THEFREEMAN IDEAS ON LIBERTY

FEATURES

124 An Optimist's View of the Entrepreneurship Explosion by Raymond J. Keating Greater economic freedom is on the horizon. 128 The Case for Economic Freedom by Benjamin A. Rogge A classic moral defense. 135 The Role of Government: Promoting Development or Getting Out of the Way by Doug Bandow How interventionism impedes economic growth and perpetuates poverty in underdeveloped countries. 141 The Source ofRights by Frank Chodorov The importance ofthe individual. 144 Confession of a Compliant Taxpayer by Dwight R. Lee To curtail fiscal folly, reduce the money pouring into federal coffers. 149 Dying for a Pizza by Ralph R. Reiland Attack crime, not commerce. 151 Cause and Effect: Crime and Poverty by Roger M Clites The real costs ofviolent and antisocial behavior. 152 We Have Yet to Learn by Gregg MacDonald The perils ofignoring history. 154 On Trial Again by Meredith Kapushion A philosophical experiment. 158 The End of the World as We Know It? by William V Bandoch, Jr., and Walter Block Is new technology rendering human labor obsolete? 160 Albert Jay Nock: A Gifted Pen for Radical Individualism by Jim Powell Portrait of"an authentic American radical." 170 Isaiah's Job byAlbert Jay Nock The demands-and rewards-ofworking for the Remnant. 173 Russell D. Shannon: In Memoriam by Donald J. Boudreaux A tribute to a gifted writer and teacher. COLUMNS

Center NOTES from FEE-Balancing the Budget by Hans R Sennholz 133 IDEAS and CONSEQUENCES-A History Lesson for Free-Market Pessimists by Lawrence W Reed 146 POTOMAC PRINCIPLES-An Agenda for Limited Government by Doug Bandow 175 ECONOMICS on TRIAL-The Rich Get Richer, and the Poor Get ... by Mark Skousen

DEPARTMENTS

122 Perspective--William H. Peterson 177 Book Reviews •The Bamboo Network: How Expatriate Chinese EntrepreneursAre Creating a New Economic Superpower in Asia by Murray Weidenbaum and Samuel Hughes, reviewed by William H. Peterson; Christianity and Economics in the Post-Cold War Era: The Oxford Declaration and Beyond, edited by Herbert Schlossberg, Vinay Samuel, and Ronald 1. Sider, reviewed by John W Robbins; Getting It Right: Markets and Choices in a Free Society by Robert 1. Barro, reviewed by Chris Weinkopf; Classical Economics:AnAustrian Perspective on the History ofEconomic Thought, Volume II by Murray N. Rothbard, reviewed by Douglas E. French; The Life ofAdam Smith by Ian Simpson Ross, reviewed by Raymond 1. Keating; Backfire by Bob Zelnick and TheAffirmativeAction Fraud by Clint Bolick, reviewed by Michael Levin. THEFREEMAN PERSPECTIVE IDEAS ON LIBERTY The Role of Government Published by The Foundation for Economic Education in Society Irvington-on-Hudson, NY 10533 Phone (914) 591-7230 FAX (914) 591-8910 E-mail: [email protected] Some time ago the Intercollegiate Studies FEE Home Page: http://www.fee.org Institute (lSI), now headquartered in Wil­ President: Hans F. Sennholz mington, Delaware, ran a series of student Managing Editor: Beth A. Hoffman seminars around the country on the Role Guest Editor: William H. Peterson of Business in Society (ROBIS). I know, for Editor Emeritus I ran one at Campbell University in 1978 that Paul L. Poirot Lewisburg, Pennsylvania featured free-market stalwarts like Walter Book Review Editor Williams and the late Arthur Shenfield. George C. Leef Adjunct Professor ofLaw and Economics, Surely the role of business deserves depic­ Northwood University tion and discussion. But so does, and I think Editorial Assistant more so, ROGIS-standing for Role of Gov­ Mary Ann Murphy Columnists ernment in Society, an acronym coined by Doug Bandow Edward A. Prentice of the Mount Hood Cato Institute, Washington, D. C. Lawrence W. Reed Society of Portland, Oregon, and Professor Mackinac Center for Public Policy Midland, Michigan Fred Decker of Oregon State University. Mark Skousen Rollins College, Winter Park, Florida There are at least three key questions relating Contributing Editors to that role: Charles W. Baird Precisely what role should the state play in California State University, Hayward Peter J. Boettke society, including the economy? How should New York University Clarence B. Carson that role tie into America's concern over American Textbook Committee Wadley, Alabama individual rights so magnificently framed in Thomas J. DiLorenzo 1787 and ratified in 1791 as the Bill of Rights? Loyola College, Baltimore, Maryland Joseph S. Fulda And what of the principle of federalism New York, New York Bettina Bien Greaves embodied in the Tenth Amendment as: Resident Scholar, FEE "The powers not delegated to the United John Hospers University of Southern California States by the Constitution, nor prohibited by Tibor R. Machan Auburn University it to the States, are reserved to the States Ronald Nash Reformed Theological Seminary respectively, or to the people"? Edmund A. Opitz Overarching these questions is, I think, the Chatham, Massachusetts James L. Payne nature of man and the admonishment of an Sandpoint, Idaho Jim Powell angry Lord Jehovah who, on banishing sinful Westport, Connecticut Adam and Eve, thundered down on them: William H. Peterson Adjunct Scholar, Heritage Foundation, Washington, D.C. "By the sweat of thy face shalt thou eat Jane S. Shaw PERC, Bozeman, Montana bread." For suddenly the Garden ofEden and Richard H. Timberlake University of Georgia its boundless plenty were no more. Instead, productive resources, including time, were The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, limited, sharply. The law of scarcity was in, established in 1946 by Leonard E. Read, is a non-political, educational starkly. Adam and Eve and their issue down champion ofprivate property, the free market, and limited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. to this hour faced-face-a life that Thomas Copyright © 1997 by The Foundation for Economic Education. Permission is granted to reprint any article in this issue, except "Albert Hobbes baldly said in his Leviathan (1651) J. Nock," provided credit is given and two copies of the reprinted was "solitary, poor, nasty, brutish, and short." material are sent to FEE. The costs of Foundation projects and services are met through dona­ So man, then and now, is in a fix, caught in tions, which are invited in any amount. Donors of $30.00 or more receive a subscription to The Freeman. For foreign delivery, a donation of $45.00 a law of trade-nffs. He can't have his bread a year is suggested to cover mailing costs. Additional copies of this issue of The Freeman are $3.00 each. and eat it too. He must weigh unlimited Bound volumes of The Freeman are available from The Foundation for ends against limited means. So Nature forces calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. him to make hard choices on the correct 122 PERSPECTIVE construct of the state-as society's protector This "inquiry"-Smith's much-overlooked or provider or both. title word-needs economic education, a Life is about choices. In making economic widespread understanding of ROGIS, of how decisions, individuals must choose among capitalism and the world work-an under­ scarce resources that have alternative uses. standing, by the way, sought by Leonard E. They must try to conquer or, more accurately, Read, in a stroke of brilliant entrepreneur­ lessen scarcity. But how? ship, when he began The Foundation for How, indeed, when everyone is choosing Economic Education in 1946. from among the same scarce resources? Is Ludwig von Mises, FEE's academic adviser this not a recipe for chaos if not bloodshed, for more than 25 years, warned of boomer­ the law of the jungle? Particularly in light of anging state intervention in Human Action: the condition of man, which Hobbes, for his "All varieties of [state] interference with part, saw as "a condition of war of everyone the market phenomena not only fail to against everyone"? achieve the ends aimed atby their authors and But man's lot is not war but peace-ifwith supporters, but bring about a state of affairs a proviso of a proper role for government: which-from the view of their authors' and a system of private property rights, limited advocates' valuations-is less desirable than government, a state not as a coercive provider the previous state of affairs which they were of goods and services but as a peaceful designed to alter." protector of life, liberty, and property. The idea of ROGIS then is pivotal. Gov­ From this construct, based on the original ernment is necessary, yes. But, as noted by U.S. Constitution and Bill of Rights, emerged George Washington: While government can a system of free markets: a price system, be a helpful servant when limited, it becomes capital investment, international trade, posi­ a fearsome master when unlimited. tive entrepreneurship. So the Founders un­ Overextended government that reaches be­ leashed Adam Smith's mighty Invisible yond the rule of law-fostering intervention­ Hand-personal incentives under the rule of ism and the Welfare State-is an idea whose law driving this remarkable system offreedom time never should have come. This issue of and free enterprise, of social cooperation and The Freeman explores, retrospectively and international harmony, called capitalism. more so prospectively, government's proper Despite capitalism's success, people often role. ask: Why is poverty so widespread within -WILLIAM H. PETERSON the nation and across the world? That's the wrong question. For, as noted, man is born Dr. Peterson, a Heritage Foundation adjunct into scarcity; poverty is his natural condition. scholar and Distinguished Lundy Professor of Adam Smith raised the right inquiry: Why Business Philosophy Emeritus at Campbell wealth? Thus, An Inquiry into the Nature and University in North Carolina, is this issue's Causes ofthe Wealth ofNations. Guest Editor.

Signing the Declaration ofIndependence.

Cover art: "Isaiah" by Gustave Dore. 123 THEFREEMAN IDEAS ON LIBERTY

An Optimist's View of the Entrepreneurship Explosion by Raymond J. Keating

A. dvocates of economic freedom, rejoice. on individual liberty, higher levels of entre­ ~espite some setbacks of late, the future preneurship, and less reliance upon and less is promising. True, the 1990s thus far have tolerance ofgovernment action. The resulting been plagued by a federal government run economic dynamism and growth promise to amok, including massive tax increases, astound. heavier regulatory burdens, and rising gov­ Major long-term trends support the thesis ernment expenditures. Indeed, recent U.S. that the entrepreneur-liberty society is com­ public-policy developments leave little to ing upon us. cheer about for proponents of smaller gov­ ernment and free markets. Increasing Entrepreneurship For example, the top income tax rate on individuals has been increased from 28 per­ Through a combination of economic sur­ cent to 39.6 percent. Factor in the Medicare vival and the enhancement ofsound economic income tax and the top rate exceeds 42 incentives, the level of entrepreneurship in percent. The corporate tax rate rose by a this nation will rise considerably. percentage point, and back in 1987 the cap­ An entrepreneurial explosion, if you will, ital gains tax rate leaped by 40 percent, from actually has been underway since the late 20 percent to 28 percent. Also, as noted in 1960s. The charts on page 126 show a nation the chart on the next page, the estimated of growing entrepreneurship. And consider­ costs of federal regulations have been on ing the many government obstacles and disin­ the rise since 1988, according to economist centives, this is a resilient and determined Thomas Hopkins. And lastly, from 1989 to bunch ofrisk-takers. The "one-man" or "one­ 1997, federal government spending growth woman" business may best capture the econ­ will outpace inflation. omy's level of entrepreneurship. Between Indeed, things look rather grim-at least 1970 and 1995, the number of sole propri­ recently and probably for the short term going etorships filing tax returns jumped by 184 forward. However, the long term reveals a percent. Home-based businesses-fuB­ more heartening story. In my view, the long or part-time-have exploded from almost 6 run promises enhanced economic opportuni­ million in 1984 to nearly 40 million in 1995. ties for all. We are moving toward a society Factor in the underground economy and whose key features will be greater emphasis entrepreneurship has expanded even further. Mr. Keating serves as chiefeconomist for the Small This entrepreneurial trend was given some Business Survival Foundation and is a principal with help in the early 1980s by a few diminishing Capital Hill Research. governmental costs-such as reductions in 124 Source: Thomas Hopkins, "Regulatory Costs in Profile," Center for the Study of American Business, August 1996 marginal income and capital gains tax rates, as In addition, increased competition will con­ well as falling real federal regulatory costs. tinue to exert pressures on large companies Fighting off high levels of inflation helped as to downsize and get leaner and meaner. To well. use economist Joseph Schumpeter's phrase, The relative level ofentrepreneurship stag­ "creative destruction" will see that entire nated a bit, however, in the latter part of the firms and industries are annihilated due to 1980s and into the 1990s, due to the above­ greater efficiencies and new products. This mentioned and other increases in governmen­ trend requires formerly reluctant entrepre­ tal costs. Consider how more robust these neurs to take the plunge into the waters of entrepreneurial indicators would have been economic risk-taking. In essence, the econ­ without the tax and regulatory hikes of recent omy is becoming more and more decentral­ years. ized. Government-imposed obstacles to entre­ preneurShip, though, will diminish in coming Leaps in Technology years, with pro-growth incentives being en­ hanced. Government will be forced to formu­ Great strides in technology help to drive late policies that recognize the changing na­ this decentralizing economic trend-from the ture of the workforce-marked by increased collapsing costs and expanding powers of the mobility, diversity, and entrepreneurship. In­ computer to leaps in telecommunications. deed, rather than focusing on targeted big­ These monumental changes place us firmly in business tax incentives or corporate welfare an era of change and upheaval more tumul­ programs, for example, broad-based tax and tuous than the Industrial Revolution. Inno­ regulatory cuts will be offered that unleash a vation, invention, and entrepreneurship in torrent of entrepreneurial activity. computers and telecommunications obviously 126 THE FREEMAN • MARCH 1997

larger businesses take advantage of new tech­ nologies and shed employees. In turn, these New Business Firms, 1983-1995 down-scaled individuals move to create their own economic security through self­ employment with the help of technological 850,000 "l"'""'""-...... ~...... _ ...... ~...... ~-_ improvements as well. 600,000 ..------m.--m-: Internationalization

750,000 ~----=-----IIl&----IlII~~ As has often occurred throughout history, protectionism has recently reared its ugly 700,000 +---_&_IIIIt-4Il11-11I1-11J-B-III-_IRI_.-.....:IlIII-I!IIk head. Modern-day protectionists have tried to paint the protectionism-vs.-free trade en­ 650,000 +-...--_W_R-III-III-BJ..-B ..w.--I--..II-C counter as a big-business-vs.-small-business standoff. The problem with such assertions is that over 95 percent of firms exporting from the United States have fewer than 500 em­ ployees; i.e., they are small or mid-size busi­ ~ ~ ~ ~ ~ ~ ~ 0 - N ~ V ~ ~ ~ m m m m m ~ ~ ~ ~ ~ ~ nesses. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ In this case, the conventional wisdom is absolutely correct. In economic terms, the globe is getting smaller every day. Interna­ Data Source: U.S. Small Business Administration tional competition is at hand, as are countless international opportunities. The Limits of Home-Based Bus1nesses Government Action Government does not work very well. What free-market advocates have been saying for 4S decades is beginning to resonate with the general populace. Increasing levels of entrepreneurship un­ doubtedly have accelerated this learning CI) 30 c o curve. Wrestling with government regula­ tions, paperwork, taxes, and bureaucrats, on a firsthand basis, crystallizes the woes and costs 1: 1S of government action-a shift from theory to the real world. Combine that with the visible harm caused by the welfare state in terms of o destroyed lives and government dependency, 1984 1995 and the education process regarding the limits of government action is moved along even Data Source: Small Business Survival Committee further. This enhanced knowledge about the woes ofgovernment will be the major impetus translate into opportunities in other indus­ for the transformation to the entrepreneur­ tries, generating new products, services, and liberty society. efficiencies. Interestingly, the employees of small busi­ Technological advancements-as they al­ nesses already possess a strong understanding ways have done in the past-give another of the costs of government. One recent poll push to the formerly timid entrepreneur, as by the Small Business Survival Committee AN OPTIMIST'S VIEW OF THE ENTREPRENEURSHIP EXPLOSION 127 showed that 63 percent of small business much more than being competitive with New employees saw the federal government as an Jersey and Connecticut, but with Florida, "opponent" rather than a "partner," and 70 Nevada, Mexico, Japan, China, Hong Kong, percent said that government regulations and Singapore. were too numerous and too costly. Nations, states, and cities adopting policies that raise costs on the private sector have Economic Dynamism always been punished by the marketplace. However, such justice will be dispensed more All of these trends point to increased swiftly and with greater severity in coming economic dynamism. Entrepreneurs are cre­ years and decades due to increasing mobility ating new demands at a rapid pace. Current of labor and capital. and future leaps in technology only quicken While big-government policies in recent the entrepreneurial pace and allow for global years can understandably depress those of dissemination. us trying to advance liberty and free markets, In such an environment, the plodding hand I remain an optimist about the future. Indeed, of government will have to be lifted. Tax when I shake off the short-term doldrums reduction, deregulation, privatization, and and look at the big picture, I get downright the demise of the welfare state will have to jubilant over the economic opportunities and occur in order to compete in a high-tech, possibilities that will materialize in the twen­ decentralized, mobile (in terms of both cap­ ty-first century. While government will always ital and labor), and global economy. And this create mischief, keeping market forces on trend will not only be required of the federal guard, state activism and tolerance for such government, but of states and cities as well. action will diminish in the coming entrepre­ New York, for example, must worry about neur-liberty society. D

FEE Trustee Dinner

at the Tarrytown Hilton, in Tarrytown, N.Y. Sunday, May 18, 1997, at 5:00 p.m.

Feature Speaker: The Libertarian Congressman Dr. Ron Paul

$45.00 per person/$75.00 per couple For reservations, please call Renee Oechsner, at (914) 591-7230. The Foundation for Economic Education, Inc. FEE Classic Reprint

The Case for Economic Freedom by Benjamin A. Rogge

y economic philosophy is here offered lifetime in the infinity of years ahead of us. I M with full knowledge that it is not gen­ present it rather as the ideal we should strive erally accepted as the right one. On the for and should be disappointed in never fully contrary, my brand of economics has now attaining. become Brand X; the one that is never se­ Where do we find the most powerful and lected as the best by the housewife, the one persuasive case for economic freedom? I that is said to be slow acting, the one that don't know; probably it hasn't been prepared contains no miracle ingredient. It loses nine as yet. Certainly it is unlikely that the case I times out of ten in the popularity polls run present is the definitive one. However, it is on Election Day, and, in most elections, it the one that is persuasive with me, that leads doesn't even present a candidate. me to my own deep commitment to the free I shall identify my brand of economics as market. I present it as grist for your own mill that of economic freedom, and I shall define and not as the divinely inspired last word on economic freedom as that set of economic the subject. arrangements that would exist in a society in which the government's only function would The Moral Case be to prevent one man from using force or fraud against another-including within this, You will note as I develop my case that I ofcourse, the task ofnational defense. So that attach relatively little importance to the dem­ there can be no misunderstanding here, let me onstrated efficiency of the free-market system say that this is pure, uncompromising laissez­ in promoting economic growth, in raising faire economics. It is not the mixed economy; levels ofliving. In fact, my central thesis is that it is the unmixed economy. the mostimportantpartofthe casefor economic I readily admit that I do not expect to see freedom is not its vaunted efficiency as a system such an economy in my lifetime or in anyone's for organizing resources, not its dramatic suc­ cess in promoting economic growth, but rather its consistency with certain fundamental moral Dr. Benjamin A. Rogge (1920-1980) was dean and principles of life itself. professorofeconomics at Wabash College in Indiana I say, "the most important part of the case" and long a trustee of FEE. This lecture, printed in The Freeman in 1963, was delivered at several FEE for two reasons. First, the significance I attach seminars and on other occasions. It sets forth the to those moral principles would lead me to Rogge ideal ofthe "unmixed" free economy. prefer the free enterprise system even if it 128 129 were demonstrably less efficient than alter­ important to the case, I want to sketch them native systems, even if it were to produce a for you. slower rate of economic growth than systems To begin with, the central value in my of central direction and control. Second, the choice system is individual freedom. By free­ great mass of the people of any country is dom I mean exactly and only freedom from never really going to understand the purely coercion by others. I do not mean the four economic workings of any economic system, freedoms of President Roosevelt, which are be it free enterprise or socialism. Hence, most not freedoms at all, but only rhetorical devices people are going to judge an economic system to persuade people to give up some of their by its consistency with their moral principles true freedom. In the Rogge system, each man rather than by its purely scientific operating must be free to do what is his duty as he characteristics. If economic freedom survives defines it, so long as he does not use force in the years ahead, it will be only because a against another. majority of the people accept its basic moral­ Next, I believe each man to be ultimately ity. The success of the system in bringing ever responsible for what happens to him. True, he higher levels of living will be no more per­ is influenced by his heredity, his environment, suasive in the future than it has been in the his subconscious, and by pure chance. But I past. Let me illustrate. insist that precisely what makes man man is The doctrine of man held in general in his ability to rise above these influences, to nineteenth-century America argued that each change and determine his own destiny. If this man was ultimately responsible for what hap­ be true, then it follows that each of us is pened to him, for his own salvation, both in terribly and inevitably and forever responsible the here and now and in the hereafter. Thus, for everything he does. The answer to the whether a man prospered or failed in eco­ question, "Who's to blame?" is always, "Mea nomic life was each man's individual respon­ culpa, I am." sibility: Each man had a right to the rewards I believe as well that man is imperfect, now for success and, in the same sense, deserved and forever. He is imperfect in his knowledge the punishment that came with failure. It of the ultimate purpose of his life, imperfect followed as well that it is explicitly immoral in his choice ofmeans to serve those purposes to use the power of government to take from he does select, imperfect in the integrity with one man to give to another, to legalize Robin which he deals with himself and those around Hood. This doctrine of man found its eco­ him, imperfect in his capacity to love his nomic counterpart in the system of free fellow man. Ifman is imperfect, then all ofhis enterprise and, hence, the system of free constructs must be imperfect, and the choice enterprise was accepted and respected by is always among degrees and kinds of imper­ many who had no real understanding of its fection. The New Jerusalem is never going to subtleties as a technique for organizing re­ be realized here on earth, and the man who source use. insists that it is, is always lost unto freedom. As this doctrine of man was replaced by Moreover, man's imperfections are inten­ one which made of man a helpless victim of sified as he acquires the power to coerce his subconscious and his environment-re­ others; "power tends to corrupt and absolute sponsible for neither his successes nor his power corrupts absolutely." failures-the free enterprise system came to This completes the listing of my assump­ be rejected by many who still had no real tions, and it should be clear that the list does understanding of its actual operating charac­ not constitute a total philosophy of life. Most teristics. importantly, it does not define what I believe the free man's duty to be, or more specifically, Basic Values Considered what I believe my own duty to be and the source of the charge to me. However impor­ Inasmuch as my own value systems and my tant these questions, I do not consider them own assumptions about human beings are so relevant to the choice of an economic system. 130 THE FREEMAN • MARCH 1997

Here, then, are two sections of the case for not expect that the day will ever come when economic freedom as I would construct it. this principle of economic freedom as a part The first section presents economic freedom of total freedom will be fully accepted and as an ultimate end in itself and the second applied. Yet I am convinced that unless this presents it as a means to the preservation of principle is given some standing, unless those the noneconomic elements in total freedom. who examine proposals for new regulation of the individual by government look on this Individual Freedom of Choice loss of freedom as a "cost" of the proposed legislation, the chances of free enterprise The first section of the case is made in the surviving are small indeed. The would-be stating of it, if one accepts the fundamental controller can always find reasons why it premise. might seem expedient to control the individ­ Major premise: Each man should be free to ual; unless slowed down by some general take whatever action he wishes, so long as he feeling that it is immoral to do so, he will does not use force or fraud against another. usually have his way. Minor premise: All economic behavior is "action" as identified above. Noneconomic Freedoms Conclusion: Each man should be free to take whatever action he wishes in his eco­ So much for the first section of the case. nomic behavior, so long as he does not use Now for the second. The major premise here force or fraud against another. is the same, that is, the premise of the In other words, economic freedom is a part rightness of freedom. Here, though, the con­ of total freedom; iffreedom is an end in itself, cern is with the noneconomic elements in as our society has traditionally asserted it to total freedom-with freedom of speech, of be, then economic freedom is an end in itself, religion, of the press, of personal behavior. to be valued for itself alone and not just for its My thesis is that these freedoms are not likely instrumental value in serving other goals. to be long preserved in a society that has If this thesis is accepted, then there must denied economic freedom to its individual always exist a tremendous presumption members. against each and every proposal for govern­ Before developing this thesis, I wish to mental limitation ofeconomic freedom. What comment briefly on the importance of these is wrong with a state system of compulsory noneconomic freedoms. I do so because we social security? It denies to the individual who are known as conservatives have often his freedom, his right to choose what he will given too little attention to these freedoms do with his own money resources. What is or have even played a significant role in wrong with a governmentally enforced mini­ reducing them. The modern liberal is usually mum wage? It denies to the employer and inconsistent in that he defends man's noneco­ the employee their individual freedoms, their nomic freedoms, but is often quite indifferent individual rights to enter into voluntary rela­ to his economic freedom. The modern con­ tionships not involving force or fraud. What is servative is often inconsistent in that he wrong with a tariff or an import quota? It defends man's economic freedom but is in­ denies to the individual consumer his right to different to his noneconomic freedoms. Why buy what he wishes, wherever he wishes. are there so few conservatives in the struggles It is breathtaking to think what this simple over censorship, over denials of equality be­ approach would do to the apparatus of state fore the law for people of all races, over blue control at all levels of government. Strike laws, and so on? Why do we let the modern from the books all legislation that denies liberals dominate an organization such as the economic freedom to any individual, and American Civil Liberties Union? The general three-fourths of all the activities now under­ purposes of this organization are completely taken by government would be eliminated. consistent with, even necessary to, the truly I am no dreamer ofempty dreams, and I do free society. THE CASE FOR ECONOMIC FREEDOM 131

Particularly in times of stress such as these, we must fight against the general pressure to curb the rights of individual human beings, even those whose ideas and actions we detest. Now is the time to remember the example of men such as David Ricardo, the London banker and economist of the classical free­ market school in the first part of the last century. Born a Jew, married to a Quaker, he devoted some part of his energy and his fortune to eliminating the legal discrimination against Catholics in the England of his day. It is precisely because I believe these non­ economic freedoms to be so important that I believe economic freedom to be so impor­ tant. The argument here could be drawn from the wisdom of the Bible and the statement that "where a man's treasure is, there will his heart be also." Give me control over a man's economic actions, and hence over his means of survival, and except for a few occasional heroes, I'll promise to deliver to Ben Rogge you men who think and write and behave as I want them to. find readers? How many men and women The case is not difficult to make for the fully would risk showing up at their state­ controlled economy, the true socialistic state. controlled jobs carrying copies of the Daily Milton Friedman, in his book Capitalism and Capitalist? Freedom, takes the case of a socialist society There are so many unlikely steps in this that has a sincere desire to preserve the process that the assumption that true freedom freedom ofthe press. The first problem would of the press could be maintained in a socialist be that there would be no private capital, society is so unrealistic as to be ludicrous. no private fortunes that could be used to subsidize an antisocialist, procapitalist press. Partly Socialized Hence, the socialist state would have to do it. However, the men and women undertaking Of course, we are not facing as yet a fully the task would have to be released from the socialized America, but only one in which socialist labor pool and would have to be there is significant government intervention in assured that they would never be discrimi­ a still predominantly private enterprise econ­ nated against in employment opportunities in omy. Do these interventions pose any threat the socialist apparatus if they were to wish to the noneconomic freedoms? I believe they to change occupations later. Then these pro­ do. capitalist members of the socialist society First ofall, the total ofcoercive devices now would have to go to other functionaries of the available to any administration ofeither party state to secure the buildings, the presses, the at the national level is so great that true paper, the skilled and unskilled workmen, and freedom to work actively against the current all the other components of a working news­ administration (whatever it might be) is seri­ paper. Then they would face the problem of ously reduced. For example, farmers have finding distribution outlets, either creating become captives of the government in such a their own (a frightening task) or using the way that they are forced into political align­ same ones used by the official socialist pro­ ments that seriously reduce their ability to paganda organs. Finally, where would they protest actions they do not approve. 132 THE FREEMAN • MARCH 1997

Second, the form of these interventions is above an existence in which life is mean, nasty, such as to threaten seriously one of the real brutish, and short. But, of course, this is not cornerstones of all freedoms-equality be­ just coincidence. Under economic freedom, fore the law. For example, farmers and trade only man's destructive instincts are curbed by union members are now encouraged and law. All of his creative instincts are released assisted in doing precisely that for which and freed to work those wonders ofwhich free businessmen are sent to jail (i.e., acting col­ men are capable. In the controlled society lusively to manipulate prices). The blind­ only the creativity of the few at the top can be folded Goddess of Justice has been encour­ utilized, and much of this creativity must be aged to peek, and she now says, with the jur­ expended in maintaining control and in fend­ ists of the ancient regime, "First tell me who ing off rivals. In the free society, the creativity you are and then I'll tell you what your rights of every man can be expressed-and surely by are." A society in which such gross inequali­ now we know that we cannot predict who will ties before the law are encouraged in eco­ prove to be the most creative. nomic life is not likely to be one which You may be puzzled, then, that I do not preserves the principle of equality before the rest my case for economic freedom on its law generally. productive achievements; on its buildings, its We could go on to many specific illustra­ houses, its automobiles, its bathtubs, its won­ tions. For example, the government uses its der drugs, its television sets, its sirloin steaks legislated monopoly to carry the mails as a and green salads with Roquefort dressings. I means for imposing a censorship on what neither feel within myself nor do I hear in the people send to each other in a completely testimony of others any evidence that man's voluntary relationship. A man and a woman search for purpose, his longing for fulfillment, who exchange obscene letters may not be is in any significant way relieved by these making productive use of their time, but their accomplishments. I do not scorn these ac­ correspondence is certainly no business of complishments nor do I worship them. Nor do the government. Or to take an example from I find in the lives of those who do worship another country, Winston Churchill, as a critic them any evidence that they find ultimate of the Chamberlain government, was not peace and justification in their idols. permitted one minute of radio time on the I rest my case rather on the consistency of government-owned and monopolized broad­ the free market with man's essential nature, casting system in the period from 1936 to on the basic morality ofits system of rewards the outbreak in 1939 of the war he was pre­ and punishments, on the protection it gives to dicting.... the integrity of the individual. -Tfie .free market cannot produce the per­ fect world, but it can create an environment Solving the Problem of in which each imperfect man may conduct Economic Allocation his lifelong search for purpose in his own way, in which each day he may order his life The "vulgar calculus of the marketplace," according to his own imperfect vision of his as its critics have described it, is still the most destiny, suffering both the agonies of his humane way man has yet found for solving errors and the sweet pleasure ofhis successes. those questions of economic allocation and This freedom is what it means to be a man; division which are ubiquitous in human soci­ this is the Godhead, if you wish. ety. By what must seem fortunate coinci­ I give you, then, the free market, the dence, it is also the system most likely to expression of man's economic freedom and produce the affluent society, to move mankind the guarantor of all his other freedoms. D Ideas and Consequences by Lawrence W. Reed

A History Lesson for Free-Market Pessimists

ometimes free-market advocates despair termined to get the state off to a fast start. To Sat the prospects for fundamental change. him that meant an activist government, which The pessimists ask, "Where are the examples would build and own railroads and canals to of a people who have learned enough from promote economic growth. With his encour­ the follies of socialism to completely reverse agement, Michigan's first constitution re­ course and pursue freedom?" quired the state to get into the highly contro­ Actually, there are more historical in­ versial business of what was then commonly stances of such a turnaround than even most called "internal improvements." optimists know. One comes from the early "The spirit and enterprise which has arisen days of my state of Michigan. It's a story among our citizens, if fostered and encour­ replete with important principles, and one aged by the State," said Mason, "cannot fail to well worth retelling today. lead to lasting prosperity." Mason denounced To many Americans who looked at a map one bill in the legislature that would permit in 1837-theyear Michigan became a state­ a private railroad as "extortion from the the "land between the lakes" seemed destined public." In that sentiment, he was joined by for obscurity. Why should settlers heading the influential Detroit Daily Advertiser, which west make a right turn to the north and put denigrated the very thought of a "policy of down roots in a territory known for long surrendering that great work [of construct­ winters and nasty swamps? ing canals and railroads] to the control of a To many Michiganians today, the fact that private corporation." Michigan would indeed the state became an economic powerhouse have a shot at proving that socialized eco­ is taken for granted. Few citizens even know nomic development could be made to work. that Michigan's early history produced a di­ Mason and his allies were so confident state sastrous experiment in state government, fol­ projects would flourish that they risked mil­ lowed by a new constitution that opened the lions and put the state deeply into debt to door to a thriving free marketplace and the make it all happen. birth of world-class, private industries. Among the first state projects was a canal At age 26, Michigan's first governor and that was to begin in Clinton Township near "Boy Wonder," Stevens T. Mason, was de- Detroit and move 216 miles west to Kalama­ zoo. This Clinton-Kalamazoo Canal began Lawrence HI: Reed, economist and author, is presi­ with high hopes and much fanfare. Governor dent ofthe Mackinac Center for Public Policy, a free Mason broke ground in Mt. Clemens in 1838 market research and educational organization head­ to celebrate the digging of the canal. Bands, quartered in Midland, Michigan. Mr. Reed would like to acknowledge the invaluable parades, speeches, and a 13-gun salute com­ assistance ofhis colleague, economic historian Bur­ memorated the occasion. Then came one ton HI: Folsom, in the preparation ofthis column. of the worst engineering fiascos in Michigan 133 134 THE FREEMAN • MARCH 1997 history: The canal was built only 20 feet wide applied." A corrective measure eventually did and four feet deep-too shallow for heavy come, but Mason never saw it. He died of freight and too narrow for easy passing. scarlet fever at the age of 31 in January 1843. Mter five years, and only 16 miles of Thomas Cooley, Michigan's most promi­ digging, the unfinished canal had cost the nent lawyer in the 1800s, observed firsthand state over $350,000 and earned only $90.32 in the way the state ran its canals and railroads: tolls. State officials then abandoned the canal "[DJoubts soon matured into a settled con­ and focused on the railroads, but ended up viction that the management of railroads was losing even more money. in its nature essentially a private business, and The Michigan Central was to go from ought to be in the hands of individuals. By Detroit west through Ann Arbor, Jackson, common consent it came to be considered and Kalamazoo and on to St. Joseph on Lake that the State in entering upon these works Michigan. Poor construction and manage­ had made a serious mistake." ment drained most of its revenues each year. Mason's successor, Governor William The Central's thin strap-iron rails were too Woodbridge, favored a complete retreat of fragile to carry heavy loads. Rather than state government from economic develop­ switch to a better quality rail, the state chose ment projects but the legislature balked. The to run regular heavy shipments over the next governor, John Barry, was of the same inferior tracks and repair them frequently. view but also fell short of gaining sufficient Not only was this practice dangerous, it was legislative support. Said Governor Barry, more costly in the long run. Under state "Seeing now the errors of our policy and the ownership, the Central didn't make it past evils resulting from a departure from correct Kalamazoo and did not earn enough to pay principle, let us with the least possible delay for needed repairs and new rails to go farther correct the one by a return to the other." west. Meanwhile, the state's blunders multiplied. A second railroad, the Michigan Southern, It was left to Governor Alpheus Felch, in was also a stunning failure. In eight years of 1846, to shed the state of its failed experi­ state management, tracks were laid only from ments. During his administration, all of the Monroe to Hillsdale (halfway to its intended state's railroads, canals, and other "internal destination), at a cost of more than $1.2 improvements" were either abandoned en­ million, with few customers to generate more tirely or sold to private enterprise, reaping than a trickle of revenue. the treasury about 55 cents on the dollar. The The state spent almost $4 million on the people of Michigan had learned important Clinton-Kalamazoo Canal, the Michigan lessons about the nature and proper role of Central, and the Michigan Southern. It spent government. another $70,000 surveying the Michigan By an overwhelming vote of the citizens, a Northern Railroad, from Port Huron to Lake new Michigan Constitution took effect in Michigan, before abandoning it. It also spent 1851. It emphatically took the state out of $47,000 clearing the route for a canal and economic development and gave wide berth turnpike near Saginaw, but quit the project to free markets and entrepreneurship. In­ and left the materials to rot or be stolen by dustries then arose in lumber, copper, and local residents. Legislators lobbied for these furniture, which would open the door to a projects to go through their towns, resulting in thriving trade in carriages. Later, Michigan­ circuitous routes that often made political but where government had failed so miserably in not economic sense. the transportation business-would ironically In his final address as governor, Mason become the world's leader in the private seemed to have learned an important lesson ownership and production of automobiles. in government enterprise. Referring to the Yes, indeed, people can learn from their maze of failed projects, he spoke of "that socialist mistakes. That should make opti­ fatal policy" for which "a corrective should be mists of all of us. 0 THEFREEMAN IDEAS ON LIBERTY

The Role of Government: Promoting Development or Getting Out of the Way by Doug Bandow

f all the tasks assumed by government, History of Development Theory Onone is more inappropriate than that of promoting economic development. It is rare Extensive state economic intervention has to find an American politician who doesn't long existed around the world, including act as if the state were duty-bound to generate the West, for political as well as philosophi­ businesses, jobs, wages, and profits. This mis­ cal reasons. Such policies have been espe­ take is common enough in the industrialized cially evident throughout the twentieth cen­ West. It has proved to be even more perva­ tury. In particular, the vast majority of Third sive-and harmful-throughout the Third World states traveled the socialist path as World. decolonization proceeded after World War For decades development economists and II. Their decision was in part nationalistic; foreign aid officials acted as though growth many new countries believed that true in­ came from government. Indeed, some be­ dependence required indigenous control of lieved that promoting development was gov­ economic resources. Statism also tended to ernment's most important role in society. benefit, both economically and politically, Thus, poor countries were to undertake di­ the elites that gained power after indepen­ rigiste economic programs. And rich ones dence. were to offer foreign aid programs. But there was also a genuine belief that the Alas, the result has been a dismal failure: government had to guide the development Many underdeveloped states have actually process. Said Ghana's Kwame Nkrumah: been growing poorer. Economic growth will "Only a socialist form of society can assure come only when governments realize that Ghana of a rapid rate of economic progress their proper role is to stay out of the way, to without destroying that social justice, that stop impeding the development that would freedom and equality, which are a central naturally occur but for state intervention. feature of our traditional way of life."

Mr. Bandow, a monthly columnistfor The Freeman, A Western Import is a Senior Fellow at the Cato Institute and the author and editor ofseveral books, including Perpetuating This dirigiste philosophy was not, however, Poverty: The World Bank, the IMF, and the based on local tradition. Indeed, the very Developing World. concept of development was an alien idea 135 136 THE FREEMAN • MARCH 1997 introduced by the West. Having helped ordain Anti-Capitalist Bias the goal of rapid industrialization, Western politicians and economists also played a ma­ So pervasive was the anti-capitalist bias in jor role in developing the statist strategies terms of Third World development that even that many Third World nationalists were to economists who recognized an important call their own. Many Westerners have acted role for the private sector in advanced econ­ as the sirens in Homer's Odyssey, luring Third omies viewed developing states differently. World economies, instead of wandering sea­ Wrote Robert Heilbroner, "in the great trans­ farers' upon the rocks. Perhaps the most formation of the underdeveloped areas, the important of these was Lenin. While Marx, market mechanism is apt to play a much ironically, viewed the colonial experience as a smaller role than in the comparable trans­ progressive force in the undeveloped world formation of the West during the industrial (in The Communist Manifesto, he lauded the revolution." Heilbroner saw the need for potential of capitalism to transform such more than just active public-sector manage­ societies), it was Lenin, in Imperialism: The ment: "Powerful, even ruthless, government Highest Stage of Capitalism, who specifically may be needed." applied socialist principles to underdeveloped The most fundamental principle of collec­ states. tivist development dogma was the need for The British Fabian socialists argued for a central planning. Development specialists more gradual collectivist transformation. Ac­ like Myrdal advocated a ubiquitous public cording to Indian economist Jagdish Bhag­ sector: "Oneofthe most serious shortcomings wati, this approach exercised "a powerful of policy in the countries in which compre­ impact through the large numbers of the hensive planning has been undertaken is the Indian elite that were processed through the failure to plan more ambitiously and on a English educational institutions prior to In­ larger scale." dian independence in 1947." Other develop­ Finally, even some Western economists ing countries-especially other former Brit­ who did not advocate full government eco­ ish colonies-looked to Fabian principles as nomic planning nevertheless endorsed the they structured their economies. sort of micromanagement that has been in­ Along with the philosophy came practical creasingly recognized as a failure in the in­ economic controls. The policies promoted dustrialized nations. Expansive fiscal and by the London School of Economics eventu­ monetary policies, for instance, were a ally suffused the British Colonial Office. Many Keynesian norm. Equally persistent was officials in London as well as colonial gover­ pressure on developing countries to increase nors, writes P.T. Bauer, "took for granted the taxes. case for the most diverse forms of state economic intervention." Business licensing, Revisionist Economic Thinking trade restraints, agricultural marketing boards, and more were part of the adminis­ These theories dominated international trative apparatus handed over to many new economic policy for about four decades fol­ governments when countries gained indepen­ lowing World War II. But reality finally in­ dence. truded as it became evident that the differ­ Western development economists, who ad­ ent statist economic theories had been put vised both underdeveloped states and West­ to the test and found wanting. By 1989 his­ ern aid agencies, generally leaned toward the tory had clearly rendered its judgment on so-called "structuralist school," which treated collectivism. The obvious lesson of this ex­ developing economies as inflexible and unre­ perience has received increasing acceptance: sponsive to market forces. Leading propo­ Without relatively open markets, little de­ nents of this view included Gunnar Myrdal, velopment will occur, irrespective of the Albert Hirschman, Hans Singer, Ragnar efforts of governments in poor or rich Nurkse, and Paul Rosenstein-Rodan. nations. THE ROLE OF GOVERNMENT 137

What Causes Development? component parts to measure economic free­ dom, as well as three alternative summary The West's dramatic escape from poverty indexes. Ranked highest were Hong Kong, has always been a good place to start in Singapore, the United States, and New Zea­ attempting to understand development. The land. At the bottom came numerous Latin rapid economic and social progress of. Eu­ American and African countries. Most im­ rope, during which people first rose out of proved between 1975 and 1990 were Chile, the dismal poverty that characterized most of Iceland, Jamaica, Malaysia, and Pakistan. human history, was largely limited to a specific Although, as noted earlier, international kind of regime-classical liberalism. The re­ comparisons are fraught with difficulty, two sulting· systems generally allowed markets to particularly important lessons emerge. First, operate, respected the rule of law, protected economic policies matter. Report Gwartney, private property, and permitted competi­ Lawson, and Block: tion. Historian Ralph Raico explains that the The 14 countries that earned a summary "European Miracle" developed because of rating grade of either A or Bin 1993-1995, greater market autonomy, which was possible achieved an average annual growth rate in only through "the inhibition of the predator­ per capita real GDP of 2.4 percent during state." Obviously, individual national experi­ 1980-1994 and 2.6 percent during 1985­ ences varied, but the grand sweep of history 1994. In contrast, the average annual presents powerful evidence that the West's growth of per capita real GDP for the 27 development was not accidental. Observed countries with a summary rating of F- in economist David Osterfeld in his well­ 1993-1995 was minus 1.3 percent during documented book Prosperity Versus Planning: 1980-1994 and minus 1.6 percent for the "The likely relationship between the West's 1985-1994 period. Twenty-one of the 27 economic institutions and its economic experienced declines in real percapita GDP growth and development cannot be ignored." during 1980-1994. This experience has been repeated rather more quickly and notably in East Asia, where Obviously, the results for individual coun­ it has taken but a generation or two for tries may be affected by many factors. But desperately poor nations to develop among the overall result is compelling. Explain the the world's most successful economies. (This authors: "No country with a persistently high is not to say that all these were exemplars of economic freedom rating during the two laissez faire. Rather, all broadly relied on decades failed to achieve a high level of market forces, despite varying degrees of income. In contrast, no country with a per­ government economic involvement.) What sistently low rating was able to achieve even makes the East Asian experience so impor­ middle income status." tant is that it is more recent and reflected a Second, changes in economic policy affect conscious break with the reigning collectivist national growth rates. According to the study, consensus, and succeeded so spectacularly. the 17 nations with the greatest increases in economic freedom enjoyed an average annual Lessons for Developing growth rate of 2.7 percent in per capita GDP Nations from 1980 to 1990, and 3.1 percent from 1985 to 1994. All 17 grew, while 11 ofthe 16 nations What was true of Great Britain, the United with the largest drops in economic freedom States, Japan, and South Korea is also true of suffered a decline in per capita GDP. today's successful developing states. Perhaps Similar are the results of the 1996 Index of the best broad-based study of economic pol­ Economic Freedom, written by Heritage icies over the last two decades is Economic Foundation analysts Bryan Johnson and Freedom of the World: 1975-1995, by econo­ Thomas Sheehy. They explain that their anal­ mists James Gwartney, Robert Lawson, and ysis "demonstrates that economic freedom is Walter Block. They created an index of 17 the single most important factor in creating 138 THE FREEMAN • MARCH 1997 the conditions for economic growth and pros­ GDP; the average for the slow growing na­ perity." Their data also demonstrate that tions was higher. Such a result is consistent countries which place the greatest reliance on with the hypothesis that high and progressive open markets consistently have the highest income tax rates muffle incentives and slow growth rates. productivity growth." Studies by other analysts and organizations yield the same general conclusion. Research­ Policy Differences ers at Cornell University and the Organiza­ tion for Economic Cooperation and Devel­ In 1996 Mancur Olson, Jr., ofthe Centerfor opment (OECD) have used a computable Institutional Reform and the Informal Sector general equilibrium (CGE) economic model at the University of Maryland (College Park), in an attempt to measure the impact of came to much the same conclusion. He re­ different policy measures. Market-oriented ported that such factors as access to knowl­ reforms in exchange-rate, fiscal, and mone­ -edge and capital cannot explain the relative tary policies all improve economic growth income differences between nations. "The rates. only remaining plausible explanation is that A decade ago economists E. Dwight Phaup the great differences in the wealth of nations and Bradley Lewis surveyed a dozen "win­ are mainly due to differences in the quality of ners" (with average annual growth rates ex­ their institutions and economic policies," he ceeding six percent) and a score of "losers" explained. He found that poorer nations with (average growth rates below 2.2 percent a the best economic policies consistently grow year). The average annual growth rates were the fastest. 7.7 percent and one percent, respectively. Phaup and Lewis relied in part on a detailed Phaup and Lewis concluded: "Itwould appear World Bank study, published as part of the that whether LDCs are winners or losers is 1983 World Development Report. The Bank determined mainly by their domestic eco­ assessed the relative economic distortions in nomic policies. Resource endowment, lucky 31 primarily developing nations and found circumstances, former colonial status, and that countries with the least interference with other similar factors make little difference in the marketplace had annual growth rates the speed with which countries grow econom­ twice as fast as those of nations with the most ically. The results of domestic policy choices inefficient policies. The more market­ pervade every economic area." oriented countries also enjoyed far greater Phaup and Lewis found that growth rates domestic savings, additional output per unit correlated well with an index for overall of investment, and increases in both agricul­ economic distortion, such as price controls. tural and manufacturing output. The Bank Similar was the role of trade. Countries that estimated that inefficient intervention-such relied on exports grew far faster than those as inflationary exchange-rate, fiscal, and mon­ which practiced import substitution. The two etary policies; price distortions; bad invest­ economists stated: "From this experience it ments; and expansive regulation-could cut can be concluded that exports cause GDP annual GDP growth by as much as two per­ growth, rather than the reverse, even though cent. exports are normally considered exogenous." The Bank has focused particular attention They found that rough indexes regarding on protectionism. In 1987 the institution "investment climate" yielded similar results. devoted much of its annual World Develop­ Government spending, in contrast, was ad­ ment Report to trade. It concluded: "The versely correlated with economic growth. economic performance of the outward­ Also apparently related to economic growth, oriented economies has been broadly supe­ though the data did not yield a statistically rior to that of the inward-oriented economies significant result, were tax revenues. Ex­ in almost all respects." The World Bank has plained Phaup and Lewis: "There was a similarly reported on the impact of agricul­ difference in the ratio of income taxes to ture policies. Here, too, it found that ineffi- THE ROLE OF GOVERNMENT 139

cient government actions, macroeconomic as pore possess little other than open economic well as sectoral, tended to discourage food markets. They have developed nonetheless. output, while market-oriented reforms in­ Resource-rich countries like Mexico and creased agricultural production. Zaire have, in contrast, struggled economi­ America's Agency for International Devel­ cally for decades. States as varied as Argen­ opment (V.S. AID) has reached similar con­ tina, Brazil, India, and Tanzania .failed to clusions. According to V.S. AID: "Recent prosper so long as they emphasized state-led academic and policy experience has shown a development plans; all four have since ad­ linkage between international trade policy justed their policies, leading to greater eco­ and overall economic progress." Particularly nomic progress. important, in its view, were open trade poli­ cies-more outwardly oriented countries Lessons from Africa grew by upwards of four times as fast as more protectionist states. V.S. AID also pointed to The World Bank has devoted particular the friendliness of the investment climate to attention to Africa. As far back as its 1981 domestic and foreign business alike. report, Accelerated Development in Sub­ Saharan Africa: An Agenda for ACTION, the Specific Experiences Bank concluded that other "factors impeding African economic growth have been exacer­ These sort of general assessments are re­ bated by domestic policy inadequacies." Thir­ inforced by the results of narrower studies of teen years later, in its Adjustment in Africa: different regions and nations. For example, Reforms, Results, and the Road Ahead, the David Osterfeld reviewed the economic im­ Bank went much further. Far from being pact of a range ofvariables: corruption, food, merely an additional problem, "the public foreign aid, migration, multinationals, popu­ sector lies at the core of the stagnation and lation, and resources. His conclusion was that decline in growth in Africa." In short, gov­ development occurred most quickly in an ernments were attempting to do far too much, "enabling environment" in which the rule of and were doing it badly. Similar have been law was stable, property was protected, polit­ the results of other research by several Bank ical power was decentralized, and most of the economists. economywas private. The primary obstacle to Studies of Brazil, Chile, Pakistan, Philip­ sustained economic development, he ex­ pines, and Turkey in the 1960s concluded that plained, "is an environment that penalizes trade restrictions alone were costing these individual initiative, is hostile to private own­ countries between four and ten percent of ership, discourages saving and investment, their GDP. Countries that improved their and severely restricts the operation ofthe free policies-Brazil, Colombia, and South Ko­ market." rea-significantly improved their employ­ Numerous international examples support ment and output. Sri Lanka changed govern­ this thesis. The East Asian economic power­ ments, and economic policies, in 1977; the houses of today-Hong Kong, Japan, Singa­ resulting liberalization had dramatic eco­ pore, South Korea, Taiwan-were much nomic results. A 1993 Bank review of the poorer than such Latin American countries as adjustment experience of18 developing coun­ Argentina after World War II. Of the many tries, Boom, Crisis, andAdjustment, found that differences between them, the most important good policies, especially freer trade and mac­ is the economic road taken. Latin America roeconomic stability, were important for eco­ firmly embraced the dirigiste model. East Asia nomic success. Obviously, every country is the chose various forms of capitalism. The na­ beneficiary orvictim ofunique circumstances, tions of Africa, the poorest on the globe, which makes anyone pairing suspect, but the followed Latin America over the abyss of overall picture-South Korea versus North collectivist development strategies. Korea, China versus Taiwan, Asia versus The city-states of Hong Kong and Singa- Africa-presents a consistent picture, and is 140 THE FREEMAN • MARCH 1997 particularly telling when it involves divided aid is one of failure-Western assistance for cultural groups like Germany, Korea, and regimes that were simultaneously authoritar­ China. ian and collectivist ended up making their people poorer rather than richer. In fact, Conclusion abundant outside aid long inhibited the com­ mitment to reform of even more responsible Every nation's economic environment is governments. By masking the pain of eco­ made up of a complex aggregation of indi­ nomic failure, development assistance allows vidual laws and regulations. All governments, borrowers to delay market reforms, worsen­ including those in the industrialized West, do ing the underlying problem. The point is, it is dumb things-sometimes out of ignorance, necessity, brought on by collectivist and pop­ sometimes in response to interest group pres­ ulist economics, that almost always drives the sure, and sometimes in an attempt to achieve reform process. noneconomic ends. The basic question is Instead of offering new aid programs, in­ whether economic stupidity is the exception or dustrialized states should reform their own the rule-whether, in essence, the government economies, encouraging faster global growth, acts as ifits role is to manipulate the economy. and open their markets to Third World prod­ What is needed in America and around the ucts. The latter step is particularly important, world is not more efficient government­ since poor nations need to participate in the reinvented by "progressive" politicians with international economy to grow. The benefit of slightly greater respect than their predeces­ free access to Western markets would vastly sors for markets. The real answer is less exceed the value of foreign aid now or likely government. That is, when it comes to devel­ to be offered. opment, the state's role in society is to provide The crisis of international poverty well the legal framework and physical security for illustrates the fact that restricting government private economic activity, not to act as an to its proper role is a matter of economic as agent of economic change itself. well as philosophical necessity. The people Foreign governments that want to help of poor nations have learned through painful poorer nations should step out of the way of experience that government cannot create private development rather than subsidize growth. Perhaps u.s. politicians will eventu­ public enterprises. The history of foreign ally comprehend that lesson too. 0 THEFREEMAN IDEAS ON LIBERTY

1996 Bound Volume

turdily sewn in a single volume with navy blue cloth cover and gold foil stamping, the twelve issues from January through December 1996 - 854 Spages, fully indexed for handy reference to the latest literature of free­ dom. More than 100 feature articles on topics such as education, environment, government regulation and control, health care, individual rights, money, morality and ethics, private property, voluntary action, and international trade. Reviews of more than five dozen books-and all the 1996 issues of Notes from FEE. Available February 15, 1997. $24.95 each Save! Special introductory price: $19.95, through April 30, 1997 FEE Classic Reprint

The Source of Rights by Frank Chodorov

he basic axiom of socialism, in all its Desire to Live T forms, is that might is right. And that means that power is all there is to morality. If In the first place, he tells us that above all I am bigger and stronger than you and you things he wants to live. He tells us this even have no way of defending yourself, then it is when he first comes into the world and lets right if I thrash you; the fact that I did thrash out a yell. Because of that primordial desire, you is proof that I had the right to do so. he maintains, he has a right to live. Certainly, On the other hand, if you can intimidate me nobody else can establish a valid claim to his with a gun, then right returns to your side. All life, and for that reason he traces his own title of which comes to mere nonsense. And a to an authority that transcends all men, to social order based on the socialistic axiom­ God. That title makes sense. which makes the government the final judge When the individual says he has a valid title of all morality-is a nonsensical society. It is to life, he means that all that is he, is his own: a society in which the highest value is the his body, his mind, his faculties. Maybe there acquisition of power-as exemplified in a is something else in life, such as a soul, but Hitler or a Stalin-and the fate of those who without going into that realm, he is willing to cannot acquire it is subservience as a condi­ settle on what he knows about himself-his tion of existence. consciousness. All that is "I" is "mine." That The senselessness of the socialistic axiom implies, of course, that all that is "you" is is shown by the fact that there would be no "yours"-for, every "you" is an "I." Rights society, and therefore no government, if there work both ways. were no individuals. The human being is the But, while just wanting to live gives the unit of all social institutions; without a man individual a title to life, it is an empty title there cannot be a crowd. Hence, we are unless he can acquire the things that make compelled to look to the individual to find an life liveable, beginning with food, raiment, axiom onwhich to build a nonsocialistic moral and shelter. These things do not come to you code. What does he tell us about himself? because you want them; they come as the result of putting labor to raw materials. You have to give something of yourself-your The late Frank Chodorov edited The Freemanfor a brawn or your brain-to make the necessary time, was associate editor ofHuman Events, and the things available. Even wild berries have to author ofseveral books, including The Income Tax be picked before they can be eaten. But the (New York: Devin Adair, 1954), from which this selection has been reprinted by permission. energy you put out to make the necessary This essay shows why a socialistic society must things is part ofyou; it is you. Therefore, when decline because it fails to respect private property. you cause these things to exist, your title to 141 142 THE FREEMAN • MARCH 1997 yourself, your labor, is extended to the things. and though a good part of it is returned to You have a right to them simply because you you, in the way of sustenance, medical care, have a right to life. housing, you cannot under the law dispose of your output; if you try to, you become Source of Government the legal "robber." Your concern in produc­ tion wanes and you develop an attitude to­ That is the moral basis of the right of ward laboring that is called a "slave" psychol­ property. "I own it because I made it" is a title ogy. Your interest in yourself also drops that proves itself. The recognition of that title because you sense that without the right of is implied in the statement that "I make so property you are not much different from many dollars a week." That is literally true. the other living things in the barn. The But what do you mean when you say you clergyman may tell you you are a man, with a own the thing you produced? Say it is a bushel soul; but you sense that without the right of of wheat. You produced it to satisfy your property you are somewhat less ofa man than desire for bread. You can grind the wheat into the one who can dispose of your production flour, bake the loaf of bread, eat it, or share as hewills. Ifyou are a human, how human are it with your family or a friend. Oryou can give you? part of the wheat to the miller in payment for It is silly, then, to prate ofhuman rights being his labor; the part you give him, in the form superior to property rights, because the right of of wages, is his because he gave you labor in ownership is traceable to the right to life, which exchange. Oryou sell half the bushel ofwheat is certainly inherent in the human being. Prop­ for money, which you exchange for butter to erty rights are in fact human rights. go with the bread. Oryou put the money in the A society built around the denial ofthis fact bank so thatyou can have something else later is, or must become, a slave society-although on, when you want it. the socialists describe it differently. It is a In other words, your ownership entitles you society in which some produce and others to use yourjudgment as to whatyou will do with dispose of their output. The laborer is not the product ofyour labor-consume it, give it stimulated by the prospect of satisfying his away, sell it, save it. Freedom ofdisposition is desires but by fear of punishment. When his the substance ofproperty rights. ownership is not interfered with, when he works for himself, he is inclined to develop Freedom of Disposition his faculties of production because he has unlimited desires. He works for food, as a Interference with this freedom of disposi­ matter of necessity; but when he has a suffi­ tion is, in the final analysis, interference with ciency of food, he begins to think of fancy your right to life. At least, that is your reaction dishes, a tablecloth, and music with his meals. to such interference, for you describe such There is no end of desires the human being interference with a word that expresses a deep can conjure up, and will work for, provided he emotion: You call it "robbery." What's more, feels reasonably sure that his labor will not be if you find that this robbery persists, if you in vain. Contrariwise, when the law deprives are regularly deprived of the fruits of your him of the incentive of enjoyment, he will labor, you lose interest in laboring. The only work only as necessity compels him. What use reason you work is to satisfy your desires; is there in putting out more effort? and if experience shows that despite your Therefore, the generalproduction ofa social­ efforts your desires go unsatisfied, you be­ istic society must decline to the point of mere come stingy about laboring. You become a subsistence. "poor" producer. Suppose the freedom ofdisposition is taken Decline of Society away from you entirely. That is, you become a slave; you have no right of property. What­ The economic decline of a society with­ ever you produce is taken by somebody else; out property rights is followed by the loss of THE SOURCE OF RIGHTS 143 other values. It is only when we have a the sense of personal pride, which distin­ sufficiency ofnecessaries that we give thought guishes man from beast, must decay from to nonmaterial things, to what is called cul­ disuse.... ture. On the other hand, we find we can do Whatever else socialism is, or is claimed without books, or even moving pictures, when to be, its first tenet is the denial of private existence is at stake. Even more than that, property. All brands of socialism, and there we who have no right to own certainly have are many, are agreed that property rights no right to give, and charity becomes an empty must be vested in the political establishment. word; in a socialistic order, no one need give None of the schemes identified with this thought to an unfortunate neighbor because ideology, such as the nationalization of in­ it is the duty of the government, the only dustry, or socialized medicine, or the aboli­ property owner, to take care of him; it might tion of free choice, or the planned econ­ even become a crime to give a "bum" a dime. omy, can become operative if the individual's When the denial of the right of the individual claim to his property is recognized by the is negated through the denial of ownership, government. 0

~~~The Industrial Revolution and Free Trade Edited by Burton W. Folsom, Jr.

ost historians give the Industrial Revolution low marks. This volume tells the rest of the story. The advent of the factory system and mass M production made more goods available to more people less expensive­ ly than ever before. Even though factory workers often labored long hours under hard conditions, they also increased their wealth, lengthened their lives, and improved their standard of living. The economic policy of free trade, which often followed when nations industrialized, fostered increased commerce, the exchange of information, and greater understanding among countries. liThe Industrial Revolution and Free Trade is a rich, informative anthology. A veritable gold mine offacts about the history offree trade and ofthe free market, it is a book worth owning and consulting. Professor Folsom has done well to provide us with this collection and with his own learned introduction." -PAUL GOTTFRIED, Professor of History Elizabethtown College, Pennsylvania DR. BURTON W. FOLSOM, JR., is a Senior Fellow in Economic Education at the Mackinac Center for Public Policy in Midland, Michigan. A former college professor, he is the author of several books and many essays on economic history.

Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-on-Hudson, NY 10533

ISBN 1-57246-057-1 • Paperback $14.95 Available in bookstores nationally, or call FEE: 1-800-452-3518 THEFREEMAN IDEAS ON LIBERTY

Confession of a Compliant Taxpayer by Dwight R. Lee

'm afraid ofthe IRS, so I always pay at least dollar it gets. The budget deficit fluctuates I as much, and probably more, than lowe from year to year, but over recent decades it in federal taxes. I confess this with apologies has tended to increase as federal revenues to my fellow taxpayers, particularly those who increase. So if some of my fellow taxpayers don't do as I do. pay more taxes than required, my taxes are You have all heard, and most of you not reduced. Quite the opposite. The govern­ believe, that honest taxpayers are victimized ment would respond to the additional money by tax evaders. In an April 1995 Money by committing to new spending that will grow magazine article, for example, Teresa Tritch faster than anticipated, with yet more money tells us, "All told, individuals and corpora­ and larger deficits being required, and I end tions are expected to shortchange their fellow up with a larger tax burden. Conversely, if taxpayers by an estimated $150 billion this some taxpayers underpay, my taxes will be filing season. That adds $1,932 to the average lower, not higher, than they otherwise would tax bill of every honest taxpaying u.s. house­ be. And government spending will also be hold." This sounds plausible enough at first less. glance, but it is based on two naive assump­ But if I benefit from additional government tions about how government operates: first, spending, I might be worse off even ifmy taxes that the government needs some fixed amount are lower because others underpay. What I of money and so if it receives less from one gain in lower taxes might be more than offset taxpayer it compensates by taking more from in lost government benefits. But do I, or does another; second, that we are better off when anyone else, benefit from additional govern­ the government spends more of our money. ment spending? Neither assumption is supported by our ex­ This may seem like a silly question. Some­ perience with government, or by the logic of one always benefits from a transfer, a subsidy, the political process. or a service when the government spends If the government required only a fixed more money. But those benefits always have amount ofmoney each year, we could hope to to be paid for by someone. So the important reduce the federal deficit by increasing tax question is, are the benefits from additional revenues. Unfortunately, the federal govern­ government spending worth the costs? When ment spends more than a dollar for every the government spends more money, are the additional benefits I receive from expansions Dr. Lee is Ramsey Professor of Economics at the in my favorite programs worth as much as University of Georgia. I have to pay for expansions in the programs 144 145 of others? For most Americans the answer as many oftheir federal tax dollars as possible, IS no. and they are not particular about how those Up to a point, federal spending for defense, dollars are spent. They will accept almost any law and order, and other necessities is worth project, no matter how little it is worth rela­ more than it costs. But the logic of the tive to cost, since the benefits accrue primarily political process suggests that we are well to them and the cost is paid primarily by beyond that point. Consider that political others. Their tax burden will not be increased decisions are far more responsive to relatively noticeably if more federal spending is secured small groups, each organized around a com­ locally, nor will their tax burden be reduced mon concern, than to the general public. For noticeably if it is not. No matter how much the example, a water diversion project concen­ public may oppose wasting tax dollars ,in trates large benefits on relatively few farmers general, each local constituency prefers that who are strongly motivated to form a coalition more be wasted in their district rather than in supporting the project. The cost ofthe project others. is spread so widely over the general public that In essence, taxpayers are caught in a few taxpayers know the cost, and almost no perverse fiscal game in which it is individu­ taxpayer sees any advantage in organizing ally beneficial to demand federal spending opposition to the project. Politicians know that is collectively harmful. The only possible that a vote favoring the project will be deeply winners are federal functionaries to whom appreciated by the few getting the benefits taxpayers must pay tribute for the privilege and ignored by the many paying the bill. Thus, of plundering one another. The govern­ government projects are funded beyond ment has become, in the words of the nine­ the point where they are worth what they cost. teenth-century French philosopher Frederic For example, in California water that costs Bastiat, "that great fictitious entity by which taxpayers over $200 per acre-foot to provide everyone seeks to live at the expense of is sold to farmers for $3.50 per acre-foot so everyone else." they can grow rice in the desert. The only way to reduce the waste in this game of fiscal folly is by reducing the tax Wasteful Government money pouring into the federal coffers. Ex­ Spending cept for a few who receive more benefits from their favorite government programs than they Farmers are not alone in using the political pay to support the programs of others, we are process to capture benefits worth less than better off when the federal government has they cost taxpayers. Indeed, the fiscal rela­ fewer dollars to spend. So most of us benefit tionship between local governments and the when others don't pay their "fair share." federal government causes everyone to sup­ I want to emphasize that I am not advo­ port wasteful government spending. About cating tax evasion. But we would be well 66 percent of our tax dollars now go to the served if law-enforcement resources were federal government (up from about 33 per­ shifted away from the IRS and directed cent in 1929), with most of these dollars be­ against those whose criminal behavior victim­ ing returned to states and localities through izes law-abiding citizens. Let's do more to federal spending on a variety of programs, punish those who rob, assault, and murder, projects, and transfers. Taxpayers everywhere and less to punish those who want to keep want their political representatives to retrieve more of the fruits of their labor. 0 Potomac Principles by Doug Bandow

An Agenda for Limited Government

4 fter an election that confirmed the Wash­ their earnings. The best and fairest cut would ~ngton status quo, the nation's capital has be across the board. How to respond to the been filled with professions of warmth and charge that the rich would get more back? promises to cooperate. One is entitled to be People would save more only ifthey are paying skeptical of the politicians' protestations of more in the first place. Anyway, it is time that goodwill toward each other. But assuming public officials laud people who become suc­ they are sincere, 1'd like to modestly suggest cessful rather than demonize the successful. a new nonpartisan theme: The era of big Washington needs to hold a serious public government is over. debate on today's outrageous levels of taxa­ A majority of those who voted last No­ tion. vember told pollsters that they wanted the • Really cut spending. Americans who live federal government to do less. Which means outside of Washington may believe that every that our elected leaders, in contrast, have a lot year Congress and the President seriously to do. debate the budget. Voters read about pro­ • Cut taxes across the board. People say grams being cut, spending being reduced, and that they want general rate reductions, not safety nets being slashed. Yet, in reality, the targeted cuts that allow the government to politicians are usually arguing about whether engage in social engineering. Obviously, the government should grow by 3.5 percent or 4.5 usual demagogues would oppose any measure percent during the coming year. Outlays in­ which offered any benefit to anyone who was crease even as legislators proclaim that they not poor. But these class warriors must be are making cuts, since reductions are mea­ confronted, and the way to do so is to make sured against a mythical "baseline budget" the moral case for tax reduction. Yes, lower­ that is always rising. And individual programs ing rates would stimulate economic growth, virtually never disappear. but that is merely a side-benefit. The more So in this new era of good feelings, let's fundamental point is that people are paying actually eliminate programs, making it diffi­ far too much in taxes. cult for them to grow back. And when poli­ This argument needs to be repeated again ticians talk about making cuts, let them really and again. It is not right, morally right, to make cuts. deprive people of over 40 percent of their Of course, some legislators are skittish incomes. They are entitled to keep more of about a budget confrontation out of fear of another government shutdown. But federal Mr. Bandow is a senior fellow at the Cato Institute appropriations are traditionally divided and a nationally syndicated columnist. He is the author of several books, most recently, Tripwire: among 13 bills that, when approved on time, Korea and U.S. Foreign Policy in a Changed allow Congress to make tough decisions with­ World. out creating a public relations fiasco. If both 146 147 parties are genuinely committed to balancing organizations. Over the years some conserva­ the budget, then surely they can agree to kill tive groups have collected grants, many for such nonessential programs as foreign aid foreign junkets in the name of promoting (which, runs the old saw, takes money from democracy abroad. But Uncle Sam has been poor people in rich countries and gives it to especially generous to labor unions, pro­ rich people in poor countries), the National abortion groups, left-wing organizers, and Endowment for the Arts (which pays people liberal senior citizen activists. Such groups to slather their bodies in chocolate and stuff have a perfect right to be politically involved, vegetables into various body orifices), busi­ but they are not entitled to collect taxpayer ness subsidy programs (if anyone in America dollars. Although such funds are theoretically doesn't need welfare, it is big business), and provided for independent social services, so on. money is fungible and federal grants • Slaughter sacred cows. There has always strengthen such organizations immeasurably. been an element of truth to left-wing attacks Congress should also cut cash collected on proposals to "balance the budget on the with the de facto assistance of government. backs of the poor." Politicians from both The Supreme Court has ruled that labor parties are more likely to cut traditional unions may not use mandatory dues for welfare than subsidies for groups with greater political purposes, but neither the adminis­ political clout. Thus, the budget overflows tration nor Congress has enforced the Beck with transfers to the well-to-do. The Coast decision. It is, however, the law of the land. Guard inspects yachts for free. The National Enforcement is also a matter of basic moral­ Park System is frequented almost entirely by ity. Organized labor has no right to loot middle- and upper-class Americans. Whether members for campaign contributions, espe­ the National Endowment for the Arts funds cially those used on behalf of candidates that opera or pornography, it benefits primarily many workers oppose. the rich. A plethora of grant, loan, insurance, • Move from welfare reform to welfare and guarantee programs enhance corporate repeal. Officials are talking about revisiting profits. the changes approved only last year, but the • Unplug the third rail of American poli­ basic problem is government assistance pro­ tics. By the year 2013, at the latest, Social grams themselves. Only private charity can Security will be running in the red. With meet each recipient's particular needs and its faux trust fund filled with Treasury IOUs speak to the whole person. Unfortunately, (the money has been borrowed to fund today's however, the always aggressive and imperial­ deficit), the system will be ready for Chapter istic public sector continues to squeeze out II. private efforts. All of the proposals so far advanced by Thus, we need not only to promote charity, bipartisan panels-changing the cost-of­ but to shrink welfare. Many different kinds of living adjustment, fiddling with benefit for­ private programs already exist. Their number mulas and retirement ages, hiking taxes (of would explode if government no longer course!), and allowing the government to sopped up private funds, assuaged people's invest tax revenues in the stock market-are natural desire to help those in need, and inadequate to "save" Social Security. Leaders relieved beneficiaries of responsibility for committed to really leading would press for their own actions. full privatization, as quickly as possible. Only • Educate voters. For years, big govern­ when people have control over their own ment congressional majorities held hearings retirement futures will both the federal bud­ to make the case for ever new and ever more get and individual liberty be safe. expensive federal programs. In this new co­ • Defund partisan lobbies. If there is any­ operative age, Congress should use the pro­ thing that people pledged to bipartisanship cess for the opposite purpose. It is time, for should be able to agree on, it is that the instance, to confront attacks on supposed government should not underwrite political "cuts" in education funding. Congress should 148 THE FREEMAN • MARCH 1997 hold hearings on the limited impact of spend­ and highlight relevant research. In short, it is ing on quality; the factors that make schools an important part of the war of ideas, which successful; why private and parochial schools continues, despite the widespread belief that do so much better than public ones; and how classical liberalism has triumphed. centralization of education has reduced pa­ Bipartisanship has a nice ring to it, but rental involvement and student achievement. those of us living outside of the Beltway will Similar efforts could be undertaken on the benefit only if elected officials work together environment, crime, and the like. One hearing to shrink government and protect liberty. It's is not enough; it should be an ongoing process time that they showed us they really believe to publicize arguments, credential scholars, the era of big government is over. D

1997 Summer SeminarsAt FEE or the 35th consecutive summer, FEE will conduct its noted seminars in the freedom Fphilosophy and the economics of a free soci­ ety. Here, in the company of like-minded individu­ als, with experienced discussion leaders, and in a setting ideal for the calm exchange of ideas, is an opportunity for those who believe that the proper approach to economic problems is through the study of individual human action. These seminars continue to attract individuals from all walks of life who seek a better under­ standing of the principles of a free society and are interested in exploring ways of presenting the case more convincingly. Each seminar will consist of 30 hours of classroom lectures and discussions in economics and government. In addition to the regular FEE staff, there will be a number of distinguished visiting lecturers. The FEE charge for a seminar-tuition, supplies, room and board-is $400. A limited number of fellowships are available. We especially encourage the application of high school and college teachers or administrators, but all are invited. Individuals, companies, and foundations interested in furthering this edu­ cational enterprise are invited to sponsor students and assist with the financ­ ing of the fellowship program. The formal announcement giving details of the seminars will be sent immediately on request. First Session: July 13-18, 1997 Second Session: August 10-15, 1997 Write: Seminars, The Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, NY 10533; or Fax: (914) 591-8910. E-mail: [email protected]. THEFREEMAN IDEAS ON LIBERTY

Dying for a Pizza by Ralph R. Reiland

t started as more than 50 people were being denying service. You can't just say, 'We hear I killed in Los Angeles by rioters who didn't it's bad there.'" agree with the verdict in the Rodney King With the way the Human Relations Com­ case. That same night, while the rest of us mission operates, the burden of proof is on were watching the mayhem on television, Carl the store, a case of being guilty until proven Truss of Schenley Farms in Pittsburgh's Hill innocent. The Commission is saying that pizza District called Pizza Hut for a pie. managers, on top ofjuggling teenage workers The store said it was too dangerous that and other workplace headaches, must also be night to deliver to Truss's neighborhood, a proficient in crime statistics by street and predominantly African-American area. Now, neighborhood in order to stay out of court. after investigating the case for over four years, "There could be a loss history," explains Charles Morrison, Director of the Human Morrison, "such as, 'When we go to ABC Relations Commission of Pittsburgh, says it's street, we get robbed.' " a case ofillegal redlining: "We've determined The year after Truss didn't get his pizza, Jay there is probable cause to believe that it is Weiss, a 34-year-old man who worked for more likely than not that a discriminatory Chubby's Pizza in Pittsburgh's North Side, act occurred here. We found that they did was killed by two teenagers while delivering a deliver to areas that had greater incidence pizza. As the driver was dying, the boys sat on of crime yet were not perceived to be 'black a curb and ate the pizza. areas.' " A few minutes after Morrison was inter­ Morrison is referring to the Oakland sec­ viewed on the Jim Quinn radio talk show in tion of the city-home to the University of Pittsburgh, "Dan," a former Pizza Hut driver, Pittsburgh, Chatham College, Carlow Col­ called the show to explain how it looked from lege, and Carnegie-Mellon University­ the inside. "We had drivers robbed every where Pizza Hut takes its risks to deliver to a day," he said. "In East Liberty, we had the large student market. That's a judgment call same driver robbed three times in one day. by a store manager, but most Pittsburghers, They usually robbed us with a gun-they I'd guess, would see Oakland as safer than the know we're not allowed to carry a gun, or Hill District on the night of the Rodney King more than $20. They'd rob us just for the riots. pizza. If we'd drive to Schenley Farms, they "We don't want any business to be exposed hid in the bushes across Herron Avenue to to putting their drivers in harm's way," says rob us. Drivers would quit after a couple Morrison, "but there has to be a basis for days." Morrison explained to Quinn's listeners Mr. Reiland is associate professor of economics at that the Human Relations Commission in this Robert Morris College in Pittsburgh. case was going after "a large company, not a 149 150 THE FREEMAN • MARCH 1997 mom-and-pop store," as if it makes any dif­ panied the waitress to her car. Mter the ference if someone's son or daughter is shot busboy returned to the restaurant, the crim­ while delivering pizza for a rich multinational inal gained entry to the car through the corporation or Chubby's. waitress' open window as she sat in the car As it now stands, one government agency counting her tips. The Delaware Supreme can fine a restaurant owner for not being Court upheld the $600,000 verdict against the careful enough if a young kitchen worker restaurant. simply picks up a grinder part and places it in As I'm writing this, the local news is re­ an automatic dishwasher, while on the same porting that a bus passenger was shot behind day another government agency can fine the the ear in Homewood, a poor African­ same owner if he's overly careful about send­ American neighborhood. During the morning ing the same employee out on an unsafe rush hour, in broad daylight, the bus was delivery. caught in a crossfire from two pistols and a When cases like Pizza Hut's wind up in shotgun. court, the business can be fined for discrim­ What's needed here is an attack on crime, ination for not sending drivers to certain not an attack on businesses that are fed areas or, conversely, fined for sending drivers up with dodging bullets. Rather than telling to unsafe areas. At the Blue Coat Inn in pizza shops how to run their businesses, Dover, Delaware, a waitress sued her em­ the first task of Pittsburgh's public officials ployer for "inadequate security" after she was should be to worry about their own job per­ abducted from her car in the restaurant's formance. That begins with making the streets parking lot, then raped and robbed. The Inn safe enough so that people-black orwhite­ routinely provided escorts for waitresses to aren't afraid to ride a bus or deliver a their cars, and on this night a busboy accom- pizza. 0

CRIMINAL JUSTICE?

The Legal System Vs. Individual Responsibility

"Robert Bidinotto has done it. He's managed to assemble a group of scholarly, yet immensely readable, articles that completely demolish a half century of half-baked theories about the causes of and society's response to crime. You're going to find out that the average citizen was right all along and the 'experts' deathly wrong." -DR. WALTER E. WILLIAMS Professor of Economics George Mason University

Criminal Justice? is easily the most controversial book on crime and pun­ ishment to appear in years, and perhaps the most important. It is must reading for law enforcement officials, crime victims, politicians-and for every citizen who values justice. SPECIAL SALE! $5.95 hardcover Order your copy from FEE today: (800) 452-3518. Booksellers and others who wish to order in quantity should call Renee Oechsner, at (914) 591-7230. THEFREEMAN IDEAS ON LIBERTY

Cause and Effect: Crime and Poverty by Roger M. Clites

t is often asserted that poverty causes of the area in which they live. Thus, crime I crime. I suggest that crime causes poverty. injures economically both direct victims and Obviously crime victims are made worse others in the crime-ridden neighborhood. off when they are burglarized or mugged. But Just as all people are better off in a society there are many other people who are made where a large portion of people are more worse off indirectly by crime. educated and more productive, all people in A high crime rate will drive businesses out a crime-infested area become worse off than ofa neighborhood. This eliminates both avail­ they otherwise would be. ability of products and services and a source It is not just others who are adversely of jobs. Further, those who do stay find it affected by criminals. Perpetrators themselves necessary to charge higher prices to offset lose ground economically. A large portion losses due to thievery and higher costs ofboth of people charged with criminal activity are security measures and insurance premi­ relatively young. Their criminal behavior ums-if insurance is available at all. harms them in several ways. They may spend Property values are driven down by a time incarcerated when they could have been smaller demand because of the greater diffi­ gaining employment experience. Their crim­ culty potential purchasers have in obtaining inal record may hamper them in obtaining mortgage loans. future employment. They develop attitudes The loss ofproductive activity by those who and habits that are detrimental to participa­ live by preying on others reduces the output tion in the workplace. For these reasons many Professor Clites teaches at Tusculum College in criminals condemn themselves to poverty. Tennessee. Crime is a major cause of poverty. D 151 THEFREEMAN IDEAS ON LIBERTY

We Have Yet to Learn

by Gregg MacDonald

he ideas of man, expressed in one way or nism in Russia, the failure of communism 90 T another, have come down to us over and miles off our coast in Cuba, or the tragic legacy over again for the past 50 centuries. As of communism in China. we approach the twenty-first century, it is almost impossible to come up with an original What We Can Learn thought. "What a great thing Adam had," from Rome quipped Mark Twain. "When he said some­ thing good, he knew nobody else had said it When we think of the Roman Empire (and before." One would think we would have it seems that everybody today tries to draw learned something after 5,000 years, but it just an analogy between the decline of America hasn't happened. As the nineteenth-century and the fall of the Roman Empire), we think philosopher Georg Hegel observed, "What of Roman citizens as being free, even though experience and history teach us is that people there were a great many slaves in the Empire. and governments never have learned anything Roman politicians lusted after citizens' votes from history, or acted on principles deduced and support just as politicians do today. from it." Commerce and business thrived in this Hegel was right. People and governments "free" economy. Farmers, shoemakers, estate never learn from history, and go on repeating agents, bakers, manufacturers, builders, inn­ the same mistakes. keepers, and a host of other tradesmen and If we had learned anything at all from the professionals flourished. In the early centu­ past, we would know that every economy must ries of the Empire, just as in the early days sooner or later rely upon some sort of profit­ of the United States, the farmers were the and-loss system to spur groups or individuals backbone of the nation, providing stability to productivity. Slavery, police supervision, and food as well as strong, free men to defend or ideological enthusiasm have always turned Rome and fight its battles. out to be too unproductive, or too expen­ Under the Emperor Diocletian, however, sive-not to mention too immoral. Rome succumbed to outright socialism. Gov­ Prosperity depends on the incentive of ernment spending led to inflation and increas­ profit, but more than that, it depends on ing poverty. In A.D. 301, Diocletian issued an freedom. Those who failed to learn this from Edictum de pretiis, which set maximum prices the past should certainly learn it from the and wages for all important goods and ser­ present by looking at the collapse of commu- vices. (In today's world such measures are simply called wage and price controls.) The Mr. MacDonald, a trustee of The Foundation for results were disastrous and set the stage for Economic Education, resides in Issaquah, Washing­ the fall of the Empire and the beginning of ton. serfdom in the Middle Ages. 152 The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: [email protected]

March 1997 Balancing the Budget t is difficult to deceive other people these funds to help subsidize agriculture, without their finding out. It is well nigh health and human services, housing and I impossible for politicians to deceive the urban development, labor, and numerous people who have been beguiled and disap­ other federal activities. But can Social pointed innumerable times. Yet, some fed­ Security be expected to help finance these eral politicos do not easily break the habit. outlays indefinitely? They want us to believe that the annual The growing federal indebtedness to trust budget deficits are declining although the funds is tantamount to growing trust fund national debt continues to soar. According surpluses which the intended beneficiaries to today's financial press (January 13, are itching to spend. Pointing at the surplus­ 1997), the federal deficit for this fiscal year es, they are clamoring for ever greater out­ is given at $107 billion, and the federal lays on their behalf which tends to increase debt at $5.31 trillion, $324 billion higher federal spending and deficits. The years of than last year. trust fund surpluses are followed by years of Such deceptions when practiced by deficits, which in time raise the specter of bankers and businessmen undoubtedly trust fund bankruptcy and call for more tax would be felonious and punishable with boosts. The chronic fears of Social Security fines and imprisonment. In politics, deceit bankruptcy call for ever higher Social and hypocrisy often are the royal road to Security taxes. success on which political statistics are The new angle in federal financing assembled and propagated. should not surprise us; all administrations The politicians who practice this decep­ since the Great Society of the 1960s readily tion are using trust funds, in particular, turned against future generations in order Social Security revenue, to finance some of to bolster their own image and popularity. the deficits. The small budget deficits they The Balanced Budget Amendment, intro­ are gloating about merely are the deficits duced as S.J.Res.l, which is a big issue of which are not fully covered by trust fund the new Congress, even would sanction the surpluses. The federal government spends use of trust fund revenue for any spending more than ever before, but uses trust funds purpose. Section 7 reads: "Total receipts that are set aside for certain purposes. In fis­ shall include all receipts of the United cal year 1997, the Social Security Trust Fund States government except those derived is expected to have surpluses of about $70 from borrowing. Total outlays shall include billion which the government will spend, all outlays of the United States government leaving only more IOUs. Altogether the fed­ except for those for repayment of debt prin­ eral government has spent some $550 billion cipal." In short, the amendment would per­ of Social Security money. The spenders use mit the spenders to incur trillion-dollar debts to the trust funds, call their budgets Genuine budget control necessitates an "balanced," and ignore the soaring national early abolition of all political transfer pro­ debt. grams. There are several roads that lead back This observation of growing federal to a free society. One would first lead to gen­ indebtedness to trust funds must not be uine privatization of all welfare functions; all interpreted as a defense of the Social Security social services would be transferred from system in any form. It constitutes the very politicians and bureaucrats to private pro­ cornerstone of the American welfare system ducers. The privatization of federal health on which all other programs rest. It also and human services alone would balance the reveals the poisonous handicraft of politics budget. which seizes income and wealth by majority Another road would lead to a temporary vote. The Social Security surplus consists of freeze of all transfer expenditures at the pre­ payments by workers recently and presently sent level. Economic expansion together with employed and taxed for the benefit of price inflation would raise tax revenues retirees, most of whom did not contribute a which, in just a few years, would catch up penny to the surplus. Having received many with the frozen expenditures. The temporary multiples of what they paid in, some aged freeze would have to be followed by a per­ never tire of demanding their cost-of-living manent freeze of both revenues and expendi­ adjustments. In the halls of politics, their tures which would shrink the transfer system voices drown out all calls for reform and at the annual rates of inflation. In just a warnings of ultimate disaster. Social Security decade or two the inflation would rescind all and Medicare always are "off the cutting but a few traces of the welfare state. table." On yet another road to fiscal responsibili­ You can judge the craftiness of a politi­ ty and stability the welfare system would be cian by his or her behavior at the cutting made to respect the religious and moral prin­ table. You can judge the moral fiber of a ciples of conscientious objectors and allow political partyby the way it vies with others them to withdraw. It also would grant relief for the votes of the elderly. If Social Security to the primary victims of the system, to as the oldest, most expensive, and most young people, and permit them to choose inequitable transfer system is untouchable, between joining the system or remaining all others following in its footsteps can be free, independent, and self-reliant. A system expected to stubbornly resist attempts to which allows its victims to go free is no place them on the table. They merely need to longer a transfer system. repeat the Social Security rationale and join Despite all the noise about the federal the transfer coalition to repel the would-be deficits and the Balanced Budget reformers. Amendment, there is no indication that the To restore a commonplace truth and real­ American public and the Congress are seri­ ism to the transfer system and enhance the ous about the importance of balancing the prospects for balanced budgets, we must budget. Public pressures for ever more trans­ reject all transfer schemes. They breed social fer benefits signal the coming of ever larger conflict and gnaw at the root of democratic deficits. institutions. They have made youth the pri­ mary beast of burden and victim of transfer; the most monstrous burdens, Social Security and Medicare, have been placed squarely on the shoulders of young people. Hans F. Sennholz March Book Sale Classics from Henry Hazlitt

Henry Hazlitt (1894-1993), a Founding Trustee of The Foundation for Economic Education, began his distinguished career in 1913 at The Wall Street Journal. He went on to write for several newspapers, including The New York Evening Post, The New York Evening Mail, The New York Herald, and The Sun. In the early 1930s he was literary editor of The Nation, and suc­ ceeded H.L. Mencken as editor of the American Mercury in 1933. From 1934 to 1946 he served on the editorial staff of The New York Times, and from 1946 to 1966 he was the "Business Tides" columnist for Newsweek. Mr. Hazlitt will be remembered as an eloquent writer, an incisive economic thinker, and a tireless defender of freedom. & 50th Anniversary Edition ~ Economics in One Lesson Foreword by Steve Forbes Few authors have done as much for liberty as Henry Hazlitt. In this book, written in 1946, he explains simply yet with great sophistication how free markets deliver both liberty and prosperity, while government intervention tends to hurt people. 205 pages $9.95 The Wisdom of Henry Hazlitt Introduction by Hans F. Sennholz A collection of some of the most incisive Hazlitt articles and essays prepared by The Foundation for Economic Education. 350 pages $11.95 The Foundations of Morality The author presents a consistent moral philosophy based on the principles required for voluntary social interaction. 388 pages $11.95 The Conquest of Poverty Capitalist production has been the real conqueror of poverty, not government programs. 240 pages $10.95

The Inflation Crisis and How to Resolve It Introduction by Hans F. Sennholz Hazlitt lays bare the facts about the New Inflation and analyzes problems the media scarcely skim. This is an updated and expanded version of What You Should Know About Inflation. 192 pages $9.95

The Failure of the "New Economics" Foreword by Hans F. Sennholz A brilliant analysis of the Keynesian fallacies. 458 pages $12.95

The Critics of Keynesian Economics Foreword by Hans F. Sennholz Edited with an Introduction and new Preface by Henry Hazlitt Leading economists (Ludwig von Mises, F.A. Hayek, Wilhelm R6pke, et a1.) explore the fallacies and implications of Keynesian theory. 427 pages $12.95

All titles listed are available in paperback edition - Sale ends March 31, 1997 Please add $3 per order of $25 or less; $4 per order of $26-$50; $5 per order of more than $50. Send your order, with accompanying check or money order, to FEE, 30 South Broadway, Irvington-on-Hudson, NY 10533. Visa and MasterCard telephone and fax orders are welcomed: (800) 452-3518; fax (914) 591-8910. Booksellers and others who wish to order in quantity should call Renee Oechsner, at 914-591-7230. New from FEE!

UP FROM POVERTY Reflections on the Ills of Public Assistance Edited by Hans F. Sennholz

From the beginning of history sincere reformers as well as demagogues have sought to abolish or at least to alleviate poverty through state action. In most cases their proposed remedies have only served to make the problem worse. The most frequent and popular of these proposed remedies has been the simple one of seizing from the rich to give to the poor. This remedy has taken a thousand different forms, but they all come down to this. The wealth is to be "shared," to be "redistributed," to be "equalized." In fact, in the minds of many reformers it is not poverty that is the chief evil but inequality.

In the last generation there has been enacted in almost every major country of the world a whole sackful of "social" measures, most of them having the ostensible purpose of "helping the poor" in one respect or another. These include not only direct relief, but unemployment benefits, old-age benefits, sickness benefits, food subsidies, rent subsidies, farm subsidies, veterans' subsidies­ in seemingly endless profusion. Many people receive not only one but many of these subsidies. The programs often overlap and duplicate each other.

What is their net effect? All of them must be paid for by that chronically Forgotten Man, the taxpayer. The mounting burden of taxation not only undermines individual incentives to increased work and earnings, but in a score of ways discourages capital accumulation and distorts, unbalances, and shrinks production. Total real wealth and income is made smaller than it would otherwise be. On net balance there is more poverty rather than less.

Up From Poverty includes a compelling introduction by Hans F. Sennholz and powerful essays by Henry Hazlitt, Leonard E. Read, Clarence B. Carson, Lawrence W. Reed, Bertel M. Sparks, and others.

Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-an-Hudson, NY 10533

ISBN 1-57246-060-1 • 208 pages • paperback $14.95 Available in bookstores nationally, or call (800) 452-3518 153

Diocletian put extensive public works into regulations, and exorbitant taxes to pay for it operation to boost employment, and food all-is there that much difference between was given to the poor at little or no cost. The our present-day American government and government brought nearly all major indus­ the regime that prevailed in Diocletian's tries and guilds-unions-under explicit con­ Rome? And, again, technology and science trol. Paul-Louis, in his AncientRome at Work, aside, ideas and thoughts seem to have tells us that in "every large city, the state changed little. became a powerful employer ... standing There can be no lasting, healthy economy head and shoulders above the private indus­ without freedom. When we are told by gov­ trialists, who were in any case crushed by ernment bureaucrats just what we are allowed taxation." Will Durant noted that business­ to do on our property, told whom we must men "predicted ruin, but Diocletian ex­ employ, and where we must send our children plained that the barbarians were at the gate, for an education-can we honestly say we are and that individual liberty had to be shelved free? until collective liberty could be made secure." The average American worker pays gov­ Diocletian's expanding, expensive, and cor­ ernment forty-seven percent out of each dol­ rupt bureaucracy proved to be too much to lar he or she earns. This money is taken by the handle. To support all this government-the IRS, FICA, local and state taxes, property army, courts, public works, and welfare­ taxes, sales taxes, and on and on. Many people taxes rose so high that men lost the incentive don't realize this. How can you say you are to work or earn. Lawyers kept finding ways free if half of everything you earn is taken to evade taxes, but other lawyers formulated away from you by government? laws to prevent evasion. To escape the tax A healthy economy, in order to grow and men, thousands of Romans fled over the spread and benefit the most people without frontiers to find refuge with the barbarians taking away from others, needs freedom to Diocletian said were at the walls of Rome. (It expand. What we have in the United States makes one wonderwhy the barbarians wanted today is an economy that has evolved through to get in.) government control to satisfy self-indulgence In an effort to stem the tide of fleeing and greed. Nor is it an economy embedded in citizens, and to facilitate regulations and freedom. Somerset Maugham warned us that taxation, the government issued decrees bind­ "If any nation values anything more than ing the farmers to their fields and the workers freedom, it will lose its freedom; and the irony to their shops until all their debts and taxes of it is that if it is comfort or money that it had been paid in full. And, as mentioned, values more, it will lose that too." serfdom entered its initial stage. The people of the United States at the end ofthe twentieth century have certainly placed The Modern Welfare State a high value on comfort and money. Entitle­ ments, golden parachutes, and rich govern­ Technologically, the modern world, and the ment pensions are just a few of the programs Western world especially, are no more like and schemes that are relentlessly driving our ancient Rome than the moon is like the sun. economy onto dangerously thin ice. If enor­ But, technology and science aside, the civili­ mous bureaucracies on the local, state, and zation of Rome in the time of Diocletian federal levels are the price we are willing to vividly reminds us how much our own gov­ pay for government contracts, welfare, and ernment parallels the Roman government entitlements in order to retain comfort, then that existed then. The welfare state, the huge can a sick economy be far behind? And is the bureaucracy to run it, stifling government loss of freedom even closer? 0 THEFREEMAN IDEAS ON LIBERTY

On Trial Again by Meredith Kapushion

or the last three years, beginning at age entrepreneurswho could use it effectively. We Ffifteen, I have taught myself philosophy were creating investments that money man­ straight from the great works of Western agers needed in volatile markets."l Milken thought, and have formally and informally and his associates at Drexel Burnham Lam­ studied economics. Fortunately, my back­ bert succeeded in raising over ten billion ground shielded me from some highly volatile dollars in capital for various companies. Yet rhetoric being espoused at the state university for all ofMilken's successes, he is still thought where I took a philosophy course last year. of as an immoral cutthroat. His actions have The course, entitled "Classics in Ethics," been subject to much debate and speculation, was taught by a professor who made no but one interesting test has yet to be applied. attempt to disguise his liberal views from the class. Normally, I dismissed his personal opin­ The Pleas ions as secondary and inconsequential to the course, but one particular claim he repeatedly Michael Milken pled guilty to five counts made prompted me to respond. The profes­ of equity technicalities and one count of tax sor took it upon himself to add yet another fraud, but to many people he was also guilty accusation to Michael Milken's list of indict­ of insider trading, fraud, and generally cheat­ ments. He accused Milken of being, at best, ing people out of money. These allegations, a simple hedonist, greed-driven to seek only however, do not even begin to correlate with short-term, selfish pleasures. I could not let the six crimes for which he pled guilty. The this charge go unquestioned. I resolved to charges, which at best are technicalities, in­ create a moral defense of Milken using the clude ugly words like "fraud," "conspiracy," professor's own tools ofthe ethical systems of and "aiding and abetting." The first charge Aristotle, Thomas Hobbes, Immanuel Kant, is a general conspiracy charge that Milken and John Stuart Mill. I chose these four planned or thought "to engage in a series of philosophers because each is unique in his unlawful security transactions." (It was my perception ofmankind. This diversity ofopin­ understanding that only Big Brother ever ion and viewpoint creates the most challeng­ prosecuted someone for their thoughts.) The ing and complete rubric of testing morality. next charge involves tax fraud, but the most Milken revitalized Wall Street by intro­ obvious thing to note is that the taxes are not ducing new methods of investment through Milken's. The charge relates to Ivan Boesky's high-yield Gunk) bonds. In his own words, false 13-d statement. The next two charges are he and colleagues were "matching capital to also based upon Boesky's testimony. Milken's transgressions were to suggest that Boesky Ms. Kapushion is a freshman at Hillsdale College, Hillsdale, Michigan, where she is majoring in eco­ buy MCA stock to hide that Golden Nugget nomics with a particular emphasis on the Austrian was selling and to assure him no loss in a sale school ofthought. to Drexel. Both of these actions are common 154 155 in business and attention was only called to out companies in need ofcapital and provided them long after the fact. These first four enormous profits for investors. Ultimately, his charges are all based on the charge that the work helped to better the economy as a whole, ownership of stock was not properly docu­ thus fulfilling Aristotle's need for total actu­ mented in a stock-parking agreement. How­ alization. Milken fulfilled Aristotle's two re­ ever, none of these charges created any injury quirements for virtue, by engaging in intel­ to MeA, Boesky, the federal government, or lectually challenging activities and succeeding anyone else involved in the transactions. The in opening an entirely new arena of oppor­ fifth charge is equally harmless. Milken pled tunity and investment in his field. The proof guilty for failing to disclose in written form of his ability in prudence and wisdom is quite an agreed-upon adjustment in transaction evident in the numbers he generated in prof­ prices between Drexel and a client. The final its. Milken's wealth was the result of a job well "crime" is that Milken helped a client reduce done. his income tax liability by selling him two Proponents of Aristotle will be quick to investments and then buying them back at a point out that Aristotle was very specific lower price.2 Yet even here, the real economic concerning wealth and its use only as an loss that the client incurred was picked up as intermediate end, useful merely as a means a gain by Drexel, and all profits were certainly to something else. Though it could be argued, taxed by Uncle Sam, somewhere along the let us assume for argument's sake that Aris­ line. totle was correct in his assessment of money. Now that his six "crimes" have been exam­ Then we must look to how Milken has used ined, his everyday actions must be considered. his money. Milken has always lived relatively The four philosophers provide an excellent modestly, refraining from ostentatious spend­ opportunity to evaluate the actions of an ing and extreme indulgence in luxuries.4 entrepreneur and businessman. Aristotle, Milken obviously did not use his wealth for Thomas Hobbes, Immanuel Kant, and John simple hedonistic pleasures, but he did use his Stuart Mill take very different approaches to wealth to achieve other ends. Milken used his morality. They differ in their perceptions of income to establish the Milken Family Foun­ man, concepts of virtue, and ideas of how to dation, which contributes millions of dollars apply ethics. These three characteristics de­ every year to fund education and charities, to fine how each philosopher might well judge underwrite cancer research, and to invest in and weigh Milken's actions. From their teach­ promising companies. It appears that any ings and perceptions, Milken will receive a allegations of pure greed are groundless from new trial. the evidence of Milken's lifestyle. Milken has satisfied Aristotle's criteria and has passed Aristotle this test. Aristotle deemed that actions were moral if Thomas Hobbes they promoted actualization, or, to be more specific, the total actualization of potentiality Milken's actions fall nicely into Thomas in all being. He defined virtues as either Hobbes's conceptions of morality. Hobbes intellectual, maintaining prudence and wis­ believed the ethical man acted in enlightened dom; or moral, the control of emotions and self-interest. None would disagree that desires in obedience to reason.3 In this way, Milken acted out of self-interest, but some man could achieve his fullest potential and be might disagree as to whether his actions were considered moral. Did Milken's actions fulfill "enlightened." This enlightenment demands the ideal oftotal actualization, yet still remain that Milken's actions not have been centered virtuous? Milken's job at Drexel Burnham in pure selfishness, but also consist of a desire Lambert was to provide financial advice to to seek higher goals. Economically, it is simple clients and to find profitable investment op­ to prove that Milken's actions benefited ev­ portunities. His investment strategies bailed eryone else either directly or indirectly, but 156 THE FREEMAN • MARCH 1997 to prove his case morally we must look everyone have a strong work ethic, as the end elsewhere. result would create no internal logical flaws, Milken sees himself as a "social scientist," nor would it create undesirable ends. Ulti­ one who looks at "what is happening in mately this maxim would only benefit all, by society, what society needs."s Milken's invest­ improving efficiency, allocation of resources, ments in telecommunications, Latin America, and the quality of life, even for those not and education certainly demonstrate his abil­ earning high profits. ity to anticipate what society needs. Compa­ nies such as Time Warner, MCI, and Turner J. S. Mill Broadcasting were able to become highly successful businesses thanks to over $5 billion John Stuart Mill's theory of utilitarianism in financing from Milken. He believes that is the final challenge that Milken faces. Util­ talented and trained people are the key to the itarianism defines the moral rightness or future, and the best investment for the future wrongness of an act in terms of the balance lies in education. Milken fulfills the role of of good or bad consequences. Mill held that Hobbes's enlightened, self-interested man actions are right in proportion as they tend perfectly. Milken invested both for himself to promote happiness, wrong as they tend to and for the world in which he lived. produce the reverse of happiness. Milken's actions must be evaluated both in terms of Immanuel Kant consequences and in happiness created, as the results prove to be different. Immanuel Kant developed one ofthe strict­ There is a common myth that wealth is est forms ofdetermining moral actions. Moral generated only at the expense of others. maxims or rules, Kant claimed, must fit within Wealth actually creates more wealth through the categorical imperative. One should "act voluntary trade. It provides an incentive that only on that maxim through which you can encourages new ideas and economic growth. at the same time will that it should become Economic expansion only occurs when entre­ universal law.,,6 In otherwords, you should act preneurs like Milken take chances in order to in a way that you would want everyone else gain profits. From a purely economic stand­ to act. For example, theft would be immoral point, Milken's actions had no net negative because you would not want everyone else results. He managed to forge an entirely new to steal as well. After the maxim or rule of way of thinking about investment. Leveraging behavior is determined, it must then be put to helped to free up badly needed capital that the tests of universality and consistency. Only allowed companies to expand and improve Milken himself truly knows which moral max­ faster and more efficiently. ims he employed; however, from his actions a If Milken never actually harmed anyone maxim can be hypothesized. coercively or fraudulently, what made him the This maxim is that one should have a strong object of so many negative emotions from the work ethic and pursue profit through fair public? Many claimed he was greedy and means. None can disagree that Michael undeserving of his wealth. In a literal defini­ Milken had a strong work ethic; it is clearly tion of utility, Milken fails miserably in the evidenced in his high profits. And his lack of eyes of the masses. However, a closer look at harm, intentional or otherwise, meets the Mill's theories will prove that in this case, the demand for fairness. It would be logical to majority truly had no right to be unhappy with apply this maxim universally, because there Milken. is nothing inherently wrong with it. Profit is The public was guilty of misjudging Milken the result of payments exceeding costs in a for many reasons. In addition to being igno­ legal transaction. It is the successful by­ rant of Milken's overall contributions to the product of free trade, and through market economy, people were misled by crusaders transactions makes people better off. One against the "decade of greed." The govern­ could also consistently "will" or desire that ment assaulted Milken and others in order to ON TRIAL AGAIN 157 displace public anger over the savings and he has had. Milken could not escape the loan failures, and in the case of at least one clutches of politics, but higher judges would special prosecutor, to gain political advan­ have found him innocent. Aristotle, Thomas tage. Likewise, the corporate establishment Hobbes, Immanuel Kant, and John Stuart and old-liners at Wall Street wanted Milken Mill represent the bastions of Western out of the picture in order to seize his profits thought, and their philosophies support Milk­ for their own companies and eliminate "the en's morality. outsider."7 Media hype only increased the It seems that my professor was too quick to animosity toward Milken, and so out of un­ judge, and wrong in his assessment. Milken justifiable emotions, Milken inadvertently should not be thought of as a hedonist or created unhappiness. criminal, but rather regarded as a hero. His Misplaced emotion can hardly be a justifi­ ideas and innovations created an entirely new cation for Milken to be considered immoral. direction for investment to grow. Michael Mill believed that in some cases majority Milken may have made enormous profits opinion does not constitute utilitarianism. during the years he worked for Drexel Burn­ "Society ... practices a social tyranny more ham Lambert, but those numbers pale in formidable than many kinds of political op­ comparison to the amount of wealth he gen­ pression. There needs protection against the erated for everyone else. The only crime tyranny of the prevailing opinion and feeling; Michael Milken is truly guilty of is doing his against the tendency of society to impose, by job and doing it well. 0 other means than civil penalties, its own ideas and practices as rules ofconduct on those who dissent from them."s How unfortunate that 1. Michael Milken, "My Story," Forbes, March 16, 1992, p. 4. there was no protection for Michael Milken, 2. Daniel Fischel, Payback (New York: HarperCollins, 1995), pp. 163-164. because by objective utilitarian standards 3. Aristotle, On Man in the Universe (New York: Random he certainly provided for the greater good of House, 1971), p. 87. 4. Fischel, p. 159. society. 5. Milken, p. 20. Michael Milken may have pled guilty to six 6. Immanuel Kant, Groundwork ofthe Metaphysics ofMorals, p.6. charges, but those so-called crimes hardly 7. Fischel, p. 300. account for the enormous amount of success 8. John Stuart Mill, On Liberty, p. 3.

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The End of the World as We Know It? by William V. Bandoch, Jr. and Walter Block

n today's world there exists a widespread as spinners and weavers of cotton had risen I belief that new technology is creating mas­ from 7,900 to 320,000, an increase of 4,400 sive unemployment and rendering human percent.1 labor obsolete. This is not true. Ever since man discovered fire, the purpose Ideally, having machines and computers do of technological advancement has been to all our "dirty work" would make our lives make life easier for everyone. If we accepted much better. After all, isn't this why our the assessment of technophobes, we'd be in primitive ancestors created the wheel? Some quite a predicament. Why contact someone genius said one day, "Hey, why should I carry via the telephone when we could hire some­ this heavy burden on my back, when it body to hand-deliver our message? Why send can be pushed in a wheeled cart?" Then his cargo from Philadelphia to Boston by railroad friend hit him over the head with a club and when we could hire an enormous number of berated him for wanting to create unemploy­ men to carry it on their backs? The anti­ ment. technology argument seems ridiculous when According to Henry Hazlitt, the belief that you look at it this way. It is in the nature of new machines on net balance create unem­ those who take pride in their work to try to ployment is one of the biggest fallacies in increase the results they can achieve in a given economic thought. To illustrate his point, number ofhours. Ifthose who fear technology Hazlitt cites the effects of cotton-spinning accepted their own rhetoric, they would have machinery on cotton spinners and weavers in to dismiss all progress and ingenuity not only eighteenth-century England. When Ark­ as useless, but also vicious.2 wright invented his cotton-spinning machin­ What really happens when technological ery in 1760, it was estimated that there were improvements and labor-saving machinery 5,200 spinners using spinning wheels, and are introduced? Hazlitt provides an interest­ 2,700 weavers, for a total of 7,900 persons ing scenario. A clothing manufacturer buys a working in the production of cotton textiles. machine that makes men's and women's over­ There was strong opposition to the invention coats for half as much labor as was previously on the grounds that it would bring massive used. Thus, half his labor force is dropped. unemployment to the cotton textile industry. While this may look like a clear loss of Yet in 1787, the number of persons working employment, one must remember that the machine itself required labor to make it. Mr. Bandoch is a student, and Dr. Block a professor Here, as one offset, are jobs that would not of economics, at the College of the Holy Cross in otherwise have existed. In the long run, the Worcester, Massachusetts. manufacturer will have increased his profits 158 159 with the use of the machine. Hazlitt then cases, there is no doubt that it does. But we states, must look at the long-run picture and the opportunities that arise from new technology. The manufacturer must use these extra New product technology is a net creator of profits in at least one of three ways, and jobs. These innovations do not merely replace possibly he will use part ofthem in all three: the old products they dislodge from the (1) he will use the extra profits to expand market, but instead develop new and ex­ his operations by buying more machines to panded markets of their own. The most make his coats; or (2) hewill invest the extra successful product innovations, like the tele­ profits in some other industry; or (3) he phone, automobile, and television leave their will spend the extra profits on increasing predecessor products orservices so far behind his own consumption. Whichever of these in terms of both output and employment that three courses he takes, he will increase the comparison is almost impossible.5 employment.3 Technology does have its supporters­ The consumers who buy the coats also save sometimes unexpected ones. Testifying be­ money. The machine has reduced the price of fore Congress many years ago, labor union the coat, allowing the consumer to spend that leader Walter Reuther spoke of how techno­ saved money on other goods, thus providing logical advances can put many desirable goals increased employment in other areas. The within our reach: greatly improved standards bottom line is that machines bring an increase of living (including increased leisure for every in production and an increase in the standard family), the relative elimination of poverty of living. in our land, rapid progress in providing the George Terborgh claims that there is one fullest educational opportunity to every child, indisputable fact about technology: It creates and providing the means to make the best new products, including services, and new health care available to all. methods of production. But will these great Unfortunately, technophobes fail to see technological advances that help make our this potential. What worries them the most is lives easier create massive unemployment? the one thing that should make them the Terborgh doesn't believe so. Instead, the happiest. Technology will continue to reduce impact technological progress has on employ­ our sweat and toil, much as the wheel enabled ment is twofold: It creates jobs, but it also our ancestors to save time and energy. destroys them. For example, There will always be those who insist on looking only at the short-term effects, while ... the thousands ofnew products that pour ignoring the long-run rewards. New and bet­ forth annually from research and develop­ ter ways of doing things have the potential to ment laboratories, and the hundreds ofnew render hard, tiresome labor obsolete. If this industries they create, obviously generate a happens, we will all be able to engage in large demand for labor. On the other hand, meaningful work and play that enable us to older products and industries are displaced make the best use of our natural abilities. Of by their competition, with a consequent loss course, none of this discussion would be of jobs.4 necessary if someone had just kicked the The same is true with new methods of pro­ wheels off that caveman's cart! duction. The technophobes are only looking 1. Henry Hazlitt, Economics in One Lesson (New York: at one side of the coin. They see only the Crown Publishers, Inc., 1979), p. 50. people who are being unemployed with each 2. Ibid., p. 54. 3. Ibid., pp. 55-56. technological advance. They fail to see the 4. George Terborgh, "Automation Hysteria and Employment new jobs created in other areas. Effects of Technological Progress," in Automation, Alienation, and Anomie, ed. Simon Marcson (New York: Harper and Row Does the gain in employment from tech­ Publishers, 1970), p. 362. nological advances exceed the loss? In some 5. Ibid., pp. 363, 364. THEFREEMAN IDEAS ON LIBERTY

Albert Jay Nock: A Gifted Pen for Radical Individualism by Jim Powell

merican individualism had virtually died vert liberty. He insisted individuals have the Aout by the time Mark Twain was buried unalienable right to pursue happiness as long in 1910. "Progressive" intellectuals promoted as they don't hurt anybody. Murray N. Roth­ collectivism. "Progressive" jurists like Oliver bard called Nock "an authentic American Wendell Holmes hammered constitutional radical." restraints as an inconvenient obstacle to ex­ Even though Nock didn't contribute to panding government power, supposedly the mass-circulation magazines and his books had cure for every social problem. "Progressive" a limited sale, he quietly affirmed individual­ education theorist John Dewey belittled ism as a living creed. He became a name to "mere learning" and claimed that "social reckon with as editor and writer for The reconstruction" was the mission of schooling. Freeman (1920-1924). The great antiwar "Progressive" hero Theodore Roosevelt glo­ journalist Oswald Garrison Villard called it rified imperial conquest. "Progressive" Pres­ "the best-written weekly yet to appear in the ident Woodrow Wilson maneuvered America United States, a publication which thoroughly into a European war, jailed dissidents, and merited a permanent place in American jour­ pushed through the income tax which per­ nalism." The influential editor and author sists to this day. Great individualists such as H. L. Mencken declared: "What publicist Thomas Paine and Thomas Jefferson were among us, indeed, writes better than Nock? ridiculed, if they were remembered at all. His [Freeman] editorials ... set a mark that no Yet author Albert Jay Nock dared declare other man ofhis trade has ever quite managed that collectivism was evil. He denounced to reach. They were well informed and some­ the use offorce to impose one's will on others. times even learned, but there was never the He opposed military intervention in the affairs slightest trace ofpedantry in them. In even the of other nations. He believed America should least of them there were sound writing and stay out of foreign wars that inevitably sub- solid structure. Nock has an excellent ear ... he thinks in charming rhythms." Mr. Powell is editor of Laissez Faire Books and a Nock won respect, too, because he was a senior fellow at the Cato Institute. He has written for highly cultured man. As literary critic Van the New York Times, the Wall Street Journal, Wyck Brooks explained: "He was a formida­ Barron's, American Heritage, and more than three ble scholar and an amateur of music who dozen other publications. Copyright © 1997 by Jim remembered all the great singers of his day Powell. Thanks to Edmund A. Opitz, Jack Schwartzman, and could trace them through this part or that and Robert M. Thornton for helping to secure scarce from Naples to St. Petersburg, London, Brus­ materials on Nock. sels, and Vienna. He had known all the great 160 161 orchestras from Turin to Chicago ... and he Beginnings had visited half the universities of Europe from Bonn to Bordeaux, Montpelier, Liege Albert Jay Nockwas born October 13,1870, and Ghent. He could pick up at random, with in Scranton, Pennsylvania. He was the only a casual air, almost any point and trace it from child of Emma Sheldon Jay, who descended Plato through Scaliger to Montaigne or Eras­ from French Protestants. His father, Joseph mus, and I can cite chapter and verse for Albert Nock, was a hot-tempered steelworker saying that whether in Latin or Greek he and Episcopal clergyman. could quote any author in reply to any ques­ Nock grew up in a semirural Brooklyn, New tion. I believe he knew as well the Old York, neighborhood, and the family had a Testament in Hebrew." American historian large garden and fruit trees. According to Merrill D. Peterson added: "Hewas a finished his account, he learned the alphabet by puz­ scholar, a brilliant editor, and a connoisseur zling over a newspaper and asking questions. of taste and intellect." He didn't attend school until he was a teen­ Nock's friend Ruth Robinson recalled, ager, but at home he was surrounded by "He was a finely constructed man, with small books, which he explored randomly. He re­ bones, hands, and feet. He was five feet ten called that the first book he focused on was inches tall, slight and quick in movement; he Webster's Dictionary, probably because it kept his excellent figure and carriage through­ was a fat book on a lower shelf. "The dic­ out life. The salient expressions of his strong tionary became quite literally my bosom face were conveyed through his brilliant blue friend, for I lugged it about, clasped it to my eyes, which could change instantly, be impen­ breast with both hands, from one place to etrable, mischievous, or express great kindli­ another where I should not be underfoot, and ness and sympathy. He had fair skin and high there I would lay it open on the floor and color and during all the years I knew him wore read it." a mustache.... Long before his hair turned When Nock was ten, his father got a job white, an iron-grey band at the edge of his on the upper shore of Lake Huron. There brown hair was an outstanding characteristic he observed "independence, self-respect, self­ of his appearance." reliance, dignity, diligence ... the virtues that Nock was an intensely private man. People once spoke out in the Declaration of Inde­ who worked with him for years had no idea pendence. . .. Our life was singularly free; that he had been a clergyman. "No one knew we were so little conscious of arbitrary re­ even where he lived," noted Van Wyck straint that we hardly knew government ex­ Brooks, "and a pleasantry in the office was isted.... On the whole oursociety might have that one could reach him by placing a letter served pretty well as a standing advertisement under a certain rock in Central Park." Frank for Mr. Jefferson's notion that the virtues Chodorov, a friend during Nock's last decade, which he regarded as distinctively American said, "It was only after I was appointed thrive best in the absence of government." administrator of his estate that I learned of After attending a private preparatory the existence of two full-grown and well­ school, Nock entered St. Stephen's College educated sons." (later to become Bard College) in 1887. It Social philosopher Lewis Mumford, who had fewer than one hundred students. Both knew Nock early in his career, remembered institutions stressed a classical curriculum, that: "He was the very model of the old­ and Nock relished Greek and Latin literature. fashioned gentleman, American style: quiet He graduated third in his ten-student class. spoken, fond ofgood food, punctilious in little Nock reportedly went on to attend Berkeley matters of courtesy, with a fund of good Divinity School, Middletown, Connecticut, stories, many ofthem western; never speaking and although he left after about a year, he was about himself, never revealing anything di­ ordained in the Episcopal Church in 1897. rectly about himself." Added Chodorov, The following year, he began serving as as­ "Nock was an individualist." sistant rector at St. James Church, Titusville, 162 THE FREEMAN • MARCH 1997

Pennsylvania. He succeeded the rector, who author Mark Twain. Located at 16 Gramercy died on New Year's Day 1899. Park South, Manhattan, it is a Gothic Revival It was in Titusville that Nock met Agnes style five-story house that architect Stanford Grumbine, and they were married April 25, White transformed into the club in 1888. Out 1900. They had two sons: Samuel, born in front are a wrought-iron balcony and Renais­ 1901, and Francis, born in 1905. Nock left sance-style gaslights. The Players Club has his wife soon thereafter, and never remarried. one of America's largest libraries on the His sons grew up to become college teachers. theatre and portrait paintings by Gilbert Stu­ Meanwhile, Nock was called to Christ Epis­ art, John Singer Sargent, and Norman Rock­ copal Church, Blacksburg, Virginia, and then well. Besides Nock, illustrious members have to St. Joseph's Church in Detroit. In 1909, he included caricaturist Thomas Nast, theatrical seems to have experienced a crisis of faith. actors John Barrymore and Helen Hayes, "My life was detached, untouched and color­ screen actors James Cagney and Douglas less," he later told Ruth Robinson. Fairbanks, Jr. Nock liked to take mail, eat, Nock embraced ideas of crusading eco­ and play pool at the Players Club-a portrait nomic reformer Henry George. "As a social ofMarkTwain hangs over a fireplace, and one philosopher, George interested me profound­ of Twain's pool cues is on display. Nock's ly," Nock recalled, "as a reformer and pub­ business card simply said: "Albert Jay Nock, licist, he did not interest me.... George's Players Club, New York." philosophy was the philosophy of human Nock absorbed the ideas of German soci­ freedom ... he believed that all mankind are ologist Franz Oppenheimer, whose radical indefinitely improvable, and that the freer book Der Staat was published in 1908. An they are, the more they will improve. He saw English translation, The State, appeared in also that they can never become politically 1915. Oppenheimer had noted that there or socially free until they have become eco­ were only two fundamental ways of acquiring nomically free." wealth-work and robbery. He declared that Nock quit the clergy to become an editor of government was based on robbery. American Magazine, launched by editors and In 1914, cash-shortAmerican Magazine was writers who had a falling out with S.S. Mc­ about to be acquired by a publisher intent on Clure, the pioneering muckraking publisher. avoiding controversy. Nock joined the staff Nock worked at American Magazine for four of The Nation, which was owned and edited years. He wrote articles advocating a single by Oswald Garrison Villard, grandson of tax on land and-it must be confessed-he antislavery crusader William Lloyd Garrison. approved Canada's policy of having govern­ Nock came to admire Villard, who coura­ ment own vast acreage. He befriended the geously opposed President Woodrow Wil­ former Toledo mayor and aspiring scholar son's scheming to get America into the First Brand Whitlock, who later wrote a biography World War. One of Nock's articles, on labor of the Marquis de Lafayette. He spent time union agitator Samuel Gompers, provoked with the likes of muckraking journalists Lin­ Wilson's censors to suppress The Nation. coln Steffens and John Reed. He honed his writing. "My stuff is good enough, perhaps," The Freeman he wrote Ruth Robinson, "and surely better than five or six years ago, but it still sounds as Nock, however, decided he couldn't abide though it was written from a seat in the grand Villard's approval of nationalizing railroads. stand." He resigned from The Nation and, backed by Helen Swift Neilson, daughter of Gustavus The Players Club Swift and heir to a meatpacking fortune, he became editor of a new magazine of opinion: Nock frequented the Players Club, fabled The Freeman. The first weekly issue appeared gathering place for people in the arts since it March 17, 1920. The magazine measured 8V2 was established by actor Edwin Booth and inches by 121/2 inches and contained 24 pages ALBERT JAY NOCK: A GIFTED PEN FOR RADICAL INDIVIDUALISM 163 ofarticles and letters about politics, literature, music, and other topics. Nock's principal collaborator was Neilson's English husband, Francis, a former stage direc­ tor at the London Royal Opera and radical Liberal Member of Parliament who became a leading pacifist. Disgusted by England's entry in the First World War, Neilson came to the United States and became an American cit­ izen. He provoked controversy with his book How Diplomats Make War, published in 1915 by Benjamin W. Huebsch, who subsequently served as president of The Freeman. Practically from the beginning, there was rivalry between the collaborators. Will Liss­ ner, a former New York Times writer who knew both Nock and Neilson, recalled that "Nock rewrote many of Neilson's articles in Nock's own distinctive style, causing the read­ ers to assume that 'Nock was The Freeman.' Neilson bitterly resented this assumption." Lewis Mumford reported that "Nock couldn't bear Neilson's somewhat inflated parliamen­ tary style; and he would quietly put Neilson's contributions in the drawer ofhis desk, letting them gather dust. ..." In his memoirs, pub­ Albert Jay Nock lished after Nock's death, Neilson claimed Nock had stolen his stuff. Nock was more decidedly wasn't a hard-core libertarian mag­ graceful. "I had far less to do with forming or azine. maintaining [The Freeman] than people think Oswald Garrison Villard hailed The Free­ I had. My chief associate was ... one of the man for, he assumed, joining the "ranks of ablest men I ever knew, far abler than I, and liberal journalism," but Nock replied in the more experienced." March 31 issue: "The Freeman is a radical The editorial staff included Suzanne La paper; its place is in the virgin field, or better, Follette. In her mid-twenties, she was the the long-neglected and fallow field, of Amer­ daughter of "progressive" U.S. Senator Rob­ ican radicalism. ert M. La Follette and a rigorous opponent "The liberal believes that the State is es­ of government intervention. "She was a very sentially social and is all for improving it beautiful woman, with a hilarious sense of by political methods so that it may function humor, a grammatical stickler ... a feminist accordingly to what he believes to be its ... generous and warm-hearted," recalled original intention. Hence, he is interested in William F. Buckley Jr., who knew her in later politics, takes them seriously, goes at them years. hopefully, and believes in them as an instru­ There was an eclectic assortment of con­ ment of social welfare and progress.... The tributors, including economic historian radical, on the other hand, believes that the Charles Beard, book reviewer Van Wyck State is fundamentally anti-social and is all for Brooks, Soviet critic William Henry Cham­ improving it off the face of the earth; not by berlin, technology critic Lewis Mumford, phi­ blowing up office-holders ... but by the his­ losopher Bertrand Russell, muckraker Lin­ torical process of strengthening, consolidat­ coln Steffens, poet Louis Untermeyer, and ing and enlightening economic organization." economist Thorstein Veblen-The Freeman To better understand the roots offreedom, 164 THE FREEMAN • MARCH 1997

Nock urged Americans to "resolutely close full of unpredictable quirks." Oswald Garri­ their eyes to diplomatic exchanges and official son Villard expressed "grateful thanks that it pronouncements, and read Thomas Paine, has existed, and our belief that it would be a Thomas Jefferson, Thoreau, Wendell Phillips, misfortune if some other medium were not Henry George." Nock added that "without found to avail itself of Mr. Albert Jay Nock's economic freedom no other freedom is sig­ exceptional equipment for editorial service." nificant or lasting, and that if economic free­ Nock sailed for Brussels, where he had dom can be attained, no other freedom can be many fond memories: "Her ways and man­ withheld." ners, her unpretending grace and charm, her Of the consequences of the First World feel of stability and soundness, are all just as War, Nock wrote: "The war immensely for­ you have been impatiently expecting to find tified a universal faith in violence; it set in them, and her face wears a jolly Flemish motion endless adventures in imperialism, smile." endless nationalist ambitions. Every war does Back in New York, Nock became a good this to a degree roughly corresponding to its friend of H.L. Mencken, the maverick who magnitude." edited American Mercury. "There is no better Nock wrote more about diplomacy than companion in the world than Henry," Nock any other subject for The Freeman, and al­ exulted after one Manhattan dinner. "I ad­ though he didn't pore through all the diplo­ mire him, and have the warmest affection for matic documents, he did gain perspective him. I was impressed afresh by his superb by traveling through Europe. For instance, character-immensely able, unselfconscious, he witnessed the 1923 German runaway in­ sincere, erudite, simple-hearted, kindly, gen­ flation: "I crossed from Amsterdam to Berlin erous, really a noble fellow if ever there was with German money in my bill-fold amount­ one in the world." ing nearly to $1,250,000, pre-war value. Ten Soon Nock was writing for intellectual years earlier I could have bought out half a magazines like American Mercury, Atlantic German town, lock, stock and barrel, with Monthly, Harper's, Saturday Review ofLitera­ that much money, but when I left Amsterdam ture, and Scribner's. American Mercury, for my best hope was that it might cover a decent instance, published "On Doing the Right dinner and a night's lodging." Thing." He wrote: "The practical reason for Nock turned some of his Freeman articles freedom, then, is that freedom seems to be the into his first book: The Myth ofa Guilty Nation, only condition under which any kind of sub­ which, based on the work of Francis Neilson, stantial moral fibre can be developed. Every­ debunked the idea that Germany was solely thing else has been tried, world without end. responsible for World War I. Nock insisted Going dead against reason and experience, all the participants deserved blame for the we have tried law, compulsion and authori­ catastrophe that resulted in some 10 million tarianism of various kinds, and the result is deaths. Historian Harry Elmer Barnes wrote nothing to be proud of." that "The Myth of a Guilty Nation was a Three admirers from Philadelphia, Ellen brilliant piece ofjournalistic Revisionism.... Winsor, Rebecca Winsor Evans, and Edmund It took some courage in those days." C. Evans, provided funds which enabled Nock Unfortunately, The Freeman never at­ to pursue his projects-their assistance con­ tracted more than about 7,000 subscribers­ tinued for the rest of his life. In 1924, he far from enough to become self-sustaining. gathered together writings of the American Annual losses reportedly exceeded $80,000. humorist and social critic Artemus Ward The magazine ceased publication after the (1834-1867), who had inspired Mark Twain. March 5, 1924, issue. There had been 208 Ward had fallen out of fashion, and Nock issues, and Nock seems to have contributed thought his social criticism could be appre­ 259 pieces. Atlantic Monthly editor Ellery ciated by just a small number of unusually Sedgwick remembered Nock's Freeman as civilized and perceptive people whom he "admirably written, diverting, original, and called the "Remnant"-a term that would ALBERT JAY NOCK: A GIFTED PEN FOR RADICAL INDIVIDUALISM 165 blossom into one of his better-known ideas a Nock's contribution was as an interpreter, dozen years later. downplaying the importance of George's fa­ mous policy proposal-a single tax on land­ Mr. Jefferson regretting George's foray into New York City politics, and emphasizing his contributions as Then Nock focused on book-length bio­ a philosopher offreedom. "He was one ofthe graphical essays. The first was Mr. Jefferson greatest of philosophers," Nock wrote, "and (1926), which skipped the most famous events the spontaneous concurring voice of all his of the Founder's life to focus on the devel­ contemporaries acclaimed him as one of the opment of his mind. Nock drew extensively best of men." on Charles Beard's The Economic Origins Meanwhile, in March 1930, backed by one of Jeffersonian Democracy. Claude Bowers's Dr. Peter Fireman, Suzanne La Follette and Jefferson and Hamilton, published the same Sheila Hibben had launched the New Free­ year, sold more copies at the time and did man, but losses became too big, and it was more to revive the reputation of Jefferson, discontinued after the March 1931 issue. who had been a forgotten man since the Civil Nock contributed 54 mostly short articles War. But it is Nock's book that remains in about art, literature, and education. There print. H.L. Mencken wrote that Nock's book was little political commentary other than a "is accurate, it is shrewd, it is well ordered, call for ending Prohibition. His articles were and above all it is charming. I know of no reprinted in The Book ofJourneyman (1930). other book on Jefferson that penetrates so In The Theory of Education in the United persuasively to the essential substance of the States (1932) and other writings, Nock chal­ man." Harvard University's great narrative lenged the American dream of educating historian Samuel Eliot Morison hailed the everybody. He believed that while most peo­ "brilliancy" of Nock's Jefferson. Historian ple could be trained to do useful things, only Merrill Peterson calls it "The most captivating a few could truly cultivate their minds and single volume in the Jefferson literature." contribute to civilization. Nock loved the sixteenth-century French Nock provided an early warning of collec­ humanist scholar, extravagant satirist, and tivist catastrophe. In July 1932, before Hitler maverick individualist Franc;ois Rabelais, and came to power, Nock observed: "Things in in 1929 he wrote a book about him, collabo­ Germany look bad at this distance. The new rating with Oxford-educated researcher government, which is making use of Hitler, Catherine Rose Wilson. "Rabelais is one of seems bent on a Napoleonic absolutism." the world's great libertarians ... he has been Nock was decades ahead of most intellec­ a stay and support to my spirit for thirty years, tuals in condemning all tyranny. "Refrain and I could not possibly have got through from using the word Bolshevism, or Fascism, without him.... The chief purpose of reading Hitlerism, Marxism, Communism," he noted a classic like Rabelais is to prop and stay the in November 1933, "and you have no trouble spirit, especially in its moments of weakness getting acceptance for the principle that un­ and enervation, against the stress of life, to derlies them all alike-the principle that the elevate it above the reach of commonplace State is everything, and the individual noth­ annoyances and degradations, and to purge it ing." of despondency and cynicism. He is to be read Nock became an implacable foe ofFranklin as Homer, Sophocles, and the English Bible, D. Roosevelt's New Deal. In May 1934, he are to be read." Five years later, Nock wrote wrote: "Probably not many realize how the A Journey into Rabelais's France, a travelogue rapid centralization of government in Amer­ illustrated by his friend Ruth Robinson ica has fostered a kind of organized pauper­ (1934). ism. The big industrial states contribute most Nock did a book-length essay on Henry of the Federal revenue, and the bureaucracy George (1939), drawing substantially on the distributes it in the pauper states wherever two-volume biography by Henry George Jr. it will do the most good in a political way. 166 THE FREEMAN • MARCH 1997

The same thing takes place within the states invariably had its origin in conquest and themselves. In fostering pauperism it also confiscation." by necessary consequence fosters corruption. "The State," he continued, "both in its ... All this is due to the iniquitous theory of genesis and by its primary intention, is purely taxation with which this country has been so anti-social. It is not based on the idea of thoroughly indoctrinated-that a man should natural rights, but on the idea that the indi­ be taxed according to his ability to pay, instead vidual has no rights except those that the State of according to the value of the privileges he may provisionally grant him. It has always obtains from the government." made justice costly and difficult of access, and Nock embraced the pessimism of the ar­ has invariably held itself above justice and chitect Ralph Adams Cram, whose Septem­ common morality whenever it could advan­ ber 1932 American Mercury article "Why We tage itself by so doing." Do Not Behave Like Human Beings" de­ Still far ahead of other intellectuals, Nock clared that most people are barbarians, there observed: "The superficial distinctions ofFas­ are limited prospects for improvement, and cism, Bolshevism, Hitlerism, are the concern the future depends on a few civilized souls. "I of journalists and publicists; the serious stu­ held to my Jeffersonian doctrine for a long dent sees in them only the one root-idea of time, meanwhile trying my best to pick holes a complete conversion of social power into in Mr. Cram's theory," Nock recalled, "but State power.... In Russia and Germany, for with no success." example, we have lately seen the State mov­ Nock's friend Bernard Iddings Bell per­ ing with great alacrity against infringement suaded him to accept a visiting professorship of its monopoly by private persons, while at in American history at Bard College, part of the same time exercising that monopoly with Columbia University, and he served there unconscionable ruthlessness." between 1931 and 1933. He delivered a series Nock despaired about individuals who be­ of lectures which focused on the struggle for come willing tools of state power: "Instead of liberty. He subsequently massaged the lecture looking upon the State's progressive absorp­ texts into his great radical polemic Our En­ tion of social power with the repugnance and emy, the State. He drew from ideas of Franz resentment that he would naturally feel to­ Oppenheimer, who had written about the wards the activities of a professional-criminal violent origins of the state. Nock championed organization, he tends rather to encourage the natural rights vision ofThomas Paine and and glorify it, in the belief that he is somehow Thomas Jefferson, the case for equal freedom identified with the State, and that therefore, articulated by Herbert Spencer. Nock ignored in consenting to its indefinite aggrandize­ a taboo and spoke kindly of the American ment, he consents to something in which he Articles of Confederation (1781-1789), the has a share." association of states without a central gov­ Most reviewers ignored Our Enemy, the ernment. He shared American historian State, but it won surprising praise from the Charles Beard's view that the Constitution pro-New Deal New Republic. Editor George reflected a struggle among interest groups. Soule ranked Nock among "the best essayists and soundest commentators on political his­ Our Enemy, the State tory." Our Enemy, the State appeared in 1935. "Isaiah's Job" Nock wrote: "There are two methods, or means, and only two, whereby man's needs In his June 1936 Atlantic Monthly article and desires can be satisfied. One is the "Isaiah's Job," Nock explained his view that production and exchange ofwealth; this is the the future of civilization depended on what economic means. The other is the uncompen­ he called the "Remnant." He told the story of sated appropriation of wealth produced by the Biblical prophet Isaiah, called by the Lord others; this is the political means . .. the State to warn people about terrible times coming. ALBERT JAY NOCK: A GIFTED PEN FOR RADICAL INDIVIDUALISM 167

"Tell them," Nock quoted the Lord, "what ical institutions and political nostrums is lu­ is going to happen unless they have a change dicrously misplaced. Social philosophers in of heart and straighten up." But the Lord every age have been strenuously insisting that acknowledged missionary workwouldn'tyield all this sort offatuity is simply putting the cart quick results: "The official class and their before the horse; that society cannot be intelligentsia will turn up their noses at you, moralized and improved unless and until the and the masses will not even listen. They will individual is moralized and improved." keep on their own ways until they carry Nock recognized the futility of violent rev­ everything down to destruction, and you will olution. For instance, these remarks from his probably belucky ifyou get outwith your life." introduction to the 1940 edition of Herbert Why bother? According to Nock, the Lord Spencer's Man Versus the State: "The people replied: "There is a Remnant.... They are would be as thoroughly indoctrinated with obscure, unorganized, inarticulate, each one Statism after the revolution as they were rubbing along as best he can. They need to be before, and therefore the revolution would be encouraged and braced up, because when no revolution, but a coup d'etat, by which the everything has gone completely to the dogs, citizen would gain nothing but a mere change they are the ones who will come back and of oppressors. There have been many revo­ build up a new society; and meanwhile, your lutions in the last twenty-five years, and thus preaching will reassure them and keep them has been the sum of their history." hanging on. Your job is to take care of the Nock was considered a conservative for Remnant, so be off now and set about it." opposing Franklin Delano Roosevelt, who Speaking to prospective prophets, Nock touted big government and schemed to get wrote that "Two things you know, and no America into another European war. Yet more: first, that they exist; second, that they Nock was among the few thinkers to main­ will find you. Except for these two certainties, tain antiwar views during both world wars. working for the Remnant means working in Moreover, having abandoned his early "pro­ impenetrable darkness; and this, I should say, gressive" ideas for government intervention, is just the condition calculated most effec­ he had actually become more radical. He tively to pique the interest of any prophetwho affirmed his authentic radicalism in many of is properly gifted with the imagination, in­ the 48 articles he wrote between 1932 and sight, and intellectual curiosity necessary to a 1939 for American Mercury, hotbed of oppo­ successful pursuit of his trade." sition to FDR. "The German State is perse­ There was yet another revival of The Free­ cuting great masses ofits people," he wrote in man in 1937. The creative spark was Frank March 1939, "the Russian State is holding a Chodorov, who had met Nock the year be­ purge, the Italian State is grabbing territory, fore at the Players Club. The eleventh son of the Japanese State is buccaneering all along Russian immigrants, Chodorov had become the Asiatic Coast. ... The weaker the State is, director of the recently chartered Henry the less power it has to commit crime. Where George School, and The Freeman served as in Europe today does the State have the best its flagship publication. It was an 18- to criminal record? Where it is weakest: in 24-page monthly that defended capitalism Switzerland, Holland, Denmark, Norway, and opposed American entry in the coming Luxemburg, Sweden, Monaco, Andorra.... European war. Chodorov published at least "Many now believe that with the rise of the eight articles by Nock. 'totalitarian' State the world has entered upon More than ever, Nock rejected claims that a new era of barbarism. It has not. The government could deal with the monumental totalitarian State is only the State; the kind of problems of the age. In his introduction to thing it does is only what the State has always Henry Haskins's 1940 book Meditations in done with unfailing regularity, if it had the Wall Street, he insisted that "the State is the power to do it, wherever andwhenever its own poorest instrument imaginable for improving aggrandizement made that kind of thing ex­ human society, and that confidence in polit- pedient. ... 168 THE FREEMAN • MARCH 1997

"So it strikes me that instead of sweating who wrote for the New York Herald Tribune, blood over the inequity of foreign states, my were charmed by the book. fellow-citizens would do a great deal better by Nock seems to have had few friends during themselves to make sure that the American his last years. He corresponded with his sons State is not strong enough to carry out the like Francis and Samuel, with Discovery of Free­ inequities here. The stronger the American dom author Rose Wilder Lane, and former State is allowed to grow, the higher its record American Mercury editor Paul Palmer. He of criminality will grow, according to its often lunched with Frank Chodorov, who had opportunities and temptations." been forced out of the Henry George School because he opposed American entry in World Memoirs of a War II; after 1943, The Freeman became the Superfluous Man Henry George News and has continued up to the present. Chodorov recalled his times with In the early 1940s Nock turned to writing Nock: "Over a meal-I was usually ready for his last and best-known book-Memoirs ofa coffee before he finished his soup-he would Superfluous Man. He worked at a house in regale you with bits of history that threw light Canaan, Connecticut. He gracefully chroni­ on a headline, or quote from the classics a cled the development of his ideas. He pro­ passage currently applicable, or take all the vided insightful commentary about his glory out of a 'name' character with a pithy heroes-like Thomas Jefferson, Herbert statement of fact. He was a library of knowl­ Spencer, and Henry George. But he omitted edge and a fount of wisdom, and if you were most personal details about his life, and he a kindred spirit you could have your pick of was steeped in pessimism. "The American both." people," he lamented, "once had their liber­ Independent oilman William F. Buckley, ties; they had them all; but apparently they Texas-born son of Irish immigrants, saw him­ could not rest o'nights until they had turned self as part of"the Remnant" Nock cherished. them over to a prehensile crew ofprofessional Periodically he invited Nock to lunch at his politicians." family's Great Elm mansion in Sharon, Con­ Nock assailed one of his favorite targets, necticut-despite Nock's radical ways. Buck­ compulsory government schooling, which ley enjoyed Nock's individualism and his promoted "superstitious servile reverence for scholarship, and Memoirs of a Superfluous a sacrosanct State. In another view one saw Man helped spur his son William F. Buckley [government schooling] functioning as a sort Jr. to defy the collectivist trends of the time. of sanhedrin, a leveling agency, prescribing uniform modes of thought, belief, conduct, Nock's Last Years social deportment, diet, recreation, hygiene; and as an inquisitional body for the enforce­ Since no magazine would take Nock's writ­ ment of these prescriptions, for nosing out ing, several friends set up the National Eco­ heresies and irregularities and suppressing nomic Council. Starting on May 15, 1943, it them. In still another view one saw it func­ published the Economic Council Review of tioning as a trade-unionist body, intent on Books, which he edited. He continued almost maintaining and augmenting a set of vested two years until failing health led him to bow interests ... an extremelywell-disciplined and out. This work was picked up by Rose Wilder powerful political pressure group." Lane. Harper's published Memoirs ofa Superflu­ In 1945, Nock developed lymphatic leuke­ ous Man in 1943. Adversaries, predictably, mia, and he gradually ran out of steam. He heaped criticism on the book-the New York told his son Francis: "If sometimes you begin Times's Orville Prescott, for instance, blasted to think the old man is pretty good, and Nock for"a corrosive, contemptuous cynicism you feel that maybe you ought to be a bit anda profound despair." But some reviewers, proud of him ... realize that he ain't so much like intellectual compatriot Isabel Paterson, after all." He moved in with his friend Ruth ALBERT JAY NOCK: A GIFTED PEN FOR RADICAL INDIVIDUALISM 169

Robinson, who lived in Wakefield, Rhode Frank Chodorov, John T. Flynn, F.A. Hayek, Island. There he died August 19, 1945. Hewas Ludwig von Mises, and Wilhelm Ropke. But 74 and left an estate of about $1,300. Since by 1954, the editors were split between those Nock had wanted to be buried "without any (like Henry Hazlitt) who wanted to focus on fuss," a local Episcopal priest conducted a economic freedom and those (like La Follette simple funeral service at Robinson's house, and and volatile Willi Schlamm) who wanted to he was buried nearby in Riverside Cemetery. make anticommunism the key issue. The In his quiet way, Nock had remarkable latter resigned and joined William F. Buckley influence. Frank Chodorov championed Jr.'s new fortnightly, National Review-which, Nock's brand of individualism through his ironically, offered new subscribers a bonus books, his monthly newsletter analysis (he collection of Nock's essays under the title didn't capitalize the first "a"), and in the Snoring as a Fine Art (1958). weekly newsletter Human Events, where he Leonard E. Read's Foundation for Eco­ became an editor. He founded the Intercol­ nomic Education acquired The Freeman, legiate Society of Individualists. pumped money into it, went to a monthly According to Henry Regnery, who pub­ schedule, retained Chodorov as its first editor, lished two volumes of Nock's material after and has issued it ever since. Freeman articles his death, The Freeman was an inspiration for have been excerpted in the Chicago Tribune, Human Events, launched by newspaperman San Francisco Chronicle, Wall Street Journal, Frank Hanighen on February 2, 1944. Han­ Reader's Digest, and dozens of other publica­ ighen and his principal collaborator, former tions, and The Freeman reaches readers in Haverford College president Felix Morley, Argentina, Australia, Brazil, Britain, Canada, were principled opponents of American in­ China, France, Germany, Greece, India, In­ tervention in foreign wars. Not long before his donesia, Italy, Japan, Lithuania, Malaysia, death, Nock had expressed his admiration for Poland, Russia, Switzerland, and 50 other the enterprise and agreed to write some countries, as well as the United States. articles. Among the early contributors were Despite the onslaught of wars and the William Henry Chamberlin, who had written relentless expansion of government power, for The Freeman, and Nock's antiwar comrade individualism endures as a living creed, and Oswald Garrison Villard. Albert Jay Nock deserves considerable credit. In 1950, Nock's former editorial associate He expressed fundamental issues of liberty Suzanne La Follette joined with Life editor with blazing clarity. He withstood withering John Chamberlain and Newsweek columnist criticism. He defied censors. He helped re­ Henry Hazlitt to launch another Freeman­ vive glorious names like Thomas Jefferson, this time, as a biweekly. They were backed by Thomas Paine, and Herbert Spencer. His businessman Alfred Kohlberg, Du Pont ex­ moral conviction, cosmopolitan scholarship, ecutive Jasper Crane, and Sun Oil heir Joseph elegant prose, and steadfast devotion inspired N. Pew, Jr., among others. The distinguished others to join the epic struggle for contributors included William F. Buckley Jr., liberty. D FEE Classic Reprint

Isaiah's Job by Albert Jay Nock

ne evening last autumn, I sat long hours commissioned the prophet to go out and warn Owith a European acquaintance while the people of the wrath to come. "Tell them he expounded a politico-economic doctrine what a worthless lot they are," He said. "Tell which seemed sound as a nut and in which I them what is wrong, and why, and what is could find no defect. At the end, he said with going to happen unless they have a change of great earnestness: "I have a mission to the heart and straighten up. Don't mince matters. masses. I feel that I am called to get the ear Make it clear that they are positively down to ofthe people. I shall devote the rest ofmy life their last chance. Give it to them good and to spreading my doctrine far and wide among strong and keep on giving it to them. I suppose the populace. What do you think?" perhaps I ought to tell you," He added, "that An embarrassing question in any case, and it won't do any good. The official class and doubly so under the circumstances, because their intelligentsia will turn up their noses at my acquaintance is a very learned man, one of you, and the masses will not even listen. They the three or four really first-class minds that will all keep on in their own ways until they Europe produced in his generation; and nat­ carry everything down to destruction, and you urally I, as one of the unlearned, was inclined will probably be lucky if you get out with your to regard his lightest work with reverence life." amounting to awe.... Isaiah had been very willing to take on the I referred him to the story of the prophet job-in fact, he had asked for it-but the Isaiah.... I shall paraphrase the story in our prospect put a new face on the situation. It common speech since it has to be pieced out raised the obvious question: Why, if all that from various sources.... were so-ifthe enterprise were to be a failure The prophet Isaiah's career began at the from the start-was there any sense in starting end ofKing Uzziah's reign, say about 740 B.C. it? This reign was uncommonly long, almost half "Ah," the Lord said, "you do not get the a century, and apparently prosperous. It was point. There is a Remnant there that you one of those prosperous reigns, however­ know nothing about. They are obscure, un­ like the reign of Marcus Aurelius at Rome, or organized, inarticulate, each one rubbing the administration ofEubulus at Athens, orof along as best he can. They need to be encour­ Mr. Coolidge at Washington-where at the aged and braced up, because when everything end the prosperity suddenly peters out and has gone completely to the dogs, they are the things go by the board with a resounding crash. ones who will come back and build up a new In the year of Uzziah's death, the Lord society; and meanwhile, your preaching will reassure them and keep them hanging on. "Isaiah's Job" is extractedfrom Chapter 13 ofNock's Yourjob is to take care of the Remnant, so be book Free Speech and Plain Language, copyright 1937 by Albert Jay Nock, published by William off now and set about it." ... Morrow & Company, New York. This extract has What do we mean by the masses, and what been reprinted with permission. by the Remnant? 170 171

As the word masses is commonly used, it many disciples; if a reformer, many converts; suggests agglomerations of poor and under­ if a musician, many auditors; and so on. But privileged people, laboring people, proletar­ as we see on all sides, in the realization of ians. But it means nothing like that; it means these several desires the prophetic message simply the majority. The mass-man is onewho is so heavily adulterated with trivialities, in has neither the force ofintellect to apprehend every instance, that its effect on the masses is the principles issuing in what we know as the merely to harden them in their sins. Mean­ humane life, nor the force of character to while, the Remnant, aware of this adultera­ adhere to those principles steadily and strictly tion and of the desires that prompt it, turn as laws of conduct; and because such people their backs on the prophet and will have make up the great, the overwhelming majority nothing to do with him or his message. of mankind, they are called collectively the masses. The line of differentiation between The Remnant the masses and the Remnant is set invariably by quality, not by circumstance. The Remnant Isaiah, on the other hand, worked under no are those who by force of intellect are able such disabilities. He preached to the masses to apprehend these principles, and by force only in the sense that he preached publicly. of character are able, at least measurably, to Anyone who liked might listen; anyone who cleave to them. The masses are those who are liked might pass by. He knew that the Rem­ unable to do either. nant would listen.... The picture which Isaiah presents of the The Remnant want only the best you have, Judean masses is most unfavorable. In his whatever that may be. Give them that, and view, the mass-man-be he high or be he they are satisfied; you have nothing more to lowly, rich or poor, prince or pauper-gets off worry about. ... very badly. He appears as not only weak­ In a sense, nevertheless, as I have said, it is minded and weak-willed, but as by conse­ not a rewarding job. A prophet of the Rem­ quence knavish, arrogant, grasping, dissi­ nant will not grow purse-proud on the finan­ pated, unprincipled, unscrupulous.... cial returns from his work, nor is it likely that As things now stand, Isaiah's job seems he will get any great renown out of it. Isaiah's rather to go begging. Everyone with a message case was exceptional to this second rule, and nowadays is eager to take it to the masses. there are others-but not many. His first,. last, and only thought is of mass­ It may be thought, then, that while taking acceptance and mass-approval. His great care care of the Remnant is no doubt a good job, is to put his doctrine in such shape as will it is not an especially interesting job because capture the masses' attention and interest. ... it is as a rule so poorly paid. I have my doubts The main trouble with this [mass-man ap­ about this. There are other compensations proach] is its reaction upon the mission itself. to be got out of a job besides money and It necessitates an opportunist sophistication notoriety, and some of them seem substantial of one's doctrine, which profoundly alters its enough to be attractive. Many jobs which do character and reduces it to a mere placebo. If, not pay well are yet profoundly interesting, as, say, you are a preacher, you wish to attract as for instance, the job of the research student large a congregation as you can, which means in the sciences is said to be; and the job of an appeal to the masses; and this, in turn, looking after the Remnant seems to me, as I means adapting the terms ofyour message to have surveyed it for many years from my seat the order of intellect and character that the in the grandstand, to be as interesting as any masses exhibit. If you are an educator, say that can be found in the world. with a college on your hands, you wish to get The fascination-as well as the despair-of as many students as possible, and you whittle the historian, as he looks back upon Isaiah's down your requirements accordingly. If a Jewry, upon Plato's Athens, or upon Rome of writer, you aim at getting many readers; if a the Antonines, is the hope of discovering and publisher, many purchasers; if a philosopher, laying bare the "substratum of right-thinking 172 THE FREEMAN • MARCH 1997

and well-doing" which he knows must have the skin of his teeth, and, he being now all existed somewhere in those societies because the Remnant there was, if he were killed the no kind of collective life can possibly go on True Faith would go flat. The Lord replied without it. He finds tantalizing intimations of that he need not worry about that, for even it here and there in many places, as in the without him the True Faith could probably Greek Anthology, in the scrapbook of Aulus manage to squeeze along somehow if it had Gellius, in the poems of Ausonius, and in the to; "and as for your figures on the Remnant," brief and touching tribute, Bene merenti, be­ He said, "I don't mind telling you that there stowed upon the unknown occupants of Ro­ are seven thousand of them back there in man tombs. But these are vague and frag­ Israel whom it seems you have not heard of, mentary; they lead him nowhere in his search but you may take My word for it that there for some kind ofmeasure of this substratum, they are." ... but merely testify to what he already knew a The other certainty which the prophet of priori-that the substratum did somewhere the Remnant may always have is that the exist. Where it was, how substantial it was, Remnant will find him. He may rely on that what its power ofself-assertion and resistance with absolute assurance.... was-of all this they tell him nothing. He may be quite sure that the Remnant will Similarly, when the historian of two thou­ make their own way to him without any sand years hence, or two hundred years, looks adventitious aids; and not only so, but if they over the available testimony to the quality of find him employing such aids, as 1said, it is ten our civilization and tries to get any kind of to one that they will smell a rat in them and clear, competent evidence concerning the will sheer off. substratum of right-thinking and well-doing Such instances as these are probably not which he knows must have been here, he infrequent, for, without presuming to enroll will have a devil of a time finding it. When he ourselves among the Remnant, we can all no has assembled all he can get and has made doubt remember having found ourselves sud­ even a minimum allowance for speciousness, denly under the influence of an idea, the vagueness, and confusion of motive, he will source of which we cannot possibly identify. sadly acknowledge that his net result is simply "It came to us afterward," as we say; that is, nothing. A Remnant were here, building a we are aware of it only after it has shot up substratum like coral insects; so much he full-grown in our minds, leaving us quite knows, but he will find nothing to put him on ignorant ofhow and when and by what agency the track of who and where and how many it was planted there and left to germinate. It they were and what their work was like. seems highly probable that the prophet's Concerning all this, too, the prophet of the message often takes some such course with present knows precisely as much and as little the Remnant. as the historian of the future; and that, I If, for example, you are awriter or a speaker repeat, is what makes his job seem to me so or a preacher, you put forth an idea which profoundly interesting. One of the most sug­ lodges in the Unbewusstsein of a casual mem­ gestive episodes recounted in the Bible is that ber of the Remnant and sticks fast there. For of a prophet's attempt-the only attempt of some time it is inert; then it begins to fret and the kind on record, 1believe-to count up the fester until presently it invades the man's con­ Remnant. Elijah had fled from persecution scious mind and, as one might say, corrupts it. into the desert, where the Lord presently Meanwhile, he has quite forgotten how he overhauled him and asked what he was doing came by the idea in the first instance, and even so far away from his job. He said that he was perhaps thinks he has invented it; and in those running away, not because he was a coward, circumstances, the most interesting thing of but because all the Remnant had been killed all is that you never know what the pressure off except himself. He had got away only by of that idea will make him do. D THEFREEMAN IDEAS ON LIBERTY

Russell D. Shannon, InMemoriam by Donald J. Boudreaux

he ranks of those dedicated to the prin­ faculty in 1992, although I'd long before T ciples of a free society are too few to known of him through his contributions to permit the loss of any champion of freedom The Freeman. Russell, several faculty col­ to go unfelt. Sadly, Thanksgiving Day 1996 leagues, and I immediately began a monthly brought the untimely death of Russell Shan­ reading group. We started with several of non-a man committed to his core to liberty Hayek's essays, and moved on to Hayek's Fatal and to human decency. He was quickly felled, Conceit. During the past few years, we also read at the too-young age of 58, by spinal cancer. and discussed articles by Ronald Coase, John This is a tragic loss to his family, friends, Locke's Second Treatise on Government, Henry colleagues, and students. Hazlitt's Foundations ofMorality, Richard Ep­ After graduating from Duke University, stein's Simple Rules for a Complex World, and Russell earned his doctorate from Tulane in Alexis de Tocqueville's Democracy in America. 1965. That same year he began his career We were in the midst of Tocqueville's master­ teaching economics at Clemson University. piece when Russell's illness struck. He never left. During his 31 years of teaching It was Russell who suggested that we read he inspired countless students, adeptly shar­ Tocqueville. If, during our dinner meetings, ing the power of sound economic thinking. the conversation strayed too far from More importantly, Russell conveyed a sophis­ the substance of the book, Russell skillfully ticated appreciation of the creative and co­ brought our conversation back to germane ordinating might of a free society. He was, issues in the text. He rightly insisted that truly, a gifted and dedicated teacher. Tocqueville's insights are too numerous and Russell was also a talented expositor in too deep to be treated summarily. Reading­ print of economic ideas. Since January 1978, no, studying-Tocqueville was for Russell a he contributed 29 articles and reviews to The labor oflove. He generously spent a good deal Freeman. Indeed, his final contribution to The of time finding enlightening articles on Freeman-a fine piece recounting the benefits Tocqueville and passing copies of these to of telephone deregulation-appeared in the each member of our group. 1 December 1996 issue. This issue was printed Our reading group has a few chapters of only days before Russell died. Tocqueville remaining to be read and discussed. I met Russell when I joined the Clemson Whatever insights we glean will be fewer and Dr. Boudreaux is associate professor of law and duller than theywould have beenifRussell were economics at Clemson University, Clemson, South still alive to lead and inspire our discussions. Carolina. More regrettably, Clemson's students will 173 174 THE FREEMAN • MARCH 1997

Russell Shannon be poorer without Russell. In September, Russell will not now write that essay. How Russell walked into my office wearing as big unfortunate for those ofus who stood to learn a smile as I'd ever seen him wear. He an­ from the insights he would have conveyed. nounced that he'd been given permission to Before closing, I want to relate one final teach a semester-long course on Adam anecdote involving Russell. A few months Smith's Wealth of Nations. He planned to before Russell took ill, Bill Dougan, the teach it as a great-books course. He and his chairman of Clemson's economics depart­ students would read and discuss Smith's great ment, recollected some of the fine graduate book from cover to cover. I'm sure that he students that this department has trained over would have taught the students in the class the years. Among the best of these students is enormous amounts about Smith's famous work. Todd Zywicki, who, after receiving his mas­ My wife, Karol, and I visited Russell less ter's degree in economics from Clemson in than 36 hours before he died. His spirits were 1990, earned a law degree from the University remarkably upbeat. And, as always, his mind of Virginia. Todd now teaches law at the was on economics. He told us of how he Mississippi College School of Law, and is planned to write an essay on the economics of compiling an impressive record of scholarly the modern hospital. His several days in the research. Bill recalled that when Todd first hospital reinforced for him the power of arrived at Clemson, Todd (a former FEE Adam Smith's insights about wealth springing intern) was familiar with only one name on forth from the division of labor. The modern the faculty. That name was Russell Shannon. hospital, Russell realized, is an urban micro­ Todd knew Russell's name through Russell's cosm. He was impressed with its smooth essays in The Freeman. operation, and with the large number of Russell was first and foremost a dedicated physicians, technicians, nurses, and other staff and masterful teacher. He valued nothing members who each play an important role. more highly than success in inspiring the likes Russell pointed out that the modern hospital of Todd and myriad other students to ap­ features public transportation (moving verti­ preciate both scholarship and the free society. cally rather than horizontally!), common ar­ He will be missed. D eas, a police force, a mayor (called "admin­ istrator"), churches, shops, thruways, and, most importantly, a welter of people each 1. Among the articles on Tocqueville that Russell recom­ mended we read was Jim Powell's "Alexis de Tocqueville: How highly specialized in performing tasks that People Gain Liberty and Lose It," The Freeman, July 1996, pp. redound to the benefit of multitudes. 520-526. Economics on Trial By Mark Skousen

The Rich Get Richer, and the Poor Get ...

"The modern market economy accords wealth The Lorenz curve measures the percentage and distribution income in a highly unequal, of a nation's total income as earned by various socially adverse and also functionally damaging income classes. Typically, it is divided into five fashion." income groups. In the United States, the -John Kenneth Galbraith highest fifth (the highest income earners) he allegation is appearing everywhere: usually receive 40 percent of the nation's T Real average wages are stagnating and income, while the lowest fifth (the lowest the distribution of wealth and income in the income earners) receive around 5 percent. United States is becoming more unequal. In Using the Lorenz curve, U.S. income appears his latest book, Galbraith cites recent Federal to be seriously maldistributed, "now the ex­ Reserve statistics: "By 1992, the top 5 percent treme case among the major industrial coun­ were getting an estimated 18 percent, a share tries," says Galbraith. that in more recent years has become sub­ However, the Lorenz curve establishes an stantially larger, as that ofthose in the poorest unfair and misleading guide for measuring brackets has been diminishing. This, the good social welfare. Suppose, for example, that an society cannot accept."1 According to the "ideal" line of "perfect" equality is achieved Bureau ofLabor Statistics, average real wages on the Lorenz curve, i.e., the highest fifth (top have been declining since the mid-1970s. If 20 percent ofincome earners) only receive 20 benefits are included, total real compensation percent of the nation's income, while the has been rising, but only modestly. Finally, bottom fifth (lower 20 percent) increase their Business Week (February 25, 1996) declared, share to 20 percent. What does this ideal "Is America Becoming More of a Class So­ mean? Everyone-the teacher, the lawyer, ciety?" The magazine cites several academic the plumber, the actor-earns the same studies indicating less upward mobility for amount of income!2 less-educated Americans. The Wall Street Since few economists think equal wages for Journal (December 23,1996) adds, "Inequal­ everyone is an ideal situation, why do they ity may grow for lifetime earnings." think moving toward "perfect equality" on the Critics of market capitalism are often mis­ Lorenz curve is appropriate? Moreover, the led by conventional measures of economic Lorenz curve is unable to show an increase well-being, in particular the Lorenz curve, in a country's standard of living over time. It which measures income distribution. merely measures distribution of income. To measure changes in social welfare, econ­ Dr. Skousen is an economist at Rollins College, omists often rely on a second measure­ Department of Economics, Winter Park, Florida average real income. This, too, has its short­ 32789, and editor ofForecasts & Strategies, one of the largest investment newsletters in the country. The comings. A single statistic may mask third edition ofhis book Economics of a Pure Gold improvements in an individual's standard of Standard has recently been published by FEE. living over time. 175 176 THE FREEMAN • MARCH 1997

For example, average real income shows finished clothing-all have advanced living hardly any change since the mid-1970s. Yet conditions. other measures of well-being, such as con­ Regarding women's work, Lebergott notes sumer expenditures and the quantity, quality, that weekly hours for household and family and variety of goods and services, show chores fell from 70 in 1900 to 30 by 1981. The remarkable advancement over the past 20 1900 housewife had to load her stove with tons years. Consumer spending rose a dramatic of wood or coal each year and fill her lamps 40 percent.per person in real terms during with coal oil or kerosene. "Central heating this period. As Professor Richard Vedder also reduced the housewife's tasks. She no says, "How many Americans in 1975 had longer had to wash the carbonized kerosene, VCRs, microwaves, CD players, and home oil, coal, or wood from clothes, curtains, and computers?" walls, nor sweep floors and vacuum rugs as persistently. Automated and mechanical equipment reduced her labor further.... By The Work of Stanley Lebergott 1950, over 95 percent ofU.S. families had the Stanley Lebergott, professor of economics facilities [of] central heating, hot water, gas, at Wesleyan University, has probably done electric light, baths, and vacuum cleaners.,,3 more work in this area than anyone else. Regarding water, Lebergott comments, Instead ofrelying on general measures such as "The average urban resident consumed about average real income, he uses a more com­ 20 gallons of water per day in 1900. Rural monsense approach-looking at individual families had virtually no piped water; 55 consumer markets in food, clothing, housing, percent did not even have privies.... By 1990, fuel, housework, transportation, health, rec­ American families devoted two days' worth of reation, and religion. His work is fascinating. their annual income to get about 100 sanitary For example, he developed the following gallons every day, piped into the home.,,4 table to measure improvements in living stan­ dards from 1900 to 1970: Benefits to the Poor, Too This kind of historical perspective is re­ Living Standards, 1900-1970 freshing and eye-opening. The increase in the Among All Among Poor standard ofliving as measured by the quantity, Percentage Families Families quality, and variety of goods and services has with ... in 1900 in 1970 increased dramatically and profoundly in the twentieth century, for people of all incomes. Flush toilets 15 99 In many ways, the poor have advanced the Running water 24 92 most and are now capable of living in decent Central heating 1 58 housing, owning an automobile, and enjoying One (or fewer) many of the pleasures previously afforded by occupants the wealthy. Cheap airline services allow them per room 48 96 to travel extensively. Television gives them the Electricity 3 99 Refrigeration 18 99 chance to see sports events and musical shows Automobiles 1 41 previously limited to the rich and the middle class. Compared to yesteryear, every house Source: Stanley Lebergott, The American Economy (Princeton today is a castle, every man is a king. 0 University Press, 1976), p. 8.

In Pursuing Happiness, Lebergott demon­ 1. John Kenneth Galbraith, The Good Society: The Humane Agenda (Boston: Houghton Mifflin Co., 1996), p. 50. strates repeatedly how American consumers 2. For a critique of the Lorenz curve, see my work Economics have sought to make an uncertain and often on Trial (Irwin, 1991), pp. 187-197. 3. Stanley Lebergott, Pursuing Happiness: American Consum­ cruel world into a pleasanter and more con­ ers in the Twentieth Century (Princeton, N.J.: Princeton University venient place. Medicines and medical facili­ Press, 1993), p. 58. 4. Ibid., pp. 117-118. See also Lebergott's latest work, Con­ ties, artificial lighting, refrigeration, transpor­ sumer Expenditures (Princeton, N.J.: Princeton University Press, tation, communication, entertainment, 1996). 177

example). These superinvestors are the refu­ gees, or their children, who fled the Maoist BOOKS communists in the 1940s. They have much to teach their Western counterparts who invest in that part of the world-or anywhere else. The Bamboo Network: How Expatriate Such are the fascinating Weidenbaum­ Chinese Entrepreneurs Are Creating a Hughes findings. Murray Weidenbaum, Pres­ New Economic Superpower in Asia ident Reagan's first chairman of the Council by Murray Weidenbaum and ofEconomic Advisers, holds the Mallinckrodt Samuel Hughes distinguished chair at Washington University in St. Louis, where he also serves as chair­ Free Press. 1996 • 272 pages. $24.00 man of the University's Center for the Study of American Business. Samuel Hughes, a Reviewed by William H. Peterson former Center fellow, is a St. Louis-based management consultant. sharp turn in human events since the The authors supply fresh meaning to net­ A end of the Cold War is the emergence working, noting "it is common for the father­ of a powerful new global economic force, one CEO stationed in Hong Kong or Bangkok without fanfare, and in an unexpected place: or Singapore to send one son to Shanghai, Southeast Asia. another to Taipei, a son-in-law to Manila, and The force is the "Bamboo Network." It's a nephew to Kuala Lumpur," so positioning made up of rich entrepreneurial Chinese them in the Bamboo Network for future families in Greater China: booming Mainland senior leadership. (Nepotism doesn't extend China (population 1.2 billion with a land as far for daughters.) mass as big as Canada), Hong Kong, and Confucian culture explains a good deal of Taiwan for the most part; and, in one degree what's behind the dramatic rise of the Bam­ or another, in nearby and similarly booming boo Network and its growing, pounding heart, Thailand, Singapore, Malaysia, Indonesia, Mainland China. The philosophy of Con­ Vietnam, and the Philippines. fucius, who died in 479 B.C., has been the fare This Bamboo Network is quickly advancing of Chinese students ever since. His values from socialism or heavy state interventionism help explain the Bamboo Network's business to a huge market economy, from degrees of success-values that include loyalty to the totalitarianism to forms oflimited republics­ hierarchical structure of authority, a code of with Mainland China and its strict one-party defined conduct between children and par­ rule having the greatest way to go. ents and other adults, a work and quality What is more, this late-blooming economic ethic, a sense of ethnic responsibility, a dis­ miracle, an unmatched recast of much of the dain for conspicuous consumption, conse­ Far East, is envisioned, financed, and led in quent high saving rates, a bent for focus, and great measure not by Japanese and Western a drive for entrepreneurship as a dynamic investors but by those aforementioned rivalrous process to combine land, labor, and wealthy, mainly overseas Chinese family in­ capital into profitable, privately held enter­ vestors and entrepreneurs. They bring to prises that serve and are served. mind the earlier House of Rothschild phe­ Covered here then are the Charoen Pok­ nomenon of internationalization and multi­ phand Group of Thailand, the Li Ka-shing plication of family fortunes. Group of Hong Kong, the Ong Beng Seng Ironically, most of these ethnic Chinese Group of Singapore (whose holdings include superinvestors, while removed from their an­ participation in Planet Hollywood, a movie­ cestral home, are now closely involved with its theme restaurant chain co-owned by Arnold economic success as well as that of their Schwarzenegger and Sylvester Stallone), the new-found homes, despite some lingering Y. C. Wang Group of Taiwan, the Salim local discrimination (Malays vs. Chinese, for Group of Indonesia, the Kuok Group of 178 THE FREEMAN • MARCH 1997

Malaysia, and the Henry Sy Group of the Stores, PepsiCo, Polaroid, Walt Disney, and Philippines. (Henry Sy's teenage daughter Xerox. The largest overseas U.S. Chamber of was abducted and killed in 1993. The authors Commerce is the American chamber in Hong note that rich local Chinese offer tempting Kong. targets to Filipino criminal gangs.) Indeed, China could already be the world's The authors also note the Bamboo Net­ second largest economy, suddenly surpassing work has only partially checked bribery, lack Japan. (Is the United States next?) Using the of property rights protection, and enforce­ controversial "purchasing power parity" the­ ment of contracts in the People's Republic of ory of measuring output by comparing each China. Intellectual property security, such as national currency's buying power of a similar trademarks and copyrights, is regularly bro­ "market basket" of goods, The Economist ken. Imitation Bausch & Lomb Ray Ban (March 9, 1996) puts China's GDP at $3.0 sunglasses are sold as "Ran Bans," for in­ trillion in 1994 against Japan's $2.7 trillion stance. Lux brand soap in the same colored and the United States' $7.0 trillion. wrapper is passed along as "Lix" soap. Du­ But what of the future? Two clouds on the pont's copyrighted rice plant herbicide for­ horizon: What happens to the Chinese Com­ mula has been filched and produced without munist party leadership when time and tide royalties. Software and movie video theft is catch up with the revered founder of the PRC fair game, upsetting American executives at, Economic Revolution, Deng Xiaoping, now among other firms, Microsoft and Walt Dis­ in his nineties? And how will Hong Kong fare ney. with its Colossus parent when it becomes a Relatedly, McDonald's 20-year restaurant "special administrative unit" of the PRC in land lease in Beijing was summarily torn up July 1997, even with "guaranteed" retention in 1994 to make room for a more lucrative of its present social, economic, and legal Oriental Plaza complex of commercial, office, systems for 50 years, according to the British­ and residential properties. A sop to Mc­ PRC Joint Declaration of 1984? Donald's: a "guaranteed" spot in the complex So the authors wind up their insightful book upon its completion in 1998. with a self-described "foggy crystal ball" and So degrees of apathy and corruption are see three possible scenarios for the giant "in" in the PRC. Shangri-La it's not. The PRC: successful transition to a market econ­ message to entice U.S. citizens and firms: Be omy, reversion to communism, and growing wary. The U.S. Foreign Corrupt Practices Act instability leading to fragmentation. subjects American bribe-payers, if caught, to The first scenario on a successful transition a fine of up to $100,000 plus five years in signals a triumph for world freedom and free prison. enterprise along with a spur to global trade Yet the wary can win out. Coca-Cola, for and economic growth. The second scenario example, sells 2.4 billion cans a year-or two on reversion to communism takes heed of for each man, woman, and child-winning PRC's ownership of-apartfrom nuclearwar­ over 15 percent of China's fast-growing soft­ heads-literally thousands of subsidized, drink market. Motorola has won a large mostly money-losing state enterprises, some fraction-$2 billion in sales in 1994 on its of them very large. Many xenophobic state investment of $1.2 billion in the PRC-ofthe enterprise operators resent the intrusion of fast-growing Chinese cellular phone and foreign competition, foreign capital, foreign pager market. products, foreign ideas, and foreign influence Motorola is among the 70 percent of all in Beijing and throughout the provinces. The U.S. firms whose Far Eastern headquarters third scenario on fragmentation sees how, fOf are in Hong Kong, a strategic location for example, the highly successful southeastern mainland know-how and joint-venture con­ province of Guangdong with its Cantonese nections. Motorola's neighbors there include dialect and its next-door proximity to Can­ Bank of America, Dun & Bradstreet, Exxon, tonese-speaking Hong Kong-itself shrewd if Hyatt, Time-Warner, May Department nervous-could break away. BOOKS 179

In all three scenarios the Western-educated that swept through American Protestant younger generation of overseas Chinese busi­ churches at the beginning of the twentieth ness leaders will playa decisive role. Ah, but century. The Declaration makes no contribu­ how? Time will tell. Stay tuned. Meanwhile, tion to an understanding ofeither Christianity Murray Weidenbaum and Samuel Hughes or economics. It makes a thorough muddle of remind you that the Chinese symbol for both. It is an ambiguously worded document durability is bamboo, that as an old oriental of undefined terms and emotive phrases. maxim puts it: "Bamboo bends; it does not Filled with the jargon of socialism, inter­ break." D ventionism, and welfare liberalism-basic Dr. Peterson is this month's guest editor. needs, common good, exploitation, selfish individualism, empowerment, ecology, dehu­ manization, environmental devastation, ineq­ uitable distribution of wealth and income­ Christianity and Economics in the the Declaration calls for government action Post-Cold War Era: The Oxford on several fronts, for example: (1) "to create Declaration and Beyond and enforce just frameworks of incentives Edited by Herbert Schlossberg, and penalties . .. [to promote] ecologically sound practices"; (2) "the right to earn a living Vinay Samuel, and Ronald J. Sider would be a positive or sustenance right. Such Eerdmans Publishing Company • 1994 • 149 a right implies the obligation of the commu­ pages. $11.00 paperback nity to provide employment opportunities"; (3) "We encourage governments and inter­ Reviewed by John W. Robbins national financial institutions to redouble their efforts to find ways to ... ensure the flow s part of an ecumenical effort to artic­ of both private and public productive capital A ulate a religious view of economics and where appropriate"; and (4) "We urge that a economic systems, 36 conferees describing major part ofthe resulting 'peace dividend' be themselves as "evangelical"-an undefined used to provide sustainable solutions to the term which apparently means neither Roman problems ofthe world's poor." There is more, Catholic, Eastern Orthodox, nor liberal Prot­ but by now the reader gets the general idea. estant-gathered in 1987, and over 100 gath­ The only redeeming economic value this ered in 1990 at Oxford and again in New Delhi book has is two essays by Calvin Beisner (of in 1995. Covenant College) and Herbert Schlossberg The result of the second meeting in 1990 (ofthe Fieldstead Institute), both participants was the "Oxford Declaration." This volume, in the Oxford conference. Beisner attacks the which includes the text of the Oxford Decla­ Declaration directly for its contradictory ration and 11 essays that are commentaries on ideas about justice, and Schlossberg finds it it, explains the genesis of the Oxford Decla­ astonishing that the Declaration (1) says ration as being organized by Ronald Sider, nothing at all about capital formation, and author ofRich Christians in an Age ofHunger. (2) assumes the Marxist notion that economic (The editors fail to list the signatories of the theory rests on and is concerned only with Declaration, and to disclose who funded this material factors. expensive project.) The Declaration implies a rejection ofboth What is the Declaration itself? Its full title capitalism and central planning, but the no­ is "The Oxford Declaration on Christian tion that there is a third way is a chimera. Faith and Economics." It makes pronounce­ Neither social stability nor freedom can be ments on four major topics: Creation and achieved by attempting to combine the pri­ Stewardship; Work and Leisure; Poverty and macy of the individual with the primacy ofthe Justice; and Freedom, Government and Eco­ group; or equality before the law with par­ nomics. It is actually an updating, a greening, tiality for favorites; or the rule of law with the ofthe old social gospel, the gospel ofaltruism, rule of whim. 180 THE FREEMAN • MARCH 1997

The Declaration concludes: "We acknowl­ public knowledge. In the first chapter, Barro edge that all too oftenwe have allowed society assigns numerical values to the economic to shape ourviews and actions and have failed freedom of various countries. He confidently to apply scriptural teaching in this crucial area forecasts that states with a capitalism quotient of our lives, and we repent." Would that they higher than a base minimum will be more had. 0 democratic by the year 2000. Hong Kong Dr. Robbins is president of the Trinity Foundation. ranks third in his list of nations on the fast track to political freedom-never mind that the tyrants of Peking take over in July. His commitment to economic analysis Getting It Right: Markets and Choices sometimes supersedes even his own good in a Free Society instincts. Barro offers tortured reasoning to explain that Major League Baseball must by Robert J. Barro impose caps on its players' "excessive" sala­ MIT Press. 1996 • 191 pages. $20.00 ries because "the competitive wage for ath­ letic skills reflects the benefit to an individual Reviewed by Chris Weinkopf team ... in contrast, the 'correct' wage from a social standpoint is the value of all teams espite serving on the faculty at Harvard, having betterplayers." But unregulated teams DRobert J. Barro is judicious, discerning, will never pay a player too much (more than and an unflagging champion of liberty. He is what he can earn for them at the box office, not scared to tackle taboo-blasting the faux concession and souvenir stands, or in TV science of"second-hand smoke" hysteria, and revenues); Barro should know that. questioning the wisdom of "protecting" en­ This wonkish approach might be tolerable dangered species at the cost of untold mil­ if it didn't also infuse the writing, but it does. lions. Such unconventional wisdom makes Getting It Right is a collection of columns not him eminently likable to conservatives and published as separate essays, but strung to­ libertarians. They will no doubt rush to buy, gether haphazardly in what fails to comprise read, and enjoy this book. But only the first a coherent whole. Barro's prose is drier than task will come easy. toasted rye, and not because it includes too This is not to say that Getting It Right has much data or jargon, but because it lacks nothing to offer; even valuable lessons can be conviction. For example, Barro blithely dis­ hard to sit through, and on various subjects, misses the Civil War, saying slavery "would most notably foreign policy, Professor Barro have been eliminated peacefully in not very has much to teach. He spurns foreign aid many years." Perhaps, but this reasoning and third-world-debt forgiveness schemes for ignores the moral imperative, not to mention subsidizing socialism and discouraging pri­ natural rights. His arguments for freedom are vate-sector investment. Likewise, he dissects always strictly utilitarian; he never acknowl­ the notion that the United States can imple­ edges that liberty has an innate value separate ment democracy in areas that don't protect from its material benefits. That sort of sagac­ property rights, let alone support functional ity doesn't show up in a graph. 0 markets. Even the war on drugs-an obvious Mr. Weinkopf is the editor of National Review domestic failure-has harmful international Online (http://www.nationalreview.com). repercussions, providing an easy source of revenue for foreign guerrillas like Peru's Shining Path. But Barro's greatest asset, his ability to demonstrate free-market truths empirically (often with charts and diagrams), becomes a liability when he places greater trust in tables and formulae than in common sense and BOOKS 181

Classical Economics: An Austrian effects of a fiat paper money system. The Perspective on the History of Economic "bullionists" contended that the increase in Thought, Volume II paper money caused the price inflation. The opposing "anti-bullionists" placed the blame by Murray N. Rothbard for the higher prices on wartime disruptions, Edward Elgar Publishing Limited. 1995 • supply shortages, and any other cause that let 528 + xvi pages. $99.50 the government and Bank of England off the hook. Reviewed by Douglas E. French The boom and subsequent bust of 1825 in Britain led to the currency versus banking ears ago Murray Rothbard set out to school debate. The currency school advocates Ywrite an Austrian answer to Robert Heil­ insisted that bank notes be backed 100 per­ broner's The Worldly Philosophers. Rothbard cent by specie. Unfortunately, they forgot was much more ambitious than Heilbroner, about demand deposits. Thus, as Rothbard whose 347 pages only (lightly) covers from writes, "the banking system, led by the Bank Adam Smith to "The Modern World." Pro­ of England, [shifted] their inflationary and fessor Rothbard kept finding more and more expansionary attentions to deposits alone-a characters that influenced economic thought, condition that still prevails throughout the resulting in a two-volume history of economic world." thought from the Austrian perspective. His Next, Rothbard looks at Marxism with a death in 1995 kept him from finishing the religious slant: "Marx harked back to the third volume. apocalyptics, ... who foresaw a bloody Ar­ Volume II, entitled Classical Economics, mageddon at the Last Days, before the mil­ picks up the story (which started with the lennium could be established." "Violent, Ancient Greeks in Volume I) with French­ worldwide revolution, in Marx's version made man J.B. Say. "Say's Law" is known to all by the oppressed proletariat, would be the Econ 101 students as "supply creates its own instrument of the advent of his millennium, demand." But little else is taught about Say. communism." Yet, Say's Treatise on Political Economy was Rothbard uses poems that Marx penned to the most popular economics text in the expose him as "mean, hard-core, [and] proto­ United States through the Civil War, going Stalinist." The mantra of Marxists is that through 26 printings, after eight printings in free-market capitalism oppresses the masses French. for the benefit of the wealthy bourgeoisie. In Rothbard next examines Jeremy Bentham, terms of sheer numbers, no system has op­ James Mill, and David Ricardo. Ricardo is pressed its citizens in the twentieth century known for "the law of comparative advan­ like the communist governments of Lenin, tage," which makes the case for free trade. Stalin, Mao, and Pol Pot, whose regimes "can But, as Rothbard points out, Professor Wil­ be considered the logical unfolding, the em­ liam O. Thweatt has demonstrated that bodiment, of the nineteenth century vision of Ricardo didn't originate the law of compar­ their master, Karl Marx." ative advantage, didn't understand it, didn't Rothbard leaves Marx for the French lais­ even have much interest in it. It was in fact sez-faire school, led by Frederic Bastiat, and James Mill who first presented the law while closes with the decline oflaissez-faire thought defending free trade against Thomas during the late 1880s and into the early 1900s, Malthus's support of the Corn Laws. spurred by a burgeoning number of Ph.D.'s The heart of Classical Economics revolves who sang the praises of "modern and pro­ around the monetary and banking theories of gressive" Big Government. the 1800s. With Great Britain suspending The book's final paragraph puts a lump in required specie payments, allowing the Bank the throat of any Murray Rothbard fan, of England to greatly inflate the supply of student, or friend. He writes that, "it is now money, economic thinkers had to consider the clear that the revolution against the classical 182 THE FREEMAN • MARCH 1997 school paradigm went far beyond emphasis committed to scholarship to the point that his on the marginal unit of a good or service, health sometimes suffered. Various particu­ especially in the hands of Carl Menger and lars about Smith's personal life are noted, his followers. But that is the stuff of another including a deep dedication to his mother, volume." being kidnapped by gypsies at the age ofthree, For scholars and students, Rothbard's bib­ a possible nervous breakdown as a student, liographical essay is worth the hefty price and lifelong bachelorhood with one or two of the book. Dr. Rothbard was dismayed that lost loves along the way. Ross concludes "that the publisher was asking so much for the two first and last [Smith] was a moralist whose volumes (together nearly $200). This writer character bore the impress of the Roman and other former students wrote Edward Stoics." Elgar, attempting to convince the publisher Ross warns, however: "We must not think that the book would reach a much wider that Smith's life was all labour over his books, audience, selling more units, if the price were worry over their reception, and refuge from lowered. But now, we just wish we could buy concentration on chains of complex ideas in Volume III, no matter the price. 0 the endless ramifications of the business rou­ Mr. French is a vice-president in commercial real tine of the Customs Board. He enjoyed a estate lending for a bank in Las Vegas, Nevada. stimulating social life, particularly through entertaining visitors from other countries in Edinburgh." Ross discusses Smith's works in their en~ The Life of Adam Smith tirety, naturally giving great attention to The Theory of Moral Sentiments and An Inquiry by Ian Simpson Ross into the Nature and Causes of the Wealth Clarendon Press, Oxford. 1995 • 495 pages. ofNations. In summary, Ross notes that The $35.00 Theory of Moral Sentiments contributed to a better understanding of the role of sympathy Reviewed by Raymond J. Keating in moral judgments and developed the idea of the "impartial spectator to account for the f you ever wondered what books Adam formation of our judgements of ourselves." I Smith's father kept in his library, then Ian As for The Wealth of Nations and the eco­ Simpson Ross's The Life ofAdam Smith is for nomics model developed within, Ross ob­ you. Indeed, Ross's biography of the father serves: "The leading features of the model, of free-market economics is jam-packed with with its concept of a freely competitive and such facts regarding Smith, his family, teach­ self-regulating market, have proved highly ers, friends, and associates. attractive up to the present day." As defined It's rather striking, when you consider by Smith himself, the Smithian model was the Adam Smith's impact on mankind, that more "obvious and simple system of naturalliber­ has not been written about his life. As Ross ty." notes, the last full-scale biography on Smith Ross illustrates that Smith's free-market was published 100 years ago. The Life ofAdam ideas were brewing for some time before the Smith paints a technically complete picture of publication of The Wealth ofNations in 1776. Adam Smith-complete in the sense that the For example, Ross provides a quote from a major endeavors ofSmith's life are addressed. 1755 paper prepared by Smith to be read to a That is, we see Smith the student, the moral society in Glasgow: "Little else is requisite to philosopher, the rhetorician, the historian, carry a state to the highest degree ofopulence the teacher, the customs official, and of from the lowest barbarism, but peace, easy course, the economist. taxes, and a tolerable administration of jus­ Overall, we gain a portrait of Smith as a tice; all the rest being brought about by the self-confident man, though modest and self­ natural course of things. All governments deprecating, absent-minded, charitable, and which thwart this natural course, which force BOOKS 183 things into another channel, or which endeav­ nate against white males, and to pressure our to arrest the progress of society at a private employers to do so. Two books at­ particular point are unnatural, and to support tacking affirmative action are therefore most themselves are obliged to be oppressive and welcome. tyrannical." Zelnick's is the more useful. Replete with This biography particularly excels when statistics and telling anecdotes, it establishes examining the many people who influenced the ubiquity of state-enforced double stan­ Adam Smith to varying degrees. Most impor­ dards penalizing white males and favoring tant were his teacher Francis Hutcheson, his blacks and women on no other basis than race friend David Hume, and Fran<.;;ois Quesnay and sex. A reporter, Zelnick lets the facts and the French Physiocrats. speak for themselves and, when transcribing The Life of Adam Smith is well worth interviews, stays in the background. It is all reading. However, I must admit that the book here: the discrepancy in SAT scores between left me wanting more in two particular areas. black and white university admittees First, from the perspective of reading a biog­ (150 points or more at Princeton, Duke, raphy, the tidbits regarding Smith's personal Dartmouth, and Brown, among others), the life were not enough to satiate me. This is discrepancy in ad~sion rates (Amherst takes probably an unfortunate consequence of the 51 percent of all blabl\s who apply as against amount ofinformation available, though, and 19 percent of whites, ~lthough the academic not necessarily the fault of the author. records of the blacks are far inferior); gov­ Second, the final chapter cried out for a ernment set-asides of billions of dollars in stronger discussion regarding the massive and contracts that virtually exclude whites; banks durable impact ofSmith's economics for more forced to subsidize mortgages for high-risk than two centuries. Unfortunately, at the blacks; Justice Department charges of "dis­ book's close, the reader possesses some doubt crimination" against home insurers (made in as to whether or not Ross fully grasps Smith's the absence of a single black complainant) deep influence to this very day. leading to demands that "discouraged appli­ There is much for the free-market reader to cants" be paid millions of dollars in restitu­ appreciate in The Life ofAdam Smith, with tion. still a bit left to be desired. 0 Zelnick explains clearly the assault on test­ Mr. Keating serves as chiefeconomist for the Wash­ ing in employment, various schemes to dilute ington, D.C.-based Small Business Survival Foun­ white voting strength, and the "effects" test dation. introduced into the 1982 Voting Rights Act, showing how they reduce productivity and polarize racial politics. Particularly odious are college admissions officers, one of whom Backfire swoons over mediocre grades by "minorities" by' Bob Zelnick while airily dismissing incomparably more Regnery • 1996 • 416 pages. $27.50 qualified Jewish students with the remark "They'll be fine." The Affirmative Action Fraud Analytical when required, Zelnick replies by Clint Bolick effectively to the arguments for quotas. Don't colleges favor the children of alumni? Cato Institute. 1996 • x + 170 pages. $10.95 "[T]here is little if any evidence that sons and paperback daughters of alumni have, as a group, aca­ demic credentials even slightly below the Reviewed by Michael Levin norm." Can black interests be represented without racial proportionality? Medicaid, espite what should have been major legal Medicare, remedial education, low-income D setbacks from recent court decisions, housing, and other measures thought of as organs of government continue to discrimi- benefiting blacks show inescapably "that sub- 184 THE FREEMAN • MARCH 1997

stantive black interests have received a sym­ due exclusively to ... oppression," licensed pathetic hearing in the councils of govern­ the federal government to tell employers ment for many years running." Zelnick's sole whom to hire, banks whom to lend to, home­ weakness is a tendency to describe anyone owners what neighbors they had to have, and who agrees with him as tall, distinguished, children where they must go to school. The shrewd, orknowledgeable-a minorvice in an "fraud" is that none of these exertions has otherwise objective, hard-hitting book. helped the population they were actually Affirmative Action Fraud is more ambitious intended to help, namely the black underclass. (and windier). It too reports on the current Where Zelnick simply wants affirmative state ofplay-Bolick and Zelnick cite many of action ended, Bolick holds critics are obliged the same passages from court decisions, es­ to propose some positive solution to the pecially to emphasize Thurgood Marshall's problems facing the underclass. His is "em­ deviousness and hypocrisy-but Bolick also powerment," the centerpiece of which are seeks to trace the ideological path from civil school vouchers allowing "choice." He is rights to quotas. His account seems to me particularly enthusiastic about a Milwaukee correct. The civil rights movement was born, program allowing "1,000 low-income children he says, when the right of all men to be free to leave abysmal public schools and to apply from coercion-the "American Creed"-was the state portion of their education funds­ seen to conflict with the institution of slavery. roughly $2,500 per student-as full payment This perception led to the Civil War and the of tuition in nonsectarian private schools." Reconstruction Amendments protecting the Such plans, popular among conservatives, rights ofblacks against incursion by the states. are gravely flawed. Bolick delicately avoids But a fatal misstep was the Civil Rights Act of mentioning the source of that $2,500, namely 1964 banning private discrimination. "[C]ivil the taxpayers of Wisconsin. Vouchers are rights laws went beyond restraints against another device to forcibly transfer money coercion to tread directly upon voluntary from producers to non-producers and to freedom of association among private indi­ infringe upon freedom of association. As viduals," clearing the way for "all the mischief such, they should be resisted by friends of that would follow." liberty. 0 The precedent that individual autonomy Professor Levin teaches in the Department of Phi­ could be invaded, combined with the view that losophy at City College and The Graduate Center of "black failure to reach parity with whites is The City University, New York, New York.

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