Freemantt,e

VOL. 27, NO. 12 • DECEMBER 1977

Marco Polo on Money Alfred Anderson Kennedy 707 Concerning the way in which paper money became legal tender under Kublai Khan.

World in the Grip of an Idea 12. Nazi-Soviet Parallels Clarence B. Carson 712 The grisly similarity is a result of a similar cause: the commitment to collectivism.

Deficits and Unemployment Henry Hazlitt 726 The record does not support the notion that inflation creates productive employment.

The Failure of the "New Economics" Ronald J. Berkhimer 728 A timely reminder of the importance of Henry Hazlitt's refutation of the General Theory of Keynes.

Helped by The Invisible Hand Daniel Patrick Doyle 731 The best way to appreciate "the establishment" is to take a job.

The Division of Knowledge Brian Summers 735 How the market most efficiently uses the knOWledge dispersed among individuals.

Freedom Is Indivisible Hans F. Sennholz 741 Consistent defense of freedom requires rejection of special privileges for ourselves.

Health Planning in Fort Wayne- The Six Million Dollar Fizzle Joe Hochderffer 744 How the taxpayers and patients pay for Federal health planning.

On Being Equal John Hospers 752 The result of enforced equality could be poverty and starvation.

Book Reviews: 757 "To Covet Honor" by Holmes Alexander

Index for 1977 761

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THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "World in the Grip of an Idea," "Deficits and Unemployment," "Freedom Is Indivisible" and "Health Planning in Fort Wayne." Alfred Anderson Kennedy Marco Polo on Money

HAVING SPENT what seems the bet­ On returning to my library, to my ter part of a lifetime reading and dismay I really couldn't decide what studying the practical and theoreti­ economist best explains money and cal ideas of the great economists, I how the various governments use recently found myself at a loss when and misuse it to any great degree of asked what economist best explains clarity in less than a million words. what has happened to our money The central problem of the in these recent years of super­ economist during the past century, inflation. Who wouldn't? I dodged in my opinion, is his inability to the question by defining our two explain fundamental economic prin­ greatest current economic problems ciples with an economy of words. as inflation and unemployment. I If one wishes a clear and very said that Calvin Coolidge once prophetic explanation of what gov­ amusingly, d.efined unemployment ernments do to create money, con­ as a condition: ~~When more and suit an early writer on the subject more people are thrown out of who explored the question well be­ work-unemployment results." In fore the science ofeconomics became that same vein, I replied, ~~When a gleam in Adam Smith's eye. I refer more and more paper money is you to the eminent Venetian thrown into the economy by explorer and entrepreneur, Marco government-inflation results." Polo (1254-1324), who spent a quar­ Mr. Kennedy is a student of liberty and a free-lance ter of a century living and traveling writer in Berkeley, California. throughout the near and far east. He

707 708 THE FREEMAN December returned to his native Venice in The great Chinese civilization of 1295 to tell Europeans about an un­ that period, the Yuan dynasty, known world. formed by Kublai Khan in 1271 is Marco Polo spent some time in the credited with sending many of Chi­ service of the Emperor of China, na's innovations to the Western Kublai Khan, one ofthe most power­ world via Marco Polo. Its cuisine, ful and richest monarchs in silk, spices, gun powder, rockets and medieval and modern history. Polo other weapons ofwar are among the attained some wealth and power most famous. himself. When he returned to Ven­ But perhaps the innovation most ice he found himself embroiled in constructive and destructive one of the many wars between the throughout western history, depend­ Italian city states of the time. As a ing on whose hands it was in, was prisoner ofwar in Pisa in the service the use of paper money as a substi­ of Venice, he dictated to a fellow tute for what had been used as real prisoner his experiences in Asia that money in other civilizations-gold became his classic: The Travels of and silver. Gold and silver are still Marco Polo. acknowledged as real money in every civilized nation as well as rec­ The Renaissance ognized commodities ofreal value in The result of the publication of primitive societies. Paper money this book was a rapid increase in was introduced as a new idea to commerce between the Italian city western civilization by Marco Polo states and China. This expansion of in a chapter of his Travels entitled: enterprise soon spread to the rest of (CHow the Great Khan Causes the Europe as well. The result for Italy Bark ofTrees, Made into Something was the creation of wealth and lei­ Like Paper, to Pass for Money All sure that made possible the Renais­ Over His Country". After reading sance. the chapter title like that, Polo's For the rest of Europe as well it readers probably thought the Great meant the slow death of the Khan to be the Great Con. medieval period and the coming of Marco Polo writes as follows: the age of exploration and enter­ prise. It was, after all, a passage to CCNow that I have told you in detail India and China by sea that Colum­ of the splendor of this city of the bus sought in 1492. The Travels of emperor's, I shall proceed to tell you Marco Polo is among the books that ofthe mint which he has in the same helped shape the world we now Iive city, in the which he has his money in. coined and struck, as I shall relate to 1977 MARCO POLO ON MONEY 709 you. And in doing so I shall make prepared duly, the chief officer de­ manifest to you how it is that the puted by the Khan smears the seal great Lord may well be able to ac­ entrusted to him with vermilion, complish even much more than I and impresses it on the paper, so have told you, or am going to tell that the form of the seal remains you in this book. For, tell it how I imprinted upon it in red; the money might, you never would be satisfied is then authentic. Anyone forging it that I was keeping within truth and would be punished with death. And reason! the Khan causes every year to be ~~The emperor's mint then is in made such a vast quantity of this this same city of Cambaluc, and the money, which costs him nothing, way it is wrought is such that you that it must equal in amount all the might say he has the secret of al­ treasure of the world. chemy in perfection, and you would ~~With these pieces of paper, made be right. For he makes his money as I have described, he causes all after this fashion. He makes them payments on his own account to be take of the bark of a certain tree, in made; and he makes them to pass fact of the mulberry tree, the leaves current universally over all his of which are the food of the kingdoms and provinces and ter­ silkworms, these trees being so ritories, and whithersoever his numerous that the whole districts power and sovereignty extends. And are full ofthem. What they take is a nobody, however important he may certain fine white bast or skin which think himself, dares to refuse them lies between the wood ofthe tree and on pain of death. And indeed every­ the thick outer bark, and this they body takes them readily, for where­ make into something resembling soever a person may go throughout she.ets of paper, but black. When the great Khan's dominions he shall these sheets have been prepared find these pieces of paper current, they are cut up into pieces of differ­ and shall be able to transact all ent sizes. sales and purchases of goods by means ofthem just as well as ifthey Signed and Sealed were coins of pure gold. ~~All these pieces of paper are is­ t~Furthermore all merchants ar­ sued with as much solemnity and riving from India or other countries, authority as if they were of pure and bringing with them gold or gold or silver; and on every piece a silver or gems and pearls, are prohib­ variety of officials, whose duty it is, ited from selling to anyone but the have to write their names, and to emperor. He has twelve experts cho­ put their seals. And when all is sen for this business, men of 710 THE FREEMAN December shrewdness and experience in such need of gold or silver or gems or affairs; these appraise the articles, pearls, in order to make plate, or and the emperor then pays a liberal girdles, or the like, he goes to the price for them in those pieces of mint and buys as much as he list, paper. The merchants accept his paying in this paper money. price readily, for in the first place ~~Now that you have heard the they would not get so good an one ways and means whereby the great from anybody else, and secondly Khan may have, and in fact has, they are paid without any delay. more treasure than all the kings in And with this paper money they can the world; and you know all about it buy what they like anywhere over and the reason why." the empire, while it is also vastly lighter to carry about on their jour­ The Tragedy of Paper neys.... So he buys such a quantity Marco Polo's account of this of those precious things every year unique Chinese method ofthe mint­ that his treasure is endless, while ing of money through the use of all the time the money he pays away paper is both amusing and tragic. It costs him nothing at all. Moreover, is amusing to us in this so-called several times in the year proclama­ enlightened, modern and sophisti­ tion is made through the city that cated age to recall the ease at which anyone who may have gold or silver the absolute monarch of China con­ or gems or pearls, by taking them to trolled the currency ofhis empire. It the mint shall get a handsome price is easy to laugh at how mandarins, for them. And the owners are glad to merchants and ordinary people were do this, because they would find no ~~taken" by their government during other purchaser give so large a the years of the Y\ian dynasty in price. Thus the quantity they bring China under a thoroughly autocra­ in is marvelous, though those who tic regime. After all, it was the 13th do not choose to do so may let it century. But look at what the west­ alone. Still, in this way, nearly all ern democratic governments have the valuables in the country come done to money in this the twentieth into the Khan's possession. century. It is no laughing matter, ~~When any ofthose pieces ofpaper and it becomes more tragic with are spoilt-not that they are so very each passing day. flimsy neither-the owner carries In our own country paper money them to the mint, and by paying not only loses value every day, it three per cent on the value he gets loses value every night as well. new pieces in exchange. And if any What is the root of the problem­ baron, or anyone else soever, hath the emperor of China? He was only 1977 MARCO POLO ON MONEY 711 the ancient antecedent, and the more than threats or promises has teacher of every modern would-be contributed to the distress of all. emperor who followed him through When dictators of all ideological the course of history. Kublai Khan persuasions flee their shores, they sought only to enrich himself, while flee not with paper money but with other government masters have en­ gold, silver, art objects or diamonds. tertained more ambitious plans for They leave the paper money and themselves and their subjects. their expense accounts for their sub­ Every government that has sought jects. to relieve the distress of one portion If one kind or gracious thing can of its population at the expense of be said for them, it is this: They another through the printing of know the value of money. After all, paper money backed by nothing they had it printed. @

Currency Convertibility

THE VALUE of currencies, like the value of many other commodities, depends upon a thousand factors which cannot· be measured. These depend upon the opinions ofthe thousands of businessmen who want to buy currencies and upon those who wish to buy and sell the goods these IDEAS ON currencies can purchase. No government has a yardstick that can measure the value of the goods· currencies can buy, and this means that ·no .government has a LIBERTY standard for measuring the value of currencies and the rate at which they should exchange for one another. The only possible way to ascertain the value ofa currency is to place it on the free marketand see what people will pay for it. To fix by law an exchange rate between two currencies which will represent the true value of both currencies is impossible. When values depend upon so many factors which cannot be measured, then it is almost inevitable that a fixed rate must cheat one ofthe parties to every exchange transaction.

GEORGE WINDER -wlrld inthB grfR<2fan Iae~

Clarence B. Carson 12. Nazi-Soviet Parallels ON August 21, 1939, a shocking an­ should reach an accord; this, plus nouncement was made in Moscow: the dread implications it had for the Nazi government of Germany power alignments in the world. and the Communist government of (There were dark r.umors in those the Soviet Union had reached an days of a Rome-Berlin-Moscow­ agreement. It was billed as a non­ Tokyo Axis against most of the rest aggression pact between the two of the world.) The Nazis were sup­ countries and has been called by posed to be on the ((extreme right" such various names as the Nazi­ and the Communists on the ((ex­ Soviet Pact, the von Ribbentrop­ treme left" of the ideological spec­ Molotov Pact, for the two foreign trum. They had supported opposing ministers who negotiated it, and the sides in the Spanish Civil War, and Moscow Pact. What was shocking Communists were proclaimed anti­ was that these two avowed enemies Fascists (which included Nazis) while Nazis trumpeted their anti­ In this series, Dr. Carson examines the connection Communism. The accord left many between ideology and the revolutions of our time communists around the world facing and traces the impact on several major countries and the spread of the ideas and practices around in the wrong direction, so to speak. the world. The Nazi-Soviet Pact lasted for

712 NAZI-SOVIET PARALLELS 713

nearly two years. The portion that war," the Germans safe behind the was made public appeared to be a Siegfried Line and the French and non-aggression pact. But the secret British behind the Maginot Line, protocols which accompanied it the Soviet Union continued its ag­ made it, in effect, a mutual aggres­ gressions. Soviet forces occupied sion treaty. Eastern Europe was di­ strategic locations in Latvia, Es­ vided into spheres of influence be­ tonia, and Lithuania as a prelude to tween the Nazis and Communists. A their annexation. Then, Soviet few days after the signing of the forces invaded tiny Finland. The pact, German forces invaded Poland, Finns, in one of the more heroic launching World War II. While episodes during WorId War II, held Polish forces were more than oc­ the Soviet armies at bay for most of cupied in the west, the Soviet armies the winter before they finally suc­ invaded that hapless country from cumbed. the east. The defeat of the Poles, which came with astonishing swift­ Twin Aggressors ness, was followed by the division of There was a more appropriate Poland between Germany and the reaction in Western Europe and Soviet Union. America to this act of aggression. When Hitler's armies invaded Po­ The Soviet Union was expelled from land, Britain and France declared the League of Nations, and the Al­ war on Germany. When Stalin's ar­ lies offered military help to Finland mies invaded Poland, no action was but were unable to provide it be­ taken against the Soviet Union. cause the other Baltic countries (Some history textbooks do not even would not permit it to pass through mention the Soviet invasion; those their ports. Into the spring of 1940 that do, generally do not explore its the Soviet Union was running ((neck significance. Less than a year later, and neck" with Germany for the when Italian armies invaded France lead as an aggressor nation. There­ following the Nazi incursion, Presi- after, Germany forged ahead with dent Franklin Roosevelt declared: the invasion of Norway, Denmark, ((The hand that held the dagger has Holland, and Belgium. plunged it into the back of its The point is this, however: for a neighbor." He might have made the brief interlude during the life of the same dramatic remark earlier about Nazi-Soviet Pact the affinity of the Soviet Union, but he did not.) Nazis and Communists was dis­ During the ensuing fall and played for all to see, even if many winter, while German and Allied preferred to avert their eyes from forces were bogged down in a ((phony the spectacle. This should not be 714 THE FREEMAN December taken to mean that there were· not violence. True, the Nazis appeared differences between Nazism and to come to power legally, but actu­ Communism. It is rather to say that ally Hitler only got into office le­ such differences as there were, were gaIly, notto real power. As has been accidental and inorganic. They were shown, the Nazis only attained a differences offocus, ofintention, and parliamentary majority by illegally of articulation. By contrast, the denying seats to the Communist similarities were organic and essen­ Party. In a similar fashion, Hitler tial. got his Enabling Act by suppressing Nazism and Communism are best opponents and terrorizing his col­ understood as parallel systems spun laborators. There was nothing more from essentially the same ideologi­ than a semblance, ifthat, oflegality cal materials. That they were com­ in the suppression of political par­ petitors for dominion over the peo­ ties, the subjection ofthe states, and ples of the world there should be no the subjugation of the labor unions. doubt, competitors whose eventual The murder of political opponents clash with one another may well laid bare just how illegal had been have been inevitable. But competi­ Hitler's thrust.to power. There was tion arises from those offering es­ never·any doubt, of course, that the sentially. the same product or ser.;. Bolsheviks seized power in Russia. vice, not from those at opposite ends of the spectrum. Their pact was a Minority RuJe temporary agreement to divide up Both Nazi and Communist rule the territory over which they would was the imposition of the will ofthe hold sway, much as two giant cartels minority on the majority. Both might agree to divide up the market Nazis and Bolsheviks failed to get a until. such time as one or the other majority in the last (relatively) free would be strong enough to begin its elections held before they consoli­ incursion into the other's area. dated their power and outlawed op­ The essential similarities of these position parties. The Nazis· tried to parallel systems emerge from a cover· this over .by holding plebi­ comparison of them. Their modes of scites' elections in which the alter­ operation and political structure native was to be for whatever was would hardly have been more nearly being proposed or for nothing, i.e., alike ifthey had come from the same against it.. The Communists have mold. tried over the years to provide an In the first place, both Com­ appearance of popular support for munists in Russia and Nazis in the regime by having elections in Germany seized power by the use of which there is only a single slate of 1977 NAZI-SOVIET PARALLELS 715 candidates. The people are asked not as wishes than commands. The to elect but to give approval to what method was more that of gangsters already has been decided. Actually, than what is ordinarily expected of since the parliament had no signifi­ prime ministers and heads of state cant power in Nazi Germany and (Hitler was both after the death of has none in the Soviet Union, the Hindenburg, though he wished to be make-up of them came to be a mat­ addressed as ~~Mein Fuhrer"). Many ter of little importance. decisions apparently were handed Nazi Germany was and Soviet down at the mid-afternoon dinners Russia is a one-party state. In both when Hitler was in Berlin. These cases, once their leaders came to frequently were attended by Goeb­ power, these parties ceased to be bels, Himmler, Hess, and other lead­ political parties, to the degree that ing figures, though rarely by Goer­ they ever had been, and became in­ ing who preferred more sumptuous struments of the ruling elite. They fare. Albert Speer, who often at­ were not originators of policy. How tended, put it this way: could they be? It is only in opposi­ Dining with Hitler regularly meant a tion to other parties that party pro­ considerable loss of time, for we sat at grams have any significance. They table until half past four in the after­ became, instead, tightly knit, noon.... fiercely loyal, and militant organi­ Yet it was important for one's prestige zations to support the will of the to attend these dinners. Moreover, it was rulers. important to most of the guests to be Nazi Germany had a personal dic­ kept abreast of Hitler's daily opinions. tatorship. In Nazi theory and prac­ The round table was useful to Hitler tice all power and authority pro­ himself as well, for in this way he could casually and effortlessly hand down a ceeded from the Fuhrer, the leader, political line or slogan. 1 Adolf Hitler. Hitler did not care at all for administrative detail and spent very little time on it. Some of Dictators All the most momentous decisions he The Soviet Union, too, has had a made, such as that ofthe extermina­ succession ofpersonal dictators. The tion of the Jews, were not even re­ practice began with Lenin, reached corded so far as has been deter­ its apogee with Stalin, and was con­ mined. (He may not have wanted a tinued by Malenkov, Khrushchev, record, of course, of the decision to and Brezhnev. Communists usually exterminate the Jews.) Hitler's or­ have made some effort to hide the ders were often given out informally personal character of the dictator­ to associates and companions, more ship behind a facade of ~~collective 716 THE FREEMAN December leadership," but the reality has sur­ the two. In late night drinking faced too often for it to be generally sprees, he was apt to do such things believed. In his ((Secret Speech to as have Khrushchev, or others, per­ the Twentieth Party Congress," form a Russian folk dance in which Khrushchev made clear the per­ they lacked all talent. Both were sonal nature of Stalin's rule: anti-Semites. Hitler, of course pub­ Stalin acted not through persuasion, licized his anti-Semitism, but Stalin explanation, and patient co-operation was more circumspect in displaying with people, but by imposing his con­ his. Khrushchev gives these exam­ cepts and demanding absolute submis­ ples of Stalin's anti-Semitism: sion to his opinion. Whoever opposed this ... When he happened to talk about a concept or tried to prove his viewpoint, Jew, Stalin often imitated in a well­ and the correctness of his position, was known exaggerated accent the way Jews doomed to removal from the leading col­ talk. This is the same way that thick­ lective and to subsequent moral and headed, backward people who despise physical annihilation. ...2 Jews talk when they mock the negative Jewish traits. Stalin also liked to put on What Khrushchev's remarks may this accent, and he was pretty good at it. obscure, however, is that while I remember when I was working in there have been differences in de­ Moscow, some kind of trouble at the gree of personal rule, it has been Thirtieth Aviation Factory was reported characteristic of communist gov­ to Stalin through Party channels and by ernments' whether in the Soviet State Security. During a meeting with Union or elsewhere. Stalin, while we were sitting around There were even parallels in the exchanging opinions, Stalin turned to style of living of Hitler and Stalin. me and said, cCThe good workers at the Both men were ((night owIs," given factory should be given clubs so they can beat the hell out ofthose Jews at the end to staying up to the wee hours ofthe ofthe working day."3 morning and keeping their as­ sociates awake with them. They If Khrushchev is to be believed, he were both addicted to movies, Hit­ considered this a direct order from ler's taste running to musicals while Stalin, but he did not carry it out. Stalin liked American westerns. Stalin had a screening room for A Lonely Position films in the Kremlin, but Hitler had Both Hitler and Stalin apparently his own ((theater" in his hideaway in were fearful of being alone, which Obersalzberg. Both men had warped was the main reason for keeping s~t\ses of humor, preferring jokes at people around so late at night. Speer the expense of those around them. has said of the late nights with Hit­ Stalin was, ifanything, the cruder of ler at Obersalzberg: ((From one 1977 NAZI-SOVIET PARALLELS 717 o'clock on some members of the tacted he insisted that the operation company, in spite of all their efforts must be carried forward as planned. to control themselves, could no «And what was the result of this? longer repress their yawns. But the The worst that we had expected. The social occasion dragged on in Germans surrounded our army con­ monotonous, wearing emptiness for centrations and consequently we another hour or more, until at last lost hundreds of thousands of our Eva Braun had a few words with soldiers."6 Hitler and was permitted to go up­ Hitler believed himself to be a stairs. Hitler would stand up about a military genius, and many military quarter of an hour later, to bid his men were greatly impressed with company goodnight."4 Of Stalin, his early successes in directing mili­ Khrushchev says: «He suffered ter­ tary operations. Hitler was a mas­ ribly from loneliness. He needed ter of the politics of collectivism, as people around him all the time. already has been noted, and so long When he woke up in the morning, he as he could conduct war in a similar would immediately summon us, manner as his political moves, i.e., either inviting us to the movies or by surprise, by audacity, by swift­ starting some conversation. ... He ness, and by doing the unexpected, was depressed by loneliness and he he was a master strategist. How­ feared it."5 ever, once his forces were on the There are many monstrous as­ defensive these tactics were of little pects to this immense concentration use. Armies that are overpowered of power in one man but none more need to withdraw, to cut their losses, than their role in making war. Ac­ maintain discipline, shorten their cording to Khrushchev, Stalin lines, and take up superior posi­ planned military operations on a tions. Time and again Hitler refused globe! He never visited the front to authorize tactical withdrawals, lines and could not be persuaded to insisting that his units stand their consult detailed maps. Khrushchev ground or seize the initiative, only told in detail the effects of this on to have them overwhelmed or re­ one operation. It was in the Kharkov treat in disarray. Although there is region in 1942. Stalin had ordered a no satisfactory way to calculate such massive encirclement operation. things, it is probable that the num­ Those who were on the scene per­ ber of deaths attributed to Stalin ceived the great danger of trying to and Hitler should be increased by carry it out. However, it was most several millions on account of their difficult to reach Stalin on the mat­ military blunders. ter, and when he finally was con- My main purpose here is neither 718 THE FREEMAN December to prove that Hitler and Stalin were creative because he is not at one dictators nor that dictatorship can with those around him. He is not at have horrifying unwanted conse­ one because there are those in his quences. Those are points, ofcourse, midst who have aims and purposes that are well taken, but they are at odds with him. This external con­ generally, though not universally, flict internalizes itself in the indi­ accepted. The point is rather that vidual as the drive to pursue his own collectivism entails dictatorship, en­ self-interest, which, in turn, tends to tails the concentration of power in set every man against every other the hands of a single man, and that man. Socialist ideologies propose a the ills that follow are a conse­ historical explanation for this condi­ quence of collectivism. tion. Marxists· hold that the condi­ In short, dictatorship as we have tion is a product of the class strug­ come to know it in the twentieth gle, a struggle resulting from the century is an effect, not a cause. It is control ofthe means ofproduction of the necessary effect of the idea goods and services by some domi­ which has the world in its grip. Ifall nant class. In this latest age, capi­ effort is to be concerted to achieve an talists constitute that dominant end, any end, that effort must be class, and they are the disrupters of directed by a single man, else it will the harmony and productivity of be dispersed due to the diversity of man. According to Nazi ideology, men. Communism was the cause of the historical conflict is basically Stalin's dictatorship. Nazism was racial. According to Hitler, what the cause of Hitler's dictatorship, stood in the way of unity, har­ even though it is conceivable that mony-at oneness-, and freedom of Hitler contrived the Nazi ideology in the German or Nordic peoples was order to become dictator. Rule by the presence in their midst of dis­ one is the norm for the control and ruptive races, or, more specifically, direction of all human organiza­ the Jews. tions; rule by one is transformed What collectivist ideologies at­ into personal dictatorship by collec­ tempt to achieve, then, is at-one­ tivism. ment. (This is the religious word ~~atonement," which socialists do not Atonement employ, but which captures the The key to understanding the ef­ overtones of their meaning. The fects produced by socialist or collec­ unity or at-one-ment they profess to tivist ideologies is their thrust to seek, of course, is not with God but concert all efforts. These ideologies within society, which is the deepest proclaim that man is not free and reason for referring to them as 1977 NAZI-SOVIET PARALLELS 719 socialists.) The basic device for ogy was deeply imbedded in the achieving an at-one-ment within whole cultural framework. This society is what is called by condition was described as the pre­ psychologists ~~projection." That is, valence of bourgeois culture. Due to they project upon some other group this prevalence, the pursuit of self­ or class or race the blame for the ills interest which occasioned the dis­ or discontents that beset them. This harmony and produced the disrup­ is also known as ~~scapegoating." tion in society had penetrated the The Marxists blame the disruption arts, literature, the family, all social upon the ~~exploiting classes," upon institutions, and was given the color capitalists, imperialists, or what­ of divine sanction by religion. Only ever. The industrial worker is in­ the most advanced of an elite could vited to project the blame for his be free from its sway at the outset. condition upon the owners offactory The Jewish infection, as Hitler and mine. The peasant is to lay the was given to calling it, was believed blame for his deprivation upon the by the Nazis to have burrowed landlord. Hitler, of course, projected deeply into German culture, and the blame for the disharmony and into that of other peoples as well. disruption of the German people on There were, of course, many promi­ the Jews. nent Jews in literature, in music, in the other arts, and particularly in Enemies to Demolish the field of publishing. The great Both Nazi and Marxist ideologues carrier of the ~~Jewish infection," Hit­ sometimes presented their cases ler claimed, was international very simplistically. To the Marxists, Marxism. But it takes no great in­ it would only be necessary for the sight to perceive that there was an proletariat to seize the means ofpro­ even more pervasive source of duction from the capitalists, and ev­ ~~Jewish infection" in Germany, erything would be set right. To the namely, the Christian churches. The Nazis, it would only be necessary to roots ofChristianity in Judaism, the suppress and drive out the Jews, and fact that Jesus was born a Jew, were the Germans would be freed from facts that Hitler might ignore pub­ the incubus afflicting them. But, of licly but which did not go away by course, it was never that simple. In being ignored. Some of the Nazis both ideologies, society was sup­ were as outspokenly anti-Christian posed to be deeply infected; the as they dared to be. Heinrich Himm­ sources of the disintegration of the ler and Martin Bormann were two of individual and society lay deep. the more prominent. Speer says that To the Marxists, capitalist ideol- Bormann carried on a continual 720 THE FREEMAN December verbal campaign against the into the collective egoism which is churches with Hitler. Hitler's stan­ the nation."9 Or again, ((It is essen­ dard reply was, ((Once I have settled tial that the individual should my other problems ..., I'll have my slowly come to realize that his own reckoning with the church. I'll have ego is unimportant when compared it reeling on the ropes."7 with the existence of the whole peo­ ple.. " ."10 He would, he declared, Rooting Out Infections stamp ((the Nazi Weltanschauung A part of the repression of Nazi [world outlook] on the German peo­ and Soviet regimes was aimed at the ple." For, (tit is only the harshest ((scapegoats," those on whom the principles and an iron resolution blame for conditions was projected. which can unite the nation into a Another part was aimed at rooting single body...."11 out and destroying any Hinfections" from these elements. The remainder Curbing Individuality of the repression, so far as it was In both the Nazi and Soviet sys­ ideological in origin, was aimed at tems, then, the individual could be concerting all efforts, Le., producing of no importance. Only as he joined action in conformity with the re­ his efforts to those ofthe mass would gime. Vladimir Yurasov, a defector they be of consequence. It follows from the Soviet Union, has summed that individual liberty would be de­ up the impact of all this in a fic­ pendent upon the will ofthe regime, tionalized account of his experi­ that individual rights could hardly ences. The following quotations in exist, that freedom of choice would the speech of one of his characters be severely circumscribed, and that are supposed to be from General private property could exist in name Serov, a real life head of military only. So it is in the Soviet Union; so security: it was in Nazi Germany. ... We cannot permit our people to live Neither freedom of speech, nor as they please! Do you understand? Peo­ freedom of press, nor freedom of as­ ple it seems have themselves too much in sociation could be tolerated. In the mind! But government deems that you Soviet Union, individuals have been should deny your own self, become the sentenced to years of servitude in same sort offanatic or else-offto a labor camp! Off to become a slave! Katia, do forced labor camps for failing to re­ you understand?8 port some anti-Communist remark or joke that they have overheard. A Hitler described the Nazi idea this priest was sentenced to death in way: HThe underlying idea is to do Nazi Germany for making an anti­ away with egoism and to lead people Nazi joke in front of an electrician 1977 NAZI-SOVIET PARALLELS 721 who was working at his rectory.12 ical predilections toward Hfolk art," Joseph Goebbels, Propaganda but in practice favored the classics. Minister for the Nazis, was in Freedom of association may well charge of the news, among other be the most valuable ofall freedoms. things. He determined what should Certainly, without it all other free­ be reported and how it should be doms are sterile and barren. It is the told. Daily press directives went out means by which voluntary co­ from the Propaganda Ministry to operation takes place, by which men editors all over the country, direc­ work together in groups to effect tives which covered in minute detail their ends, whether social, religious, how everything should be handled.13 charitable, business, or whatever. There are, of course, no private .And, freedom of association is newspapers or television or radio anathema to collectivism. Since all stations in the Soviet Union; in con­ activity must be concerted, any vol­ sequence, all news is determined by untary association is suspect, or political an.d ideological considera­ worse. It is a potential conspiracy tions. Crashes of Soviet airplanes against the state; hence, it must be are not reported, for instance, and broken up. the names of those killed are never published. There is good reason for Restrictions on Association this latter practice; no record is kept Association with an ((enemy ofthe of passengers on airlines. So much people" has long been proscribed in for the individual! the Soviet Union. Penalties for it Nazis held ceremonial book burn­ range from a few years in a camp to ings at universities and other death. But it is not possible ordinar­ places. Not only were the works of ily to know who is an ((enemy of the Jews consigned to the flames but people" until he has been convicted also many works of Gentiles that or sentenced. Thus, all associations were considered dangerous. In gen­ are fraught with danger, even with eral, modern art and modern music members of one's own family, for were proscribed in Germany. In the punishment ordinarily is retroactive Soviet Union, all access to foreign for association with an ((enemy of materials is limited or restricted, the people." There are, of course, and all publishing houses are gov­ many associations in the Soviet ernment controlled. Much of the Union, but membership in them is same sort of art and music that was hardly voluntary, and they are not prohibited in Nazi Germany is kept free. There are associations of writ­ from view by the Communists. Both ers, ofartists, ofworkers, offarmers, Communists and Nazis had ideolog- ofclergymen, and so on. It is usually 722 THE FREEMAN December necessary to belong to the ~~associa­ not permitted to work in Jewish tion" in order to engage in the activ­ households. ~~Jewish pupils were ity involved-to belong to the as­ excluded from the state-school sys­ sociation of writers in order to get tem, and all Jews were debarred published, for example-, but the from public swimming-pools, sports association is under the direction grounds and parks. ...A typical and control of the state. It is an scene took place at a Berlin green­ instrument of state, not of its mem­ grocer's when a four-year old Jewish bers. girl begged her mother for some The restrictions on assqciation cherries; when told that fruit was were never as thorough and com­ excluded from the Jewish ration she plete in Nazi Germany as in the ran out of the shop crying."14 It was Soviet Union, but it hardly could be precarious, of course, to associate said that the Germans had freedom with a Marxist, a pacifist, or anyone of association. Only one political who might be anti-Hitler or anti­ party was permitted.so that there Nazi. was no choice of political associa­ Private property is the necessary tion. Only one labor union was al­ condition of individual rights. With­ lowed, and it was government con­ out it, there is no place to stand trolled. In effect, there could be no against the state, and there are no private business associations or pri­ means with which to protect oneself. vate farmer organizations. The gov­ It is well known that Russian Com­ ernment penetrated and controlled munists made a root and branch these. A dissident association of assault on private property. Such clergymen ended with many of its remnants of it as remain in the :members in prisons and concentra­ Soviet Union are privileges granted tion camps. by the state, not rights belonging to the individual. The attack upon Especially, the Jews property was neither so direct nor so The most strenuous restrictions drastic in Nazi Germany as in the on association were between other Soviet Union. The major exception Germans and Jews. (Jews generally was the property of Jews, much of have insisted, and rightly, that they which was confiscated. Indeed, the were Germans too.) The most rigor­ Nazi approach to property differed ous restrictions were applied to mar­ from that ofrevolutionary socialism. ital and sexual relations between It was more nearly that of Gentiles and Jews, but they ex­ gradualist or evolutionary social­ tended to other areas as well. Except ism. Hitler had declared in the mid­ for the aged, ~~German" women were dle of 1933 that henceforth he in- 1977 NAZI-SOVIET PARALLELS 723 tended to follow an evolutionary regime also partly coerced and partly road. This was generally so where coaxed farmers into reducing the area private property was concerned. under such crops as wheat, rye and­ temporarily-hops in favour ofbeet, flax, Empty Forms of Property rape and sunflowers.15 Land titles and deeds generally Coercion apparently extended also were left undisturbed. Individual to farm animals, for the Food Estate and family holdings were likely to prescribed that each hen should lay remain technically in the same at least 65 eggs per year. It is un­ hands as before. ((Technically" is the likely, however, that Nazi Gauleit­ key word here, however, for prop­ ers came to the farms personally to erty was treated as an adjunct ofthe wring the necks of non-conformist state, something to be used and dis­ hens. posed ofin the interest ofthe nation. In brief, the Nazis controlled, or The substance of private property attempted to, the means of produc­ was drained away while the form tion and distribution of goods and was left more or less intact. For services. All producers belonged to example, from 1937 onward share­ some sort of collective, one devised holders could no longer participate for the particular undertaking. in determination ofcorporate policy. These collectives, in turn, were in­ Many Nazis were placed on boards terpenetrated and dominated by the of directors, and control of com­ government. Prices and wages were panies was determined by a combi­ controlled; production quotas were nation of managers, Nazi Party offi­ set; and the unproductive were ciaIs' and government policy. There weeded out. Licensing for trades and was a movement toward a return to crafts controlled the opening of new primogeniture and entail for rural businesses. The socialist plank of property, which divested the owner the Nazi program was honored; even of the power to dispose of the prop­ if it was not in the way prescribed erty. Agriculture was controlled by by Marxists. what was called the Food Estate. Some of its activities are described Propaganda Measures in the following: Repressive measures were not the The Food Estate maintained a dossier only means used by Nazis or Soviet on each farm, in which it entered Communists to draw people into the monthly reports on the state ofcrops and collective effort. Both regimes livestock, labour force and wages, deliv­ sought to concert all efforts by ((posi­ ery obligations and actual delivery data. tive" measures. There were paral­ Intent on its self-sufficiency drive, the lels here, too. Communists employ 724 THE FREEMAN December propaganda on a massive scale. In­ communists have been. German deed, the language, the literature, might became visible by way of the arts, and even the architecture goose-stepping soldiers marching is permeated with propaganda. through the streets or massing at Communists have long opposed the some rally. But millions ofGermans idea of((art for art's sake." The prac­ who were not in the army wore uni­ tical meaning of this is that art forms. Eventually, nearly all chil­ exists for ideological, political, and dren belonged to the Hitler Youth propagandic reasons. They are between the ages of10 and 18. There equally opposed to food for food's was the SA and the elite corps of SS sake, tractors for tractors' sake, in their uniforms. The ideal Ger­ clothing for clothing's sake, sports man, German history, and German for sports' sake, and so on. Every­ exploits were depicted in song, in thing that is produced and brought story, in film, on canvas and, if it into being is for the glorification of could be done, in architecture. The communism: production is for the Third Reich was supposed to last for statistics of production (gross na­ a thousand years, a millennium, ac­ tional product, as we would say); cording to Nazi propaganda, and its victories of Soviet athletes show the enduring foundation was being laid superiority of communism; tractors by Hitler. demonstrate the progress of Russia under communism. Foreign news­ Commitment to Collectivism men are apt to be accused of spying There are too many parallels be­ when they take pictures in the tween the Nazis and Soviet Com­ Soviet Union. Their offense, one munists to be covered here. They suspects, is that they may get such parallel one another in such things pictures published without the as the Hitler Youth and Komsomol propaganda gloss which is necessary or Young Communists. Both at­ to ((understanding" them. tempted to use the schools for imbu­ The Nazis used propaganda as ing the young with their ideas. Both vigorously and extensively as any Nazi and Soviet leaders were regime ever has. Joseph Goebbels gangsterlike in their operations. undertook to see that every medium Both regimes relied on terror to con­ of expression was used to glorify the solidate and maintain their power. Aryan race, the German people, the The list could be made longer, but Nazis, and Hitler. Nazis probably surely the point emerges. The mat­ were much more successful in draw­ ter has been aptly summed up by ing the people into and making Leopold Tyrmand in the opening them a part of the propaganda than paragraph of a chapter on ((Com- 1977 NAZI-SOVIET PARALLELS 725 munism and Nazism: a short com­ Meeting the worried and abstracted parative study": Goldstein, Kohn tells him that David­ sohn has died. Goldstein shrugs his Ruminating on this topic is generally shoulders. ~~Well, if he got a chance to regarded as vulgar, as something too better himself...."17 @ unbecoming to be done. But why? Noone really knows for sure. It is the terror of a convention. Too many people who later Next: 13. World War II: became respectable declared themselves Communists at some time in their lives. A Socialist Conflagration Those, however, who survived both Nazism and communism, without con­ -FOOTNOTES- senting to participate in either, are not versed in such subtleties. In Eastern 1Albert Speer, Inside the Third Reich, trans. Europe there are millions ofsuch people, by Richard and Clara Winston (New York: and the rule consecrated by intellectuals Avon Books, 1970), p. 181. that communism and Hitlerism are not 2Nikita Khrushchev, Khrushchev Remem­ the same does not hold water with them. bers, trans. and ed. by Strobe Talbott (New York: Bantam, 1970), p. 614. Because if one thinks about it un­ 3/bid., p. 279. squeamishly, pitilessly, and to the end, it 4Speer, op. cit., p. 137. is all too easy to establish their grisly 5Khrushchev, op. cit., pp. 320-21. similarity.16 6Ibid., p. 648. 7Speer, op. cit., p. 175. The ~~grisly similarity" is a result 8Vladimir Yurasov, Parallax, trans. by of a similar cause: the commitment Tatiana Balkoff Drowne (New York: W. W. of both regimes to collectivism. The Norton, 1966), p. 124. effort to produce human felicity in 9Alan Bullock, Hitler, A Study in Tyranny (New York: Harper & Row, 1962 rev. ed.), p. both cases produced widespread 402. torment. Even grisly regimes, 1°/bid., p. 401. perhaps grisly regimes particularly, llIbid., p. 405. give rise to their own wry humor. 12Richard Grunberger, The 12-Year Reich (New York: Holt, Rinehart and Winston, Hitler was hardly a laughing matter 1971), p. 331. to Jews, but their sense of humor, 13See ibid., p. 395. this last resort of the human spirit, 14Ibid., pp. 456, 461. did not entirely desert them. Here is 15Ibid., p. 163. 16Leopold Tyrmand, The Rosa Luxemburg a Jewish joke from Nazi Germany Contraceptives Cooperative (New York: Mac­ which might just as well have come millan, 1972), p. 165. from Soviet Russia: 17Grunberger, op. cit., p. 340. DEFICITS & UNEMPLOYMENT

Henry Hazlitt

I HAVE explained in a previous arti­ In the foregoing tabulation, the cle some ofthe harm that deficits do. deficits are for the fiscal years end­ Here I wish to concentrate on one ing on June 30; the unemployment thing they do not do. They do not is an average of the full calendar cure unemployment. year. These deficits may not seem Let us turn to segments of the large in comparison with the sums historical record, year by year. to which we have recently become After 1930, we had cheap money, accustomed, but they were not triv­ inflexible or rising wage-rates, and ial in their time. As the average heavy government deficits for the annual deficit for the period was next ten years. We also had mass $2.8 billion, and the average expen­ unemployment for the next ten diture $6.7 billion, the deficits aver­ years-until World War II finally aged 42 per cent of total expendi­ bailed us out: tures. Translated into other terms, Deficit Percentage of the $2.8 billion average was 3.6 per Year (MIllions) Unemployment cent of the gross national product of 1931 $ 462 15.9 the period. The same percentage of 1932 2,735 23.6 the gross national product of 1976 1933 2,602 24.9 would be equivalent to a deficit of 1934 3,630 21.7 $60.9 billion. 1935 2,791 20.1 Henry Hazlltt, noted economist, author, editor, re­ 1936 4,425 16.9 viewer and columnist, is well known to readers of 1937 2,777 14.3 the New York Times, Newsweek, The Freeman, Sar­ 1938 1,177 19.0 ron's, Human Events and many others. Best known of his books are Economics in One Lesson, The 1939 3,862 17.2 Fai/ure ofthe "New Economics," The Foundations 01 1940 3,095 14.6 Morality, and What You Should Know About Inflation.

726 DEFICITS AND UNEMPLOYMENT 727

Now let us look at the record from dispute. But on their face the figures 1960 through 1976: hardly tend to show that deficits, even massive ones, prevent or re­ Deficit Percentage of duce unemployment. On the con­ Unemployment Year (MIllions) trary, the higher the deficits in the 1960 $ 269 Surplus 5.5 foregoing table, the worse the un­ 1961 3,406 6.7 employment record. 1962 7,137 5.5 The average unemployment in 1963 4,751 5.7 this country over a long period of 1964 5,922 5.2 years has been a shade under 5 per 1965 1,596 4.5 cent. In the six years beginning 1966 3,796 3.8 1971, when massive chronic deficits 1967 8,702 3.8 set in, the unemployment rate aver­ 1968 25,161 3.6 aged 6.36 per cent, and higher in the two years when the deficits were 1969 3,236 Surplus 3.5 highest. 1970 2,845 4.9 It is interesting that in the sixteen 1971 23,033 5.9 years following 1960, there was a 1972 23,372 5.6 surplus in only one year-1969­ 1973 14,849 4.9 and in that year unemployment was 1974 4,668 5.6 the lowest.shown in the table. 1975 45,108 8.5 A coincidence, no doubt. But one 1976 66,461 7.7 of the worst consequences of the fixed Keynesian myth that deficit spending cures unemployment is not Sources: The Budget of the United States Government, 1978, p. 437. Economic Report of only that it promotes reckless gov­ the President, January, 1977, p. 221. ernment spending and monetary in­ flation, but. that it systematically There are so many factors operat­ deflects attention from a study ofthe ing at all times in a national econ­ real causes of unemployment-ex­ omy, and so many conditions, in cessive union wage-rates, minimum particular, helping to determine the wage laws, prolonged unemploy­ overall rate of employment or un­ ment insurance, and a score ofother employment, that a simple statisti­ social programs that diminish the cal comparison like the foregoing incentives for men to accept market does not ~~prove" anything beyond wages or to look for work. i Ronald J. Berkhimer The Failure of the "New Economics"

BACK in 1959 there came into print To answer this question we must a book which might have changed first look at what Keynesian eco­ our world. In painstaking detail, it nomics is all about. refuted all the premises of the most Although the writing of Keynes influential book on economics since (pronounced HKanes") is compli­ Marx, John Maynard Keynes' Gen­ cated and contradictory, Hazlitt has eral Theory ofEmployment; Interest reduced it to something quite sim­ and Money, first published in 1936. ple. He finds it largely a rehash of Other well-known free market mercantilism, a centuries old theory economists had attacked Keynes, that when business is bad it is due to but this was the first full length (1) a scarcity of money, and (2) gen­ analysis, almost sentence by sen­ eral overproduction. The first of tence, of Keynes' chief work. these is one of the old, populist Yet Van Nostrand's original edi­ easy-money theories which still per­ tion of Henry Hazlitt's The Failure sists to some extent in Congress 200 ofthe ~~New Economics" sold no more years after it was first destroyed by than 5,000 copies and a 1973 edition Adam Smith. If it were valid, the by Arlington has added only 7,000 underdeveloped nations would only more. In a world largely controlled need to print large quantities of by words, why has an apparently paper money in order to have in­ monumental work been so com­ stant prosperity. pletely ignored? Jean Baptiste Say, the French economist, disproved the over­ Mr. Berkhimer is a retired chemical engineer who is now engaged in volunteer work with nonprofit, non­ production fallacy with his Law of partisan organizations. the Markets in 1803. He pointed out

728 THE FAILURE OF THE ltNEW ECONOMICS" 729

KEYNES is unsuccessful in his attempt to deny the most strongly established principle in economics-that if the price of any commodity or service is kept too high (i.e., above the point of equilibrium) some of that commodity or service will remain unused or unsold. When wage-rates are too high there will be unemployment. Adjusting the myriad wage-rates to their respective equilib­ rium points may not always be in itself a sufficient step to the restoration of full employment, but it is an absolutely neces­ sary step. Keynes tried to substitute general monetary infla­ tion for piecemeal wage-and-price adjustment. But without proper wage-price coordination, inflation cannot bring full employment. HENRY HAZLITT

that supply creates demand, if not Another feature of Keynes' Gen­ for itself, then for something else. eral Theory is his consistent refusal Nobody produces anything except to to attribute any blame for un­ consume it or exchange it for some­ employment to inflated wage rates. thing else to consume. Therefore, In so doing, Hazlitt says, Keynes is since demand is essentially unlim­ unsuccessfully attempting ((to deny ited, there can never be more than a the most strongly established prin:­ temporary oversupply of some com­ ciple in economics-that if the price modities. This is logical, though few of any commodity or service is kept of us non-economists would have too high (Le. above the point of thought of it in this way. equilibrium) some of that commod­ ity or service will remain unused or Errors Abound unsold. When wage rates are too Yet, 130 years after Say, Keynes high there will be unemployment." came out with his essentially mer­ How could a man so obviously cantile theories as if they were erroneous in his theories have been something new, and he became fa­ so influential, be made a lord, and mous, as Hazlitt puts it, by ((refut­ convert to Keynesianism, among ing" Say's Law by simply saying it others, Presidents Franklin was untrue. Roosevelt and Richard Nixon and 730 THE FREEMAN some of President Carter's current old days, they would have burned it. advisers? Now, with their power over the Let us look at the political and communication channels, they have economic climate of the times the simply ignored it. General Theory appeared and the An awakening to the fact of The years since. On a world in the dark­ Failure of the rrNew Economics" ness of a general depression, the might revolutionize our society. We book burst like a skyrocket (with might get unionized labor back in just about as much permanent the free market and solve the un­ light). Keynes had an easy way to employment problem at the same bring back prosperity. Just have the time. We might balance the Federal government spend more money,. put~ budget in short order and set an ting it in the hands of people who example for the rest of the world in would immediately put it into circu­ the control of inflation. lation, thus ((greasing the wheels of Is it too late for this to happen? industry." No matter that the gov­ True, we are far down the road to ernment didn't have the money·to socialism. But there are hopeful spend-just borrow it, orprintit. So signs. More and more frequently we this deficit spending creates infla­ read of growing doubts about tion? Better that than to fail to udo Keynesianism. something." Was it Shakespeare who said, ((Truth will out"? Deficit Spending Let it be soon! @ Keynes did not originate deficit spending; the U.S. had already been Editor's Note: Arlington doing it for several years. But, as a House recently has brought supposedly brilliant economist, he forth a new printing of The legitimized it and has insulated it Failure of the rrNew Econom­ against reality for many years up to ics" ($11.95), as well as the and including the present. companion volume compiled Since Keynesianism has the un­ and edited by Mr. Hazlitt, The reasoning support of the big spend­ Critics of Keynesian Econom­ ers among the politicians and bu­ ics ($9.95). reaucrats, the higher-wage advo­ Either book is available and cates of. the unions, and the left­ may be ordered from The leaning media, one can easily see Foundation for Economic Edu­ why Hazlitt's book, which under­ cation, Inc., Irvington-on­ mined some of their most basic be­ Hudson, N.Y. 10533. liefs, got the silent treatment. In the Daniel Patrick Doyle Helped by THE INVISIBLE HAND

ARE you one ofthose who lobbies for to grasp the obtuseness of Marcuse National Health Insurance and yet qualify for you as a fitting victim of shudders at the thought ofputting a a terrorist bombing? bedpan under a sick person? Do you Well, if you are, then please read constantly squeak out noises about the following because it just may ~~the whole rotten system" and its save you from a horrible fate. Satanic conspiracy to never listen to Although initially I was highly your whining? Do you find your skeptical, very shortly I personally spiritual experience in some hell on verified the existence and superior earth? Do you eat too much with economic (and personal) efficacy of money given to you for dreaming up The Invisible Hand of the free mar­ new ways to redistribute the ket. This natural mechanism is wealth? Are you a middle class art really present and operating with major who lectures his father on the greater success than any other terminal inferiority of money and economic system, even in spite of work while helping yourself to a wasteful Federal controls. The free dessert that he paid for by his work­ market is benevolent in both the ing? Does a person who is too acute proximate and ultimate senses of the word. More than decisively dem­ Mr. Doyle, of Jennings, Missouri, finds the flaws in onstrating the necessity and merit his liberal progressive education being corrected by of individual initiative, the private the precious freedom that allows Adam Smith and John Dewey to compete for readers In the same enterprise system also distinguishes library. between quality effort and medioc-

731 732 THE FREEMAN December rity and rewards and penalizes them anesthesia than rest. I now work accordingly. Its very impersonality full-time. I attend college two nights enables the free market to offer op­ a week and karate lessons another timum opportunity for personal two nights. On weekends, I have input into one's work, leisure and fun-good, clean, healthy fun­ relationships. instead of my former neurotic pur­ suit of a religious experience in de­ All of the above is true! I assert it pravities and mutually lacerating without doubt or guile and with the . personal relationships. confident pleasure of an Olympic My family, friends and old ac­ sprinter enjoying his race too much quaintances have all been to ponder the physiological pro­ dumbstruck by the sight of Dan cesses involved in his performance. Doyle out ofhis rut, out ofbed before Like him, I know that a Gold Medal noon, off his back and on his feet all is more than just the sum of the day, out ofhis ivory tower and doing chemical phenomena in his running something positive instead of bit­ body. No, an achievement, any terly cursing every passing atom so achievement, is much, much more ill-mannered as to exist in the same than that. universe with him. And just im­ In my own case, a year of healing agine! My body is now lean, hard exposure to the natural tonics of and full of energy! My mind is on hard work, competition, thrift and this side of the grave, for a welcome the pleasure of earning on the level change! I have joined the living and of my ability was a real therapy. It I love it! gave me the self-confidence, im­ Before, a minor discourtesy from a proved lifestyle and happiness that grocery clerk would sink me into a pills, shock treatments and state­ week of depression and squirming, subsidized psychiatry had never destructive fantasies. Now I smile given me. and laugh at such things and I usu­ I lost over 100 pounds of morbid ally say a kind word that will have fat. I quit drinking and smoking. the person confiding in me the rea­ That haunted look has left my eyes. son why he or she insulted an unde­ I no longer weep wretchedly for a serving stranger in the first place. minimum of an hour a day. I now sleep soundly and manage well with How did it all happen? What was five hours per night, less than halfof the stimulus? Who or what do I the minimum twelve hours per day thank? Well, several people and that I used to spend in frightened, many things, but mostly I credit the protective slumber that was more experience of competition and the 1977 HELPED BY THE INVISmLE HAND 733 opportunity to try and fail, and dis­ it would catch my boss's corrective cover myselfstill alive, and then try eye. My neglect of it would finally again and again and finally succeed. cause me more problems than had I I thank the exhilaration of exerting steadily packed it in an ongoing my muscle and mind against the manner as it came down the chute real world and the rich, full, happy during the day. In other words, feeling that came from punching out trash-baled and stacked-meant: at the end of my shift and leaving a) keeping my job and income; b) the baling room filled up with continued opportunity to save neatly packed, tightly'wired, 500­ money for the future, my future that pound bales of trash standing in I now chose to look forward to. Take symmetrical rows against the walls. away the trash and a dismal hole To me, my daily transformation of opened in which to throw myselfand loose, randomly dropped mountains not even make a sound. Trash trans­ of trash into disposable units was lated itself into a convincing argu­ the embodiment of utilitarian ment. beauty! Yes, I was a trashman! For Sears, So, on my very first day ofmy new J. C. Penney and other companies. job, I decided that: nYes, I am frus­ And doubt it if you will, but the trated and yes, I am getting even trash challenged me! It motivated more aggravated by this job, but me! I unearthed a treasury of wis­ since I presently lack the skills and dom coming down the chute at experience to secure something bet­ Sears! The cardboard, the paper, the ter, I will stay right here and grow wood and glass and other waste did up and right now! I will convert my not quote to me from famous literary tensions into a personal gain, and nihilisms. The trash did not argue or change anxiety and anger into a debate or score points or use wit, nor paycheck. I will transform this did it listen to me do those things. knotted-up Minus in my seething No, the trash just resisted me. Its insides into a Plus! Instead of day­ prolonged presence and magnifica­ dreaming about maximums, I will do tion in the absence of my labor on something with minimums! Besides, it-well, those things contained per­ it feels 100 per cent better to be sonal implications that challenged awake with sweat and sore muscles me. Trash just lay there in a disor­ than to be dead asleep because my ganized heap that would not bale idle melancholy and morbidity itself and would inevitably get big­ caused consciousness to lose its at­ ger and bigger until it accumulated traction!" to such an unwieldy magnitude that So, I stayed and I worked hard! I 734 THE FREEMAN learned to listen and talk to people. I you negate the dignity ofthe human learned to accept authority without beings who create it and other resentment, to not fear a co-worker things. Ifyou weep bitter metaphys­ with bigger muscles and not to bully ical tears over soggy cardboard, then one smaller than I am. I learned to you cannot legitimately thrill to smile and laugh naturally and spon­ Cyrano de Bergerac, the Sistine taneously, to kid around without Chapel or Bach! Ifyou find misery in getting serious and to be serious so living, it is because you have not without kidding around. And, in my yet discovered life-life from more free time, I worked out in a gym than one isolated, negatively self­ instead of overeating. And I drove centered perspective. It is because out into the country and walked you have run away into the psychic around among the lilies of the field limbo of infinite questioning, eter­ and really considered them instead nal doubting and that deathly of reading the articulate illiteracy paralysis of not choosing to choose! and adolescent pretensions in the Why does Sartre want to trade his self-improvement books. I enjoy the sentiency for the inanimacy of a lilies, but I do not envy them. Com­ doorknob? Because he is jealous of it! parisons between men and women He is so undecided as to his own and flowers are impossible. I live by humanity because he has never my own thought and labor. I advance exercised it! You cannot eat as much in direct relation to the quality cake (and everything else) as he of my judgment and work. And does and still have your starving my happiness is powered primarily workers revolution too! by my simple confession that only In a little baby's power to fall death does not require daily main­ down, get up and go on chasing after tenance and growth. Since trash a puppy, there is more authentic does "require them, then trash is an commitment than in all the verbose integral positive of life to be valued volumes scrawled by a lifelong old in hierarchy, like all other things. man who has never changed a Deny the necessity of trash and diaper. ®

Two Hands Better Than One

IDEAS ON HE that gives good advice, builds with one hand; he that gives good council and example, builds with both; but he that gives good admoni­ tion and bad example, builds with one hand and pulls down with the LIBERTY other.

FRANCIS BACON Brian Summers THE DIVISION OF KNOWLEDGE

IN the 1930's and 1940's, F. A. alone. A complete list would include Hayek wrote a pioneering series of personal memories, innermost be­ essays describing how free market liefs, and unspoken ambitions. prices communicate knowledge. 1 However, only two types of such More recently, Israel M. Kirzner private knowledge will concern us reinforced and extended Hayek's ar­ here. One type is preferences, par­ guments.2 If Hayek and Kirzner are ticularly consumer preferences. A correct-and I believe they are-the consumer's preferences are gener­ free market is the most efficient ally unknown to others until he dis­ economic system because it most closes them by choosing one product fully utilizes the knowledge dis­ over another. Similarly, a worker's persed among the individual mem­ occupational preferences are re­ bers of society. vealed when he pursues a particular Every individual possesses a job. An individual's preferences are wealth of knowledge known to him his private knowledge until his ac­ tions reveal them. Mr. Summers is a member of the staff of The Foun­ The second type of private knowl­ dation for Economic Education. edge we will consider is that which lCollected in Individualism and Economic comes from being in a unique Order (University of Chicago Press, 1948). situation-the knowledge of the 2See especially Competition and Entre­ ~(man on the spot." For instance, a preneurship (University of Chicago Press, 1973) and Market Theory and the Price System gas station operator knows his (D. Van Nostrand, 1963). workers' skills, their personalities,

735 736 THE FREEMAN December

how well various workers get along partly based on private knowledge with one another, where to hire which he doesn't possess? part-time help, which equipment is This cannot be achieved by cen­ in good condition and which is likely tral planning-socialism-because to need repair, where to get spare the knowledge of millions of indi­ parts, where to get stock if supplies viduals cannot be concentrated at a are interrupted, when business is single point. In fact, the private likely to be busy and when it is knowledge we have been consider­ likely to be slow, his customers' par­ ing is knowledge which by its very ticular needs, and the like. Such nature cannot enter into statistics information is known to the and thus cannot be conveyed to a operator plus perhaps a few im­ government planner in statistical mediate acquaintances. form. What government statistics do The gas station operator possesses convey are aggregates and averages essentially private knowledge be­ which lump together, as resources of cause he is in a unique situation, at the same kind, items which differ in a unique location, dealing with quality, age, location, and other par­ unique individuals and equipment. ticulars. Such statistics are of little Clearly, efficient production re­ use to someone who may, for in­ quires that production decisions stance, need a certain kind of ball somehow take into account the bearing, and have no need for data operator's knowledge of particular on the nation's yearly output of ball circumstances as well as the unique bearings. knowledge ofother such ~~men on the To fully appreciate these prob­ spot." lems, we need to consider how pro­ But, efficiency requires more than duction and consumption decisions that production decisions be based are coordinated in a free market. on private knowledge. There must Suppose we are in a free market in exist a means by which each pro­ which a new use is discovered for ducer's decisions tend to coordinate copper. Almost immediately, the with the decisions of all the other market begins to adjust. Copper producers and consumers in society. miners start producing more copper, current users ofcopper begin to sub­ The Role of the Market stitute other resources, producers of On the face of it, this appears substitute resources adjust their impossible. How is an individual to outputs, producers of substitutes for coordinate his decisions with the de­ the substitute resources change cisions of millions of other people their production plans, and on and when their decisions are at least on throughout the market. 1977 THE DIVISION OF KNOWLEDGE 737

Prices Tell the Sto~y by a central authority and without In a free market all these changes knowing why demand is low and occur, not because everyone is in­ supply is high. formed about the new use for copper, Free market prices give each in­ but because the price ofcopper tends dividual at least some idea of what to rise. Most people do not know why others are likely to offer for his there is an increased demand for products. The Hgoing market price" copper; they do not know where or is an invaluable aid in planning for what use the copper is needed; production and consumption. For they do not know who is buying the commodities traded by speculators, copper; nor do they know his race, futures prices are a further aid. In sex, politics, or religion-factors a most cases, the manufacturer can socialist allocator ofresources might plan production without performing take into account. Free market extensive marketing research, i.e., prices are an impersonal means of without canvassing the public, find­ communicating knowledge. They ing his potential customers, and provide the individual with all he asking them what they would be needs to know to coordinate his pro­ willing to offer for this or that prod­ duction and consumption decisions uct. ,with those of his fellow men­ Free market prices also tell a without knowing anything about businessman the relative impor­ their particular decisions! tance others place on the factors of For example, if a scarce commod­ production (natural resources, labor, ity is in great demand, its price is and capital goods) which he can use high. The high price encourages in supplying other people's needs. people to make careful use of the The businessman is spared the commodity-which is precisely what monumental task of locating all potential users would want them to those who are interested in using do-without being aware of who is each factor of production, determin­ demanding the commodity or what ing the relative importance of each the total supply happens to be. In factor to each potential user, and fact, for many commodities, such as somehow forming an aggregate that natural resources, no one knows the expresses-in one number-the ~~to­ total supply or the identities of all tal importance" they place on each the potential users. particular factor. If a commodity's price is low be­ In a free market, the contribution cause of low demand and large sup­ of each particular factor of produc­ ply, people will make freer use ofthe tion-each unit oflabor, each unit of commodity-without being ordered natural resources, each capital 738 THE FREEMAN December good-is evaluated according to how and/or it is being used where each much the factor adds to production, ton of copper contributes little to and the expected selling price of the physical output. In these cases, each product. Hence, the contribution of ton of copper makes. only a small each factor depends on how it is contribution to the revenues of the employed. Efficient production re­ manufacturer using it. As a result, quires that each factor be employed manufacturers place low values on where it makes the greatest contri­ copper, and it can be obtained for a bution. low price. Suppose an entrepreneur surveys Errors to be Corrected this situation and discovers what he Because knowledge is divided believes to be a more profitable way among millions of individuals, with of using copper-by making a prod­ no one knowing more than a tiny uct which he hopes -consumers will part, factors of production _often are value highly and/or by using a employed where they make less method of production which gets than the maximum contribution. A more output per unit input. If he is manufacturer may be unaware that wrong-and has overestimated the a factor could make a greater con­ prices consumers will pay and/or tribution in another employment. underestimated his expenses-he. Those who know of other employ­ will fare no better than most other ments may be unaware of the manufacturers and have little im­ availability of the factor, or even of pact on the market. its existence. If he is right, however, he will To correct these misallocations of earn high profits because ~ach ton of scarce resources,we need a system copper will make a large contribu­ that (1) provides a means of discov­ tion to his revenues. His profits will ering misallocations, (2) stimulates encourage and enable him to expand people to use the means ofdiscovery, production, and he will bid more and (3) encourages people to transfer more copper away from other man­ control of resources to manufactur­ ufacturers. Other businessmen will ers who have discovered misalloca­ notice his profits, stop using copper tions, and (4) rewards the correction in the old and relatively unproduc­ of misallocations. tive employments, and start copying All this is accomplished by the his use ofcopper. In the process, com­ free market profit and loss system. petitive bidding will tend to raise Suppose, for example, copper is the-price ofcopper to reflect its new, being used to make products on more productive use. At the same which consumers place low values, time, increased output will tend to 1977 THE DIVISION OF KNOWLEDGE 739 reduce the price of the entrepre­ deals; they must be made aware of neur's product. Competition assures the better deals. Hence, advertising that the entrepreneur has no is colorful, humorous, shrill, repet­ guarantee of permanent profits. itive-whatever it takes to attract This, in essence, is how misalloca­ ~onsumers' attention. In the process, tions are discovered and corrected consumers learn about products, by profit-seeking manufacturers. businessmen learn about consumer Production is most efficient when preferences, and consumers often each factor of production is making learn something about their own the greatest possible contribution. preferences. By moving factors to more produc­ Many people attack certain profits tive uses, manufacturers earn pro­ (but never losses) as ~~excessive." fits. But, in a free market, so-called ~~ex­ Thus, in a free market anyone can cessive" profits mean that an ~~ex­ determine a manufacturer's effi­ cessive" misallocation of scarce re­ ciency by examining his profit and sources is being corrected. Attack­ loss statement. Under socialism, ing profits is attacking the very pro­ there is no comparable test for effi­ cess that exposes and corrects misal­ ciency. locations. Of course, many businessmen are Many socialists contend that the not manufacturers. Many of them competitive processes just described are middlemen who use their special are wasteful because competition knowledge of market conditions to results in ~~needless duplication." A ~~bring together" buyers and sellers socialist sees two producers making who are unaware of one another's similar products and immediately willingness to exchange. A con­ concludes that one of them is super­ sumer cannot enjoy a product if he fluous. But which one would the doesn't know ofits existence or ofits socialist close down? Each producer availability at an acceptable price. is trying to earn profits by using Middlemen are ~~men on the spot" each factor of production where it who perform a vital role in reducing makes the greatest contribution. No ignorance. one knows which one will be the more successful. Of course, anyone Competition can look back fifty years and assert Advertising performs a similar which producers were the most suc­ role. A businessman cannot correct cessful. But, no one can look forward a misallocation if consumers don't and know, before the fact, which know about his product. It is not producer will prove to be the most enough to offer consumers better efficient. That will have to be de- 740 THE FREEMAN cided, in time, by the same competi­ ones. Other interventions-such as tive processes socialists condemn. taxes on profits, monopoly Perhaps some socialists have been privileges, tariffs, and subsidies to misled by the idea that CCthe market inefficient producers-prevent mis­ is a computer." Maybe they think allocations from being corrected. they can improve upon this cCcompu­ ter." But a computer uses data that The free market pricing system is is all cCgiven" to a single operator. the only viable means of com­ The market, on the other hand, is a municating many forms of knowl­ means ofcommunicating millions of edge, particularly consumer prefer­ pieces of information, each of which ences and their influence on the use is known by at most a few individ­ ofscarce resources. In a free market, uals. The cCcomputer" analogy is an each price represents millions of unfortunate error. pieces of knowledge, with no one Any government intervention dis­ knowing more than a few of the rupts the market process. Govern­ pieces. In a command economy this ment interference with free market communication breaks down, and pricing must, by its very nature, not cCprices" reflect the ignorance, fears, only prevent misallocations from and political aspirations of the au­ being revealed, but also create new thorities in power. @

Efficient and Voluntary

THE price system has two outstanding features. First, it is by all odds the most efficient system ofsocial organization ever conceived. It makes it possible for huge multitudes to cooperate effectively, multitudes who IDEAS ON may hardly know of each other's existence, or whose personal attitudes toward one another may be indifference or hostility. Second, it affords a maximum of individual freedom and a minimum of coercion. And since LIBERTY people can cooperate effectively in production even when their attitudes on other issues are hostile, there is no need for unity and conformity in religion, politics, recreation, and language-or even in patriotism and good will except in the very broadest sense.

w. ALLEN WALLIS, «The Price System" Hans F. Sennholz

FREEDOM IS INDIVISIBLE

MANY opponents of nationalized care is too important to be subjected medicine question its workability, to bureaucratic regulation and con­ while surrendering the foundation trol. Its quality will decline and its upon which it would rest. They have expenses will soar." yielded to the philosophical premise Such arguments are not persua­ that medical care, like education, sive once you accept government as ought to be available to everyone as the regulator ofour economic affairs his right. They subscribe to the no­ and the guarantor ofeconomic well­ tion that certain services are the being. There are differences be­ proper concern of government, tween public education and public which must control and regulate health. But if government is ex­ them, or even provide them for the pected to provide the former because benefit of all. While they embrace public education is said to be so bene­ the principle of political control of ficial for all, why should govern­ some industries, and political read­ ment not provide an equal, or even justments of individual income and more beneficial, service to public wealth, they find it disturbing when health? If an army of public school politics finally turns its attention to teachers can render valuable ser­ their particular profession. ~~But we vices to public educatien, can not an are different," they tell us. ~~Medical army of physicians, under similar employment conditions, render Dr. Sennholz heads the Department of Economics at equally valuaple services to public Grove City College and is a noted writer and lecturer health? There are technical differ­ on monetary and economic affairs. This article is reprinted by permission from the October 1977 issue ences: the education of our children of Private Practice. is imparted collectively to small 742 THE FREEMAN December

groups assembled in public build­ right in nature nor in the realm of ings, while medical care in most human action. The right to services cases is provided individually in and benefits, which so many are non-public buildings. A surgeon op­ proclaiming today, is merely the erates on patients one at a time. But right to seize income and wealth such differences do not explain why from other individuals through the government should be more con­ body politic. The right of one is the cerned about education than it is duty of another, the benefit of one is about medical care. the loss of another. The right to services and benefits actually is the In the United States, government right to tax and confiscate, which pays for all or part of the medical not only negates someone else's care for some 70 million persons­ rights to his own labor and freedom, veterans, Medicare and Medicaid but also jeopardizes peaceful and recipients, members of the armed harmonious social cooperation. A forces, and others. Thus, govern­ society that creates such rights be­ ment is already providing limited comes a conflict society in which nationalized medicine to vast num­ political might is the source of all bers of people. If this is fair and rights. And the rights of some be- . equitable, if this is the proper func­ come the tyranny of others. tion of government for 70 million people, why should it be so outra­ The physician who readily accepts geous for 200 million Americans? the transfer system in education, The answer is simple: one practice transportation, communication, or is as bad as the other. But the urban redevelopment must find it multiplication of government ser­ very difficult to prove why medical vices to more and more people is care should not be redeveloped ac­ multiplying the evil, which must cording to similar plans. The dentist prevail in the end. This is why we who, as a student at a state college should regret and oppose each and and state dental school, applauded every step toward a provider society, massive redistribution through pub­ the national education system as lic education, cannot logically op­ well as a national health system, pose more transfer through public and all others. medical care. We should deny the philosophical But who wants to be logical in premise of the welfare state that such matters? The physician who education, medical care, and the like clamors for a million dollar Federal ought to be available to all as a grant to his community hospital matter of right. There is no such may resent the half-million dollar 1977 FREEOOM IS INDIVISIBLE 743 grant to the new community center. are now taken to be unquestioned The industrialist with a multimil­ prerogatives of the profession. Old lion dollar Federal loan may be in­ license and accreditation procedures dignant about the food stamps that force the student of law to attend a enrich the idle paupers. And the school accredited by the American Social Security beneficiary who is Bar Association, and then seek ad­ anxiously awaiting another raise is mission to a state bar after passing a loudly condemning Federal aid to mandatory state examination. The higher education. In the end, they all procedure anchored in state legisla­ may perish in the sinking ship, even tion shelters the attorneys in each the innocent passengers. state from competition not only by unlicensed practitioners but also by To defend individual freedom suc­ other attorneys properly licensed in cessfully we must rally to the de­ other states. Of course, the legisla­ fense of all professional and tion was passed in order to economic freedoms. To reverse the safeguard and improve the quality long trend toward political power oflegal services to the citizenry. But and economic conflict, we must turn unfortunately it also greatly reduces away from government as a conve­ the number ofattorneys available in nient source of rights and benefits, each state, necessitates more labor and once again rely on individual reaching across state lines, and effort and initiative to solve our otherwise raises the costs of legal problems. And lest we be suspect of services and the incomes of the insincerity in the defense of properly trained and licensed attor­ freedom-that we seek it whenever neys at law. While we need not it presumably favors us, but prefer question the motivation of the qual­ government regulation and control ity legislation, its effects cast doubt whenever they promise benefits on the stated objectives of bar as­ to us-we must·be uncompromising­ sociations and their recom­ ly consistent. In particular, we must mendations for further legislation show the way by shunning and re­ toward professional improvements. linquishing all rights and privileges To question the state license pro­ that favor our own profession. The cedures for schools, members, and college professor must reject the their places of work is like question­ Federal research grant offered to ing the very existence of the profes­ him, and the physician the Federal sion. But where government is the subsidy to the community hospital. acknowledged author of license and Some government favors were livelihood, it can also author a na­ granted in the distant past, which tional health system. @ Joe Hochderffer HEALTH PLANNING IN FORT WAYNE- The Six Million Dollar Fizzle

FEDERAL health planning has cost passed to correct the blunders of a our community more than six mil­ previous Congress which, in 1965, lion dollars in inflated construction created Medicare and Medicaid. costs, a two-year denial of needed In the summer of 1973 Fort hospital facilities, and a confused, Wayne was a placid community of divided citizenry. 170,000 people earning higher than This year the Northern Indiana average incomes and served by six Health Systems Agency, a creature shopping centers, five McDonalds, of Public Law 93-641, the health two Holiday Inns, and three general planning law, expects to become one community hospitals. Not one in a of the nation's first HSAs to receive thousand residents was aware that ((full designation" as a health plan­ his tax dollars supported the newly ning agency by HEW. formed Health Planning Council The Fort Wayne story began (HPC), staffed by a handful of plan­ shortly after Federal health plan­ ners and secretaries whose ning became the law of the land. paychecks came circuitously from This was the result ofa 1971 law, PL HEW. 92-603, which created Health Plan­ The health planners were making ning Councils. PL 92-603 was speeches about the plan they were going to create for our nine-county Health Planning Area when, sud­ Mr. Hochderffer is Assistant Administrator, Park­ denly, two separate groups of physi­ view Memorial Hospital, Fort Wayne, Indiana. This article is reprinted by permission from the cians presented them with proposals August 1977 issue of Private Practice. to build additional hospitals in Fort

744 HEALTH PLANNING IN FORT WAYNE 745

Wayne. The need for additional Head Start facilities was well known toa com­ Each hospital had expansion munity accustomed to overflowing plans on the drawing boards when hospitals. the health planning legislation was Federal procedure called for the passed. Being more familiar with planners to consider whether or not the law than others (because they a proposal fit the overall community had to be), the hospitals had been health plan. And there was no such waiting for the HPC to develop its plan. So the planners determined master plan before submitting ex­ within a few weeks that Fort Wayne pansion proposals. needed 156 medical-surgical beds. Now the State Board of Health A Health Planning Council, asked the hospitals ifthey could add which by law must be composed of 156 beds more economically than more health care Hconsumers" than could the backers of new hospitals. ~~providers,"started a series ofdelib­ Yes, they could. erations. After weeks of testimony The reason was simple: new hos­ and hearings, the consumer­ pitals had to build laboratories, dominated body approved one pro­ x-ray departments, kitchens, phar­ posal and forwarded it to the State macies, and laundries to serve their Board ofHealth for final action. The beds; existing hospitals already had other they sent to the State Board of such ancillary services and needed Health without recommendation. only to utilize them more fully or Thus a local controversy was trans­ enlarge them. ferred to the State Board of Health During the next several months for resolution. as the local HPC again went The state board dug out its through a long series of meetings to guidelines and discovered that any consider plans of the existing hospi­ proposal it approved must conform tals' promoters of new hospitals de­ to a State Plan, which was a crea­ bated board members and adminis­ ture of the Hill-Burton Act. Under trators ofexisting hospitals. And the the State Plan, Fort Wayne was al­ public got a picture of three giant lotted three hospitals-and they al­ hospitals conspiring to gain a ready existed. monopoly and to strangle any at­ ~~What about those three hospi­ tempt to build a fourth hospital in tals?" the state board asked. ~~Did Fort Wayne. they plan to do anything about the The public still had the idea that hospital bed shortage in Fort we were under the free enterprise Wayne?" system. They believed that if a As a matter of fact, they did. group of people wanted to build a 746 THE FREEMAN December hospital, and had the wherewithal public that had had no previous to do it, they should be able to. knowledge of health planning laws The public was not aware that and regulations. when it turned the hospital care of There followed two years of law­ its senior citizens over to Medicare suits by new hospital backers, dur­ free enterprise went out the window. ing which time existing hospitals If you do not get HPC approval of were enjoined from carrying out ex­ your capital outlays, the law states, pansion plans. And inflation hurried you cannot count those expenditures on, unrestrained. as legitimate costs when the gov­ The appeals process was not ernment reimburses you for exhausted until late 1976, when the Medicare/Medicaid patients. fourth hospital backers had clearly So existing hospitals and· backers lost. Nobody in Fort Wayne felt good ofnew ones were forced to seek HPC about the whole matter. I work for approval for new facilities. Since one of the existing hospitals, the there was a magic quota fixed by alleged winners, and there's a dirty master planners on the number of taste in my mouth. beds needed, existing hospitals True, our present three hospitals could win only at the expense ofnew can build and operate new beds more hospitals, and new hospitals could economically than could a new hos­ win only ifold hospitals were denied pital. But the Federal planning pro­ expansion plans. What was in real­ cess created a divided medical staff ity a battle of ((hospitals versus Fed,. at our hospital, caused; bitter eral quotas" appeared to be ((hospi­ animosities .within the community; tals versus hospitals." wasted thousands of hours and mil­ lions of dollars, and after four years Action Delayed has not yet produced a single new When the smoke cleared six hospital bed in Fort Wayne. months later, existing hospitals That was all under the old plan­ were allowed to expand. They could ning law, 92-603. Now we have a add new beds more economically new law, PL 93-641, that is much than a new hospital could build more restrictive. them. It mandates ((consumer" domina­ But that was not the stated reason tion of HSA boards. On the surface for the decision. The stated reason this is not much different-from PL was that the State Plan called for 92-603. That law required ((consum­ only three hospitals in Fort Wayne ers" to comprise at least 51% of and therefore a fourth one could not planning boards; nproviders" of be built. This seemed ridiculous to a health care (doctors, dentists, 1977 HEALTH PLANNING IN FORT WAYNE 747 nurses, hospital administrators) meet the approval of HEW bureau­ comprised the remaining 49%. A crats. ~~provider" was defined as anyone The new law eventually substi­ who derived a major portion of his tutes Federal power for state power. income from providing health ser­ Under previous laws, final vices. The new law is different. It decision-making was done by state broadens the definition of~~provider" boards of health. Under PL 93-641, to include anyone who has even re­ as soon as the HSA receives ~~full mote connections with a medical in­ designation," it becomes the final stitution. Hospital board members, authority. for example, who usually serve Ours was one of the three Fort without pay and who derive their Wayne hospitals asked to submit income from other sources, are clas­ plans and cost estimates for adding sified as ~~providers."People who sell beds back when the Health Plan­ health insurance are ~~providers." ning Council was considering appli­ Thus the effect of the new law is to cations for new hospitals in the city. insure domination on planning On our drawing boards at that time agency boards of persons wholly ig­ (1973) was a large project to expand norant of medical care. In practice, certain service departments such as these people become dependent upon x-ray, laboratory, and dietary which the professional planners employed our hospital had outgrown. We were by HEW to guide them in the deci­ also considering additional beds, but sion-making process. those plans were not as well­ developed nor was the need so press­ A New Base of Power ing as that of the ancillary depart­ The new law further removes the ment expansion. power base from the local commu­ nity. PL 92-603 had shifted the An Efficient Business planning base from the community In its 20-year history our hospital to a multi-county district. PL 93-641 had grown from 250 beds to a 600­ eliminates these small districts and bed regional referral center. We creates large ones. Our HSA covers were one of the most successful and one-third of Indiana, from the financially sound hospitals in the Chicago suburbs to the farmlands of nation. We had consistently oper­ northeastern Indiana. ated at high occupancy (over 90%), PL 93-641 mandates planning. No had engaged in six expansion proj­ hospital (or any other business) ever ects and paid for them without in­ survived without planning, so curring major debt, and were charg­ what's new? Now the planning must ing our patients $10 a day below the 748 THE FREEMAN December state average and $30 a day under Our bed proposal was approved, national averages. In American including the percentages of upcom­ Hospital Association records we ing ancillary expansion, plans could find no hospital in our class which had not yet been submitted. operating as inexpensively as we Then followed the two years of law­ were. suits and injunctions, during which In 1970 we had added 56 beds and time we had undersized service de­ paid for it out ofoperations. In 1973 partments to accommodate growing we needed to expand ancillary de­ numbers of patients. We could not partments to handle the increased proceed with ancillary expansion, capacity, as well as the burgeoning because the size of that expansion growth of outpatient business. depended on whether or not we re­ When the planners asked us how ceived final approval for the new much it would cost to add new beds, beds. we had to speed up the planning New Planners for Old process for beds and delay the ancil­ lary expansion plans. We asked if During the waiting period, PL we should submit both proposals at 93-641 replaced PL 92-603 as the once, because our most pressing Federal health planning law. Old need was for ancillary, not bed, ex­ health planning boards were re­ pansion. placed with large new ones. New No, said the planners, that would bureaucrats moved into the wealth cloud the issue. Just tell us how of new Federal jobs created. And much the beds would cost. when the court decision finally freed Okay, we said, but we can't add us to add the beds, we faced a new beds without expanding service de­ agency with a new set of rules partments. The new beds will mean in trying to get approval for ancil­ that we must enlarge our ancillary lary expansion. areas slightly more than our exist­ We brought our ancillary expan­ ing plans call for. How will we show sion proposal before them. that in our proposal for new beds? Our hospital, with its one part­ Just take a percentage of your time planner (me), faced a new ancillary expansion needs and tack agency with a staff of 25 planners. that onto your bed proposal, said the ((How many meals do you produce planners. per square foot?" they asked. ((Why So we did. It was backwards plan­ is the volume of x-rays performed so ning as far as we were concerned, much higher on the day shift than but we did it the way the planners on the night shift? Can you fully told us. document the need for 2,750 more 1977 HEALTH PLANNING IN FORT WAYNE 749 square feet of surgery? Why not even with proposed expansion, our 1,375 square feet?" square footages were below the Thus began a six-month ordeal to ranges the planners had used. Even try to get facilities to serve patients with construction and financing who had been denied them too long. costs added, our rates would still be What evolved was an 80-page ap­ far under state and national aver­ plication plus a 40-page financial ages. feasibility study conducted by inde­ The board went against its own pendent auditors. The fourth draft of staff and approved us. this document was accepted as But, we were to discover, the fight adequate. had just begun. Following Federal guidelines to Proposal Rejected the letter, we met with the HSA staff a given number of days before The group that endorsed our proj­ the board hearing was to be held. ect was known as a ~~sub-area coun­ They informed us that the staff cil." The next step was to get ap­ would recommend our project be re­ proval before the executive commit­ jected. tee of the Northern Indiana Health Why? we asked. Systems Agency. This was a small Because it does not meet Federal committee, most of whose members mandates to contain costs, they re­ lived more than a hundred miles plied. from our community and whose al­ But, we protested, our hospital legiance to the professional planners has the best cost record in the coun­ was unmistakable. try. It would seem that you would The hearing was held 70 miles want to encourage operations such from home. The procedure allowed as ours. no presentation on our part. We True, they said, you have a good were permitted to answer questions, cost record. But we have no assur­ but nothing else. Ittook less than 10 ance that it will continue. minutes for them to dispose of us. During the next hour our board Our proposal was rejected. members and administration made We had one more chance. almost no impression on the HSA At this point the HSA had only staff. So we decided to take our case qrecommending" authority. The to their board anyway. final decision still rested with the Our presentation before the board state board of health. Our alterna­ convinced them that our project was tives were either to take our appli­ deserving and financially feasible. cation to the state board of health We were able to demonstrate that, -with one ((approval" and one ~~dis- 750 THE FREEMAN December approval" on our record-or with­ be reduced or eliminated. Should draw it, as the planners hinted we, for example, scale down the we should do, and revise it. dietary department or surgery, or Our inclination was to go to the what? state board. These were reasonable The director merely looked over people who were familiar with our our heads at the light fixtures. We hospital. Surely we could get a fair were patiently reminded of Federal shake. concern over medical costs and But the Federal procedure stated gently scolded for not being more that if an applicant is turned down cooperative with the planning staff. by the state agency, it cannot sub­ After a series of hints and innuen­ mit the proposal again for three does, we finally got the picture. years. Our patients had already ~~Cut at least 10% from the costs. waited three years, should we gam­ We don't care where or how you do ble? it. Just cut the dollars." Through unofficial channels we On the surface this sounds rea­ tried to get a feel as to how the state sonable. Federal planners insisting board ofhealth viewed our proposal. that those inefficient, gouge-the­ What we learned was frightening. public hospitals reduce their expen­ ditures. Who could quarrel with SUbsidy Means Control that? The state board was intimidated. But our hospital was not ineffi­ Much of the State Health Depart­ cient. Its cost record was doc­ ment's funding comes from Federal umented and known. It had dem­ sources. And the word was that ifthe onstrated at the public hearing that state didn't go along with the Fed­ if it were to become ~(average" (and eral recommendations, there would thus fit all the planners' guidelines) be serious questions raised about it would spend an extra $8 million in Federal Funding in other areas of operating costs in two years, nearly operations. enough to finance the proposed We learned (unofficially) that our building project. project didn't stand a chance. We had learned our lesson, how­ So we withdrew it, as the planners ever. The Federal planners now had suggested. Our next step was to called the tune. No longer did our meet with them and learn the sur­ hospital board determine the in­ render terms. stitution's destiny. What counted In a two-hour conference with the was how close the hospital could top HSA officials, we asked what it come to the ((averages" used in was in our application that should planners' reference guides. 1977 HEALTH PLANNING IN FORT WAYNE 751

Playing Their Game cent per month all that time. We'll The purpose of the average is, have to build these inflated costs presumably, to bring below-average into our charge structure. (And hospitals up to par. The effect is also guess whom the public will blame?) to bring above-average hospitals, Today in Fort Wayne $27 million such as ours, down to par. in construction is underway by three In order to get the needed hospitals. If hospital boards (much facilities, we played the game. more local in composition and with a The cuts made in our project were greater ratio of consumers than the designed to please the planners, not HSA boards) had determined the to make good economic or opera­ construction starts, rather than tional sense. The planners, in effect, governmental agencies, more than wrote our new application for us. We $6 million could have been saved. ground out more reams of data­ Many Fort Wayne citizens still laboratory procedures per square believe that the three existing hos­ foot, man hours per meal, ad in­ pitals kept a fourth hospital from finitum. It was the same material opening in their community. That we'd done before, only turned upside the public itself allowed Federal in­ down to please the bureaucrats. tervention, through Medicare and The HSA staff approved us this health planning laws, to stifle free time. The subarea council okayed us enterprise, they do not believe. (for a second time).and the executive In the rest ofthe nation HSAs are committee gave us unanimous ap­ not yet in full operation. But the proval. Now we can .build; we've mandate is clear. The Federal plan­ paid the ransom. ners will absolutely control hospital In the spring of 1977 we broke development. They will not save ground on a project that, without the money, they will waste it. Federal planning laws, would have They will achieve only one thing: been started in 1974. Construction control. And that's what they're af­ costs have been escalating at one per ter. @

Due Process IDEAS ON IT is hardly lack of due process for the government to regulate that which it subsidizes. LIBERTY UNITED STATES SUPREME COUR'I Wickard v. Filburn, 317 U.S. 111, p. 131, Oct. 1942 John Hospers

ON BEING EQUAL

LET'S suppose we all start out to do this if the enterprising people equally, say with $1000. How long had not created the businesses that would this equality last? provided them the work. Some people would spend the And so by the end of a year, let us whole thousand the same day and be say, some would have nothing, some penniless by nightfall. Others would would have part of the original spend it in a week, others in a thousand, and others would have month. Still others would put the multiplied the original amount money to work: in a bank, to collect many times over. They would end up interest; or in stocks or bonds; or as with unequal incomes. down payment on a farm or shop. Suppose now that the government The most adventurous ones would intervened to make it all equal put the whole $1000 into some such again. Those who had nothing left new enterprise and even borrow, at would get $1000. Those who had interest, from others. With this they $100 left would get $900. Those who would buy a plant and materials, had more than $1000 would have to and put other people to work. give up the surplus to provide the These workers would then be able to others with what they had spent. save their original $1000 and spend What would happen now? only out of what they had earned. Those who had spent it before But they would not have been able would spend it again, believing that the government would reimburse Dr. Hospers is Professor of Philosophy, University of Southern California, Los Angeles. them for what they had spent. Those

752 ON BEING EQUAL 753

who previously had spent some but professional robber will do the job not all of it would now spend it all, himselfand hold up the other person knowing they'd get more from the at gunpoint, or burglarize his house government the more they spent. while he's away. But most people And what of those who had multi­ don't dare risk this. They do it plied their returns? They'd be very another way. They vote for senators cautious about doing it again, be­ and representatives who will in turn lieving that it would only be taken vote in Congress to take it away away from them at the end of from those who have earned it, so another year. So they'd probably that it can be given to those who spend it too. But if everyone did have not. Not wanting to take the that, whence would come the risks and see the blood themselves, goodies to be distributed the follow­ they hire a stick-up man who will ing year? use force and threat offorce to do the The moral ofthis little tale is very job. simple: if everyone received the Doing the stick-up job via one's same income no matter what each congressman may give some people did, soon there would be nothing left a kind of satisfaction-it has to distribute. There would be equal­ brought the achiever down to their ity, but equality ofzero. Ifpeople are level. But by doing this they have, of to achieve anything, they must be course, robbed the man who earned able to keep at least a good part of it; not only that, in the end they what they have earned; otherwise have robbed themselves too. They there will be no point in trying to may be accustomed to having con­ improve themselves by earning sumer goods which the achiever has more-while incidentally providing produced; and ifthey keep on taking employment for others. his income away from him, finally he won't care to produce any more. Commensurate Rewards Why go to the trouble and expense, People's achievements are un­ and risk of laying his money on the equal. People's labors are unequal. line for uncertain returns, ifit's only People's efforts are unequal. Accord­ going to be taken away from him ingly, it is only natural that their anyway? Aside from the loss of rewards should be unequal. motivation to produce, in the end he But some people object if rewards won't be able to produce. are unequal. Many a person, seeing To produce, the achiever has to others earn more income than him­ have capital, to keep his equipment self, says: ~tThey're getting too renewed, to pay his workers, to much! Take it away from them!" A modernize his plant. He won't be 754 THE FREEMAN December able to do any of these things if he the services they have made avail­ can't keep what he earns. And when able to you. the factory closes, his'employees will And remember that those who be out of work. So there are already make a lot of money'are no threat to several disadvantages to this you. Ifyou don't like the rock singer scheme: he will be bankrupt, the em­ whoearns haifa million a year, ployees will no longer have work, remember that you don't have to and the consumers will be without patronize him. You don't have to a product they had before. contribute one penny to his success. Yet in spite of this,many people Whether or not he succeeds is en­ are envious of those who succeed. tirely up to consumers of his prod­ ttWe should all'be equal," they say, uct. As long as he'earns his money ttnot only before the law, but in in­ from those who voluntarily pay to come." The people who say this are hear him, you have no reason to usually the people who don't pro­ resent him. You are perfectly free to duce anything and want to be taken ignore him-which is more than you care of by the people who do. can say of the government. You pay not one penny ofextra tax because of Imitate Success his success. In fact you probably pay Let us not try to take it away from less because he pays more. the man who succeeds. Let us not There's another point often forgot­ even envy him; rather let us try to ten. No person can produce a prod­ emulate him if we can. Meanwhile, uct or a service on the free market let us realize how much we depend by forcibly taking money from other on him. Those to whom we owe the people. He may spend all his money debt, we would not be able to repay and borrow more to start up a busi­ in a hundred lifetimes. How many ness that makes a new product, and lifetimes do you think it would take if he earns a million dollars from it you or me to repay Thomas Edison (and the chances are very much for all he did to advance the human against this) the only way he can do condition? When you pick up a tele­ it is to produce in quantity a'product phone, think of the thousands of that millions ofpeople are willing to people whose efforts have made it buy at the price for which he offers possible for you to dial and reach in it. And they will do that only if the a few seconds a person three product is better or cheaper than the thousand miles away. Could you competition offers. have done it yourself? No? Then The president of General Motors don't resent or rob the persons who is an influential man, but he has no did-not as long as you desire to use power to arrest you if you don't buy 1977 ON BEING EQUAL 755 his products, or to try you or fine you bureaucracy is always unwieldy and or jail you if you refuse. He offers wasteful: the money they're using is you a product at a price, and if you not their own money, but yours. don't want to pay the price you can If a person is spending money he turn to someone else. At least that's earned himself, he is usually pretty the way things are in a free competi­ careful about how he spends it be­ tive society. Competition keeps the cause he knows how hard it was to price down, and keeps the producers acquire (if he does spend it wild­ always on their toes. ly, then he's broke, and that's his problem, not yours). But if he's a Why Governments So Often government official, and has mil­ Behave Irresponsibly lions of your dollars to spend, he It's all very different with govern­ won't be nearly as careful-he prob­ ment, of course. When the govern­ ably won't be careful at all. Would ment does something, it doesn't you be as careful how you spent it if have to make money; almost always you suddenly had a million dollars of the government enterprise loses other people's money to spend, and money, and spreads the loss to you even if you misspent it or wasted it and the other taxpayers. There is no you knew you could tax people and competition to keep the price down, get more where that came from? for the government creates a But most people seem confused monopoly. The government­ about this difference. They don't see operated Post Office Department that when a corporation president won't permit anyone else to handle buys a yacht, no one else is taxed to first-class mail. If it did, the Post help pay for it. But when the presi­ Office Department would be out of dent of the United States gets a business in a week. It can maintain yacht, the taxpayers will have paid its status only by being a monopoly. for it down to the last bolt and screw. Nor is there any great incentive to offer efficient service, or to serve you Is It Worth It? well. After all, if you don't like it, Sometimes the service you get in what can you do about it? You can't return for your tax dollar may be go to any private handler of mail worth it. Maybe the president is because that's not permitted. You worth what he gets. Maybe con­ have to go through the government gressmen are too, though at the or not have such a service at all­ moment many seem to be largely and they know it. That's why gov­ concerned with spending taxpayers' ernment personnel are often so cyni­ money. Sometimes the police are cal and so inefficient. That's why worth it: that depends on where you 756 THE FREEMAN live and how much you need them produce in various ways: new prod­ and how well they respond to those ucts, new versions of old products, needs. But many others are not­ services, inventions, ideas; both especially the endless array of gov­ workers and managers are producers, ernment regulators in the each in his own way. Nonproducers, thousands of government agencies, by and large, are to be found on the who dream up one regulation after receiving end of a government pay­ another by which they can cripple out, paid for out of your labor. your business and bury you in un­ This, of course, places an ever necessary paper work filling out heavier burden on the producers. If their forms, and take out of your they are squeezed much further, paycheck in taxes the money they production for trade will finally use to regulate you. They may not cease, and we shall be in a state of know anything about your business, splendidly equalized destitution. It but they can still force you to con­ is time that we brought this mania duct it their way. for equality to a halt. For if we do And so it comes to this: there are not, we shall indeed all be equal, in producers and nonproducers. People poverty and starvation. @

Equality

No DOUBT all the trees in the forest fundamentally have equal rights and privileges. But they don't all grow to the same height, and it would seem rather foolish to cut the tall trees down to the level of the lesser ones to satisfy the theoretical demands of an unnatural formula. And it

IDEAS ON would seem just as preposterous ruthlessly to pull the short trees up to the height of the tall ones. If we did, it would mean their uprooting­ they would wither and die, as all things do unless they grow by LIBERTY themselves from their own roots. And so, to those who would like to eliminate differences among men, it should be said that if it were possible to do so, progress would cease. Equality cannot therefore mean to bring all men low. It must mean opportunity for each man to rise to those heights to which his energies and abilities will take him-and allow all men the same privilege-to the end that progress may continue, and that thereby all will find benefit. Equality which means less than this is not equality at all-it is slavery.

RICHARD L. EVANS A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

ALEXANDER HAMILTON

To Holmes Alexander, who has At a younger age I would have put watched the passing show as a syn­ Jefferson and Madison on pedestals dicated columnist in Washington for fully as high as the one Holmes thirty years, our first Secretary of Alexander reserves for Hamilton. the Treasury Alexander Hamilton J efferson, with his purchase of the qualifies as the ((second greatest Louisiana Territory, made us a con­ American." (George Washington is tinental people. He, along with his the obvious first.) The Jeffersonians fellow Virginians, will be associated will hate the choice, but Mr. Alex­ forever with the Bill of Rights. ander goes a long way toward sus­ Hamilton's own definitive role in taining it in his biography ofHamil­ shaping our Constitution cannot be ton, To Covet Honor (Western Is­ denied, but the final document rep­ lands, 395 Concord Avenue, Belmont, resented a Madisonian ((pull back" Massachusetts, 02178, $12.00). from Hamiltonian centralization. For myself as a reviewer, I was When I look at the way the federal convinced by Mr. Alexander while I government has perverted the gen­ was reading his heroic and tragic eral welfare clause of the Constitu­ evocation ofHamilton's career, from tion and denied the States' and indi­ his illegitimate birth in the West vidual rights implications of the Indies to his death in the duel with Ninth and Tenth Amendments, I Aaron Burr. But maybe the times tremble to think ofwhat might have have something to do with my feel­ happened ifHamilton had succeeded ings. in endowing a strong executive with 758 THE FREEMAN December

the union from disintegration at the outset. Our country did well in the years it abided by Hamiltonian fiscal principles. Now that we are threat­ ened with dissolution from the fi­ nancial repudiation that is inherent in inflation, we can see all the more clearly the justice of Hamilton's claim to be second only to Washing­ ton as a nation maker. Hamilton's statement, that Hthe creation of a debt should always be accompanied with the means ofextinguishment," has, in late years, been so honored in ALEXANDER HAMILTON. the breach that we may be past recovery. Certainly the Madisonian the right to appoint State governors. constitution and the Jeffersonian That sort of thing led to the fatal Bill of Rights will be doomed if rigidity of the Old Regime in Hamilton's anti-inflation principles France. can't be restored. But if Hamilton must yield to Madison as a Constitution maker, Hamilton's Ancestry Mr. Alexander clearly establishes Mr. Alexander plays down the the importance offiscal sobriety and whole question of Hamilton's ances­ probity if a nation is to endure. If try. West Indian records of the Madison had prevailed over Hamil­ Eighteenth Century are so fragmen­ ton on the issue ofthe public credit, it tary, and so contradictory where is doubtful that we would have had a they do exist, that no one can be sure country to enjoy life under a con­ about anything. Hamilton himself stitution in the first place. Madison chose his own birthplace and birth was against Hamilton's plan for the date and paternal forebears. Mr. Federal assumption of state debts. Alexander apparently believes that But a government born in repudia­ the less said about Hamilton's tion would have had little chance of mother, the better. Unwilling to in­ survival. Hamilton's insistence that dulge in romantic conjectures, Mr. the young United States should Alexander takes Hamilton out ofSt. meet all obligations incurred in Croix in the West Indies as soon as fighting for its right to exist saved possible. He says Hamilton's father 1977 ALEXANDER HAMILTON 759 and mother-whoever they may tune to work in Mr. Cruger's count­ have been-were of little impor­ ing house, where he learned some­ tance in his life. A self-designated thing about the value of solid coin. New Yorker, Hamilton never had any desire to return to St. Croix, An Objective Viewpoint where he got his education, or to Not the least of the advantages Nevis, the British island he claimed which Hamilton took with him to for his birth. New York was the ~~exterior view." Mr. Alexander is on sound ground Coming from a tropical island out­ as an historian in refusing to post of European empire, he had no romanticize. But, as an admirer of inborn allegiance to any single one Gertrude Atherton's great historical of the thirteen colonies that fought novel about Hamilton, The Con­ the war against King George III. He queror, it is hard for me to accept liked living in New York, but it was Mr. Alexander"s casual dismissal of the cosmopolitan city that fasci­ Hamilton's origins. Hamilton's nated him. He was our first real mother may have had dubious sex­ nationalist. As Washington's war­ ual morals (the same was true of time aide (and corresponding secre­ Hamilton himself) but every re­ tary), he had to deal with an almost searcher agrees that she was some­ impotent Continental Congress. He thing of a bluestocking. The young was the one man in' America who Hamilton must have got his first­ happened to be molded by training rate brain from someone. and experience to set forth the idea His maternal relatives on St. of a solventrepublic, able to defend Croix, who took him in and eventu­ its borders and to' encourage local ally helped make upa purse to send manufactures that would enable it him to New York and a college edu­ to endure discrimination and block­ cation, must have given him some­ ade. If Hamilton always remained thing of a home atmosphere. He had something ofa mercantilist, he was good teachers, notably Dr. Hugh not insensitive to the need for a Knox; he had ready access to the flourishing foreign trade. He would classics in the homes of wealthy have learned more about political sugar planters; and. he learned to economy if he had lived into the write with such power that his de­ age of Ricardo. scription of a hurricane, published With a strong brain, Hamilton in a local paper, impelled a number worked from a master plan. As Mr. of people besides his relatives to Alexander points out, quoting from stake him to his American trip. an earlier biographer, the Eng­ Moreover, he had had the good for- lishman Frederick Scott 0 liver, 760 THE FREEMAN

Hamilton's ((three phases of inde­ Hamilton might have become pendence" had to do with finance, rich, but he preferred to take pay­ foreign policy and industry: First, he ment in honors. As Major General wanted to free the nation from ((un­ Hamilton, he might have seized warranted gratitude" for wartime power in 1800. John Adams, who loans. Second, he sought freedom disliked him for being ((an in­ from foreign intrigue. And third, he triguant . . . a bastard . . . a for­ wanted to see his country self­ eigner," thought he might have sufficient in a world of warring em­ made an attempt at a coup d'etat. pires. Since he was a favorite of But Adams was wide of the mark. Washington, he had a unique oppor­ After all, Hamilton had used tunity to translate his master plan thousands of written and spoken into action. At the end of Washing­ words to prove that the American ton's second term he provided the Revolution differed entirely from Father of Our Country with his fa­ the French, and this precluded any mous Farewell Address. Thus he put adventure in Bonapartism. The his mark on an independent foreign man whom Burr killed stands as the policy that was to prevail until greatest example of intellectual Woodrow Wilson departed from it. honesty in our history. @

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