone with my soul, I haven't thecourage to consider myself as anartist. 4One more quotation, this timefrom Joseph Wood Krutch, generalizingabout modern artists:They no longer represent anythingin the external world, because theyno longer believe that the world which4 Quoted by Joseph Wood Krutch inAnd Even If You Do (New York: Wm.Morrow & Co., 1967) p. 186.exists outside of man in any wayshares or supports human aspirationsand values or has any meaningfor him.')Art once celebrated the greatnessof the human spirit and man'saspiration for the divine; greatart reconciled man to his fate."We are saved by beauty," wroteDostoevsky. Art now is the reachingout for bizarre forms of selfexpressionby more or less interestingpersonalities; or it becomesoutright buffoonery and charlatanism.GoodnessThe fifth big idea has to do withethics; it is the conviction thatmoral values are really embeddedin the nature of things, and thatmen have the capacity and are underthe necessity of choosing thegood and eschewing evil. Given arevival of belief in reason and freewill I am confident that ethicalquestions will be brought withinthe human capacity to resolve. Butif we succumb to the attacks onreason and free will, and if weaccept the ideology of Materialismwe will seek in vain for some substitutefor ethics. We reduce moralityto legality; we confuse whatis right with what works; or whatadvantages us, or what pleases us.These things, including utilitari-5 Ibid., p. 185.

1972 SIX IDEAS TO KEEP US HUMAN 725anism and relativism, boil downto ethical nihilism, for if nothingis really right, then nothing isreally wrong either.The SacredThe sixth big idea pertains tothe human experience of thesacred - a dimension which transcendsthe workaday world. Thisencounter evokes awe, reverence,a sense of the sublime; and it produces- in the intellectual sphere-the philosophy known as Theism.Theism is the belief that the universeis not merely brute fact, butthat a mental/spiritual principleis at the heartof things; the finitemind in each of us is somehowgrounded in an infinite Mind. Inone perspective, Theism encompassesall the other ideas; and inanother perspective, if our thinkingis right on the previous fiveideas, Theism is an immediateinference.We res,ist the word "God" becausefor most people the notionsof their childhood still cling to it,and these notions they have out- igrown while they have not permittedtheir ideas of God to growwith them. But if one rejects theidea of God, he has no logical stoppingplace short of the idea ofMaterialisim; and if he goes thisfar, he has embraced an ideologywhich shortchanges his own mentalprocesses. Mind, reason, logic,and God are all bound up together.Santayana was once referred to asan atheist, and he replied, "Myatheism, like that of Spinoza, istrue piety towards the universe,and rejects only gods fashioned bymen in their own image, to beservants of human interests."Genuine Theism demands that webe "a-theistic" toward the falsegods.Theism 'contends, as a minimum,that a Conscious Intelligence sustainsall things, working out itspurposes through man, nature,and society. This is to say that theuniverse is rationally structured,and this is why correct reasoningpans a few precious nuggets oftruth.Acceptance of the Creator remindsmen of their own finitude;no man can believe in his ownomnipotence who has any sense ofGod's power. And finite men,aware of their limited vision, havea strong inducement to enrichtheir own outlook by cross fertilizationfrom other points of view.When theistic belief is absentor lacking in a society, men arebeguiled by the prospect of establishinga heaven on earth. Theyvainly dream that some combinationof political and scientific expertisewill usher in utopia, andthey use this future possibility asan excuse for present tyranny.lJnder Theism, they modestly seek

726 THE FREEMAN Decemberto improve themselves and theirgrasp of truth - thus making thehuman situation more tolerable,more just, more enjoyable - confidentthat the final issue is in God'shands.But won't men perversely useTheism as in excuse for intolerunceand even persecution, as indeedhas happened in history? Ofcourse they will, for there is nogood thing that cannot be misused.But reflect on the deadlinessof the alternative as exhibited byregimes which make atheism official.Communism, during its firstfifty years in several countries,has taken a toll of at least eightyfourmillion lives!What is Man? the creature fromMars might ask. And our answerwould be that man is a being withan anthropoid body and six ideas.What if he loses contact with oneor more of these ideas? our questionercontinues. In that case, weanswer, his humanity is therebythat much diminished.Diminished man has come to thefore at an accelerating rate duringthe past century. In statecraft, hewas unable to resolve minor differencesbetween Western nationsand thereby prevent them fromtearing each other to pieces in thecycle of wars which began in 1914.In religion, we have a split betweenthe "death of god" trend,on the one hand; and, on the other,an emphasis on push-button salvationism.In education, there isagreement on one point only, thatthere is a crisis in the schools; butthere's no consensus as to causeand cure. Philosophers have abandonedthe great tradition in philosophyto embrace one fad afteranother; positivism, linguisticanalysis, existentialism. Thenthere is the "treason of the intellectuals,"many of whom havefound communism and socialismirresistible; who resolved thatthere should be no more war inthe Thirties but decided a fewyears later that war was a wonderfulthing. And in personal life, ata time when the male is giving hisworst performance, unable to reconcilewomen to their roles inlife, the female wants liberationso she can imitate the' male!It goes without saying that asI list a portion of the indictmentagainst modern man, I have inmind statesmen, artists, philosophers,theologians, intellectuals,as well as ordinary men andwomen, who have kept the faith,who have not lost their heads. Iam not certain that the madnessfrom which we suffer has run itscourse, and that we've turned thecorner, but I am enough of anoptimist to have confidence thatthe corner is within sight, andthat there is sufficient health in ust.o make it. ~

'7?'7Ar.e You GettingYourMoneys Worth?W. M. CURTISSIN TERMS of personal income andits purchasing power, one mustconclude that Americans never hadit so good! With the great stridesin technology and the tremendousinvestment in the tools of production,workers are fantastically productive.And, in a general way,one's income is based on what oneproduces, as valued in the marketplace.In a free economy, one may exchangehis money or property forthings or services he values morethan the money or property hegives up. Thus,both the buyer andseller benefit from the exchangeand each is better off, in his judgment,than before.But what are you getting forDr. Curtiss is Executive Secretary and Directorof Seminars at The Foundation for EconomicEducation.your money today? How much ofyour spending is for things you'drather do without if the choicewere entirely yours!One might argue that we alwaysspend our money in the way wechoose, given the alternatives. Wepay a dentist to relieve a toothache,not because a trip to thebeach wouldn't be more fun. butbecause it is less painful to visitthe dentist. If we lived in a dryclimate we might avoid the purchaseof an umbrella. If we livednear our work we might avoid buyinga second car. If we lived inMaine, we might not buy an airconditioner. And so on throughmany choices like these, where noone else is forcibly influencing ourdecision.Even under coercion, we still

728 THE FREEMAN Decemberchoose among alternatives. We maygive our wallet to an armed robber,under the circumstances. Mostof us grudgingly pay our taxes,rather than face the consequencesof refusing to pay. But thesechoices, the alternatives we chooseunder duress, differ from ourpurely voluntary spending. And inorder to know whether we've "everhad it so good," we ought to considerthose expenditures which areforced upon us, for things we'drather do without.Crime CostsAn example is the cost of crime.Government is essential for theprotection of life and property,and most people will willingly payto be protected from the few personswho have no respect for thelife and property of others. Butthe mounting incidence of crimein our affluent society calls forfurther consideration of the costsand possible causes.How do you feel about the costof installing a burglar alarm systemin your home? Or having neartamper-proof locks put on youroutside doors? Or the extra costof a buzzer to make certain youremove your auto keys? Or theextra cost of taking a taxi becauseyou're afraid to ride a subway?These are just a few of the manyexamples of the rising costs ofcrime over recent decades. Moredirect costs, of cOllrse, includelosses of life and property by personswho are objects of the burglaryor perhaps just innocent bystanders.Mounting also are thecosts of prevention, detection, andpunishment, including the hiringof extra police, additional courtcosts and the like. Attempts havebeen made to estimate such costsbut who can say, and with whataccuracy? What is certain is thatthe money one is forced to spendeither to prevent crime or to repairthe damages is money thatcannot be spent voluntarily forother things.No doubt, the people of theUnited States are among the mostproductive and affluent in theworld. We have a very high levelof living in automobiles, color televisionsets, the quality of food weeat, education, medical services,housing, leisure, travel, and a hostof other things.But our level of living also includesa few items we mightchange if we could. The costs andconsequences of crime are amongthese items.We can take littlecomfort in knowing that our crimecosts per capita may be the highestin the world! Much of the cost isburied in the total expenditures bygovernmental units - federal,state and local- the total supportof which takes some 40 per cent of

19'72 ARE YOU GETTING YOUR MONEY'S WORTH? 729our very high productivity. So, wemay say that our affluence supportsthe most costly governmentin the world. But, if we had our"druthers," is this the "level ofliving" we would buy?Why Crime IncreasesMuch of the crime, especially inour larger cities, is tied to the increasinguse of illegal drugs. Thedaily cost of supporting a drughabit far exceeds what many auser is able to earn legally. Manyaddicts thus turn to robbery, prostitution,"pushing" drugs onothers, and various sorts of organizedcriminal activity.Why does this happen? If aproduct or service is forbidden bylaw, and if some people want theproduct or service badly enough,someone will undertake to providethe illegal item, usually at a priceto cover the risk of getting caughtbreaking the law. A classic· examplecomes from the "prohibitionera" following World War I,with the resultant high cost ofbootlegging, gang wars, and attemptedlaw enforcement activities.Prohibition eventually was acclaimeda failure and was repealed.Whether the morality of the peoplewas improved or diminishedby the experiment is not the subject of this inquiry. Nor is thequestion of whether the governmentshould attempt to legislatemorality. We are merely pointingout the tremendous costs involved,costs forced upon individuals whomight rather have spent theirmoney in some other way.Not repealed, however, is thegovernmental attitude toward alcoholicbeverages. Instead of directprohibition, there is now a"prohibitive" tax on liquor. Likewise,"cigarettes may be hazardousto your health," and areheavily taxed. These taxes and thehigh costs of enforcement are apart of today's high cost of living.These three examples - drugs,cigarettes, and liquor - illustrateproblems which arise l~rgely outof government intervention, andthen have to be controlled, to someextent, at very high costs to taxpayers.In any event, when thetotal cost of government becomesas burdensome as it is in thiscountry, the incentive to cheat isstrengthened, as anyone couldtestify who either files or fails tofile an income tax return. There isa strong temptation to get "apiece of the action" by governmentworkers who handle "publicmoney," award contracts, purchaseitems for government use, and thelike. And even the rare few whooccasionally expose such cheatingmust be sorely tempted not to doit. Who wants to be a model of integrityin a den of thieves!

730 THE FREEMAN DecemberWelfare CostsGovernment welfare activitiesare another source of corruption.Such programs- have grown byleaps and bounds in the past quartercentury at a time when the nationwas never more affluent. Thereasons are many and often complicated.Many social workers andother government employees seemto measure their success by thenumber of cases handled and theamount of money distributed. SocialSecurity offices, for example,post notices in local papers sayingin effect: "Are you getting all theSocial Security you are entitledto? Come in and let us help you!"Workmen's Compensation clientsare officially advised not to dealwith employers but to come directlyto the Board.Aside from the outright cheating,one of the causes of the risingcost of welfare, a cause which thewelfare client cannot change, isminimum wage legislation. Wages,set higher by law than they wouldbe in a free market, increase unemployment.The unemployablesare especially the young, the old,and members of minority groups.Whether for lack of skill, or ofeducation, or whatever the reasons,unemployment rises sharplyin such categories whenever minimumwages are raised by law. Increasingunemployment means increasingwelfare costs.Respect for PropertyPart of the problem is the breakdownof respect for property. Andespecially is this true of the growingvolume of "unowned" or "public"property. Consider, for instance,the breaking of windowsand other destruction of schoolproperty. The problem is seriousenough that some schools havegone to the considerable expenseof installing "unbreakable" glass.Some new school buildings are beingbuilt without windows.College buildings and groundsare prime targets for vandalism;public parks and playgrounds alsoare used and treated with disrespect.It seems that what belongsto everyone belongs to no one. Thecost to those who must pay forsuch vandalism and destructionlowers their level of living, deprivesthem of alternative waysthey would spend their money.Governmental efforts at "consumerprotection" go far beyondcuring us of the "bad habits" ofdrugs, alcohol, and tobacco. Thegovernment also tries to do to uswhat is "good" for us. An illustrationis the requirement that variousgrocery and other items bepriced by weight so that shopperscan more easily compare productsof different distributors, differentsize packages, and the like. However,after sellers have gone to theexpense of doing this (which con-

1972 ARE YOU GETTING YOUR MONEY'S WORTH? 731sumers pay), few shoppers payany attention to it.Similarly, when consumers borrowmoney, or buy on installments,shouldn't they know theirinterest costs expressed as a simplerate per year? How else canthey compare different sources ofcredit? So, the revealing of thesefigures is required by law andadds to the cost for the consumerwho is to be protected. Again,there is evidence that few consumersuse this new service theyhave paid for.One of the most absurd of allconsumer protection items is thecompulsory addition of seat beltsto autos. Why should I have to becompelled to pay for seat belts toprotect me in an auto accident? IfI think seat belts are useful, I willhave them installed and will usethem! Who is likely to be more interestedthan I am in protectingme from injury? Upon discoverythat only one-third of the driverswere using the seat belts they hadbeen forced to pay for, all driverswere then subjected to the costs ofinstalling buckle-up buzzers andlights and other educational devices.Other consumer protection itemssuch as air bags, more effectivebumpers, and other gadgets will becompulsory additions before longand the cost of automobiles to theconsumer is bound to reflect theadditional expense. It is estimatedthat by 1975 the cost of these additions,which the consumer didnot order, will be more than thetotal cost of a new car when Americanswere less affluent than today.This might be a part of your "levelof living" you would do withoutif you had a choice.Most "consumer protection"plans show a complete lack offaith in two very important aspectsof the market. One is thewisdom of the consumer in lookingafter his own interest and. theother is the power of competitionbetween suppliers in an unfetteredmarket to serve the consumer ashe wishes.GamblingThe attitude of governmentstoward gambling is a curiousthing. At times, it has appearedthat governments have consideredgambling to be immoral and havetried to ban it completely. Morerecently, governments have permittedgambling in some places,but not in others; You may be permittedto bet on a horse race atthe race track but not elsewhere.You may indulge in games ofchance if they are conducted bychurches licensed by the state. So,perhaps gambling is not really amoral problem at all!In recent years, in their questfor new sources of revenue, more

732 THE FREEMAN Decemberand more states are permittingand encouraging gambling so longas the state gets a substantial cutof the proceeds. In New YorkState, you need not go to the trackto bet on the horses if off-trackbetting is more convenient. Statelotteries also are gaining in popularityand respectability, with alarge "take" going to the state.Still, the state is partly in andpartly out of the gambling business.Many types of gamblingsuch as the "numbers" game, bettingon human athletes or teams,and other games of chance are stillillegal. It would be difficult if notimpossible to estimate the amountof money which governments spendunsuccessfully to enforce gamblingor anti-gambling laws - anotherexample of spending your moneyin a way you might not spend ityourself, given a choice.The ProblemMost of the economic problemsthat are left to the market aresolved without great fanfare. Weeither buy, or refrain from buying,and thus send a meaningfulsignal to the producer. It doesn'trequire a committee or a governmentcommission, or a popularityvote to make the decision. Ifenough people object to tail finson their autos, the manufacturerwill soon get the message. And ifthe decision of the market goesagainst the lover of tail fins, herarely makes much of a fuss. Butlet the decision be made by a governmentbureau, or even a Harvardprofessor, and a feeling of disenfranchisementis certain to arise.Practically all of the majoreconomic problems that seem sotroublesome are the result of someactivity of government when it hasgone beyond its principled role ofprotecting life and property. Oneof our most serious, with ramificationsin many areas of life, isinflation. Inflation is simply the resultof the Federal governmentspending beyond its means andexpanding the supply of money tosupport its profligacy.School problems, involving suchquestions as how to finance them,who should run them, who shouldattend them, and what should beoffered in them, are largely problemswhich arise because governmenthas assumed much of thisresponsibility. Little choice is offeredthose concerned.The problem of housing, especiallyin urban centers, is largelya result of the intrusion of governmentinto urban renewal, rent controls,construction codes, and otherrestrictions.Consumer protection wouldcause no difficulties if it were avoluntary thing between buyer andseller. Auto manufacturers wouldghidly supply seat belts to those

1972 ARE YOU GETTING YOUR MONEY'S WORTH? 733who want them and are willing topay for them - just as radios aremade available. The problem ariseswhen motorists who neither wantnor use them are compelled by lawto pay for them.Just now, control of pollution ofair and water is being promotedby a few vocal individuals, organizations,and an imaginative press,In haste to respond to such pressures,governments are certain tofurther add to their already overextendedactivities.Are you getting your money'sworth? The question finally boilsdown to whether you are primarilyinterested in freedom of choice forthe individual - your choice withyour own money - or "full securityand protection" by government inevery last detail.True, some consumers will makea lot of mistakes, as judged by youand me, in their choices as to howto spend their money. But farmore serious than the combinederrors of individuals is the mastererror - a belief that such mistakescould be avoided if only the governmentwere in total control ofour lives. t)FreedomIDEAS ONLIBERTYFREEDOM CAN WELL BE LOST to us through misinterpretation ofit. When we think it gives us the right to another man's harvest,or entitles us to an honor we are unwilling to earn, we place ourselvesin a bondage that curtails our true growth in every way.Through the privilege of choice our way is opened for us tobecome what we will. The wise use of this faculty brings out thebest that is in us, and thereby places us in positions and circumstancesthat are compatible with our abilities and much to ourliking ... Freedom does not mean that each shall have the samething, or even express in the same way; for it is every man'sright to discover the path to his highest good. But how we usethis priceless heritage of choice decides what we become. Truefreedom is· experienced as we· earn it through thought and deed.LA VERNE BOWLESFrom the "Daily Guide to Richer Living" forSeptember 15, 1960, appearing in Science of Mind.

CLARENCE B. CARSONTHEFOUNDINGOFTHEAMERICANREPUBLIC17Principlesof the ConstitutionTHE QUESTIONS at issue in the constitutionalconvention were rarely,if ever, philosophical in nature.The men gathered at Philadelphiain 1787 were practical men, by andlarge, going about the practicalbusiness of proposing how powerwould be disposed, arrayed, anddistributed in the United States.Nor is the Constitution a treatiseon philosophy; except for the preamble,the document deals exclusivelywith the practical and themundane. Nonetheless, the debateswere informed by principles, asremarks and occasional flights oforatory indicate, and the Constitutionis based on high principles,which we may know both fromanalysis and an examination ofthe apologies for it.These principles follow, if notinevitably then naturally enough,from the Founders' understandingof human nature. The same humannature which made governmentnecessary, they thought, made certainprinciples appropriate to itand essential if it was to endurefor any extended time. Governmentis made necessary becauseman is not perfect. James Madisonput the matter succinctly:If men were angels, no governmentDr. Carson recently has joined the faculty ofHillsdale College in Michigan as Chairman ofthe Department of History. He is a noted lecturerand author, his latest book entitledThrottling the Railroads.734

1972 PRINCIPLES OF THE CONSTITUTION 735would be necessary. If angels were togovern men, neither external nor internalcontrols on government wouldbe necessary,!Obviously, Madison thought menare not angels; on the contrary,man is a flawed being, needingrestraints whether he belongsamong the governed or the governorsat any particular time.Human Nature Is SuspectThere is no indication that anyof the other Founders thoughtotherwise. Alexander Hamilton declaredthat "men are ambitious,vindictive, and rapacious." 0) Norcould he see that human ~aturewas more dependable because thebeings involved lived in republicsrather than under monarchs:Has it not ... invariably beenfound that momentary passions, andimmediate interests, have a more activeand imperious control over humanconduct than general or remoteconsiderations of policy, utility, orjustice? Have republics in practicebeen less addicted to war than monarchies?Are not the former administeredby men as well as the latter?Are there not aversions, predilections,rivalships, and desires of unjustacquisitions that affect nationsas well as kings? Are not popularassemblies frequently subject to theimpulses of rage, resentment, jealousy,avarice, and of other irregularand violent propensities?3Hamilton's low estimate of humannature is well known, but thegentle spoken Benjamin Franklindid not rate it much higher. Hedeclared that when you "assemblea number of men to have the advantageof their joint wisdom, youinevitably assemble with thosemen, all their prejudices, theirpassions, their errors of opinion,their local interests, and theirselfish views." He predicted thatthe government they were providingfor in the convention "can onlyend in Despotism, as other formshave done before it, when the peopleshall become so corrupted asto need despotic Governmentbeing incapable of any other."4 Afair interpretation of this latterstatement would be that man hasan ingrained downward bent. Thepolitical implications were spelledout by Madison in this way: "Inframing a government which is tobe administered by men over menthe great difficulty lies in this: YO~must first enable the governmentto control the governed; and inthe next place oblige it to controlitself.";'Capable of ReasonIt does not do jllstice to theFounders' conception of humannature simply to emphasize theflawed side. Man is a rational animal,they thought, i. e., capable of

736 THE FREEMAN Decemberreason. He loves liberty, and needsit for the fulfillment of his possibilities.He is self-interestedatrait that can be turned to gooduse - but he is also capable ofconceiving a general interestwhich embraces others as well ashimself. He is an active, responsiblebeing, capable of invention,construction, concern, and whatgoes by the name now of creativity.Put power in his hands overothers, however, and he must becarefully watched..This was thecornerstone of their political faith.With these views of human nature,the Founders combined anunusual mixture of hope and resignationabout the government theywere contemplating, hope that theycould contrive a system that wouldbe lasting but resigned to thelikelihood that it would foundersooner or later on the· shoals ofthe lust for power of those whogoverned and the bent to corruptionof the governed. Many of thedebates of the convention hoveredaround the question of whethertoo much or two little power wasbeing conferred and whether thosewho would exercise it would havesufficient leeway to act energeticallyor be sufficiently restrainedto prevent arbitrary and despoticaction. The debates reflected theseconcerns; the Constitution embodiedtheir conclusions. The conventionwas the forge; the Constitutionwas the finished and temperedmetal. The following are itsmost salient principles:) . federal System of GovernmentThe federal system of government,as we know it, was inventedat Philadelphia in 1787. Dictionaries,encyclopedias, and textbooksnow define a "federal government"as one in which there is a divisionof powers between a general government,on the one hand, andlocal (or state) governments, onthe other, both governments havingjurisdictions over the citizenrywithin their bounds. A confederationis now held to differ from thisarrangement in that under it theindividual states retain the soleauthority to use force on individuals.No such distinction appearsto have existed in 1787. The onlyperceivahle distinction was agrammatical one. "Confederation"was the noun form used to describethe organization of thestates into a unit. "Federal" wasthe adjective form of the word"confederation." For example,Richard Henry Lee, who was opposingratification of the Constitution,said that the "object hasbeen all along to reform our federalsystem. ~ . ."6 He could onlyhave been referring to the systemunder the Articles of Confederationas "federal." In adjoiningsentences, Hamilton employed the

1972 PRINCIPLES OF THE CONSTITUTION 737words as if interchangeable inmeaning. 7 Initially in the convention,those who favored a generalgovernment with sanctions referredto it as "national." Theydid not, however, get the systemthey had .. conceived, and in thecourse of the debates "national"had odium attached to it. Thosewho favored adoption of the Constitutionreferred to themselves as"federalists," and to the governmentas a "federal" one, 8 in part,one suspects, to minimize the extent.of the innovation. Clearly,what they had wrought was not aconfederation, and it came to becalled a :'federal" government.It made sense, once the Americansystem had been devised, touse the words "federal" and "confederation"to call attention tostructural differences in systems,but this development in languagehas tended to obscure the inventionthat took place. Occasionally,however, it has been pointed out.A present-day writer notes thatthe "United States is regarded bymany students as the archetype ofa federal system. . . . Even generaldefinitions of the term seemto derive from the Americanmodel."o James Madison wroteone passage, too, in which hecalled attention to the new characterof what they. had devised:The proposed Constitution ... is, instrictness, neither a national nor afederal Constitution, but a compositionof both. In its foundation it isfederal, not·national; in the sourcesfrom which the ordinary powers ofthe government are drawn, it ispartly federal and partly national;in the operation of these powers,it is national not federal; in theextent of them, again, it is federal,not national; and, finally inthe authoritative mode of introducingamendments, it is neither whollyfederal nor wholly nationa1. 10It is a brilliant description of thecomplex arrangements in the Constitution,but, unfortunately,Madison is speaking in an unknowntongue so far as presentdayAmericans are concerned. Notonly did the distinction between"federal" and "confederation" takeplace, but in contemporary usage"federal" is employed almost exclusivelyto refer to the generalgovernment and has, thus, becomea synonym of "national." Whereas,Madison used "federal" to referto those things in the Constitutionin which the states retainedtheir force and vigor.At any rate, the main feature ofthe federal system of governmentis that the power of governmentwas divided between the generalgovernment and the state governments.Such a division has theappearance of being a division ofsovereignty, something which politicaltheorists have said could not

738 THE FREEMAN Decemberbe done. The Founders disposedof the theoretical problem byignoring it in that they did notvest any such absolute authorityas is described by sovereignty inany government. A political scientisthas put the matter correctlyin this discussion of the Americangovernment: "Sovereignty, in theclassic sense, has no meaning;divided as power is, the elementof absoluteness which is essentialto the concept of sovereignty isnot present."ll The Constitutionacknowledges the existence of thestates and vests some of thepowers of government in theUnited States. Power is dispersedrather than concentrated, and eachof the co-ordinate (not levels of)governments has its own jurisdiction.The Role of the StatesBoth the general and the stategovernments are independent ofeach other to a degree but are alsodependent on one another. Theserelationships are provided for byintricate arrangements. All electionstake place within states andunder their auspices. The Constitutionwas only to go into effectafter the ratification by conventionsheld state by state. The selectionof the personnel for thebranches of the general governmentinvolved the states to greateror lesser degree depending uponthe office involved. The House ofRepresentatives was to be composedof members chosen fromdistricts within states, and thenumber allotted to each state wasto be based on population. Eachstate, on the other hand, has twoSenators, providing for an equalityof the representation of statesin the upper house. This wasworked out in what is sometimescalled the Great Compromise ofthe convention, or the ConnecticutCompromise. The President isselected by an electoral college,each state having as many electorsas it has Representatives and Senators.The members of the courtswere to be appointed by the Presidentwith the advice and consentof the Senate. The Senate was alsogiven major powers in the approvalof other appointments andin treaty making. The states retaineda large role both becauseof the pre-eminence of the Senateand that everything having to dowith popular election is done byand within states.The general government wasclearly given control over the massiveuse of force and the stateswere left with the preponderantauthority to use force ordinarily.The general government is authorizedto raise and maintain armedforces and may call into action underits authority any state militaryforce. Laws made in pursu-

1972 PRINCIPLES OF THE CONSTITUTION 739ance of the Constitution are dedaredto be the supreme law ofthe land. The states retained mostpolice powers, courts dealing withmost civil and criminal matters,and much that has to do with theprotection of life, liberty, andproperty. The general governmentis charged with protecting thestates from foreign invasion andfrom one another. The line betweenthe powers of the states andthose of the general governmentwas not marked by great detail;it was, no doubt, expected thatthey would contend with one anotherover various jurisdictionsand thus limit one another. Suchcontentions were expected to counter-balancethe extensive use ofpower by any government.To say that federalism was anAmerican invention is not to implythat it sprang from the headof Zeus fully clothed at Philadelphiain that summer. Actually, theFounders were encompassing atradition when they devised thefederal system. There were elementsof federalism in the Britishcolonial system. Each colony hadits own government to deal withlocal matters. The British governmentexercised the type of powersover the colonies that were now tobe vested in the general government.Moreover, the Congress underthe Articles of Confederationhad much of the authority whichwas now vested in the generalgovernment, even if it lacked thepower for the full exercise of it.Most of the innovation was in thewresting of a pattern from an imperialsystem and installing it ina republican setting.2. Republican Form of GovernmentThere are two basic requirementswhich must be met if agovernment is to be styled a republic:(1) it must be popular inorigin, Le., draw its authorityfrom an extensive electorate; and(2) power must be exercised byrepresentatives. It is distinguishedfrom an· hereditary monarchy inthat it is based on popular electionand from democracy in thatpower is wielded by representatives.Those who favored the newConstitution took pains to showthat the government it providedfor was republican in character.James Madison showed that itspowers were derived from the peopleby this explanation:The House of Representatives, likethat of one branch at least of all theState legislatures, is elected immediatelyby the great body of the people.The Senate, like the. Present Congressand the Senate of Maryland,derives its appointment indirectlyfrom the people. [The Senate waschosen by state legislatures until theratification of the 17th Amendment.]The President is indirectly derivedfrom the choice of the people, accord-

740 THE FREEMAN Decembering to the example in most of theStates. Even the judges, with all otherofficers of the Union, will, as in theseveral States, be the choice, thougha remote choice, of the people themselves.12As they understood the differencebetween a republic and a democracy,it was a republic, not ademocracy. Though it was basedon the people, the people actedthrough representatives. Populardecision went through a series offiltrations, as Madison put it, beforeit became government action.The United States was not amonarchy, and safeguards wereintroduced to prevent its becomingone, as Madison said:Could any further proof be requiredof the republican complexion of thissystem, the most decisive one mightbe found in its absolute prohibition oftitles of nobility, both under the federaland State governments; and inits express guaranty of the republicanto each of the latter.l 33. Separation and Balance 01 PowersIf there was one principle uponwhich the Founders were agreedmore than any other it was thatof the separation of powers. Montesquieuhad taught them that itwas a requisite of good government.Both they and Montesquieuknew the separation of powers inprinciple from the British example.State governments alreadyincorporated the principle, howeverimperfectly. Once it was decidedthat the power to coerceindividuals would be lodged in theUnited States government therewas little doubt that a system ofchecks and balances must be lqcatedin the system. If the individualcould be coerced by it thenthe government must be restrainedby checks and balances.For this to be done, there mustbe several branches to limit oneanother. The branches, as constituted,made it a mixed government.·This idea is not so wellknown anymore, for it comes fromclassical theory, which no longeris the basis of our studies as itwas for the Founders. The ideais that there are three possiblepure modes of rule: they are,monarchy, aristocracy, and democracy.In this sense, neither theUnited States nor the states havea pure form of government; theyare, instead, mixed. In the UnitedStates government, the Presidentis based on the monarchical principle,the Senate the aristocratic,and the House the democratic(both because it has more membersand is directly elected). Itwas not monarchy,aristocracy, ordemocracy, but rather drawn from

1972 PRINCIPLES OF THE CONSTITUTION 741principles of each of them as aform, Le., from rule by one, ruleby a few, and rule by the many.The Founders had considerabledifficulty devising a mixed governmentfrom a constituencywhich contained no fixed classes.As they saw it, it was very importantthat each of the branchesbe distinct from the other in themanner of its selection. A mixedgovernment was desirable, in thefirst place, because there were differingfunctions of governmentwhich could best be entrusted toone, to a few, or to many. But, ifthe functions were best performedin this way, the division shouldnot be watered down by having allthe branches chosen by the sameelectorate. Perhaps it would bemost accurate to say that theypartially solved the problem. Themembers of the House were directlyelected, and the number ofthem apportioned according topopulation. The Senate was to beelected by the state legislatures.This was natural enough and didbase the choice on two differentrealities. But they never hit uponany comparable reality from whichthe President could be chosen.Having him elected by an electoralcollege was an artificial expedientwhich, while it did give him anindependent basis of selection, didnot provide him with one that wasorganic to the country.Three Branches of GovernmentThere was much talk in theconvention of making each of thebranches independent of the other,and much was done to achieve thisprinciple. The branches were· notonly given different sources ofelection but also were providedprotections from one another. Thehouses of Congress make theirown rules, are judges of the electionsof their members, and jointlyset their pay. They have a constitutionallyestablished regulartime of meeting, and may adjournby agreement one house with theother. The President can protecthimself by the use of the veto andby his powers of patronage. Moreover,he is commander-in-chief ofthe armed forces as well as havingat his disposal the Federal constabulary.The members of thecourts are to be paid according toa regular schedule, their salariesnot to be reduced during theirtenure, which is for life or duringgood behavior.But there is no denying that thebranches are also interdependentand entwined in their operation.All legislation must pass bothhouses of Congress on the way tobecoming law. Even appropriations,which must originate in theHouse, must still pass the Senatebefore they can go into effect. ThePresident can veto acts of theCongress; in which case, such an

742 THE FREEMAN Decemberact can only become law by beingpassed by at least two-thirds majoritiesin each of the houses. ThePresident and the Senate are particularlyentwined in the appointiveand treaty making powe'lts,.,Amendments to the: Constitutionnot only regularly involve bothhouses of the Congress but thestate legislatures as well. The effectof all thi.s interdependence isto require government by a consensusof the branches and, inthe case of constitutional amendments,of the states also. Themore important the decision, thebroader the base for its approvalmust be for it to be put intoeffect.4. Limited GovernmentThe crowning principle of theConstitution is limited government,for all the other principlestend toward and are caught up inthis one. The federal system ofgovernment, the republican formof government, the principle ofseparation all place procedural limitson the powers of the governments.The independence of thebranches, one of another, and ofthe state and general governmentsprovides them with a base fromwhich to check and limit oneanother. Their interdependencemakes the concurrence of branchesand governments necessary foraction to be taken.The Constitution provided notonly for procedural limits on governmentsbut for substantive onesas well. One way in which the generalgovernment is substantivelylimited is by enumerating its powers.This is done most directly insetting forth the legislative powersof the government, which powersare all vested in the Congress.They are contained in Section 8of Article I, and read, in part, asfollows:The Congress shall have Power tolay and collect Taxes....To borrow Money on the credit ofthe United States;To regulate Commerce with foreignNations, and among the severalStates, and with the Indian Tribes;To establish an uniform Rule ofNaturalization .To coin money .To establish Post Offices and postRoads; ....To declare War, grant Letters ofMarque and Reprisal, and make Rulesconcerning Captures on Land andWater....To have placed all legislative authorityin the Congress was alimitation on the other branches.To have enumerated the powersimplied that those not listed werenot included. Discussions withinthe convention bear this out. Forexample, the question was raisedas to whether or not the general

1972 PRINCIPLES OF THE CONSTITUTION 743government ought to be grantedthe authority to construct canals.The idea was rejected on theground that this would involve thegeneral government in projectswhich would be mainly beneficialto the people of particular states.The point, however, is that theywere operating on the assumptionthere that if the power were notlisted it was not granted.But it is not necessary to concludeonly from the enumeratedpowers that the general governmentis limited by the Constitution.There are specific limitationscontained in it. The Constitutionrequired that all direct taxes beapportioned on the basis of population.(This prohibition was laterremoved by the 16th Amendment.)Other taxes must be levied uniformlythroughout the UnitedStates. All taxation must be forthe common defense and generalwelfare of the United States,which should be conceived as amajor limitation. Specific restrictionson the general governmentare listed in Section 9 of Article I,of which the following is a partiallist:The Privilege of the Writ of HabeasCorpus shall not be suspended,unless when in Cases of Rebellion orInvasion the public Safety may requireit.NoBill of Attainder or ex postfacto Law shall be passed....No Tax or Duty shall be laid onArticles exported from any State....No Money shall be drawn from theTreasury, but in Consequence of Appropriationsmade by Law....No Title of Nobility shall begranted by the United States.State governments were alsolimited in the Constitution in severalways (Section 10, Article I).The following is an example:No State shall enter into anyTreaty, Alliance, or Confederation,grant Letters of Marque and Reprisal;coin Money, emit Bills ofCredit; make any thing but gold andsilver Coin a Tender in Payment ofDebts; pass any Bill of Attainder orex post facto Law, or Law impairingthe Obligation of Contracts, or grantany Title of Nobility.Some delegates to the conventionwere heartily in favor of aspecific prohibition being placedin the Constitution against theUnited States government emittingbills of credit (Le., issuingpaper money). Others said thatoccasions might arise, such asduring the late war, when the issuanceof paper money might benecessary. The upshot was a silentcompromise. Congress is not authorizedto emit bills of credit, butneither is it specifically prohibitedto do so. (The going assumption,however, was that if it was notgranted it was prohibited.)

744 THE FREEMAN DecemberCurbing the MajorityThe other main limitation inthe Constitution was the tacitlimitation on the powers of thepeople. There was much concernexpressed both in the constitutionalconvention and in the stateratifying conventions about limitson the people. The Founders perceivedthat a majority may betyrannical; it may work its wayso as to intrude on the rights ofindividuals, which rights wereconsidered to be the premier ones.Alexander Hamilton said: "Thevoice of the people has been saidto be the voice of God; and, howevergenerally this· maxim hasbeen quoted and believed, it is nottrue to fact. The people are turbulentand changing; they seldomjudge or determine right."14 MosesAmes, speaking in the Massachusettsconvention which wasconsidering the ratification of theConstitution, said: "It has beensaid that a pure democracy is thebest government for a small peoplewho assemble in person.... Itmay be of some use in this argument... to consider, that it wouldbe very burdensome, subject to factionand violence; decisions wouldoften be made by surprise, in theprecipitancy of passion, by menwho either understand nothing orcare nothing about the subject; orby interested· men, or those whovote for their own indemnity. Itwould be a government not bylaws, but by men."15 James Madisondeclared that "on a candidexamination of history. we shallfind that turbulence, violence, andabuse of power, by the majoritytrampling on the rights of theminority, have produced factionsand commotions, which, in republics,have more frequently thanany other cause, produced despotism."16The people were limited by theoriginal Constitution in that theycould act only through representatives,that except for the Houseof Representatives the brancheswere indirectly chosen, and thatthe courts were most remote frompopular control. Both the governmentand the people are limited bythe vesting of effective negativepowers on any legislation in eachof the houses, of a veto in thePresident, and the establishmentof a Supreme Court which, it wasunderstood, would have a finalnegative. Positive action requiresa concurrence of the branches;while several of them have thepower of negation. The directpower of the people is also limited'by the staggering of the terms ofoffices. The House of Representativesis chosen every two years.The terms of Senators are for sixyears, and approximately one-thirdof them are chosen every twoyearS. The President's term is for

1972 PRINCIPLES OF THE CONSTITUTION 745four years, and the members ofthe courts serve during good behavior.This provided both forstability in the government and asafeguard against the people'sworking their will over the governmentwhile they were underthe sway of some temporarypassion.5. The Transformation of Empire.One of the least appreciatedprinciples of the Constitution isthat contained in the provisionwhich makes it possible to dissolvean empire periodically byadding new states to the union.The United States had an empirefrom the beginning; indeed, writersand speakers frequently referredto the United States as anempire. At the least, however, theUnited States had a vast territorywest of the Appalachians and tothe north and west of existingstates. It was of considerable interestat the convention what provisionshould be made for thefuture of this territory. Should itbe carved into provinces which,when anyone of them becamepopulous enough,_ would be ad.,.mitted on equal terms with theolder states. Gouverneur Morris,among others, argued vigorouslythat this should not be the case.He feared that in time the westernstates would outnumber theeastern states; "he wished thereforeto put it in the power of thelatter to keep a majority of votesin their own hands." He summedup his case in this way: "Thebusy haunts of men not the remotewilderness are the proper schoolof political talents. If the Westernpeople get the power into theirhands, they will ruin the Atlanticinterests. The back members arealways averse to the best measures."17On this occasion, however, Morriswas outpointed by the leadersof the Virginia delegation. GeorgeMason said: "If the WesternStates are to be admitted into theUnion, they must be treated asequals and subjected to no degradingdiscriminations. They willhave the same pride and otherpassions which we have, and willeither' not unite with or willspeedily revolt from the Union, ifthey are not in all respects placedon an equal footing with theirbrethern." Edmund Randolph declaredthat it was entirely "inadmissiblethat a larger and morepopulous district of Americashould hereafter have less representationthan a smaller and lesspopulous district." Madison joinedin the colloquy by saying that"with regard to the WesternStates he was clear that no unfavorabledistinctions were admissible,either in point of justice orpolicy."IS

746 THE FREEMAN DecemberThe Constitution simply statesthat "New States may be admittedby the Congress into this Union...", followed by some protectionsof the territory within existingstates. The manner of providingfor representation, however,assured that new states would beon a par with the original thirteenwhen they came into the union.The effect of this has been thedissolution of empire by the admissionof new states. In short,the Constitution provided for thetransformation of empire intostates which joined the union asfullfledged members of an expandingUnited States.The state delegations presentand voting in the convention atits close gave unanimous approvalto the Constitution. Only a veryfew individuals refused to signthe handiwork of the convention.The document was submitted tothe Congress, from whom it wasto go to the states which wereasked to hold ratifyingconventions.As the signing was takingplace, Benjamin Franklin madethe last public remarks recordedfor the convention. James Madison.described them this way:Whilst the last members were signingit Doctor Franklin looking towardthe President's Chair, at the back ofwhich a ... sun happened to be painted,observed to a few members nearhim, that Painters had found it difficultto distinguish in their art a risingfron1 a setting sun. I have, saidhe, often and often in the course ofthe Session, and the vicisitudes of myhopes and fears as to its issue, lookedat that behind the President withoutbeing able to tell whether is was risingor setting: But now at length Ihave the happiness to know that it isa rising and not a setting sun.!DAll who would having signed,the convention adjourned sine die.~Next: The Bill of Rights.• FOOTNOTES •1 James Madison, Alexander Hamilton,and John Jay, The Federalist Papers(New Rochelle: Arlington House, n. d.),p. 322. Hereinafter referred to as TheFederalist.:! Ibid., p. 54.:{ Ibid., p. 56.4, James Madison, Notes of Debates inthe Federal Convention of 1787, AdrienneKoch, intro. (Athens, Ohio: Ohio UniversityPress, 1966), p. 653.3 The Federalist, p. 322.6 Richard W. Leopold, et al, eds.,ProbleTfLs in American History (EnglewoodCliffs: Prentice-Hall, 1966), p. 134.7 The Federalist, p. 114.8 See Hamilton's argument in The Fed··eralist #9, for example.n Richard H. Leach, American Federalism(New York: Norton, 1970), p. 2.10 The Federalist, p. 246.11 Leach, op. cit., p. l.I~ The Federalist, p. 242.13 Ibid.14 Elliot's Debates, Bk. I, Vol. 1, p. 422.13 Ibid., Vol. 2, p. 8.Hi Ibid., Vol. 3, p. 87.17 Charles Warren, The Making of theConstitution (New York: Barnes andNoble, 1937), p. 594.18 Ibid., pp. 594-95.In Madison, Notes, p. 659.

'1L1'1APerfect Systenl of Government?LUDWIG VON MISESTHE "SOCIAL ENGINEER" is the reformerwho is prepared to "liquidate"all those who do not fit intohis plan for the arrangement ofhuman affairs. Yet historians andsometimes even victims whom heputs to death are not averse tofinding some extenuating circumstancesfor his massacres orplanned massacres by pointing outthat he was ultimately motivatedby a noble ambition: he wanted toestablish the perfect state of mankind.They assign to him a placein the long line of the designersof utopian schemes.Now it is certainly folly to excusein this way the mass murdersof such sadistic gangsters asStalin and Hitler. But there is nodoubt that many of the mostbloody "liquidators" were guidedby the ideas that inspired fromtime immemorial the attempts ofphilosophers to meditate on a perfectconstitution. Having oncehatched out the design of such anDr. Mises needs no introduction to Freemanreaders. This article is reprinted by permissionfrom The Ultimate Foundation of EconomicScience (Princeton, New Jersey: Van Nostrand,1962) pp. 94-101, now out of print.ideal order, the author is in searchof the man who would establish itby suppressing the opposition ofall those who disagree. In thisvein, Plato was anxious to find atyrant who would use his powerfor the realization of the Platonicideal state. The question whetherother people would like or dislikewhat he himself had in store forthem never occurred to Plato. Itwas an understood thing for himthat the king who turned philosopheror the philosopher who becameking was alone entitled to actand that all other people had, withouta will of their own, to submitto his orders. Seen from the pointof view of the philosopher who isfirmly convinced of his own infallibility,all dissenters appear merelyas stubborn rebels resisting whatwill benefit them.The experience provided by history,especially by that of the lasttwo hundred years, has not shakenthis belief in salvation by tyrannyand the liquidation of dissenters.Many of our contemporaries arefirmly convinced that what isneeded to render all human affairs

748 THE FREEMAN Decemberperfectly satisfactory is brutalsuppression of all "bad" people,Le., of those with whom they disagree.They dream of a perfectsystem of government that - asthey think - would have alreadylong since been realized if these"bad" men, guided by stupidityand selfishness, had not hinderedits establishment.A modern, allegedly scientificschool of reformers rejects theseviolent measures and puts theblame for all that is found wantingin human conditions upon thealleged failure of what is called"political science." The naturalsciences, they say, have advancedconsiderably in the last centuries,and technology provides us almostmonthly with new instrumentsthat render life more agreeable.But "political progress has beennil." The reason is that "politicalscience stood still."l Political scienceought to adopt the methodsof the natural sciences; it shouldno longer waste its time in merespeculations, but should study the"facts." For, as in the natural sciences,the "facts are needed beforethe theory."2One can hardly misconstruemore lamentably every aspect ofhuman conditions. Restricting ourcriticism to the epistemological1 N. C. Parkinson, The Evolution ofPolitical Thought (Boston, 1958), p. 306.2 Ibid., p. 309.problems involved, we have to say:What is today called "political science"is that branch of historythat deals with the history of politicalinstitutions and with the historyof political thought as manifestedin the writings of authorswho disserted about political institutionsand sketched plans fortheir alteration. It is history, andcan as such never provide any"facts" in the sense in which thisterm is used in the experimentalnatural sciences. There is no needto urge the political scientists toassemble all facts from the remotepast and from recent history,falsely labelled "present experience."3Actually they do all thatcan be done in this regard. And itis nonsensical to tell them thatconclusions derived from this materialought "to be tested by experiments."4It is supererogatoryto repeat that the sciences of humanaction cannot make any experiments....That every human action has tobe judged and is judged by itsfruits or results is an old truism.It is a principle with regard towhich the Gospels agree with theoften badly misunderstood teachingsof the utilitarian philosophy.But the crux is that people widelydiffer from one another in theirappraisal of the results. Whato I bid., p. 314.4 Ibid.

1972 A PERFECT SYSTEM OF GOVERNMENT? 749some consider as good or best isoften passionately rejected byothers as entirely bad. The utopiansdid not bother to tell us whatarrangement of affairs of statewould best satisfy their fellowcitizens. They merely expounded'what conditions of the rest ofmankind would be most satisfactoryto themselves. Neither tothem nor to their adepts who triedto realize their schemes did it everoccur that there is a fundamentaldifference between these twothings. The Soviet dictators andtheir retinue think that all is goodin Russia as long as they themselvesare satisfied.But even if for the sake of argumentwe put aside this issue, wehave to emphasize that the conceptof the perfect system of governmentis fallacious and self-contradictory.The Human ConditionWhat elevates man above allother animals is the cognition thatpeaceful cooperation under theprinciple of the division of laboris a better method to preserve lifeand to remove felt uneasiness thanindulging in pitiless biologicalcompetition for a share in thescarce means of subsistence providedby nature. Guided by thisinsight, man aloneamong all livingbeings consciously aims at substitutingsocial cooperation for whatphilosophers have called the stateof nature or bellum omnium contraomnes or the law of the jungle.However, in order to preservepeace, it is, as human beings are,indispensable to be ready to repelby violence any aggression, be iton the part of domestic gangstersor on the part of external foes.Thus, peaceful human cooperation,the prerequisite of prosperity andcivilization, cannot exist withouta social apparatus of coercion andcompulsion, i.e., without a government.The evils of violence, robbery,and murder can be preventedonly by an institution that itself,whenever needed, resorts to thevery methods of acting for theprevention of which it is established.There emerges a distinctionbetween illegal employment of violenceand the legitimate recourseto it. In cognizance of this factsome people have called governrnentan evil, although admittingthat it is a necessary evil. However,what is required to attain anend soughtand considered as beneficialis not an evil in the moralconnotation of this term, but ameans, the price to be paid for it.Yet the fact remains that actionsthat are deemed highly objectionableand criminal when perpetratedby "unauthorized" indi.,.viduals are approved when committedby the "authorities."Government as such is not only

750 THE FREEMAN Decembernot an evil, but the most necessaryand beneficial institution, as withoutit no lasting social cooperationand no civilization could be developedand preserved. It is a meansto cope with an inherent imperfectionof many, perhaps of themajority of all people. If all menwere able to realize that the alternativeto peaceful social cooperationis the renunciation of all thatdistinguishes Homo sapiens fromthe beasts of prey, and if all hadthe moral strength always to actaccordingly, there would not beany need for the establishment ofa social apparatus of coercion andoppression. Not the state is an evil,but the shortcomings of the humanmind and character thatimperatively require the operationof a police power. Government andstate can never be perfect becausethey owe their ra,ison d'etre to theimperfection of man and can attaintheir end, the elimination ofman's innate impulse to violence,only by recourse to violence, thevery thing they are called upon toprevent.The Fight for LibertyIt is a double-edged makeshiftto entrust an individual or a groupof individuals with the authorityto resort to violence. The enticementimplied is too tempting fora human being. The men who areto protect the community againstviolent aggression easily turn intothe most dangerous aggressors.They transgress their mandate.They misuse their power for theoppression of those whom they\vere expected to defend againstoppression. The main politicalproblem is how to prevent thepolice power from becoming tyrannical.This is the meaning of allthe struggles for liberty. The essentialcharacteristic of Westerncivilization that distinguishes itfrom the arrested and petrifiedcivilizations of the East was andis its concern for freedom fromthe state. The history of the West,from the age of the Greek citystate down to the present-day resistanceto socialism, is essentiallythe history of the fight for libertyagainst the encroachments of theofficeholders.A shallow-minded school of socialphilosophers, the anarchists,chose to ignore the matter by suggestinga stateless organizationof mankind. They simply passedover the fact that men are notangels. They were too dull to realizethat in the short run an individualor a group of individualscan certainly further their owninterests at the expense of theirown and all other peoples' long-runinterests. A sQciety that is not preparedto thwart the attacks ofsuch asocial and short-sighted aggressorsis helpless and at the

1972 A PERFECT SYSTEM OF GOVERNMENT? 751mercy of its least intelligent andmost brutal members. While Platofounded his utopia on the hopethat a small group of perfectlywise and morally impeccable philosopherswill be available for thesupreme conduct of affairs, anarchistsimplied that all men withoutany exception will be endowedwith perfect wisdom and moral impeccability.They failed to conceivethat no system of social cooperationcan remove the dilemmabetween a man's or a group's interestsin the short run and thosein the long run.Man's atavistic propensity tobeat into submission all other peoplemanifests itself clearly in thepopularity enjoyed by the socialistscheme. Socialism is totalitarian.The autocrat or the board of autocratsalone is called upon to act.All other men will be deprived ofany discretio:q to choose and to aimat the ends chosen; opponents willbe liquidated. In approving of thisplan, every socialist tacitly impliesthat the dictators, those entrustedwith production management andall government functions, will preciselycomply with his own ideasabout what is desirable and whatundesirable. In deifying the state- if he is an orthodox Marxian,he calls it society - and in assigningto it unlimited power, he deifieshimself and aims at the violentsuppression of all those with whomhe disagrees. The socialist does notsee any problem in the conduct ofpolitical affairs because he caresonly for his own satisfaction anddoes not take into account the possibilitythat a socialist governmentwould proceed in a way he doesnot like.Lost in DetailsThe "political scientists" arefree from the illusions and selfdeceptionthat mar the judgmentof anarchists and socialists. Butbusy with the study of the immensehistorical material, theybecome preoccupied with detail,with the numberless instances ofpetty jealousy, envy, personal ambition,and covetousness displayedby the actors on the political scene.They ascribe the failure of all politicalsystems heretofore tried tothe moral and intellectual weaknessof man. As they see it, thesesystems failed because their satisfactoryfunctioning would haverequired men of moral and intellectualqualities only exceptionally,present in reality. Starting fromthis doctrine, they tried to draftplans for a political order thatcould function automatically, as itwere, and would not be embroiledby the ineptitude and vices of men.The ideal constitution ought tosafeguard a blemishless conductof public affairs in spite of therulers' and the people's corruption

752 THE FREEMAN Decembeorand inefficiency. Those searchingfor such a legal system did notindulge in the illusions of theutopian authors who assumed thatall men or at least a minority ofsuperior men are blameless andefficient. They gloried in their realisticapproach to the problem. Butthey never raised the question howmen tainted by all the shortcomingsinherent in the human charactercould be induced to submitvoluntarily to an order that wouldprevent them from giving vent totheir whims and fancies.However, the main deficiency ofthis allegedly realistic approachto the problem is not this alone.It is to be seen in the illusion thatgovernment, an institution whoseessential function is the employmentof violence, could be operatedaccording to the principles ofmorality that condemn peremptorilythe recource to violence. Governmentis beating into submission,imprisoning,and killing.People may be prone to forget itbecause the law-abiding citizenmeekly submits to the orders ofthe authorities so as to avoid punishment.But the jurists are morerealistic and call a law to whichno sanction is attached an imperfectlaw. The authority of manmadelaw is entirely due to theweapons of the constables whoenforce obedience to its provisions.Nothing of what is to be~aid about the necessity of governmentalaction and the benefitsderived from it can remove ormitigate the suffering of thosewho are languishing in prisons.No reform can render perfectlysatisfactory the operation of aninstitution the essential activity ofwhich consists in inflicting pain.Responsibility for the failure todiscover a perfect system of governmentdoes not rest with thealleged backwardness of what iscalled political science. If menwere perfect, there would not beany need for government. Withimperfect men no system of governmentcould function satisfactorily.The· eminence of man consistsin his power to choose ends andto resort to means for the attainmentof the ends chosen; the activitiesof government aim at restrictingthis discretion of the individuals.Every man aims atavoiding what causes him pain;the activities of government ultimatelyconsist in the infliction ofpain. All. great achievements ofmankind were· the product of aspontaneous effort on the part ofindividuals; government substitutescoercion .for voluntary action.It is true, government is indispensablebecause men are notfaultless. But designed to copewith some aspects of human imperfection,·itcan never be perfect.~

A REVIEWER'S NOTEBOOKJOHN CHAMBERLAINThe Essential Paul Elmer MoreALONG toward the end of the NineteenTwenties, the philosophy ofhumanism - it was called the NewHumanism then, just to make itfashionable - had a short-lived revivalin literary New York. TheNew Humanism set its face againstmost of the prevailing 'isms of theday, against humanitarianism, socialism,liberalism, anarchism,progressivism or whatever. Naturallyits enemies vastly outnumberedits friends, but for a briefperiod the New Humanism had itsmagazine outlets (Seward Collins'sBookman and, to a limited extent,Lincoln Kirstein's Hound andHorn). For one excited year IrvingBabbitt, the Harvard don whohad made an arch-devil out ofRousseau, and Paul Elmer More,a legendary figure who had beenliterary editor of The Nation beforeWorld War I (what a differentNation it had been then!),were the subject of thousands ofarguments in Greenwich Village.Babbitt and More were the Oldand New Testaments of the NewHumanist movement, and as wesearched the texts (Babbitt'sRousseau and Romanticism andMore's Shelburne Essays) wefound horrifying things. One ofour group, C. Hartley Grattan, gotup a book, The Critique of Humanism,to which we all contributedscornful papers. My own was adefense of the modern novelagainst New Humanist critics.We hated Paul Elmer More witha special passion for his defenseof property. Had he not said that,"looking at the larger good ofsociety, we may say that the dollaris more than the man, and thatthe rights of property are moreimportant than the right to life"?(The italics were More's.) Morehad written the infuriating wordsin 1915 in response to SocialistMorris Hilquit's attack on the

754 THE FREEMAN DecemberRockefellers for their alleged hiringof "criminals and thugs toshoot the strikers" in the coalfields of Colorado. Rememberingthe recent executions of Sacco andVanzetti, whom we considered victimsof the propertied classes ofMassachusetts, we could only concludethat Paul Elmer More wasa cold-blooded enemy of humanitywho deserved all that he got in ournow-forgotten Critique of Humanism.New Wars to Wage in J929The quarrel over the New H u­manism was at the height whenthe stock market crashed in 1929.But as the depression snowballed,with the bread lines lengthening,literary New York soon turned tomore immediate concerns. Babbittand More were forgotten; thenewer quarrels were over HowardScott's Technocracy, Rexford Tugwell'sBrain Trusters and theStalin-Trotsky split in the SovietUnion. The intellectuals of theThirties went off in several sociologicaldirections, some of themto work for writers' projects onthe WPA, and the big tempestover the New Humanism blew nomore. Since then the works ofPaul Elmer More have gone out ofprint, and only an occasional RussellKirk has seen fit to talk aboutMore as though he were a livingauthor.The republication of a selectionfrom More's writings in The EssentialPaul Elmer More, editedwith an introduction and notes byByron C. Lambert (ArlingtonHouse, $12.95), is an eye openerafter all these years. Rereadingthat once-hated essay by More indefense of property, I am struckby its subtlety. What seemed, in1929, to be a crass defense of richmen was actually nothing of thekind. More was championing therights of property not particularlybecause he cared for the Rockefellers,but because he believed thatthe right to life could not be secureif property were not itselfsecure. More had written his essaybefore Lenin had taken over inRussia and rendered life precariousfor generations to come. Withtremendous foresight More questionedthat "community of ownership"would "eliminate the greedand injustice of civilized life." Hehad nothing to go on here beyondhis observation that socialistswere "notoriously quarrelsome"among themselves, yet he turnedout to be eminently correct. Lookingback over the long past,. Morefound "a convincing uniformity inthe way in which wealth and civilizationhave always gone together,and in the fact that that wealthhas accumulated only when privateproperty was secure."

1972 THE ESSENTIAL PAUL ELMER MORE 755In the Worker's InterestIt was in the interests of theworking men that More defendedthe property relations of the capitalistorder. He had noticed, hesaid, that nearly all that makeslife more significant to men thanit is to beasts is associated withpossessions. This is true "withproperty, all the way from thefood we share with the beasts, tothe most refined products of thehuman imagination." More wasnot sentimental about the workers,but he argued that those who werecareless about ownership wouldnot see to it that "labour shallreceive the recompense it has bargainedfor" and that "the labourer,as every other man, shall besecure in the possession of whathe has received." As for the oldcanard that the desire for propertyencourages "materialism," Moresaid that the sure way to fosterthe spirit of materialism is tounsettle the material basis of sociallife. "The mind," he argued,"will be free to enlarge itself inimmaterial interests only whenthat material basis is secure, andwithout a certain degree of suchsecurity a man must be anxiousover material things and preponderantlyconcerned with them."All this, in 1972, sounds mostreasonable. What More was sayingas far back as 1915 is that theproperty right is a human right,and that a man without possessionsis inevitably at the mercy ofothers, and especially at the mercyof the political bureaucrats whorun the State. In 1929 most of uswere too stupid to see the validityof More's reasoning.Training for CivilizationIn a foreword to ProfessorLambert's selections of "The EssentialPaul Elmer More," RussellKirk writes that "if some of usare to fight our way to shore, weneed More's chart." The chart ishere, for the Lambert selectionsgive us More in all his catholicity.He was immensely learned inGreek, Latin, Sanskrit and severalmodern languages, yet he hatedthe pedantry that would shun ideasin order to concentrate on suchthings as linguistics and archaeology.He thought Greek and Latinsupplied a good discipline, but anequally important reason forstudying the classics was to learnsomething about the rise and fallof civilizations. It was "a virilescholarship of ideas" that he wasafter.More wrote long before we hada "counter-culture," or before themodern theory of "relevance" hadbeen elaborated. But his essay on"Natural Aristocracy" could standfor a good commentary on thecultural and educational trends ofthe Nineteen Sixties. Concentra-

756 THE FREEMAN Decembertion on currently topical studies,he said, "results in isolating thestudent from the great inheritanceof the past; the frequent habit ofdragging him through the slumsof sociology, instead of makinghim at home in the society of thenoble dead, debauches his mindwith a flabby, or inflames it witha fanatic, humanitarianism. Hecomes out of college ... a nouveauintellectual, bearing the same relationto the man of genuine educationas the nouveau riche to theman of inherited manners."More, of course, had not heardabout "relevance." But he knewall about cant, and he had theanswer to the Sixties way back in1915.ENTERPRISE DENIED: Originsof the Decline of American Railroads,1897-1917 by Albro Martin(New York: Columbia UniversityPress, 1971, $10.95, 402 pp.)Reviewed by Joseph M. CanfieldAMERICA grew at a phenomenalrate during the first decade of thetwentieth century, and the railroadstried to expand to meet thechallenge. This era producedPennsylvania Station and GrandCentral Terminal in New Yorkand Union Station in Washington,conspicuous evidence of the desireof the railroads for expansion.Railroad buffs can show, fromtheir own photo collections, orfrom the pages of a plethora ofpublished railroad histories, dramaticevidence of the increase insize and power of locomotives inthis period. But rolling stock iseasy to acquire, even when capitalf or fixed way and structures isdifficult to obtain. President Elliottof the Northern Pacific Railwayobserved, in 1907, that theroads were "attempting to force athree inch stream through a oneinch nozzle." The congestion ofthe railroads was a harbinger ofthings to come.The warning sounded by Elliottand other railroad leaders wasn'theeded. Martin declares, and demonstrateshis point statistically,that the capital needed for expansionof the railroad plant was far,far short of what was needed tocope with expanding -traffic. Histable shows that the growth 'capitalavailable in certain years, beforeWorld War I, came to aslittle as a fourth of the amountactually required to handle thetraffic being thrust upon the railroads.In those "Golden Years" theprice index rose rapidly. Everythingthat the railroads boughtcost more. Labor demanded-andreceived - substantial -wage increases~.But under the regulatoryphilosophy prevailing, the railroadswere not permitted to raiserates at all.

1972 OTHER BOOKS 757Railroad regulation was basedon a philosophy, called by Martin"Archaic Progressivism." It hadseveral assumptions, all nowproved to be substantially invalid.One was that the railroads wereovercapitalized. This supposedlymade the shippers pay excessiverates in order to give the securityholders undeserved earnings. Thefallacy was ultimately exploded,as a result of the ICC ordered valuationof the railroads, but·it isstill believed in many sectors ofthe community and still taught inmany schools.Another fallacy was the conceptof a "reasonable rate." A freightrate is a price for moving goods,nothing more. Hopefully, it wouldpermit satisfactory recompense tothe carrier, covering the·cost ofservice and a return on investment.At the same time it mustbe at a level that will permit goodsto move. Somehow, the Progressivesin Congress - and elsewhere- believed in a concept of "reasonableness"substantially independentof market factors inherent inthe setting of any other price.This undefined and undefinableconcept buttressed the determinationof leaders in the "ProgressiveEra" to deny the railroads increasesin rates.Three times in the Roosevelt­Taft-Wilson period, the railroadswent to the Interstate CommerceCommission for general acrossthe-boardincreases in freightrates. The chapters in which Martindescribes these exercises infutility are entitled, "The FirstDenial," "The Second Denial,""The Third Denial." The philosophyof the times, the prevailingpolitical climate, the laws creatingthe Commission and directing itsactivities doubtless left any otherkind of decision outside the realmof probability; the parties involvedreally didn't know how theeconomy worked. They appearedquite unaware of how tinkeringat one point in the economic systemcould produce unwanted resultsin other areas. Even the railroadofficers, expert railroaders,were quite unaware ·of the ideasprevailing outside their own group- and how to contend with them."Defeat of the young by the oldand silly." This quotation fromone of Vachel Lindsay's poems ap""pears at the head of the chapter"Third Denial." The quotation isappropriate in view of the succeedinggenerations which havehad to contend with inadequatetransportation. The men who"'starred" in that era in placingthe regulatory shackles on therailroads may well be described as"old" and/or "silly." Typicallythey were men whose thinking onrailroads had congealed in theconditions of the 1870's, with rem-

758 THE FREEMAN Decemberedies based on interpretationswhich probably weren't valid eventhen. They were men of advancingyears who clung to ideas whichhad lost contact with the realworld they were supposed to belegislating for.Robert M. LaFollette foughtvaliantly as late as 1917 to preventany rate increase. An increasedidn't fit in with his ideasof Commission regulation. La­Follette's reputation was based onhis earlier career in Wisconsinwhere his Wisconsin RailroadCommission was considered amodel of the genre. Elsewhere ithas been shown that this Commissioncame close to depriving Milwaukeeof both power and transportationa few years later.Theodore Roosevelt's blockingof E. H. Harriman's control andrevitalization of the Alton Railroadserved only to provide firstratepublicity for an exceptionalcase of looting a railroad. And itkept the Alton from its full potentialin the railroad system untilafter World War II.William Howard Taft succeededin alienating every shade of opinionon the railroad question. Buthe proudly took credit for theParcel Post Law. This forced therailroads to haul packages as mailat much lower rates than they hadreceived for similar packageswhen handled as express - notvery helpful when earnings werealready jeopardized and the roadsthirsting for capital.Louis D. Brandeis, while supposedlyprotecting the "public,"played major roles in all three"Denials." In fact, he made thehearings pretty much his show.He cleverly trapped railroad officialsand twisted the effect of theirtestimony, while refutationsdidn't get the publicity his presentationreceived. He was on theSupreme Court when the AdamsonAct (8-hour railroad day)came before that body. He servedneither the railroads nor the public.The 8-hour day crisis as it builtup under Wilson demonstrates thesilliness of the time, the age, themovement. Martin describes a dramaticscene at the White Housewhere Wilson had summonedthirty railroad· presidents:If the railroads would cooperate hewas willing to do all he could to getthe ICC to grant rate relief, providedthat the eight-hour commissionrecommended it. Pointing his fingerat the. railroad presidents, he declared,"If a strike comes, the publicwill know where the responsibilityrests. It will not be upon me."The crisis had been forced uponthe railroads by denying themnormal economic freedom. Placingthe entire onus for a strike on therailroad presidents was not in ac-

1972 OTHER BOOKS 759cord with the moral principles ofour American tradition. It wasreprehensible to order the railroadsto increase their costs (byshortening the working day) withoutpermitting commensurate rateincreases by grant of the InterstateCommerce Commission. IfWilson could order the railroadmen, he could instruct the Commission.He didn't choose to giveequal treatment.In the winter following Wilson's"salon," the nation paid dearly forthe maltreatment of its railroads.The incredible congestion at theports, the car shortages, the shortagesof necessities, the skyrocketingprices, the approach to civilrights were among the end resultsof following policies which did notallow the railroads to operate in afree market.~ THE GROWTH OF ECONOMICTHOUGHT by Henry W. Spiegel(Englewood Cliffs, New Jersey:Prentice-Hall, 1971), 816 pp.,$12.95.~ THE EVOLUTION OF ECO­NOMIC THOUGHT by W. E.Kuhn (2nd ed.; Cincinnati:Southwestern, 1970), 500 pp.,$10.20.Reviewed by Gary NorthTHERE ARE a lot of textbooks tracingthe development of economicthought. Too many of them, infact. Sometimes one of these canbecome a true classic, such asJoseph Schumpeter's History ofEconomic Analysis, but most ofthem gather dust on the shelves,for good reason. They are essentiallyreference books and torturesinflicted on undergraduate students.The two books under review are,from the point of view of the freemarket position, quite serviceable.Spiegel's is more clearly a referencebook, going from school ofthought to school of thought,. scholar by scholar. His is a summary,a descriptive work, withvery little critical analysis. But hegives a fair presentation of theadvent of marginalism and thecontributions of the AustrianSchool. The book contains a superbannotated bibliography, 130 pageslong. It is a kind of miniature encyclopedia,and for quick referencefor refresher purposes, Spiegel'sis an ideal guide.Kuhn's book is more technicaland analytical. In contrast to Spiegel'sbrief sketches of the contributionsof many economists,Kuhn has focused on key membersof various schools of thought, thusenabling him to present more completedescriptions of their contributions.The first half of thebook is arranged in terms of thevarious economic schools: "FromMenger to Bohm-Bawerk," "From

760 THE FREEMAN DecemberMarshall to Wicksell," "Keynes,"and so forth. The second half isdevoted to important areas of inquiry,such as "Monetary andBanking Theory," "InternationalTrade Theory," and "Business CycleTheory." At the end of eachchapter he adds a helpful biographicalsection, although thesketches are brief.By avoiding the pitfalls associatedwith any single form of organization,whether purely chronological,topical, or biographical,Kuhn has produced a textbookthat deals adequately with bothhistory and issues, people andideas. The careful student cancome away from the book with abetter chance of rememberingsome of the data jammed into thechapters.So long as the reader understandsthe limitations on textbooks- that they should be used to introduceus to the key primarysources and to refresh our memoriesonce we have read the basicoriginal materials - an investmentin either or both books could payoff. Next time, you can look upthat seemingly obscure footnoteand find out why the author·botheredto make reference to somelong-dead economist. It will helpus to understand why Keynes saidthat the intellectuals and politiciansof any era are quite likelyto be mouthing the phrases ofsome "academic scribbler of a fewyears back."~ AN ECONOMIST'S PROTESTby Milton Friedman (22 AppletonPl., GI en Ridge, N. J.:Thomas Horton & Co., 1972), 219pp., $2.95.This paperback collection ofProf. Friedman's Newsweek columnsis a handy. reference guidefor those who want a simplified,quick introduction to the author'scontroversial opinions. Sections on"Nixon Economics," "MonetaryPolicy," "A Volunteer Army," "SocialSecurity and Welfare," "Governmentand the Interests," and"Government and Education" presentnumerous articles that havebeen plaguing "liberals" over thepast six years. For example, thesection on "Monopoly" containsthree essays, two of which assailthe Post Office, and the third onecriticizes governmental regulationand state ownership in general. ~

THE FREEMAN - Volume 22, January-December 1972Prepared by BETTINA BIEN GREAVES of the Foundation staffNOTE: In page references, the number preL:eding the colon designates the month, those followingrefer to pages. All articles have at least three entries-author, subject, and title--except ina few cases when title clearly indicates subject matter. Books reviewed are listed on page 768.ABORTION: a metaphysical approach(T. L. Johnson) 8:498-505ACADEMIC freedomEducational dilemma, The (Dozer)6:359-365ADVERTISING (Kinner) 9:515-528ADVERTISINGEconomic-power syndrome, The (Petro)4: 212-225AGELESS faith for a vacillating America(Bearce) 10:586-590AGRICULTURAL revolution, new (Mueller)5:259-264AMERICAN Competitivism: cause or result?(Heiner) 3:164-167AMERICAN economy is NOT depressionproof,The (Sennholz) 11: 666-673AMERICAN Republic, founding of. SeeCarsonANARCHYPerfect system of government? A (Mises)12:747-752ANTICAPITALISM, anti-business ideologyAre we Marxians now? (Sennholz)8:451-460Business baiting-1972 style (Rukeyser)6:367-371Economic-power syndrome, The (Petro)4: 212-225Objectivity and accountability: a one-waystreet (Hardesty) 4: 195-204Roots of "Anticapitalism," The( Kuehnelt-Leddihn) 11 : 657·665"ANTIPRENEURS"Objectivity and accountability: a one-waystreet (Hardesty) 4: 195-204ARE we Marxians now? (Sennholz)8:451-460ARE you getting your money's worth?(Curtiss) 12:727-733AARGENTINE inflation, The (Benegas Lynch)12:715-717BBACK to basics - fable of the berry pickers(Paton) 12:707-714BALANCE of trade/paymentsFounding of the American Republic, The(Carson) #6, 1:42-54In search· of a new monetary order(Sennholz) 1: 3-11See also Money; TradeBALLOONING welfare state, The (Hazlitt)4:226-231BARGER, Melvin D.See Book reviews (Voorhees)BASTIAT, Frederic - ideas ofOn re-reading The Law (Colvard) 2:76-81BEARCE, Robert G.Ageless faith for a vacillating America10:586-590BENEGAS· Lynch, Alberto, Jr.Argentine inflation, The. 12: 715-717BLOOD from turnips (Elniff) 6:372-377BREESE, Edward Y.Vote for myself, A. 10: 584-585BROWNFELD, Allan C.See Book reviews (Edwards)BUSINESS baiting - 1972 style (Rukeyser)6:367-371CAHILL, John P.Vouchers: government control of privateschools? 7: 397-400CAN we sustain prosperity? (Paton)1: 33-41CANFIELD, Joseph M. See Book reviews(Martin)c761

762 THE FREEMAN DecemberCAPITAL, capitalismAre we Marxians now? (Sennholz)8: 451-460Cure for poverty, The (Hazlitt) 6: 355-358Economics: a branch of moral philosophy(Read) 1: 22-27Why can't we have both? (Hockman)2: 67-73See also Free MarketCARSON, Clarence B.Founding of the American Republic, The:(6) Mercantile impasse, The. 1: 42-54(7) First American crisis, The:1763-1766. 2: 112-124(8) British acts become intolerable.3: 147-159(9) Prelude to independence. 4: 232-244( 10) Declaration of Independence, The.5: 273-283(11) War for independence, The.6: 341-354(12) Scourge of inflation, The. 7: 419-433(13) American triumph, The. 8: 471-485(14) Freeing the individual. 9: 550-561(15) Critical period, The. 10: 616-627( 16) Making the Constitution. 11:684-699(17) Principles of the Constitution.12: 734-746CAUSE and effect (Yankus) 9:545-549CAUSES of inflation, The (Sennholz)5 :284-292CHAMBERLAIN, John. See Book reviews.CITY/local government5° above zero (Paton) 10:612-615"I was a slumlord . . ." (Frank) 6: 365-366Zoning laws: case for repeal, The (Mandel)7: 437-443CIVILIZATION, basis ofSix ideas to keep us human (Opitz) #1,11: 643-651We and the third world: a note of Christiandissent (Kuehnelt-Leddihn) 2: 85-94CLOSER look at gold, A (C. E. Weber)9: 533-544COLESON, EdwardCreeping capitalism: is free enterprisecoming back? 10:595-611When men appeal from tyranny to God.6 :323-335COLLEGES/universitiesEducational dilemma, The (Dozer)6: 359-365COLONIALISMAre we Marxians now? (Sennholz)8: 451-460We and the" third world: a note of Christiandissent (Kuehnelt-Leddihn) 2: 85-94COLVARD, Ray L.On re-reading The Law. 2:76-81To be free and equal. 5: 293-296COMMUNAL societiesI visit a managed society (0. Johnson)11: 676-683Utopia: a dream into nightmare (Winston)3: 131-139COMPETITIONAdvertising (Kirzner) 9: 515-528American competitivism: cause or result'?(Heiner) 3:164-167CONSUMER sovereignty vs. consumerprotectionAre you getting your money's worth?(Curtiss) 12: 727-733Economic-power syndrome, The (Petro)4: 212-225New agricultural revolution, The (Mueller)5: 259-264Productivity of freedom, The (Harriss)9: 562-569CONFLICT of interests and "classes"Are we Marxians now? (Sennholz)8: 451-460Status: end product of welfare(Shumiatcher) 5:297-315COOLEY, Oscar W.Pollution and property. 6: 336-340COONEY, RONALDNatural rights. 10: 628-631COOPERATION, social and the marketAmerican competitivism: cause or result?(Heiner) 3:164-167Perfect system of government? A (Mises)12:747-752CREEPING capitalism: is free enterprisecoming back? (Coleson) 10:595-611CRIMEAre you getting your money's worth?(Curtiss) 12: 727-733Population question, The (J. A. Weber)10: 579-583CULLINANE, KevinPine tree shilling, The. 7: 434-436CURE for poverty, The (Hazlitt) 6: 355-358CURTISS, W. M.Are you getting your money's worth?12: 727-733DEMERS, Robert W.Digging ditches. 3: 140-141DIETZE, Gottfried. See Book reviews(McClellan)DIGGING ditches (Demers) 3: 140-141DISASTER reliefFlood relief (Poirot) 10:591-594DOZER, Donald M.Educational dilemma, The. 6: 359-365D

1972 INDEX 763DRUGS, narcoticsAre you getting your money's worth?(Curtiss) 12:727-733EECONOMIC depression, boom-bust cycleAmerican economy is NOT depressionproof,The (Sennholz) 11: 666-673.ECONOMIC development/progress/productionBack to basics - fable of the berry pickers(Paton) 12:707-714Can we sustain prosperity? (Paton)1: 33-41ECONOMIC-power syndrome, The (Petro)4:212-225ECONOMICS: a branch of moral philosophy(Read) 1: 22-27EDUCATION, governmental vs. privateOn re-reading The Law (Colvard) 2:76-81Vouchers: government control of privateschools? (Cahill) 7:397-400You rascal, you!, (Read) 11: 652-656EDUCATIONAL dilemma, The (Dozer)6: 359-365ELNIFF, Terrill I.Blood from turnips. 6: 372-377ENERGY: the ultimate raw material (Wei)8 :486-496ENTREPRENEUR, role ofAdvertising (Kirzner) 9: 515-528ENVYOn appraising envy (Hazlitt) 3: 142-146Roots of "anticapitalism," The(Kuehnelt-Lerldihn) 11: 657-665FFEDERAL Reserve System, The (Sennholz)4: 245-253FEDERAL Trade CommissionObjectivity and accountability: a one-waystreet (Hardesty) 4: 195-2045° above zero (Paton) 10:612-615FIXED exchange rates and monetary crises(North) 3: 168-185FLOOD relief (Poirot) 10: 591-594FOUNDING of the American Republic, The.See CarsonFRANCKOWIAK, L~nudHeads will roll. 10:632-634FRANK, George'"I was a slumlord..." 6: 365-366FREE enterprise and the Russians(Kuehnelt-Leddihn) 8:461-470FREE giving vs. the welfare state (La Dow)2:109-111FREE market, free enterpriseAdvertising (Kirzner) 9: 515-528Creeping capitalism: is free enterprisecoming back? (Coleson) 10: 595-611Roots of "anticapitalism," The(Kuehnelt-Leddihn) 11: 657-665Status: end product of welfare(Shumiatcher) 5:297-315See also CapitalFREEDOM and the individualAgeless faith for a vacillating America(Bearce) 10: 586-590Cause and effect (Yankus) 9: 545-549Productivity of freedom, The (Harriss)9: 562-569Six ideas to keep us human (Opitz) #2,12: 718-726To be free and equal (Colvard) 5: 293-296When men appeal from tyranny to God(Coleson) 6: 323-335FRIEDMAN, MiltonMorality and controls. 1: 28-32Natural history of governmentalintervention, The. 8: 497FRIEDMAN, Milton-views on moneyAmerican economy is NOT depression-proof,The (Sennholz) 11: 666-673FROM price control to Valley Forge,1777-1778 (Greaves) 2: 81-84GGAMBLING, lotteryAre you getting your money's worth?(Curtiss) 12: 727-733GOVERNMENT, nature and role ofFounding of the American Republic, The(Carson) #13, 8:471-485; #14, 9:550-561;#15, 10:616-627;#17, 12:734-746Heads will roll (Franckowiak) 10: 632-634Morality and controls (Friedman) 1: 28-32Natural rights (Cooney) 10:628-631Perfect system of government? A (Mises)12:747-752Population question, The (J. A. Weber)10: 579-583Productivity of freedom, The (Harriss)9: 562-569Rights and pseudo rights (Lindl) 2: 73-75Status: end product of welfare(Shumiatcher) 5: 297-315GOVERNMENT interventionAmerican economy is NOT depression-proof,The (Sennholz) 11:666-673Are we Marxians now? (Sennholz)8: 451-460Are you getting your money's worth?(Curtiss) 12:727-733Natural history of governmentalintervention, The (Friedman) 8:497

764 THE FREEMAN DecemberNature of modern warfare, The (Osterfeld)4: 205-211Ownership: free but not cheap (North)7:401-414Power to the people: the mask of despotism(Keyser) 7:387-396Why can't we have both? (Hockman)2: 67-73GREAVES, Percy L., Jr.From price control to Valley Forge,1777-1778. 2:81-84Government intervention (continued)HARDESTY, C. Howard, Jr.Objectivity and accountability: a one-waystreet. 4: 195-204HARRISS, C. LowellProductivity of freedom, The. 9: 562-569HAZLITT, HenryBallooning welfare state, The. 4: 226-231Cure for poverty, The. 6: 355-358On appeasing envy. 3: 142-146Should we divide the wealth? 2: 100-108Welfarism gone wild. 5: 265-272Why some are poorer. 1: 15-21See also Book reviews (Hutt)HEADS will roll (Franckowiak) 10:632-634HEINER, RonAmerican competitivism: cause or result?3: 164-167HISTORY, historiographyFounding of the American Republic, The(Carson) #14,9:550-561HOCKMAN, JeanWhy can't we have both? 2: 67-73HUMANITY, essence ofSix ideas to keep us human (Opitz) #1,11: 643-651I VISIT a managed society (0. Johnson)11: 676-683"I WAS a slumlord ..." (Frank) 6:365-366IDEAS/ideals/ideologiesAmerican competitivism: cause or result?(Heiner) 3:164-167Are we Marxians now? (Sennholz)8:451-460Creeping capitalism: Is free enterprisecoming back? (Coleson) 10: 595-611Economic-power syndrome, The (Petro)4:212-225Off the beaten track (Read) 7:415-418Roots of "anticapitalism," The (Kuehnelt­Leddihn) 11:657-665HIdeas (continued)Six ideas to keep us human (Opitz) #1,11: 643-651When men appeal from tyranny to God(Coleson) 6: 323-335IN SEARCH of a new monetary order(Sennholz) 1:3-11INCENTIVE, individualBusiness baiting-1972 style (Rukeyser)6: 367-371Can we sustain prosperity? (Paton) 1: 33-41Should we divide the wealth? (Hazlitt)2: 100-108Why some are poorer (Hazlitt) 1:15-21INDIVIDUAL freedom/rights/responsibilityAbortion: a metaphysical approach (T. L.Johnson) 8: 498-505Founding of the American Republic, The(Carson) #7, 2:112-124; #9, 4:232-244;#14, 9: 550-561Heads will roll (Franckowiak) 10: 632-634Modern volunteer army, The (Kramer)2: 95-99Natural rights (Cooney) 10: 628-631Six ideas to keep us human (Opitz) #2,12: 718-726Status: end product of welfare(Shumiatcher) 5:297-315To be free and equal (Colvard) 5: 293-296JOHNSON, OrienI visit a managed society. 11: 676-683JOHNSON, Thomas L.Abortion: a metaphysical approach.8: 498-505JKKEYNES, John M.-ideas ofAmerican economy is NOT depression-proofThe (Sennholz) 11: 666-673KEYSER, Carl A.Power to the people: the mask of despotism7:387-396KIRZNER, Israel M.Advertising. 9: 515-528KRAMER, David J.Modern volunteer army, The. 2: 95-99KUEHNELT-LEDDIHN, Erik vonFree enterprise and the Russians. 8:461-47lRoots of "anticapitalism," The. 11: 657-661We and the third world: a note of Christialdissent. 2: 85-94LLA DOW, Charles R.Free giving vs. the welfare state. 2: 109-11

1972 INDEX 765LABOR, wagesBallooning welfare state, The (Hazlitt)4:226-231What do you have again"st the poor? (Read)9: 528-532LAND, ownership and use ofOwnership: free but not cheap (North)7: 401-414Should we divide the wealth? (Hazlitt)2: 100-108Zoning laws: case for repeal, The (Mandel)7 :437-443LEGAL tender: sellers beware (Poirot)1:12-14LINDL, John D.Rights and pseudo rights. 2: 73-75MMALZ, Allan. See Book reviews (Hospers)MANAGED society, I visit (0. Johnson)11: 676-683MANDEL, David J.Zoning laws: the case for repeal. 7:437-443MARGINAL producer, who is the? (Paton)3: 160-163MARX, Karl - ideas ofAre we Marxians now? (Sennholz)8:451-460MATERIALISM/behaviorism/environmentalismSix ideas to keep us human (Opitz) #1,11: 643-651;#2, 12: 718-726MERCANTILISMCreeping capitalism: is free enterprisecoming back? (Coleson) 10:595-611Founding of the American Republic, The(Carson) #6, 1: 42-54METHODOLOGY, libertarianEconomics: a branch of moral philosophy( Read) 1:22-27Off the beaten track (Read) 7:415-418What do you have against the poor? (Read)9: 528-532MISES, Ludwig vonPerfect system of government? A. 12:747-752MISES, Ludwig von - ideas ofAmerican competitivism: cause or result?(Heiner) 3: 164-167Economic-power syndrome, The (Petro)4: 212-225Ownership: free but not cheap (North)7: 401-414See also Book reviews (Toward Liberty)MODERN volunteer army, The (Kramer)2: 95-99MONEY, credit and inflationAmerican economy is NOT depression-proof,The (Sennholz) 11:666-673Argentine inflation, The (Benegas Lynch)12:715-717Blood from turnips (Elniff) 6: 372-377Causes of inflation, The (Sennholz)5: 284-292Closer look at gold, A (C. E. Weber)9: 533-544Federal Reserve System, The (Sennholz)4 :245-253Fixed exchange rates and monetary crises(North) 3:168-185Founding of the American Republic, The(Carson) #12,7:419-433In search of a new monetary order(Sennholz) 1: 3-11Legal tender: sellers beware (Poirot)1: 12-14Pine tree shilling, The (Cullinane) 7: 434-436Social inflation (Poirot) 11:674-675MORALITY and controls (Friedman) 1: 28-32MORALS, morality. See ReligionMUELLER, George B.New agricultural revolution, The. 5:259-264NNATIONALISM and aggressionNature of modern warfare, The (Osterfeld)4: 205-211NATURAL history of governmentalintervention, The (Friedman) 8:497NATURAL RIGHTS (Cooney) 10:628-631NATURE of modern warfare, The (Osterfeld)4: 205-211NEGATIVE income taxShould we divide the wealth? (Hazlitt)2: 100-108NEW agricultural revolution, The (Mueller)5 :259-264NORTH, GaryFixed exchange rates and monetary crises.3: 168-185Ownership: free but not cheap. 7: 401-414See also Book reviews (Goldman; Kuhn;Sanborn; Spiegel)oOBJECTIVITY and accountability: a one-waystreet (Hardesty) 4: 195-204OFF the beaten track (Read) 7:415-418ON appeasing envy (Hazlitt) 3: 142-146ON re-reading The Law (Colvard) 2: 76-81OPITZ, Edmund A.Six ideas to keep us human, #1, 11: 643-651;#2, 12: 718-726See also Book reviews (Andelson; Halle)

766 THE FREEMAN DecemberOSTERFELD, DavidNature of modern warfare, The. 4: 205-211OWNERSHIP: free but not cheap (North)7: 401-414pPATON, W. A.Back to basics - fable of the berry pickers.12: 707-714Can we sustain prosperity? 1: 33-4150 above zero. 10: 612-615Who is the marginal producer? 3: 160-163PERFECT system of government? A (Mises)12: 747-752PETRO, SylvesterEconomic-power syndrome, The. 4: 212-225PINE tree shilling, The (Cullinane) 7: 434-436POIROT, Paul L.Flood relief. 10: 591-594Legal tender: sellers beware. 1: 12-14Social inflation. 11: 674-675POLLUTION and the environmentEnergy: the ultimate raw material (Wei)8: 486-496Population question, The (J. A. Weber)10:579-583POLLUTION and property (Cooley) 6: 336-340POPULATION question, The (J. A. Weber)10: 579-583POVERTY - government programsCreeping capitalism: is free enterprisecoming back? (Coleson) 10: 595-611Cure for poverty, The (Hazlitt) 6: 355-358Should we divide the wealth? (Hazlitt)2: 100-108Welfarism gone wild (Hazlitt) 5: 265-272What do you have against the poor? (Read)9: 528-532Why some are poorer (Hazlitt) 1: 15-21POWER, fuel supplies - production and useEnergy: the ultimate raw material (Wei)8: 486-496Objectivity and accountability: a one-waystreet (Hardesty) 4: 195-204POWER - political vs. economicEconomic-power syndrome, The (Petro)4: 212-225POWER to the people: the mask of despotism(Keyser) 7:387-396PRICE and wage controlsFrom price control to Valley Forge,1777-1778 (Greaves) 2:81-84Morality and controls (Friedman) 1: 28-32PRIVA TE propertyOwnership: free but not cheap (North)7: 401-414Pollution and property (Cooley) 6: 336-340Zoning laws: case for repeal, The (Mandel)7: 437-443PRIVATE schools, government control of:Vouchers ( Cahill) 7: 397-400PRODUCTIVITY of freedom, The (Harriss)9: 562-569PROSPERITY, can we sustain? (Paton)1: 33-41RREAD, Leonard E.Economics: a branch of moral philosophy.1: 22-27Off the beaten track. 7:415-418What do you have against the poor?9: 528-532You rascal, you! 11: 652-656RELIGIOUS and moral valuesAgeless faith for a vacillating America(Bearce) 10: 586-590Founding of the American Republic, The(Carson) #14, 9: 550-561Roots of "anticapitalism," The(Kuehnelt-Leddihn) 11: 657-665Six ideas to keep us human (Opitz) #2,12: 718-726We and the third world: a note of Christiandissent (Kuehnelt-Leddihn) 2: 85-94When men appeal from tyranny to God(Coleson) 6: 323-335RENT control"I was a slumlord ..." (Frank) 6: 365-366REPUBLIC, definedFounding of the American Republic, The(Carson) #17, 12: 734-746REVOLUTION, causes ofFounding of the American Republic, The(Carson) #10, 5: 273-283;#11, 6: 341-354On appeasing envy (Hazlitt) 3: 142-146RESPONSIBILITY, individualSix ideas to keep us human (Opitz) #2,12: 718-726Vote for myself, A (Breese) 10:584-585RIGHTS and pseudo rights (Lindl) 2: 73-75ROGERS, Tommy W. See Book reviews(Leoni; Peterson; Rothbard)ROOTS of "anticapitalism," The(Kuehnelt-Leddihn) 11: 657-665RUKEYSER, Merryle StanleyBusiness baiting - 1972 style. 6: 367-371RUSSIANS, free enterprise and(Kuehnelt-Leddihn) 8:461-470SAN QUENTINI visit a managed society (0. Johnson)11: 676-683s

1972 INDEX 767SELF-IMPROVEMENT/reliance/responsibilityCause and effect (Yankus) 9: 545-549Digging ditches. (Demers) 3: 140-141Vote for myself, A (Breese) 10: 584-585You rascal, you! (Read) 11: 652-656SENNHOLZ, Hans F.American economy is NOT depression-proof,The. 11: 666-673Are we Marxians now? 8: 451-460Causes of inflation, The. 5: 284-292Federal Reserve System, The. 4: 245-253In search of a new monetary order. 1: 3-11SHOULD we divide the wealth? (Hazlitt)2: 100-108SHUMIATCHER, Morris C.Status: end product of welfare. 5:297-315SIX ideas to keep us human (Opitz) #1,11: 643-651;#2, 12: 718-726SLAVERYCause and effect (Yankus) 9: 545-549Founding of the American Republic, The(Carson) #14, 9: 550':'561When men appeal from tyranny to God(Coleson) 6: 323-335SMITH, Adam - ideas ofCreeping capitalism: is free enterprisecoming back? (Coleson) 10: 595-611SNYDER, Carl - ideas ofEconomics: a branch of moral philosophy( Read) 1: 22-27SOCIAL inflation (Poirot) 11: 674-675SOCIAL SecurityBallooning welfare state, The (Hazlitt)4: 226-231SOCIALISM, socialist ideologyCan we sustain prosperity? (Paton) 1: 33-41Perfect system of government? A (Mises)12:747-752Power to thelleople: the mask of despotism( Keyser) 7: 387-396Roots of "anticapitalism," The(Kuehnelt-Leddihn) 11: 657-665When men appeal from tyranny to God(Coleson) 6: 323-335STATUS: end product of welfare(Shumiatcher) 5:297-315TT AXES, taxationBack to basics - fable of the berry pickers(Paton) 12:707-714Founding of the American Republic, The(Carson) #6,1:42-54; #8, 3:147-159Should we divide the wealth? (Hazlitt)2: 100-108Vouchers: government control of privateschools? (Cahill) 7: 397-400THIRD world and us (Kuehnelt-Leddihn)2 :85-94THORNTON, Robert M. See Book reviews(Hoffer; Wilder)TO be free and equal (Colvard) 5: 293-296TRADE, international - history ofCreeping capitalism: is free enterprisecoming back? (Coleson) 10: 595-611Founding of the American Republic, The(Carson) #7,2:112-124; #8, 3:147-159When men appeal from tyranny to God( Coleson) 6: 323-335TRADE, international - theory ofNature of modern warfare (Osterfeld)4: 205-211We and the third world: a note of Christiandissent (Kuehnelt-Leddihn) 2: 85-94uU. S. HISTORY and ConstitutionFrom price control to Valley Forge,1777-1778 (Greaves) 2: 81-84Pine tree shHling, The (Cullinane)7 :434-436Power to the people: the mask of despotism(Keyser) 7: 387-396See also CarsonUTOPIA: dream into nightmare (Winston)3: 131-139vV ALLEY Forge, from price control to(Greaves) 2: 81-84VOLUNTEER army, modern (Kramer)2: 95-99VOTE for myself, A (Breese) 10:584-585VOUCHERS: government control of privateschools? (Cahill) 7:397-400wWARS/military draft/conscriptionFounding of the American Republic, The(Carson) #12, 7: 419-433Modern volunteer army, The (Kramer)2: 95-99Nature of modern warfare, The (Osterfeld)4: 205-211WE and the third world: a note of Christiandissent (Kuehnelt-Leddihn) 2: 85-94WEBER, Charles E.Closer look at gold, A. 9: 533-544WEBER, James A.Population question, The: limitedgovernment or limited people? 10: 579-583

768 THE FREEMAN DecemberWEI, JamesEnergy: the ultimate raw material.8: 486-496WELFARE stateBallooning welfare state, The (Hazlitt)4: 226-231Free giving vs. the welfare state (La Dow)2: 109-111Rights and pseudo rights (Lindl) 2: 73-75Status: end product of welfare(Shumiatcher) 5:297-315WELFARISM gone wild (Hazlitt) 5: 265-272WHAT do you have against the poor? (Read)9:528'-532WHEN men appeal from tyranny to God(Coleson) 6: 323-335WHO is the marginal producer? (Paton)3: 160-163WHY can't we have both? (Hockman) 2:67-73WHY some are poorer (Hazlitt) 1: 15-21WINSTON, AlexanderUtopia: dream into nightmare. 3: 131-139YANKUS, StanleyCause and effect. 9: 545-549YOU rascal, you! (Read) 11:652-656yzZONING laws: case for repeal, The (Mandel)7: 437-443BOOK REVIEWS(Reviewers name in parentheses)ANDELSON, Robert V. Imputed rights(Opitz) 8:510-512BEICHMAN, Arnold. Nine lies about America(Chamberlain) 9: 570-573BEILENSON, Laurence W. Power throughsubversion (Chamberlain) 5: 316-319BUCKLEY, William F., Jr. Cruising speed: adocumentary (Chamberlain) 3: 186-189EDWARDS, Marvin H. Hazardous to yourhealth (Brownfeld) 9:573-576FRANKE, David and Holly. Safe places(Chamberlain) 7:444-447FRIEDMAN, Milton. An economist's protest.12: 760GOLDMAN, Marshall 1. The spoils of progress:environmental pollution in the Soviet Union(North) 10:638-640HALLE, Louis J. The ideological imagination(Opitz) 11:703-704HOFFER, Eric. First things, last things(Thornton) 2:128HOSPERS, John. Libertarianism: a politicalphilosophy for tomorrow (Malz) 3:189-190HUTT, W. H. Politically impossible . ..?(Hazlitt) 1: 58-60KENDALL, Willmoore. Willmoore Kendallcontra mundum (Chamberlain) 4: 254-256KIRK, Russell. Eliot and his age (Chamberlain)11:700-703KUHN, W. E. The evolution of economicthought (North) 12:759-760LAMBERT, Byron C. (ed.) The essential PaulElmer More (Chamberlain) 12:753-756LEONI, Bruno. Freedom and the law (Rogers)7:447-448MARTIN, Albro. Enterprise denied: originsof the decline of American railroads, 1897­1917 (Canfield) 12:756-759McCLELLAN, James. Joseph Story and theAmerican Constitution (Dietze) 6:381-384MORE, Paul Elmer. The essential Paul ElmerMore (Chamberlain) 12:753-756PETERSON, Mary Bennett. The regulatedconsumer (Rogers) 3:191-192READ, Leonard E. To free or freeze: that isthe question (Chamberlain) 8:506-509ROCHE, George III. The bewildered society(Chamberlain) 10: 635-638ROTHBARD, Murray N.Man, economy andstate (Rogers) 5: 319-320ROUGIER, Louis. The genius of the West(Chamberlain) 1: 55-58SANBORN, Henry N. What, how, for whom:the decisions of economic organization(North) 8:509-510SHUMIATCHER, Morris C. Welfare: hiddenbacklash (Chamberlain) 6: 378-381SPIEGEL, Henry W. The growth of economicthought (North) 12: 759-760TOWARD LIBERTY. Collection of essays inhonor of Ludwig von Mises' 90th birthday(Chamberlain) 2: 125-128VOORHEES, Enders M. Financial policy in achanging economy (Barger) 1: 60-63WILDER, Laura Ingalls. The little housebooks - a pioneer chronicle (Thornton)1: 63-64