THEFREE IDEAS ON LIBERTY

404 What's Your Problem? CONTENTS Lynn Tilton NOVEMBER Accepting personal responsibility for problem-solving leads to success. 1991 406 A Checklist for Healthy Skeptics VOL. 41 Dianne L. Durante NO.11 Learning to approach predictions of environmental doom critically. 410 School for Scandal James L. Payne Federal mismanagement seems here to stay. 412 Art and Representative Govemment William R. Allen and William Dickneider Let consumers and philanthropists determine what kind of art they want. 414 The S.E.C.'s War Against the Theater John Chodes How regulation limits theatrical choices. 416 Corporate Giving: The Case for Enlightened Self-Interest Edward H. Crane Counteracting some destructive trends in American philanthropy. 424 Capitalism: Who Are Its Friends and Who Are Its Foes? Donald J. Boudreaux A casual empirical study. 427 Spending for Spending's Sake John Semmens The intransigence of a bloated government determined to spend more money. 428 The Big Nag Donald G. Smith Is there no escape from bureaucratic badgering? 429 Poland's Flawed Reform Plan Paul A. Cleveland Looking for reasons behind Poland's lagging economic performance. 431 Govemment Funding Brings Govemment Control Gary McGath The real issue behind Rust v. Sullivan. 434 Book Reviews John Chamberlain reviews China Misperceived by Steven W. Mosher. Raymond J. Keating examines The Capitalist Spirit, edited by Peter L. Berger; Jeffrey Tucker looks at Economic Policy and the Market Process, edited by Groenveld, Maks and Muysken; and The Culture ofSpending by James L. Payne is discussed by William H. Peterson. THEFREEMAN IDEAS ON LIBERTY PERSPECTIVE

Published by Double Standard The Foundation for Economic Education Irvington-on-Hudson, NY 10533 In October 1990, theAnchorage Daily News and the Anchorage Times, two ofExxon's most strident President of The Board: Bruce M. Evans critics since the 1989 Valdez oil spill in Prince Vice-President: Robert G. Anderson William Sound, reported that Federally funded re­ Senior Editors: Beth A. Hoffman searchers killed hundreds of birds and animals in Brian Summers Contributing Editors: Bettina Bien Greaves an attempt to bolster the government's case Edmund A. Opitz against the oil producer. The issue has received Paul L. Poirot limited coverage in the national press, and little or Copy Editor: Deane M. Brasfield no comment from animal rights and environmen­ tal special interest groups.... The Freeman is the monthly publication of A review of the reported facts surrounding this The Foundation for Economic Education, startling, and possibly illegal, use of taxpayers' Inc., Irvington-on-Hudson, NY 10533. FEE, money: established in 1946 by Leonard E. Read, is a nonpolitical educational champion of private property, the free market, and limited govern­ • The Justice Department determined that, to ment. FEE is classified as a 26 USC 501 (c) get higher damages, it needed a reliable scien­ (3) tax-exempt organization. Other officers of FEE's Board of Trustees are: Thomas C. tific model to prove that the Valdez accident Stevens, chairman; David H. Keyston, vice­ killed over 100,000-300,000 unrecovered birds chairman; Paul L. Poirot, secretary; Don L. that they believe floated out to sea. Foote, treasurer. • Justice ordered the Interior Department's U.S. The costs of Foundation projects and services Fish and Wildlife Service (FWS) to conduct are met through donations. Donations are in­ Bird Study No.!. The study consisted of killing vited in any amount. Subscriptions to The Freeman are available to any interested per­ birds, dunking them in oil, planting them with son in the United States for the asking. Addi­ transmitters, and depositing them in the water. tional single copies $1.00; 10 or more, 50 cents Once recovered, the scientists could supposed­ each. For foreign delivery, a donation of $15.00 a year is required to cover direct mail­ ly [estimate] how many birds drifted away and ing costs. sunk after the spill. • FWS approved a $600,000 contract with a Port­ Copyright © 1991 by The Foundation for Economic Education, Inc. Printed in the land, Oregon, research company, Ecological U.S.A. Permission is granted to reprint any Consulting Inc., to kill up to 350 birds. article in this issue, provided appropriate • The hired killers shot 250-350 mUITes, scoters, credit is given and two copies of the reprinted material are sent to The Foundation. cormorants, and ancient murrelets on remote Alaskan islands, many of them protected na­ Bound volumes of The Freeman are available tional wildlife refuges, and returned them for from The Foundation for calendar years 1971 to date. Earlier volumes as well as current is­ use in the study. sues are available on microfilm from Univer­ • The Alaska Department of Fish and Game sity Microfilms, 300 North Zeeb Road, Ann killed an equal number of ducks for the same Arbor, MI 48106. purpose, along with 32 deer, 28 harbor seals, The Freeman considers unsolicited editorial three sea otters and minks, and 17 Stellar's sea submissions, but they must be accompanied lions recently listed as a threatened species, to by a stamped, self-addressed envelope. Our author's guide is available on request. further their case against Exxon....

Phone: (914) 591-7230 By way of contrast, the killing of birds by pri­ FAX: (914) 591-8910 Cover art: © Washington Post Writers Group vate landowners has been taken quite seriously by Justice. In one case, a Springfield, Illinois, res­ ident was ordered by local officials to "get rid of"

402 PERSPECTIVE unruly pigeons that congregated in his trees. The Don't Judge Motives resident, Mr. Harvey Von Fossan, laid out poison for the birds, which was unwittingly eaten by two By judging our motives rather than our actions, common grackles and a mourning dove, killing we can assuage all guilt over any action orinaction. them instead. An outraged neighbor informed the Everybody thinks his motives are pure and good. U.S. Attorney's office, which prosecuted Mr. Von And on a conscious level, they probably are. Fossan under the Migratory Bird Treaty. The ac­ That's why motives just aren't the issue. Whatwe tion, one government attorney stated, was "one of do, not what we intend, is what counts. the most important cases" in his office. In aI!0ther On the global level, assessing motives rather case, the government vigorously prosecuted the than actions has led to serious moral distortions. A owner of a million-dollar goldfish farm for killing particularly important example concerns assess­ birds that were devouring his crop. Both landown­ ments of capitalism and Communism. ers were found guilty, with Mr. Von Fossan receiv­ Communism has resulted in the loss offreedom ing a suspended sentence and a fine, and the gold­ by more nations and the deaths ofmore individuals fish farmer a fine and a jail sentence. than has any other doctrine in human history. Yet -GLENN G. LAMMI because it is perceived as emanating from good Washington Legal Foundation motives-abolition of poverty, greater equality­ many people refuse to accord it the antipathy that its deeds deserve. Affirmative Action Capitalism, on the other hand, has led to greater freedom and to less poverty than perhaps any other I hold that we blacks ought not to allow our­ political-economic doctrine in history. Presumably, selves to become ever-ready doomsayers, always it ought to be widely admired. Yet it is often vilified alert to exploit black suffering by offering it up to and even its supporters rarely consider capitalism more or less sympathetic whites as a justification to be a particularly moral system. The reason? It is for incremental monetary transfers. Such a posture based on selfish motives. seems to show a fundamental lack of confidence in Defense of Communism and opposition to capi­ the ability of blacks to make it in America, as so talism emanate from the same flaw-assessing mo­ many millions ofimmigrants have done and contin­ tives, not results. ue to do. Even if this method were to succeed in -DENNIS PRAGER, writing in his quarterly gaining the money, it is impossible that true equal­ journal, Ultimate Issues (6020 Washington ity ofstatus in American society could lie at the end Boulevard, Culver City, CA 90232) of such a road. Much of the current, quite heated debate over Managed Trade affirmative action reveals a similar lack of confi­ dence in the capabilities of blacks to compete Over the long run, managed trade has proved a in American society. My concern is with the incon­ disaster. Lacking both competition and access to sistency between the broad reliance on quotas by modern technology, Eastern Europe was never dis­ blacks, and the attainment of "true equality." cinlined for delivering computers that were instant There is a sense in which the demand for quotas, museum pieces or cars that belched rotten-egg which many see as the only path to equality for fumes. When the Kremlin announced last year that blacks, concedes at the outset the impossibility the colonies must make their own way in a global that blacks could ever be truly equal citizens. market, hundreds of seemingly productive facto­ -GLENN LOURY, speaking at the Heritage ries became obsolete overnight. Foundation, quoted in the Spring 1991 -'-PETER PASSELL, writing in the issue of Issues & Views February 13, 1991, New York Times

403 404 THEFREEMAN IDEAS ON LIBERTY

What's Your Problem? by Lynn Tilton

na market economy, when individuals look their private enterprise recycling program gener­ within themselves rather than to the state to ated outside money for the university, but it's cut I solve their problems, those problems become landfill fees $30,000 per year. opportunities for success. After all, problems Since BYU was one of the largest users of the aren't solved by laws or by organizations, but by local landfill, this program means that the landfill individuals. will last longer than expected. Market incentives With more than 1,300 acres ofcampus property, (cost reduction and extra income) helped ease a Brigham Young University in Provo, Utah, gener­ problem that concerned everyone in the region, ates mountains of grass clippings, tree trimmings, without hiring a single extra bureaucrat to oversee and the waste associated with the daily campus liv­ the situation. ing of 27,000 students. Their landfill expenses kept climbing. The First Yogurt Sandwich Waste is a particular problem in the western states because so much ofthe land is owned by the As Americans became more health conscious, federal government. Less private land is available the ice cream industry responded to changing cus­ for landfills, so fees tend to be high. Many indus­ tomer preferences and began producing frozen tries, caught between the demands of economics yogurt. The Elgin Company developed a soft­ and environmentalists, expect government solu­ freeze yogurt maker, much like its highly success­ tions. Rather than tum to the state for help, BYU, fulline ofsoft-freeze ice cream machines. one ofthe largest private universities in the nation, Unlike ice cream, however, yogurt cannot be initiated its own recycling program. kept overnight in the machine. Bacterial growth is University officers gave Roy Peterman, BYU's one reason, and the many city, state, and Federal grounds manager, responsibility for solving the health regulations constitute another. Nor do cus­ university's waste-disposal headache. In 1990, in tomers like yogurt that has been saved in the addition to keeping the campus in its usual visitor­ store's main freezer and re-run the next day impressing condition, Peterman's crew of 43 full­ through the frozen yogurt maker. time workers and 260 student employees turned Supermarketers could either throwaway the green waste into 10,000 cubic yards of compost. yogurt left over at closing, or quit making yogurt They also sold 12 tons of aluminum cans, 120 tons when the machine emptied late in the day. They of cardboard, 150 tons of newsprint, and 200 tons couldn't afford waste; neither could they fail to ofother recyclable materials. have the expected product available. That's a fast Says Peterman, "We recycled 30 percent ofour way to lose customers to the competition. total waste. Our goal is 50 percent." Not only has Keith Neibdring of the Food Marketing Corporation of Fort Wayne, Indiana, found a Mr. Tilton is a full-time, free-lance magazine writer liv­ ing in Hereford, Arizona. He is coauthor of a novel, lucrative solution. From his bakery counter he Night Pilot (Deseret Books, 1991). took two cookies that were destined to be dis- 405

gz F z ~ Walter Swan turned an "unpublishable" book into a success story. counted because they were "day old." He layered "1 had to succeed," he said. "1 borrowed on my two ounces of yogurt on one cookie, pressed the house to get my book printed." other on top, and voila! the world's first yogurt Swan found an empty department store build­ sandwich. ing in nearby historic Bisbee, Arizona, and The stores in his chain began making yogurt stocked it with his book. Dressed in cowboy hat, sandwiches with the leftover yogurt and the day­ red neckerchief, and overalls; he sat in the window old cookies. They also started featuring different and waved to the tourists. His "One Book Book­ flavors, increasing customer selection-and satis­ store" caught the tourists' fancy, and he was off faction-eonsiderably. and running. His business helped the landlord rent With the help of Jim Newlin, Elgin's sales out the rest of the building to other entrepreneurs director, the inventor took the solution one step who took advantage of the traffic the One Book further. He started filling pie crust shells with Bookstore generates. seven ounces of yogurt, adding a piece of appro­ Television soon discovered this storyteller, and priate fruit or decoration on top, and selling yo­ he's been a guest on several national late-night gurt pies. programs. Every appearance generated hundreds Says Newlin, "Basically, Keith took 93 cents ofrequests for his $19.95 book. Some days walk-in worth of ingredients and turned them into a $6.95 traffic and mail orders total more than 700 copies product." ofthe book no one wanted to publish. (A national publisher recently offered him a $20,000 contract, The One Book Bookstore but he turned it down flat.) Swan's got a second book out, and he's opened another bookstore. He Walter Swan is a retired plasterer in southeast calls it "The Other Bookstore." Arizona. Although health finally forced him to The common thread through these examples is retire from a young man's trade, he wanted to that accepting personal responsibility for problem­ remain active. He fulfilled a lifetime dream when solving leads to success, whether your problem is he wrote his autobiography. Since no commercial garbage, leftover yogurt, or even a book no one press would handle his book, Swan decided to else wants to publish. The solution to each prob­ publish it himself. lem took work, time, and imagination. But those Self-publishing led to another problem: market­ three things are available to anyone who under­ ing. There was no one to promote his book, and stands that the real answer to almost any problem bookstores wanted 40 percent off the top to sell it. is in the marketplace. D 406

A Checklist for Healthy Skeptics by Dianne L. Durante

e in the UnitedStatesare becomingter­ pounds of apples a day wouldn't do it. Further rified of our own technology. Nuclear examples: w. energy will zap us into early graves. • How much radiation was released from Alarand DDTwill give us cancer. The greenhouse Three Mile Island in March 1979, in what is widely effect will melt the polar ice caps, and Manhattan referred to as the worst nuclear accident in U.S. will be submerged. Wouldn't it be better to live "in history? Answer: about one millirem in the sur­ harmony with nature," thatis, without all ourhigh­ rounding area, and a maximum of 80 to 100 mil­ tech devices but in peace and health and security? lirems within theplant. Let's put that into perspec­ Or would it, perhaps, be better to ask first how tive. The average "background" exposure to a much truth there is in the media hype that bom­ resident of the U.S. is about 350 millirems a year. bards us with such dire predictions every day? Few By flying from New York to Los Angeles, you of us know how to evaluate predictions of high­ would expose yourselfto about five additional mil­ tech doom. We must learn, if we are to keep the lirems; by choosing to live in Colorado or in the technological achievements that give us one ofthe radon belt of eastern Pennsylvania, you might get highest standards of living in the world. Before a couple hundred millirems more than the average accepting the media's forebodings of imminent yearly dose. Comparison with these exposures disaster and screaming for the government to from normal background sources reveals that the charge to the rescue, consider the following points. one millirem released at TMI was actually a very minor amount.2 1. What are the facts? Get specific facts, with • Precisely how many cases of cancer can be places, dates, amounts, and sources; don't accept traced to DDT? None. In fact, the National Can­ emotional tirades or vague generalities. If, for cer Institute declared in 1978 that DDT is not a example, a movie star says Alar causes cancer, ask carcinogen. For a debunking ofevery horror story when and where and by whom and on what was you've heard about DDT, from the soft-shelled the study done that reached that conclusion. Have birds' eggs (they were occurring before DDT other studies supported those findings? How came into use) to the idea that DDT never breaks much Alar would you, a human, have to eat to get down (it does, within about two weeks in most the same effect? According to Dixy Lee Ray, to get cases), see Ray's chapter on pesticides.3 the amount ofAlar fed to the mice who developed tumors, you would have to eat 28,000 pounds of 2. Check your sources. Don't assume that any­ apples every day for 70 years.1 Mice fed smaller one who has made a movie or landed a job as a doses didn't develop tumors: eating a mere 14,000 reporter has taken the time to research the matter Dr. Durante is afree-lance researcher living in Brooklyn, in question. The news reporter, because he must New York. frequently condense his presentation to a two- 407 minute slot, often may not have a strong incentive how does the amount of risk compare with the to thoroughly investigate the matter. He does, benefits gained from the product? however, have a strong incentive (his ratings, and • The Three Mile Island accident, the worst ultimately his job) to grab your attention and hold mishap in 35 years of nuclear power generation in it, and may not hesitate to exaggerate, ignore, or the United States, resulted in no deaths.sContrast distort the facts in order to make his story more the record ofelectricity generation by coal. Mostly attention-getting. As for "celebrity authorities," because producing one megawatt of electricity their occupations require acting ability, not scien­ requires much more coal than uranium, using coal tific training. Suggestions for checking sources: leads to about 100 times more deaths in mining • Find out where the reporter got his informa­ coal than in mining uranium for a nuclear power tion. If he gives no source, that's a serious short­ plant, and leads to more than 20 times as many cas­ coming. In fact, when the question is one ofscien­ es of industrial diseases among coal miners than tific evidence, if no source is given, you can and uranium miners.6 should simply dismiss the statement as arbitrary, as • DDT did not result in any proven fatalities if the speaker had said, "Pluto is composed or cancers, but while in use it saved millions of entirely of rum raisin ice cream." Unsubstantiated people from disease and death. DDT was the emotional diatribes are unacceptable, no matter most effective weapon against the mosquito that who the speaker is. spreads malaria, a disease that has caused mil­ • If an authority is cited by name, what are his lions of deaths in Asia and even in the United credentials? Is he in a field that is applicable to States, and is doing so again now that DDT has whatever he's talking about? For example: few been banned.7 biologists know in detail how nuclear power is gen­ erated and what its risks and safeguards are. Being 4. Play devil's advocate with the facts, once you a scientist rather than a piano teacher is not have them. It's a useful method of self-defense to en0tlgh to qualify one to speak on all scientific become familiar with how some facts can be dis­ issues. torted and how other equally important facts can • Find out where the authority who is cited has be completely ignored.8 Two common techniques been published. A sensation-seeker may manage a to watch out for: mention in Time, but not an article in a well-estab­ • Ignoring the larger picture, while citing only lished scientific journal that requires review of the facts sure to alarm the listener. A mock advertise­ article by other scientists before publication. ment in Petr Beckmann's book (p. 77) reads, • Check the date of the statement. Often one "Foods advertised in Reader's Digest are radioac­ vague statement, if dramatic enough, will be tive." In small print, he points out that virtually all picked up and cited over and over again, despite foods have trace amounts of radioactivity. any evidence to the contrary that was known at the • Confusing cause and effect with correlation. time orhas become known since. A good example: Many people die while they're sleeping; therefore prompted by an extremely hot and dry summer in sleeping is a leading cause of death. Some people the continental United States in 1988, NASA's got sick after ingesting PCBs, so PCBs must be James Hansen told a Congressional hearing that dangerous chemicals. (In fact, in the case cited as year that he was 99 percent sure the greenhouse evidence of this, the liquid mixed in with the food effect was drastically changing the climate. He is had come from air conditioning equipment, and still cited very frequently. How many people know, contained, aside from PCBs, chemicals known to remember, or mention the fact that the winter of be highly toxic.)9 1989 was the coldest on record in Alaska?4 S. What to do? If a hazard to human health 3. Put potential risks into perspective; look at exists, what is the best way to deal with it? There the forest as weD as the trees. No technology and are basically two alternatives: government action, no element in nature is 100 percent risk-free: while or action by individuals. They depend on two very drinking a quart of water may save your life, different views of man: that he can't be trusted to putting your head into a bucket of water may kill look out for his own welfare, and must therefore you. Ifthere is solid evidence of a harmful effect, have a paternalistic government tell him what's 408 THE FREEMAN • NOVEMBER 1991

A lunchtime jog at Three Mile Island Despite the media scare, there was no evidence that human or animal life was threatened by the accident at TMI. good for him and force him to do it; or that man is can be ruptured (and have been) by a backhoe a rational being, to be dealt with through persua­ operator. Individuals working and cooperating sion, who ultimately must be left alone to plan his within the free market must be left to deal with own course of action. environmental problems, as they deal with prob­ The evidence is overwhelming that government lems ofsupply and demand. Only individuals have economic planning is an abysmal failure. It fails the knowledge to make the decisions proper to because no central agency can process, or even col­ their own welfare. lect, all the details that, in a free market, each indi­ *** vidual considers in order to make the best choices We feel pity for a man who's "afraidof his own for himself. The same is true for environmental shadow." To be afraid of one's own mind is worse, regulations, which are just another form of eco­ and fearing the technology we've created is pre­ nomic intervention. cisely that: fear of the efforts and products of the At present, the government has severely re­ human mind. The mind is man's means ofsurvival. stricted the use ofDDT. In a free market, a person It is his only way to make the earth, often so in­ in a tropical climate might decide that he is willing hospitable, a wonderful place to live. To reject the to risk whatever minor hazards come from using products of the mind on the grounds that they are DDT, in return for dramatically decreasing his not immediately perfect or 100 percent risk-free is chances ofgetting malaria. Atpresent, the govern­ to condemn man to perpetual fear, backbreaking ment has imposed such stringent controls on labor, and premature death.10 nuclear power plants that many utility companies I called this article a checklist for "healthy skep­ cannot afford to build them. In a free market, a tics." The reason should now be clear. To remain utility company might persuade the residents of healthy, we must learn to approach predictions of New York City that a nuclear plant (whose con­ environmental doom critically, not accepting them tainment vessel can withstand the impact ofa jetat unless or until the doomsayers meet basic stan­ landing speed) is safer in a crowded urban area dards of proof. than huge, flammable gas tanks, or gas lines that Isn't this being a bit harsh? Shouldn't we give A CHECKLIST FOR HEALTHY SKEPTICS 409 environmentalists some credit because they have imperative, if you want to remain a healthy human good intentions? Aren't they working for clean air being, that you refuse to accept any claim that tech­ for all ofus tobreathe and open spaces for ourchil­ nology or specific technological achievements are dren toplay in? Aren'tthey fighting technologyfor going to kill or maim you, unless such claims are our benefit? proven beyond reasonable doubt. D Let me answer these questions with two quotes from prominent environmentalists. The first is 1. Dixy Lee Ray, Trashing the Planet: How Science Can Help Us Deal with Acid Rain, Depletion ofthe Ozone, and from John Muir, founder of the Sierra Club, Nuclear Waste (Among Other Things) (Washington, D.C.: addressing alligators: "Honorable representatives Regnery Gateway, 1990), pp: 78-79. Ray, the former Chair­ of the great saurians of older creation, may you man of the Atomic Energy Commission, provides a clearly and vividly written analysis of the evidence concerning the long enjoy your lilies and rushes, and be blessed greenhouse effect, acid rain, pesticides, Alar, asbestos, diox­ now and then with a mouthful of terror-stricken ins, PCBs, nuclear energy, and so on. The book is aimed at man by way of a dainty!"ll Does this sound like a the layman and has substantial footnotes. 2. Ray, p. 126. For a good discussion of normal exposure man who has good intentions toward you and the to radioactivity, as well as a detailed description of how rest of humanity? nuclear power plants operate and how they compare in Andfrom Stephen Schneider, one ofthe leading terms of safety with other types of energy generation, see Petr Beckmann, The Health Hazards ofNOT Going Nucle­ spokesmen for the greenhouse theory: "We need ar (Boulder, Colorado: Golem Press, 1976). Beckmann is to get some broad-based support, to capture the Professor Emeritus of Electrical Engineering at the Univer­ public's imagination. That, of course, entails get­ sity of Colorado. 3. Ray, pp. 68-74. See also Elizabeth Whelan, Toxic Ter­ ting loads of media coverage. So we have to offer ror (Ottawa, Ill.: Jameson Books, 1985), pp. 59-85. Whelan up scary scenarios, make simplified, dramatic has other chapters on PCBs, dioxins, nuclear energy, and statements, and make little mention of any doubts acid rain, each organized in sections: the charges made against the substance or process, the facts, the background, we may have.... Each ofus has to decide what the various studies on the subject, and concluding remarks. The right balance is between being effective and being book is heavily annotated. Whelan has doctoral and honest."12 Does this sound like someone who is master's degrees in epidemiology from the Harvard School of Public Health and a master's degree in public health from interested in presenting you with the truth, and the Yale School of Medicine; she is president of the Ameri­ nothing but the truth, so that you can make your can Council on Science and Health. own informed decision? 4. Ray, pp. 32, 34-35. 5. Whelan, p. 239. She notes that President Carter's inves­ Such people don't simply want clean air for man tigatory panel (the Kemeny Commission) concluded that to breathe or open areas where children can play. there was no evidence that human or animal life had been They rank clean air and open spaces above any threatened by the accident at TMI. 6. Beckmann, pp. 83-85. concern for man. They consider nature (which has 7. Whelan, p. 69, with a chart on Ceylon, where reported come to mean anything on earth that's not human) cases of malaria dropped from 2,900,000 in 1948 to 17 in good in itself, not good for any benefit it might 1963, when DDT was widely sprayed in homes. The spray­ ing was stoppedin 1964, and by 1969 the reported cases bring to man. Ifman suffers so that the snail darter were back up to 2,500,000. and the spotted owl can prosper, so be it. This idea 8. For more on this, see Darrell Huff and Irving Geis, that man is a disfiguring blot on the face of the How to Lie with Statistics (New York: W. W. Norton, 1954). 9. Ray, p. 87. earth is the reason that many leading environmen­ 10. See Ayn Rand, "The Anti-Industrial Revolution," in talists wish for alligators to have us as appetizers.13 The New Left: The Anti-Industrial Revolution (New York: Granted, the above quotes are from only two New American Library, 1971), for an enlightening descrip­ tion of what would happen if technology were abolished, members of the environmentalist movement, but why we cannot restrict just some technology, and the Muir and Schneider have been prominent leaders motives of those who want to. This essay, written 20 years of it, and one must judge rank-and-file members ago, is remarkable for its insight into the principles behind the ecology movement and for where that movement must by the fact that they have accepted these men as inevitably lead. leaders. 11. Quoted in George Reisman, "The Toxicity of Envi­ Technology-man's tool for shaping his environ­ ronmentalism" (Laguna Hills, Calif.: The Jefferson School of Philosophy, Economics, and Psychology, 1990), p. 4; also ment to suit his needs-improves man's living con­ forthcoming in Rational Readings on Environmental ditions and ultimately prolongs his life expectancy. Concerns, ed. Jay Lehr. An excellent analysis of the driving Forevidence ofthat, you need only look at the high force behind environmentalism. 12. Quoted in Reisman, p. 10. level of disease and the low life expectancy in any 13. This premise is developed at length by Reisman and period before the Industrial Revolution. It is Rand in the essays cited above. 410

School for Scandal by James L. Payne

re wasteful scandals like the savings and climb-to over 3,000 in 1990 (costing taxpayers an loan disaster a thing of the past? Has estimated $350 million per year). A Congress learned from its mistakes? A What accounts for the strange failure of close examination of a little-noticed legislative Congress to accomplish its announced inten­ muddle reveals that Federal mismanagement is tions? The answer is that when the legislators here to stay. actually look at the reports that are suggested for The muddle concerns the "reports problem." elimination, they realize that they need them. Since the beginning of the Republic, Congress has They provide information about the far-flung required the executive branch to supply reports on activities of the federal government. How can administrative actions, implementation of laws, Congress regulate farming, mining, stockbroking, and national problems. In modern times, the num­ trucking, medicine, and so on unless it gets ber of required reports has increased dramatically. reports on the problems in these areas, and finds Since preparing all these reports is costly, it makes out about the flaws in its policies? So the reports sense to try to limit them. By 1980, a limit was obvi­ have to stay. ously necessary: the number of reports had grown The problem, of course, is that Congressmen from 600 in 1963 to over 1,400. (These figures refer can't possibly digest and respond to all these only to reports required on a repeated basis. In reports. Atthis point, thoughtful members ofCon­ addition, there are 500 to 1,500 specific, one-time gress would conclude that they ought to restrict reports required in a typical year.) the scope of government to activities they could , So Congress got busy, passing the Congression­ responsibly manage. Unfortunately, our lawmak­ al Reports Elimination Act of 1980 and the Con­ ers won't admit they are over-extended. In asking gressional Reports Elimination Act of 1982. After for more reports than they can read, Congressmen all this legislative activity, how many reports were have proven they are way out of their depth, but required in 1985? The answer is 2,800, twice as haven't the sense to move to shallower water. many as in 1980. Don't laugh yet, Congress wasn't A close look at how reporting requirements done. In 1986 it passed another Congressional begin illustrates the Congressional illogic. In a Reports Elimination Act. After much huffing and desperate effort to prevent further waste and cor­ puffing, this act managed to eliminate a grand ruption in the S&L bailout, Congress has mandat­ total of 25 reports. Meanwhile, the number of ed the production of several dozen reports from recurring reporting requirements continued to the Treasury Department, the Attorney General, James L. Payne has taught political science at Wesleyan, Yale, and from an alphabet soup of agencies most peo­ Johns Hopkins, and Texas A&M University. His book The ple have never heard of: NCUA; SAIF, RFC, Culture of Spending: Why Congress Lives Beyond Our OCC, RTC, GAO, FHFB, FDIC, CSC, and OTS. Means has been published this fall by the Institute for Con­ temporary Studies in San Francisco, and is reviewed on page Congressmen need these reports to master the 439 ofthis issue. subject in depth and exercise responsible over- 411

sight. But are they likely to digest and act on these there were thousands of other reports to read. reports? It's a factual question, because we've Finally, in 1989, the HUD scandal broke in the been here before. media, and the nation learned that billions of dol­ In the mid-1970s, a major scandal broke at the lars had been wasted. This time, 600 people were Department ofHousing and Urban Development. indicted. Over 500 people were indicted in connection with Explaining why his oversight committee hadn't a number of fraudulent practices. Congressmen, looked into the HUD mess sooner, one senator embarrassed that they hadn't been minding the said, "When you're working with a trillion-dollar store, moved to prevent future scandals by requir­ budget, with 100 different agencies and Cabinets, ing the Inspector General ofHUD to make semi­ [we] can't overview each of these agencies." annual reports to Congress about "problems and Obviously. Then, one asks, why not try fewer deficiencies." agencies? Unfortunately, the humility needed to The Inspector General filed his reports. As ear­ accept this logic is in short supply in Washington. 1y as 1981, they told of overcharging, fraud, and Congressmen will go on attempting to regulate unsound loans, and pointed out how the programs what they can't possibly understand, and the rest needed to be changed to prevent these abuses. But of us will go on paying for the costs of their mis­ congressmen didn't pay any attention. After all, management. D 412

Art and Representative Government by William R. Allen and William Dickneider

here, on a patio ofa university campus, was sovereignty" should prevail, with individual artists a pile of twisted, rusted iron pipe. But it determining the nature oftheir own creations. But T wasn't debris from plumbing renovation. It let there be also "consumer sovereignty" in con­ was an art exhibition~~ sumption of the art produced. Let consumers Why had the artist blessed us with this miniature determine for themselves the works of art they junkyard? It was neither pretty to the eye nor co­ pay for. Further, don't restrict philanthropists herent to the mind. Of course, we are not to ask in subsidizing artists: one of the tenets of a system what a modern painting or sculpture is. But per­ ofmarkets and private property is that people gen­ haps it is legitimate to ask what the artist meant to erally can dispose of their assets as they please. convey. But two points of elaboration. Ifwe generously presume that the artist is really First, while artists are to be free to use resources saying something of importance, how are we to which either they buy with their earned income or receive and translate the message? Are we to sup­ which are given to them by private patrons, they pose that the message sent is the same as the mes­ have no right to commandeer resources from un­ sage received? If not, this is peculiar and clumsy willing contributors through exploiting the co­ communication. Or maybe no message is being ercive powers of government. sent although one is to be received, with the receiv­ Second, we are not morally obliged either to er doing the artist's work by inferring something subsidize or to deify artists. While we guard the that wasn't transmitted. freedom to create works ofart-evenpiles oftwist­ Perhaps interaction between producer and ed, rusted pipe-protecting artistic freedom is very consumer isn't the intended game, at all. Maybe different from insisting that taxpayers buy whatev­ the purpose of the artist is personal catharsis: by er people chose to produce with that freedom. dumping rusted pipe on the patio, he gets a psy­ But some artists, like some ofthe rest ofus, can chological monkey off his back. Or maybe it is be seduced by government favor and applause. to be a profitable variation of "the emperor's "The arts are not a luxury," says a lawmaker, "they clothes" scam, with a clientele of connoisseurs are the soul of society." Art "reflects things that finding art where lesser folk see only junk. are happening in our society," says another, "and Within broad limits-if the art community is to closing our eyes will not make these things go be subject to any constraints-surely "producer away. Such art can help us recognize other influ­ ences on our culture and even help us understand William R. Allen is professor ofeconomics at UCLA; he them. Andifit does not help me oryou specifically, and William Dickneider collaborate on the Midnight Economist radio program, syndicated by the Reason you can be sure that it is helping someone, some­ Foundation ofSanta Monica, California. where, who can relate to it." 413

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Artists are not loath to accept an exalted role. being. Most agree that government properly "... art is social conscience," we are assured by the provides such fundamental services and ar­ director of a subsidized theater. "Art," he says, rangements as law and order and administration "has only one obligation-to tell stories and make ofjustice, national defense, and protecting prop­ images about who and what we are and who and erty rights which conduce economic efficiency what we might become." In all the community, and social stability. "only the artist must tell the truth." But something like subsidization ofthe arts is an Such precious rationalization for raids on the alien element in this context. It is not a "public Treasury cannot be analytically persuasive. Better good" like national defense, for markets have long to acknowledge simply that beneficiaries want the provided ample incentive for artists to meet con­ money and politicians want their support-and to sumers' preferences. And while the state has com­ remember that the arts flourished for most of pelled us to pay for many things we would not have America's history without substantial Federal approved if given effective choice, we do not legit­ money. Only in the last few decades has govern­ imize new error by past error. ment put arts significantly on the dole. Able people have long debated the appropriate Government is not the wellspring of art and purposes of government. But if there are any lim­ culture. Nor does some law of nature or sense of its to what should concern government, then sub­ social survival compel us to clutch sensitive sidization of art, however defined and identified, artistic souls as our conscience, guide, or judge. is pushing out the boundaries very far. Indeed, if Subsidizing artists is not a role of government idiosyncratic behavior not valued by the bulk of that is clearly legitimate or even commonly the community is to receive largess from the accepted. All except addled anarchists acknowl­ public trough, then little remains of representa­ edge that government does have reason for tive government. D 414

The S.E.C.'s War Against the Theater by John Chodes

s a playwright, I recently had a con­ aters by attracting favorable reviews and thus frontation with the Securities and Ex­ major producers and/or investors. Small produc­ A change Commission, related to a theatri­ tions also are used to "get a show on its feet" to cal production of mine. As a result of this brush analyze its strengths and flaws in front of a live with the law, I learned that the S.E.C. regulates audience. much more than the stock market. It negatively Second, the fact of "substantial losses to the influences what kind of theater is produced. investors" is more a reflection of current condi­ The difficulty revolved around the incorrect tions in the art world, where government subsidies filing of investor documents for my show. I was have created the very negative conditions men­ fined. To be certain that this never happened tioned in the S.E.C. warning. again, I reread the prospectus more carefully, and Before government entered the scene, many was shocked. The regulations were so absurd: they small productions made back their expenses, seemed to challenge producers to raise money out­ which tended to be quite low. Producers and side the legal parameters by making it very investors weren't afraid to put their creative ener­ difficult for the small theatrical enterprise. gies and money into new and innovative plays. In One glaring example was a bold-faced "Risks to fact, the showcase was the backbone ofthe theater. Investors" statement that seemed more like the Most plays reached Broadway or became films via warning on a pack of cigarettes: "Even if critically this route. acclaimed a play may J?-ot recoup its production expenses. The record for this type of limited run Subsidies Raise Costs [showcase or mini-contract] production ... indi­ cates that only a very few, if any, such productions Then in 1965 Congress created the National have ever turned a profit and the vast majority Endowment for the Arts, which lavishes $174 mil­ have resulted in substantial losses to the investors. lion annually on the arts. (This base figure is inflat­ ... Investors should be fully prepared and expect ed by city, state, and corporate matching grants.) that, ... they will lose all or a substantial portion of N.E.A. subsidies have· increased the demand for their investment in this offering." theaters, costumes, and scenery, so that production In this one paragraph there are two misleading costs have risen-much as prices tend to rise in an statements. First, showcase or mini-contract pro­ auction when the big spenders show up. ductions aren't intended to be profit-making. In the past decade, rental prices have soared They are used as stepping stones to larger the- about 600 percent for the most prestigious show­ case theaters. One factor is that government­ John Chodes' most recent play, The Longboat, was pre­ subsidized theater groups have made their per­ sented on Theatre Row in New York. He is also the Com­ munications Director for the Libertarian Party ofNew manent homes in what formerly were purely York City. rental-per-show stages. These favored groups 415

A scenefrom John Chodes' allegorical play, The Longboat. have monopolized these sites, restricting access play's production. These pronouncements about to those periods when the subsidized theater the professional experience of the producer'and groups are not performing. director indicate another disclaimer, this time Another factor driving up costs is that theatrical related to what they have notdone more than their unions have become more aggressive and demand­ accomplishments. (For instance, "Mr. Jones has ing. Historically, theater and the other arts were produced five Broadway musicals but has never largely labors of love. Unionism was weak at the produced a mini-contract play before.") This con­ lower end because there wasn't enough money to tinues the emphasis on the negative, which creates attract organizing activity. Subsidies changed this. fear instead of presenting the facts. The flow of government money extended union S.E.C. rules also forbid more than 35 "angels" rules and unrealistic wage contracts down to even (theatrical investors) from contributing to a show­ the lowest level productions, whether they were case production. Thus, fewer shows get off the funded or not. This has killed off many small-scale ground. By being forced to assume a substantial shows. financial burden, each angel experiences more It is unreasonable to expect that many small, anxiety about the investment. This tends to make independent plays could survive the stringent them believe the warning on the prospectus: the requirements of the mini-contract rules, the sec­ play is doomed to fail. ond lowest level in the Actors Equity code book. The S.E.C.'s doomsday warning frightens off Wages for each actor in a miniscule 99-seat show­ investors. In many cases, their decision for or case theater are over $200 dollars per week-not against participation isn't based on the merits of just from opening night, but from the first day of the play oron intangible personal motives, such as rehearsal. In addition, the producers must con­ wanting to associate with the "glamor" of the tribute to the actors' pension and health funds. theatrical world or an interest in helping the arts. The dollar formula is complex, but the amounts Instead, fear becomes the greater propelling are substantial. Ifthe cast is large, these two items force: fear of losing one's money, no matter how alone can escalate to several thousands of dollars promising the play may be. By this means alone, over the life of a play. the S.E.C. has reduced the number of plays that This wage and benefit plan makes breaking reach the stage. even a fantasy for most producers. It leaves many The essence of theater is the individual view­ small productions awash in red ink-unless, of point, which can revolutionize ourway ofthinking. course, Uncle Sam is picking up the tab. By controlling the theater through S.E.C. rules The S.E.C. also requires statements concerning and N.E.A. SUbsidies, the federal government is the credentials of the principals involved with a thwarting mind-provoking plays. 0 416

Corporate Giving: The Case for Enlightened Self-Interest by Edward H. Crane

enin once said the capitalists will one day The typical senior business executive who is sell the rope used to hang them. In this expected to address issues of public concern is L area, at least, he has proven to be dis­ often confronted by anti-corporate activists, a turbingly close to the mark, with the only modifi­ skeptical (if not hostile) media, and government cation being that many capitalists seem deter­ bureaucrats who derive great psychic income from mined to give the rope away. A truly curious the arbitrary power they hold over corporations. aspect of American corporate philanthropy has Perhaps it is therefore understandable why so been the tendency to give corporate profits to many of them assume a defensive, almost apolo­ groups openly hostile to profits in general and getic posture when it comes to speaking out. The corporations in particular. truth is, however, that the vast majority of Ameri­ A recent survey by the Capital Research Center cans have few axes to grind with corporations. in Washington, D.C., found that the 146 corpora­ They respect competence, innovation, productivi­ tions responding (out of the Forbes 250) gave ty, and yes, profits. Ifmany detractors ofcorporate more than twice the funding to generally anti­ America are motivated by envy, most Americans capitalist organizations than they did. to groups take genuine pleasure in the legitimate achieve­ supportive ofthe free market system. There is rea­ ments of others, including corporations. son to believe that the giving pattern ofthose com­ The point is, simply, that senior executives with panies not responding to the survey is onthe whole the courage to speak out in defense of capitalism even more skewed toward the economic and envi­ and the role their corporation plays in our society ronmentalleft. would find a much stronger positive response than This trend in corporate giving is disturbing on they might imagine. Corporate executives, be­ two accounts. First, it is not in the long-term inter­ cause ofthe somewhat hostile public environment ests ofshareholders or employees. Second, it is an they find themselves in, tend not to recognize the abrogation of a broader societal obligation corpo­ moral suasion they possess. And the moral argu­ rations have, as centerpieces of the free enterprise ment for capitalism is made all the more compell­ system, to promote understanding of and support ing because it is a system based on voluntary ex­ for market capitalism. Americans have a much change, rather than compulsion. Capitalism is a higher level of respect for the business community moral system. than most businessmen realize. It is important to recognize that the revolutions Mr. Crane is president ofthe Cato Institute in Washing­ that have occurred in Eastern Europe are less ton, D.C. revolts against Communism-a system that has 417 been intellectually bankrupt for decades-than The Systemic Nature they are revolts against government control of people's lives, per se. People risked their lives for of Government Growth the right to be free to choose, as Milton Friedman One of the great dangers of the present ap­ put it. They want to choose where they live, what proach to public policy undertaken by the business they read, at which jobs they will work, and for community is that it fails to recognize govern­ how much money. The victory of capitalism over ment's encroachment on the private sector as a socialism is more fundamentally a victory of free­ systemic problem, the "natural progress of things" dom over coercion. that Jefferson warned us of. The literature from distinguished free-market Claiming the Moral High Ground economists on the growth of government is exten­ sive. To begin with, there is the Public Choice The very fact that choice (and private property) School, led by Nobel laureate James Buchanan, is at the heart of capitalism provides the business which makes a persuasive case that bureaucrats executive with a clear moral high ground, if only he are not the disinterested public servants our high­ would choose to employ it. Behind the moral pos­ school civics texts might have led us to believe. turing of capitalist detractors invariably lie Like the rest of us, bureaucrats are motivated in schemes to limit individual choice-to direct the good measure by self-interest. Indeed, the bureau­ workings of the marketplace by bureaucratic edict cratic imperative is constantly to generate ratio­ and coercive redistribution. The chipping away at nalizations for expanding existing government our free enterprise system by critics of business programs, if not creating new ones. should be dealt with through a principled counter­ Another Nobel laureate, Milton Friedman, has assault rather than tepid protestations and finan­ written about the "tyranny of the status quo." cial handouts that only serve to embolden the Friedman describes the process whereby a bill will adversary. bedebated for years, even decades, only to pass in The lack of a vigorous, principled business­ Congress by a single vote. From that point for­ community stand in support ofthe free market sys­ ward, however, the only debate is overwhether the tem has been a significant factor in the ominous budget should be increased by 5 percent or 15 per­ growth ofgovernment during much ofthis century. cent. The new government program is protected The business community should, in fact, support by what Friedman refers to as the "Iron Trian­ limited government in general-not just in the gle"-the direct beneficiaries of the program, the economic realm-because it is the principle of Congressional oversight committee, and the Fed­ limited government that ultimately protects mar­ eral agency charged with administering it. Billions ket capitalism. ofdollars are spent annually by the federal govern­ More than 200 years ago Thomas Jefferson ment on consultants (whose existence depends wrote that "The natural progress of things is on the government) to determine the value of for liberty to yield and for government to gain (read: justify) these programs. To suggest that the ground." Certainly events in the 20th century program has proven more expensive than its should remind us of the wisdom of Jefferson's proponents had claimed it would, or to challenge admonition. In the early part of this century, gov­ the efficacy of the program once it is in place, is ernment spending at all levels-Federal, state, and considered somewhat ill-mannered inside the local-amounted to just 10 percent of National Beltway. Income. By 1950 the percentage had risen to 26 There are other powerful reasons for the percent. Today, the total of all levels of govern­ growth of government, also unrelated to the val­ ment spending has reached 43 percent of National ue ofthat growth. For instance, programs typical­ Income. The greater the amount of private sector ly dispense concentrated benefits while costs are money spent by the public sector, the less efficient diffuse. When that is not the case, as in the recent and productive will be the market system, and the catastrophic health care bill (directly tied to less competitive American industry will be in the increased taxes on the elderly), the chances of international marketplace. stopping the growth of the state are greatly 418 THE FREEMAN • NOVEMBER 1991 enhanced. Additionally, Congress has, through nize that employee involvement and feedback are incumbent-protection legislation, created an essential to operating at competitive levels of pro­ institution virtually impervious to voter disci­ ductivity. In a like manner, the corporate world is pline. The "culture ofspending" that exists inside ready for a revolution in its 1960s-style approach the Beltway and in the state capitals around the to corporate giving. nation tends to distort the good sense of even the best-intentioned legislators. A History ofGovernment Failure More Than an Academic Exercise The failure of government runs the gamut of issues. For all practical purposes government has a Determining the causes of government growth monopoly in the field of education. Over the past and the commensurate threatto the viability ofthe three decades real spending per pupil has tripled free enterprise system is more than just an aca­ while test scores have steadily declined. Yet the demic exercise. If a business is going to succeed it government education bureaucracy from the Fed­ must not only have appropriate management sys­ eral to the local level argues that the problem is a tems in place, but also a political environment that lack of funds. is hospitable to capitalism and conducive to eco­ The Social Security system, sold as a safety net nomic growth. for the indigent elderly, now provides the majority The purpose of this paper is not to develop an ofretirement income for a majority ofAmericans. exhaustive case against big government. It is to As a pay-as-you-go system, it has deprived the outline the most effective approach to corporate economy of true savings, and now offers individu­ giving consistent with the interests of sharehold­ als entering the work force a rate of return upon ers, employees, and consumers. But it would be retirement that we estimate to range from -2 per­ shortsighted to ignore the systemic failures of gov­ cent to +2 percent. And that assumes a 26 percent ernment in areas outside of business regulation combined payroll tax early in the next century. and taxation. Those failures are directly relevant Added to this is the remarkable fact that, unlike a to the destructiveness of government intervention private retirement plan, individuals don't own the in the marketplace. corpus of money paid into Social Security over Business in America has, for the most part, their working lives. assumed a rather myopic approach to public poli­ In the area of welfare, where the state has cy, lobbying for changes in this bill, influencing the assumed a massively larger role since the Great mark-up of that bill, as often asking for govern­ Society programs of the Sixties, more money has ment protection and favors as fighting off unwant­ led directly to larger bureaucracies and more peo­ ed taxes and regulations. Policy-research institutes ple on welfare. Charles Murray's path-breaking and public interest groups are more likely to book, Losing Ground: American Social Policy, receive funding from corporate America if they 1950-1980, documents the self-defeating incen­ are on the pro-government intervention side of tives government welfare programs have created, this fray. often severing what he calls the "tendrils of com­ This is a serious strategic error. As former Sec­ munity" by displacing private charities and absolv­ retary of the Treasury William E. Simon wrote in ing capable individuals of any responsibility for The Wall Street Journal two years ago, "we in the their own lives. American business community have a right and a The list of major government failures, if not responsibility to steer our gifts to institutions com­ endless, is nevertheless extensive. When one looks mitted to maintaining freedom." directly at government attempts to regulate busi­ Moreover, this myopic approach to public ness the results are much the same. We estimate policy is dated and unsophisticated. In the past that deregulation of trucking has saved consumers decade American business has revolutionized its on the order of $60 billion a year, not just in lower approach to management techniques. Faced with shipping rates but even more importantly in the the reality of a global marketplace, corporations ability of firms to develop just-in-time inventory that had survived for decades employing rigid, top­ systems. Airline deregulation has allowed millions down management systems have come to recog- more Americans every year to fly at lower rates. CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 419

What problems ofcongestion remain are primarily the latest outrage they've caved in to in order to the result of the failure to privatize the air traffic appease anti-capitalist activists must surely be all control system and the airports themselves, which they really want? No. They want to determine the have not responded to increased traffic as a temperature ofthe water in your hotel room. The market entity would, by increasing capacity. danger of government is systemic. It cannot be Perhaps the prime example of government fail­ fought, at least not successfully, in the long run, on ure in the business world is the savings and loan an ad hoc, piecemeal, and reactive basis. It most debacle. S&Ls have always been something of a assuredly cannot be fought by letting the oppo­ creature of government-not a market creation. nents of free enterprise determine the agenda for When the yield curve moved sharply negative in the debate. the 1970s, deregulation ofinvestments and interest rates became essential. Unfortunately, Congress "Politically Correct" Intimidation not only failed to deregulate Federal deposit insur­ ance, it actually increased coverage to make it fea­ To be blunt, the Sixties approach to giving sible for individuals and institutions to Federally placed corporate America (in general-there are guarantee tens of millions of dollars of deposits. several commendable exceptions to the rule) in Without depositor discipline, some $500 billion of the vanguard of what has only recently been bad investments were made-to be underwritten dubbed "politically correct" thinking. A piece in by the American taxpayer. the New York Times last fall explained that "p.c.," In the face of this remarkably unimpressive as it is often referred to, reflects "a large body of record of government involvement in society­ belief in academia and elsewhere that a cluster of greatly transcending the limited role envisioned by opinions ... defines a kind of 'correct' attitude the Founders-the business community in Amer­ toward the problems ofthe world, a sort ofunoffi­ ica has allowed itself to be thoroughly cowed by cial ideology...." The issues in the cluster include the opponents of capitalism. Instead of standing ecology, culture, and foreign policy. The article up to its opponents, the business community has goes on to note the "Marxist" influence on some attempted to appease them at every turn. Instead p.c. thinking and that "The cluster of politically ofproclaiming the moral superiority ofcapitalism, correct ideas includes a powerful environmental­ it has conceded the moral high ground to the likes ism" and an anti-capitalist mentality. of a Ralph Nader. Consider Nader's vision for This whole phenomenon, the article concludes America as revealed in a recent magazine article: encouragingly, is being challenged by intellectuals " 'How's your hand?' Rosenfield asks. Nader willing to stand up to the left: "But more than an looks at the hand he scalded in a sink a few days earnest expression of belief, 'politically correct' back in Sacramento. has become a sarcastic jibe used by those conser­ "'Better,' Nader says. 'That hot water was vatives and c1assicalliberals alike, to describe what almost boiling. The government hasn't set temper­ they see as a growing intolerance, a closing of ature limits in Sacramento, so that's what hap­ debate, a pressure to conform to a radical program pens.' " orrisk being accused of... thought crimes...." To There is a point that the business community the list of politically correct ideas one could confi­ seems not to grasp. If the problem with govern­ dently add the views that corporations are ment is systemic, then orienting one's defense to "exploitative" and that profits are "obscene." protecting the status quo is a mistake. For the sta­ It should be noted here that without some kind tus quo is not a given set ofprograms. It is, rather, of mental self-flagellation and deep-seated guilt a process. And that process is leading inexorably over being a part ofWestern civilization, one is not to ever greater government involvement. It is considered to have seen the light. Corporate leading to a society in which Americans will have America has been an especially sensitive target for the benevolent hand of government determine the p.c. enforcers in our society, visibly wincing the temperature of the hot water in their hotel when accused of being out of step. Funds to sup­ rooms. port p.c. causes, including anti-business agitation, Yet how often do corporate representatives and have been quickly forthcoming from the corporate business lobbyists operate on the assumption that community for the past 30 years. 420 THE FREEMAN • NOVEMBER 1991

The Politics ofEnvironmentalism "like starting to build a bridge over a river without knowing where the other side is." Luckily, Ameri­ The collapse of the intellectual case for social­ can industry did not switch to cold fusion without ism and the planned economy has led many anti­ first finding out if it worked. capitalist activists into a new camp: the environ­ Our point is that accommodating the environ­ mental movement. To be sure, concern over a mental movement is an endless task. There is an clean and healthy environment is something most anti-progress (anti-human?), almost Luddite men­ Americans share. Corporate America has not tality behind many of the demands from this always acted responsibly with respect to the envi­ group, as the above quotes from their leadership ronment. Advocates of the free market should reveal. The Earth Day slogan was "We changed support the "polluter pays" principle ofprotecting the world. Now it's time to change it back." From the environment. But there must be sensible, a capitalist standpoint, there is quite literally no rational standards for what constitutes unaccept­ satisfying this movement. able levels of pollution. The accommodating approach of business to The environmental movement has, for the most the Clean Air Act of 1990 illustrates the dangers part, been taken over by individuals with a po­ involved here. The Act imposes an enormous bur­ litical agenda that is considerably more ambitious den on our economy, which we estimate to be in than merely cleaning up the environment. What the range of $30 to $40 billion a year. Further, it leftist environmentalists recognize that most imposes a bureaucratic command and control sys­ Americans don't think about is the fact that tem on business that greatly inhibits the flexibility economic activity is inherently "polluting." It nec­ industry needs to stay competitive. And all this is essarily entails the transformation of scarce done in the name of such problematic goals as resources into higher-valued objects and then into reducing CO2 in the air in order to solve an acid some form of "refuse." Thus, in the name of elim­ rain problem that the best scientific evidence says inating pollution, nearly all human action could be doesn't even exist. 60 Minutes, a television pro­ subject to regulation. But to allow the environ­ gram hardly biased in favor ofbusiness, devoted a mental movement to micro-manage levels of pol­ segment to the absurd cost/benefit ratio of the lution and the environmental consequences of Clean Air Act. Yet the business community, rather economic activity is to invite central economic than fighting the Act on a fundamental level, planning via the back door. opted to accept the major premise and hustle to It should not be considered alarmist to suggest patch in damage-control nuances. that many leaders ofthe environmental movement An even more recent example ofcapitulation of have just such an agenda in mind. Indeed, their a major business to disingenuous lobbying by an philosophy transcends an anti-business posture environmental group is the McDonald's Corpora­ and at times seems aimed squarely at the very idea tion's agreement to cease using foam packaging at of improving the human condition. the behest of the Environmental Defense Fund. During the briefwindow when there was height­ The fact that McDonald's was on the verge of a ened optimism over the viability of "cold fusion," major recycling project for its foam containers or, the Los Angeles Times interviewed several leading more important, that total worldwide human pro­ environmentalists to get their views on the subject. duction of CFCs (the offending chemical) is less Onemight have thought thatthe prospectofclean, than 1/400 of the chlorine released into the atmo­ inexpensive energy would be cause for an environ­ sphere by sea water evaporation made no differ­ mentalist celebration. But one would have been ence. The politically correct position won an easy wrong. Paul Ehrlich said viable cold fusion would victory. be "like giving a machine gun to an idiot child." Indeed, solid-waste management and "waste­ Jeremy Rifkin said, "It's the worst thing that could ful" product packaging are among the latest ratio­ happen to our planet." Barry Commoner, who nalizations for regulating business. State and local once ran for President on a socialist platform, laws are proliferating. Congress has worked on a offered the helpful advice that we not convert our re-authorization of the Resource Conservation plant and equipment over to cold fusion until it is and Recovery Act, which will be horrendously proven to work. Otherwise, he said, it would be expensive and without tangible benefit, and the CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 421

Environmental Protection Agency has proposed materials and the preferences of consumers. To expensive new regulations on local landfills. Once insure that the price system faithfully reflects real again, corporations appear all too ready to con­ conditions, it is necessary that all costs be "inter­ cede the left's premises in the hope of winning nalized"; that is, every scarce resource must carry some marginal compromises. It will not work. An a market price. examination of the premises makes this clear. Thus, regarding packaging, it is essential that The prejudice against disposable product pack­ landfill services and other disposal costs not be aging is actually a prejudice against consumption. subsidized by government at any level. Such a sub­ The (false) claim that Americans waste too much sidy distorts decision-making toward more pack­ masks a beliefthat Americans consume too much. aging because consumers don't pay the full costs of The prejudice against consumption is itself based using it. In contrast, government efforts to increase on the fallacy that resources are finite, as well as the costs of using packaging will result in other, 'on a fundamental belief that human action dis­ unintended losses (such as food, as noted above). turbs the natural world. Compromise will only If consumers must pay the true costs of disposal, whet the left's appetite. If these premises go they will make packaging decisions consistent with unchallenged, we will move inexorably toward their values, with their means, and, without intend­ ever wider recycling regulations, packaging ing it, with what economists call "social utility." We restrictions, deposit policies, and even product thus can say that the free market promotes ratio­ bans. This would be a major step toward the nal conservation. politicization of business decision-making. As noted, the corporate response on this issue All human action involves trade-offs, and the to date has not been encouraging. It has been ad very purpose of a market economy is to make pos­ hoc, material-specific, and fragmented. The very sible intelligent trading off. It does so through the least American business could do to protect the price system, which encapsulates socially dispersed remnants offree enterprise that we enjoy would be knowledge about supply and demand and puts it to move their foundation contributions from those into a form usable by all participants in the market. that seek greater control over people's economic The anti-market mentality is characterized by a activities to those that will develop and propagate refusal to believe that trade-offs are unavoidable. the kind of arguments outlined above. For example, recycling is presented as a costless method of reducing waste and saving resources. A Principled Approach to No consideration is given to the resources used in Public Affairs the recycling process itself. The handling of sepa­ rated materials requires more vehicles using more Ifthe free enterprise system is to survive in the fuel creating more auto emissions. The production United States, it is imperative that the business of foam packaging, which was devised in response community develop an effective strategy for sav­ to the anti-paper, save-a-tree lobby, is more energy ing it. Without a principled counteroffensive efficient and less polluting than other forms of against those forces determined to destroy it, the packaging. According to research, in the United corporation in America has a less promising future States, where there is said to be more packaging than the spotted owl. The environmental move­ "wasted," there is less food thrown away than in ment, egalitarian ideologues, and high-tax redistri­ countries where less packaging is used. Finally, butionists won't lose sight of their goals simply recycling costs consumers time. Why should the because your corporation has made an accommo­ environmental movement have the power to dation to their latest demands. decide that consumers' time is worth less than they In order to seize the moral high ground, howev­ think it is? These trade-offconsiderations won't be er, the first thing the business community must do found in the literature of the recyclists. is stop using government to gain a temporary com­ Government is incapable of making intelligent petitive advantage in the marketplace. Doing so decisions about what kind of packaging is best; it not only hurts competitors, it also imposes costs on simply doesn't have the necessary information. consumers. Part of the new enlightenment of cor­ The factors that go into a market-based decision porate America, in addition to employee-oriented include the relative scarcity of the competing management, is a recognition that the consumer 422 THE FREEMAN • NOVEMBER 1991

(at whatever level of production) must be treated through support of policy-research institutes and with respect. In addition, it is difficult if not impos­ public interest advocacy groups. Regrettably, as sible to maintain an entrepreneurial spirit in the noted, mostcorporate support for such organiza­ workplace while diverting corporate resources to tions is perversely invested. There are a good num­ manipulating the coercive levers ofgovernment to ber of important, efficient organizations support­ gain competitive advantage. Is the company's goal ing capitalism and limited government that are to make the best product at the lowest price, or to deserving of corporate support-much more so unfairly restrict competition and consumers? Cor­ than many groups that receive much more. We porate America cannot have it both ways. recommend the following guidelines for corporate As Paul Weaver wrote in his Cato Institute/ support of policy research and advocacy groups: Simon and Schuster book The Suicidal Corpora­ tion: How Big Business Fails America: 1. The organization should beopenly supportive of free enterprise and limited government. The effort to grab competitive advantage 2. The organization should be non-polemical from the political process doesn't work any and nonpartisan. more, for the same reason that protectionism 3. Its product should be professionally packaged doesn't work. The effort to beggar one's neigh­ and marketed. bor soon becomes apparent to the neighbor, 4. Avoid endowed organizations unless they and he proceeds to do something about it. Fifty appear to be utilizing their income stream from the years ago and more, business's efforts in the endowment efficiently. U.S. to lobby government for advantages at 5. The policy approach should be innovative, the expense of many parts of the population entrepreneurial, and designed to move the debate stimulated farmers, workers, consumers, and off dead center. Avoid supporting groups that others to organize and lobby for protection spend a high percentage oftheir resources defend­ and subsidies of their own. Over the years, it ing the status quo. worked all too well. Sooner or later the policy 6. Do not support organizations that accept gov­ makers got around to giving at least something ernment funds. to nearly everyone. The heavy, unpredictable, 7. The organization should have a high level of economically harmful burden that government output and visibility relative to its resources. puts on American business today is the end result, direct and indirect, of a century of busi­ In his preface to Patterns ofCorporate Philan­ ness lobbying. thropy, former Delaware Governor Pete du Pont Under the pressures of a competitive global wrote: economy, American executives are beginning to Ifthe public policy program requesting funds face up to this shocking and disillusioning truth. is designed to .change things at the margin, by As they do, I believe-I hope-that they will five or ten percent, forget it. ... Become the turn away from the blind, manipulative, self­ entrepreneurs your companies' founders once destructive selfishness that is corporatism and were. Look for exciting new ideas, bold new begin to embrace the humane system ofenlight­ solutions, interesting new experiments to be ened self-interest and voluntary cooperation tried, and give them a chance, because that is under law that some call capitalism. where America's future lies. To achieve that goal, corporate representatives During the past decade, America's corpora­ must be directed to take principled stands in sup­ tions have displayed courage in managing their port of an open-market system when testifying own affairs. While government has relied ever before Congress or lobbying in its halls. Certainly more on an outdated model ofbureaucracy, cor­ they should stop their practice of developing such porations have adapted to the new realities of close relationships with Congressmen and their the information age by cutting bureaucracy and staffs that they endup lobbying the corporation on relying ever more on market forces to dictate behalf of government. decisions. Now, as they look at their public pol­ In general, one of the most highly leveraged icy philanthropy, corporations need to take a means of influencing the public policy debate is page from their own lesson books and promote CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 423

a new approach to public policy, an approach part of American business can make an enormous that seems radical only by the standards of difference. Support of free market public policy American government in the 1990s. research groups should be a major part of the principled opposition. In an op-ed last year in The Wall Street Journal The distinguished University of Pennsylvania entitled "Socialism is Dead; Leviathan Lives," historian Alan C. Kors, in discussing the decline in James Buchanan wrote that "The death throes of importance of American universities, said in a socialism should not be allowed to distract atten­ recent interview, "But what's coming out ofcertain tion from the continuing necessity to prevent the think tanks and certain foundations and certain overreaching of the state-as-Leviathan, which institutes is very exciting and much more central to becomes all the more dangerous because it does the real debates about the problems of American not depend on an ideology to give it focus." Con­ society." Itis time for corporate America to decide sistent, principled opposition to Leviathan on the which side of the debate it supports. D

IDEAS ON Democracy and Diversity LIBERTY ome corporations have defended their grants to anti-business activists on the grounds that such grants supposedly strengthen the Sdemocratic process by encouraging "diversity." The reasoning $ seems to be that by supporting a wide range ofopinion and thought in pol­ icy research and advocacy, the "best" ideas in the current policy arena will prevail. In fact, however, one ofthe principal reasons for this study is that diversity is the last thing being encouraged. The federal government has provided hundreds of milions of dollars to nonprofit advocacy organizations, at least 98 percent of which promote inter­ ventionist economic policies, in addition to which government funding of public policy research far outstrips private, corporate funding and is biased heavily toward the left. Government agencies fund policy research that calls for a more activist government, intellectual support for which is obviously conducive to the larger budgets they typically seek. Government's predomi­ nant role in funding academic public policy research is an important reason why this research-and academic opinion in general-is so heavily biased in favor of state intervention. Thus, the overall funding ofpublic affairs organizations and ofpublic policy research is already grossly unbalanced in favor of those who espouse inter­ ventionist economic policy. Additional corporate funding merely augments this imbalance, exacerbating an already overwhelming anti-free enterprise bias. It does not encourage balance and diversity; it stifles them. -THOMAS DILoRENZO from Patterns ofCorporate Philanthrophy, 1990 (Capital Research Center, 1612 K Street, NW, Suite 704 Washington, DC 20006) 424

Capitalism: Who Are Its Friends and Who Are Its Foes? by Donald J. Boudreaux

Marxian 'alienation' is aphilosophically esoteric through their pension funds. Thus, Marx's expla­ concept projected by intellectuals onto the working nation ofpeople's political views is far too simplis­ class, rather than apassion felt from within that class tic to take seriously. with such intensity as to drive the proletariat to the Butover the years I've noticed another problem barricades.! with this Marxist proposition: Not only is it too -THOMAS SOWELL simplistic in presuming labor to be opposed to cap­ ital, it fails to explain the observed pattern ofpolit­ ne of the standard pillars of Marxist ical beliefs. thought is that a person's economic posi­ Six years ago, when I took a faculty position in Otion determines his orherpolitical beliefs. economics at George Mason University, it oc­ People who are wealthy capitalists or prosperous curred to me that nearly all of my libertarian and members of the bourgeoisie support public poli­ classical liberal friends come from working class cies favoring "capital" over "labor," while the backgrounds, as I do. Were we the exception that ever-growing working class supports pro-labor as proved Marx's rule? Or is Marx's rule wrong? I opposed to pro-capitalist policies. couldn't answer this question definitively because, As an economist, I always have been skeptical quite frankly, I knew too few people who came of this piece of Marxist dogma because, in a free from privileged backgrounds. So, when I entered market economy, pro-capitalist policies are not law school two years ago at the University of Vir­ necessarily anti-labor, and pro-labor policies are ginia, I decided to take note ofthe family and edu­ not necessarily anti-capitalist. After all, capital cational backgrounds of as many of my fellow law accumulation increases the productivity of work­ students as I could. ers' which, in tum, increases real wages. Another problem with this Marxist proposition is that most Who Are Capitalism's laborers in free market societies are themselves Intellectual Foes? capitalists. It is not uncommon for blue collar workers to directly own stocks in corporations, or, Over the past two years I've conducted a casual indeed, to own their own businesses. More signifi­ empirical study of family backgrounds and politi­ cantly, nearly all working people in the United cal beliefs, using law students at the University of States own shares of corporations indirectly Virginia as my sample. This is a good sample set Don Boudreaux is studying law at the University ofVir· because a large number of my fellow students ginia. come from very privileged backgrounds and were 425 educated at the best prep schools and undergrad­ black! Marx's explanation ofpolitical biases clear­ uate institutions in the world. But also a sufficient ly doesn't explain the lineup of opinions manifest­ number (though not a majority) oflaw students at ed in that classroom. the University of Virginia are products of working class backgrounds and were educated at decidedly Why Do the Wealthy Promote non-elite undergraduate colleges. I finally had the Self-Destruction? opportunity to test the veracity of Marx's explana­ tion of political beliefs. The findings ofmy admittedly informal study of I found that Marx's explanation is backwards. family backgrounds and political views suggest the The more privileged a person's background, the interesting question: Why this pattern? Why do more likely he is to be a leftist. I know not a single leftists and interventionists come disproportion­ classical liberal law student who is a scion of a ately from wealthy families, while libertarians and wealthy family. Students who share my free mar­ classical liberals come overwhelmingly from work­ ket political views invariably aresons ordaughters ing and middle class backgrounds? of blue collar or middle class workers, or of fami­ Several possible answers come to mind. One is lies whose substantial economic success was first that wealthy families are better able to send their achieved by the parents ofthese students. No clas­ children to Ivy League schools. Because leftist sicalliberal students that I know attended elite thought is most prevalent in these institutions, prep schools, and only a very few received their children from wealthy families are more likely to undergraduate educations at Ivy League universi­ be exposed to interventionist ideas than are chil­ ties. Likewise, the most committed leftists in the dren from less advantaged families. student body typically attended exclusive prep Another explanation that no doubt contains an schools and, almost invariably, received their element oftruth is that children from wealthy fam­ bachelor's degrees from schools such as Harvard, ilies often feel guilty for being economically privi­ Yale, Smith, and Stanford. In short, it is the leged. Of course, this guilt occurs when wealthy wealthy-or, at least, the children of the wealthy people come into contact with those who are -whomost shrilly criticize capitalist achievement below the poverty line. But it also occurs when and values. Capitalism's defenders come over­ wealthy people learn about working class whelmingly from the working and middle classes. lifestyles. A friend told me that he knows of a An incident during my first year of law school wealthy young woman who expressed surprise and reflects the invidious attitudes of students from shock upon learning that most people purchase privileged backgrounds. Our Constitutional Law automobiles on installment plans and not outright class was discussing affirmative action when a for cash. People who are accustomed to riding in black student spoke up against such policies. This nothing but new BMWs or Volvos quite naturally student argued that affirmative action is unconsti­ feel pity for those who can afford no more than tutional as well as demeaning to minorities. It Chevrolets or Toyotas purchased on credit. It nor­ should be noted that this black student is from the mally doesn't occur to persons from wealthy back­ Washington, D.C., ghetto, and, because ofhis own grounds that people who are able to get credit to hard work, he managed to attend Dartmouth as an buy Chevys or Toyotas don't pity themselves, but undergraduate. He also earned one of the coveted instead feel quite pleased with their purchases. few positions on the Virginia Law Review.2 Leftist politics is a way to assuage the guilt that When this black student expressed his opposi­ grows from this pity. tion to affirmative action, he was taken to task by There is surely some truth to these explanations, several white students in the class-all of whom but neither seems sufficient to explain the pattern enjoyed an upbringing much more economically ofpolitical views I detect among my fellow law stu­ and socially privileged than that enjoyed by the dents. The guilt explanation appears particularly black student. Oneparticularly grotesque example weak. of left-liberal presumptuousness took place when Earlier I stated that I met in law school a few a white student (who is from wealthy Fairfax classical liberal friends whose families are quite County in Virginia) openly accused this black stu­ wealthy. However, in all ofthese cases the parents dent of being naive about what it means to be of my classmates are the first generation in their 426 THE FREEMAN • NOVEMBER 1991 families to achieve substantial economic success. ketplace does so only by producing new wealth Therefore, the explanation for leftist bias among and not by taking it from someone else. the wealthy that focuses on guilt clearly isn't a suf­ ficient explanation. Conclusion The factor that distinguishes these wealthy clas­ sical liberals from the leftist children of other Quite obviously, my empirical "study" offamily wealthy families is that the classical liberals are backgrounds and political beliefs among my fellow firsthand witnesses to the effort and risk-taking law students is only very casual and impressionis­ that were required for their parents to achieve tic. And I don't wish to claim that there are no great economic prosperity. Children from families exceptions to my findings. Committed libertarians whose wealth extends back two or more genera­ and classical liberals can be found among the ranks tions never see the productive source oftheir fam­ of the wealthiest in our society, and diehard inter­ ilies' wealth and, hence, remain unaware of the ventionists exist among middle and working class extent to which hard work and risk-taking were citizens. Nevertheless, I continue to be struck by necessary components of their families' substan­ the prevalence of leftist interventionist thought tial material success. My sense is that another fac­ among people whose families are wealthy and tor in addition to Ivy League schooling and guilt have been so for several generations. And I am contributes substantially to the leftist bias of peo­ equally struck by the disproportionately large ple who enjoyed privileged upbringings. number oflibertarians and classical liberals whose My identification of this other factor leading to parents or grandparents are ofno more than mod­ leftist bias isn't novel, but it does help explain the est means. I conclude from my casual survey that, pattern of my casual observations better than any to the extent that capitalism is threatened in other hypothesis I can think of. It is this: Children America, its intellectual enemies come mainly from wealthy families take wealth for granted, from that group of people who Marx theorized whereas children ofworking and middle class back­ would be capitalism's most staunch supporters. As grounds do not. The longer wealth has been in the usual, Marx was wrong. D family, the greater the inclination to look upon wealth as something to be distributed rather than 1. Thomas Sowell, Marxism: Philosophy and Economics (New something that must be created and continually re­ York: William Morrow, 1985), p. 202. created by hard work, sacrifice, and risk-taking. 2. I emphasize that this student earned his position on the law review. Like many law schools, the University ofVirginia has a policy Children of the economically well-to-do assume ofsetting aside a half-dozen or so law-review positions each year for that wealth is more or less a fixed stock that always minority students. Minority students who don't earn a position on the law review through their grades orwriting skills get an additional has been and always will be around; the only ques­ opportunity to become a member of the law review by writing an tion is how it is to be shared. In contrast, people essay explaining why their minority status (as opposed to their aca­ demic achievements) qualifies them for law-review membership. who don't hail from affluent families generally The black student who spoke out against affirmative action quite understand-often - at only an emotional admirably refused even to participate in this minority set-aside pro­ gram. He became a member of the law review solely by virtue of his level-that high tax rates, burdensome govern­ academic abilities and hard work. 3. By silly products-liability laws I mean statutes and, more ment regulations, and silly products-liability laws often, judicial rulings that impose on manufacturers monetary block the path ofthose seeking to produce wealth.3 penalties for injuries to consumers that are caused by consumer negligence rather than by the negligence of manufacturers. A Wealth isn't thought of by these people as an telling example of such a silly law was presented in a segment on ever-present and indestructible fund that can be CBS's 60 Minutes several years ago. A farmer used a ladder to climb onto the roof of his bam during the winter months. The lad­ taken willy-nilly from its producers without caus­ der remained in place through the spring, at which time, while ing a diminution in its size. Therefore, people from being used by the farmer to climb onto his bam's roof, the ladder lost its footing. The ladder fell, causing injury to the farmer. The working and middle class families are much less ladder fell for good reason: when the farmer put it in place during likely than people from wealthy families to be sus­ the winter, he set it on a mound of frozen cow manure and the manure thawed during the spring. Naturally, the ladder's footing picious of those who achieve economic success in wasn't secure on a mound ofthawed cow manure. The farmer sued the marketplace. Children of the non-wealthy are the ladder manufacturer and won. The court's argument was that the ladder manufacturer was negligent in not warning the farmer of much more likely than are children of the wealthy such danger. See generally, Peter W. Huber, Liability: The Legal to realize that a person who gets rich in the mar- Revolution and Its Consequences (New York: Basic Books, 1988). 427

told they must choose a consultant without con­ sidering price. Spending for Eliminating price as a factor defies all logic. Surely, such a bizarre requirement demands an explanation. The only explanations offered, Spending's though, ranged from the stubbornly uninforma­ tive "we don't allow it" to the old standby of "this is the way we've always done it." Sake These "explanations" explain nothing. They merely illustrate the intransigence of a bloated government determined to spend more money. by John Semmens Ofcourse, the Federal bureaucracy does have the support of Congress with its own mandates for higher prices (like the Davis-Bacon Act, which ew of us are in a position to act as if price forbids contractors on Federal projects from com­ were no object. We weigh prices against val­ peting on labor costs) and unnecessary purchases Fues, so as to avoid wasting money. (like requiring the Navy to buy obsolete aircraft it It would seem that this would be a useful way to doesn't want). control public spending. Unfortunately, govern­ The Arizona bureaucrats resolved the issue of ment's own procurement policies often forbid the regional airport study by re-advertising the comparison shopping. project and selecting a bidder without regard to Consider the recent case of a Federally funded cost. The FAA's rules are followed by state study of the need for a new regional airport in bureaucrats because it is the only way to assure Arizona. This expensive study was delayed. The that Federal money will be spent in their state. delay wasn't due to doubts about the utility of the The questions of whether a study was needed or study, though doubts were certainly warranted. whether taxpayers got the best value for their Neither was the delay due to spending cutbacks money were left unanswered. aimed at trimming the Federal budget deficit. The only way to answer such questions is to The delay was caused by the fact that Arizona abolish the government program. Determining bureaucrats were attempting to factor in price as the need for a commercial airport is a question the one of the elements for deciding whom to hire to market is ideally suited to answer. If a study is undertake the study. needed, it would be worth it for a private business The effort to consider price was relatively to fund it. A private business would be likely to meager. In a list of factors to be evaluated, price carefully weigh prices versus values in determining was to have a total weight of 10 percent. Even the scope of the study and in selecting who to per­ this overstates the implied impact of price. Since form it. bids are typically ranked as a percentage of the Usually government pretends to be cost con­ low bid, even a price twice as high would still get scious. Elaborate bidding rituals are conducted half the allowable points. The norm is for all the to buttress this pretense. Occasionally, though, bids to fall within a few percentage points ofeach the pretense falters, as in the case of the FAA's other. "no price" bidding regulation. This provides a Nevertheless, the possibility that price might clearer view of the real objective: spending for account for as much as 2 to 3 percent of the the sake of spending. weight in selecting a consultant to do this study This clearer view should remind us that over­ was too much for the Federal Aviation Adminis­ extended government doesn't work very well. tration. The FAA's procurement rules forbid The sooner a majority of us realize this and stop bureaucrats from factoring in prices when select­ depending on government to do what it is unsuit­ ing a consultant. The Arizona bureaucrats were ed to do, the sooner we can replace its malfunc­ Mr. Semmens is an economist for the Laissez Faire Insti­ tioning parts with higher performing free market tute in Tempe, Arizona. alternatives. D 428

this now seems to be only an adjunct to the endless flow ofadmonition that pours forth from Washing­ The Big ton, every state capital, every county seat, and every city hall on a round-the-clock schedule. It is as though ourbureaucrats have run outoflaws and Nag have decided to enter the field of human behavior to fill their empty hours. This· is accompanied by the tacit message that they, government, know far by Donald G. Smith better than we, the people, how we should be con­ ducting our personal affairs. Government has consequently evolved into a nagging, scolding, ever-counseling superpresence, n January 4,1977, I smoked my last reminding us constantly to eat a good hot lunch cigarette. For anyone interested in fur­ and to come directly home from school. It might Other details, it happened in Burbank, Cal­ well be described as a nagocracy, a kind ofgovern­ ifornia, at precisely 11 A.M., and the cigarette was ment that sees itself as the kindly protector of a Lark. It was tough going for a day or two, but I potentially naughty children and spends the bulk soon broke free, and it's been a long time since I of its time seeing that we make it through the day have even wanted to smoke. safely. As always, it means well, but then what nag I thought of this recently when I was in a public doesn't? building and came across a big anti-smoking dis­ I thought a lot about this as I gazed upon the dis­ play that was a monument to the sloganeer's art. It gusting and overstated anti-smoking display in the was a pretentious, sermonizing, government­ public building. My first thought was that I had sponsored presentation that scolded smokers quit smoking on my own with the simple decision thoroughly and told them ofthe evil consequences that it was bad for me and that I should have the to be faced if they didn't mend their ways immedi­ fortitude to stop; which I did. Government badger­ ately. The effect it had on me was to make me want ing had nothing to do with it, and I don't know any­ to light up, not because I wanted to smoke but one who ever gave up smoking because a bureau­ merely to protest this government intrusion into crat said it wasn't a good thing to be doing. personal behavior. More important, though, was the thought that This sort of thing has been going on for many someone on the public payroll received money years, butit seems that recently the whole business to create this display, and others were paid to cart ofgovernment nagging has passed beyond the rea­ it into that building and set it up. To compound sonable limits of human tolerance. And it isn't all the sin, there are countless others being paid to tied up in smoking. We are told to eat more fiber, tell us to stay out ofthe sun and to rotate our tires see our dentists twice a year, hire the handicapped, regularly. exercise, buy bonds, vote, learn to swim, drive Is this really why we have government? I cannot safely, conserve water, and share the ride. believe that our political structure exists to tell us The advice given is sometimes good, sometimes how to conduct our daily affairs and to chide us questionable, and occasionally quite bad, but one into refraining from harmful behavioral patterns. wonders why it is offered at all on a governmental The smoking matter, in particular, has gotten quite level. It is a case of authorized and approved nag­ out ofhand. We just don't need government to tell ging, a big bureaucratic finger shaking in our col­ us not to smoke. As a nonsmoker, I find myself lective faces and telling us that if we don't eat our paradoxically more and more on the side of the vegetables we won't be getting any dessert. smokers when the issue arises because they aren't There was a time when government was clearly nearly as hard to take as the carping minions ofthe in the business of making and enforcing laws, but civil service society whose chief aim in life seems to be to nag the populace into conformity. This is Mr. Smith is a writer living in Santa Maria, California. He has been a frequent contributor to The Wall Street why, in a restaurant, I always ask for a table in the Journal. smoking section. I want them to see me there. D 429

Poland's Flawed ReformPlan by Paul A. Cleveland

oland's economy recently has undergone en product. This raises production costs, hindering some radical changes. Price restrictions the firm's ability to remain price competitive. P have been lifted, its borders have been The quality of the firm's product also suffers. opened to foreign goods, and interest rates and Not only is the employer unable to reward employ­ exchange rates have been allowed to fluctuate. ees on the basis of productivity, he is unable to These are encouraging moves toward a free mar­ reward those who are careful not to make mistakes ket system. in the production process. Therefore, where wages The results, however, have been mixed. Small are restricted, a firm won't be able to compete with businesses have opened in record numbers and firms whose wages aren't restricted. many shortages have been eliminated, but unem­ In places such as Poland, where wages are con­ ployment has risen and productivity has fallen. trolled while other prices are free to fluctuate and Why hasn't Poland's economy responded in a markets are relatively open, firms cannot produce more positive fashion? goods of sufficient quality at low enough prices to The problem is that wages remain regulated. compete with outside firms that don't have to Increased unemployment and lagging productivity abide by such artificial restrictions. Productivity are the natural result. falls and unemployment rises. In a market where product prices move freely There is an additional result from Poland's and businesses are free to compete for customers, peculiar mix of free market changes with contin­ it is important to produce a quality product while ued socialist policies: the tremendous growth of remaining price competitive. However, if the gov­ small retail businesses. I saw this firsthand when I ernment controls the wages a firm may pay, it visited Warsaw recently. becomes very difficult to do this. Since employers Within walking distance from my hotel, there no longer can compensate employees for exem­ were people on a major street selling all types of plary performance, workers lose the incentive to goods right out of the trunks of their cars. It was put forth maximum effort. Instead each employee amazing to see the wide variety of products. tends to discharge his duties at a minimal level of Across the street was a flea market made up of acceptable performance. small, wood-framed booths that housed other Controls on wage rates, therefore, mean that emerging retail establishments. It was obvious more labor hours will be needed to produce a giv­ that these vendors had made something of a Professor Cleveland teaches finance at Birmingham­ successful stride forward by procuring a fixed Southern College, Birmingham, Alabama. establishment for their operations. Beyond this 430 THE FREEMAN • NOVEMBER 1991

Old Town in Warsaw. Many shops have opened in the storefronts, and there are retailers sellingfrom carts and stands along the street. stage were the business enterprises that were This poses another problem for the Polish peo­ opening in many of the storefronts in the down­ ple. If business expansion is limited, the country's town area. The availability ofproduce that can be ability to compete in large-scale production with bought from these retailers is nothing short of other countries will be hampered. Poland won't be miraculous. able to gain from economies ofscale. This, in turn, However, the success of these enterprises is not will limit the increase in the standard ofliving that without peril. In particular, there is some question the Polish people can expect from the changes as to how much they will be able to grow. The rea­ they have made thus far. son is once again the wage-rate restrictions. If a Poland's future remains uncertain. Already retailer is to hire an employee, he must pay the reg­ there are special interest groups, such as the ulated wage. Therefore, it will be very difficult for nation's farmers, who want to close·the borders to these potential employers to expand their opera­ foreign products. This would begin to wipe out the tions. Will they hire more employees than they can gains that already have been made. personally supervise? The evidence is against it. Poland's reform plan is flawed. However, the An employer can't afford to hire a supervisor who flaw is not the result ofits new free market policies. must be paid a regulated wage. Therefore, firms Rather, the flaw is due to the residual socialist poli­ will grow only to a limited size. cies that remain in force. 0 431 Government Funding Brings Government Control by Gary McGath

ne way for a government to control peo­ inating certain kinds of information, or expressing ple is to threaten them with punishment certain points of view. Ifthe regulations had stated Ofor disobedience. Such 11 direct approach, that the clinics couldn't recommend even birth con­ though, often provokes strong opposition. A sec­ trol pills-or if they had specified that only clinics ond, subtler way is to tax them, then allow them to that made abortion referrals could receive funds­ have some money back only if they do as the gov­ the legal logic would have been the same. ernment wishes. The federal government's power Many of the critics have focused on the effect of to exercise the second kind of control grew alarm­ the decision on women seeking help from the clin­ ingly on May 23,1991. ics, particularly women who are too poor or isolat­ On that day, in the case of Rust v. Sullivan, the ed to seek alternatives. Certainly these women Supreme Court ruled that the government could have a vital interest in the case, and their options restrict not just what subsidized family planning are diminished by the Court's decision. But there clinics may do, but what they may say to their is no such thing as a right to be provided with in­ clients. According to the ruling, a regulation by formation, except by the agreement of the the Department of Health and Human Services provider. Rust v. Sullivan cuts into not the right to (HHS), which prohibits Federally funded clinics receive information, but the right to give it. from providing information about abortion ser­ The central issue of rights applies to the owners vices or recommending abortion, is valid under the of the clinics and the professionals who practice Constitution. there. In giving them money, may the government Many people on both sides saw this case as an properly restrict the information that they are "abortion issue." Opponents of abortion cheered; allowed to provide? The two focal points in the advocates of the right to choose protested against issue are funding and information; abortion is the restriction on abortion rights. In his dissenting involved only incidentally. opinion, Justice Blackmun wrote that HHS regu­ As in many issues of this type, the main debate lation "has both the purpose and the effect of contains a false alternative. Recipients of govern­ manipulating [a woman's] decision as to the con­ mental funding assume that they have an un­ tinuance of her pregnancy." conditional right to the money. Opponents of But in fact, the issue is not abortion but speech abortion regard tying strings to the money as a -specifically, speech by those who accept govern­ legitimate way to implement their policy. Both of ment subsidies. The Supreme Court's ruling upheld these views are seriously flawed. One seeks to the principle that when the government offers ignore, the other to exploit, the negative conse­ funds, it may include as a condition of funding that quences of tax subsidies. those who receive the money refrain from dissem- When the government funds an activity, it will exercise control over it. As the "Wizard of Id" com­ Mr. McGath is a software consultant in Penacook, New Hampshire. ic strip once put it: "Remember the golden rule. He 432 THE FREEMAN • NOVEMBER 1991 who has the gold makes the rules." The govern­ impact of the decision, and applaud it; but the ment must judge the qualifications ofapplicants on power that the Court has granted the federal gov­ the basis of what they do, and choose to fund some ernment can be used equally by the Left and the and not others. The "right" to funding depends on Right. The HHS restrictions, and the Court's how closely the applicant's activities coincide with approval of them, tremendously increase the gov­ the goals and criteria of the government agency ernment's power to control any kind of activity giving out the money. Value-neutral funding is that it funds. As Justice Blackmun noted in his dis­ impossible. The more the activity bears upon mat­ sent: "Until today the Court never had upheld ters of strong personal concern, the more obvious viewpoint-based suppression of speech simply the value preferences in the funding will be. because that suppression was a condition upon the We can see the same phenomenon in other acceptance of public funds. Whatever may be the areas of governmental funding. The National Government's power to condition the receipt ofits Endowment for the Arts provides money for largess upon the relinquishment of constitutional works that are deemed sufficiently "artistic," rights, it surely does not extend to a condition that according to the judgment of the officials in suppresses the recipient's cherished freedom of control of the money. The question of whether speech based solely upon the content or viewpoint Congress or NEA officials should control that of that speech." decision is merely a dispute between different Yet in this formulation, Blackmun acknowl­ branches of the government. edges that the government may call on recipients The more such precedents the government of subsidies to relinquish some of their constitu­ sets, the more it becomes protective of its power tional rights. (For example, recipients of govern­ to control the beneficiaries. In the majority opin­ ment money often are required to implement affir­ ion in Rust v. Sullivan, Chief Justice Rehnquist mative action programs, limiting their freedom to wrote: "To hold that the Government unconstitu­ choose their employees.) Rust v. Sullivan expands tionally discriminates on the basis of viewpoint this power disastrously; but the potential for the when it chooses to fund a program dedicated to disaster existed from the day that governmental advance certain permissible goals, because the subsidies of private activity were first devised. program in advancing those goals necessarily dis­ These subsidies, we must remember, come from courages alternate goals, would render numerous taxation. To get one's money back, one must meet government programs constitutionally suspect. the government's qualifications for a subsidy. When Congress established a National Endow­ Thus, those who choose non-subsidized activities ment for Democracy to encourage other coun­ are, in effect, punished for their choices by having tries to adopt democratic principles, it was not their money taken and not returned. Traditionally, constitutionally required to fund a program to the losers are people whose activities aren't encourage competing lines of political philoso­ deemed sufficiently important to the "public inter­ phy such as Communism and Fascism." est." After Rust v. Sullivan, though, the qualifica­ The implicit smear is ugly enough in itself, com­ tions for activity in the "public interest" can ing in an official statement by the Chief Justice. include not only what one does but what one says. When the government permits those whom it The government now can use the coercive power funds to express only the official point of view, it oftaxation not just to benefit certain activities, but excludes many philosophies that are not commu­ to promote certain ideas. nistic or fascistic by any stretch ofthe imagination. Butleaving this aside, his statement shows how the A New Threat logic of power feeds on itself. Rather than err on the side of endangering current programs that per­ What is most frightening is the possibility of mit the expression only of the official philosophy, expanding Federal control of expression and the Court endorsed a further expansion ofthe gov­ information to private educational institutions ernment's power to specify the content of the that receive government money-meaning virtu­ activities it subsidizes. ally all of them. Neither liberals nor conservatives The impact of this decision is potentially devas­ have a monopoly on the desire to exercise con­ tating. Foes of abortion see only the immediate trol. Whether we see attemptsto ban "racist" and GOVERNMENT FUNDING BRINGS GOVERNMENT CONTROL 433

"homophobic" courses and textbooks, or "blas­ pIe's money and expend it for its own purposes. phemous" and "obscene" ones, depends only on Any successful challenge to the expansion of whether the politically correct Left or the funda­ governmental power resulting from Rust v. Sulli­ mentalist Right acts first. van must challenge both the controls and the sub­ Neither side is likely to have much success in the sidies that make them possible. It must challenge immediate future. A major assault on our liberties the legitimacy oftaking money by force from some always happens in stages. The first step is the people to promote the ends of other people. The establishment of a principle, and its application to owners of subsidized family planning clinics want one area where there is widespread support for the freedom of choice, but they don't want to grant restriction. Next comes a period in which those freedom of choice to the people who are footing who established the principle assure us that the the bill-the taxpayers. They need to recognize disastrous consequences predicted by its critics that they can't have it both ways. When they lob­ won't happen. Only after people get used to the bied for government funding, theyinvited govern­ principle, and after the critics have grown less ment control. If they now want freedom, they vocal, does the government follow through in a should call for an end to Federal subsidies. major way. Itwas over 20 years after the establish­ The owners of the clinics probably would argue ment ofgovernmental funding for the arts that the that they would be even less free without govern­ first explicit regulations concerning content were mental money. They would have to call on private passed. And, ironically, the regulations requiring donations to provide low-cost services; and private "decency" in art were quite different from any that donors might call for similar restrictions, or even the liberal advocates of artistic subsidies would more stringent ones, before donating any money. have wanted. But private donors are making a choice con­ By the time the principle of Rust v. Sullivan cerning their own money, not someone else's. If a incubates and comes to maturity, there's no telling donor wants to give money only to organizations what political fads will have arisen, and what kind that meet his standards-however capricious they of lobbies will be in a position to impose speech­ may seem to another person-that is his right. In based restrictions on funding. the absence of governmental funding, the clinics The walls of academic freedom will take a long still would be able to ask for money from anyone time to knock down. However, other recipients of who wanted to give it, but they would not have the governmental subsidies may be more vulnerable. right to obtain money by compulsion. The precedent set by the Supreme Court applies To be free ofgovernmental control, one must be directly to the medical profession. It would be no independent of the government. Those who great leap for a government agency to issue a reg­ accept the idea that the government may take ulation that forbids doctors who receive Medicaid money from others to help them in promoting or Medicare payments from discussing the option their goals are, whether they realize it or not, to withhold life-support with patients suffering accepting the idea that the government can dictate from terminal diseases. A system of national their goals. Simply "reforming" the system by health insurance would, ofcourse, greatly increase attempting to guarantee the independence of the the scope of this danger. recipients of the money isn't a viable solution; the Control through funding bypasses all consti­ government will, in one way or another, control tutionallimitations. As Chief Justice Rehnquist what it subsidizes. argues, people still have a choice; they can de­ Senator Strom Thurmond pointed this out in cide not to accept governmental funding. The 1963, when he warned against governmental sub­ government doesn't impose penalties on them sidies to the arts: "The Supreme Court has stated for anything they might say; it merely takes their that the Federal Government has the power to money and gives it to people who accept restric­ control that which it subsidizes, and experience tions on what they may say. This moves the issue proves that when the Federal Government has the to the disparaged category of economic free­ power, that power is eventually exercised." dom. The principle of free speech is dangerous Government funding and government control of to challenge head-on; it's much safer to act on private activities go hand in hand. To keep private the principle that the government may take peo- activity free, its financing must be kept private. D 434

A REVIEWER'S NOTEBOOK

China Misperceived by John Chamberlain

teven W. Mosher begins his study of China Buckley should have been well aware ofNixon's Misperceived: American Illusions and Chi­ long-term goal ofseparating Red China from Red Snese Reality (New York: A New Republic Russia. But Nixon's effusiveness in greeting Mao Book, 260 pages, $19.95 cloth) by plunging us into and Zhou was gagging. And the deference paid by Nixon's dilemma of 1972. President Nixon, after Nixon to the "revolutionary opera ... the brain­ dispatching Henry Kissinger to mainland China to child of Mao's wife, Jiang Qing, who became Chi­ get the feel ofthings, faced up to a geopolitical fact na's de facto cultural czar during the Cultural Rev­ that if Moscow and Beijing were ever to make olution," was strange. Nixon had called the radical active common cause against the West, America leftist SDS, or Students for a Democratic Society, would have a two-front struggle on its hands. To "campus bums." But that was in America. Now, in avert this possibility almost any mendacity was jus­ his determination to ingratiate himself with Mao tified. But what Mosher calls the "cruelty and vio­ and Jiang Qing, he found himself "warbling" that lence of the Cultural Revolution" precluded easy the operatic play The Red Detachment ofWomen, acceptance by Americans that Chairman Mao and which had been staged for Nixon's benefit, was Premier Zhou Enlai were anything other than "great." "It was a powerful message and intended monsters. Nixon's problem was, first, to convince for that ... excellent theater and excellent dancing score~ of print and TV journalists that Mao and and music," Nixon told a reporter. And what was Zhou were not devils. He could then try to change the "message"? Only that poor peasant daughters the image ofmainland China in the average Amer­ should run off to join the Red Army. ican's eyes. Theodore White of Time and Bill Buckley This was no easy task, given the fact that some sat next to each other on the way over to China. 30 million people, Red Guards included, had died "As White's ideological opposite," says Mosher, in famines that might have been mitigated. Mao "... Buckley brought a different set of presuppo­ and Zhou were as culpable in trying to hide evi­ sitions to bear on the People's Republic of China. dence of famine as Stalin had been in the case of ... unlike White, he believed that Nixon's overture the Ukraine. to China was not only not in the best interests of It took two huge planes to carry White House the United States, it was positively immoral given and State Department personnel and 87 print and the enormity of the crimes of those with whom TV journalists to Beijing with Nixon in 1972. Nixon would be meeting." So who was "misper­ Included among the journalists were Bill Buckley ceiving" what? Ifyou believed in the fellow travel­ and Theodore White. Walter Cronkite, Dan er's picture of the world, you would be on White's Rather, and Barbara Walters were also aboard. It side. Butif Red China, despite Tiananmen Square, was Buckley who provided the inspiration for is destined to go capitalist with the rest of the Mosher to take a close look at "the deci~edly world, the big long-term "misperception" will be gentle treatment accorded Mao's China by Nixon's with the Deng Communists. press corps." Mosher goes back to beginnings. Throughout 435 the Middle Ages Marco Polo's tales ofthe "myste­ call for the U.S. to worry about a war on two fronts rious East" fascinated Europe. But it was not until as long as the Soviets are distracted by trouble in Jesuit missionaries went to China at the turn ofthe the Baltic states and in the Ukraine and Great 17th century that the West learned anything about Russia itself. George Bush is playing it cagey-he China. The Jesuits hoped to convert the Chinese does not make excuses for Deng and Tiananmen to Christianity. But the conversions seemed to Square. But he does not assume the right to con­ work in reverse. demn Deng as long as there is a chance for signifi­ The prestige of missionaries was revived after cant change in China under Deng's successor, who­ 1928, when Kuomintang leader Chiang Kai-shek ever he may be. married Wellesley graduate Soong Mei-ling and All things considered, Mosher has written a fas- announced his conversion to Methodism. With a cinating book. D Christian couple running China, Protestant mis­ sionaries seemed to have succeeded where the Jesuits had failed. Pearl Buck, the daughter of missionaries, did THE CAPITALIST SPIRIT: more than anyone else to provide a picture of Chi­ TOWARD A RELIGIOUS ETHIC OF na acceptable to Americans. Her best-selling WEALTH CREATION novel The Good Earth, and the movie that was edited by Peter L. Berger made of it, reached tens of millions. Buck, says ICS Press, 243 Kearny Street, San Francisco, CA 94108 Mosher, created "a new stereotype of rural Chi­ 1990 • 192 pages • $18.95 cloth nese as a strong and attractive people of the soil, kind and generous toward the young, respectful Reviewed by Raymond J. Keating toward the elderly, and dignified, even cheerful, in misfortune." heologians usually overlook the creation of This image of the Chinese was consonant with wealth when discussing the ethics of socio­ what became known as the Yenan picture. Mao T economic issues. They focus instead on had led his long march to Yenan in northern China, wealth distribution, or more accurately redistri­ a place that was duly mythologized as the capital bution. Since distribution, however, doesn't occur of an agrarian people who were about to rescue in a vacuum, the ethics of distribution have been China from Chiang, who had to flee the Maoists to deficient and largely distorted. After all, wealth Taiwan. Itwas in Yenan that the Communist Party distribution is meaningless without wealth cre­ of China perfected "the array of techniques to ation first taking place. handle short-term visitors-parachute journal­ This book takes some initial steps in redressing ists-which they later used to such effect during this neglect ofcreativity and production. Bringing Nixon's visit." together some prominent free market thinkers, Guenther Stein of the Christian Science Moni­ sociologist Peter Berger has created a volume tor described "the men and women pioneers of dedicated to forming a strong ethical case for cap­ Yenan" as "new humans...." They constituted "a italism. brand new well integrated society, that has never Berger sets the tone when he states in the intro­ been seen before anywhere." Harrison Forman of duction that "[e]xcept under the most primitive the New York Herald Tribune and London Times conditions (a subsistence economy in a tropical was so impressed by small-scale private enterprise paradise, for example), wealth is never given-it in Yenan that he said the Chinese Communists did must be created." Such a theme is in stark contrast not practice Communism at all. Theodore White to the anti-capitalist, pro-socialist, zero-sum spoke of "agrarian liberals" in his dispatches, only thinking prevailing among many theologians, for to have the malapropism edited out by the percep­ example, the National Council of Churches, the tive Whittaker Chambers, then the foreign editor American Catholic bishops, and various liberation of Time. theologians. Set against the dismal, statist philoso­ The Nixon trip, even with all its nonsense, was phies of such groups, The Capitalist Spirit is a col­ justified, butthings have changed with the collapse lection of insightful and sometimes even inspiring of Communism in most of the world. There is no essays. 436 THE FREEMAN • NOVEMBER 1991

Professor David Novak, in his essay "Economics • "Fifth, a commercial society would mix and Justice: A Jewish Example," sagaciously together the ancient social classes." expounds upon the distribution/production rela­ • "Sixth, as market activities grow, so also do tionship: "Those who produce more of what is popular knowledge, skills, and specializations." needed by the society are given more than those who produce less. These rewards, even more than • "Seventh, markets require forms of civilized being recompense for past productivity, are incen­ behavior: patient explanation, civil manners, a tives for future productivity. It would seem that willingness to be of service, and a willingness to anyone who does not at least partially correlate the reach satisfactory mutual consent." economics of distribution and the economics of • "Eighth, the replacement of agrarian ways production is operating under an illusion ofinfinite (with their relative isolation and taciturnity) by supply and immediate availability." commercial ways (with their city bustle and rapid David Novak also illustrates a very delicate and talk) tends to awaken one of the most precious, significant balance struck by the Jewish tradition. high, and rare forms of moral development: the He summarizes: "By emphasizing the covenantal civic need for the virtue of sympathy." necessity of human mutuality before God, Jewish • "Ninth, pursuing this ideal [i.e., sympathy] t(adition affirmed the value ofindividual incentive helps the person of commerce to be a little more without the glorification of individual human self­ objective than others, to see a little farther, and to ishness, and it affirmed the value of communal discern needs and possibilities that have not yet restraints without the glorification of collective been served." human power." Indeed, this has been an important legacy in the West. Novak recognizes a need for some "practical Perhaps the most complete exposition of a cap­ moral guidance" in the realm of commerce, and italist ethic in this text, however, is given to us by declares that the "best moral instruction ... begins author Michael Novak in his "Wealth and Virtue: by raising aloft the ideal to be pursued: the The Development of Christian Economic Teach­ exercise of God-given talents to imagine, invent, ing." He notes a too-often disregarded, yet critical discover, and bring into widespread use the aspect of the ethical nature of capitalism: "Many resources that God has hidden in the natural intellectuals ignore the evidence of. the immense world." benefits, in the form of prosperity, liberty, and sig­ In "Private Property, Ethics, and Wealth Cre­ nificant moral progress, that the capitalist ation," economist Walter Block also declares that economies ushered into history." the capitalist system no longer can continue to In particular, Michael Novak turns to the great concede "the moral high ground to its detractors." Scottish Enlightenment thinkers for a moral basis He asserts that the answer lies with the libertarian of the free enterprise system. He cites the argu­ philosophy. The libertarian emphasis on self­ ments of David Hume and Adam Smith "in favor ownership, private property, voluntarism over of the turn toward a capitalist economy": coercivism, entrepreneurial capitalism over state capitalism, and negative rights, is intrinsic in estab­ • "First, life in premodern rural society was cir­ lishing an ethic of wealth creation. Block also lays cumscribed not only by poverty but also by the to rest the destructive belief held by some libertar­ absence of possibilities for self-improvement and ians that religious belief and libertarianism are action. The Scottish intellectuals saw such possibil­ incompatible. ities in commerce." Due to space considerations, I merely will men­ • "Second, by ending dependency, the rise of tion that "Early Christianity and the Creation of commerce and industry would awaken the rural Capital" by Robert M. Grant and "Camels and poor out of the slumbers of idleness." Needles, Talents and Treasure: American Catholi­ cism and the Capitalist Ethic" by George Weigel • "Third, a commercial society is less warlike." are well worth reading also. • "Fourth, the practices of commerce bring Finally, in "Wealth and Whimsy: Being Rich, people together in more frequent and more com­ Producing Riches," Richard John Neuhaus, editor­ plex interactions." in-chief of First Things, seeks to put this entire OTHER BOOKS 437

debate over a religious ethic ofwealth creation into ECONOMIC POLICY AND THE MARKET proper perspective. He warns that those who take PROCESS: AUSTRIAN ECONOMICS AND wealth too seriously-both those "captive to their MAINSTREAM ECONOMICS possessions" as well as "religiously driven ideo­ edited by K. Groenveld, J. A. H. Maks, and logues [who promote] designs for a just economic J.Muysken order"-"are in danger of attributing an ultimacy North-Holland, P.O. Box 882, Madison Square Station, to something that is, at most, prepenultimate." New York, NY 10159 • 1990 • 304 pages. $69.50 cloth Neuhaus holds to an intriguing interpretation of the Reformation as it relates to this ethical conun­ drum: "[I]t may be suggested that the reformers' Reviewed by Jeffrey Tucker articulation ofthe Pauline doctrine ofgrace assist­ ustrian economics, with a tradition dat­ ed economic enterprise chiefly by underscoring ing back over 100 years, distinguishes the truth that worldly success does not matter that A itself by its insistence on using strict rules much, it does not matter ultimately. In the Calvin­ of logic to deduce economic laws that govern ist tradition, economic achievement may have human action. But that isn't the source of the been motored less by its being viewed as a token worldwide attention the Austrian school is now of election than by the fact that a grace-based receiving. Instead, it is its association with Pauline lightheartedness about worldly achieve­ economists who steadfastly declare that the free ments created free space within which a variety of market is the most stable and rational means for callings could be exercised in good conscience." ordering economic society. This book is a new col­ Neuhaus also comments on creativity, growth, lection of articles by leading free-market Austri­ and the discovery of possibilities, and how these ans debating conventional interventionists. relate to free persons and their participation in For most of this century, Austrians have argued "God's continuing education." In this vein, he cites that socialism, and the endless variants of the Dietrich Bonhoeffer, the Lutheran theologian mixed economy (democratic socialism, social who was put to death by the Nazis in 1945. For democracy, planned markets), prove deficient in Christians, however, I believe that Neuhaus would providing a coherent mechanism for ensuring that have sealed his case by referring to an additional economic resources are used by society in the most quote from Bonhoeffer's Ethics: "There are ... optimal way. What's more, the Austrian case for certain economic orsocial attitudes and conditions the free market has an intellectual power that is which are a hindrance to faith in Christ and which unavoidably attractive, since it insists that eco­ consequently destroy the true character of man in nomic laws apply to all societies at every stage of the world. It must be asked, for example, whether economic development. capitalism orsocialism orcollectivism are econom­ The editors of this volume are all professors of ic forms which impede faith in this way." economics at universities in the Netherlands and The editor and contributors of The Capitalist. are highly sympathetic with policy positions of the Spirit have answered this question. Entrepreneuri­ Austrian school. And they enlist some well-known al capitalism, with its emphasis on freedom, cre­ Austrians to help make their case. ativity, and industry, is indeed no impediment to Most of their Dutch colleagues who also con­ faith. D tribute essays are not sympathetic-they are dif­ ferent breeds of social democrats. Whether they Mr. Keating is New York Director ofCitizens for a Sound Economy. regard themselves as post-Keynesian, neoclassical, -:"~~??;';c~~';-,_ orinstitutionalist, they see a need for a market, but a limited one, heavily regulated, taxed, and restricted. They favor a wide variety ofsocial wel­ fare programs to promote "equality" and "social justice," antitrust laws, labor market restrictions, and so forth. When these two world views clash-the free market versus social democracy-sparks some- 438 THE FREEMAN • NOVEMBER 1991 times fly. Other times, the contributors just talk Bellante's respondent, E Keizer, pleads for cost­ past each other. Although this book neither benefit appraisals of labor market intervention, initiates nor closes the debate, the exchange here­ although he fails to provide persuasive evidence in, enlisting 20 economists in all, is a fruitful one. on the benefit side of the calculus. His main argu­ Israel Kirzner launches the debate with a mas­ ment favors a kind ofdemocratic collectivism: The terful presentation ofthe case for viewing the mar­ voters tolerate labor interventionism, so what's the ket as a process of learning, depending on a free problem? The problem is that voters are prone to price system, and driven by entrepreneurial dis­ vote their parochial interests at the expense of the covery. Interventions in this market may generate common good, and economists are supposed to "unanticipated side-effects," substitute "the pref­ rise above that. erences of legislators or officials in place of the Moving to issues of macro-economic stability, wishes of the consuming public," and limit "the Austrian economist Pascal Salin presents an out­ exploitation of opportunities for pure entrepre­ standing case for dropping the entire interven­ neurial profits." tionist apparatus of fiscal and monetary manipu­ Angus Maddison responds with bewilderment: lation, on grounds that it is de-stabilizing. "Kirzner's description of the market process is Especially impressive is his argument for the somewhat extreme or even mystical." He dismiss­ Austrian theory of the origins of business cycles. es much ofKirzner's history of the 1930s economic It points to central bank credit expansion as the calculation debate between Ludwig von Mises and source of interest rate manipulation that distorts Oskar Lange as "not very relevant." It's unfortu­ investment decisions. His respondent, J. C. nate that Kirzner has no opportunity to rejoin the Siebrand, is aghast at Salin's policy proposals and debate. tosses out a series of one-liners against the mar­ Although not an Austrian, Yale Brozen pre­ ket that have the ring ofcliches rather than scien­ sents one of the best empirical cases against gov­ tific analysis. ernment intervention seen in years. He covers Another exchange occurs between free­ monopoly policy, wealth redistribution, taxes, the banking advocate Roland Vaubel and central negative consequences of an inflationary mone­ banker G. A. Kessler. And again the substantive tary policy on saving and investment, and more. arguments are on Vaubel's side, and his opponent It was a strategic decision to include this essay, doesn't seem up to the task of refuting his case given both Austrian tendency to rely on high the­ against central banking. ory and mainstream economists' skepticism The volume also contains an interesting discus­ about abstraction. sion ofthe merits and flaws ofEuropean economic Yet Brozen's respondent, Arnold Heertje, is not integration. impressed: "We must go back to economic theory Part of the difficulty in such debates is that the ...itwould not be too difficult to produce evidence two sides use different vocabularies. For example, which just 'proves' the opposite of what Brozen when Austrians speak of competition, they mean likes to indicate." This kind of methodological cir­ an open-ended and unrestricted process ofdiscov­ cularity can be frustrating, for it raises the ques­ ery. The social democrats see competition as an tion: Exactly what kind of argument for free mar­ end-state to which the market must be made to kets, if any, will a social democrat accept? conform. One wishes that the editors had taken Austrian economist Don Bellante weighs in notice ofsuch difficulties and insisted on more dis­ with an outstanding case for free labor markets, cussion of this issue. These problems are com­ pointing out the bad effects labor unions and wage pounded by the ideological rigidity of the main­ controls have on labor market coordination. In the stream economists presented here. But this process he points. to the embarrassing reality (for doesn't detract from the merits ofthe debate. Let's market opponents anyway) that unions cartelize hope the future presents opportunities for many the labor market at the expense of nonunion more such exchanges, and that the Austrian school employees. Legislation enacted on behalf of a economists continue to win. D union has negative consequences for the entire economy. Mr. Tucker is afellow ofthe Ludwig von Mises Institute. OTHER BOOKS 439

ernment omnipotence. Nonetheless, the Ameri­ THE CULTURE OF SPENDING: WHY can clergy, apart from the American people, is CONGRESS LIVES BEYOND OUR MEANS hardly noted for its libertarianism. In any event, by James L. Payne what the people and Congress ought to hear again ICS Press, 243 Kearny Street, San Francisco, CA 94108 1991 • 221 pages • $24.95 cloth and again is Payne's refreshing opposite con­ tention to notions of government efficacy: "Gov­ ernment makes problems worse." Reviewed by William H. Peterson Similarly refreshing is Payne's play on opportu­ arry L. Hopkins, adviser to F.D.R., nity costs as a means of getting at the deep-seated reportedly said in 1938, "We will spend idea that government money is somehow "free," H and spend, and tax and tax, and elect and almost manna from heaven. This free-lunch dream elect." helps explain the proliferation of Washington Hopkins' thought is masterfully mirrored in this offices and high-priced lobbyists maintained by work by political analyst James L. Payne. Payne, many states and cities. Governors and mayors who has taught political science at Wesleyan, Yale, want to be sure that they get their cut of the swag, Johns Hopkins, and Texas A&M, is a research fel­ from new post office buildings to "free" harbor­ low at the Independent Institute in Oakland, Cal­ dredgings-not counting grants-in-aid to states ifornia, and head of his own Sandpoint, Idaho, and localities already running in excess of $100 bil­ research firm, Lytton Research and Analysis. lion year after year. Payne sees Congress as sinking in a whirlpool of What to do? "spend and spend" with the taxpayer drowning Be wary of legalisms, says the author, noting along with the Congressmen, with the nation and how a Colombian constitutional provision for the media pretty much in the dark as to whys and a balanced budget has long been blithely ignored wherefores, and with the aftermath of a long­ by the politicians in Bogota. Similarly, he calls ongoing spending orgy reflected in nine post­ attention to our own Congressional Budget and World War II recessions and a 90 percent drop in Impoundment Control Act of 1974 with its cre­ the value of the dollar in the last half-century. ation of a watchdog Congressional Budget Office, One thing wrong, says the author, is the all ofwhich has come to naught in terms of arrest­ widespread belief in government efficacy. Most ing our ingrained culture of spending. people and Congressmen believe that government By the same token, Dr. Payne recalls George can solve any social or economic problem that Bush's 1988 campaign pledge of "no new taxes." comes along. Call it faith in government omnipo­ He also recollects the Gramm-Rudman-Hollings tence. For however misplaced that faith, Payne's Act of1985 that bravely promised a balanced bud­ examples of government inefficacy, including the get by 1991. Alas, 1991 is here with more than $600 boomerang effects of farm subsidies and the War billion piled onto the national debt in fiscal 1991 on Poverty, add up to proof positive of the bed­ and 1992, with that debt officially projected to rock incompetence and tragic human waste ofthe exceed $4 trillion by December 1992. Our red ink Welfare State. runneth over. Still, perhaps Payne's most surprising argument Well, if legalisms aren't the answer to undoing is his observation that blind faith in government the spending culture, what is? James Payne's main has deep historical roots. Payne recalls what hap­ response is term limitations in Congress. He thinks pened after 313 A.D. when Constantine made senior Congressmen by fastening themselves into Christianity a lawful religion. Church leaders key committee chairmanships wield too much preached that rulers were always right and should power. He cites 25-termer Jamie Whitten, chair­ be obeyed. As a reward, the government subsi­ man of the House Appropriations Committee, as dized church leaders and carried out persecutions a case in point. of dissenters on their behalf. The pattern repeated The Payne response is welcome butit still leaves itself in the 16th century in the Geneva theocracy unanswered the power of legions of Washington under John Calvin. lobbyists, armed with oodles of PAC (political To be sure, modern separation of church and action committee) money. Too, there's the power state has somewhat ameliorated the creed of gov- ofthat unelected fourth branch ofgovernment, the 440 THE FREEMAN • NOVEMBER 1991 bureaucracy, two-million strong, with highly influ­ nized lawyer to organized Hispanic to organized ential tenured agency officials who survive one senior citizen to organized ... what-have-you. Administration after another. Our Welfare-State tango glides along to the I recommend this Payne book for its probing beat of spend-and-spend, which means get-and­ lookinside darkfiscal closets atop Capitol Hill. Yet get, with the tax-and-t3;x partwoefully forgotten or I wish he had expanded on his call for a "Second misunderstood under the seductive music of tax­ Madisonian Revolution." For it takes two to tan­ the-rich. go: The problem is not just the free-spending, dev­ The need, in sum, is education, essentially eco­ il-may-care Congressman but, as the late Lem nomic education on the iron law of no free lunch. Boulware drummed into me, his freely receiving, Educational mission impossible? Let's begin. vote-giving constituent or, by the same token, that There's too much at stake. D constituent's interest group, from the organized Dr. Peterson, adjunct scholar at the Heritage Foundation, is worker to organized farmer to organized teacher the Lundy Professor ofBusiness Philosophy at Campbell to organized veteran to organized doctor to orga- University, Buies Creek, North Carolina. The Freedom Philosophy

The 14 essays in this anthology exam­ ine, in turn, the economic, moral, and polit­ ical aspects of freedom-and point the way to an enriched life through the personal practice of freedom. A number of all-time "FEE favorites" appear in this collection-including "I, Pen­ cil," "Not Yours to Give," and "Isaiah's Job." The Freedom Philosophy is ideal for use in study groups or to introduce friends to FEE's work. It's also a perfect refresher course in basic principles-a great antidote for feelings of hopelessness that may beset any freedom devotee from time to time. Quality paperback, sturdily bound. 152 pages single copy $5.95 FEE pays all postage on prepaid orders.

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