THEFREEMAN IDEAS ON LIBERTY

IDEAS AND INFLUENCE 251 Perspective-An Affirming Flame 253 The World in the Grip ofan Idea Revisited by Clarence B. Carson 260 The Welfare State: Promising Protection in an Age ofAnxiety by Robert Higgs 267 Losing Freedom Costs a Lot by John Semmens 274 "I, Pencil" by Leonard E. Read 279 Education and the Free Society by George Roche 283 Fifty Years of FEE-FiftyYears of Progress in Austrian Economics by Israel M Kirzner 290 Civil Rights Socialism by Llewellyn H Rockwell, Jr. 295 Environmental Protection: The New Socialism? by Jane S. Shaw 299 Freedom and American Labor Relations Law: 1946-1996 by Charles W Baird 310 Banking and Freedom in the Fifty Years of FEE by Steven Horwitz 315 The Economic Foundations of Freedom by Ludwig von Mises 322 Rose Wilder Lane, Isabel Paterson, and Ayn Rand: Three Women Who Inspired the Modern Libertarian Movement by Jim Powell

THE PAST AS PROLOGUE

332 Onward Still by Hans F Sennholz 337 FEE and the Climate of Opinion by Bettina Bien Greaves 348 Leonard Read, the Founder and Builder by Mary Sennholz 355 From Leonard Read: A Legacy of Principles by Melvin D. Barger 362 The Moral Dimension of FEE by Gary North 371 The Freeman: Ideas on Liberty by Paul L. Poirot 375 The Function of The Freeman by Henry Hazlitt 380 The Foundation for Economic Education: Success or Failure? by Benjamin A. Rogge

COLUMNS

271 POTOMAC PRINCIPLES-FiftyYears of Statism by Doug Bandow 320 ECONOMICS on TRIAL-One Graph Says It All by Mark Skousen 346 IDEAS and CONSEQUENCES-FEE: A Lighthouse for Freedom by Lawrence W Reed

BOOKS 393 The Literature of Liberty by EdmundA. Opitz and Robert Batemarco 401 The Case for the Free Market by John Chamberlain 403 Bastiat, Liberty, and The Law by Sheldon Richman 407 Classics Reconsidered eJohn Attarian: Democracy and Leadership by Irving Babbitt; Leonard P Liggio: The Servile State by Hilaire Belloc; Raymond J. Keating: Wealth and Poverty by George Gilder; Murray Weidenbaum: The Constitution of Liberty by Friedrich A. Hayek; Dwight R. Lee: "The Use of Knowledge in Society" by Friedrich A. Hayek; William H Peterson: The Failure of the "New Economics" by Henry Hazlitt; James L. Payne: The Right and Wrong of Compulsion by the State and Other Essays by Auberon Herbert; Matthew Carolan: Modern Times by Paul Johnson; William C. Dennis: In Defense of Freedom and Related Essays by Frank S. Meyer; Jane S. Shaw: Knowledge and Decisions by Thomas Sowell; Peter J. Boettke: Human Action: A Treatise on Economics by Ludwig von Mises.

IN APPRECIATION . .. 388 FEE Trustees and Staff, 1946-1996 412 The Freeman, Honor Roll ofAuthors, 1956-1996 THEFREEMAN IDEAS ON LIBERTY PERSPECTIVE Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Phone (914) 591-7230 FAX (914) 591-8910 An Affirming Flame E-mail: [email protected] President: Hans F. Sennholz For half a century, the Foundation for Managing Editor: Beth A. Hoffman Economic Education has devoted itselfto study­ Guest Editor: Mark Spangler ing and explaining the principles that underlie a Editor Emeritus Paul L. Poirot free society, striving to make its message acces­ Lewisburg, Pennsylvania sible to people from all walks oflife. Book Review Editor Robert Batemarco Those who assume (often automatically) that Marymount College, Tarrytown, New York Associate Editor America is still the model ofa free society, might Gregory P. Pavlik view fifty years offreedom talk as pointless pon­ Assistant Editor William J. Watkins, Jr. dering. But others, who comprehendjust how far Editorial Assistant Mary Ann Murphy down the socialist path Americans have walked, Columnists admire FEE as a champion in the intellectual Doug Bandow Cato Institute, Washington, D.C. fight to renew liberty. The seven trustees who Lawrence W. Reed Mackinac Center for Public Policy founded FEE in 1946 correctly anticipated in Midland, Michigan Mark Skousen their original prospectus that those most interest­ Rollins College, Winter Park, Florida ed in FEE's activities would "have no doubts Contributing Editors Charles W. Baird about the decline of economic liberty in California State University, Hayward Doug Bandow America. Coercion is being rapidly substituted Cato Institute, Washington, D.C. Peter J. Boettke for voluntary enterprise. Collectivism is displac­ New York University ing individualism." Clarence B. Carson American Textbook Committee By the 1940s, this shift in ideas had marked a Wadley, Alabama Thomas J. DiLorenzo critical point in world history. In the United Loyola College, Baltimore, Maryland Joseph S. Fulda States, the last bulwark of freedom, an under­ New York, New York Bettina Bien Greaves standing of the ideological heritage that yielded Resident Scholar, FEE the most prosperous country ever was quickly Robert Higgs The Independent Institute, Oakland, California fading as people sanctioned government solu­ John Hospers University ofSouthern California tions and political programs to guarantee the Tibor R. Machan Auburn University good life. In bold contrast, a solitary FEE Ronald Nash Reformed Theological Seminary embarked upon its mission, and emerged as Edmund A. Opitz more than an educational organization. Chatham,Massachusetts James L. Payne FEE and its founder, Leonard E. Read, would Sandpoint, Idaho William H. Peterson come to occupy a special place in the hearts of AdjunctScholar, Heritage Foundation, Washington, D.C. Jane S. Shaw many "students ofliberty" who, before discover­ PERC, Bozeman, Montana Richard H. Timberlake ing this wellspring of inspiration and comfort, University ofGeorgia felt isolated in their thinking. The late Benjamin Lawrence H. White University ofGeorgia Rogge referred to Read's FEE as "an island of The Freeman is the monthly publication of The Foundation for sanity in an increasingly insane world" and an Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is a non-political, educa­ institution that merited total appreciation for tional champion of private property, the free market, and limited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt burning "abrilliant and never-failing and affirm­ organization. ing flame." In rallying freedom's thought leaders Copyright © 1996 by The Foundation for Economic Education. Permission is granted to reprint any article in this issue, except "Three and emulators, FEE fashioned the basic fabric of Women Who Inspired the Libertarian Movement," provided credit is given and two copies of the reprinted material are sent to FEE. the modern libertarian movement. The costs of Foundation projects and services are met through donations, which are invited in any amount. Donors of$30.00 or more To say that FEE is the "granddaddy" of pro­ receive a subscription to The Freeman. Student subscriptions are $10.00 for the nine-month academic year; $5.00 per semester. Additional freedom think-tanks has practically become a copies of this issue of The Freeman are $7.00. For foreign delivery, a cliche-but true nevertheless. Leonard Read was donation of$45.00 a year is suggested to cover mailing costs. Bound volumes of The Freeman are available from The Foundation the first to react in an effective, organized way to for calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd., Ann Arbor, MI48106. the rise ofcollectivism and statism in twentieth-

251 PERSPECTIVE

FEE's Irvington-on-Hudson home-an 1889 Hudson River mansion purchased and converted into offices in 1946.

centuryAmerica. He imbued his institution with rights legislation, environmental regulation, a style that was to become a trademark-focus­ compulsory unionism, and central banking. ing on ideas rather than personalities, searching Classic reprints by Leonard Read and for truth rather than compromise, and educating Ludwig von Mises illustrate the importance of self rather than reforming others. FEE's exam­ free markets. We also hear about the resurgence ple encouraged the establishment of similar in Austrian Economics, and three authors organizations not only in this country but the whose impact on libertarianism was made world over. FEE continues to serve a vital role through the popular press. in the revival of classical liberalism. In a special series ofarticles FEE staffmem­ Attempting to distill the essence of such an bers and associates reflect on the Foundation's organization's half-century of activities into a past and future, its founder, and the develop­ single publication would be challenging (if not ment of a literature of freedom-abundant foolhardy). Nonetheless, this issue of The today but scarce at FEE's founding. Current Freeman, the banner publication for the last president Hans F. Sennholz advises that FEE's forty of FEE's fifty years, commemorates the mission is more urgent than ever. Despite the golden anniversary of the Foundation for collapse of socialist economies, the United Economic Education. It is dedicated to Leonard States may be weaker today in the spiritual and Read and the writers, speakers, editors, staff, moral antecedents of a free society as socialist trustees, and students who have devoted them­ values live on in the minds of many Americans selves to FEE's operations or graced the pages under various labels. of its publications. Finally, the spirit of FEE's golden jubilee Our special issue opens by revisiting the idea could not have been captured without hearing that has captured the fancy ofworld populations directly from people who have been inspired by and prompted the forming ofFEE-socialism in FEE. They speak for themselves as their stories all its versions. Subsequent articles survey trends and expressions of gratitude are quoted in collectivist variants found in the United throughout this issue. States-welfarism (and its massive costs), -Mark Spangler, Guest Editor democratic statism, government schooling, civil Beth A. Hoffman, Managing Editor

252 THEFREEMAN IDEAS ON UBERTY

The World in the Grip ofan Idea Revisited by Clarence B. Carson

he notion of a work under the title The 3. Government is the instrument to be T World in the Grip ofan Idea began to used to concert all efforts behind the take shape in my mind in 1976, and I began realization of human felicity and the the writing ofit in the fall ofthat year (which necessary alteration of culture. was also the thirtieth anniversary of FEE). This idea, when shaped as a political A somewhat amended and expanded ver­ program, is called by a variety of names, sion was published as a book under that among which are: socialism, collectivism, title by Arlington House in 1980. Many social democracy, democratic socialism, intellectual and spiritual changes have oc­ Fabianism, national socialism, and Commu­ curred in the past twenty years, some of nism. Or, it may not be given a generic name them in directions sought by the Foundation at all, but advanced orconcealed under such for Economic Education. I hope to highlight vague terms as democracy or liberalism. some of these changes and their relation Regardless of specific variations, there are to the work of FEE by revisiting the theme essentially two roads to socialism, which is ofthis book and placing them in the context the generic name most commonly applied of developments in the last several years. to the idea that has the world in its grip. The theme ofthe book was that the whole Revolutionary and evolutionary socialism world, to varying extents among countries, are the two approaches, and they form much had come under the sway of an idea, the of the organizational framework of The essence of which was expressed in the World in the Grip ofan Idea. convergence of three ideals. Revolutionary Socialism 1. To achieve human felicity on this earth by concerting all efforts to achieve Revolutionary socialism had its founda­ common ends. tions in the teachings of Karl Marx and Frederick Engels in the nineteenth century. 2. To root out, discredit, and discard all It came to power in Russia following the aspects ofculture which cannot other­ Bolshevik Revolution of 1917, led by V. I. wise be altered to divest them of any Lenin and his cohorts and followers. The role in inducing or supporting the in­ touchstone ofrevolutionary socialism is the dividual's pursuit of self-interest. violent overthrow of the existing govern­ ment and system. Marx and Engels put it Dr. Carson has written and taught extensively, this way: "The immediate aim of the Com­ specializing in American intellectual history. munists is that of all the other proletarian 253 254 THE FREEMAN • MAY 1996 parties: formation of the proletariat into a The Evolutionary class, overthrow of the bourgeois suprem­ acy, conquest of the political power by the Road to Socialism proletariat.,,1 Beyond this political revolu­ Socialists of the earlier nineteenth cen­ tion, Marx declared the purpose to be "the tury either sought to build self-contained forceful overthrow of all existing social socialist communities or were revolution­ conditions.,,2 The ultimate aim was the aries. It was this latter that attracted Karl transformation ofman in a classless society, Marx and that eventuated in Soviet Com­ but "revolution" was a key idea in his munism, and its imitators. By the late nine­ ideology, and it distinguishes revolutionary teenth century, some socialists began to socialism from evolutionary socialism. become enamored ofthe idea that socialism The World in the Grip of an Idea gives could be attained gradually by gaining influ­ in-depth treatment to revolutionary social­ ence and control over established govern­ ism in two countries: the Soviet Union ments. Theirs would be an evolutionary and Germany. The Soviet Union was an road to socialism that would not entail obvious choice for at least two reasons. revolution, the violent seizure of power, or One, it was the first country to establish a swift radical changes. It was more than a totalitarian revolutionary socialist govern­ little influenced by biological evolutionary ment. Communism came to power there theories. Peaceful change could be wrought first. Two, it became the center for the by democracy and labor unions, among spread ofCommunism internationally. Ger­ other forces, many came to believe. many was a less obvious choice but was One ofthe early proponents ofevolution­ chosen because Nazism was a different ary socialism was Eduard Bernstein, a variety of revolutionary socialism, though Marxist who saw a different road. He it is not always discussed under that cate­ thought he saw signs of the peaceful move­ gory. Nazism was shortlived, holding power ment toward socialism in developments in for only 12 years, and its particular ideolog­ the latter part ofthe nineteenth century. He ical mix of racism, nationalism, and social­ described them this way: ism never spread elsewhere. But it was a In all advanced countries we see the privi­ dramatic case of revolutionary socialism leges of the capitalist bourgeoisie yielding whose totalitarian mode has stuck in the step by step to democratic organizations.... public mind. Factory legislation, the democratising oflocal Moreover, German Nazism made a major government. .., the freeing of trade unions impact on the political power configura­ ... from legal restrictions, the consideration tion in the world during and after World of standard conditions of labour in the work War II. The role ofNazism in World War II undertaken by public authorities. .. are signs 3 is highlighted in my book in a chapter of the evolution. . entitled "A Socialist Conflagration." The Evolutionary socialism-whether it is theme of the chapter is that World War II called democratic socialism, social democ­ was at its heart a contest between two racy, gradualism, Fabianism, or whatever­ revolutionary socialist powers-the Soviet is gradualist, statist, interventionist, and Union and Germany. It was a contest for collectivist. Its advocates and followers be­ dominance over the great Eurasian land lieve that man and society can be improved mass at its center. The United States and and transformed by the astute application Britain threw their weight on the side ofthe of government power. The usual result of Soviet Union. The defeat of Nazi Germany taking this route to socialism has been the wiped out what remained of the balance welfare state, but that was more conse­ of power on the European continent. This quence than original intent. set the stage for the Cold War, a long-term My book deals with evolutionary social­ underlying struggle between revolutionary ism in depth in three countries: England, and evolutionary socialism. Sweden, and the United States. The English THE WORLD IN THE GRIP OF AN IDEA REVISITED 255 experience best shows what happened to tier. The programs were at first called pro­ the original intent. The English socialists gressive and then liberal and were usually were bent on nationalizing all major in­ advanced as alleged solutions for various dustries, that is, taking them from their pressing problems. The mode of this grad­ owners and bringing them under govern­ ualist road to socialism in the United States ment control. The Fabian Society was the was to centralize and concentrate power in spearhead of socialism in England. It con­ the general government and to make all sisted initially of intellectuals, who issued organizations and people within the country tracts, penetrated existing organizations, dependent upon government. and attempted to permeate them with so­ cialist ideas. The instrument they finally The Destructive used to achieve power was the Labour Impact of Socialism Party. This party finally came into power with an effective majority in the elections The World in the Grip ofan Idea makes in 1945. They moved with haste to nation­ clear with much history and numerous ex­ alize banking, power and light, transport, amples the destructive impact of socialism and iron and steel, and to assert a govern­ on institutions, societies, and the lives of ment role in all areas of the economy. people. Soviet Communism was oppressive Nationalization, which had never been tried and tyrannical from the outset and became on a large scale in an advanced industrial much more so under Joseph Stalin in the country before, was given a major trial in 1930s, 1940s, and into the 1950s, and im­ England. proved only marginally for the next three The measures were such an abject failure decades. Evolutionary socialism did not and wrought misery, suffering, and oppres­ have so drastic an impact as Communism sion so clearly that other countries were and Nazism, but it worked over the years to disinclined to imitate England, and, despite gain control ofthe material substance ofthe the tenacious efforts of the Labourites, the people under it, to undermine their beliefs, nationalization was eventually abandoned to take away much of their independence, there as well. The welfare measures which and to impose systems that are spiritually, the English introduced, such as socialized intellectually, politically, and economically medicine, had a much longer life. bankrupt. Sweden, however, was the earliest and Even so, socialist premises were not usu­ most thorough example ofthe welfare state. ally challenged except by such organiza­ The Swedes never showed any great enthu-' tions as the Foundation for Economic Ed­ siasm for confiscating or appropriating pri­ ucation. Socialism spread around the world, vate property. Instead, they taxed away a especially in the middle fifty years of the large portion of the proceeds from land, twentieth century. World War II and the labor, and capital to maintain an extensive defeat of the Nazis, as already noted, pro­ welfare state. vided the opportunity for the spread of Evolutionary socialism did not for long Soviet Communism into eastern Europe. go by the name of socialism in the United During the war, the Soviet Union forcibly States. Those who ran for office under that annexed Latvia, Estonia, Lithuania, and a name were overwhelmingly rejected by portion of Finland. By agreement with Hit­ American voters. On the other hand, social­ ler at the beginning of the war, they con­ ist ideas made increasing gains in the twen­ quered and claimed part of Poland as well. tieth century as the underlying premises of During the closing year of World War II, political programs, initiatives, and legisla­ as the Red Army moved westward into tion. They entered American political life eastern Europe, the groundwork was laid by way of a series of "four-year-plans," for Communism in the countries there. In variously called the Square Deal, New Free­ the mid and late 1940s Communist regimes dom, New Deal, Fair Deal, and New Fron- were established in Poland, Czechoslova- 256 THE FREEMAN • MAY 1996 kia, Hungary, Yugoslavia, Romania, Bul­ opla In 1974. In 1975, North Vietnamese garia, Albania, and East Germany. Communist forces conquered South Viet­ It was at this juncture, in the course of nam; the Khmer Rouge imposed Commu­ 1948, the Cold War began-an ideological nism on Cambodia; the Pathet Lao orga­ and geo-political, occasionally military, nized Communist rule in Laos, and a struggle. The Soviet Union was fostering People's Republic of Mozambique came to civil wars in Greece and Turkey, and bid­ power in Africa. Communists came to ding fair to come to power in Italy. The power in Angola in 1977. Communist-bent Soviet Union and the United States were Sandinistas took over the government in the main belligerents in the Cold War, but Nicaragua in 1979, and the Soviet Union the struggle encompassed much of the rest sponsored a coup in Afghanistan and in­ of the world at one time or another and in stalled a Communist regime. one way or another. It lasted from 1948 to Thus, when The World in the Grip ofan 1989, or thereabouts. Ideologically, it was Idea went to press in1979, there were many often described as a struggle between de­ signs that Communism might indeed be mocracy and Communism. To describe it "the wave of the future," at least in indus­ as a contest between democratic socialism trially undeveloped countries. But the story and Communism is much more accurate. of Communists progressively coming to The prominent allies of the United States power is only a part of the story of the in this struggle were more or less openly spread ofCommunist influence and socialist socialist, and the United States had estab­ ideas. Communist parties were long in op­ lished a welfare state undergirded by social­ eration either openly or clandestinely in ist assumptions. Foreign aid became a major most countries ofthe world. Many countries means for promoting and sustaining demo­ in which Communists have never come to cratic socialism around the world. power have been deeply infected by Com­ munism. Communists have infiltrated labor The "Wave of the Future"? unions, churches, colleges, and other orga­ nizations, and have spread disinformation in The spread of Communism in power can many non-Communist as well as Commu­ be chronicled as Communist-controlled nist publications. In sum, Communist influ­ governments were established. The spread ence has been worldwide. More openly, of Communism in eastern Europe has al­ democratic (or evolutionary) socialist ideas ready been described, so we continue the have gained influence, often dominant, in chronicle elsewhere. In 1948, Communist many countries of the world. If there was rule was instituted in North Korea. In 1949, a country in the world in 1980 not under Mao Tse-tung proclaimed the People's Re­ the influence or in the grip ofsocialist ideas, public of China, inaugurating Communism it escaped the attention of this writer. Nor in the most populous country in the world. has anyone suggested to me since the re­ In 1955, Communism was established in lease ofthe book that such a country existed North Vietnam. In 1960, a Council of Rev­ in 1980, or in the decades preceding that olution seized power in Algeria. In 1965, date. Cuba became officially a one-party (Com­ munist) state, and South Yemen became a A Loosened Grip "People's Democratic Republic" (Commu­ nist). Guyana became a Communist-domi­ Since that time, however, the idea has nated country in 1970, and Communist Sal­ loosened its grip. The election of Ronald vador Allende was elected president of Reagan as President of the United States in Chile. In 1971, Syria got a pro-Communist 1980 signaled not only the loosening of the dictatorship. In 1972, a revolutionary social­ hold ofthe idea on Americans but also the ist government was formed in Benin. Com­ widespread appeal ofa countervision to that munist dictatorship was established in Ethi- of socialism. Much the same could be said THE WORLD IN THE GRIP OF AN IDEA REVISITED 257 for the significance of Margaret Thatcher's and killed. The glue was giving way at the becoming Prime Minister of the United edges of the Empire. Kingdom in 1979. Reagan was re-elected in 1984 and became the first president to serve The Gorbachev Years two full terms since Eisenhower in the 1950s. Mrs. Thatcher held the post ofPrime Although the beginning strokes of the Minister from 1979 to 1990. Their elections unraveling of the Soviet Union caught al­ and tenure signified the considerable impact most everyone by surprise, in retrospect of conservative ideas on Anglo-American we can see that events and developments politics. More certainly than that, however, were preparing the way for a change. it was an augury of the declining appeal of Mikhail Gorbachev became the dictatorial the socialist idea or vision. head of the Soviet Union in 1985. He was The most dramatic ideological develop­ 54 years old, the youngest man to come to ment since 1980 has been the dissolution this position since Joseph Stalin, and the and disappearance ofthe Soviet Union. The first born since the Bolshevik Revolution, Soviet Union was, after all, the centerpiece He tended to adjust to changes rather than of Communism from its inception. It was dominate them by his will. At first, he the land, and Moscow was the city, to which continued the war in Afghanistan but even­ admirers and supplicants came from around tually withdrew. Confronted by the re­ the world to study and learn about "the arming of the United States led by Ronald wave ofthe future." The vision ofCommu­ Reagan, he must have soon realized that the nism and its propaganda spread from the Soviet Union did not have the means to keep Soviet center around the world, provoking pace. Indeed, Gorbachev did initiate some revolts, succoring imitative political parties, changes which may have prepared the way and breeding apologists for the Communist for the unraveling. One was called pere­ motherland. Many, many socialists in other stroika, meaning to restructure or make lands never became Communists, or, if so, structural changes in the Soviet Union. The only briefly, but they still pinned much of main restructuring occurred in the govern­ their socialist faith on its purest exemplar, ment itself, which no longer supported with­ the Soviet Union. The unraveling of the out resistance the programs advanced by Soviet Empire would surely be the precur­ the party bosses. Glasnost was another idea sor of the decline and demise of Commu­ advanced by Gorbachev: it means open­ nism, ifnot the socialist idea itself. Or, so it ness, or, perhaps, frankness. In practice, it seemed. involved the removal of censorship, the At any rate, the Soviet Empire began to freeing ofreligious observance, the opening unravel in 1989. The unraveling took place of the Soviet Union to outside observers first on the periphery. In March, the Red and the publishing of information about Army completed its withdrawal from Af­ otherlands and peoples in the Soviet Union. ghanistan. In August, the Baltic countries The Soviet Union did not long survive (absorbed into the Soviet Union during perestroika and glasnost. It survived even World War II)-Estonia, Latvia, and more briefly the unwillingness ofGorbachev Lithuania-demanded independence from to use major force to maintain the Empire. the Soviet Union. In October, Hungary The events of 1989 had not brought major assumed independence from the Soviet reprisals from Moscow. In eastern Europe, Union. East Germans poured through Hun­ the Soviet satellite countries began to oper­ gary into West Germany without interfer­ ate independently in 1989-1990, forming ence. In November, the Berlin Wall crum­ their own governments, some non-Commu­ bled as people tore it apart with no nist, and all reformed with greaterfreedoms. opposition from the authorities. In Decem­ But what was much more striking in 1990, ber, the long-time Communist dictator of the Soviet Union itself split into its constit­ Romania, Nicolae Ceausescu, was deposed uent parts. As a historian has said, "By the 258 THE FREEMAN • MAY 1996 end of the year, all 15 of the constituent physical relics from the past put away, ideas union republics had declared their sover­ are not so readily discarded or displaced. eignty.... As the world watched, Gor­ They leave residues in the minds of people bachev seemed destined to lose the contest and practices in their ways that may con­ with the powetful centrifugal forces tearing tinue after doctrines have been more or less the mighty Soviet Union apart as the decade publicly repudiated. I asked the question of the 1990s opened.,,4 in 1989, when those events were only getting In early 1991, Gorbachev continued to try underway, what would happen "ifCommu­ to keep the Soviet Union intact by some sort nism were to yield up the monopoly ofpower of federal union. Instead of succeeding in in those countries in which it now rules?" I this, in August, he was confronted with a see no reason now to alter significantly what coup whose leaders took him prisoner and I wrote then, which I now quote: demanded a return to the old Communist system. Boris Yeltsin, President ofthe Rus­ Would Communism simply wither away and disappear? That is not a very likely pros­ sian Republic, stood firm against the leaders pect. ... It is unlikely not only because the ofthe coup; the rebellion dissolved and the immediate prospect is for some Communist leaders were imprisoned. Gorbachev re­ rulers to cling to their hold on power for the signed as Communist Party leader and in foreseeable future but also because even if short order the Communist Party lost its there were no longer rulers who claimed a preferred position. The Soviet Union con­ monopoly ofpower by way oftheir position in tinued to deteriorate, as republic after re­ the dominant Communist party there would public reaffirmed or declared its indepen­ still be a large residue of Marxism-Leninism dence. "Gorbachev's efforts to reconstitute around. Every country in the world is infected the state in one form or another ... all with at least the outcroppings of socialism of proved futile in face of the republics' irre­ which Marxism was the most successful ofthe extremes. pressible nationalism and irresistible deter­ For example, every government in the mination to seek their own paths to the world today is making a greater or lesser effort future. By year's end Gorbachev had be­ to manage or control the economy over which come a superfluous president ofa vanishing it governs.... Most countries try to regulate country...."5 The Soviet Union was no and alter economic activity by their fiscal and more. A vast Russian Federation under monetary policies.... It is so widely ac­ Boris Yeltsin remained-still the largest cepted as to be virtually universal today that country in the world-but many lands that governments are responsible for the material had been part of the Soviet Union, such as well being ofthe populace that they govern. To the Ukraine, Georgia, Kazakhstan, Molda­ that end, they are expected to manage and via, Armenia, and others, were now follow­ control the economy, tax and distribute wealth, and provide an assortment of welfare ing an independent course. programs.6 Many symbolic changes were made in the wake of the official abandonment of As expected, some Communist rulers Communism. Statues of Lenin that had have clung to power, most notably in China, dotted the land were removed. Lenin's tomb North Korea, Cuba, but elsewhere as well. ceased to be a shrine, and his remains were Even in lands where Communists no longer finally buried. Leningrad became St. Peters­ formally rule, many bureaucrats and mem­ burg once again, by the will and vote ofthe bers of the privileged nomenklatura still inhabitants. Marx's claim that "Religion hold office and wield power. Former Com­ is the opiate of the people" was obliterated munists often hold high or top offices. The or obscured where possible. By appear­ parties change names; those who govern do ances, Communism had become the wave of not profess Marxism-Leninism, but they the past in Russia. were Communists, quite often, and are still While statues may be taken down, names imbued with the ideas which they held, then changed, building space reassigned, and the to greater or lesser extent. THE WORLD IN THE GRIP OF AN IDEA REVISITED 259

This is not said to underrate the great its grip. Then again, they may not. significance of the disintegration of the So­ The idea that has the world in its grip viet Empire and Union and the adoption of has great attraction for peoples around the many freedoms of the West in these coun­ world. The notion that government is re­ tries. Undoubtedly, too, the tenacious hold sponsible for the material and intellectual ofthe idea that has had the world in its grip well-being of populaces has great appeal, has been loosened somewhat. Ideas are especially when it is accompanied by actual being widely questioned that were once payments and subsidies from government. treated as settled once and for all. Few Many people become dependent upon gov­ would be so bold today as to declare that ernment handouts, and even those who are socialism is the wave of the future. It is not particularly dependent may lose confi­ rather to affirm that the world is still to dence in their ability to provide for them­ greater orlesser extent in the grip ofthe idea selves. These feelings, attitudes, and prac­ which has held sway for much of this cen­ tices are residues from the better part of a tury. century of socialism in its several varieties. Inthe United States, this is still the case. They have produced vastly overgrown gov­ Ronald Reagan could talk the talk of indi­ ernments and the politicalization of life. vidual liberty, free enterprise, and constitu­ Governments and politicians are the prob­ tional government, but without support lem, not the solution. he could not walk the walk. He championed Sturdy individuals, stable families, vital the reduction of taxes, but he could not communities, limited government, and faith advocate the removal of the welfare state in a transcendent God who provides for us at its core. He started out pledging to abol­ through the natural order and the bounties ish two departments; instead, he ended up of nature-these alone can break the grip adding a Department of Veterans Affairs. of the idea. It is now a cliche that socialism President Bush did not even keep his pledge is a failure; it now is the fullness oftime to act of no new taxes, much less considering upon the insight that gave rise to its fall. D the restoration of constitutional govern­ ment. The votes may be out there to shake 1. Z. A. Jordan, ed., Karl Marx: Economy, Class and the idea that has the world in its grip, but Society (New York: Scribner's, 1971), pp. 126-27. thus far politicians tend to waffle when 2. Ibid., p. 292. 3. Eugen Weber, ed., The Western Tradition (Boston: D.C. confronted with tenacious defenders of the Heath, 1959), p. 292. status quo. The Republicans who mustered 4. RobertSharlet, "The Union Republics ofthe U.S.S.R.," The Americana Annual (1991), p. 44. majorities in both houses in 1994 may, with 5. Robert Sharlet, "The Second Soviet Revolution," The block grants and audacity, foist upon the Americana Annual (1992), p. 32. 6. Clarence Carson, Basic Communism: Its Rise, Spread states the responsibility for determining and Debacle in the 20th Century (Wadley, Ala.: American the fate of the idea that has the world in Textbook Committee, 1990), p. 481. THEFREEMAN IDEAS ON UBERTY

The Welfare State: Promising Protection in an Age ofAnxiety by Robert Higgs

nxiety, according to The Random in the federal government. Since Franklin A House Dictionary, denotes "distress Delano Roosevelt assumed the presidency or uneasiness of mind caused by apprehen­ in 1933, voluntary relief has taken a back sion of danger or misfortune." By this seat to government assistance. Eventually, definition, the twentieth century qualifies as hardly any source of distress remained un­ an age of anxiety for Americans. attended by a government program. Old There is irony in this condition, because in age, unemployment, illriess, poverty, phys­ many respects we twentieth-century Amer­ ical disability, loss ofspousal support, child­ icans have enjoyed much more security than rearing need, workplace injury, consumer our forebears. Our life expectancy has been misfortune, foolish investment, borrowing longer, our work easier and more remuner­ blunder, traffic accident, environmental ative, our style of life more comfortable, hazard, loss from flood, fire, or hurricane­ stimulating, and unconstrained. Yet not­ all became subject to government succor. withstanding all objective indications that Our ancestors relied on themselves; we our lives are better than those ofour ances­ rely on the welfare state. But the "safety tors, we have become incessant worriers. net" that governments have stretched be­ Our predecessors dealt with their worries neath us seems more and more to be a by relying on religious faith. For tangible spider's web in which we are entangled and assistance, they turned to kinfolk, neigh­ from which we must extricate ourselves if bors, friends, co-religionists, and comrades we are to preserve a prosperous and free in lodges, mutual benefit societies, ethnic society. associations, labor unions, and a vast as­ sortment of other voluntary groups. Those Bismarck, Soldiers, and who fell between the cracks ofthe voluntary Mothers societies received assistance from cities and counties, but governmentally supplied as­ The modern welfare state is often viewed sistance was kept meager and its recipients as originating in Imperial Germany in the stigmatized. 1880s, when the Iron Chancellor, Prince In the twentieth century, especially dur­ Otto von Bismarck, established compulsory ing the past sixty years, Americans have accident, sickness, and old-age insurance placed their faith in government, increasingly for workers. Bismarck was no altruist. He intended his social programs to divert work­ Dr. Higgs is research director for the Indepen­ ingmen from revolutionary socialism and dent Institute, Oakland, California. purchase their loyalty to the Kaiser's re- 260 261 gime, and to a large extent he seems to have That politicians turned the legitimate pen­ achieved his objectives. sion system for injured veterans and their In the late nineteenth century, no aspiring survivors into a political patronage machine American social scientist regarded his edu­ should hardly have come as a surprise. cation as complete without a sojourn in a Buying votes and dispensing patronage are German university, and the impressionable what elected politicians normally do unless young men brought back to the United rigidly constrained. The doleful experience States a· favorable view of Bismarckian might well have served as a warning, and for social policies absorbed from the teachings a while it did, but eventually the lesson was of Deutschland's state-worshiping profes­ forgotten. soriate. 1 Men such as Richard T. Ely, Ed­ During the first three decades of the ward A. Ross, Henry Carter Adams, and twentieth century, when middle-class polit­ Simon Patten transported ideas and out­ ical movements generally refused to support looks that persisted through several gener­ proposals for comprehensive social spend­ ations. Consider, as only one example, that ing programs on the grounds that elected Edwin Witte, the chief architect of the politicians would abuse them, women's or­ Social Security Act of 1935, was a student ganizations, including the General Federa­ of John R. Commons, who was a student tion of Women's Clubs and the National of Ely (described by Joseph Schumpeter Congress of Mothers, lobbied successfully as "that excellent German professor in an for the establishment of state mothers' pen­ American skin"z). sions.5 These small, locally administered While Ely and the others were preaching stipends went to "respectable impoverished their Germanic doctrines, an incipient wel­ widows" to allow them to care for children fare state was emerging quite independently at home. Between 1911 and 1928 forty-four in the United States through a far-reaching states authorized such payments.6 In 1935, expansion of the pensions provided to with passage ofthe Social Security Act, the Union veterans ofthe Civil War. Originally federal government joined forces with the the pensions went only to men with proven states in financing an extension ofthe moth­ service-related disabilities and their depen­ ers' pensions, Aid to Dependent Children dent survivors. But politicians, especially (ADC)-later called Aid to Families with the Republicans, recognized that they could Dependent Children (AFDC), which ulti­ buy votes by dispensing the pensions more mately became nearly synonymous with liberally. Eligibility rules were stretched "welfare." farther and farther. Eventually no service­ Also, during the second decade of the related disability needed to be proved, no twentieth century, all but six states enacted combat experience was required, and old workmen's compensation laws, which re­ age alone was sufficient for a veteran to moved workplace injury claims from the qualify. Some Congressmen even went so courts and required that employers carry far as to change the official military records insurance to pay compensation for various ofdeserters in order to award them pensions types of injury under a system of strict through special acts of Congress. 3 liability.7 Between 1880 and 1910 the federal gov­ ernment devoted about a quarter of its The First Cluster, 1933-1938 spending to veterans' pensions. By the latter date more than half a million men, about 28 Between 1929 and 1933 the great eco­ percent of all those aged 65 or more, were nomic contraction left millions of Ameri­ receiving pensions, as were more than cans destitute. State and local governments, 300,000 dependent survivors of veterans. straining to provide unprecedented amounts Moreover, thousands of old soldiers lived of relief while their own revenues were in homes maintained by the federal govern­ shrinking, called on the federal government ment or the states.4 for help. President Herbert Hoover opposed 262 THE FREEMAN • MAY 1996 federal involvement in relief efforts, but he unemployed. The President appointed Hop­ reluctantly signed the Emergency Reliefand kins as administrator. By the time it was Construction Act of 1932, which transferred terminated eight years later, the WPA had federal funds to the states for relief of the paid out more than $10 billion for 13.7 unemployed (under the fiction that the trans­ million person-years ofemployment, mostly fers were loans). in construction projects but also in a wide After Roosevelt took office the federal range of white-collar jobs including contro­ government immediately launched into vast versial support for actors, artists, musi­ relief activities. The Federal Emergency cians, and writers.ll Relief Administration (FERA), directed by Like the FERA, the WPA engaged the welfare czar Harry Hopkins, channeled ambitions of state and local politicians in a funds to the states-half in matching grants "cooperatively administered" arrangement ($1 for $3) and half in discretionary grants. that set a pattern for many subsequent The money went to work-relief projects for welfare programs Under federally issued construction of roads, sewers, and public guidelines and with mostly federal funding, buildings; to white-collar beneficiaries such state and local officials got substantial con­ as teachers, writers, and musicians; and to trol of the patronage. Local governments unemployable persons including the blind, usually designed the projects, selecting crippled, elderly, and mothers with young workers from their relief rolls and bearing a children.8 small portion ofthe costs. Republicans cor­ Hopkins's discretionary allocations and rectly viewed the WPA as a massive Dem­ his oversight ofthe federal money embroiled ocratic vote-buying scheme. WPA projects the FERA in political controversy. Politi­ were frequently ridiculed, as in the follow­ cians fought fiercely for control of the pa­ ing stanzas of a contemporary song: tronage inherent in determining who would get the relief money and jobs and fill the We're not plain every day boys, 150,000 administrative positions. "Gover­ Oh, no, not we. nor Martin Davey of Ohio had an arrest We are the leisurely playboys warrant sworn outfor Hopkins should he set Of industry, foot in the state, and a number ofpoliticians, Those famous little WPA boys the most notable being Governor William Of Franklin D. Langer ofNorth Dakota, were convicted of Here we stand asleep all day misusing funds and served time in jail.,,9 While F. D. shooes the flies away Also in 1933, Congress created the Civil­ We just wake up to get our pay ian Conservation Corps, to put young men What for? For leaning on a shovel. 12 to work in outdoor projects under quasi­ military discipline; the Public Works Ad­ The spirit of this song persisted ever after­ ministration, to employ people in building ward, as many tax-paying private employ­ public works such as dams, hospitals, and ees have resented those employed in gov­ bridges; and the Civil Works Administra­ ernment make-work projects (often tion, to operate hastily contrived federal described in later days as "training" pro­ make-work projects for more than 4 million grams). of the unemployed during the winter of During the first two years of his presi­ 1933-1934. dency, Roosevelt came under growing pres­ In 1935, with 7.5 million workers (more sure from more radical politicians. Louisi­ than 14 percent of the labor force) still ana Senator Huey Long touted his Share unemployed and another 3 million in emer­ Our Wealth Plan for a sweeping redistribu­ gency relief jobs,IO Congress passed the tion of income and gained a national fol­ Emergency ReliefAppropriation Act, under lowing in 1934 and 1935. Simultaneously, authority of which FDR created the Works California physician Francis Townsend re­ Progress Administration (WPA) to hire the cruited millions of supporters for his THE WELFARE STATE: PROMISING PROTECTION IN AN AGE OF ANXIETY 263

Townsend Plan, under which people over 40 cents over seven years), fixed a maximum sixty years of age would retire and receive work week (originally 44 hours but sched­ from the government a monthly stipend of uled to fall to 40 by 1940), set a 50 percent $200 on the condition that all the money premium for overtime work, prohibited the be spent within thirty days. To head off the employment ofchildren under sixteen years mass appeal of such outlandish proposals, of age in most jobs, and authorized the FDR formed in 1934 a Committee on Eco­ Department of Labor to enforce the law. 15 nomic Security, whose Executive Director Afterward, Congress raised the minimum was Edwin Witte, to formulate a plan for e wage repeatedly. It is now $4.25 per hour. national social security system. This pseudo-welfare measure has proven This planning bore fruit in 1935 when to be an effective means of increasing the Congress passed the Social Security Act, unemployment rate of low-productivity the foundation of America's welfare state. workers (those who are young, ill-educated, The act gave federal matching funds to the or inexperienced), but continuing support states for assistance to the aged poor, the by leftist politicians and labor unions has blind, and dependent children. It levied a prevented its repeal. payroll tax, 90 percent of which would be refunded to states that established accept­ The GI Bill able unemployment insurance systems. (All of them did.) And it created a national In the spring of 1944, with elections loom­ old-age pension program disguised as insur­ ing and 11.5 million men-most of them ance but actually, especially after amend­ draftees-in the armed forces, FDR and ments in 1939 added surviving dependents Congress saw the wisdom of accepting the as recipients, a scheme for transferring cur­ American Legion's proposals to create un­ rent income from working to nonworking precedented benefits for veterans: hence the people. Servicemen's Readjustment Act, popularly From that time forward, defenders ofthe known as the GI Bill of Rights. Besides pension system denied that it was a "wel­ guaranteeing medical care in special veter­ fare" program for redistributing income. ans' hospitals, the law provided for pensions "It was portrayed instead as a huge set of and vocational rehabilitation for disabled public piggy banks into which individual veterans, occupational guidance, unem­ prospective 'beneficiaries' put away 'con­ ployment benefits for up to 52 weeks, guar­ tributions' for their own eventual retire­ anteed loans for the purchase of homes, ments."13 In the 1950s, 1960s, and 1970s, farms, orbusinesses, and stipends and living congressional incumbents made the pension allowances for up to four years for veterans system a fabulous vote-buying machine, as continuing their education. 16 Most of the they repeatedly extended its coverage, 16 million veterans of World War II took added Disability Insurance in 1956, raised advantage ofthe unemployment and educa­ the benefits and even, in 1972, indexed the tional benefits. And by 1962 the Veterans' pensions to protect them from inflation. Administration had insured more than $50 Only in the 1990s did a substantial portion of billion in loans. 17 the public begin to recognize that the piggy­ Even though the veterans' program ap­ bank depiction was a myth and that the plied to only a minority of the population, system faced bankruptcy as the ratio of it helped to retain the momentum of the taxpayers to recipients slipped ever lower burgeoning welfare state. "When the steam because of demographic changes. 14 appeared to have escaped from the engine As the New Deal was breathing its last in ofthe New Deal by 1945, the World War II 1938, it brought forth the Fair Labor Stan­ nondisabled veterans' benefits-by design dards Act. This established a national min­ and chance-provided new sources of en­ imum wage (originally 25 cents per hour for ergy. ,,18 The GI Bill set an irresistible pre­ covered employees but scheduled to rise to cedent, and laterlegislation provided similar 264 THE FREEMAN • MAY 1996 benefits for veterans of the Korean War $300 million to create community action and, in 1966, even for those who served in agencies, a wild scramble to get the money the armed forces in peacetime. 19 ensued, led by local politicians and, in some cities, criminal gangs-as vividly portrayed The Second Cluster, 1964-1972 in Tom Wolfe's tragicomic tale Mau-Mau­ ing the Flak Catchers (1970). With the succession ofthe ambitious New In 1965 Medicare was added to the Social Dealer Lyndon B. Johnson to the presi­ Security system, insuring medical care for dency, the drive to build the welfare state everyone over 65 years of age. Medicaid, a became ascendant again. The election of cooperatively administered and financed 1964 brought into office a large, extraordi­ (state and federal) program, assured medical narily statist Democratic majority in Con­ care for welfare recipients and the medically gress. Keynesian economists were assuring indigent. As usual, these programs were the public that they could fine-tune the not exactly what they were represented to economy, taking for granted a high rate of be. "Most of the government's medical economic growth from which the govern­ payments on behalf of the poor compen­ ment could reap a perpetual "fiscal divi­ sated doctors and hospitals for services dend" to fund new programs. John Kenneth once rendered free of charge or at reduced Galbraith, Michael Harrington, and other prices," historian Allen Matusow has ob­ popular social critics condemned the fail­ served. "Medicare-Medicaid, then, primar­ ures of the market system and ridiculed its ily transferred income from middle-class defenders. The public seemed prepared to taxpayers to middle-class health-care profes­ support new measures to fight a "War on sionals. ,,23 Poverty," establish "social justice," and The federal government's health pro­ end racial discrimination. Hence the Great grams also turned out to be fiscal time Society.20 bombs. Between 1970 and 1994, in constant Congress loosed a legislative flood by (1987) dollars, Medicare outlays increased passing the Civil Rights Act of 1964. Among from $16.4 billion to $109.3 billion; the other things, this landmark statute set aside federal portion ofMedicaid from $7.7 billion private property rights and private rights of to $63.5 billion. 24 Like the old-age pensions, free association in an attempt to quash racial these programs achieved rates of growth discrimination. But the ideal ofa color-blind that could not be sustained indefinitely. society died an early death, succeeded Other Great Society measures to protect within a few years by "affirmative ac­ people from their own incompetence orfolly tion"-an array of racial preferences en­ included the Traffic Safety Act (1966), the forced by an energetic Equal Employment Flammable Fabrics Act (1967), and the Con­ Opportunity Commission and activist fed­ sumer Credit Protection Act (1968). eral judges.21 Mter Richard Nixon became President, Congress proceeded to pass a variety of highly significant measures continued to laws injecting the federal government more pour forth from Congress-the National deeply into education,job training, housing, Environmental Policy Act (1969), the Clean and urban redevelopment. The Food Stamp Air Act Amendments (1970), the Occupa­ Act of 1964 gave rise to one of the govern­ tional Safety and Health Act (1970), the ment's most rapidly growing benefit pro­ Consumer Product Safety Act (1972), .the grams: in 1969 fewer than 3 million persons Water Pollution Control Act (1972), and the received stamps, and federal outlays totaled Equal Employment Opportunity Act (1972), $250 million; in 1981, 22 million persons to name but a few. Nixon also wielded his received stamps, and federal outlays totaled congressionally authorized power to impose $11 billion. 22 The Community Action Pro­ comprehensive wage and price controls be­ gram aimed to mobilize the poor and raise tween 1971 and 1974, thereby (spuriously) their incomes. When Congress appropriated protecting the public from the inflation cre- THE WELFARE STATE: PROMISING PROTECTION IN AN AGE OF ANXIETY 265 ated by the monetary policies ofthe Federal "if the state is to guarantee to a man what Reserve System. the consequences of his actions shall be, it must take control of his activities ... to The Welfare State Marches On keep him out of the way of risks. ,,28 In the interval since Jouvenel was writing, the Although the growth of the welfare state demand for government protection has risen has slowed during the past twenty years, it to new heights, and the corresponding loss has scarcely stopped. Such recent measures of individual liberties has proceeded apace. as the Clean Air Act Amendments (1990), If we are to regain our liberties, we must the Nutrition Labeling and Education Act reassert our responsibilities for ourselves, (1990), the Safe Medical Devices Act (1990), accepting the consequences of our own the Americans with Disabilities Act (1990), actions without appealing to the government the Civil Rights Act (1991), and the relent­ for salvation. To continue on the road we less power-grabs of the Food and Drug Americans have traveled for the past cen­ Administration show that our rulers remain tury is ultimately to deliver ourselves com­ as determined as ever to protect us from pletely into the hands of an unlimited gov­ ourselves-to treat us as a shepherd treats ernment. It will not matter if democratic his flock, and with similar regard for our processes lead us to this destination. As intelligence and our rights. noted above, the making ofthe welfare state Ifwe cared nothing for our own freedom, has been from the very beginning a matter of we might be inclined to accept the minis­ corrupt vote-buying andpatronage-dispens­ trations of the welfare state with gratitude. ing by politicians-democracy in action. But even then our contentment would be And one sad servitude alike denotes disturbed by the large extent to which the The slave that labours and the slave that governmentfails to deliver what it promises. votes.29 To be blunt, the government's protection is largely fraudulent. Officials pretend to pro­ We can have a free society or a welfare tect citizens and promote social harmony state. We cannot have both. D while actually accomplishing the opposite. Thus, the government's affirmative action 1. Dorothy Ross, The Origins ofAmerican Social Science programs have actually fostered racial acri­ (Cambridge: Cambridge University Press, 1991), pp. 104-106. 2. Joseph A. Schumpeter, History ofEconomic Analysis mony and conflict rather than racial harmo­ (New York: Oxford University Press, 1954), p. 874. ny.25 The environmental laws have caused 3. Theda Skocpol, "America's First Social Security Sys­ tem: The Expansion of Benefits for Civil War Veterans," in many billions of dollars to be squandered Theda Skocpol, Social Policy in the United States: Future in mandated actions for which costs vastly Possibilities in Historical Perspective (Princeton: Princeton University Press, 1995), p. 63. exceeded benefits.26 And the Food and Drug 4. Ibid., p. 37. Administration, far from improving public 5. Theda Skocpol, "Gender and the Origins of Modern Social Policies in Britain and the United States," in Skocpol, health, has caused (at least) hundreds of Social Policy, pp. 114-129. thousands of excess deaths and untold hu­ 6. Ibid., pp. 74,76. 27 7. Herman M. Somers, "Workmen's Compensation," man suffering. It is bad enough that citi­ International Encyclopedia of the Social Sciences 16 (New zens are viewed as sheep; it is worse that York: Macmillan and The Free Press, 1968), pp. 572-576. 8. Searle F. Charles, "Federal Emergency Relief Admin­ they are sheared and slaughtered. istration," in Franklin D. Roosevelt: His Life and Times, ed. Fifty years ago Bertrand de Jouvenel Otis L. Graham, Jr., and Meghan Robinson Wander (Boston: G. K. Hall, 1985), pp. 132-133. wrote, "The essential psychological char­ 9. Jeremy Atack and PeterPassell, A New Economic View acteristic of our age is the predominance of of American History from Colonial Times to 1940, 2nd ed. (New York: Norton, 1994), p. 670. fear over self-confidence.... Everyone of 10. Michael R. Darby, "Three-and-a-Half Million U.S. every class tries to rest his individual exis­ Employees Have Been Mislaid: Or, an Explanation of Unem­ ployment, 1934-1941," Journal ofPolitical Economy 84 (Feb­ tence on the bosom ofthe state and tends to ruary 1976): 7. regard the state as the universal provider." 11. Lester V. Chandler, America's Greatest Depression, 1929-1941 (New York: Harper & Row, 1970), pp. 203-205. But this protection costs the public far more 12. "Leaning on a Shovel," by John LaTollche, reprinted than the high taxes that fund its provision: in Richard D. McKinzie, "Works Progress Administration," 266 THE FREEMAN • MAY 1996

in Franklin D. Roosevelt, ed. Graham and Wander, p. 462. Basic Books, 1975); Thomas Sowell, Civil Rights: Rhetoric or Econometric historians have tried to determine how much of Reality? (New York: William Morrow, 1984), pp. 38-42. the New Deal's relief spending reflects playing politics. See 22. Edgar K. Browning and Jacquelene M. Browning, John Joseph Wallis, "Employment, Politics, and Economic Public Finance and the Price System, 2nd ed. (New York: Recovery during the Great Depression," Review ofEconomics Macmillan, 1983), p. 128. and Statistics 69 (August 1987): 516-520. 23. Allen J. Matusow, The Unraveling of America: A 13. Theda Skocpol with G. John Ikenberry, "The Road to History ofLiberalism in the 1960s (New York: Harper & Row, Social Security," in Skocpol, Social Policy, p. 162. 1984), pp. 231-232. 14. Bipartisan Commission on Entitlement and Tax Re­ 24. Office ofManagement and Budget, Budget ofthe United form, Interim Report to the President (August 1994), pp. 14-15, States Government: Historical Tables, Fiscal Year /996 18-19. (Washington: Superintendent of Documents), pp. 105, J08. 15. Chandler, America's Greatest Depression, p. 237; 25. Thomas Sowell, Preferential Policies: AnInternational Gregory King, "Wages and Hours Legislation," in Franklin D. Perspective (New York: William Morrow, 1990). Roosevelt, ed. Graham and Wander, p. 438. 26. William C. Mitchell and Randy T. Simmons, Beyond 16. Jack Stokes Ballard, The Shock ofPeace: Military and Politics: Markets, Welfare, and the Failure of Bureaucracy Economic Demobilization after World War 11 (Washington: (Boulder: Westview Press, 1994), pp. 146-162. University Press of America, 1983), pp. 48-49. 27. Dale H. Gieringer, "The Safety and Efficacy of New 17. "G.I. Bill," in The -Reader's Companion to American Drug Approval," Cato Journal 5 (Spring/Summer 1985): 177­ History, ed. Eric Foner and John A. Garraty (Boston: Hough­ 201; Robert M. Goldberg, "Breaking Up the FDA's Medical ton Mifflin, 1991), p. 449. Information Monopoly," Regulation, No.2 (1995): 40-52; 18. Davis R. B. Ross, Preparing for Ulysses: Politics and Hazardous To Our Health? FDA Regulation ofHealth Care Veterans During World War 11 (New York: Columbia Univer­ Products, ed. Robert Higgs (Oakland, Calif.: The Independent sity Press, 1969), p. 290. Institute, 1995), passim. 19. Ibid. 28. Bertrand de Jouvenel, On Power: The Natural History 20. Robert Higgs, Crisis and Leviathan: Critical Episodes of Its Growth (Indianapolis: Liberty Fund, 1993; original in the Growth ofAmerican Government (New York: Oxford French edition 1945), pp. 388-389. University Press, 1987), pp. 246-251. 29. Peter Pindar's lines as quoted by Jouvenel, On Power, 21. Nathan Glazer, A,f/irmative Discrimination (New York: p.353. THEFREEMAN IDEAS ON UBERTY

Losing Freedom Costs a Lot by John Semmens

ver the last fifty years, the federal of, rather than supplant, previous rules and Ogovernment in the United States has regulations. Consequently, it is not uncom­ taken ·on behemoth proportions. Six new mon for the victims of these rules and cabinet departments have been created (Ed­ regulations to be required to engage in ucation, Energy, Health and Human Ser­ contradictory actions. For example, to pro­ vices, Housing and Urban Development, tect workers from being run over'by vehicles Transportation, and Veterans Affairs). used in the workplace, the federal govern­ Twenty new "independent establishments ment mandates that vehicles be equipped and government corporations" have been with "beepers" to warn of their approach. added to the thirty that existed in 1945. Nine To protect workers from hearing damage, new mini-bureaucracies now report directly the federal government mandates that they to the President (there were none in 1945). wear earplugs. The creation of new bureaucratic fief­ This enhanced meddling has not corne doms, robust as it has been, understates the cheaply. In 1945, the federal government expansion of the federal government. Bu­ spent $10 billion on nondefense outlays. By reaucracy, new and old, has been extending 1994, nondefense spending had risen to over its reach into more and more facets ofdaily $1,200 billion. This is nearly a 12,000 per­ life. The federal government may require cent increase. Ofcourse, inflation has some­ your child to be bussed to a school across thing to do with the apparent size of this town in order to achieve racially "bal­ expansion in federal spending. (Although, anced" student bodies. The federal govern­ even here, the federal government is neither ment may dictate what you can and cannot a passive nor innocent victim of inflation.) say in a classified newspaper ad seeking There also has been population growth to to offer or obtain services, rent property, or contend with. If we put aside the govern­ acquire a roommate. The federal govern­ ment's complicity in creating inflation and ment may prevent you from improving your adjust spendingin 1945 to the 1994 purchas­ property (or saving your house from burning ing power equivalent, we find that the fed­ down) in order to protect the habitat of the eral government was laying out about $590 kangaroo rat. per person for nondefense spending in 1945. Congress has authorized an army of bu­ By 1994, this figure had ballooned to over reaucrats to invent a plethora of new rules $4,600 per person, nearly a 700 percent and regulations. Each year, nearly 100,000 increase. pages of new rules and regulations are Fortunately, a growing private sector was issued. Almost all of these accrete on top able to offset some ofthis increasing burden on the nation's economy. Still, the federal Mr. Semmens is an economist with Laissez-Faire government has taken increasingly larger Institute in Chandler, Arizona. bites out ofthe nation's wealth. In 1945, the 267 268 THE FREEMAN • MAY 1996 Growth in Federal Government Spending Since 1945

Non-Defense Spending As a % of Transfer Transfer Spending Gross Domestic Spending Per Payments Payments Year ($ in billions) Product Capita ($ in billions) Per Capita

1945 $ 10 5% $ 69 $ 2 $ 14 1950 $ 29 100/0 $ 190 $ 14 $ 93 1955 $ 26 6% $ 155 $ 15 $ 90 1960 $ 44 9% $ 244 $ 26 $ 145 1965 $ 68 10% $ 348 $ 37 $ 188 1970 $ 114 11% $ 555 $ 75 $ 367 1975 $ 246 15% $1,138 $173 $ 802 1980 $ 457 17% $2,007 $313 $1,376 1985 $ 694 17% $2,909 $472 $1,978 1990 $ 953 17% $3,815 $619 $2,478 1994 $1,204 18% $4,618 $880 $3,375 federal government's nondefense spending ing. By 1994, this type of spending had consumed about 5 percent of the Gross increased to nearly $900 billion. In 1945, Domestic Product (GDP). That is, the fed­ 20 percent ofthe federal government's non­ eral government confiscated and spent 5 defense spending was ofthe "robbing Peter percent of the wealth created by the econ­ to pay Paul" variety. By 1994, nearly 75 omy in 1945. By 1994, the federal govern­ percent offederal government's nondefense ment was confiscating and spending 18 per­ spending was ofthis type. Ifthis $900 billion cent of the GDP. in "income transfer" spending were distrib­ uted evenly over the entire population, it would amount to over $3,000 per person. Of The Growth of "Income course, this spending is not distributed Transfer" Programs equally. Some receive much larger shares of the "loot." Others receive less. Still others While infesting society with new rules and must have their pockets picked, their bank regulations has imposed substantial costs on accounts embezzled, and their earnings di­ the economy, most ofthese costs are borne verted to provide the "loot." by businesses and individuals, and thus, do not show up in the aforementioned figures. What Might Have Been What does show up in these figures is the tremendous expansion of "income trans­ All of this government intervention was fer" spending. Government''income trans­ supposed to have improved the "security" fer" programs have institutionalized the ofthe average guy. Nonetheless, the current "robbing Peter to pay Paul" concept. Dis­ American economy seems lethargic by past satisfied with the mutually agreeable and standards. Real wages appear to have stag­ voluntary exchanges between "Peter" and nated for the last two decades. Between the "Paul," the federal government has under­ inefficiencies inflicted by excessive regula­ taken an array of schemes to impose invol­ tion and the oppressive burdens of taxes untary, and frequently disagreeable, ex­ extracted to support the massive spending changes. A considerable portion of the increases of the federal government over population has thereby been persuaded that these last five decades, the economy has it is not a disgrace to adopt the mind set of fallen far short of its potential. To get an beggars, whiners, and thieves whenit comes inkling of how far short of its potential the to debating public policies. economy has fallen, let's consider the ques­ In 1945, "income transfer" programs ac­ tion of opportunity cost. That is, what the counted for only $2 billion offederal spend- situation might be today if a different path LOSING FREEDOM COSTS A LOT 269

Alternate Inflation-Adjusted Ifthe government were spending a trillion Federal Government dollars per year less, the private sector Spending Scenarios would have a trillion dollars more to spend. (In 1994 dollars) This is more than $4,000 per person per year. Consumers could satisfy more oftheir Actual Non-Defense Spending at needs and wants. Businesses would have Spending 1945 Levels Year ($ in billions) ($ In billions) more resources for expanding operations, acquiring more equipment, and inventing 1945 $ 83 $ 83 new technology. If only 5 percent (the 1950 $ 180 $ 90 average post 1945 savings rate) of this dif­ 1955 $ 144 $ 98 ference between actual federal spending 1960 $ 223 $107 and the lower levels projected in ourthought 1965 $ 321 $115 experiment had been invested at a 3 percent 1970 $ 439 $121 per year rate of return (the long-term aver­ 1975 $ 684 $127 1980 $ 830 $134 age rate of real growth of the American 1985 $ 965 $141 economy), there would be more than a 1990 $1,092 $147 trillion dollars ofadditional capital available 1994 $1,204 $154 to support employment opportunities and wages. Since it currently requires about $50,000 in capital to support each job, this translates into a hypothetical additional had been chosen in 1945. While measuring 20 million jobs. Inasmuch as the number of the opportunity cost ofexcessive regulation unemployed workers is only one-third of would be difficult, ifnot impossible, we can this amount, this additional capital would get a glimpse ofwhat the magnitude ofsuch likely have also resulted in higher wages. To an opportunity cost might be in the case of the extent that a less burdensome govern­ excessive spending. ment might have permitted even higher rates For our thought experiment, we will con­ of saving and returns on investment, the sider what might· have happened if the fed­ material abundance available to the average eral government's per capita nondefense American would be several times what it is spending had remained at the level in effect at present. in 1945. Remember, 1945 was after Presi­ So, not only have our freedoms been dent Franklin Roosevelt's "New Deal" had eroded, we have also paid a heavy price already substantially increased the govern­ ment's role in our society. For this experi­ ment we will also convert all money figures FEDERAL (NON-DEFENSE) SPENDING into their 1994 purchasing powerequivalent. SINCE 1945 In dollars of 1945 purchasing power, fed­ eral nondefense spending was $10 billion $1,400 in 1945. In dollars of1994 purchasing power, $1,200 federal nondefense spending was $83 bil­ $1.fXXJ lion in 1945. In the history that did take .. '0 $800 place, federal nondefense spending rose to • $1,204 billion by 1994. If per capita nonde­ :I $6DO fense spending had been held to 1945's I $«X) inflation adjusted levels, population growth would have boosted this spending to only $200 $154 billion by 1994. That is, the federal government could now be spending over a trillion dollars less per year than it now Years spends. 270 THE FREEMAN • MAY 1996 in terms of sacrificed material well-being. dedicated to promoting a freedom philoso­ Since a major announced motivation for the phy. expansion ofgovernment has been to ensure The Foundation for Economic Education our "social security," we have not gotten has been a continuing force in promoting this what we have "paid" for. Instead, we have freedom philosophy in the post-1945 period. confirmed Ben Franklin's fear that a nation Founded when the idea offreedom was atits willing to trade freedom for security will end lowest ebb in American history, FEE has up losing both. contributed to the revival ofthe apprecia­ As bleak as the preceding analysis ap­ tion for the value of a free society. Cutting pears, we are not without hope. While the government "services" is now a respect­ momentum of government has carried it able, perhaps even dominant, policy option far down the road to turning us all into serfs, in public debate. Governments around the the intellectual support for this direction globe are actively seeking ways to "privat­ has been severely compromised. The social­ ize" government operations, cut taxes, and ist premise upon which the massive expan­ return liberties to the people. FEE has served sion ofgovernment has been based has been and will continue to serve as an illuminator undermined by the relentless efforts ofthose of the path to a better, freer world. 0 Potomac Principles by Doug Bandow

Fifty Years of Statism

istorian Paul Johnson has called the various New Deal schemes intended to H twentieth century the "age of poli­ bring the nation out ofthe Great Depression. tics," the era in which people increasingly But for those less prescient than Leonard turned to the state to solve any and all Read, 1946 might also have looked like the problems. That is no less the case in Amer­ peacetime apogee of government. After all, ica than elsewhere around the globe. In the America's great economic and security cri­ early 1900s Progressivism and Woodrow ses, which had caused government's dra­ Wilson's messianic international crusade matic and rapid growth, were receding into helped set the U.S. government on its ever­ history. And for a time government actually expanding course. did shrink. Federal outlays ran $55.2 billion The growth of the state has been partic­ in 1946, five times the last year of peace, ularly spectacular this past half century. 1940, but down from $92.7 billion in 1945. Since FEE's birth in 1946, the federal Dr. Expenditures fell to $29.8 billion in 1948. Jekyll has turned into the most odious ver­ Then the trend reversed, however, and sion of Mr. Hyde. Over that time Washing­ within two years the federal government ton has become the redistributive state, the was spending more than it had in 1946 Santa Claus for any interest group with a (though outlays still lagged once adjusted letterhead and mailing list. Ithas become the for inft.ation). nanny state, the paternalist determined to The march of statism seemed to slow run every American's life. Ithas become the during the Eisenhower years: federal expen­ militarist state, the guarantor of a veritable ditures actually fell for a time and grew only global empire at the expense of freedom at slowly thereafter. But by 1966 real outlays home. There is, in fact, little that political had rolled past those of 1946. Uncle Sam acolytes have not sought to entrust to the was bigger and more intrusive than in the state-medicine, child care, and even spir­ aftermath of economic depression and itual fulfillment through something called global war. "the politics of meaning. " Government continued to grow steadily The necessity for FEE was obvious if slowly-1969 was the last year that the enough in 1946. The national government federal government balanced its budget­ had been swollen by America's participa­ before the go-go years of the late 1970s and tion in World War II and inauguration of early 1980s. By 1985 the national govern­ ment was spending twice as much in real Doug Bandow is a Senior Fellow at the Cato terms as it had in 1946. Today, at a time Institute and a nationally syndicated columnist. He is the author and editor of several books, when America is secure economically and including The Politics of Envy: Statism as The­ militarily, the real federal budget is running ology (Transaction). nearly thrice that of 1946. 271 272 THE FREEMAN • MAY 1996

Uncle Sam's growing budget has been and donations offederal property." Almost matched by his expanding reach. Over the all ofthese were created during the last half last fifty years the federal government has century and act as vehicles to redistribute constantly looked for new fields to enter, wealth. creating the Departments of Education; Although Uncle Sam is the most visible Energy; Health, Education and Welfare; villain of statism run rampant, he is not the Health and Human Services; Housing; only culprit. State and local expenditures Transportation; and Veterans. Also added and responsibility, too, have grown dramat­ was a host of agencies, from the Environ­ ically. Between 1946 and 1995 state spend­ mental Protection Agency to the Consumer ing jumped from $49 billion·to about $606 Product Safety Commission to the Legal billion. Over the same period local outlays Services Corporation to the National En­ rose from $9.1 billion to roughly $847 billion. dowment for the Arts to the Corporation These 100-fold increases dwarf that of for National Service. The last half century Washington. Combined federal, state, and has seen initiation of the so-called war on local outlays went from $61.5 billion in 1946 poverty, hiring of politically minded legal­ to almost $3 trillion last year. Adjusted for aid lawyers, government patronage of por­ inflation, the jump was still 523 percent. nographic art, Medicare and Medicaid, fed­ These pervasive increases demonstrate eral subsidies for education, Uncle Sam as the necessity of emphasizing philosophical energy investor, a torrent of grants and arguments for limited government. The hall­ loans for business, students, and other gov­ mark of the last half century has been a ernments, and much, much more. belief in the rightness of government to Indeed, since 1946 the government has intervene anywhere at any time in any way. increasingly epitomized Frederic Bastiat's Opponents have all too often criticized not notion of legalized plunder. Three of the so much the proposed outlay, regulation, top five federal spending categories involve or tax, but its amount or extent. In short, transfer programs, or "entitlements": So­ intervention was fine, though the specific cial Security, Medicare, and Medicaid. An­ proposal needed to be fine-tuned and mod­ other top spending program, interest, erated. Not surprisingly, when faced with largely reflects the expansion of the other such a choice, Americans tended to choose three. Only one, defense, involves a tradi­ the real thing. And advocates of interven­ tional government role. tion always returned to push for more ifthey Moreover, much of the increase in so­ were only partially successful the first time called discretionary spending has gone to around. grant and loan programs that enrich the This problem remains today, even in sup­ politically nimble. Cheap credit to custom­ posedly revolutionary times. Over the years ers of U.S. exporters, government-paid ad­ FEE has spawned a host of free-market vertising abroad for American corporations, think-tanks around the nation that present subsidized loans to well-connected small practical policy alternatives to the usual businesses, low-cost mortgages to develop­ statist panaceas. These groups have helped ers, grants for college researchers, aid to expand the debate over a range of issues. students, ad infinitum. In fact, the Govern­ Nevertheless, their arguments often remain ment Assistance Almanac, published annu­ constrained by the realities of the political ally by Omnigraphics, presents hundreds of process. pages offederal pork and loot available for Yet believers in freedom must also chal­ the asking. The book, states its publicity lenge the philosophical basis ofstatism. This materials, catalogues all "grants, loans, in­ was, for instance, the great vacuum in last surance, personal payments and benefits, year's budget battle. For all the hue and subsidies, fellowships, scholarships, train­ cry, no politician suggested that government eeships, technical information, advisory should not guarantee medical care for every services, investigation of complaints, sales senior. Noone argued that housing was not FIFTY YEARS OF STATISM 273 a matter for the government, let alone the has become the nation's governing ideol­ federal government. No major political ogy: over the last fifty years the mass of leader advocated getting Washington out people has come to believe that government of education. Where were the legislators can legitimately do anything. As a result, saying no-that's NO-to subsidies for even those legislators who most rail against state and local governments, businesses, the deficit in the abstract are unwilling to and students? And on it went. Who asked empty Uncle Sam's financial cornucopia. why the national government was subsidiz­ This century, and most particularly the ing energy research? Who proposed stop­ last fifty years, is truly the age of politics. ping Washington from pouring billions down The failures of this approach are manifold, money-losing, mass transit ratholes? Where and are obvious even to those in power. But was the politician to challenge the very many Americans-policymakers and citi­ notion of Uncle Sam funding welfare in zens alike-have yet to give up their statist every state and city in America? And on illusions. Many simply aren't aware of an and on. alternative. But there is one. One which Fundamentally, the problem of the fed­ FEE has been teaching for the last half eral budget is one of philosophy. Statism century: freedom. D THEFREEMAN IDEAS ON LIBERTY

"I, Pencil" by Leonard E. Read

I am a lead pencil-the ordinary wooden face ofthis earth knows how to make me. pencil familiar to all boys and girls and This sounds fantastic, doesn't it? Especially adults who can read and write.* when it is realized that there are about one Writing is both my vocation and my and one-half billion of my kind produced in avocation; that's all I do. the U.S.A. each year. You may wonder why I should write a Pick me up and look me over. What do genealogy. Well, to begin with, my story is you see? Not much meets the eye-there's interesting. And, next, I am a mystery­ some wood, lacquer, the printed labeling, more so than a tree or a sunset or even a graphite lead, a bit of metal, and an eraser. flash oflightning. But, sadly, I am taken for granted by those who use me, as if I were a mere incident and without background. This Innumerable Antecedents supercilious attitude relegates me to the Just as you cannot trace your family tree level ofthe commonplace. This is a species back very far, so is it impossible for me to of the grievous error in which mankind name and explain all my antecedents. But cannot too long persist without peril. For, I would like to suggest enough of them to the wise G. K. Chesterton observed, "We impress upon you the richness and complex­ are perishing for want of wonder, not for ity of my background. want of wonders." My family tree begins with what in fact I, Pencil, simple though I appear to be, is a tree, a cedar of straight grain that grows merit your wonder and awe, a claim I shall in Northern California and Oregon. Now attempt to prove. In fact, if you can under­ contemplate all the saws and trucks and stand me-no, that's too much to ask of rope and the countless other gear used in anyone-if you can become aware of the harvesting and carting the cedar logs to the miraculousness which I symbolize, you can railroad siding. Think ofall the persons and help save the freedom mankind is so un­ the numberless skills that went into their happily losing. I have a profound lesson to fabrication: the mining of ore, the making teach. And I can teach this lesson better of steel and its refinement into saws, axes, than can an automobile or an airplane or a motors; the growing of hemp and bringing mechanical dishwasher because-well, be­ it through all the stages to heavy and strong cause I am seemingly so simple. rope; the logging camps with their beds Simple? Yet, not a single person on the and mess halls, the cookery and the raising of all the foods. Why, untold thousands of Leonard E. Read (1898-1983) founded FEE in 1946 and served as its president until his death. "I, Pencil," his most famous essay, was first *My official name is "Mongol 482." My many published in the December 1958 issue of The ingredients are assembled, fabricated, and fin­ Freeman. ished by Eberhard Faber Pencil Company. 274 275

eonard Read's delightful story, "I, Pencil," has become a classic, and deservedly Lso. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith's invisible hand-the possibility of cooperation without coercion-and Friedrich Hayek's emphasis on the importance ofdispersed knowledge and the role ofthe price system in communicating information that "will make the individuals do the desirable things without anyone having to tell them what to do." We used leonard's story in our television show, "Free to Choose," and in the accompanying book ofthe same title to illustrate "the power of the market" (the title of both the first segment of the TV show and of chapter one of th~ book). We summarized the story and then went on to say:

"None of the thousands of persons involved in producing the pencil performed his task because he wanted a pencil. Some among them never saw a pencil and would not know what it is for. Each saw his work as a way to get the goods and services he wanted-goods and services we produced in orderto get the pencil we wanted. Every time we go to the store and buy a pencil, we are exchanging a little bit of our services for the infinitesimal amount of services that each of the thousands contributed toward producing the pencil. "It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak different languages, practice different religions, may even hate one another-yet none ofthese differences prevented them from cooperating to produce a pencil. Howdid it happen? Adam Smith gave us the answer two hundred years ago." "I, Pencil" is a typical leonard Read product: imaginative, simple yet subtle, breathing the love of freedom that imbued everything leonard wrote or did. As in the rest of his work, he was not trying to tell people what to do or how to conduct themselves. He was simply trying to enhance individuals' understanding ofthemselves and of the system they live in. That was his basic credo and one that he stuck to consistently during his long period of service to the public-not public service in the sense of government service. Whatever the pressure, he stuck to his guns, refusing to compromise his principles. That was why he was so effective in keeping alive, in the early days, and then spreading the basic idea that human freedom required private property, free competition, and severely limited government. It is a tribute to his foresight, persistence, and sound understanding of the basis for a free society, that FEE, the institution he established and on which he lavished such loving care, is able to celebrate its fiftieth anniversary. -MIllon Friedman Senior Research Fellow, Hoover Institution persons had a hand in every cup ofcoffee the tal thereto? These legions are among my loggers drink! antecedents. The logs are shipped to a mill in San Consider the millwork in San Leandro. Leandro, California. Can you imagine the The cedar logs are cut into small, pencil­ individuals who make flat cars and rails and length slats less than one-fourth of an inch railroad engines and who construct and in thickness. These are kiln dried and then install the communication systems inciden- tinted for the same reason women put rouge 276 THE FREEMAN • MAY 1996 on their faces. People prefer that I look My cedar receives six coats of lacquer. pretty, not a pallid white. The slats are Do you know all the ingredients oflacquer? waxed and kiln dried again. How many skills Who would think that the growers ofcastor went into the making of the tint and the beans and the refiners ofcastor oil are a part kilns, into supplying the heat, the light and ofit? They are. Why, even the processes by power, the belts, motors, and all the other which the lacquer is made a beautiful yellow things a mill requires? Sweepers in the mill involves the skills ofmore persons than one among my ancestors? Yes, and included can enumerate! are the men who poured the concrete for Observe the labeling. That's a film formed the dam of a Pacific Gas & Electric Com­ by applying heat to carbon black mixed with pany hydroplant which supplies the mill's resins. How do you make resins and what, power! pray, is carbon black? Don't overlook the ancestors present and My bit of metal-the ferrule-is brass. distant who have a hand in transporting Think of all the persons who mine zinc sixty carloads of slats across the nation. and copper and those who have the skills Once in the pencil factory-$4,OOO,000 in to make shiny sheet brass from these prod­ machinery and building, all capital accumu­ ucts of nature. Those black rings on my lated by thrifty and saving parents ofmine­ ferrule are black nickel. What is black nickel each slat is given eight grooves by a complex and how is it applied? The complete story machine, after which another machine lays of why the center of my ferrule has no leads in every other slat, applies glue, and black nickel on it would take pages to places another slat atop-a lead sandwich, explain. so to speak. Seven brothers and I are Then there's my crowning glory, inele­ mechanically carved from this "wood­ gantly referred to in the trade as "the plug," clinched" sandwich. the part man uses to erase the errors he My "lead" itself-it contains no lead at makes with me. An ingredient called "fac­ all-is complex. The graphite is mined in tice" is what does the erasing. It is a Ceylon. Consider these miners and those rubber-like product made by reacting rape­ who make their many tools and the makers seed oil from the Dutch East Indies with of the paper sacks in which the graphite sulfur chloride. Rubber, contrary to the is shipped and those who make the string common notion, is only for binding pur­ that ties the sacks and those who put poses. Then, too, there are numerous vul­ them aboard ships and those who make the canizing and accelerating agents. The pum­ ships. Even the lighthouse keepers along ice comes from Italy; and the pigment which the way assisted in my birth-andthe harbor gives "the plug" its color is cadmium sul­ pilots. fide. The graphite is mixed with clay from Mississippi in which ammonium hydroxide No One Knows is used in the refining process. Then wetting agents are added such as sulfonated tal­ Does anyone wish to challenge my earlier low-animal fats chemically reacted with assertion that no single person on the face of sulfuric acid. After passing through numer­ this earth knows how to make me? ous machines, the mixture finally appears Actually, millions of human beings have as endless extrusions-as from a sausage had a hand in my creation, no one ofwhom grinder-cut to size, dried, and baked for even knows more than a very few of the several hours at 1,850 degrees Fahrenheit. others. Now, you may say that I go too far To increase their strength and smooth­ in relating the picker of a coffee berry in ness the leads are then treated with a hot far off Brazil and food growers elsewhere mixture which includes candelilla wax from to my creation; that this is an extreme Mexico, paraffin wax, and hydrogenated position. I shall stand by my claim. There natural fats. isn't a single person in all these millions, "I, PENelL" 277 including the president of the pencil com­ I, Pencil, am a complex combination of pany, who contributes more than a tiny, miracles: a tree, zinc, copper, graphite, and infinitesimal bit of know-how. From the so on. But to these miracles which manifest standpoint ofknow-how the only difference themselves in Nature an even more extraor­ between the miner ofgraphite in Ceylon and dinary miracle has been added: the config­ the logger in Oregon is in the type of uration of creative human energies-mil­ know-how. Neither the miner nor the logger lions of tiny know-hows configurating can be dispensed with, any more than can naturally and spontaneously in response to the chemist at the factory or the worker in human necessity and desire and in the ab­ the oil field-paraffin being a by-product of sence ofany human master-minding! Since petroleum. only God can make a tree, I insist that only Here is an astounding fact: Neither the God could make me. Man can no more workerin the oil field nor the chemist nor the direct these millions of know-hows to bring digger ofgraphite or clay nor any who mans me into being than he can put molecules or makes the ships or trains or trucks nor together to create a tree. the one who runs the machine that does the The above is what I meant when writing, knurling on my bit ofmetal nor the president "If you can become aware of the miracu­ of the company performs his singular task lousness which I symbolize, you can help because he wants me. Each one wants me save the freedom mankind is so unhappily less, perhaps, than does a child in the first losing." For, if one is aware that these grade. Indeed, there are some among this know-hows will naturally, yes, automati­ vast multitude who never saw a pencil nor cally, arrange themselves into creative and would they know how to use one. Their productive patterns in response to human motivation is other than me. Perhaps it is necessity and demand-that is, in the ab­ something like this: Each of these millions sence ofgovernmental orany other coercive sees that he can thus exchange his tiny master-minding-then one will possess an know-how for the goods and services he absolutely essential ingredient for freedom: needs or wants. I mayor may not be among afaith infreepeople. Freedom is impossible these items. without this faith. Once government has had a monopoly of No Master Mind a creative activity such, for instance, as the delivery of the mails, most individuals There is a fact still more astounding: The will believe that the mails could not be absence ofa master mind, ofanyone dictat­ efficiently delivered by men acting freely. ing or forcibly directing these countless And here is the reason: Each one acknowl­ actions which bring me into being. No trace edges that he himself doesn't know how of such a person can be found. Instead, we to do all the things incident to mail delivery. find the Invisible Hand at work. This is the He also recognizes that no other individ­ mystery to which I earlier referred. ual could do it. These assumptions are It has been said that "only God can make correct. No individual possesses enough a tree." Why do we agree with this? Isn't it know-how to perform a nation's mail deliv­ because we realize that we ourselves could ery any more than any individual possesses not make one? Indeed, can we even describe enough know-how to make a pencil. Now, a tree? We cannot, except in superficial in the absence offaith in free people-in the terms. We can say, for instance, that a unawareness that millions of tiny know­ certain molecular configuration manifests hows would naturally and miraculously itselfas a tree. But what mind is there among form and cooperate to satisfy this necessi­ men that could even record, let alone direct, ty-the individual cannot help but reach the constant changes in molecules that tran­ the erroneous conclusion that mail can be spire in the life span ofa tree? Such a feat is delivered only by governmental "master­ utterly unthinkable! minding." 278 THE FREEMAN • MAY 1996 Testimony Galore to one's range or furnace in New York at unbelievably low rates and without sub­ If I, Pencil, were the only item that could sidy; they deliver each four pounds of oil offer testimony on what men and women from the Persian Gulf to our Eastern Sea­ can accomplish when free to try, then those board-halfway around the world-for less with little faith would have a fair case. money than the government charges for However, there is testimony galore; it's delivering a one-ounce letter across the all about us and on every hand. Mail de­ street! livery is exceedingly simple when com­ The lesson I have to teach is this: Leave pared, for instance, to the making of an all creative energies uninhibited. Merely automobile or a calculating machine or a organize society to act in harmony with this grain combine or a milling machine or to lesson. Let society's legal apparatus remove tens of thousands of other things. Deliv­ all obstacles the best it can. Permit these ery? Why, in this area where men have creative know-hows freely to flow. Have been left free to try, they deliver the human faith that free men and women will respond voice around the world in less than one to the Invisible Hand. This faith will be second; they deliver an event visually and confirmed. I, Pencil, seemingly simple in motion to any person's home when though I am, offer the miracle ofmy creation it is happening; they deliver 150 passen­ as testimony that this is a practical faith, as gers from Seattle to Baltimore in less than practical as the sun, the rain, a cedar tree, four hours; they deliver gas from Texas the good earth. 0 THEFREEMANIDEAS ON UBERTY

Education and the Free Society by George Roche

n the verge ofa new century, one ofthe scores for college-bound students, rising Omost important questions we must ask crime, and declining standards in schools. ourselves is: "On what does the free society Businesses are forced to devote huge sums depend?" There are, of course, many an­ ofmoney and time to giving their employees swers, but I would offer this one: The free remedial education courses. This in itself society depends on successive generations has become a multimillion-dollar industry. of citizens who understand what freedom The tragic fact is that in public education is all about and who are willing and able to "nothing succeeds like failure. " Well before defend it. But today our young people are the widely remarked Nation at Risk study growing up in an environment that is, at was published in 1983, we knew we had a best, lukewarm and, at worst, hostile to­ serious problem. By "we," I mean you and ward the basic precepts that have served as I-the man on the street. We were alone in the foundation ofour nation and the bedrock our concern, for, according to the experts of our civil liberties. (in government, the NEA, and the public The American public school system is in school bureaucracy) there was no prob­ large part to blame. Even in its basic struc­ lem-at least not until Ronald Reagan was ture and operations, this system is antithet­ elected and public spending on education ical to freedom; it is a command industry, was supposedly slashed. meaning that all the decisions are made from the top down, and market forces of supply The Growth of Public and demand are completely ignored. As a Education result, the educational establishment is cur­ rently spending enormous amounts of tax­ Let us look at the real record. In the late payer money-so much money that you can 1980s, Detroit News syndicated columnist hardly conceive of it-on an educational Warren Brookes called public education a system that has, on balance, done more "$180 billion monopoly." He reported back harm than good for our children, our econ­ then that, in spite of one of the world's omy, and the future of our nation. highest levels of per-capita spending, our The statistics reveal plumme~ing SAT students were ranking dead last in science Dr. Roche is president ofHillsdale College and and near-last in language skills and social author of12 books. His latest book is The Fall of studies among leading industrialized na­ the Ivory Tower: Government Funding, Corrup­ tions. But in the 1980s, education spending tion, and the Bankrupting of American Higher per pupil rose by 400 percent. That kind of Education (Regnery Publishing, 1994). phenomenal increase is continuing in the From 1966 to 1971, he was director ofseminars at the Foundation for Economic Education. 1990s. Public education is, quite simply, From 1971 to 1990, he also served as a trustee of America's top growth industry. the Foundation. It is fair to ask, then: Are our schools 279 280 THE FREEMAN • MAY 1996 better off? Are our children getting a better Most students take courses called "Intro­ education? Are our workers better equipped duction to Economics" but remain eco­ for their careers? Are they taught a funda­ nomic illiterates. Known as the "dismal mental appreciation for the principles of science," economics in the classroom is bor­ limited government and free enterprise that ing, complex, and biased. Teachers spend lie at the core of the American experience more time on Karl Marx than they do on and that must be preserved and defended if Adam Smith, and the attitude is that anyone we are to prosper as a free society? truly interested in preserving liberty, im­ The answer to all these questions is a proving the lot of the disadvantaged, or resounding no. Between 1963 and 1989, promoting the wise use ofnatural resources average national SAT scores fell an in­ must look to government rather than the credible 77 points, from 980 to 903. Iowa private sector for solutions. achievement tests for junior and senior high We. are clearly failing to. teach the next school students fell ata similar rate. (Don't generation about basic terms, about how the be fooled by any new reports, by the way, market actually works, about its underlying that scores are improving-that is an illu­ values, and about its relationship to our sion. Students now earn an extra 100 points political system. simply by taking the test.) The national These are some ofthe problems in Amer­ drop-out rate has continued to climb; a ican education. But what worries me even quarter of the students now in high school more than these problems is the fact that all will not finish, and in some cities the figure the would-be reformers seem to be advo­ is as high as 50 to 75 percent. It isjust as bad cating the same solutions. What are those at the college level. One half ofall students solutions? More money and more govern­ who enter college never graduate. Those ment control. who do-as I have already suggested-are Look, for example, at the Department of often ill-prepared and lack the critical basic Education, which was created by Jimmy skills needed to pursue their careers. Carter. When Carter left office, the DOE budget was $10 billion. Ronald Reagan Economic Illiterates vowed to abolish the entire agency, but was unsuccessful in his effort to persuade Con­ And what about economic literacy? In gress, and by the time he left office, the DOE test after test, more than 60 percent of the budget was $22 billion-more than double nation's high school seniors cannot define what it had been before. Under George Bush the word "profit." Only half of all college and now under Bill Clinton, spending has seniors can define "inflation," "productiv­ gotten so out-of-control that the Department ity," and "fiscal policy." George Douglas has to borrow money from the next year's observes in his recent book, Education fiscal budget to pay for the current year's Without Impact: "For citizens in a democ­ shortfall-the same kind ofshenanigans that racy to be able to make intelligent decisions brought on the congressional check-kiting about public policy, it is necessary for them scandal, but you don't hear anyone in Wash­ to have a rudimentary knowledge about the ington, D.C., admitting it. national debt, the consequences of taxes, There is a great philosophical dividing line how the Federal Reserve system works, between those who advocate individual re­ how to make sense of the financial pages of sponsibility and old-fashioned virtues, and the daily newspaper." Yet, he adds, mil­ those who merely pay lip service. In Wash­ lions don't know "what money is or where ington, D.C., it is perfectly acceptable to it comes from. " When the savings and loan bend the rules in the name of "the public industry failed a few years ago at a cost of good. " And in public education, it happens billions, "not one person in a hundred could with alarming frequency. We must not for­ give an articulate explanation of what had get the dictum ofSt. Thomas Aquinas-that happened." the end pre-exists in the means. No matter EDUCATION AND THE FREE SOCIETY 281 how good proposed reforms sound or how mentalism, and on the theory of "ultimate much money is used to implement them, frisbee," but they get very little in the way they won't work ifthey are solely dependent of rigorous academic training in history, on politics. English, economics, and math. They are Reform has gone in the wrong direction, also frequently taught that old-fashioned away from the heartland ideas and values concepts like "family, God, and country" which once informed the lives ofvirtually all are really narrow-minded, sexist, and racist Americans. I grew up in the Rocky Moun­ forms of oppression. tains of Colorado between two peaks that formed a part of the continental divide. I The Challenge went to an eight-grades-in-one-room coun­ try school house called Gas Creek School. So, what are we to do? Should we simply My teacher was a woman named Georgie give up on our educational system and House. Like most of the ranchers and min­ continue to try to mend matters once stu­ ers in the upper Arkansas Valley, Mrs. dents are out of school and in the work­ House knew that there was a state govern­ place? Certainly not. We can still salvage ment in Denver and a federal government education. And the main way to do it is to in Washington. She didn't mind. So long as take students out of the system. We ordi­ the government bureaucrats didn't bother nary citizens-not the NEA, not any gov­ her, she didn't bother them. ernment task force-are the ones who can Gas Creek School didn't have any fancy reintroduce competition. We are the ones textbooks, or any computers, or even cen­ who realize that public education will not tral heating, but it offered an outstanding improve as long as it continues to be a education. Without hesitation, I would protected monopoly. match it against anything offered at public There are also other ways to help re­ schools today. Mrs. House educated the introduce competition. The Foundation for children at Gas Creek School as conscien­ Economic Education is one sterling exam­ tiously as if they were her own. They not ple. For 50 years, it has advanced the cause only learned their 3 R's, but they learned of the free society by educating literally what it is to be self-responsible, freely thousands of individuals, many of whom choosing individuals. have been high school and college students Thank goodness for Gas Creek School who have had no previous introduction to and Mrs. House. But where are they today? free market ideas. Though FEE is a com­ Certainly, there are many good schools and paratively small institution, its impact has teachers out there, but they have to fight been like the ever-widening ripples caused against the system, and they have very little by a pebble thrown into a pond. Moreover, freedom to teach in the way Mrs. House did. FEE's success has helped inspire the estab­ How different education used to be! In the lishment ofdozens ofother market-oriented supposedly "backward years" of the early organizations. to mid-twentieth century, we had perhaps J. Patrick Rooney, chairman of the the best educated citizens in the history of Golden Rule Insurance Company-the larg­ the world. But today, in nationwide tests, est provider ofindividual medical insurance tens of thousands of college seniors do not in the world-provides us with another know when Columbus sailed for America, powetful example of how to reintroduce who wrote the Declaration of Indepen­ competition in education. Several years dence, or why the Civil War was fought. ago, he established a $1 million-plus schol­ And these students are not only academi­ arship fund for disadvantaged children in cally ill-prepared; they are culturally, eco­ Indianapolis. After more than 20 years of nomically, and morally illiterate. endless talk and debate about vouchers, It is no wonder. They are free to take tuition tax credits, school choice, and this classes on death, on sexuality, on environ- plan or that, this man simply put his money 282 THE FREEMAN • MAY 1996

where his mouth was. He said, "Are there And, most important ofall, private vouchers kids who want to go to private school who place power in the hands of parents, stu­ can't? Well, then, I'll do something about it dents, and teachers rather than the educa­ right now." What Rooney has done, in tion bureaucracy. We do not all have to have essence, is to privatize vouchers. a million dollars to make private vouchers Private vouchers start working immedi­ work in our communities. We can sponsor ately with no red tape and they don't create individual students, one at a time. a mountain ofpaperwork or need hordes of These examples remind us that it is as administrators to manage them. Unlike easy as that to recover the self-reliant, "government vouchers," which so many "can-do" spirit that once pervaded this people are calling for today, private vouch­ country and that is the lifeblood of the free ers do not make the schools who accept society. And they apply to every facet of them liable to future government control as our society, not just education. Once we supposed "recipients offederal funds. " Pri­ stop looking to Washington, D.C., for so­ vate vouchers also create badly needed lutions, we will find them in our own back­ revenues for good schools, allowing them to yard, and they will turn out to be real expand and help more and more students. solutions, not panaceas. D THEFREEMAN IDEAS ON UBERTY

Fifty Years of FEE­ Fifty Years of Progress in Austrian Economics by Israel M. Kirzner

t this time ofFEE's goldenjubilee, an and was thoroughly ignored in the main­ A Austrian economist's thoughts dwell stream ofthe economics profession. History naturally upon the pivotal role which the of economic thought textbooks published Foundation has played in the survival and soon after the war tended to refer to the resurgence of Austrian Economics during Austrian School in the past tense. The the twentieth·century. The state of and reason for this is, at a superficial level, not prospects for Austrian Economics in 1996 difficult to understand (although the full are far healthier and more promising than explanation for the sudden demise of the they were fifty years ago. This essay briefly School would require a detailed study that sketches some highlights in the develop­ still awaits its doctoral dissertation). Con­ ments that have occurred during these five sider some ofthe basic facts ofthe situation: decades, and draws attention to FEE's im­ 1. A variety of circumstances (including portant contribution in this regard. especially the political unrest in Europe) had, already in the mid-thirties, physically Austrian Economics in 1946 dispersed most of the brightest minds in the interwar Viennese scene. F.A. Hayek An· observer of the intellectual scene in had been brought by Lionel Robbins (later 1946 might have been excused for conclud­ Lord Robbins) to London at the beginning ing that the distinguished tradition of Aus­ of the thirties. Ludwig von Mises had fled trian Economics, the tradition that had be­ to Geneva in 1934; Fritz Machlup, Gottfried gun with Carl Menger, Eugen von Bohm­ Haberler, Oscar Morgenstern, and Paul Bawerk, and Friedrich von Wieser, was no Rosenstein-Rodan (and, of course, later longer alive. The Austrian School, which a Mises himself) eventually found their sepa­ scarce fifteen years earlier had been perhaps rate ways to the United States. Richard von at its peak in professional prestige and had Strigl had died in Vienna during the war. been enjoying widespread attention in the 2. Mises, who had arrived in New York in United States and in England, was, by the 1940, had been cold-shouldered by the U.S. end of World War II, virtually nonexistent economics profession. Not until 1945 was Dr. Kirzner is a professor ofeconomics at New he able to secure a visiting teaching position York University, New York City, and has served at New York University-one hardly com­ as a FEE trustee. mensurate with his international stature. 283 284 THE FREEMAN • MAY 1996

His major work, Nationalokonomie, pub­ hold in economics; advances in the sophis­ lished during the war in Geneva had made tication of mathematical tools used in eco­ virtually no impression-certainly in large nomics were beginning to threaten the lit­ part as a result of the place and date of its erary tradition. Hayek's brilliant wartime publication. (The intensely critical tone of Economica articles on method later to be Knight's review article in the November published as The Counter-Revolution of 1941 issue of Economica cannot have Science were early reactions to the shifting helped, either.) A visiting professorship tides already being felt in economic meth­ afforded Mises neither the stimulus nor the ods. But his passionate appeals on behalf opportunity for intellectual influence which ofsubjectivism and methodological individ­ had been made possible by his famous ualism in the social sciences were falling on Privatseminar in Vienna, nor did he have deaf ears. the relaxed, carefree opportunity for teach­ 5. Paradoxically, a significant element ing and for scholarly work which he had supporting the common impression that the enjoyed in Geneva. Austrian tradition was no longer alive, was 3. Hayek, who had entered the British the earlier success of that tradition in influ­ economics scene with great success in encing the British mainstream in economics. 1931, had, by the outbreak ofWorld War II, A number of Austrians, including Hayek seen his professional eminence sharply re­ and Machlup (and, to a degree, Mises as 2 duced. In the public perception, at least, we1l ), had come to believe that what was he had been decisively defeated by John valid and important in Austrian Economics Maynard Keynes (in regard to business had been successfully absorbed into the cycle and monetary theory) and by Oskar mainstream. Robbins' influential 1932 book, Lange (in regard to the possibility ofefficient The Nature and Significance ofEconomic socialism). His major recent contribution, Science, which is thoroughly steeped in the The Pure Theory ofCapital (1941) was, like Austrian perspectives ofthe late 1920s, was Mises' 1940 book, virtually ignored by the not seen as an attempt to change the sub­ postwar profession. (A 1948 reference to the stance of British economics. Rather the work saw it as not much more than a work was seen (by its author as well as by ,restatement of earlier positions expressed others) as an attempt to teach British econ­ during the 1930s. 1 In any event, the profes­ omists that, with relatively minor adjust­ sion was clearly not now interested in those ments in their methodological orientation, earlier discussions.) Although his 1944 The they would see that their own economics Roadto Serfdom was certainly a resounding had for a long time been entirely congruent success, it was (correctly) seen as a primar­ with the Austrian variety. ily political work rather than one in which This view, that Austrian economics was Hayek was contributing to Austrian Eco­ by now thoroughly integrated into main­ nomics. In regard to both Mises and Hayek, stream thinking, undoubtedly helped the the public perceived Austrian Economics in sense among younger Austrians that there the 1940s as not much more than an unfash­ was no intellectual tragedy to be seen in the ionable ideological residue left over from a physical dispersal of the Vienna group once vibrant but now defunct intellectual among far-flung British and American uni­ tradition. versities. Brilliant young Austrian econo­ 4. The scientific methods which Austrian mists, such as Machlup, Morgenstern, and Economics had consistently applied since Haberler, felt able to pursue economic re­ Menger, were becoming increasingly un­ search alongside their newfound academic fashionable in the profession. Keynesian colleagues, without the need to emphasize economics was making its inroads, pushing any uniqueness derived from their Viennese methodological individualism off center­ training. stage; logical positivism in philosophy was Yet despite all this, Austrian Economics, (with the usual cultural lag) taking a firm as we shall see, was certainly not dead in FIFTY YEARS OF PROGRESS IN AUSTRIAN ECONOMICS 285

1946. In fact, at that very moment both placed before the profession until that time. Mises (in New York) and Hayek (in Lon­ These extensions to Austrian subjectivism don) were deepening their own understand­ by both Mises and Hayek, we now recog­ ings ofthe economic system in ways, rooted nize, can plausibly be linked to their expe­ in Austrian insights, that would profoundly riences during the interwar debate on the influence the subsequent course ofthe Aus­ possibility of socialist economic calcula­ trian tradition. Their work would, in the tion. 4 These experiences gradually taught fullness oftime, inspire a remarkable resur­ Mises and Hayek that what separated their gence of interest in that very tradition. economics from that of the British/ Walrasian neoclassical mainstream was The Extension of Austrian more than language and style. The lessons Subjectivism which these two Austrians respectively learned constituted separate but comple­ What was occurring during the 1940s in mentary extensions of the subjectivism the works ofMises and Hayek was, it is now which had, already for six decades, charac­ apparent in the hindsight of half a century, terized Austrian economics. 5 a most significant extension of Austrian subjectivism. There is a certain drama in Action and Knowledge the circumstance that, precisely at the time when the Austrian tradition seemed most Much of Mises' deepened self-awareness thoroughly extinct, there were emerging is captured in the title of his magisterial from the pens of Mises and Hayek papers work, Human Action. Economics was seen and books that radically deepened the Aus­ and presented as the science of human trian insights which they had inherited from action-with "action" articulated in a way their intellectual forebears. which sets it decisively apart from the util­ To be sure, these advances did not occur ity- or profit-maximizing decision which in a vacuum. Mises had for many years forms the analytical building block of main­ devoted much thought to the methodologi­ stream microeconomics. Mises' analysis of cal foundations of economics. In 1933 he action, it can be argued,6 is unique in its had published a volume ofcollected papers incorporating the entrepreneurial element as Grundprobleme der Nationalokonomie in human choice. This element reflects the (later to be translated as Epistemological open-ended context in which choices are Problems of Economics); many of the in­ made; that is, it reflects the circumstance sights developed in those papers had been that the future consequences of one's ac­ welded together to form the basis for the tions are never "given" to the prospective "praxeological" approach Mises explicitly agent, but must always be conjectured adopted in his 1940 Nationalokonomie. Yet against a background of absolute uncer­ his work in developing the latter volume into tainty as described by F. H. Knight. This his magnum opus, Human Action, was more open-endedness ofMisesian economics has than mere translation. Certainly as far as the subtle but profoundly important implica­ English-speaking world was concerned, the tions for one's understanding of the market 1949 book was a major extension of Mises' process. This process now becomes visible, earlier work. not as a clockwork mechanism grinding out Hayek's work during the 1940s was also, instantaneous solutions to systems ofsimul­ certainly, rooted in his pioneering contribu­ taneous equations (made up of the compli­ tions of the 1930s involving the role of cated supply and demand functions relevant knowledge and learning in the economic in a multi-commodity universe), but, Mises process.3 Yet it can be argued that his 1948 emphasized, as a process of continually collection of papers, Individualism and changing entrepreneurial conjectures con­ Economic Order, offered a fundamentally cerning the open-ended future. In this pro­ fresh, integrated approach that had not been cess, competition plays a role, and is ex- 286 THE FREEMAN • MAY 1996 pressed through innovative entrepreneurial as applied to the understanding of market entry (and threat of entry). outcomes. These views emerged, as already Mises' science of human action consti­ mentioned, as a result ofpainful exposure to tutes an extension of Austrian subjectivism mainstream misunderstandings concerning in that it sees human action as "choosing," the differences between the socialist econ­ as it were, the very framework within which omy and the market economy. In the main­ to engage (simultaneously!) in conventional stream view there was, at that time at least, maximizing decision-making. Choices do virtually no room for entrepreneurial cre­ not merely reflect and express the subjective ativity and very little indeed for knowledge preferences of the agent among given alter­ and learning. Hence, socialist economists natives; choices reflect also (and, for Mises, such as Oskar Lange or Abba Lerner might more importantly) the agent's subjective be .excused for wildly underestimating the judgment concerning the range of alterna­ subtlety and complexity with which a mar­ tive courses of action in fact available, and ket economy spontaneously stimulates en­ concerning the likelihood oftheir alternative trepreneurial awareness and thus sets in outcomes. It is this additional dimension for motion the process of systematic, mutual subjectivism which definitively shapes the knowledge-enhancement. It was in the character ofthe entrepreneurial market pro­ course of their being forced to grapple with cess in Mises' perception. these mainstream misunderstandings, that Hayek's contribution to the extension of Mises and Hayek were led to articulate their Austrian subjectivism consisted in his focus respective restatements ofthe theory ofthe upon knowledge and its role in the market market process. They not only learned that process. In the course ofa remarkable series Austrian Economics had not been success­ ofpapers, culminating in his 1945 American fully absorbed into the mainstream, they Economic Review paper, "The Use of also learned to appreciate more than they Knowledge in Society," and in his 1946 themselves had been hitherto able to do, the paper, "The Meaning of Competition," full implications of Austrian subjectivism in Hayek saw the market process as one of market theory. This enhanced appreciation mutual learning on the part of market par­ deserves to be recognized as a significant ticipants. Such learning is required if a advance in Austrian Economics. disequilibrium set of decisions-i.e., a set of decisions which must to some extent Post-1950 Developments eventually be frustrated because they are based on inadequate mutual awareness-is Despite these important contributions to be replaced by a better coordinated set by Mises and Hayek, the extent ofresearch of decisions. In focusing on knowledge and and teaching activity in Austrian Economics learning, Hayek was offering a radically in the years immediately after the first half altered view of the market process-a sub­ of the century was meager indeed. Mises jectivist view which draws our attention not conducted a seminar (as well as a classroom so much to changing prices or production course) at New York University at which he processes, but rather to the subjective per­ kept the tradition alive. Although the sem­ ceptions of market participants concerning inar included a number of future leaders in the opportunities available to be grasped in Austrian Economics, including especially the market. Murray Rothbard and Hans Sennholz, it No doubt there are significant differences was nonetheless but a pale shadow ofMises' between the Misesian "entrepreneurial" Vienna Privatseminar. Both within the uni­ view of the market process, and the versity and in the profession generally, Hayekian focus upon processes of system­ Mises was seen as a relic ofa bygone era. At atic mutual learning. But it seems reason­ best, he and his seemingly archaic views able to recognize both views as complemen­ were tolerated; more often he was roughly tary extensions of Austrian subjectivism dismissed as an obscurantist ideologue, out FIFTY YEARS OF PROGRESS IN AUSTRIAN ECONOMICS 287 of touch with modem social science tech­ tional Austrian approach. These events niques and encrusted in unfashionable, seemed, moreover, to push economics into rock~ribbed conservatism seen as serving two paths: either along a highly abstract the interests of big business. Although he theoretical road which appeared to be su­ continued to write a remarkable stream of premely unconcerned with the real world, new books (including particularly The Ulti­ concentrating overwhelmingly upon ele­ mate Foundation of Economic Science, gance of mathematical technique; or along 1962, and Theory andHistory, 1957), Mises' an empirical road employing powerful impact upon the profession seemed to be econometric techniques to establish func­ almost invisible. tional relationships relating to extremely Hayek had joined the University of Chi­ narrow slices of real world economic his­ cago in 1950, not primarily as an economist, tory. Both these paths were not just unat­ but as a member of the interdisciplinary tractive (to put it mildly) to appreciators of Committee on Social Thought. Indeed his the Austrian tradition;· it seems fair now to own writing thereafter was to concentrate say with the benefit of hindsight that they upon political philosophy rather than upon drained economics of excitement for sub­ pure economics. In the world of academic sequent generations of graduate students. economics, Keynesian doctrines had be­ Plausibly, all this played a role in laying the come the dominant new orthodoxy, with groundwork for the resurgence ofinterest in even mainstream neoclassical microeco­ Austrian Economics that began to manifest nomics (let alone Austrian Economics) very itself in the mid-1970s. much on the defensive. Hayek's trade cycle theory ofthe 1930s seemed to be completely The Resurgence of forgotten; his recent new work on knowl­ Austrian Economics edge and the economic process was entirely ignored. This writer can (as can many oth­ The works ofMises and Hayek, although ers) attest that Austrian Economics was not they were indeed ignored during the 1950s rejected or disparaged by the economics and '60s, had not been written in vain. And profession of the 1950s and '60s; for the the teaching to which Mises dedicated him­ profession at that time, Austrian Economics selffor years at New York University, while simply did not exist (except, ofcourse, as a largely absorbed by graduate business stu­ chapter in the history ofeconomic thought, dents for whom the study of economic to be studied alongside Mercantilism, Clas­ theory was of distinctly secondary impor­ sical Economics, or the German Historical tance, was yet destined to bear fruit. If School). Mises' contributions were, in those lonely At the same time, developments in the decades, appreciated primarily by a handful mainstream of the profession were pushing of stalwart individuals, almost all of whom and pulling economic thinking in a variety were not academicians, this was to change, of directions. Important work by the mon­ if only gradually. One by one the small etarist school was beginning to undermine number of Mises' U.S. students who ob­ Keynesian dominance, even as it strength­ tained their doctorates under his guidance ened the positivist trends toward an eco­ went outinto the world to teach and to write. nomics consisting largely of econometric (Some ofthose inspired in his seminar went model building and empirical testing proce­ on to obtain their degrees at other univer­ dures. Advances in mathematical econom­ sities.) And his books, as well as those of ics were vastly increasing the sophistication Hayek, began to be discovered by a small of pure theory. These developments were, but growing number of students at univer­ by the early 1970s, restoring the centrality sities around the country. Farsighted net­ of neoclassical microeconomic theory, but working, supported by private foundations, in a way which seemed, ifanything, to widen was able to identify a number of such the gap between that theory and the tradi- individuals thirsting for a more satisfying 288 THE FREEMAN. MAY 1996 economics than they were being taught in profession have not heard, at least, of Aus­ the classrooms of their own colleges or trian Economics; (ii) some of the best pub­ graduate schools. A good deal of this inter­ lishers of economics books are vigorously est was sparked by growing interest in competing to publish the steady stream of libertarian thought, to which it was believed new Austrian books·being written (and in­ Austrian Economics was somehow related. deed the sum total of Austrian work pub­ But many ofthose who discovered Austrian lishedduring the past five years is most Economics in this way were to pursue it impressive in its volume, scope, and quali­ subsequently strictly for its own intellectual ty); (iii) major economics journals, long and scientific worthwhileness, quite apart coldly uninterested in what appeared to from any ideological implications that may them to be an old-fashioned approach, have have been perceived. begun to show a lively interest in publishing The death of Mises in 1973 brought with Austrian contributions; (iv) a number of it a certain amount of attention to his life's professors who were graduate students in work. And, in 1974, all this ferment of the 1980s have since won tenure at univer­ activity and interest culminated in a pivotal sities, based solidly and forthrightly on their event, the now-famous South Royalton scholarly contributions to Austrian Eco­ meeting, at which several lecturers, includ­ nomics. We have every reason to hope that ing especially Ludwig Lachmann and Mur­ the intellectual momentum of this growth ray Rothbard, set forth (in a weeklong series in Austrian Economics will carry it to in­ oflectures and discussions) the foundations creased levels of scholarly activity and pro­ and main features of a subjectivist way of fessional recognition. understanding economics, a way rooted in the work of Carl Menger and articulated in the mid-century contributions of Mises and FEE's Role in the Survival Hayek. and Resurgence of Following the South Royalton conference Austrian Economics (and certainly assisted by the encourage­ ment seen in Hayek's receipt in 1974 of the FEE's identification with Austrian Eco­ Nobel award in economics), there ensued nomics has been unmistakable from its very years of vigorous growth in the number of beginning. The appreciation of how free graduate students pursuing their doctorates markets contribute to societal prosperity while they were absorbing and exploring has been taught by FEE primarily as seen further the subtleties of what sets Austrian through Austrian lenses. Not only Leonard Economics apart from mainstream eco­ Read, but in particularfarsighted and deeply nomic thinking. By the early 1980s a number knowledgeable longtime FEE trustees such offull-fledged faculty members at universi­ as Larry Fertig and Henry Hazlitt, set the ties around the country were self- acknowl­ intellectual tone for FEE and charted the edged " Austrians." Centers of Austrian course of its educational mission. It was academic teaching and research crystallized their vision which brought Ludwig von at New York University, George Mason Mises to FEE at a time when he was, to put University, Auburn University, and the it mildly, all but ignored on the academic University of Nevada, Las Vegas. In addi­ scene. It was through the resources ofFEE, tion many individual faculty members its skilled·use ofthe tools ofcommunication across the country, in Europe, and around and public education, which ensured that the world met at regularly held summer Mises' message would survive. seminars at which they were introduced to There must be few among today's Aus­ Austrian Economics. trian academicians who do not look back By the mid-1990s the upsurge in interest with profound gratitude for the moral and in Austrian Economics has matured to the material support which FEE provided to point where: (i) very few in the economics them, directly or indirectly, in the lonely FIFTY YEARS OF PROGRESS IN AUSTRIAN ECONOMICS 289 years prior to the contemporary revival of to a substantial measure of professional Austrian Economics. This writer can attest recognition and respect, the Foundation for that the very first financial foundation for the Economic Education is entitled to a major New York University doctoral program in share of the credit. As we celebrate FEE's Austrian Economics, was laid through the anniversary, this element in its half century good offices of Leonard Read in the early of achievement, too, deserves 'our recogni­ 1970s. Together with otherfoundations who tion and our appreciation. D have had the vision to support the resur­ gence in Austrian Economics during re­ 1. Howard S. Ellis (editor), A Survey of Contemporary Economics (Homewood, Illinois: Richard D. Irwin [1948] cent years, FEE has continued to play a 1963), volume 1, p. 39. 2. See Ludwig von Mises, Epistemological Problems of central role. For the past eight years FEE Economics (Princeton: Van Nostrand, 1960 [translated from co-sponsored and hosted New York Uni­ the German original, 1933]), p. 214. 3. See especially, "Price Expectations, Monetary Distur­ versity's annual weeklong summer seminar bances and Malinvestment" (1935), in F. A. Hayek, Profits, in Austrian Economics for faculty and grad­ Interest and Investment (London: George Routledge, 1939); "Economics and Knowledge," Economica IV (new series, uate students from around the world. 1937), pp. 33-54 (republished in F. A. Hayek, Individualism FEE's identification with Austrian Eco­ and Economic Order (London: Routledge and Kegan Paul, 1949). For the thesis of continuity in Hayek's work on nomics has become even more deeply en­ Knowledge, see Gerald P. o'Driscoll, Jr., Economics as a graved in its philosophy and activities ever Coordination Problem: The Contributions of Friedrich A. Hayek (Kansas City: Sheed Andrews & McMeel, 1977). since its presidency has been entrusted to 4. See the writer's "The Economic Calculation Debate: the steady hands of Dr. Hans Sennholz, Lessons for Austrians," Review ofAustrian Economics (1988, vol. 2), republished in Israel M. Kirzner, The Meaning of veteran teacher of Austrian Economics to Market Process, Essays in the Development ofModern Aus­ thousands upon thousands of students at trian Economics (London and New York: Routledge, 1992). 5. For development of this thesis concerning the comple­ Grove City College, ever since his comple­ mentarity between the work of Mises and Hayek, see the tion of his doctorate under Mises in the writer's Meaning ofMarket Process, op. cit., chapter 7. 6. For this thesis, see the writer's Competition and Entre­ 1950s. preneurship (Chicago: University of Chicago Press, 1973), pp. Iftoday Austrian Economics has returned 32-37. THEFREEMANIDEAS ON UBERTY

Civil Rights Socialism by Llewellyn H. Rockwell, Jr.

he Fabian Society ofBritain believed in Socialism, U.S. Style T three central doctrines ofpolitical econ­ omy. First, every country must create its What accounts for this? American social­ own form of socialism. Second, socialism ism is a carefully tailored product. First, it imposed slowly is more permanent than the is designed to fit with America's excessive revolutionary form. And third, socialism is devotion to abstractions like democracy and not likely to succeed in Western countries equality. Second, it is designed to exploit ifit appears undemocratic or authoritarian. the radical heterogeneity ofour population. On all these points, the Fabian Marxists Third, its implementation relies on Ameri­ disagreed with Marxist-Leninists. ca's traditionally sanguine view of central­ And just as the Fabians recommended, ized executive power. today's America is under the spell of a We could argue about when American peculiar form of socialism, designed for our socialism first took root. Many say it began political and demographic conditions. with the Great Society. Others trace it to Under Fabian influence, Britain's piece­ the New Deal. There's a good case to be meal socialism was marked by nationalized made that it began in the Lincoln presidency industries, soft planning, extreme labor and the Reconstruction era, which used union privileges, middle-class income redis­ the language of democracy and egalitarian­ tribution, and a government-run medical ism, exploited our radical heterogeneity, industry. and dramatically centralized power in an Here in the United States, on the other imperial executive. That period also pro­ hand, we have little reason to fear nation­ vided a test run for inflationary monetary alized industries or comprehensive plan­ policy and income taxation, two institutions ning. Labor union power seems to be on that the Progressive Era entrenched and the decline. Americans bristle at any hint of which provide the fuel for American social­ direct controls over production decisions. ism today. Our semi-socialized medicine resists change The symptoms ofAmerican socialism are toward greater government control, or less, easy to identify. They appear in legislation with the conservative Republican leader­ like the Americans with Disabilities Act, ship dedicated to "saving" Medicare. But the limitless amendments to the Civil Rights our labor markets, though increasingly de­ Acts, the Community Reinvestment Act, in void ofdirect union control, are more frozen the egregious behavior of the Equal Em­ and regulated than Britain's were at the ployment Opportunity Commission, and in height of union power. all manner ofinterference with the freedom of association. In addition, executive­ Mr. Rockwell is president of the Ludwig von branch agencies issue tens of thousands of Mises Institute in Auburn, Alabama. regulations each year to manage the private 290 291 lives of citizens and the conduct of private pear not only in individuals but also system­ business, including the Department of atically in groups. Housing and Urban Development, the bank­ Men as a group, for example, are different ing regulators at the Federal Reserve, and from women as a group. Northerners are the bureaucrats at the EEOC. different from Southerners. Californians The result has been tyranny. Civil rights are different from Texans. Catholics are lawsuits have shut down thousands ofbusi­ different from Baptists. Blacks are different nesses. Many potential capitalists decide not from whites. Immigrants are different from to open businesses at all for fear ofthe race, natives. The rich are different from the poor. sex, and disability police. Small companies The evidence for these propositions is all routinely do anything within the law to avoid around us and should be celebrated. As advertising for new positions. Why? Be­ Ludwig von Mises pointed out, radical in­ cause government now sends out "testers" equality is the key fact about the human to entrap business in the crime ofhiring the race, and thank goodness. Ifwe were all the most qualified person for ajob. Pity the poor same, there could be no division of labor. real estate agent and the owner of rental Yet our central government attempts to units, who walk the civil rights minefield abolish these differences by forcing individ­ every day. If any of these people demon­ uals and businesses to act as if they did not strate more loyalty to the customers than to exist. The primary means has been the the government, they risk bringing their criminalization of our most serious secular businesses to financial ruin. sin: discrimination. There can be no action The restaurants Denny's and Shoney's, in American life-save the decision of two wonderful examples of capitalism in whom to marry-that discriminates on the action, know all about this. In the last few grounds ofany number ofcriteria as defined years, they were both hit with class action by the government. If anyone commits this suits alleging discrimination. It didn't matter sin, the penalty is cash to the government that the plaintiffs were all trumped up and and the special interests, with a bundle going the specific cases cited were patently fraud­ to the left-wing lawyers who arrange the ulent. For example, one plaintiff found a transfer. foreign object in her hashbrowns and To see just how serious the government claimed it was put there on grounds of her takes this sin, and how absurd the result, race. Both companies decided to settle out consider disabilities law. The EEOC has of court, establish extensive quota pro­ effectively defined disability as any physical grams, payoff all plaintiffs, and set up new or mental limitation. Along with other civil highly subsidized, minority-owned fran­ rights laws, this robs business of any oper­ chises. They did so not because they were ational discretion in the treatment of em­ guilty, but because the so-called justice ployees, how much they are paid, ifthey are system is stacked against them. promoted, or whether they are hired at all. If you have hired a salesman who can't Denying the Obvious remember names, he's got a mental disabil­ ity. You cannot demote him, much less fire The courts enforce an egalitarianism that him, because that would be discrimination. tolerates no acknowledgment of the differ­ Since the ADA went into effect, tens of ences among people, especially not when thousands of complaints, which are threat­ they express themselves along group lines. ened lawsuits, have been filed with the But this denies the obvious. People do differ Equal Employment Opportunity Commis­ radically in their talents and weaknesses, sion. Drunkards are suing for their right their determinations to succeed, their men­ not to show up to work and still get paid. tal facilities, their attitudes and character, Students are suing for their right not to study their physical abilities, and their physical and take tests. The government is siding makeup. Moreover, these differences ap- with every conceivable complaint, from 292 THE FREEMAN • MAY 1996 men who want to work as waitresses in people on the political left propose an ex­ restaurants with all-women workforces to plicit quota program for lending, which people in wheelchairs who want to dance on would effectively require banks to give loans stage. to minorities regardless ofcredit history,job The number ofprivate complaints against history, or assets. The pool of loanable employers in which no suits are filed but funds has become a convenient substitute result in settlements would be impossible for direct welfare benefits, and it's just as to count. The amount of lost wealth is vast redistributionary. and growing. With the ADA, there is even­ The same is true in other sectors of the tually no way to comply, because there is economy. Consider two recent government no way to prepare for every possible con­ housing programs: Moving to Opportunity, tingency, every possible lawsuit or govern­ which is administered by HUD, and resi­ ment ploy. dential integration, which is administered by The ADA illustrates an important point the Justice Department. In both cases, the about anti-discrimination law, the central government has declared that all voluntary pillar of American socialism. Contrary to group associations resulting in racial dispro­ myth, rules against discrimination never portionalities are segregationist by defini­ create a level playing field. Forbidding one tion. That term no longer refers to de jure form of discrimination must necessarily action but to the de facto results of volun­ compel another. If a person is forbidden to tary behavior. To remedy the non-problem discriminate in hiring on grounds of sex or that people tend to group themselves by race, the government can only discover a their similarities, HUD has a program to violation of the law by looking at who is give minorities in city slums the financial hired. This compels active discrimination means to move to middle-class suburbs. against people on grounds of their sex or An incident in Vidor, Texas, illustrates race. It is a zero-sum game where one per­ something about the use of force. The Jus­ son's winnings come from another's losses. tice Department and HUD orchestrated a The only way to end this is through the repeal propaganda blitz against this insular and ofall anti-discrimination laws, and all other peaceful community, painting it as thor­ laws that violate the freedom ofassociation. oughly racist. This paved the way for federal Until that happens, whole institutions are marshals to install some new minority res­ being destroyed in the name ofstamping out idents into a housing complex whose resi­ discrimination. The banking sector has been dents wanted to be left alone. And this is racked by complaints that it discriminates representative ofwhat is happening to every against minorities in its granting of loans. business in the country. You might think the regulators would con­ In many respects, a firm is much like a sider that minorities have relatively weaker community. It has its own internal culture credit ratings and fewer assets. In fact, that that bestdevelops and thrives in the context doesn't matter, since the executive agencies of liberty. Whether the federal bureaucrats enforcing equality care only for the numbers. are invading Denny's, Decatur Savings & In the banking sector, tens ofbillions have Loan, or Vidor, the effect is the same: to been doled out to satisfy interest groups who snuff the very life out ofthe business world cry discrimination. Fleet Financial Group and the communities around the country. surrendered to an extortionist who used The media and the government imply that complaints of group victimology. Decatur because one firm hasn't hired and promoted Savings & Loan in Atlanta was put out of a member of every politically represented business by a federal lawsuit. Sovran Bank group then no firm is going to. This reveals had to buy its right to become Nationsbank a misunderstanding ofthe nature ofcompe­ by handing out welfare checks to the polit­ tition. In a free market, competition is not ically correct. only between laborers but also between This campaign has only just begun. Some whole firms and communities of firms. We CIVIL RIGHTS SOCIALISM 293 must allow diversity between firms, even if the other. Equal protection of life and pri­ it is does not exist within them. vate property from violent transgressions is Free markets and private property are the only ideal of equality that is consistent all of a piece. We cannot have free labor with individual liberty. markets so long as we don't have the free­ The free market economy has a record dom to hire and fire. It is as essential that like no other ofoffering economic advance­ women's health clubs be allowed to exclude ment for everyone no matter what his sta­ men as it is for Korean restaurants to be able tion in life. But it does not offer equality of to hire and promote only Koreans. These result or equality of opportunity. How can are the rights and privileges that come with opportunity be equated between the quick­ private property. If we limit them, we en­ witted and simple-minded, between the en­ danger the foundation of capitalism and ergetic and the lazy? The free market offers civilization itself. not an unstratified society, but something of real value: liberty itself. And civil rights Forced Equality laws violate that liberty. Libertarian philosophers have long America's peculiar version of socialism pointed out that the conventional separation is just as coercive as any other form. Yet between human rights and property rights because it is more expansively egalitarian is a false one. Ifproperty rights are violated, than others have been, the ill-effects are so are human rights. If property rights are made worse by the demographic differences protected, so are human rights. in the American population. Forced equality The same logic applies to civil rights. If has no chance ofsuccess in any country, but they are invoked at the expense of private especially not here. The attempt has property-which they are by definition in wrought destruction, and if extended much the U.S. legal context-they violate rights. further, will create a reign of terror. What Herbert Spencer called the "law of America's fascination with equality equal freedom"-in which a person has stretches back to the Declaration of Inde­ property rights and no special privileges­ pendence, when Mr. Jefferson penned the means a society in which people can dis­ obvious untruth that all men are created criminate or not discriminate, i.e., make equal. He couldn't have meant it literally or choices, on any grounds of their choosing. in the way it is used today. In the very same Sometimes those who think that civil document, Jefferson accuses the King of rights have gone too far see the problem exciting insurrections among the''merciless in terms of quotas. This is a misdirection Indian savages, whose known rule of war­ of intellectual energy. Under a pure prop­ fare is an undistinguished destruction of all erty regime, people are free to impose quo­ ages, sexes, and conditions." tas if they desire. Even the alleged dream In those two statements, we find the of a perfectly integrated society could be essential contradiction of the American achieved ifthat is what market actors chose. democratic faith. We are supposed to want It is also the case that a "separated" society people to be equal. We are supposed to want could result. the president to insure it to be so. Based on experience, what we are likely If we are ever to reverse our current to see in a regime of pure property rights course, we must pay closer attention to the is authentic diversity, rather than the wisdom of Alexis de Tocqueville, John C. trumped-up form imagined by government Calhoun, John Randolph ofRoanoke, Lord bureaucrats. Some firms, companies, and Acton, Helmut Schoeck, Bertrand de Jou­ communities would be homogeneous, while venal, Ludwig von Mises, Murray N. Roth­ others would be heterogeneous. But the bard, and all the others who have taught us more important goals of social peace and that liberty and equality are incompatible prosperity would be met in a demographic goals. One always comes at the expense of free market. 294 THE FREEMAN • MAY 1996

But would vulnerable populations be The capitalist or commercial society, he helped? Yes, but not as a result of special says, is defined by two elements: first, rights and coercion. The division of labor private property in the means ofproduction; finds a place for all sorts of people, and second, regulation ofthe productive process encourages a culture ofproductivity, which by private contract, management, and ini­ would eventually replace the no-win culture tiative. By Schumpeter's definition, we only of envy and victimology. have capitalism in the first sense. We have As the Fabians recognized, there are as private property, but no longer can we many varieties of socialism as there are govern the productive process by private nations. We are cursed with a particularly contract, management, and initiative. The vicious sort that denies the right of associ­ government exercises veto power over all ation, rejects essential aspects of the free­ matters of economic management. dom of enterprise, and combats natural By socialist society, he further writes, he inequalities as ifthey represented a disease means an institutional pattern in which the on the body politic. control over the means of production itself As executive agencies acquire ever more is vested with a central authority, or as a power and money, and run roughshod over matter of principle, the economic affairs of all aspects ofprivate life, we are encouraged society belong to the public and not to the to look the other way. At this rate, we may private sphere. eventually disprove the old Fabian teaching Which does our society most closely re­ that socialism in Western countries cannot semble: Schumpeter's commercial society succeed if it appears undemocratic or au­ or Schumpeter's socialist society? Certainly thoritarian. we know where the trend line is pointing. Anyone familiar with Joseph Schumpet­ And we know what to do about it: eliminate er's paradoxical prediction that socialism all violent intervention in the market, and would win out over capitalism might also allow for the flourishing offreedom of con­ think that the retreat of socialist govern­ tract and association, and the protection of ments in 1989 disproved him .. In light ofour private property. present situation, let's revisit Schumpeter. That is the only way to dig ourselves out In Capitalism, Socialism and Democracy ofthe pit ofthis peculiarly American form of he defines his terms very carefully. socialism called civil rights. D THEFREEMAN IDEAS ON UBERTY

Environmental Protection: The New Socialism? by Jane S. Shaw

n 1990, the economist Robert Heilbroner (and much of the developed world) has I expressed genuine surprise at the collapse experienced the results of this basic misun­ of socialism. Writing in The New Yorker, derstanding, the view that economic growth he recalled that in the debates over central poses an "ecological burden." The nation planning in the 1930s and 1940s, socialism has acted upon the premise that more pro­ seemed to have won. A halfcentury later he duction leads to more smokestacks puffing realized that he had been wrong and that out more pollutants and more sewage pipes "Mises was right.,,1 sending more heavy metals and otherwastes Since Heilbroner has leaned toward so­ into our streams, and that only government cialism for most of his career, he deserves regulation can stop the process. This as­ creditfor admitting that he was so mistaken. sumption has led to extensive federal inter­ Yet by the end of his revealing essay, vention in normal activities, from manufac­ Heilbroner was suggesting that perhaps so­ turing to logging and, ultimately, to absurd cialism wasn't dead, after all. He proposed results. "another way of looking at, or for, social­ • The federal government defines a "wet­ ism." He suggested that we think of social­ land" in such a way that it doesn't have to ism "not in terms of the specific improve­ be wet, as long as it has vegetation typical ments we would like it to embody but as the of wetlands. It regulates wetlands on the society that must emerge if humanity is to basis of the Clean Water Act, which does cope with the one transcendent challenge not mention the word wetland (the relevant that faces it within a thinkable timespan." provision was originally designed to prevent That challenge, says Heilbroner, is "the pollution into "navigable waters"). People ecological burden that economic growth is have gone to jail for dumping a few loads of placing on the environment." dirt on such "wetlands." Heilbroner's characterization ofenviron­ • The Endangered Species Act has been mental problems is as misinformed as his interpreted so severely that people are now half century of wishful thinking about so­ deliberately modifying the habitat of their cialism. But this should not be surprising. land so that endangered species will not Environmental issues- frequently overwhelm settle on it. Without the act they would have intelligent thought and factual analysis. been pleased to have a bald eagle or red­ For the past thirty years, the United States cockaded woodpecker take roost. • The government ofAnchorage, Alaska, Jane S. Shaw is a Senior Associate ofPERC, a is adding 5,000 pounds offish waste per day research center in Bozeman, Montana. into its sewage water. Environmental Pro- 295 296 THE FREEMAN • MAY 1996 tection Agency regulations require that 30 bargo of1973, the book's predictions looked percent of the organic material in sewage credible. be removed before the sewage reaches the And, indeed, there were environmental ocean; but in Anchorage, the sewage problems. In many cities the air was dirty, doesn't have enough organic material. It and rivers were polluted and full of debris. must be added and then 30 percent must be The Cuyahoga River is said to have actually removed. 2 caught fire in 1969. The event became a • Strict controls on grazing practices symbol of the severity of pollution and have prevented the adoption of innovative galvanized many people to do something range management. On private land, the about it. Deseret Ranch in Utah, for example, stocks This determination to "do something" hundreds ofcattle, while the Bureau ofLand came at a time when Americans were look­ Management, which manages public land on ing to the federal government to solve just the other side ofthe fence, can barely allow about any problem. The nation had just thirty animals on similar acreage. embarked on the War on Poverty, and the • The EPA contends that a mobile home Apollo program to land a man on the moon parkin Aspen, Colorado, is built on an was nearing its objective. extremely dangerous mine waste site, and State and local governments, which had that residents face harm from lead poison­ taken on some responsibility for environ­ ing, even though those who have lived mental regulation, were not always aggres­ there for years have blood lead levels below sive in tightening environmental regula­ the national average. The EPA has made tions, since they knew that residents did the park a Superfund site, and insists on a not necessarily want the. goal of cleaner air costly and disruptive cleanup. Other small and streams to override all other goals. But mining towns similarly face a belligerent environmental activists considered these at­ EPA. titudes parochial, unenlightened, and polit­ ical. They sought more control at the federal How This Situation Arose level, and they got it. Pollution control went offin a "bold new direction," says textbook After World War II, as incomes rose, author Thomas Tietenberg, with a "mas­ people's attitudes toward the environment sive attempt to control the injection of around them changed. "Postwar affluence substances into our air.,,7 That federal at­ had produced a generation reared in relative tempt is still going on. comfort, one now in search of 'postmate­ The nationalization of pollution control rial' values long deferred by their elders," did not eliminate environmental politics, of writes Christopher Bosso, attempting to course, but changed its location. Today, explain the rise of environmentalism in the local and state governments find themselves 1960s.3 in battles with the Environmental Protection Against the backdrop of growing wealth Agency as it threatens to cut offfunds ifthey and leisure, the 1962 publication of Silent don't meet the EPA's standards. And con­ Spring,4 an eloquent book by Rachel Car­ gressmen from one state pit themselves son, dropped like a bombshell. It aroused against those of other states, with the in­ fears that the natural world was being dam­ dustrialized "Rustbelt" states in the North­ aged, perhaps destroyed, by human tech­ east and Midwest voting to impose heavier nology. In 1972 another book, The Limits to controls on new plants built in "pristine" Growth,5 raised fears offamine, overpopu­ areas such as the growing "Sunbelt.,,8 lation, and resource depletion. The authors predicted that "the limits to growth on this A Basic Misunderstanding planet will be reached sometime within the next one hundred years.,,6 When energy All this has happened because most peo­ prices skyrocketed after the OPEC oil em- ple don't know that economic growth and ENVIRONMENTAL PROTECTION: THE NEW SOCIALISM? 297 environmental protection are closely and save money by saving expensive chemicals positively linked. Economists are well or metals rather than losing them in the aware of this. A study by Gene Grossman waste stream. So there is· an inexorable and Alan Krueger of Princeton University9 tendency to reduce pollution. suggests that at low levels of income, eco­ These two reasons explain why the air in nomic growth puts initial stress on the the United States was getting cleanerfaster environment, but after a certain level of during the 1960s than in the 1970s, when the wealth is reached the environment begins Clean Air Act was passed. 11 And private to improve. They indicated, for example, air property rights also encourage efficient use pollution begins to decline when per capita of raw materials. income reaches between $4,000 and $5,000 In 1965, the production of 1,000 metal (in 1985 dollars). beverage cans required 164 pounds ofmetal Another indication of this link is the (mostly steel). By 1990, this required only 35 affluence of environmentalists. For exam­ pounds (mostly aluminum). 12 And the trend ple, members of environmental organiza­ is toward ever lighter cans for the. simple tions tend to be among the more aflluent reason that it is possible to save millions of Americans. A typical reader of Sierra, the dollars. Reducing the aluminum can's metal magazine ofthe Sierra Club, earns twice the by 1 percent will save about $20 million a 13 average American income. 10 year. The profit motive spurs both inno­ In other words, as people become more vation and cost savings. affluent, they become more interested in Another illustration of this trend toward protecting environmental amenities. That efficiency is Mikhail Bernstam's compari­ doesn't in itself eliminate pollution, which son of resource use in socialist and market will continue as long as the airand waterare, economies. He found that the market-based to some extent, "free goods." But in a economies used about one-third the amount system based on private property rights, of energy and steel, per unit of output, that several factors encourage people to limit the socialist countries used. 14 pollution. Partly due to the growth of incomes and One factor is the common law, specifi­ the growing awareness of the environment, cally the legal doctrines ofpublic and private private conservation has been a hallmark of nuisance, trespass, wrongful bodily inva­ American society for more than 100 years. sion, and riparian law. Although court suits Late in the nineteenth century, for example, are used less now, in the past when pollution the National Audubon Society created a was severe and when it affected a few people system of bird refuges around the country; disproportionately (not the community as a early in the twentieth, the Sempervirens whole), courts would provide protection, Club began saving California redwoods, in either through damages or injunctions large part through private donations. In the against further pollution. People have a right 1930s, activist Rosalie Edge and a small against invasion ofthemselves ortheir prop­ group offriends bought a few hundred acres erty by harmful pollutants. This protection to create the Hawk Mountain Sanctuary in has never been perfect, but it has prevented eastern Pennsylvania, to stop the slaughter or ended severe pollution. ofbirds ofprey. But this rich vein ofhistory, Second, over the long run, the profit of which these examples are mere nuggets, motive encourages owners to reduce pollu­ is little known. tion. Over the short term, they may be able to lower costs by letting waste out the The Situation Today: smokestack, but that waste costs them Hopeful or Disturbing? money. Particulates in the air often are unburned fuel; by using that fuel rather than In the late 1980s, Ocie Mills began to build letting it go up the smokestack, companies a home for his son near Santa Rosa County, can save money. Similarly, companies can Florida. He poured clean fill dirt on the 298 THE FREEMAN • MAY 1996 property. Although he had the approval of vironmentalism. The "moderate" Republi­ state officials, he had failed to obtain a cans, terrified at losing the moral high permit from the federal government for ground by being viewed as anti-environmen­ filling a wetland. Mills and his son each tal, have stopped the reform movement. served a 21-month prison sentence for fail­ What is needed is a better understand­ ing to obtain a permit. 15 ing ofenvironmental protection, and partic­ Criminals to some, they were to others ularly its connection with economic growth victims ofregulatory excess. And gradually, and the institutions.that promote economic individuals such as the Mills were joined growth. This educational process will take by hundreds, and then thousands, ofpeople time, but the evidence is there to achieve who had felt the encroachment ofthe federal that understanding. To borrow Heilbroner's government. These people formed grass­ words, that is our "transcendent chal­ roots groups around the country and be­ lenge." D came the nucleus of the modern property rights movement, a movement that has been 1. Robert Heilbroner, "After Communism," The New 16 Yorker, September 10, 1990, p. 91ff. called a revolution. The anger of these 2. Ann Reilly Dowd, "Environmentalists Are on the people who felt their rights had been tram­ Run," Fortune, September 19, 1994, p. 98. 3. Christopher J. Bosso, Pesticides and Politics: The Life pled helped bring sweeping changes to Con­ Cycle of a Public Issue (Pittsburgh: University of Pittsburgh, gress in the 1994 election. 1987), p. 111. 4. Rachel Carson, Silent Spring (Boston: Houghton Mif­ The 1994 election was greeted by jubilant flin Company, 1962). expressions of hope for a rollback of major 5. Donella H. Meadows et aI., The Limits to Growth: A Reportfor the Club ofRome's Project on the Predicament of regulations, repeal of some laws, and a Mankind (New York: Universe Books, 1972). general recognition that less government is 6. Meadows et al., p. 23. 7. Thomas Tietenberg, Environmental and Natural Re­ better. And the new House of Representa­ source Economics (Glenview, Ill.: Scott, Foresman and Com­ tives started out with substantial plans for pany, 1984), pp. 293-4. 8. Robert W. Crandall, Controlling Industrial Air Pollu­ regulatory reform. But these quickly fizzled. tion: The Economics and Politics of Clean Air (Washington, The reason is the same one that bothered D.C.: The Brookings Institution, 1983), pp. 129-30. 9. Gene M. Grossman and Alan B. Krueger, "Environ­ Robert Heilbroner-the feeling that eco­ mental Impacts of a North American Free Trade Agreement" nomic growth and environmental protection (Discussion Paper in Economics, Woodrow Wilson School of Public and International Affairs, Princeton University, Prince­ are incompatible without the strong arm of ton, N.J., February 1992), p. 5. federal regulation. Environmental activists 10. 1992 "MRI Reader Survey" (San Francisco: Sierra Club, 1992), p. 1. found that they could build on this idea and 11. Crandall, p. 19. frighten people into thinking that the 1994 12. Lynn Scarlett, "Make Your Environment Dirtier­ Recycle," The Wall Street Journal, January 14, 1991. election had unleashed a destructive mon­ 13. William F. Hosford and John L. Duncan, "The Alu­ ster. minum Beverage Can," Scientific American, September 1994, pp.48-53. Unfortunately, the strong positive role of 14. Mikhail Bernstam, The Wealth of Nations and the the private sector in protecting the environ­ Environment (London: Institute of Economic Affairs, 1991), p.24. ment is mostly unknown to Congress. Even 15. Richard Miniter, "Wetlands Send Man up the River," Newt Gingrich, House Speaker and pro­ Insight, December 14, 1992, p. 31. 16. Bruce Yandle, LandRights: The 1990s' Property Rights ponent of less government, appears to be Rebellion (Lanham, Md.: Rowman & Littlefield Publishers, completely unfamiliar with free-market en- Inc., 1995), p. ix. THEFREEMAN IDEAS ON UBERTY

Freedom and American Labor Relations Law: 1946-1996 by Charles W. Baird

t the close of World War II, large seg­ seated in January 1947, immediately entered A ments ofthe American economy were into a battle with President Truman on the in the iron grip of forced unionism. The issue of taming the unions. The result was Norris-LaGuardia Act (1932) together with the Taft-Hartley Act which became law on the National Labor Relations Act (NLRA, June 23, 1947, by a congressional override 1935) had effectively exempted labor unions of Truman's veto. from the ordinary rule of law to which all This essay first outlines some basic prin­ individuals and other institutions were sub­ ciples ofthe common law ofcontract, prop­ ject. John L. Lewis, the notorious leader erty, and tort and explains what Norris­ of the United Mine Workers, actually was LaGuardia and the NLRA substituted for allowed to endanger the war effort in 1943 by it. It then explains the ineffectiveness ofthe a massive strike in the coal mines. Only the Taft-Hartley to ameliorate the worst ex­ passage of the War Labor Disputes Act of cesses of Norris-LaGuardia and the NLRA that year, over President Roosevelt's veto, despite its authors' hopes. The third section stopped the strike.! That Act expired after discusses the phenomenon of government­ the war, and there followed an "unprece­ sector unionism and why it is the only form dented wave of strikes that were to almost of unionism that is prospering in 1996. In overwhelm the nation during the winter of conclusion, on the horizon may be changes 1945 and the first half of 1946.,,2 Accord­ in American labor relations law that are ing to Congressman Fred Hartley, the co­ consistent with the principles of a free sponsor of the 1947 Taft-Hartley Act, labor society articulated by FEE in the past fifty racketeering was so pervasive that the press years. almost ignored it as commonplace. 3 Largely because of union-based chaos, Common Law, Norris­ terror, and corruption, and the widespread LaGuardia, and the NLRA perception that the Democratic party was in thrall to union bosses, Republicans gained Common Law and Voluntary Exchange control of both houses of Congress in the The definitive common law critique of off-year elections of 1946 (as they did again American labor relations law is Richard in 1994). The 80th Congress, which was Epstein's "A Common Law for Labor Re­ lations: A Critique of the New Deal Labor Dr. Baird, a contributing editor ofThe Freeman, is a professor ofeconomics and the director of Legislation.,,4 Prior to the 1930s, the em­ The Smith Center for Private Enterprise Studies ployment relationship was simply one of at California State University, Hayward. voluntary exchange contract between a will- 299 300 THE FREEMAN • MAY 1996 ing employer and a willing employee. The Employers' Common Law Rights proper role ofgovernment was "to prevent Prior to Norris-LaGuardia and the NLRA, the private use of force and violence and an employer had a common law right to to enforce promises, except when those resist the unionization of his firm. For ex­ promises are induced by duress or misrep­ ample, as part of a job description, he was resentation, or made by persons ofmanifest free to include a requirement that a pro­ incompetence such as infants and insane spective employee refrain from union­ persons.,,5 related activity. An employee who accepted The common law develops over time as a job offer that included that union-free (or successive judges discover the moral and so-called "yellow dog") requirement was logical implications of the principles of vol­ bound by his promise. A union that subse­ untary exchange in many different kinds of quently tried to get the employee to join a disputes in many different kinds of circum­ union and also to continue the employment stances. Voluntary exchange contracts meet relationship would be guilty of the tort of four criteria: inducement of breach of contract.6 Note, 1. Entitlement. All parties to the contract the union-free agreement did not prevent must either own that which they offer to workers from joining unions. They simply exchange, or they must be acting as the required that if a worker chose to join a authorized agent ofthe owner(s). Inemploy­ union he had to sever the employment ment contracts, workers own their labor relationship. Prior to 1932 government en­ and employers own thejob (in thesense that forced these union-free contracts like any they own or lease the plant and equipment othercontracts.7 In 1932, Norris-LaGuardia and site at which the job is done). Workers made them unenforceable, and three years and employers are free to hire or not hire later the NLRA made them illegal. agents to represent them in the labor mar­ Another way that an employer could le­ ket. gally resist unionization under the common 2. Consent. All parties to the contract law was to hold meetings with employees, must agree to enter into the contracting re­ on his time and premises, to try to convince lationship-Le., to bargain with each oth­ them, without misrepresentation, that er-and to the terms at which any actual ex­ unions were a bad choice for employees. change takes place-i.e., the final outcome The NLRA imposed a gag order on employ­ ofthe bargaining. No forced bargaining can ers. The NLRA forced employers to remain result in a voluntary exchange contract. silent on the question ofunionization. It was 3. Escape. All negotiating parties must none of their business. It was up to the be able to tum down any offers they do not employees and the unions, without inter­ like and walk away from the bargaining vention from the employers, to decide the process without losing anything to which issue of unionization. Section 8(1) made it they are entitled. There is no requirement an "unfair labor practice" for an employer that bargaining continue until a satisfactory "to interfere with" the employee's decision deal is made or that either side must make to unionize. While interference by means concessions. of force or fraud are properly enjoined, 4. No misrepresentation. No party to the "interference" in the form of honest ex­ contracting may defraud any other parties. pressions ofopinion to the effect that unions That is, no one can tell a lie. This leaves are bad for workers are not. room for honest error. Someone can make Another wayan employer could legally a claim that he believes to be true when resist unionization under the common law made, even if it turns out later to be incor­ was to refuse to hire a worker who was rect. Moreover, this criterion does not re­ known to want to unionize his firm. Workers quire the parties to tell all they know. It in unionized firms are faced with conflicting merely proscribes any person saying some­ demands for loyalty. If I run a union-free thing he knows to be false. shop my employees will be more loyal to FREEDOM AND AMERICAN LABOR RELATIONS LAW: 1946-1996 301 the firm than if they are unionized. As an property, through force or threat of force, ordinary measure of self defense, the com­ Jones is guilty of trespass. What then of mon law would allow me to refuse to hire union organizers, strikes, and picketing? anyone who would reduce the loyalty ofmy As we saw above, Section 8(1) of the employees to my firm. Section 8(1) of the NLRA made it an unfair labor practice for NLRA made it an unfair labor practice for an employer''to interfere with" an employ­ an employer to discriminate for or against a ee's decision to unionize. In addition to worker based on his membership or non­ restrictions on employer speech, this was membership in a union. interpreted to prevent an employer from Employers also had a common law right denying union organizers access to his to choose to promote unionism. For exam­ plant. Suppose my employees are interested pIe, an employer was free to agree with a in signing up for computer instruction. A union to hire only workers who had chosen representative of a computer training firm to be its members. So long as the employer shows up at my door asking to speak to my and the union were not forced to bargain employees. I have a common law right to over the issue, and so long as both con­ prevent that representative from entering sented to the arrangement without coercion my plant at any time and talking with my or misrepresentation, it was a voluntary employees during working hours. But, un­ exchange contract which the government der the NLRA, if a union organizer showed was supposed to enforce. The NLRA forced up at my door asking to speak with my employers to bargain with unions to set up employees, I could not keep him out of the such" closed shops." Moreover, the unions plant. I could prevent him from talking with with which the employers were forced to my employees while they were working, but bargain were not made up of voluntary I could not prevent him from talking with members. The NLRA forced all individual them, on my premises, during breaks. workers to be represented by the union that A strike is more than just a collective was "selected" by a majority of workers. withholding of labor by workers who each Employers had a common law right to regard the employer's offer ofcompensation set up their own unions. These were called (or some other proposal) to be inadequate. company unions, and they were very com­ A strike is that, but it is also, through picket mon during the 1920s. They were programs lines, an attempt to prevent replacement by which employers sought to bring employ­ workers, suppliers, and customers from ees into some decision-making. They were doing business with the struck firm. Mass early examples of what today are called picketing, even ifit is peaceful, is intimidat­ worker-management cooperation schemes. ing. It is an implicit (and most often an They were also used by some employers to explicit) threat of harm to anyone who deflect the organizing efforts ofindependent crosses the line. As such, picketing is tres­ unions. The NLRA made company unions pass against the common law property right illegal. of the strike target to do business with willing replacement workers, suppliers, and Other Special Privileges for Unions customers. The U.S. Supreme Court upheld The common law of property entitles that common law right in American Steel an owner to "possess, use, and dispose" of Foundries v. Tri-City Central Trades Coun­ that which he owns as he sees fit so long as cil (257 U.S. 184 [1921]). The Court limited in so doing he does not engage any other pickets to one per entrance, and stated that person in any involuntary exchange. Jones all pickets had to be actual employees ofthe who seeks to enter, remain on, or use the firm being picketed. Strangers, nonstrikers property of Smith may do so only with bussed in by the union to create formidable Smith's permission. Absent that permis­ picket lines, were forbidden to picket in sion, Jones is guilty of trespass. Moreover, strikes. The Court allowed one picket per if Jones blocks access of others to Smith's entrance on free speech grounds, but disal- 302 THE FREEMAN • MAY 1996 lowed mass picketing and any picketing by The common law includes the doctrine of strangers on grounds of the common law respondeat superior, or vicarious responsi­ ofproperty and trespass. Norris-LaGuardia bility. IfI am driving a delivery truck for my repealed the Court's Tri-City decision. It employer and I hit a pedestrian, I am liable permitted mass picketing, including picket­ for damages, and so, too, is my employer. ing by strangers. As a driver for him, I am his agent. He is Worse than that, it allowed violent pick­ responsible for any damages I create. Under eting to prevent replacement workers, sup­ the common law, the same rule would apply pliers, and customers from crossing the line. to labor unions. Under the NLRA, if I am Norris-LaGuardia prohibited federal judges walking a picket line at the behest ofa union, from issuing injunctions against picketing, and I hit a replacement worker overthe head or other strike activity, even if violence with a hammer, I am liable for damages (and was involved. (It was left to the usually even criminal prosecution by local authori­ outnumbered local police officials to keep ties), but the union that placed me on that the peace.) Specifically, Section 7(c) of picket line is not. Norris-LaGuardia gave Norris-LaGuardia said no strike activity unions complete freedom from vicarious could be enjoined by a federal court unless responsibility. No union can be prosecuted testimony, subject to cross examination and for any of the acts of its strikers, no matter accompanied by rebuttal testimony, had how violent oreven ifunion bosses order the been taken which leads the judge to think violence. "thatas to each item ofreliefgranted greater The heinous results of the special privi­ injury will be inflicted upon complainant leges granted to unions by Norris-La­ [the employer seeking the injunction] by the Guardia are well illustrated in the case of denial of relief than will be inflicted upon Apex Hosiery Co. v. Leader (310 U.S. 409 defendants [the violent union picketers] by [1940]). The employer was operating on an the granting of relief." Suppose a gang is open-shop basis. Th~ union wanted to force raiding an office building. If Section 7(c) of all 2,500 employees to unionize. Eight em­ Norris-LaGuardia applied, ajudge could not ployees who were union members, joined enjoin the raid unless competing testimony by members of the same union who were led him to think that the damage to the employed by other firms (Le., strangers to building owner if the raid continues would Apex), undertook a sitdown strike. In other be greater than the damage to the gang ifthe words, they occupied the premises of the raid were stopped. employer, prevented willing employees There is a common-law proscription of from working, and proceeded to destroy "combinations in restraint of trade." The machinery on the shop floor. The company 1890 Sherman Antitrust Act and the 1914 applied for an injunction against the union Clayton Act were codifications ofthat com­ on Sherman Act grounds of a violent com­ mon law proscription. Prior to Norris­ bination in restraint of trade including tres­ LaGuardia, labor unions were subject to pass on private property. In the end the U.S. the antitrust laws. Some secondary strikes Supreme Court denied the company any (e.g., a strike of the employees of firm A relief by claiming that Norris-LaGuardia against firm B that isacustomerora supplier protected unions from any antitrust prose­ of firm A) were enjoined as impermissible cution. In the words of the Court, "Re­ restraints of trade. Violent primary strikes straints not in the [Sherman] Act when were also sometimes enjoined on antitrust achieved by peaceful means, are not grounds. But Norris-LaGuardiagave unions brought within its sweep merely because, immunity to the antitrust laws.8 Strikes, without other differences, they are attended even violent strikes, and even secondary by violence." So much for the basic respon­ strikes, could not be enjoined on any sibility of government "to prevent the pri­ grounds, whether trespass or antitrust, in vate use offorce and violence" and maintain federal courts. the peace. FREEDOM AND AMERICAN LABOR RELATIONS LAW: 1946-1996 303

Workers' Common Law Rights ocratic. The National Labor Relations Board Workers also had a common law right to (NLRB) was given the authority to deter­ resist unionization. This was part of their mine what a majority wants. There was no freedom ofassociation as guaranteed by the mandatory secret ballot election. Union Bill ofRights in the U.S. Constitution. Each "organizers," could solicit signatures of individual worker could decide for himself, workers on an eyeball-to-eyeball basis. notwithstanding what a majority of his col­ Workers who refused to sign often did so at leagues might choose, whether to be repre­ their own risk. The NLRB could order an sented by a union in the sale of his labor. election, but it didn't have to. Inasmuch as A worker who wanted such representation members of the NLRB were selected from joined the union and paid its dues. A worker the ranks of union sympathizers, they usu­ who wanted to speak for himself in the sale ally certified exclusive bargaining agents of his labor neither joined a union nor paid without benefit of a vote. its dues. The scheme was undemocratic in yet The NLRA destroyed the freedom of another respect. The NLRA did not require association of individual workers who any regularly scheduled re-elections. Once wanted to remain union-free although a certified as an exclusive bargaining agent, majority of their colleagues wanted to a union was presumed to continue to have unionize. Specifically, Section 9(a) states majority support forever, even if all the that, "Representatives designated or se­ workers that originally" selected" it left the lectedfor the purposes ofcollective bargain­ firm and were replaced with new workers. ing by the majority of the employees in a The new workers never had any kind of say unit appropriate for such purposes, shall be in the question. the exclusive representatives of all the em­ To make matters worse, the NLRA ployees in such unit for the purposes of forced employers to bargain with unions collective bargaining in respect to rates of over whether to force all the employees pay, wages, hours of employment, or other represented by an exclusive bargaining conditions ofemployment." Individuals are agent to be, or become, dues-paying union forbidden to represent themselves. They are members. Section 8(3) ofthe NLRA makes forbidden to enter individual contracts with it an unfair labor practice for an employer their employers. "to encourage or discourage membership in Unionists excuse this tyranny of the ma­ any labor organization: Provided, that noth­ jority on the grounds that it is democratic. ing in this Act ... shall preclude an em­ But "democracy" is a form of government ployer from making an agreement with a designed to give the governed some say over labor organization ... to require as a con­ what the government does. Democracy is dition ofemployment membership therein" an institution originally conceived as a way [emphasis in original]. Note the duplicity: of preventing government from trespassing An employer cannot encourage or discour­ on the protected private domain of human age membership in a union, he can only action. The Founders of the American re­ require it. public never intended that the will of a Forced union membership is called "union majority should control anything except security." Unions were granted security their short list ofconstitutionally authorized against workers who want to be union-free. governmental activities. The sale of a pri­ Thus workers who didn't want to associate vate citizen's labor is not a governmental with unions were coerced in two ways. They matter. It is a private matter. Under com­ were forced to have a union "selected" by mon law, government's only legitimate role a majority of their colleagues represent in the employment relationship is to enforce them, and they were forced to pay tribute voluntary exchange contracts. (dues) to those unions as a condition of Moreover, the "selection" made by a continuing their employment relationship majority in Section 9(a) was not really dem- with their employers. 304 THE FREEMAN • MAY 1996

Unions defended their union security wages low, most employer associations (forced membership) schemes on the grounds were formed in self-defense against unions that since Section 9(a) forced unions "se­ that had already been formed to attempt to lected" by a majority to represent all work­ take wages out of competition. ers, it was only fair for all· workers to be The question of bargaining power in vol­ members. Otherwise a minority would be untary exchange contracting is one ofalter­ "free-riders." They would get the benefits natives. The labor market is like any other of union representation for free. Of course, market. Buyers (employers) compete with if unions represented only their voluntary other buyers, and sellers (employees) com­ members, only those who individually pete with other sellers. When a buyer· and wanted union representation, there could be seller come together to bargain on a mutu­ no free-riders. Unions, and the politicians in ally beneficial exchange, their bargaining their thrall, were not embarrassed by the power depends on those two types of com­ fact that they fought long and hard to get the petition. Other things being equal, the em­ privilege of exclusive representation and ployee has more bargaining power when then claimed that exclusive representation there is strong competition among employ­ "forced" them to represent all workers who ers to hire his type oflabor and when there therefore must be forced to join and pay is weak competition among other workers dues. trying to sell his type oflabor. Other things The common law, as we have seen, is equal, the employer has more bargaining based on voluntary exchange contracting power when there is weak competition between individuals. The preambles ofboth among employers seeking to hire similar Norris-LaGuardia and the NLRA asserted labor and strong competition among work­ that workers do not have "actual liberty of ers seeking to sell similar labor. Obviously, contract," thus the common law was inad­ insofar as a worker is not responsible for equate to protect the rights of workers. denying an employer access to other work­ Employees were, the preamble to the ers selling similar labor, there are no moral NLRA asserted, on the short end of an grounds for government to favor the em­ "inequality ofbargaining power," with em­ ployer over the worker. Why then, insofar ployers. This idea that workers on their own as an employer is not responsible for deny­ are helpless in the labor market so they need ing a worker access to alternative employ­ unions for self-defense is a hoary myth. As ment opportunities, should government W. H. Hutt9 and, later, Morgan Reynolds 1o favor the worker over the employer? The have demonstrated, data falsify the myth. Fourteenth Amendment to the U.S. Consti­ In the nineteenth century, long before the tution is supposed to guarantee the em­ existence of significant unionization in the ployer and the employee "equal protection United States, real wages were on a strong of the laws." upward trend, and worker-initiated job switching was frequent and became increas­ The Taft-Hartley Act ingly common. Contrary to the view that says large-scale employers exploited unor­ The Taft-Hartley Act is named after its ganized workers, large firms paid workers principal sponsors: Senator Robert A. Taft more than small firms. Contrary to the claim and Representative Fred A. Hartley, Jr. that employers had unfair bargaining power The purpose of the legislation was to "re­ because unorganized workers could not af­ store some balance" between unions and ford to turn down even poor job offers, employers, by curbing the power ofunions. workers with savings weren't able to bar­ Whereas the preamble ofthe NLRA blamed gain for better wages than workers without. employers for the ills the legislation was Finally, contrary to the conventional wis­ supposed to cure, the preamble of Taft­ dom that unions were necessary to offset Hartley assigned equal blame to unions and employer combinations designed to keep employers. Whereas the announced intent FREEDOM AND AMERICAN LABOR RELATIONS LAW: 1946-1996 305 of the NLRA was to promote and assist immune to injunctions against any, includ­ unions, the announced intent of Taft­ ing violent, strike activity. In United States Hartley was to protect the rights ofworkers, v. Enmons (410 U.S. 396 [1973]) the Su­ unions, and employers. Whereas under the preme Court explicitly granted unions im­ NLRA the official job of the NLRB was to munity to the Hobbs Anti-Extortion Act. 14 get workers into unions, under Taft-Hartley As long as their activities are related to their its official job was to be a neutral umpire legitimate purposes in a primary strike, they in labor disputes. ll Whereas the NLRA can be as violent as they like. Individual assured the right of workers to unionize, perpetrators of violence are liable to pros­ Taft-Hartley added a right of workers to ecution by local authorities, but the unions refrain from organizing. Whereas the NLRA themselves are not. Taft-Hartley did affect listed only employer unfair labor practices, some points raised in the first section, but Taft-Hartley added a list of union unfair inadequately. It restricted union secondary labor practices. There is no doubt that strikes, but the NLRB found ways around Taft-Hartley did tip the scales toward more the restrictions, so in 1959 the Congress had balance. However, it fell far short ofachiev­ to strengthen those restrictions in Title VII ing that balance. ofthe Landrum-Griffin Act. The restrictions The union movement labeled Taft-Hart­ are still inadequate. ley the "Slave Labor Bill" when it tried, Taft-Hartley did not directly affect the unsuccessfully, to defeat it in Congress in access of union organizers to employers' 1947. The union movement referred to Taft­ property, but it did so indirectly. In 1956 the Hartley as the "Slave Labor Act" in its Supreme Court, in NLRB v. Babcock & successful attempt to re-elect President Tru­ Wilcox (351 U.S. 105), apparently inspired man and restore both houses ofCongress to by the intent of Taft-Hartley to restore the Democrats in the elections ofNovember balance, made a distinction between union 1948. 12 Notwithstanding that victory, the organizers who are already employees and union movement failed subsequently to re­ those who are not. The former were granted peal Taft-Hartley. It is still the law of the unrestricted access, the latter were granted land. Far from a slave labor act, I think it access if they had no other means of com­ is better labeled the "Continued Forced municating with the workers they sought Unionism Act of 1947." to organize. This was called the principle First, Taft-Hartley didn't reach many of of accommodation. In 1992, the Court, in the points raised in the previous section at Lechmere v. NLRB (502 U.S. 527), the first all. Union-free (or "yellow dog") contracts majority opinion written by Justice Clarence are still illegal. Employers are still not free Thomas, greatly restricted this principle of to refuse to hire union sympathizers. Em­ accommodation to those (very few) cases of ployers are still not free to form company worker isolation such as in residential log­ unions and offer them to their employees as ging camps. alternatives to independent unions. In fact, The authors of Taft-Hartley tried to ad­ in 1992 the NLRB ruled that a worker­ dress the issue of employer free speech. management cooperation program in a non­ Section 8(c) of the Act states that "The union firm was an illegal company union expressing ofany views, argument, or opin­ and was used by the employer in an illegal ion, or the dissemination thereof, whether way to discourage unionization. 13 Now, it in written, printed, graphic, or visual form, seems, labor-management cooperation that shall not constitute or be evidence of an is not union-management cooperation is unfair labor practice under and of the pro­ illegal. Mass picketing by strangers is still visions of this Act, if such expression con­ legal. Unions are still immune to the anti­ tains no threat ofreprisal orforce orpromise trust laws. They are still exempt from the of benefit." It is supposed to apply equally common-law principle of vicarious respon­ to unions and to employers, but, in practice, sibility; and, in primary strikes, they are still it does not. For example, employers are 306 THE FREEMAN • MAY 1996

forbidden to promise a pay raise in exchange First, it mandates secret ballot elections for a worker's vote against a union in a unless the employer agrees to waive an certification (or representation) election. election. The employer cannot recognize a But unions can promise a pay raise to a union as the exclusive bargaining agent worker in exchange for a vote in favor of a unless the union has majority support. Most union in the same election. The fig leaf that ofthe time employers insist on an election as covers that unequal protection ofthe law is the only way a union can demonstrate that that unlike the employer, the union doesn't majority support. Sometimes, however, an promise the pay raise out ofits own pocket. employer will recognize a union on the basis Worse, in NLRB v. Gissel Packing Co. (395 ofsigned authorization cards. Ifa union gets U.S. 575 [1969]) the Supreme Court said that at least 30 percent ofthe workers it seeks to the employer was guilty of an unfair labor unionize to sign authorization cards, it can practice because, during a certification elec­ petition the NLRB to hold a secret ballot tion, the employer claimed that it was not certification election. financially strong so that if the union were Taft-Hartley also added a decertification certified and then called a strike the plant election process to the law. Once certified, may have to be closed. The Court said that a union is still presumed to have majority an employer may express general views support indefinitely, even if all the workers about unions, but any predictions ofconse­ that voted for the union are no longer quences of any specific unionization must employed by the firm; but disgruntled em­ be limited to consequence beyond the em­ ployees may attempt to decertify the union. ployer's control. So much for meaningful Employers must keep hands offthe process, free speech. but if individual employees are able to While the NLRA imposed a duty on collect the signatures of at least 30 percent employers to bargain with certified unions, of the relevant workers on a petition re­ .the unions had no such duty; they could questing a decertification election, the refuse to bargain with impunity. Taft­ NLRB will order such an election. It is as if Hartley imposed a duty to bargain on unions a member of Congress could hold his office as well as employers. Moreover the bargain­ indefinitely unless some voters in his district ing had to be in "goodfaith." In practice this got at least 30 percent of the eligible voters means that employers (and, to a smaller in his district to sign a petition requesting a extent, unions) have to grant concessions recall election. during the bargaining. For example, in More importantly, Taft-Hartley did noth­ NLRB v. General Electric Co. (418 F. (2d) ing to exclusive representation itself. It is 736 [1969]), the employer was found guilty still true that if a majority of workers who of an unfair labor practice because its rep­ vote in a certification election vote in favor resentative placed a proposal before the of a union, that union is the exclusive bar­ union negotiators and, in effect, said take it gaining agent for all workers in the unit. It or leave it. The employer refused to grant represents the workers who voted for it, concessions. Note that this, too, is a restric­ the workers who voted for another union, tion on employer free speech. In this case the workers who voted to be union-free, and the employer arrived at his offer by polling the workers who didn't vote. It still is a the workers to see what they would consider winner-take-all system subject to the same reasonable. The employer was chastised for objections raised in the first section of this dealing with the union through the employ­ essay. ees rather than, as Taft-Hartley requires, Taft-Hartley also made some significant dealing with the employees through the changes with regard to union security. It union. outlawed the closed shop, but put the union Taft-Hartley did make some significant shop and the agency shop in its place. In the changes with regard to the "selection" of former, a worker doesn't have to be a union unions to be exclusive bargaining agents. member to be hired, but after a probationary FREEDOM AND AMERICAN LABOR RELATIONS LAW: 1946-1996 307 period he must join the union as a condition of private sector unionism on federal em­ of continued employment. The British call ployees. With the present (104th) Congress, the union shop a post-entry closed shop. In there is little likelihood that will happen. the agency shop version of union security, After President Kennedy's executive or­ workers don't have to join unions to keep der, state after state imposed the full bur­ theirjobs; they just have to pay union dues. dens ofprivate-sector unionism on state and It is still the case that employers are forbid­ local government employees. At present den to encourage or discourage workers 24 states have done so. In 1994 President from affiliating with unions, they can only Clinton appointed the Task Force on Ex­ compel workers to do so. However, Section cellence in State and Local Government 14(b) of Taft-Hartley does affect union se­ through Labor-Management Cooperation to curity in a significant way. It allows the study the possibility of enacting a national individual state governments to pass right government employees labor relations law to work laws within their own jurisdictions. to force all states to adopt Taft-Hartley-style Twenty-one states have done so. In those unionism for their state and local govern­ states, unions and employers are forbidden ment employees. Again, the 104th Congress to include any union security clauses in their is unlikely to cooperate. collective bargaining agreements. In the 29 However, the government sector is the states that have failed to pass right-to-work only place where unionism flourishes today. laws, the objections raised to union security In the private sector only 10 percent of the in the first part of this essay still apply. labor force are unionized. In the govern­ Congress is currently debating a National ment sector, 39 percent are. 15 The peak year Right to Work Bill, which would make all of private-sector density was 1953, when union security schemes in the private sector it was 36 percent. In that year figures on illegal, but President Clinton is sure to veto government-sector density weren't even it. It is likely that there are insufficient votes collected. Government-sector unionism to override the veto. was almost nonexistent, and where it did exist it was not officially recognized. Government-Sector Unionism According to Leo Troy, private-sector density will be below seven percent in the Government employees were exempted year 2000, about where it was in 1900, before from coverage under both the NLRA and Norris-LaGuardia and the NLRA. Troy Taft-Hartley. Until 1962 government em­ calls this the symmetry of history.16 The ployee unionism was widely regarded as primary reasons for the decline of private­ unthinkable, even by union-friendly politi­ sector unionism are the globalization of cians such as Franklin Roosevelt and Harry economic competition and technological Truman. However, in that year President changes. Competitive pressures have made Kennedy issued Executive Order 10988 it virtually impossible for employers to pass which authorized limited, but mandatory, union-based cost increases forward to con­ collective bargaining by unions representing sumers so the employers are more resistant federal employees. In Title VII of the Civil to unionism than they were in the past. Service Reform Act of 1978, the principle of Advances in technology have greatly de­ exclusive representation was imposed on creased the market shares of blue-collar federal employees, but they were spared the industries in which private-sector unionism principle of union security. There is still a had its strength. Private-sector unionism is limited scope of collective bargaining. For declining in all major industrial countries. example, federal employee unions cannot The real threat of unionism to freedom is bargain over wages. Nevertheless, in 1993 now in the government sector. The new President Clinton appointed the National president ofthe AFL-CIO is John Sweeney, Partnership Council whose charge it is to the erstwhile president of the Service Em­ promote the imposition of the full burdens ployees International Union, which consists 308 THE FREEMAN • MAY 1996

primarily of government employees. There Government-sector unionism is inher­ are three reasons that government-sector ently anti-democracy. 17 Unionists have long unionism is flourishing. First, government argued that employment in the government agencies are usually monopoly providers of sector is the same as employment in the their products and services so it is easy for private sector. If we allow unionism in the government employers to pass union-based latter, we must do so in the former. But this cost increases on to customers (taxpayers). argument doesn't work. Think how collec­ Second, government unions and govern­ tive bargaining is done in the private sector. ment agencies that employ government First, the employer is forced to bargain in workers are actually on the same side ofthe good faith with a certified union. The em­ bargaining table. It is in the interest ofboth ployer must make concessions to the union. groups to pick the pockets oftaxpayers and Second, the employer is forbidden to deal to have their budgets and responsibilities with workers directly. The union's approval grow. Troy calls government-sector union­ is necessary before the employer decides ism the "new socialism." It is primarily an anything that comes under the scope of attempt to redistribute more and more ofthe collective bargaining. Third, the bargaining national income to government. Third, to a is done behind closed doors with both sides large extent the government-sector unions legally bound to keep the negotiation con­ have organized the already organized. fidential until either an impasse or an agree­ Union organizers, aided by favorable legis­ ment is reached. In sum, the employer is lation, merely converted already estab­ forced to share decision-making power with lished public-employee associations into the union, and the general public is excluded unions. from the process. FREEDOM AND AMERICAN LABOR RELATIONS LAW: 1946-1996 309

Now, wages and salaries and other terms inclined person, all existing labor relations and conditions of employment in the gov­ law could be scrapped. ernment sector are matters ofpublic policy. Abolishing exclusive representation Collective bargaining in government, on the would protect the right ofeach individual to private-sector model, means that govern­ select representatives "of his own choos­ ment is forced to share its making ofpublic ing." Ifunions bargained for their voluntary policy with a private organization, on an members and no one else, union security exclusive basis. The general public is for­ would be moot. Moreover, returning to the bidden to participate in the process. The common law of contract would mean mak­ Constitution established three branches of ing collective bargaining voluntary instead government: the executive, the legislature, of compulsory, and restoring the right of and the judiciary. There is no fourth branch workers and employers to resist unioniza­ ofgovernment called unions ofgovernment tion. We could return to the common law of employees. Government employee unions property, by allowing owners themselves, don't just lobby government on matters of rather than the NLRB, to decide who has public policy like other special interest access to their property. In sum, the only groups, the Sierra Club, for example. They "unfairlabor practices" would be those that actually co-determine public policy with the are inconsistent with the principles of vol­ government. This is the model from Mus­ untaryexchange. D solini's Italy. Government workers are citizens like any 1. Fred A. Hartley, Jr., Our New National Labor Policy (New York: Funk & Wagnalls Co., 1948), p. 16. other citizens. Therefore, they should have 2. Ibid., p. 18. the same influence on public policy as any 3. Ibid., p. 41. 4. Richard A. Epstein, •• A Common Law for Labor other group of citizens. But they shouldn't Relations: A Critique ofthe New Deal Labor Legislation," The be given the disproportionate influence that Yale Law Journal, Volume 92, Number 8, July 1983, pp. 1357-1408. mandatory, closed-door bargaining with ex­ 5. Ibid., p. 1359. clusive bargaining agents in the government 6. Ibid., p. 1374. 7. See, for example, Hitchman Coal & Coke Co. v. sector gives them. It is undemocratic for Mitchell, 245 U.S. 229 (1917). Interestingly, Morgan Reynolds, government employees to conspire with Power and Privilege, (New York: Universe Books, 1984), pp. 98-100, showed that at least in this case the union-free government agencies, in rooms from which agreements were initiated by employees to inhibit the United taxpayers are excluded, on the size of the Mine Workers Union organizers. 8. Many free-market economists say that there should be government budget. no antitrust laws at all. D. T. Armentano says they have been In the private sector the optimal amount misused to protect specific competitors rather than the process of competition. My view is that ifwe have antitrust laws they of unionism is whatever would emerge un­ ought to be applied equally to employers and to unions. der neutral legislation. Government should 9. W. H. Hutt, The Strike Threat System (New Rochelle, N.Y.: Arlington House, 1973), Chapter 16. neither support nor inhibit private-sector 10. Morgan O. Reynolds, Power and Privilege: Labor unionism. However, the optimal amount of Unions in America, op. cit., Chapter 3. 11. R. Alton Lee, Truman and Taft-Hartley (Lexington, unionism in the government sector is zero. Ky.: University of Kentucky Press, 1966), p. 184. It amounts to taxation of the people, by the 12. Ibid., Chapters 4-7. 13. Charles W. Baird, "Are Quality Circles Illegal? Global unions, for the unions. Competition Meets the New Deal," Cato Briefing Papers No. 18, The Cato Institute, Washington, D.C., February 10, 1993. The case was Electromation 309 NLRB No. 163. In Conclusion 14. For an exhaustive record of union violence from 1947 through 1983, see Armand J. Thieblot, Jr., and Thomas R. Haggard, Union Violence: The Record and the Response by The fiftieth anniversary year ofthe Foun­ Courts, Legislatures, and the NLRB, The Wharton School, dation for Economic Education could be a Industrial Research Unit, University of Pennsylvania, 1983. 15. Leo Troy, "Private-Sector Unionism Weakens," The watershed year in labor relations law. Ifthe Wall Street Journal, September 1, 1995, op-ed page. 105th Congress, which will be elected this 16. Foran excellent discussion ofthe history and prospects of government-sector unionism and the decline of private­ November, is a bit more sympathetic to sector unionism, see Leo Troy, The New Unionism in the New individual liberty than the incumbent 104th Society (Fairfax, Va.: George Mason University Press, 1994). 17. Robert S. Summers, Collective Bargaining and Public Congress (especially the Senate), and if the Benefit Conferral: A Jurisprudential Critique (Ithaca, N.Y.: office ofthe President is filled by a similarly Institute of Public Employment, Cornell University, 1976). THEFREEMAN IDEAS ON UBERTY

Banking and Freedom in the Fifty Years ofFEE by Steven Horwitz

he regulatory changes undergone by the tutions were rigidly divided into commercial T u. S. banking system in the fifty years banks or savings and loans associations; since the founding of FEE are a very close neither was able to operate across state reflection ofthe broaderintellectual changes lines, and many states prevented both from that have taken place during the same pe­ operating branches even within the state. riod, many ofwhich are due to the effort of Options for consumers were extremely lim­ people associated with the Foundation. One ited-for most, simply a choice between a can plausibly argue that, in several respects, passbook savings account that could earn the U.S. banking system is less burdened no more than 5 percent interest, and a by regulations than at any time in the past. checking account that, bylaw, could earn no At the same time, however, the regulations interest. Financial institutions were fre­ that do remain hamper the operation of quently "mom-and-pop" operations, with profitable banks, harm consumer welfare, many observing so-called''bankers' hours" _ and continue to undermine the safety and of 10 to 3, and almost all facing relatively stability of the U.S. banking system. The little competition from nonbank providers grudging removal ofsome regulations by the offinancial services. 1 There were no ATMs, federal and state governments has enabled no mutual funds, very few credit cards, just banks to provide a range of products and one kind ofmortgage, and virtually no price services (both economically and geograph­ competition because of price controls on ically) that was unheard ofjust a couple of interest payments.2 decades ago. If deregulation of the banking In the intervening decades, the banking industry continues into the next century, industry has undergone numerous changes, American consumers will more fully reap many due to investments in advancing tech­ the benefits of freedom in this most central nology that has made new kinds offinancial of industries. services available to consumers. A list of The American banking industry of 1946 examples would be quite lengthy, but one would seem odd to someone who has come group should make the point. The develop­ of age in the 1980s and '90s. Banking insti- ment of high-speed computers and the as­ sociated communications technology have Dr. Horwitz is Eggleston Associate Professor of made possible ATM machines, wire trans­ Economics at St. Lawrence University in Can­ fers, and a variety ofsophisticated financial ton, New York and is the author of Monetary Evolution, Free Banking, and Economic Order, instruments that depend on computer cal­ as well as numerous articles. on financial history culations to figure the riskiness of alter­ and banking regulation. native financial assets in a portfolio. The 310 311 explosion ofchoices available to consumers out ofthe reach ofsmall savers. The brilliant ofeven modest means is tribute to both the entrepreneurial solution to this problem dur­ market's ability to generate technological ing the mid-1970s was the money market innovation through competition (where that mutual fund. These funds (often operated freedom is allowed) and the prosperous by nonbank financial institutions) would standard of living in the United States that pool the savings of their customers and, in has enabled consumers to demand more tum, buy large denomination certificates of sophisticated financial instruments. deposit (over $10,000), which were not sub­ ject to the interest rate controls. After sub­ The Push for Change tracting administrative costs and profits for itself, a money market fund would pay its In addition, many of the industry's customers slightly less than what it earned changes have been due to genuine deregu­ from the CDs, but far more than depositors lation, the push for which has come from were receiving from standard checking or three sources. First, the inflation of the savings accounts. The result was a major 1970s radically changed the banking indus­ drain of funds away from conventional try by creating problems it had never faced banks, toward financial institutions that were before. Second, the advances in technology offering the new money market instruments. and communications that simplified the Of course the banks did not stand idly by moving of money made the existing geo­ while this was happening. They appealed to graphic restrictions on banking seem even regulators to allow them to offer special more archaic than they already were. Third, kinds ofinterest-bearing checking accounts the general skepticism toward centralized akin to the money market mutual funds. government solutions that emerged in the They also lobbied for the removal of the 1980s (a result ofhistorical events both here interest rate controls that dated back to the and abroad and changes in the intellectual mid-1930s. Both of these efforts were suc­ landscape) generated political support for cessful and now banks can offer a wide range deregulation. 3 of mutual fund instruments and are free to The inflation ofthe 1970s was responsible pay competitive interest rates on standard for a number of changes in the banking checking accounts. In these ways, banks are industry, dealing primarily with the price notably freer than they were fifty, or even controls on interest rates. As inflation twenty-five, years ago. caused interest rates to rise as high as 20 Often overlooked in the popularpress was percent by 1980, consumers and banks faced that the savings and loan failures of the serious problems. For consumers, the prob­ 1980s were rooted in the inflation of the lem was finding a place to put money that 1970s. As interest rates rose due to inflation, could earn rates ofinterest that would com­ savings and loans who had granted thirty­ pensate them for the ongoing inflation. Ifthe year mortgage loans at low, fixed rates of inflation rate was 10 percent, then money interest found themselves in trouble. They deposited in a standard checking account were only earning five or six percent on their that paid no interest eroded by 10 percent loans, but had to pay up to 20 percent to peryear. Passbook savings accounts offered bring in new funds. This combination was a only about 5 percent interest and did not recipe for disaster, and sent many savings allow checks to be written against them. and loans into a tailspin as early as the Neither option was desirable. As a result, middle and late 1970s. In addition, double­ consumers wanted to find ways around the digit inflation also spurred the development price controls to earn competitive interest of adjustable-rate mortgages, as well as rates on their bank balances. the whole secondary market in mortgage­ One option, buying large denomination backed securities, as ways for banks to financial instruments that were allowed to shield themselves against interest rate risks. pay higher rates of return, was frequently In so doing, the banks also offered new 312 THE FREEMAN • MAY 1996 options to consumers who might prefer York could negotiate an arrangement with adjustable rates if they believed interest New Jersey to allow each other's banks to rates would fall in the future. cross the state line. From the mid-1970s As the troubles of the savings and loans onward, states began to make just these continued on into the early 1980s, the ac­ sorts of arrangements, in most cases by quisition of failing institutions by stronger forming regional reciprocal agreements.5 banks or savings and loans was seen as a In the last five years or so, most states have way to avoid some of the most harmful opened their borders to any other state that effects of bank failures. However, federal is willing to reciprocate. Moreover, as of regulations limited such opportunities by September 1995, national legislation went restricting interstate mergers and acquisi­ into effect that allows banks from all states tions, particularly for savings and loans. In to merge with or acquire banks in any other 1983, Congress passed the Gam-St Germain state. These changes in the interstate bank­ Act, which allowed interstate mergers and ing laws are among the most significant acquisitions if the acquired institution was deregulatory moves in the recent history of in serious trouble. Although brought on banking. They promise to provide height­ by previous government activity (Le., ened competition and greater safety in the the inflation), this regulatory change was a years to come by allowing banks to better step in the right direction, and opened the diversify their loan portfolios. door to further activity in interstate banking. Despite these gains, significant problems Along with the need to address the dev­ still exist with the regulatory structure of astating effects of inflation on the banking the banking system, three of which I will system, two other factors were crucial to briefly discuss. Perhaps the most important ending the geographic limitations on banks is the federal deposit insurance program. and savings and loans. As communica­ Banks are .forced to pay premiums into a tions technology continued to change, as fund designed to pay the depositors offailed domestic and international markets ex­ banks. Because premiums are based solely panded, and as the population became more on amounts deposited without regard to mobile,. the limits on interstate banking­ portfolio risk, banks are inclined to worry cemented in place in the 1920s-became less about risky lending practices. increasingly burdensome. In addition, the One factor contributing to the crisis of high concentration of bank and savings savings and loans was Congress' allowing and loan failures in Texas and Oklahoma them to enter the commercial real estate after the fall in oil prices in the 1980s also market in the early 1980s-by itself not a suggested that interstate banking was de­ mistake as it allowed diversification-at the sirable. The oil-state banks had significant same time it raised the maximum amount limits on their ability to make loans across covered by deposit insurance from $40,000 state lines. As a result, they were heavily to $100,000, thereby giving the savings and tied to oil-related firms. When oil prices loans both more ability and more incentive fell, the firms collapsed, taking the banks to undertake risky loans. When the real along with them.4 Both banks· and policy estate market took a tumble later in the makers recognized that increased opportu­ 1980s, many banks and savings and loans nities for geographic diversification were were taken down with it. Industry analysts needed. have pointed out that 43 percent ofthe total From about the mid-1970s forward, some losses ofsavings and loans were due to bad states began to address the interstate bank­ real estate investments. Had the deposit ing issue through a loophole in the law. The insurance ceiling not been raised (or not Douglas Amendment to the Bank Holding existed at all) and had savings and loans Company Act of 1956 allowed individual been able to lend across state lines more states to admit banks from other states by a easily, the overall riskiness of their loan specific legislative act. For example, New portfolios would have been lower and the BANKING AND FREEDOM IN THE FIFTY YEARS OF FEE 313

number offailures would have been far less. majority to weaken or eliminate it. 6 Ending Reforming, abolishing, or privatizing fed­ the eRA would both release needed bank eral deposit insurance remains one of the resources and enhance the stability of the most important policy issues facing the U.S. banking system. banking industry as a new century is about The third set of restrictions on banking to begin. freedom is a much more fundamental one. A second set of regulation still plaguing The span of FEE's existence is virtually banks, and, according to a survey of bank­ identical with the period during which the ers, the single most costly set ofregulations Federal Reserve has become the dominant they face, are those associated with the policy-making force in the U.S. economy. Community Reinvestment Act of1977. This It has done so by being insulated from any law forces banks to make a certain percent­ political or economic constraints on its de­ age of their loans to individuals and busi­ cision-making power. The wide range of nesses in their local area, and requires an discretion given to the Fed to promote "full immense amount ofpaperwork to document employment" reflects the intellectual atmo­ their compliance. Beyond the waste of the sphere of1946, also the yearin which the full paperwork, the CRA increases the riskiness employment mandate was thrust upon the of banks by forcing them to make loans to Fed. In the fifty years since, the increased borrowers to whom they would not other­ skepticism concerning government in gen­ wise lend. The CRA amounts to a wealth eral, and ofdiscretionary monetary policy in redistribution program with banks as the particular, has led many economists to chal­ means. Inthe end, consumers and taxpayers lenge the validity ofthe task assigned to the carry the burden either because banks are Fed. In 1996, Congress may consider re­ forced to .forgo making other loans (what moving the "full employment" mandate on economists call an opportunity cost) or the Fed, and its concomitant discretionary government bails out depositors of banks power, replacing it with a mandate for price who fail due to too many bad loans. The stability.7 CRA seems likely to linger on as onerous The downside of such a policy change is as ever despite efforts by the Congressional that the most important and fundamental 314 THE FREEMAN • MAY 1996 power of the Fed, its monopoly over the The next fifty years hold great promise for production of currency, would remain un­ building on the changes we have already dented. This monopoly is what ultimately seen and increasing the level of freedom in enables the Fed to change the money supply the U.S. banking industry. D as it deems appropriate and gives it the power to inflate away the value ofthe dollar. 1. Bankers' hours were not as much ofa problem at a time Binding the Fed to price stability (while when most families had only one adult working full-time during arguably better than full employment) is the day. Housewives could do the banking during the daytime hours when banks were open. It is also true that the limited still theoretically controversial among free­ hours tended to create lines at banks, especially when drive-up market economists and leaves intact the windows and ATMs were not as common as today, creating additional inefficiencies. Federal Reserve's power to inflate. Chal­ 2. Of course banks skirted these controls by offering non­ lenging the Fed's monopoly over the pto­ monetary forms ofinterest such" as free toasters orclock-radios when you opened a new account. The primary effect of the duction of currency and removing the dol­ interest rate ceilings was to divert resources into less efficient lar's fiat status will remain important tasks forms ofinterest-an important lesson for the ongoing discus­ sion of price controls in the health-care industry. facing free-market thinkers in the next fifty 3. It is worth mentioning that this was not a Republican years. Party phenomenon. One of the co-sponsors of the airline deregulation bill was Ted Kennedy, and one ofthe co-sponsors As we have seen from the changes in the ofthe recently enacted interstate banking bill was Don Riegle, former Soviet Union and Eastern Europe, both Democrats. 4. This is also one response to those who blame the savings the ruling ideas of the mid-1940s are fading and loan crisis on "deregulation." If that was the case, why from the scene, being replaced by ideas from were so many failures concentrated in two states, and states that severely limited the ability of their banks to diversify? If scholars who were fortunate enough to have it was just "deregulation" we would expect the failures to be access to the ideas and resources of orga­ more widely distributed. 5. Some states immediately invited banks from any and all nizations like FEE who kept alive the clas­ other states into theirs. sical liberal tradition through its darkest 6. The banking bill passed in the House on September 28, 1995, included several deregulatory moves, but did not touch days. The changes that have occurred, and the CRA. Any moves toward its reform or abolition will the minor victories that have been won, are probably have to wait until after the 1996 elections. surely not enough, and the power ofthe old 7. As of October 1995, a bill was pending in Congress to make such a switch. Whether it will come to the floor and get ideas lingers on in the existing regulations the needed votes remains unclear. Another measure of the change in the intellectual landscape is that a presidential and government power which shackle the candidate (Steve Forbes) could publically call for a return to the creative energy ofthe U.S. banking system. gold standard without threat of ridicule. THEFREEMAN IDEAS ON UBERlY

The Economic Foundations of Freedom

by Ludwig von Mises

nimals are driven by instinctive urges. compliance with definite rules, the rules of A They yield to the impulse which pre­ morality. Do the right things, shun the bad vails at the moment and peremptorily asks things. for satisfaction. They are the puppets of It is obvious that the exhortations and their appetites. Man's eminence is to be admonishments ofmorality make sense only seen in the fact that he chooses between when addressing individuals who are free alternatives. He regulates his behavior de­ agents. They are vain when directed to liberatively. He can master his impulses and slaves. It is useless to tell a bondsman what desires; he has the powerto suppress wishes is morally good and what is morally bad. He the satisfaction ofwhich would force him to is not free to determine his comportment; renounce the attainment of more important he is forced to obey the orders ofhis master. goals. In short: man acts; he purposively It is difficult to blame him if he prefers aims at ends chosen. This is what we have yielding to the commands of his master to in mind in stating that man is a moral person, the most cruel punishment threatening not responsible for his conduct. only him but also the members ofhis family. This is why freedom is not only a political Freedom as a Postulate of postulate, but no less a postulate of every Morality religious or secular morality. All the teachings and precepts of ethics, The Struggle for Freedom whether based upon a religious creed or whether based upon a secular doctrine like Yet for thousands ofyears a considerable that of the Stoic philosophers, presuppose part of mankind was either entirely or at this moral autonomy of the individual and least in many regards deprived ofthe faculty therefore appeal to the individual's con­ to choose between what is right and what science. They presuppose that the individ­ is wrong. In the status society ofdays gone ual is free to choose among various modes by, the freedom to act according to their of conduct and require him to behave in own choice was, for the lower strata of society, the great majority ofthe population, Professor Mises (1881-1973), one of the centu­ seriously restricted by a .rigid system of ry's pre-eminent economic thinkers, was aca­ controls. An outspoken formulation of this demic adviser to the Foundation for Economic Education from 1946 until his death.- principle was the statute ofthe Holy Roman This article first appeared in "the April 1960 Empire -that conferred upon the princes issue of The Freeman. and counts ofthe Reich (Empire) the power 315 316 THE FREEMAN • MAY 1996 and the right to determine the religious allegiance of their subjects. The Orient~ls meekly acquiesced in this state ofaffairs. But the Christian peoples of Europe and their scions that settled in over­ seas territories never tired in their struggle for liberty. Step by step they abolished all status and caste privileges and disabilities until they finally succeeded in establishing the system that the harbingers of totalitari­ anism try to smear by calling it the bourgeois system. The Supremacy of the Consumers The economic foundation of this bour­ geois system is the market economy in which the consumer is sovereign. The con­ sumer, Le., everybody, determines by his buying or abstention from buying what should be produced, in what quantity, and of what quality. The businessmen are forced by the instrumentality of profit and loss to obey the orders of the consumers. Only Ludwig von Mises those enterprises can flourish that supply in the best possible and cheapest way those succeeded in serving the consumers. In the commodities and services which the buyers market economy private property is in this are most anxious to acquire. Those who fail sense a public service imposing upon the to satisfy the public suffer losses and are owners the responsibility ofemploying it in finally forced to go out of business. the best interests of the sovereign consum­ In the precapitalistic ages the rich were ers. This is what economists mean when the owners oflarge landed estates. They or they call the market economy a democracy their ancestors had acquired their property in which every penny gives a right to vote. as gifts-feuds or fiefs-from the sovereign who, with their aid, had conquered the The Political Aspects of country and subjugated its inhabitants. Freedom These aristocratic landowners were real lords as they did not depend on the patron­ Representative government is the politi­ age of buyers. But the rich of a capitalistic cal corollary of the market economy. The industrial society are subject to the suprem­ same spiritual movement that created mod­ acy ofthe market. They acquire their wealth ern capitalism substituted elected office­ by serving the consumers better than other holders for the authoritarian rule ofabsolute people do and they forfeit their wealth when kings and hereditary aristocracies. It was other people satisfy the wishes of the con­ this much-decried bourgeois liberalism that sumers better or cheaper than they do. In brought freedom of conscience, ofthought, the free market economy the owners of of speech, and of the press and put an end capital are forced to invest it in those lines to the intolerant persecution of dissenters. in which it best serves the public. Thus A free country, is one in which every ownership of capital goods is continually citizen is free to fashion his life according to shifted into the hands ofthose who have best his own plans. He is free to compete on the THE ECONOMIC FOUNDATIONS OF FREEDOM 317

market for the most desirable jobs and on Against all this fanatical propaganda there the political scene for the highest offices. He is need to emphasize again and again the does not depend more on other people's truth that it is big business that brought favor than these others depend on his favor. about the unprecedented improvement of If he wants to succeed on the market, he the masses' standard of living. Luxury has to satisfy the consumers; if he wants goods for a comparatively small number of to succeed in public affairs he has to satisfy well-to-do can be produced by small-size the voters. This system has brought to the enterprises. But the fundamental principle capitalistic countries of Western Europe, of capitalism is to produce for the satisfac­ America, and Australia an unprecedented tion of the wants of the many. The same increase in population figures and the high­ people who are employed by the big corpo­ est standard ofliving ever known in history. rations are the main consumers ofthe goods The much talked-about common man has at turned out. Ifyou look around in the house­ his disposal amenities of which the richest hold of an average American wage-earner, men in precapitalistic ages did not even you will see for whom the wheels of the dream. He is in a position to enjoy the machines are turning. It is big business that spiritual and intellectual achievements of makes all the achievements ofmodem tech­ science, poetry, and art that in earlier days nology accessible to the common man. Ev­ were accessible only to a small elite of erybody is benefited by the high productiv­ well-to-do people. And he is free to worship ity of big-scale production. as his conscience tells him. It is silly to speak of the "power" of big business. The very mark ofcapitalism is that The Socialist Misrepresentation supreme power in all economic matters is of the Market Economy vested in the consumers. All big enterprises grew from modest beginnings into bigness All the facts about the operation of the because the patronage of the consumers capitalistic system are misrepresented and made them grow. It would be impossible distorted by the politicians and writers who for small or medium-size firms to turn out arrogated to themselves the label of liberal­ those products which no present-day Amer­ ism, the school of thought that in the nine­ ican would like to do without. The bigger a teenth century crushed the arbitrary rule of corporation is, the more does it depend on monarchs and aristocrats and paved the way the consumers' readiness to buy its wares. for free trade and enterprise. As these ad­ It was the wishes-or, as some say, the vocates of a return to despotism see it, all folly-of the consumers that drove the au­ the evils that plague mankind are due to tomobile industry into the production of sinister machinations on the part of big ever bigger cars and force it today to man­ business. What is needed to bring about ufacture smaller cars. Chain stores and wealth and happiness for all decent people is department stores are under the necessity to to put the corporations under strict govern­ adjust their operations daily anew to the ment control. They admit, although only satisfaction of the changing wants of their obliquely, that this means the adoption of customers. The fundamental law of the socialism, the system ofthe Union ofSoviet market is: the customer is always right. Socialist Republics. But they protest that A man who criticizes the conduct of socialism will be something entirely differ­ business affairs and pretends to know better ent in the countries of Western civilization methods for the provision ofthe consumers from what it is in Russia. And anyway, they is just an idle babbler. If he thinks that his say, there is no other method to deprive the own designs are better, why does he not try mammoth corporations of the enormous them himself? There are in this country power they have acquired and to prevent always capitalists in search of a profitable them from further damaging the interests of investment of their funds who are ready to the people. provide the capital required for any reason- 318 THE FREEMAN • MAY 1996 able innovations. The public is always eager a reciprocal relation between his acquiring to buy what is better or cheaper, or better wealth by serving the consumers and accu­ and cheaper. What counts in the market is mulating capital and the improvement ofthe not fantastic reveries, but doing. It was not standard of living of the wage-earners who talking that made the "tycoons" rich, but form the majority of the consumers. The service to the customers. masses are in their capacity both as wage­ earners and as consumers interested in the Capital Accumulation Benefits flowering of business. This is what the old All of the People liberals had in mind when they declared that in the market economy there prevails a It is fashionable nowadays to pass over harmony ofthe true interests ofall groups of in silence the fact that all economic better­ the population. ment depends on saving and the accumu­ It is in the moral and mental atmosphere lation of capital. None of the marvelous ofthis capitalistic system that the American achievements of science and technology citizen lives and works. There are still in could have been practically utilized if the some parts of the United States conditions capital required had not previously been left which appear highly unsatisfactory to made available. What prevents the econom­ the prosperous inhabitants of the advanced ically backward nations from taking full districts which form the greater part of the advantage of all the Western methods of country. But the rapid progress of industri­ produ~tion, and thereby keeps their masses alization would have long since wiped out poor; is not unfamiliarity with the teachings these pockets ofbackwardness ifthe unfor­ of technology but the insufficiency of their tunate policies of the New Deal had not capital. One badly misjudges the prob­ slowed down the accumulation of capital, lems facing the underdeveloped countries the irreplaceable tool of economic better­ if one asserts that what they lack is techni­ ment. Used to the conditions ofa capitalistic cal knowledge, the "know-how." Their environment, the average American takes it businessmen and their engineers, most of for granted that every year business makes them graduates of the best schools of something new and better accessible to him. Europe and America, are well acquainted Looking backward upon the years of his with the state of contemporary applied sci­ own life, he realizes that many implements ence. What ties their hands is a shortage of that were totally unknown in the days ofhis capital. youth and many others which at that time A hundred years ago America was even could be enjoyed only by a small minority poorer than these backward nations. What are now standard equipment ofalmost every made the United States become the most household. He is fully confident that this affluent country of the world was the fact trend will prevail also in the future. He that the''rugged individualism" ofthe years simply calls it the "American way of life" before the New Deal did not place too and does not give serious thought to the serious obstacles in the way of enterprising question of what made this continuous im­ men. Businessmen became rich because provement in the supply of material goods they consumed only a small part of their possible. He is not earnestly disturbed by profits and plowed the much greater part the operation of factors that are bound not back into their businesses. Thus they en­ only to stop further accumulation of capital riched themselves and all ofthe people. For but may very soon bring about capital de­ it was this accumulation of capital that cumulation. He does not oppose.the forces raised the marginal productivity oflabor and that-by frivolously increasing public ex­ thereby wage rates. penditure, by cutting down capital accumu- . Under capitalism the acquisitiveness of lation, and even making for consumption of the individual businessman benefits not only parts of the capital invested in business, himself but also all· other people. There is and, finally, by inflation-are sapping the' THE ECONOMIC FOUNDATIONS OF FREEDOM 319 very foundations ofhis material well-being. The confusion manifests itself in the pop­ He is not concerned about the growth of ular idea that what is going on in the market statism that wherever it has been tried refers merely to the economic side ofhuman resulted in producing and preserving condi­ life and action. But in fact the prices of the tions which in his eyes are shockingly market reflect not only "material con­ wretched. cerns" -likegetting food, shelter, and other amenities-but no less those concerns No Personal Freedom Without which are commonly called spiritual or Economic Freedom higher or nobler. The observance or nonob­ servance of religious commandments-to Unfortunately many ofour contemporar­ abstain from certain activities altogether ies fail to realize what a radical change in the or on specific days, to assist those in need, moral conditions ofman, the rise ofstatism, to build and to maintain houses of worship, the substitution ofgovernment omnipotence and many others-is one of the factors that for the market economy, is bound to bring determines the supply of, and the demand about. They are deluded by the idea that for, various consumers' goods and thereby there prevails a clear-cut dualism in the prices and the conduct of business. The affairs of man, that there is on the one side freedom that the market economy grants a sphere of economic activities and on the to the individual is not merely "economic" other side a field of activities that are con­ as distinguished from some other kind of sidered as noneconomic. Betweenthese two freedom. It implies the freedom to deter­ fields there is, they think, no close connec­ mine also all those issues which are consid­ tion. The freedom that socialism abolishes is ered as moral, spiritual, and intellectual. "only" the economic freedom, while free­ The simple truth is that individuals can dom in all other matters remains unim­ be free to choose between what they con­ paired. sider as right or wrong only where they are However, these two spheres are not in­ economically independent of the govern­ dependent of each other as this doctrine ment. assumes. Human beings do not float in What makes many people blind to the ethereal regions. Everything that a man essential features of any totalitarian system does must necessarily in some way or other is the illusion that this system will be oper­ affect the economic or material sphere and ated precisely in the way which they them­ requires his power to interfere with this selves consider as desirable. In supporting sphere. In order to subsist, he must toil and socialism, they take it for granted that have the opportunity to deal with some the "state" will always do what they them­ material tangible goods. selves want it to do. D Economics on Trial by Mark Skousen

One Graph Says It All

"But the free market is not primarily a economists argued that central planning, the device to procure growth. It is a device to welfare state, and industrial policy lead to secure the most efficient use of higher growth rates. Incredibly, as late as resources." 1985, Paul Samuelson (MIT) and William D. -Henry C. Wallich 1 Nordhaus (Yale) still declared, "The planned Soviet economy since 1928 ... has n celebrating fifty years of service by the outpaced the long-term growth ofthe major I Foundation for Economic Education, we market economies.,,2 Mancur Olson, a observe one overriding lesson of history: Swedish economist, also stated, "In the Freedom is, on balance, a great blessing to 1950s, there was, if anything, a faint ten­ all mankind. dency for the countries with larger welfare Now, this may seem to be obvious; today states to grow faster."3 we all nod our heads in agreement with this Henry C. Wallich, a Yale economics pro­ conclusion. But not everyone concurred fessor and recent member of the Federal during the post-war era. In fact, for much of Reserve Board, wrote a whole book arguing the past fifty years, supporters ofeconomic that freedom means lower economic liberty were on the defensive. After World growth, greater income inequality, and less War II, laissez faire was an unwelcome competition..In The Cost of Freedom, he phrase in the halls of government and on concluded, "The ultimate value of a free college campuses. Governments both here economy is not production, but freedom, and abroad nationalized industry after in­ and freedom comes not at a profit, but at a dustry, raised taxes, inflated the money cost.,,4 And he was considered a conserva­ supply, imposed price and exchange con­ tive economist! trois, created the welfare state, and engaged in all kinds of interventionist mischief. In The New Enlightenment academia, Keynesianism and Marxism be­ came all the rage, and many free-market Fortunately, the attitudes ofthe establish­ economists had a hard time obtaining full­ ment have gradually changed for the better. time positions oli college campuses. In recent years the defenders of the free The big-government economy was market have gained ground and, since the viewed by the establishment as an automatic collapse of the Berlin Wall and Soviet cen­ stabilizer and growth stimulator. Many top tral planning, have claimed victory over the dark forces of Marxism and socialism. Dr. Skousen is an economist at Rollins College, Winter Park, Florida, and editor ofForecasts & Today, governments around the world are Strategies, one ofthe largest investment news­ denationalizing, privatizing, cutting taxes, letters in the country. controlling inflation, and engaging in all 320 321 kinds of market reforms. And free-market Nations with the highest level of freedom economists can now be found in most eco­ (e.g., United States, New Zealand, Hong nomics departments. In fact, almost all Kong) grew faster than nations with mod­ of the most recent Nobel Prize winners in erate degrees offreedom (e.g., United King­ economics have been pro-free market. dom, Canada, Germany) and even more Furthermore, new evidence demon­ rapidly than nations with little economic strates forcefully that economic freedom freedom (e.g., Venezuela, Iran, Congo). comes as a benefit, not a cost. Looking at the The authors conclude, "No country with a data of the 1980s, Mancur Olson now con­ persistently high economic freedom rating cludes, "it appears that the countries with during the two decades failed to achieve a larger public sectors have tended to grow high level of income." more slowly than those with smaller public What about those countries whose poli­ sectors.,,5 Contrast that with his statement cies changed during the past twenty years? about the 1950s. The authors state: "All 17 of the countries Now comes the coup de grace from a new in the most improved category experienced exhaustive study by James Gwartney, eco­ positive growth rates.... In contrast, the nomics professor at Florida State Univer­ growth rates of the countries where eco­ sity, and two other researchers. They pains­ nomic freedom declined during 1975-95 takingly constructed an index measuring the were persistently negative.,,6 degree of economic freedom for more than If all this is true, what of the data that 100 countries and then compared the level of seemed to demonstrate a positive correla­ economic freedom with their growth rates tion between big government and economic overthe past twenty years. Their conclusion growth in the 1950s and later? In the case of is documented in the following remarkable the Soviet Union, most economists now graph: agree that the data were faulty and mislead­ ing. In the case of Europe, perhaps the economic incentives of rebuilding after the war overshadowed the growth ofthe welfare 20.------. state. In other words, Europe grew in spite of, not because of, government. Once re­ 15 building was complete by the late 1950s, the weight of government began to be felt. a:~ a c After fifty years of hard work, it is high C> m10 .!9 5 time for FEE and the other free-market .~ t= think-tanks to celebrate their untiring efforts o Gi 5 to educate the world about the virtues of a. liberty. Their work is finally paying off. Let me be one of the first to say congratula­ O~-"- ~ FOe BA tions-a job well done! D 1995 Economic Freedom Grade 1. Henry C. Wallich, The Cost of Freedom (New York: Collier Books, 1960), p. 146. 2. Paul A. Samuelson and William D. Nordhaus, Econom­ ics, 12th ed. (New York: McGraw-Hill, 1985), p. 776. If ever a picture was worth a thousand 3. Mancur Olson, How Bright Are the Northern Lights? (Lund University, 1990), p. 10. words, this graph is it. 4. Wallich, The Cost ofFreedom, p. 9. Clearly, the greater the degree of free­ 5. Olson, How Bright Are·the Northern Lights?, p. 88. 6. James D. Gwartney, Robert A. Lawson, and Walter E. dom, the higher the standard of living (as Block, Economic Freedom ofthe World: 1975-1995 (Washing­ measured by per capita real GDP growth). ton, D.C.: Cato Institute, 1996), p. xvii. THEFREEMAN IDEAS ON UBERTY

Rose Wilder Lane, Isabel Paterson, and Ayn Rand: Three Women Who Inspired the Modem Libertarian Movement by Jim Powell

iberty was in full retreat in the early All were outsiders who transcended dif­ L 1940s. Tyrants oppressed or threat­ ficult beginnings. Two were immigrants. ened people on every continent. Western One was born in frontier territory not yet intellectuals whitewashed mass murderers part ofthe United States. They struggled to like Joseph Stalin, and Western govern­ earn money as writers in commercial mar­ ments expanded their power with Soviet­ kets dominated by ideological adversaries. style central planning. Fifty million people All were broke at one time or another. They were killed in the war that raged in Europe, endured heartaches with men-one stayed Africa, and Asia. The United States, seem­ in a marriage which became sterile, and two ingly the last hope for liberty, was drawn became divorced and never remarried. into it. These women who had such humble be­ Established American authors who de­ ginnings-Rose Wilder Lane, Isabel Pater­ fended liberty were a dying breed. H.L. son, and Ayn Rand-published major books Mencken had turned away from bitter pol­ during the same year, 1943: The Discovery itics to write his memoirs, while others like ofFreedom, The God ofthe Machine, and Albert Jay Nock and Garet Garrett were The Fountainhead, respectively. The women, mired in pessimism. recalledjournalist John Chamberlain, "with Amidst the worst of times, three bold scornful side glances at the male business women banishedfear. They dared to declare community, had decided to rekindle a faith that collectivism was evil. They stood up for in an older American philosophy. There natural rights, the only philosophy which wasn't an economist among them. And provided a moral basis for opposing tyranny none ofthem was aPh.D." Albert Jay Nock everywhere. They celebrated old-fashioned declared that, "They make all of us male rugged individualism. They envisioned a writers look like Confederate money. They future when people could again be free. don't fumble and fiddle around-every shot They expressed a buoyant optimism which goes straight to the centre." was to inspire millions.

Mr. Powell is editor ofLaissez-Faire Books and Rose Wilder Lane a Senior Fellow at the Cato Institute. He has Like her compatriots, Rose Wilder Lane written for the New York Times, the Wall Street Journal, Barron's, American Heritage, and more surprised people. She once described her­ than three dozen otherpublications. Copyright © self by saying "I'm a plump, middle west­ 1996 by Jim Powell. ern, middle class, middle-aged woman." 322 323

She had bad teeth, her marriage failed, she She quit school after the ninth grade and worked to support her aging parents, and determined that somehow she would see the at one point during the 1930s she was so world beyond rural Missouri. She took a financially distressed that her electricity train to Kansas City and accepted ajob as a was shut off. Yet she soared with great Western Union telegraph clerk on the night eloquence as she helped revive the radical shift. She spent most of her spare time principles of the American Revolution, and reading, perhaps three hours aday. By 1908, she inspired millions of adults and children she relocated to San Francisco for another alike as the editor of the beloved "Little Western Union job and romance with ad­ House" books about individual responsibil­ vertising salesman Gillette Lane. They mar­ ity, hard work, stubborn persistence, strong ried in March 1909. She.became pregnant families, and human liberty. but had either a miscarriage or stillbirth. It Rose Wilder Lane was born December 5, became impossible for her to conceive again. 1886, near De Smet, Dakota Territory. Her By 1915, the marriage had broken up, but father, Almanzo Wilder, and her mother, through his newspaper connections Lane Laura Ingalls, were poor farmers, devas­ found her start as ajournalist. For the San tated by drought, hailstorms, and other Francisco Bulletin, a radical labor paper, calamities that ruined crops. For years, the she began writing a women's column, then family lived in a windowless cabin. They a series ofdaily 1,500-word personality pro­ missed many meals. Their daughter, named files. She wrote an autobiographical novel after wild roses which bloomed on the serialized in Sunset magazine. prairie, often went barefoot. In March 1920, the Red Cross invited When Lane was four, the family gave up her to travel around Europe and report on on Dakota and moved to Mansfield, Mis­ their relief efforts, so that prospective do­ souri, which offered better farming pros­ nors-on whose support they depended­ pects. She went to a four-room, red brick would know about the good deeds of the schoolhouse that had two shelves ofbooks, organization. Based in Paris, she traveled to and she discovered the wonders of Charles Vienna, Berlin, Prague, Warsaw, Budapest, Dickens, Jane Austen, and Edward Gibbon. Rome, Sarajevo, Dubrovnik, Tirana, Tri­ Her mainstay became the famous Readers este, Athens, Cairo, Damascus, Baghdad, compiled by Cincinnati College President and Constantinople. Lane imagined that William Holmes McGuffey, who imparted Europe was the great hope for civilization, moral lessons as he taught the fundamentals but instead she eluded bandits, encountered of reading and exposed young minds to bureaucratic corruption, endured runaway many great authors of Western civilization. inflation, witnessed civil war horrors and the "We did not like discipline," Lane re­ darkening shadows of ruthless tyranny. called, "so we suffered until we disciplined Lane visited the Soviet Union four years ourselves. We saw many things and many after the Bolsheviks seized power. Like opportunities that we ardently wanted and many people, she was enchanted by the could not pay for, so we did not get them, or Communist vision for a better life. She got them only after stupendous, heartbreak­ met peasants whom she expected to be ing effort and self-denial, for debt was much rapturous about Communism. But as she harder to bear than deprivations. We were reported later, "My host astounded me by honest, not because sinful human nature the force with which he said that he did not wanted to be, but because the consequences like the new government. ... His com­ of dishonesty were excessively painful. It plaint was government interference with was clear that ifyour word were not as good village affairs. He protested against the as your bond, your bond was no good and growing bureaucracy that was taking more you were worthless ... we learned that it and more men from productive work. He is impossible to get something for noth­ predicted chaos and suffering from the ing...." centralizing of economic power in Mos- 324 THE FREEMAN • MAY 1996 cow.... I came out of the Soviet Union Against Authority, was published January no longer a communist, because I believed 1943. in personal freedom." While most historians focused on rulers, After returning to America, her career Lane chronicled the epic 6,000-year struggle blossomed as she wrote for The American ofordinary people, who defy rulers to raise Mercury, Country Gentleman, Good House­ families, produce food, build industries, en­ keeping, Harper's, Ladies' Home Journal, gage in trade, and in countless ways improve McCall's, and the Saturday Evening Post, human life. She was lyrical about the Amer­ among'others. She wrote novels about pio­ ican Revolution, which helped secure lib­ neer life. Famed actress Helen Hayes dra­ erty and unleashed phenomenal energy for matized oJ1e of Lane's novels, Let the Hur­ human progress. ricane Roar, on the radio. But Lane was With stirring, sometimes melodramatic financially devastated during the Great prose, she attacked myriad 'collectivist in­ Depression. In 1931, she wailed, "I am fluences, including government schools and forty-five. Owe $8,000. Have in bank so-called "progressive" economic regula­ $502.70.... Nothing that I have intended tions. She ridiculed claims that bureaucrats has ever been realized." could do better for individuals than they In 1936, Lane wrote "Credo," an 18,000­ could do for themselves. She swept away word article on liberty for the Saturday gloom with her towering self-confidence. Evening Post. Three years later Leonard , "Five generations of Americans have led Read, General Manager of the Los Angeles the Revolution," she declared, "and the Chamber of Commerce, helped establish a time is coming when Americans will set this little publishing firm called Pamphleteers, whole world free." which reprinted Lane's article as Give Me Individualist Albert Jay Nock lavished Liberty. praise on the book, but Lane was dissatis­ In it, Lane explained how free competi­ fied with it and refused permission to reprint tion enables civilization to flourish despite it. She never got around to completing scoundrels. "I have no illusions about the another edition. Only a thousand copies of pioneers," she wrote. "Ingeneral they were the book were printed during her lifetime. trouble-makers of the lower classes, and Nonetheless, The Discovery ofFreedom Europe was glad to be rid of them. They had a big impact, circulating as an under­ brought no great amount of intelligence or ground classic. It helped inspire the launch­ culture. Their principal desire was to do as ing of several organizations to promote they pleased. ... [Yet] Americans today liberty. Among them, Leonard Read's ... are the kindest people on earth.... Foundation for Economic Education, F.A. Only Americans pour wealth over the Harper's Institute for Humane Studies, world, relieving suffering in such distant and Robert M. Lefevre's Freedom School. places as Armenia and Japan.... Such are Read retained General Motors consumer a few of the human values that grew from researcher Henry Grady Weaver to adapt individualism while individualism was cre­ the book as The Mainspring of Human ating this nation." Progress, and hundreds of thousands of copies have been distributed by FEE. The Discovery ofFreedom The Little House Books In 1942, an editor of John Day Company asked Lane to write a book about liberty. Although The Discovery ofFreedom was She began work in a McAllen, Texas, trailer a founding document of the modern liber­ park, amidst a tour of the Southwest. She tarian movement, Lane had perhaps a went through at least two drafts at her home greater calling behind the scenes. In 1930, in Danbury, Connecticut. Her book, The Laura Ingalls Wilder gave Lane a manu­ Discovery of Freedom, Man's Struggle script about her early life from Wisconsin to THREE WOMEN WHO INSPIRED THE MODERN LmERTARIAN MOVEMENT 325

Kansas and Dakota. Lane deleted the ma­ what you decide is the one that stands." terial about Wisconsin, then went through Lane spent two months rewriting it and two drafts ofthe rest, fleshing out the stofY drafted a letter for their literary agent, and characters. This became a 100-page asking for better terms. This manuscript manuscript tentatively called Pioneer Girl," became On the Banks ofPlum Creek. Lane and she sent it to her literary agent, Carl spent most of 1939 rewriting the manuscript Brandt. The Wisconsin material became a for By the Shores of Silver Lake; in 1940, 20-page story, "When Grandma Was a Lit­ The Long Winter; in 1941, Little Town on tle Girl," a possible text for a children's the Prairie; and in 1942, These Happy picture book. One publisher suggested that Golden Years. the story be expanded to a 25,OOO-word Throughout the later books especially, book for younger readers. Lane portrayed young Laura Ingalls Wilder Lane conveyed the news to her mother, as a libertarian heroine. Foor example, in and since the original manuscript had been Little Town on the Prairie, she described her rewritten beyond recognition, she ex­ mother's thoughts this way: "Americans plained, "Ifis your father's stories, taken are free. That means they have to obey their out of the long PIONEER GIRL manu­ own consciences. No king bosses Pa; he has script, and strung together, as you will see." to boss himself. Why (she thought), when I Lane specified the kind of additional mate­ am a little older, Pa and Ma will stop telling rial needed, adding "If you find it easier me what to do, and there isn't anyone else to write in the first person, write that way. who has a right to give me orders. I will have I will change it into the third person, later." to make myself be good." Lane reassured her mother that the collab­ In 1974, NBC began adapting the books oration remained a family secret: "I have for Little House on the Prairie, a hugely said nothing about having run the manu­ popular television series which ran nine script through my own typewriter...." By years and resulted in more than 200 pro­ May 27,1931, the "juvenile" was done, and grams. Then came a syndication agreement Lane sent it offto publishers. Harper Broth­ assuring that they will be run again and again ers issued it in 1932 as Little House in the Big for atleast the next quarter-century. Michael Woods, and it became a beloved American Landon wrote and directed many shows, story. and starred as Laura's father, Charles In­ In January 1933, Wilder gave Lane galls. Farmer Boy, a manuscript about Almanzo's Lane's last blast was a book about Amer­ childhood recollections. Publishers had re­ ican needlework, which she turned into a jected it, presumably because it was mainly hymn for liberty. "American needlework a chronicle of farm skills. Lane spent a tells you," she continued, "that Americans month turning it into a flesh-and-blood live in the only classless society. This re­ story, and Harper's bought it. The follow­ public is the only country that has no peas­ ing year, Wilder gave Lane a manuscript ant needlework.... American women. .. about her life in Kansas, and she spent five discarded backgrounds, they discarded bor­ weeks rewriting it into Little House on the ders and frames. They made the details Prairie. create the whole, and they set each detail in The books began generating significant boundless space, alone, independent, com­ income for the Wilders, a relief to Lane plete." whose aim was to help provide their finan­ cial security. Wilder expanded part of Pio­ Isabel Paterson neer Girl into another manuscript and gave it to Lane in the summer of 1936. "I Lane knew but wasn't close to the bold, have written you the whys of the story as hot-tempered, sometimes tactless journalist I wrote it," Wilder explained. "But you Isabel Bowler Paterson. According to scholar know yourjudgement is better than mine, so Stephen Cox, she was "a slight woman, 5'3" 326 THE FREEMAN • MAY 1996 tall, very nearsighted, a lover of pretty and the following year. Both were about young slightly eccentric clothes, fond of delicate women struggling to achieve independence. foods, a light drinker, a devotee of nature Although Canada had become a protec­ who could spend all day watching a tree tionist nation, Paterson made clear in The grow ..." Shadow Riders that she was a free trader. Paterson held stubbornly to her views and Paterson moved East following World told all who would listen what she thought War I and started reading her way through about an issue. Dominating conversations much of the New York Public Library. In tended to limit her social life, especially 1922, she persuaded New York Tribune as she became a dissident against New Deal literary editor Burton Rascoe to give her a government intervention, but she did have job, even though he didn't like her. "She some stalwart friends. One remarked that said bluntly that she wanted the job," he "if people can stand her at all, theyeven­ recalled. "I told her my budget would not tually become very fond of her." allow me to pay what she was worth. She Paterson wrote novels and some 1,200 said she would work for whatever I was newspaper columns, but it was The God of prepared to pay. I said the pay was forty the Machine which secured her immortality dollars a week. She said, 'I'll work for that.' " in the annals of liberty. It mounted a pow­ In 1924, she started writing a weekly erful attack on collectivism and explained column on books, and it became an influ­ the extraordinary dynamics offree markets. ential forum for the next quarter-century. She was born January 22, 1886, on Man­ She used books as a point of departure to itoulin Island, Ontario. Her parents, Francis talk about practically anything. Many col­ and Margaret Bowler, were poor farmers umns affirmed her commitment to American who moved to Michigan, then Utah and individualism. She attacked collectivist so­ Alberta in search of better luck.. Paterson cieties based on status and defended dy­ made soap, tended livestock, and spentjust namic capitalism. She denounced Herbert two years in school. But she read books at Hoover's interventionism and Franklin home, including the Bible, some Shake­ Roosevelt's New Deal. speare, and novels by Charles Dickens and Alexander Dumas. The God ofthe Machine When she was about 18 years old, Pater­ son went off on her own. She worked as a Many columns explored themes which waitress, bookkeeper, and stenographer, became the basis for The God of the Ma­ earning $20 a month. She was proud to be chine, published by Putnam's in May 1943. independent. "Listen, my girl," she told a Paterson attacked fascism, Nazism, and journalist, "your paycheck is your mother Communism as varieties of the same evil, and your father; in other words, respect it. " collectivism. She reserved some ofher most At 24, in 1910, she married Kenneth eloquent blasts for Stalin, who charmed so Birrell Paterson, but the relationship many intellectuals. Anyone who imagines soured, and within a few years they went that socialist horrors were exposed recently their separate ways. She seldom talked will be shocked to see how clearly Paterson about him again. She was more determined understood why collectivism always means than ever to maintain her independence. stagnation, backwardness, corruption, and She had done a little writing on the side slavery. to relieve boredom, and after she became a There's· much more in this tremendous secretary to a Spokane, Washington, news­ book. Paterson provided a grand overview paper publisher, she did more. She began ofthe history ofliberty. She made clear why writing his editorials. She wrote drama crit­ personal freedom is impossible without po­ icismfortwo Vancouver newspapers. Next, litical freedom. She defended immigrants. fiction-her novel The Shadow Riders was She denounced military conscription, cen­ published in 1916, and The Magpie's Nest, tral economic planning, compulsory union- THREE WOMEN WHO INSPIRED THE MODERN LffiERTARIAN MOVEMENT 327

ism, business subsidies, paper money, and Paterson's-andjust about everyone else's compulsory government schools. Long be­ for that matter-selling some 20 million fore most economists, she explained how copies. New Deal policies prolonged the Great De­ pression. Ayn Rand Paterson celebrated private entrepre- . neurs, who are the primary source ofhuman Rand had a striking presence. As biogra­ progress. For instance: "Everything that pher Barbara Branden described Rand upon was the creation ofprivate enterprise in the her arrival in America at age 21: "Framed railways gave satisfaction. Private enter­ by its short, straight hair, its squarish shape prise mined, smelted, and forged the iron, stressed by a firmly set jaw, its sensual invented the steam engine, devised survey­ wide mouth held in tight restraint, its huge ing instruments, produced and accumulated dark eyes black with intensity, it seemed the capital, organized the effort. In the the face of a martyr or an inquisitor or a building and operation of the railways, saint. The eyes burned with a passion that whatever lay in the realm of private enter­ was at once emotional and intellectual-as prise was done with competence.... What if they would sear the onlooker and leave people hated was the monopoly. The mo­ their dark light a flame on his body." Later nopoly, and nothing else, was the political in life, chain smoking and sedentary habits contribution." took their toll, but Rand was still unfor­ By 1949, Paterson's libertarian views be­ gettable, as book editor Hiram Haydn re­ came too much for editors of the New York called: "A short, squarish woman, with Herald Tribune, and she was fired. None­ black hair cut in bangs and a Dutch bob. ... theless, she expressed her gratitude, saying Her eyes were as black as her hair, and they probably published more of her work piercing. " than would have been tolerated anywhere Rand was born Alissa Rosenbaum on else. They gave her a small pension, and she February 2, 1905, in St. Petersburg. Her got along by investing her savings in real father Fronz Rosenbaum had risen from estate. She refused Social Security, return­ poverty to the middle class as a chemist. Her ing her card in an envelope marked "Social mother Anna was an extrovert who believed Security Swindle." in vigorous exercise and thrived on a busy Meanwhile, she had become a focal point social life. Alissa wanted nothing to do with for the fledgling libertarian movement. For either exercise or parties. example, after Leonard Read founded the She was precocious. After school, she Foundation for Economic Education, she studied French and German at home. In­ introduced him to influential journalist John spired by a magazine serial, she began Chamberlain, whom she had helped convert writing stories, and at nine years old she into a libertarian, and a decades-long col­ resolved to become a writer. laboration blossomed. The Rosenbaums' comfortable world Back during the early 1940s, Paterson ended when the Czar entered World War I, served as a mentor for Russian-born Ayn which devastated the nation's economy. Rand who, 19 years younger, joined her Within a year, more than a million Russians weekly when she proofread typeset pages were killed or wounded. The government of her Herald Tribune book reviews. She went broke. People were hungry. The Bol­ introduced Rand to many books and ideas sheviks exploited the chaos and seized about history, economics, and political phi­ power in 1918. losophy, helping Rand develop a more so­ The Russian Revolution spurred young phisticated world view. When Rand's novel Alissa to invent stories about heroic indi­ The Fountainhead was published, Paterson viduals battling kings or Communist dicta­ promoted it in a number of Herald Tribune tors. At this time, too, she discovered nov­ columns. Rand's books went on to surpass elist Victor Hugo whose dramatic style and 328 THE FREEMAN • MAY 1996 towering heroes captivated her imagination. entering his studio, and he took herto the set "I was fascinated by Hugo's sense oflife," of his current production. She started work she recalled. "Itwas someone writing some­ as an extra for $7.50 a day. thing important. I felt this is the kind of At DeMille's studio, Rand fell in love with writer I would like to be, but I didn't know a tall, handsome, blue-eyed bit actor named how long it would take." Frank O'Connor. They were married April At the University of Petrograd, she took 15, 1929, before her visa expired. She no courses with the stem Aristotelian Nicholas longer had to worry about returning to the Lossky who, scholar Chris Sciabarra Soviet Union. Two months later, she ap­ showed, had an enormous impact on her plied for American citizenship. thinking. She read plays by Johann Chris­ The DeMille Studio closed, and she found toph Friedrich von Schiller (she loved oddjobs such as a freelance script reader. In him) and William Shakespeare (hated him), 1935 she had a taste of success when she philosophy by Friedrich Nietzsche (pro­ earned as much as $1,200 a week from her vocative thinker), and novels by Feodor play Night ofJanuary 16th, which ran 283 Dostoevsky (good plotter). She was utterly performances on Broadway. It was about a captivated to see some foreign movies. She ruthless industrialist and the powerful had her first big crush, on a man named Leo woman on trial for his murder. who risked his life to hide members of the anti-Bolshevik underground. We the Living In 1925, the Rosenbaums received a letter from relatives who had emigrated to Chi­ Rand spent four years writing her first cago more than three decades earlier to novel, We the Living, about the struggle to escape Russian anti-Semitism. Alissa ex­ find freedom in Soviet Russia. Kira Ar­ pressed a burning desire to see America. gounova, the desperate heroine, became the The relatives agreed to pay her passage and mistress of a party boss so she could raise be financially responsible for her. Miracu­ money for herlover suffering from tubercu­ lously, Soviet officials granted her a pass­ losis. Rand finished the book in late 1933. port for a six months' visit. On February 10, After many rejections, Macmillan agreed to 1926, she boarded the ship De Grasse and take it and pay a $250 advance. The com­ arrived in New York with $50. pany published 3,000 copies in March 1936, She soonjoined her relatives in a cramped but the book didn't sell. Although word-of­ Chicago apartment. She saw a lot ofmovies mouth gave it a lift after about a year, and worked at her typewriter-usually Macmillan had destroyed the type, and We starting around midnight, which made it the Living went out of print. Rand had difficult for others to sleep. During this earned just $100 of royalties. period, she settled on a new first name for In 1937, while struggling to develop the herself: Ayn, after a Finnish writer she had plot of The Fountainhead, Rand wrote a never read, but she liked the sound. And a short, lyrical futurist story about an individ­ new last name: Rand, after her Remington ual versus collectivist tyranny-Anthem. Rand typewriter. Biographer Branden says Rand's literary agent sold it to a British Rand might have adopted a new name to publisher but couldn't find a taker in the protect her family from possible recrimina­ American market. About seven years later, tion by the Soviet regime. Los Angeles Chamber of Commerce Gen­ Determined to become a movie script eral Manager Leonard Read visited Rand writer, she moved to Los Angeles. Through and O'Connor-then living in New York­ her Chicago relatives, she persuaded a and remarked that somebody ought to write movie distributor to write a letter introduc­ a book defending individualism. Rand told ing her to someone in the publicity depart­ him about Anthem. Read borrowed her ment of the glamorous Cecil B. DeMille copy, read it, and his small publishing firm Studio. She met the great man himselfwhile Pamphleteers made· it available in the THREE WOMEN WHO INSPIRED THE MODERN LffiERTARIAN MOVEMENT 329

United States. It has sold some 2.5 million stirred a groundswell of interest, and the copies. publisher ordered a succession of reprint­ ings which were small, in part, because of The Fountainhead wartime paper shortages. The book gained momentum and hit the bestseller lists. Two Rand finished plotting The Fountainhead years after publication, it sold 100,000 cop­ in 1938 after nearly four years ofwork. Then ies. By 1948, it had sold 400,000 copies. came the writing. Her hero, architect Then came the New American Library Howard Roark, expressed her vision of an paperback edition, and The Fountainhead ideal man. He battled collectivists all around went on to sell over 6 million copies. him to defend the integrity ofhis ideas, even The day Warner Brothers agreed to pay when it meant dynamiting a building be­ Rand $50,000 for movie rights to The Foun­ cause plans were altered in violation of his tainhead, she and O'Connor splurged and contract. each had a 65-cent dinner at their local Selling the book proved tough. Rand's cafeteria. Rand fought to preserve the in­ editor at Macmillan expressed interest and tegrity ofthe script and was largely success­ offered another $250 advance, but she in­ ful, though some ofher most cherished lines sisted the company agree to spend at least were cut. The movie, starring Gary Cooper, $1,200 on publicity, so Macmillan bowed out. Patricia Neal, and Raymond Massey, pre­ By 1940, a dozen publishers had seen fin­ miered July 1949. It propelled the book onto ished chapters and rejected the book. One the bestseller lists again. influential editor declared the book would Sometime earlier, when the hardcover never sell. Rand's literary agent turned edition had just come out, Rand told Isabel against it. Her savings were down to about Paterson how disappointed she was with its $700. reception. Paterson urged her to write a Rand suggested that the partial manu­ nonfiction book and added that Rand had a script be submitted to Bobbs-Merrill, an duty to make her views more widely known. Indianapolis-based publisher which had is­ Rand rebelled at the suggestion that she sued The Red Decade by anti-Communist owed people anything. "What if I went on journalist Eugene Lyons. Bobbs-Merrill's strike?" she asked. "Whatifall the creative Indianapolis editors rejected The Fountain­ minds of the world went on strike?" This head, but the company's New York editor became the idea for her last major work, Archibald Ogden loved it and threatened tentatively called The Strike. to quit if they didn't take it. They signed a contract in December 1941, paying Rand a Atlas Shrugged $1,000 advance. With two-thirds ofthe book yet to be written, Rand focused on making As Rand worked on the book for some 14 her January 1, 1943, deadline for comple- years, everything about it became larger -tion. She found herself in a friendly race than life. The book featured her most fa­ with Isabel Paterson, then working to finish mous hero, mysterious John Galt,-the phys­ The God ofthe Machine. icist-inventor who organized a strike of the Rand made her deadline, and The Foun­ most productive people against taxers and tainhead was published in May 1943, the .other exploiters. The book introduced Dag­ same month as The God of the Machine, ney Taggart, Rand's first ideal woman, who about nine years after the book was just a found her match in Galt. Key characters dream. The Fountainhead generated many delivered long speeches presenting Rand's more reviews than We the Living, but most philosophical views on liberty, money, and reviewers either denounced it or misrepre­ sex-the book often seems more like "a sented it as a book about architecture. For polemic for individualism and capitalism. A a while, Bobbs-Merrill's initial print run of friend suggested that the tentative title 7,500 copies moved slowly. Word-of-mouth would make many people think the book 330 THE FREEMAN • MAY 1996 was about labor unions, and she abandoned phy was published 18 years later. Branden it. O'Connor urged her to use one of the later became a bestselling author about chapter headings as the book title, and it self-esteem. became Atlas Shrugged. During the past half century, no single Rand's ideas were as controversial as individual did more than Ayn Rand to win ever, but sales of The Fountainhead im­ converts for liberty. Her books sell a re­ pressed publishers, and several big ones ported 300,000 copies year after year with­ courted her for Atlas Shrugged. Random out being advertised by publishers or as­ House co-owner Bennett Cerf was most signed by college professors. Indeed, her supportive, and Rand got a $50,000 advance works have been trashed by most intellec­ against a 15 percent royalty, a first printing tuals. Her enduring appeal is an amazing of at least 75,000 copies, and a $25,000 phenomenon. advertising budget. The book was published Curiously, despite the enormous influ­ October 10, 1957. ence ofRand's books, they have had limited Most reviewers were savage. The old-line impact outside the English-speaking world. socialist Granville Hicks was a vocal critic The most successful has been The Foun­ in the New York Times, and others were tainhead, with editions in French, German, similarly offended by Rand's attacks on Norwegian, Swedish, and Russian. We the collectivism. The most hysterical review of Living is available in French, German, all turned out to be in conservative National Greek, Italian, and Russian editions, but a Review where Whittaker Chambers, pre­ fifth as many copies are sold. The only sumably offended by her critique ofreligion, overseas edition of Atlas Shrugged is in likened Rand to a Nazi "commanding: German-incredibly, it was never published 'To a gas chamber-go!' " Word-of-mouth in England. Anthem still hasn't appeared in proved too strong for these naysayers, and a translation, although French and Swedish sales began to climb, eventually past 4.5 editions are underway. Confirmation, per­ million copies. haps, that America remains the world's With Atlas Shrugged, Rand had fulfilled hotbed of rugged individualism. her dreams, and she became depressed. She was exhausted. She no longer had a The Final Years giant project to focus her prodigious ener­ gies. She leaned increasingly on her Rand, Paterson, and Lane saw little of Canadian-born intellectual disciple Natha­ each other over the years. Rand and Pater­ niel Branden with whom she had become son, both prickly pears, had a bitter split intimate. To serve the growing interest in during the 1940s; after publication of Atlas Rand and help revive her spirits, he estab­ Shrugged, Paterson attempted a reconcilia­ lished the Nathaniel Branden Institute, tion without success. Paterson's friendship which offered seminars, marketed taped with Lane apparently had ended in some lectures, and began issuing publications. kind of intellectual dispute. Suffering gout Rand wrote articles about her brand of and other infirmities, Paterson moved in libertarian philosophy, which she called with two of her remaining friends, Ted and Objectivism. Branden, 25 years younger Muriel Hall in Montclair, New Jersey. than Rand, was sometimes an abrasive There she died on January 10, 1961, at age taskmaster, but he displayed remarkable 74. She was buried in an unmarked grave. skills promoting the ideals of individualism Rand and Lane had already split over and capitalism. Good times continued until religion. Although Lane remained active August 23, 1968, when he told Rand about throughout her life-Woman's Day sent her his affair with another woman. Rand de­ to Vietnam as their correspondent in 1965­ nounced him publicly, and they split, al­ she cherished country living at herDanbury, though the reasons weren't fully disclosed Connecticut, home. On November 29, 1966, until Branden's ex-wife Barbara's biogra- she baked several days' worth ofbread and THREE WOMEN WHO INSPIRED THE MODERN LIBERTARIAN MOVEMENT 331 went upstairs to sleep. She never awoke. train take her from New York to New She was 79. Her close friend and literary Orleans where 4,000 people cheered her heir, Roger MacBride, brought her ashes to resounding defense of liberty. Mansfield, Missouri, and had them buried Rand's heart began to fail in December next to hermother and father. MacBride had 1981. She hung on for three more months, her simple gravestone engraved with some asking her closest associate, Leonard words by Thomas Paine: "An army of Peikoff, to finish several projects. She died principles will penetrate where an army of in her 120 East 34th Street, Manhattan soldiers cannot. Neitherthe Channel nor the apartment on March 6, 1982. She was buried Rhine will arrest its progress. It will march next to O'Connor in Valhalla, New York, as on the horizon of the world and it will some 200 mourners tossed flowers on her conquer." coffin. She was 77. Rand had quarreled with many friends With their acknowledged eccentricities, and led a reclusive life during her last years. Rand, Paterson, and Lane were miracles. She endured surgery for lung cancer. She They came out ofnowhere to courageously kept more to herselfafter Frank 0'Connor's challenge a corrupt, collectivist world. They death in November 1979, oblivious to how single-mindedly seized the high ground. her ideas inspired millions. Two ·years later, They affirmed the moral imperative for lib­ she enjoyed one heartening view, though; erty. They showed that all things are entrepreneurJames Blanchard had a private possible. D THEFREEMAN Samuelson and, W. Fellner as well as the IDEAS ON LIBERTY devout Marxians Oskar Lange, L. R. Klein, and P. M. Sweezy. Many younger econo­ mists were doing government work in the numerous offices ofthe federal government. The War Production Board, Office of Price Onward Still Administration, and other government agencies were swarming with economists charting the course of "reconstruction." by Hans F. Sennholz Many Americans had come to accept the philosophical premises of the New Deal, differing only on the team ofpoliticians who could' carry out economic intervention most hen Leonard Read was laboring to efficiently and effectively. They were con­ W launch the Foundation for Economic vinced ,that the old economic order of un­ Education in early 1946, the American peo­ hampered competition and individual enter­ ple were engaged in the giant task of con- prise no longer served the interests of the , verting from wartime to peacetime produc­ working people, that greedy entrepreneurs tion. There were shortages of meat, sugar, and capitalists were abusing and exploiting and cereal products despite record-breaking­ them, and ~hat legislators and regulators crops. More than one million workers were should be called upon to head off such evils. out on strike in such essential industries Leonard Read saw the great issues of his as steel, motors, electrical equipment, and time in a different light. His ideological communications. Congress and the media mentors were William Graham Sumner and were debating the wisdom ofprice and wage T. N. Carver, his favorite authors J. B. controls, which had affected almost every Clark, C. J. Bullock, and F. W. Taussig. aspect of economic life since the spring of From the day Leonard settled in Irvington, 1942. The Truman Administration not only Henry Hazlitt and Ludwig von Mises were was unable to cope with the vital problems his staunch allies and steady companions. of labor unrest, soaring prices, black mar­ Together they set -out to awaken public kets, and shortages, but, according to some interest in sound economics and rekindle the economists, was actually causing them. By freedom philosophy. The task was momen­ the end ofthe year, it was so discredited that tous and urgent. "A new generation, one the people rose on election day and turned which has never experienced economic lib­ the Democrats out of both houses of Con­ erty, is taking over," they wrote. "Young gress where they had ruled supreme since men who have become accustomed to being Franklin D. Roosevelt's first election. regimented and restricted are coming into Much more needed to be done than just positions of responsibility in business. The change the political guard. Public opinion, job of economic education must be under­ that indicator of the political, social, and taken now while those who appreciate the economic climate, which caused the people value ofliberty are still in position to support to cast their votes and the legislators to it." To undertake this giant task, they enact the contentious laws and regulations, molded the Foundation for Economic Edu­ needed to be changed. Most economists cation ("FEE"). whose names attracted attention were con­ A 1946 Outline ofProposedActivities and cerned with macroeconomic schemes for a Reasons Therefor expounded five basic centrally managed economy. Among these principles of education which were to be­ were the Keynesian professors such as Paul come FEE's guiding principles. 1. "The Foundation shall confine itself Dr. Sennholz is president ofthe Foundation for to the field of ideas. It shall not disparage Economic Education. or support particular persons or political 332 333 parties. Its purpose shall be a program of economic education rather than political campaigning. It shall content itself with presenting its findings for whatever use citizens want to make of them. " 2. Education cannot be imposed. Unless economic enlightenment is wanted and sought it falls on barren ears. FEE must create a desire for economic understanding and then serve the desire thus created. 3. FEE will conduct an "integrated pro­ gram of production, promotion, and distri­ bution," engaging scholars and specialists now working in isolation and calling on others to assist FEE from the outside. 4. Since the intellectual leaders oftomor­ row cannot be known today, the only way to reach all possible leaders is by "creating opportunity for the enlightenment of all. " 5. There is an intellectual hierarchy among scholars. The thought leaders from all walks oflife must reach out to those who write, expand, and explain to yet larger Hans F. Sennholz, President ofFEE groups until "almost any literate person can understand and appreciate" the importance of economic knowledge. to be right. In time, FEE was to become a Freedom education not only imparts "home" for the friends of freedom every­ knowledge of economic theories and prin­ where, a bright beacon ofhope inspiring the ciples but also aims to develop a sense of creation of numerous similar organizations right, self-reliance, and responsibility. It at home and abroad. After ten years on needs writers and teachers who can explain Leonard's senior staff, F. A. Harper left the meaning and beauty of liberty, who FEE to found the Institute for Humane impart knowledge and teach by example. Studies on the west coast. Ken Ryker cre­ Leonard Read, therefore, surrounded him­ ated the Freedom Center in Fort Worth, self with men and women of excellence, Texas, and Ralph Smeed The Center for seekers ofknowledge and students ofliberty Market Alternatives, in Boise, Idaho. In such as V. Orval Watts, Frank Chodorov, other countries, Antony Fisher and his F. A. Harper, George C. Roche III, The friends founded the Institute for Economic Reverend Edmund A. Opitz, and others. He Affairs in London; Alberto Benegas Lynch invited famous professors such as Fred established the Centro de Estudios sobre la Rogers Fairchild of Yale University, J. Libertad in Buenos Aires; Manuel F. Ayau Hugh Jackson of Stanford University, and built a new university, Universidad Fran­ Leo Wolman ofColumbia University tojoin cisco Marroquin in Guatemala City; him on the board of trustees. This they did Gustavo Velasco and Agustin Navarro cre­ as a gesture of endorsement of a great task ated the Instituto de Investigaciones 80­ and noble endeavor to which they gladly ciales y Econ6micas in Mexico City, and contributed some of their time and effort. Nicomedes Zuloaga forged the Instituto The Foundation helped to revive and Venezolano de Analisis Econ6mico y Social guide the intellectual opposition to the ideo­ in Caracas. To all, FEE pointed the way and logical mainstream. It refused to be fashion­ instilled new hope for the future offreedom. able but, instead, stood for what it believed Hope ever tells us that tomorrow will 334 THE FREEMAN • MAY 1996

FEE senior staffand associates, 1955 - first row (left to right): »ZM. Curtiss, Bettina Bien (now Greaves), Leonard Read, Ludwig von Mises, FA. Harper; second row: Paul L. Poirot, Edmund Opitz, Ivan Bierly, Charles Hull Wolfe, Thomas Shelly. be better. All things change, and we must cause the system itselfis chaotic, unnatural, change with them. Halfa century has passed and inhuman; but the doctrines and values since the doors of FEE first opened. That of socialism are very much alive in all parts which stood in front of the founders is of the world. They live on in the minds of behind us, and that which they could not many Americans under the labels of "social foresee is before us. The "Evil Empire" has market economy," "moderate" Democra­ disintegrated and the overall political and tism or Republicanism, "middle-of-the­ economic climate ofthe world has improved road," or just "welfarism," and merely dramatically. The old conditions of super­ proceed more slowly to the same destina­ power confrontation and constant danger tion: economic poverty and social disinte­ of nuclear devastation may have given way gration. to amicable negotiations and discussions. Socialism and welfarism are cousins of the The Soviet empire in all its forms and colors, same family having many features in com­ which had degenerated to a backward col­ mon. Both are guided by messianic objec­ lectivistic prison, was weighed in the bal­ tives such as ' 'social justice" or "social ance and found wanting. All over the world security" to which all individual concerns the political and economic gates have are held captive. In the name of "social opened, permitting individual freedom to justice" both enslave their people-one by advance. But they may close again if the barbed-wire fences, and the other by tax opening is misunderstood and misinter­ collectors who force their victims to spend preted. Only the philosophy of individual half their working lives laboring for "the freedom and the property order can keep will ofthe people." Bothresort to legislation them open. and regulation to arrange and settle all Socialistic countries have collapsed be- things. Both politicize economic activity ONWARD STILL 335

The staffofFEE, February 1996-first row (left to right): Bettina Bien Greaves, Beth Hoffman, Mary Sennholz, Hans Sennholz, Felix Livingston, Barbara Dodsworth; second row: William Watkins, Harriet Bender, Kyle Swan, Renate Oechsner, Michael Darcy, Kathleen Walsh, Gregory Pavlik, Janette Brown, Marion Sheehan, Mary Ann Murphy, Helen Dalzell. and collectivize many manifestations of so­ disavow family responsibility for the edu­ cial life. Both substitute public law for cation ofchildren and the care ofthe old and contract law, passing hundreds of public sick. Both erode the basic Judeo-Christian laws in every session of the legislature and values of honesty, fairness, trustworthiness, imposing countless new regulations every reliability, diligence, frugality, and depend­ year. Both make a mockery of property ability. Both give birth to a "new morality" rights. One confiscates means ofproduction which actually is immorality and dissolu­ and allocates income, while the other forc­ tion. ibly redistributes income from the means of Social disintegration may take the form of production. The difference is minimal when soaring crime rates, growing underground both consume more than one half of the economic activity, ethnic and racial con­ social product. frontations, and even calls to arms. An early In the name of "social security" both symptom is the growing weight and gravity systems create much insecurity. When the of politics, which tum into an unending crime rates soar, one may inflict cruel and bitter battle about" taxes and entitlements. unusual punishments on the violators, while Politicians become rancorous spokesmen the other incarcerates millions ofits citizens for their special entitlement groups while in comfortable recreation centers. Both de­ all the rest, in their view, are strangers, stroy self-reliance, responsibility, and mo­ enemies, or thieves and highwaymen. While rality. Where government makes all deci­ the economy stagnates or even declines, sions, everyone is merely obliged to obey. the people belligerently cling to their polit­ Noone is responsible for the consequences ical privileges and entitlements: the young of his blunders, but everyone has "rights" clutch their educational benefits from the which are claims against all others. Both nursery to medical school (always at other 336 THE FREEMAN • MAY 1996 people's expense), the elder generation The task of education is more urgent and clings to Social Security and Medicare ben­ momentous than ever. There is but one efits, and millions ofmiddle-aged Americans method ofpreserving ourfreedom and main­ thrive on government payrolls or subsist on taining the social peace, and that is by public assistance. The number of govern­ disseminating the seeds of Judeo-Christian ment employees now exceeds that of all morals and economic knowledge by means Am~rican manufacture. The number ofpeo­ of education. As public tax-supported edu­ ple with "entitlements" is incalculable. In a cation is a root cause of the rise of welfar­ society so torn by political conflict it may be ism and an important pillar of the conflict difficult, if not impossible, to halt the social system, this can be done effectively only deterioration. by the means of purposeful private educa­ All Western welfare states are heading tion. There is no room for complacency. toward disintegration. The weight of the It is imperative that we face political and pyramid of entitlement debt amounting to social turmoil with courage and self-assur­ trillions ofdollars is likely to crush the very ance, always pointing toward the light of system that incurred the debt. It will cause freedom. welfare governments to default in one form The Foundation for Economic Education or another to both their creditors who fi­ is dedicated to preserving and strengthening nanced the pyramid and to the entitlees who the moral and ideological foundation of a were promised much more. The ultimate free society. It is not just one of many default ofttimes leads to angry polarization organizations seeking to impart economic and even bloody confrontation. In societies knowledge and promote the cause of free­ ofhomogeneous ethnic and cultural compo­ dom. From the day it opened its doors in sition, the crisis may give rise to a political 1946 to this very day it has never compro­ and economic command system which bru­ mised its principles. It cares more for the tally suppresses all entitlement conflicts. In truth than for popularity, for truth is its own societies with various ethnic and cultural witness. classes, individual alienation tends to tum The Foundation shuns politics and keeps into civil strife and bloody warfare. a respectful distance from politicians. Gov­ The potential for political, social, and ernment has come to be an institution of economic strife may be greater today than booty and privilege, and is managed primar­ when FEE was born. Surely, the United ily on class-war principles. Many people States now is the sole superpower of the plunge into politics to make their own and world and no longer needs to fear anyone their electorate's fortune and care only that adversary. It rules the world as no country the world will last their span of days. ever did. But it may also be weaker morally The Foundation seeks to impart not only and spiritually than it was halfa century ago. economic knowledge but also individual The welfare state has eroded the moral fiber values which are essential for social peace of the people, has created a conflict system such as honesty and integrity, industry and with classes of beneficiaries and victims, self-reliance, prudence and courage, and and fostered the growth ofmulticulturalism charity toward all men and women. which breeds hatred and hostility. It casts Wisdom, knowledge, and virtue are nec­ doubt on the feasibility ofa roll-back oreven essary for the preservation of our freedom purge of the conflict system and raises the and the republican form of government. spectre of civil violence in case the benefit Therefore, we must discover and dissemi­ system should fail to meet the demands of nate the seeds of virtue and knowledge the entitlees. Economic stagnation and de­ through every part of society by all means cline tend to seriously aggravate the social at our disposal. We must dedicate ourselves conflict. and our labors to this very end. D THEFREEMAN IDEAS ON UBERTY

FEE and the Climate ofOpinion by Bettina Bien Greaves

"The genuine history of mankind," as private enterprise and entrepreneurship are Ludwig von Mises wrote, "is the his­ being studied on college campuses. Do these tory of ideas." In this sense, history is events portend a widespread ideological made, although it is not planned, by men shift toward freedom and limited govern­ and by their ideas. We can see the power ment, with more recognition of individual of ideas by studying history. Just as water rights, private property, religious freedom? can in time wear away rock, so too may Only time will tell. an idea whose time has come erode the rock When the Foundation for Economic Ed­ of public opinion and change the course ucation (FEE) was established in 1946, ofhistory. For instance: the concepts ofthe World War II had just ended. Discussion of eighteenth-century Enlightenment-indi­ military matters had, ofcourse, been strictly vidual rights, private property, religious prohibited during the war, and even criti­ freedom, and limited government-sparked cism of government was considered unpa­ an "industrial revolution" and reduced ab­ triotic. The majority of the people in the solute monarchs to figureheads; socialist, United States at that time undoubtedly be­ Communist, and fascist ideas produced the lieved that President Franklin Delano totalitarian states and the world wars ofthe Roosevelt had rescued the nation from a twentieth century; political propaganda ca­ serious depression and had been responsible tering to the fears and hopes of people for our victory in a war that destroyed the persuaded the voters in the 1930s to wel­ foreign "devil," Adolf Hitler. A few orga­ come Roosevelt's New Deal and Hitler's nizations founded in opposition to the New national socialism; and the widespread be­ Dealt survived, but, generally speaking, lief that government spending and inflation criticism of government was not in fashion. are needed for the economy to prosper has Most organizations that want to bring produced today's "welfare states." about ideological change try to influence the But ideas, and with them the climate of masses, to change votes and politicians at opinion, are constantly changing. There are the next election. But FEE was different. signs today that people are beginning to Through Henry Hazlitt, Leonard Read had reject some aspects of the "welfare state" encountered the Austrian economist Lud­ and to look outside government for solu­ wig von Mises, who stressed the importance tions to problems. Time and again, political of ideas and the power of ideology. Thus, "ins" are voted out. Cuts in government FEE looked beyond the next election; it spending and privatization are now being hoped to bring about a more lasting change discussed in the halls of Congress; and in people's ideas and attitudes. When FEE was founded, most people in Mrs. Greaves has been with the Foundation since this country believed that government plan­ 1951 andpresently serves as its resident scholar. ning was necessary to recoverfrom the war, 337 338 THE FREEMAN • MAY 1996 that economic prosperity depended on gov­ Economics in One Lesson, first published ernment spending and inflation, and that in 1946, has been, and still is, one ofthe best government should provide a "safety net" easy-to-read introductions to economic to protect people from the effects ofhunger, thinking. It has had wide appeal; Reader's poverty, and old age. The ideas on which Digest published two separate chapters be­ we act come from many sources-family, fore the book was published, and it has been school, church, workplace, friends, col­ translated into twelve different languages.2 leagues, and books. FEE still sells several thousand copies ev­ Thefinal spark that ignited Read's interest ery year. in promoting the freedom idea had come from California businessman W. C. Mullen­ Promoting the dore. However, the freedom philosophy Freedom Philosophy itself has a broad base; it is built on the principles of classical liberalism as devel­ Read used to say "You can't sell freedom oped by thinkers over the ages, and as they like soap." In trying to promote the freedom are still being developed today by philoso­ philosophy, he refused to try to reach the phers, scholars, historians, economists, and masses; he rejected the use offlashy adver­ others who ponder the problem. tisements or radio "sound bites',-TV had Foremost among the thinkers on whose barely been born in 1946. To change opin­ theories and writings FEE has depended ions long-range, not simply in time for the is the Austrian-born free market economist next election, to effect a turnabout in think­ Dr. Ludwig von Mises. Mises was one ofthe ing, FEE wanted to reach people interested first persons Henry Hazlitt introduced to in ideas-intellectuals, teachers, writers, Read when he was making plans to establish and anyone else who could help to spread the Foundation. Mises already had a well­ the freedom philosophy. FEE began pub­ deserved reputation in economic circles in lishing books, pamphlets, and articles; hold­ Europe as a scholar, as an outspoken advo­ ing seminars; and giving lectures. FEE's cate of capitalism, and also as a critic of writers, of course, criticized the New Deal/ government intervention. It is not surpris­ Fair Deal "welfare state" philosophy ofthe ing, therefore, that Read asked Mises to day. But they did more; they also presented serve as FEE's economic adviser. Mises the positive free-market alternative. was never a regular member ofFEE's staff, In FEE's view, there is good and bad in but he visited FEE regularly, lectured at everyone. Most people recognize the advan­ seminars, and wrote articles for FEE. One tages of voluntary cooperation and want to draft of Mises' magnum opus, Human Ac­ cooperate, to get along and live at peace tion: An Economic Treatise, was typed on with others. Thus the market itself, a prod­ FEE's premises by FEE secretaries. When uct ofvoluntary cooperation, tends to bring Yale University Press published it in 1949, out the good, the moral, the best in people. FEE distributed copies to college and uni­ On the other hand, government controls and versity libraries throughout the country. regulations help some, hurt others, cause Mises' teachings on economics, market conflicts, and thus inevitably tend to bring operations, monetary theory, the role of out the worst in people. government, the importance of private Government should not interfere in the property, and the dangers of socialism, economy; it should not play favorites; it communism, and interventionism pervade should protect everyone equally against all FEE's efforts. aggression, domestic and foreign. Period. Henry Hazlitt was one of the Founda­ That is all! The New Deal/Fair Deal pro­ tion's founding trustees. Although he was grams obviously interfered. Moreover, they never on FEE's staff, his ideas and his didn't accomplish what their proponents writings have been FEE staples from the intended; price and wage controls led to very beginning. Hazlitt's powerful little shortages and agricultural subsidies to sur- FEE AND THE CLIMATE OF OPINION 339

World? and Illusions ofPoint Four by Henry Hazlitt, Industry-Wide Bargaining by Leo Wolman, Liberty: A Path to Its Recovery byF. A. Harper, and The TVA Idea by Dean Russell. The Foundation's tracts attacked some of the government's most" sacred cows. " And they were effective. The National Association of Real Estate Boards reprinted and distributed to its mem­ bers nationwide many thousands of copies of "Roofs or Ceilings?" In February 1949, Reader's Digest (dis­ tribution then 4.5 million in the U.S. alone) reprinted FEE's "No Vacancies" by Ber­ trand de Jouvenel.

Bettina Bien Greaves amidst her books. FEE Investigated and Criticized pluses. As Mises stated, government inter­ ference with the market not only fails to Like a burr under a horse's saddle, FEE's accomplish the ends aimed at but "makes critiques of government programs festered conditions worse, not better," even from and irritated some politicians. In the spring the point of view of the government and of1950, the House ofRepresentatives set up those backing its intetference. a Select Committee for Lobbying Activities. FEE explained that the solution for al­ Its objective was to investigate "all lobbying most any problem was to get government off activities." In actual fact, it spent most of people's backs. Free men and women could its time examining a few "conservative" solve their own problems better than any organizations, including the Foundation. government planner or bureaucrat. Individ­ Were they pressuring Congressmen on be­ uals must assume responsibility for them­ half of their "conservative" agenda? Were selves and their families and stop looking to they lobbying in the guise of engaging in government for help. Only then would they "educational" activities? Should they be be free to pursue their personal goals in registered as lobbyists? And who was pay­ peace. "Anything that's peaceful" became ing for their attacks on public housing? Rent Read's mantra. control? Farm price supports? TVA? For­ FEE gradually began to build up a mailing eign aid? Labor unions? list of persons to whom it sent, free of The Committee asked to see the Founda­ charge, one-page easy-to-read "Clippings tion's financial records and Mr. Read finally of Note" and small pamphlets. Each com­ decided to open FEE's files. Four Commit­ mented on some current event. They raised tee staffers spent about a week in Irvington questions. They made people think! going through FEE's records. The Foundation also published longer Mr. Read testified before the Committee studies, more serious booklets including on FEE's role as an educational organiza­ "Roofs or Ceilings?" by two future Nobel tion: laureates, Milton Friedman and George The Foundation is not, I believe, charged by Stigler, "No Vacancies" by Bertrand de you with lobbying or with violation of the Jouvenel,' Fiat Money Inflation in France existing act. Rather, the thought is that activ­ by Andrew Dickson White, Planned Chaos ities such as those carried on by the Founda..; by Ludwig 'von Mises, Why Kill the Goose? tion, while not being regarded as lobbying as by Sherman Rogers, Will Dollars Save the that action is .commonly construed, may, 340 THE FREEMAN • MAY 1996

International students pictured on FEE's front porch during the August' 1989 seminar.

nonetheless, have as much or more influence of the biggest and best financed pressure on legislation than those actions popularly outfits in America. ... It is the fountain­ thought ofas lobbying. Ithas been said that our head for half-truths and distortions, de­ activities are in the "fringe" zone oflobbying, signed to deceive the American public for in~ implying that these "fringes" might be the benefit ofthe outfits who are behind this eluded in any new lobbying act. That, as I understand it, is why your Committee inves­ thing. " The next day the same commentator tigated the Foundation, and why I am here. said: "The Foundation for Economic Edu­ The organization which I represent is a cation is a vicious anti-labor propaganda non-profit research and educational institu­ outfit. It spreads its venom in order to crush tion. Its sole purpose is a search for truth in organized labor and, if possible, to crush economics, political science and related sub­ Farm Bureau cooperatives as a secondary jects. It is that, and nothing more-an institu­ objective." tion for learning. I doubt that any college or FEE's largest donors, according to the university or other institution of learning in CIO News, included "some of the same this country is more genuinely, and with any wealthy individuals and firms who have more uncompromising honesty, dedicated to kicked in to every anti-labor, pro-big busi­ the search for truth in these matters than is the ness propaganda and lobby outfit in the Foundation...." business of trying to convince the average Syndicated columnist Drew Pearson American that the country is going socialist, called the Foundation "A mysterious orga­ if it isn't there already, and that such aids nization, . . . a vigorous lobby aimed at to mankind as social security, unemploy­ wrecking the European Recovery Program ment compensation, the TVA, public hous­ [that] has been flooding the country with ing, rent and other price controls are de­ propaganda aimed at undermining the Mar­ priving him ofhis freedom to go hungry and shall Plan, rent control, aid to education and unsheltered in his own sweet way." social security." A labor union spokesman wrote: "the One radio commentator called FEE "one Foundation doesn't have to scrounge for FEE AND THE CLIMATE OF OPINION 341 dollar bills like labor organizations do. ... her syndicated column on F. A. Harper's The list of big contributors sounds like the "Morals and the Welfare State," a FEE 'Who's Who' of American big business." pamphlet. She was "struck" by the impli­ FEE's President, Leonard Read, was de­ cation that there is some similarity between scribed in Ammunition, a left-wing publica­ the "welfare state" and Communism. tion, as "smooth.... He wears $250 suits, "[M]uch that appears in this pamphlet," she $30 shoes, $10 cravats (you wear a necktie, wrote, is "dishonest in its thinking.... the he wears cravats), and $15 shirts.... The mere tying together of communism and Foundation for Economic Education ... socialism" was "dishonest. They are two was set up with plumbing that included a quite different things.... We can have pipeline into the treasury ofevery really big opinions as to whether all the things that corporation in America. " have been done and euphemistically One radio report released by the UAW­ grouped together under the name of 'wel­ CIO Education Department charged that fare state' are wise economic measures. Or Donaldson Brown, a retired Vice President we may question the effect on the character ofGeneral Motors had been" so impressed" ofthe people when the government assumes with Read that he "set him up in the certain responsibilities in conjunction with propaganda business." The release went the people. However, that does not make on to say that there is "something called the us Communist or Socialist. Corrupt Practices Law which forbids cor­ "We are a free people and what we porations to contribute money to political choose to do should not be labeled some­ campaigns and there is the Lobby Registra­ thing which it is not." tion Act which requires lobbies to list the source of all of their contributions over FEE's Efforts Continue $500. But this foundation operates outside both these laws." The Buchanan hearings interrupted but One Democratic Congressman, Carl Al­ did not deter FEE from its educational goal. bert of Oklahoma, paid FEE a backhanded The Foundation went quietly on its way compliment. Read was "far more effec­ trying to erode the rock of pro-government tive," he said, "than the average buttonhole public opinion with the written and spoken artist, so-called, around the CapitoL" word. Its influence was gradually spread­ The House Select Committee on Lobby­ ing beyond FEE's immediate circle through ing had set out to determine whether or not its readers and personal contacts. Yet dur­ new legislation was needed to regulate lob­ ing these years the media paid little atten­ byists. Its hearings did not lead to new tion. legislation. However, only the Democratic The early 1950s saw the publication of members of the Committee would sign its two ofFEE's long-term "best sellers." The report; the Committee Republicans consid­ Mainspring of Human Progress by Henry ered it too biased. It was''designed to help Grady Weaver, inspired by Rose Wilder 'leftists' now running for office," they Lane's Discovery of Freedom (1943), had charged; the Democratic conclusions were been privately printed. FEE acquired the "lopsided" and as "intolerant as an article rights and put out a new edition. Weaver's in Pravda." The Republicans called the thesis is that individuals have prospered majority report a "Socialist white pa­ throughout history only when they have per. ... The majority members say all lob­ been free. The book proved popular and has bying by business and conservative ele­ gone through many printings, sold many ments is bad; all lobbying by left-wingers, thousands ofcopies (several thousands each labor organizations and Fair Deal office year just to one firm that uses the book as holders is good." 3 an aid in teaching their students of fast­ In 1951, Eleanor Roosevelt, widow of reading). Franklin Delano Roosevelt, commented in Read "discovered" FEE's second best 342 THE FREEMAN • MAY 1996 seller-The Law by French deputy and bitten off in a fight. Read's acquaintance journalist Frederic Bastiat (1801-1850)­ with Whitey began with a vitriolic letter while still in California. Bastiat had written from Whitey attacking something Read the book as an attack on the socialist think­ had written about unions. Rather than an­ ing of his day but it was just as pertinent to swering in kind, Read replied soberly, twentieth-century thinking. Bastiat distin­ calmly, and sent Whitey some books to guished "law" from "morality." Depriving read. Whitey had hardly expected such a person of his property for the benefit of gentlemanly treatment. He read the books another was "plunder," Bastiat said, and it and asked for more. Read and Whitey con­ was wrong no matter who did it. When the tinued to correspond for a couple of years. government authorized "plunder," when it But then for a time no word from Whitey. taxed some people to protect manufacturers Finally a letter. Whitey had been in an or to give subsidies to farmers, Bastiat said, automobile accident and hospitalized for it was "legal plunder." three months. Then Whitey added: " ... Through Pamphleteers, Read had re­ but, Mr. Read, you should see the interest printed in California the somewhat archaic my three doctors are showing in our philos­ British translation then available of The ophy." Law. Read was disappointed at the book's Anti-free trade protectionists protested reception. So after FEE was started, he had vigorously when, in 1953, FEE published the book retranslated from the original W. M. Curtiss's The Tariff Idea. Many French into modern colloquial English. producers panic at the thought offree trade The new translator, Dean Russell, a young for fear of lost sales due to cheap foreign journalist, was a World War II veteran imports and lost jobs because of low-cost who had been a bombardier in the U.S. foreign competitors. Shortly after its publi­ Air Force. Read's attention was attracted cation, J. Howard Pew, CEO ofSun Oil and to Russell by a Saturday Evening Post a FEE trustee, announced that he would article Russell had written explaining have to resign from the Board and stop why he would not take government money supporting FEE financially. Generally under the G.1. Bill to attend graduate speaking, he said, he was in favor of the school. Russell's rendition of The Law Foundation's position. But, he said, when has sold more than a half million copies the government had pressed for exchange and has been translated into Spanish and controls, he, as head of his company, had Polish. As a result of FEE's promotion, actively fought for tariffs as the lesser evil. Bastiat has even been "rediscovered" in Pew did not think he should support tariffs France. as his company's CEO and at the same time Read .lectured far and wide on behalf of oppose tariffs as a FEE supporter. His FEE. One of his favorite talks was on obligations to Sun Oil's workers and stock­ "How to Advance Liberty." The task, he holders compelled him, he said, to resign said, was a learning, not a selling, process. from FEE's board and to withdraw all Freedom would be won only as individuals, financial support. Pew had been contribut­ one by one, "did their homework," ac­ ing to the Foundation from the beginning, quired enough understanding first to reject had even withstood the Buchanan Commit­ socialist teachings, and then to climb the tee onslaught, and had become one ofFEE's ladder step by step until in time they, largest supporters. Read didn't consider themselves, could become spokesmen for for a moment dropping FEE's anti-tariff, the freedom philosophy. This has been pro-free trade position; "We'll miss you, FEE's educational approach througholit Howard," he said. Fortunately for FEE, a the years. fellow Board member and close friend of Read used to tell the tale of "Whitey," a Pew's persuaded hini not to resign and he fiery labor union organizer. Whitey had led remained a FEE Trustee and supporter until a violent life, had even had one ofhis fingers he died. FEE AND THE CLIMATE OF OPINION 343 The Freeman scholarly staffer on the program that sum­ mer, was an advocate of "natural rights." The Freeman began publication in New For him, the right to own property was York City in the fall of 1950, as a biweekly sacred; it should not be violated, not by pro-free market Newsweek-sized magazine anyone, not ever! He wouldn't steal, he of opinion. Given the widespread accep­ said, not even if he and his family were tance of the "welfare state" philosophy at starving; certainly he didn't want the gov­ that time, free-market oriented journals ernment to "steal" on his behalf. Heated found it difficult to survive financially; sub­ discussions followed. At the close of the scriptions and advertising could not cover seminar week, the participants lined us expenses. After a few years, in the hope of FEE-staffers up at the front of the lecture cutting costs, the financial backers of The room. With great ceremony they presented Freeman decided to move the publication us with a peck of potatoes-to assure that to Irvington. In the summer of 1954, The we needn't starve, not even ifwe refused to Freeman was taken overby Irvington Press, steal or to accept government handouts. a subsidiary of FEE. It was then converted Just as every individual is different and into a monthly with Frank Chodorov as has a definite personality, so do groups have editor. But it still lost money. different "personalities," depending on For almost ten years, the Foundation had their individual members. Attending the been issuing occasional one-page releases, next FEE seminar that same summer was "Clippings of Note" and "Cliches of So­ a young Mexican, Agustin Navarro. To cialism," also pamphlets and once in a while Agustin, FEE was "Mecca," the source of a book. In 1955, it started Ideas on Liberty, all truth. His enthusiasm and eagerness intended to be a quarterly. Only three issues were infectious; all were affected and, as a had appeared when the decision was made result, the participants at that seminar re­ to combine it with The Freeman. In January ceived FEE's message most favorably. That 1956, the first issue of The Freeman: Ideas was a time when Mexico was hostile, even on Liberty, reduced to Reader's Digest size, dangerous, for anyone advancing anti­ appeared under the aegis of the tax-exempt Communist and pro-market ideas. Yet upon Foundation. This journal then became Navarro's return, he took over the Instituto FEE's principal publication outlet. Another de Investigaciones Sociales y Econ6micas format change in 1986 altered its appearance and operated it for years, publishing leaflets but not the free market principles ex­ and pamphlets criticizing socialism and pounded. Communism and promoting the free-market philosophy. FEE's Seminars FEE's Message Silently and steadily over the years, a stream of books, pamphlets, lectures, let­ What is FEE's message? For many years, ters, monthly issues of The Freeman, have FEE publications have stated that the Foun­ issued forth from FEE. The Foundation dation's goal was to promote the philosophy has also reached many individuals person­ of the free market, limited government, ally by means of the spoken word, through private property. Its message may be boiled lectures and seminars, both in Irvington and down to three easy-to-grasp concepts: in­ on the road. dividual freedom is good, moral, and pro­ In 1956, FEE held its first summer semi­ ductive (see Mainspring); for one person to nar in Irvington. FEE's limited government plunder another's property is wrong and philosophy was so strange to the ears ofthe immoral, just as is government-authorized participants, many of them Keynesian and plunder, or "legal plunder," as Bastiat anti-business teachers, that they rejected it called it (see The Law); and individuals out ofhand. Dr. F. A. Harper, FEE's most working, exchanging, and cooperating vol- 344 THE FREEMAN • MAY 1996 untarily in a free market increase production and improve economic conditions, while government interferences make matters worse (see Hazlitt's Economics in One Les­ son and the logical explanations in Mises' works). Over the years, FEE has persuaded many persons to accept these basic con­ cepts. In many cases, these ideas have changed their thinking, goals, and lifestyles. As has been pointed out, many factors influence the ideas on which a person acts. Everyone we meet, everything we read, see, hear, learn, can affect our ideas. Even when persons have told us directly, as some have, that FEE has changed their lives, that does not mean that FEE was the only influence. Nevertheless, we can point to a few specific cases. A former public school teacher told us that he became disillusioned with the public schools because of what he learned from FEE, left the system and Henry Hazlitt, founding trustee, in the FEE annex that became an entrepreneur. One couple with­ houses his personal library, 1984. drew their daughter from the public school system and enrolled her in a private school with some special field. Dozens of such because ofa personal letter from a member free-market institutions, foundations, or ofFEE's staff. Others have turned to home­ think-tanks have sprung up since the Foun­ schooling. Several teachers have told us that dation was started. Although FEE may have attending a FEE seminar made them more had nothing directly to do with their found­ effective, and quite a few have returned for ing, if you scratch the persons responsible refresher seminars in free-market econom­ for their operations, you are bound to find ics. FEE's ideas have challenged many, somewhere some connection with FEE. forcing them to rethink their basic philoso­ phy of life. Some have started discussion A Worldwide Shift in groups, written books and articles and oth­ Ideology? ers have been inspired to go on the lecture circuit. Now, fifty years after World War II and FEE's articles have been reprinted many the founding of FEE, it is apparent that the times, in many places. Many have appeared climate of opinion in the United States is in newspapers as op-eds. Quite a few FEE changing. There is less antagonism toward publications have been translated and dis­ "big business," less confidence that welfare tributed abroad. Reader's Digest has pub­ state programs are succeeding, and less lished at least eight articles from The Free­ pressure to grant privileges to labor unions man in their American and international or subsidies to special interest groups than editions where they reached many millions there was when FEE was founded. There is ofreaders in the United States and overseas. talk now of cutting government budgets, A number of FEE "alumni" have been even of trying to restrict spending on such influenced, at least in part by FEE, to start sacred government programs as Social Se­ their own free-market oriented think-tanks. curity, Medicare, and welfare. There is None has been an actual FEE clone; rather more discussion of_free enterprise, entre­ each has aimed at a somewhat different preneurship, and privatization. Unfortu­ audience, used another approach, or dealt nately, however, not enough. People are FEE AND THE CLIMATE OF OPINION 345 still not confident enough ofthe advantages advocates of free markets such as Mises of free markets to elect politicians who and Hazlitt, and those of the many new appreciate the importance ofdrastically lim­ free-market oriented think tanks, have iting government so as to leave people really played, and are playing, a small role in this free. ideological shift. What role, if any, no one If we look back, however, we see a can really know. We can only say that hopeful trend. From the time of the Great FEE was among the early promoters of the Depression, which was wrongly blamed on freedom idea in this country after World capitalism, until the 1960s, the advocates of War II, that FEE has been pegging away at big government met little or no serious the same thesis ever since, and that ideas opposition. But ideas seem to have changed have consequences. D somewhat. The Foundation may not have been directly responsible for the 1964 nom­ 1. The more prominent "conservative" organizations es­ tablished during the early years of the New Deal were The ination of Barry Goldwater as the Republi­ National Economic Council, founded in 1930-1931; the Econ­ can presidential candidate, for the 1979 omists' National Committee on Monetary Policy, set up in 1933 when the United States went off the gold standard; and the election ofa conservative Margaret Thatcher Committee for Constitutional Government, established origi­ in England, for the 1980 election of the nally in 1937 as the National Committee to Uphold Constitu­ tional Government to fight Roosevelt's proposal to pack the emotionally pro-freedom Ronald Reagan, or U.S. Supreme Court. The America First Committee, started in for the 1989 downfall of Communism in the 1940 in opposition to Roosevelt's foreign policy, which the Committee's members held was taking the country into a war U.S.S.R. and Eastern Europe. However, it that wasn't our business, had been disbanded promptly after is possible that FEE's constant pounding the Japanese attack on Pearl Harbor. 2. Czech, French, German, Italian, Lithuanian, Norwe­ away at the freedom philosophy for fifty gian, Romanian, Polish, Portuguese, Spanish, and Swedish. years, together with the efforts of other 3. The New York Times, October 30, 1950. Ideas and Consequences by Lawrence W. Reed

FEE: A Lighthouse for Freedom

hen G. K. Chesterton was asked why In no small measure, the success of W there were no statues in England to groups like the Mackinac Center can be commemorate the influence there of the linked to the inspiration of the Foundation Romans, he answered, "Are we not all for Economic Education. I am one ofcount­ statues to the Romans?" In a very real way, less people who support or are associated statues to the Foundation for Economic with free-market organizations that trace Education are everywhere-in the form of their roots to FEE, The Freeman, and people and institutions that seek to advance Leonard Read. Back in the days when FEE ideas nurtured for years by FEE when those kept freedom's candle lit in a night ofstatist ideas were not popular. darkness, we were devouring whatever Yes, ideas do indeed have consequenc­ came forth from the venerable scholars in es-more powerful and longlasting than ap­ Irvington-on-Hudson. And what a cornuco­ pearances on the surface might suggest. pia it has been-articles, monographs, FEE's work provides ample proof. books, speeches, seminars-all that free­ I manage an influential organization in dom's partisans on the cusp of ideological Michigan known as the Mackinac Center revolution could hope for from a single for Public Policy. Often termed a "think­ organization! tank," we advance a distinctive "free­ FEE's work has been, and continues to market" perspective on a range ofeconomic be, ofgreat importance to groups like mine issues ofconcern to the people ofour state. precisely because ofthe uniqueness that has Starting with a staff of two and a budget defined FEE since its inception. It does not of $80,000 in 1988, the center now employs lobby legislatures. It does not advise gov­ 14 full-time individuals on a budget well over ernments on how to do their business more a million dollars. Friend and foe alike fre­ efficiently. It does not tinker at the margins quently acknowledge the great impact of of reform. Rather FEE's work is that of an our work and that of a growing number of intellectual lighthouse; it illuminates broad similar organizations in other states. Weare principles, focusing light on the ideal. The changing the climate ofpublic opinion, state rest of us who work to change laws and by state, by the sheer force of persuasive policies fill in the blanks as freedom's light argumentation. shines brightly over our shoulders. Sam Staley, Vice President for Research at the highly acclaimed Buckeye Institute Lawrence W. Reed, economist and author, is for Public Policy Solutions in Dayton, Ohio, president of The Mackinac Center for Public Policy, a free market research and educational cut his intellectual teeth on FEE's publica­ organization headquartered in Midland, Michi­ tions and seminars. He sees FEE's contri­ gan. butions this way: 346 347

FEE was· one of the first organizations that demeanor, that freedom advocates find developed a complete program around com~ . compellingly attractive. municating the concepts of classical liberal­ FEE champions ideas, not personalities. ism-free markets, limited government, indi­ Once that is understood, new avenues for vidual rights, and respect for civil liberties-to persuasion open up. The most fruitful way a non-academic audience. Its mission was to advance liberty is rarely to assail the broad: FEE didn't focu~ only on a small audience of academics or inside-the-beltway intelligence or the motives of those who policy insiders. Itpublished ajournal that used believe another way. Focusing on ideas and a principled, yet accessible style to widely appealing to reason are much less likely to disseminate the ideas essential to the function­ provoke hostility. That approach, seasoned ing of a·free society. I am convinced that with patience and a smile, is avital ingre­ FEE's example laid important ground work for dient in FEE's recipe for winning minds and the now burgeoning think-tank movement in hearts for liberty. the United States and abroad. FEE promotes self-improvement in place of a condescending know-it-all attitude. If The Mackinac Center in Michigan, the you want to be a missionary for liberty, to be Buckeye Institute in Ohio, the Goldwater vaguely familiar or generally sympathetic Institute in Arizona, and some two dozen with the concept is not enough. Success at other state-based organizations work daily convincing others requires attention to the to stimulate private initiatives and tear down attractive qualities of a well-rounded indi­ barriers to progress erected by govern- . vidual. Be as good as you can possibly be, ments. We are constantly tantalized by Read used to say, and others will seek your compromise and expediency. The tempta­ tutelage. tion to get along with the politicians, to settle I think I also absorbed from FEE a sense for something less than what's right, comes of eter:nal optimism. No matter the turn of with the territory. Without a lighthouse like events in the short term, people inspired by FEE to remind us ofthe noble and enduring FEE's work almost always look to the principles that attracted us to this movement future with great hope. I have never met a in the first place, we might degenerate into regular reader of The Freeman who de­ a gaggle of "better government" groups. spaired or felt the urge to give up and "let history take its course." The reasons for this The Higher Plane are obvious: FEE believes that ideas rule the wofld and that individuals can indeed FEE and The Freeman remind us that alter the course of events by influencing there is a higher plane ofhuman interaction ideas. Moreover, FEE promotes the free­ than good intentions backed by the force of dom idea in a fashion that appeals to the the state. That higher plane is the peaceful, loftiest instincts and ideals humans possess, voluntary context in which enlightened cit­ thereby inspiring devotees to carry forth the izens who respect life and property choose message. Lights go on, not out, when you to associate. As for me, I find myselfasking read The Freeman or hear a lecture by a this question ofalmost everything my orga­ FEE speaker. nization produces: "Does it meet the high­ The FEE recipe for advancing liberty est standards for advancing the cause of lives on in the organization itself and in liberty?" Or as the late Leonard Read him­ many others like mine. On this occasion of self would ask, "Does it leak?" the Foundation's anniversary, many of us Largely because the persona of FEE's will be celebrating not only the last fifty founder, Leonard Read, is so firmly embed­ years, but the next fifty as well. We know, ded in the organization, FEE is more than a beyond any shadow of doubt, with every publisher of books and articles and a spon­ assurance that success breeds success, that sor of seminars. It is an organization with FEE's light will lead us to a freer a distinctive style, approach, attitude, and tomorrow. D THEFREEMAN IDEAS ON UBERTY

Leonard Read, the Founder and Builder by Mary Sennholz

n 1946, the eyes ofmost Americans were the world ofthought and ideas, ofideologies I on the U.S. Congress debating full em­ and philosophies, and create the Foundation ployment, higher minimum wages, ex­ for Economic Education. tended social security benefits, price and Leonard's passion had not always been rent controls, public housing projects, and for ideas and ideologies. For much of his government health insurance. Many Amer­ adult life (1928-1945) he had been a business icans were eager to follow in the footsteps and trade association executive, a vocal of the British Labour Party which, having Chamber of Commerce spokesman who won an overwhelming electoral victory, was faithfully defended the official Chamber busily nationalizing various industries and position, which at that time was sympathetic enacting a comprehensive Social Security to President Franklin D. Roosevelt's New system, including a national health service; Deal and his attempts to pull the economy but they did not dare call their aspirations out of depression by organizing business, "socialism," as the Labour Party openly regulating prices, and stimulating bank proclaimed; instead, Americans called it credit through monetary inflation. His mo­ just another deal, a "Fair Deal," which, in ment of reformation and conversion came the years to come, was to have its essential in the fall of 1933 when, after hearing that parts enacted by both popular political par­ a prominent California executive had been ties. criticizing the Chamber, he arranged a visit Unbeknownst to the political world, the to set the businessman "straight." The former manager of the Los Angeles Cham­ businessman was W. C. Mullendore, an ber of Commerce, Leonard Edward Read, official of Southern California Edison Com­ was laboring in Irvington-on-Hudson to rally pany. Having made the Chamber of Com­ the remnants of old-fashioned liberalism merce pitch, he was then obliged to listen to and prepare for an intellectual counteroffen­ Bill Mullendore patiently explaining individ­ sive. Read was an entrepreneur par excel­ ual liberty and the private property order lence, confident, ambitious, and courageous, and refuting the New Deal contentions. who could have launched any enterprise to Until his dying days Leonard swore this which he had set his mind. But for reasons explanation had been his best lesson ev­ no one will ever know, he chose to enter er-it had removed the blinders from his eyes. Mrs. Sennholz is an administrative assistant at FEE and an honorary trustee. She is the author Leonard was a self-educated man who of Leonard E. Read: Philosopher of Freedom learned much not only from books but from (FEE, 1993). a great deal of experience. Leonard's prac- 348 349 tical education began when most children are still preoccupied with mastering the Three R's. Already by the age of twenty he had faced an unusual share of challenges which shaped his lofty spirit, empowered him with knowledge, and became the ker­ nels of an industrious adult life. By the age of 48 he had achieved remarkable success in two endeavors when he brought forth his greatest creation, the Foundation for Eco­ nomic Education.

Formative Years Leonard Edward Read was born Septem­ ber 26, 1898, on an 80-acre farm just outside Hubbardston, Michigan. He was the first­ born ofOrville Baker Read and Ada Sturgis Read. The family labored from dawnto dusk to wrest a meager living from the bounty of nature. Leonard's father had come there Aggie and Leonard Read in the 1960s from Watertown, New York, a descendant of a long line of farmers who immigrated accredited school that was well known for from England early in the eighteenth cen­ its excellence in college preparatory instruc­ tury. Leonard's mother often spoke of her tion was Ferris Institute in Big Rapids. Grandfather Sturgis, who was the first set­ Founded in 1884 by Woodbridge Ferris tler in Shiawasee County. Both families (later to become Governor of Michigan), it truly were pioneer folk with pioneer atti­ was a poor child's private school with more tudes-venturesome, hardworking, willing than 1,200 pupils. A poor boy could earn his to share, thankful for their blessings. tuition by working for the school. At Ferris When Leonard was barely eleven and his Institute, hard work and severe discipline sister Rubye nine, tragedy struck. Their were the rule. Any student failing in his father died at the age offorty from septice­ academic subjects or violating the tough mia, commonly called blood poisoning. His rules ofconduct and behavior was expelled death changed the life ofthe family dramat­ immediately, before the whole assembly. ically, leaving Leonard the man ofthe family When Leonard was seventeen his mother who now faced adult responsibilities. He let him go. To work his way through Ferris helped his mother sell the farm and establish Institute he would fire the furnace (at 5 the first boarding house in town. To supple­ a.m.), carry in wood and water, rake leaves, ment the family income, he at times worked mow lawns, shovel snow, and so forth. He sixteen hours a day, milking cows at Uncle charged every new difficulty, in both studies John's farm and working in the village store. and living conditions, with every ounce of A boy is said to be more trouble than a his energy. He tackled his most uncongenial dozen girls. But Leonard had little time for subjects and conquered them. He read and play and trouble. He labored diligently and studied fervently and graduated a year later, yet did not neglect his school work, hoping in June 1917. "One way to check whether to become a physician. Because Hubbards­ you ought to be doing this or that," he was ton High was a rural public school with to say later," is to feel your zest pulse. Ifit's limited resources, he had to look elsewhere low, chances are you should be elsewhere or to complete studies necessary for college doing something else. My zest pulse seems and ultimately medical school. The nearest to be high in everything." 350 THE FREEMAN • MAY 1996 The "War to End All Wars" Upon discharge from the service in July 1919,Leonard was eager to go to college and World War I had been raging in Europe earn a degree so that he could proceed to since August 1, 1914; the United States had medical school. But his severance pay joined on April· 6, 1917. Soon· after his would barely see him through the freshman . graduation Leonard enlisted with the Avia­ year. He had to seek employment which tion Section, U.S. Signal Corps. He hoped would permit him to save for his college to become a pilot, but on the very day he was career. to be transferred to a training program his Squadron was ordered to leave for' New Husband, Father, and York and embark for France. Leonard was Entrepreneur so eager to go to war that he declined the pilot training. Much later, in another war, After he had worked in several bookkeep- his two sons, Leonard E. Read, Jr., and . ing and cashier positions that were disap­ James Baker Read, were both to become pointing, he set out to establish himself in pilots and flight instructors. the business he knew best, the farm produce Many young men are attracted by the business. For more than five years Leonard glamour, pride, and glory ofwar. In times of struggled to build his Ann Arbor Produce . war they would think poorly of themselves Company. While other young men of his for not having been a soldier who tested his age were attending college, Leonard built a courage in battle. Soldiers rarely question thriving business with six employees and the justifiableness of war, or virtue and better than a quarter of a million dollars in righteousness. Leonard Read was skeptical gross sales, which in today's minidollars ofPresident Woodrow Wilson's pronounce­ would be more than three million dollars. He ments that the war was the" culminating and ' even found time ,to marry petite, vivacious final war to end all wars." He wondered Gladys Cobb-later affectionately ~alled about Theodore Roosevelt's oration that he Aggie. They soon were blessed with two was to fight "in the quarrel of civilization strong and energetic sons-Lenny, Jr., and against barbarism, of liberty against tyran­ "J.B." At the age of 25 Leonard was a ny." To Leonard, it was not his busines's to well-known and highly respected business­ question, but to fight. man in Ann Arbor, owning a stately home in In France, Leonard became a "rigger," a prosperous neighborhood. who assembles and services planes. He Yet, there is an element offate that shapes always kept in mind that the pilot's life man's ends. Leonard's situation so radically depended on the care and accuracy of his changed through the advent of chain stores work, which made him labor hard and give that he. was to liquidate the Ann Arbor scrupulous attention to detail. He bought Produce Company, forever leave the pro­ books on aerodynamics, which he studied duce business, and move to California for in the evening and learned the refinements an entirely new career. What had begun as of his craft. He later was able to boast that a step toward medical school had yielded no flyer ever lost his life because of struc­ valuable experiences and many joys, and tural failure of a plane that he had rigged. ended with a step forward into the next When his reputation for knowledge and phase of his life. capability grew, he became a natural teacher A great talent is often lost for the want of as other ground crews sought his guidance. a little courage. For Leonard it took a great He learned two lessons which remained with deal of courage to give up his business, a him throughout life: (1) whatever you do, it lovely home in his native state, and move is ofparamount importance to pay attention 2,000 miles in order to find a new beginning. to detail; (2) when you improve your own And yet, a stirring restlessness, nourished learning and understanding, others will seek by growing doubts as to the future ofhis Ann you out for knowledge and advice. Arbor Produce Company, prompted the LEONARD READ, THE FOUNDER AND BUILDER 351

Leonard Read, at the celebration ofhis seventieth birthday in 1968, flanked by Lawrence Fertig and FA. Hayek. difficult decision and took the Leonard Read he directed a staff of 150 serving 18,000 family to California, the Golden State. members. Leonard grew in many fields and branches Seeking More Light of knowledge. In time he became a vocal critic of policies that would limit the scope Success in life is a matter ofconcentration of individual freedom and expand the pow­ and service. Step by step, little by little, bit ers of government. There were many local by bit-that is the way to success. Unbe­ issues on which the Chamber ofCommerce knownst to himself, Leonard was about to was expected to take a position such as the enter a phase ofhis life that would take him "Production for Use" movement, the pop­ to the very summit of accomplishment. He ular "Ham and Eggs" scheme, "End Pov­ would succeed above his fellows because he erty in California," and many other pro­ would continue to grow in strength, knowl­ grams. In hundreds of speeches and edge, and wisdom. He would seek more pamphlets Leonard Read opposed these light, and find more the more he sought. welfare schemes with some success. "Mter Leonard Read was to become one of those six years of these 'successes,'" he later rare individuals who take and give every wrote, "it became evident that if the intel­ moment of time. lectual soil from which these fallacies lie spent the next eighteen years with the sprung were rancid, new ones would spring Chamber ofCommerce, serving as manager up in their places. Only the labels would be ofChambers in four locations: Burlingame, different. What I had been doing was com­ Palo Alto, the National Chamber's Western parable to proving only that the earth isn't Division in Seattle, and finally, as General flat. The positive knowledge of someone Manager ofthe Los Angeles Chamber. Here discovering that the earth is a spheroid has 352 THE FREEMAN • MAY 1996 rid us of the whole collection of fallacies dazed and puzzled, with renewed courage about the earth's shape. While it is neces­ and hope. He went to his typewriter, and sary to understand and explain fallacies, between 3 p.m. and midnight wrote a de­ that's less than halfthe problem. Finding the scription ofthe organization he envisioned. right is the key to salvation, for the wrong On that day in January 1946, the idea ofthe can be displaced only by the right." Foundation for Economic Education was Leonard felt a sense of duty to speak out born. Tojoinall its pieces it would take a few clearly and courageously. He raised his more months, but a great idea had come to voice against any abuse ofpower and espe­ the world and now was pressing for admis­ cially against injustice committed in the sion. name of law. His devotion to the cause· of freedom caught the attention of many peo­ The Founding of FEE ple in high places. Virgil Jordan, the Presi­ dent of the National Industrial Conference On March 7,1946, seven founders of the Board (NICB) in New York, had the wis­ Foundation met in the office ofDave Good­ dom to invite Leonard Read to achieve with rich for the inaugural meeting. They were NICB on ·a national scale what he had Leonard Read, Donaldson Brown of Gen­ accomplished so admirably at the L.A. eral Motors Corporation, Professors Fred Chamber. And so, on May 15, 1945, Leon­ R. Fairchild of Yale University and Leo ard Read became Executive Vice President Wolman of Columbia University, Henry ofthe National Industrial Conference Board Hazlitt of the New York Times, Claude and was looking forward to launching a Robinson ofOpinion Research Corporation, nationwide educational program for the res­ and Goodrich himself. toration ofindividual freedom and the mar­ The founders were ·convinced that New ket order. York City, with its splendid education and As was his wont, Leonard poured his full financial facilities, provided the ideal setting effort and energy into raising money for the for FEE. But rent control had created a great task he was about to undertake. He painful shortage of office space while con­ was "on the road" most ofthe time, calling fiscatory income and estate taxation had on prospective donors and presenting his forced luxury homes and mansions to the ambitious program. However, NICB's pol­ market, which were now being sold at frac­ icy was to organize public meetings at which tions of their original construction costs. "both sides" of an issue were presented. When a thoughtful real estate agent showed Leonard opposed this policy. How do you Leonard a property at 30 South Broadway represent "both sides" when "one side" is in Irvington-on-Hudson with its badly over­ all around· you? How do you state your case grown grounds and a mansion that showed for individual freedom and the private prop­ evidence of neglect, he knew he had found erty order when the other side is monopo­ the ideal home for his fledgling organization. lizing the stage? Here he could set out to complete his After eight frustrating months with NICB, mission "to discover, gather and to fasten Leonard resigned his position. Since he had attention on·the sound ideas that underlie raised many thousands ofdollars for a cause the free market economy which, in tum, he was unable to promote fullheartedly, he underlies the good society." felt obliged to visit the donors and apologize Leonard sought to surround himself with for his failure. One ofthese men was David men and women of excellence, seekers of Goodrich, Chairman of B.F. Goodrich knowledge and students ofliberty. Through­ Company in New York City. When Leonard out the years his senior staff consisted of brought him the sad news ofhis failure, Mr. scholars who combined in a common effort Goodrich raised a simple question: "If you and with energy and industry sought to had an organization of your liking, what serve the cause. Most of them spent a few would it look like?" Leonard went home, years in Irvington and then moved on to LEONARD READ, THE FOUNDER AND BUILDER 353

In the early days ofFEE, Leonard himself responded to all requests for lectures and speeches explaining the freedom philoso­ phy. His friends and members of the board oftrustees would invite him to speak to their service clubs and other groups. As the request for lectures and speeches continued to grow, the senior staff, too, was called upon to explain the work ofthe Foundation. Leonard and his colleagues traveled thou­ sands of miles, from Maine to Hawaii, Man­ itoba to Miami, in orderto explain the benefits of freedom. The growing popularity of the FEE speakers, finally, pointed to the need for short courses or "seminars" lasting one or two days. Throughout the year they conducted seminars at the Foundation in Irvington, attended by eager students of liberty from many parts of the country and world. Leonard was always aware of the ethical and religious dimensions of human liberty. American institutions and the American More 1968 birthday festivities: Leonard ReadJoined by way of life, he believed, ultimately rest on Benjamin Rogge (center) and William F. Buckley Jr. the tenets of the Judeo-Christian religion. It is from this source that we derive our other important pursuits in industry and convictions as to the meaning of life, the education. Some were to become captains nature of man, the moral order, and the of industry, founders of enterprise, or fa­ rights and responsibilities of individuals. mous educators. They all became wiser for The American system, as it was originally their years of learning at FEE and their conceived, is a projection of this religious association with Leonard. heritage, and the American dream has an Ludwig von Miseswas associated with implicit religious content. the Foundation from the day FEE opened Leonard used what he knew about nature its doors to the day ofhis death in 1973. Read as evidence for his belief in God. Nature and Mises formed a team of discovery, reveals certain qualities that are character­ united in the love of liberty and truth, istic of an intelligent mind which designed succeeding in all they undertook, and whose nature for a purpose. In his own words: successes were never won by the sacrifice "There is the Mind ofthe Universe-God­ of a single principle. Their association and from which all energy flows. Individuals are friendship, which began for an end, contin­ receiving sets of this Infinite and Divine ued to the end. Their joint efforts were to Intelligence." make the Foundation in Irvington-on-Hud­ Although Leonard Read published nu­ son the intellectual center of the freedom merous tracts on political economy, his movement. chief contributions to social thought lie in In time The Freeman was to become the what he added to the philosophical, ethi­ flagship publication of the Foundation. It cal, and psychological basis of human ac­ came to FEE in 1955 when it ran into tion. He was essentially a social philosopher financial difficulties. In the·dreary world of who was more interested in moral and political strife The Freeman brings new hope psychological principles than in economic to the weary mind and instills new strength. theory. 354 THE FREEMAN • MAY 1996 A Commitment to Principle permitted the rest of his life. He sometimes declared that the most important lesson For the founder of the Foundation for which golf may teach its devotees is the Economic Education, the meaning of edu­ "magic of believing." In belief lies the cation was of crucial concern and occupied secret of all valuable exertion and success. his mind from FEE's beginning. In The It should not surprise us that a man who Coming Aristocracy (1969) he stated his found so much fun and pleasure in life on concern in simple terms: "Intentionally the golf course and the curling rink, as did working on others takes the effort away Leonard, displayed a great deal of interest from self. It has no effect on others, unless in the practices of the "good life." He took adversely; and the unevolving selfis always his cooking stove, saucepans, and pantry the devolving self. The net result is social seriously and believed that dinner tables decadence-and has to be. The corrective should be ever pleasant places in an other­ for this is to rid ourselves ofthe notion that wise arid world. With his love ofinnovation Joe Doakes must stand helpless unless he be and experimentation Leonard transformed made the object ofour attention. Joe will do the Read cuisine into a gourmet's labora­ all right-and the same can be said for you tory, ever searching for exclusive culinary and me if we'll just mind our own business, delights for the benefit of soul and body. the biggest and most important project any Because Aggie, an excellent cook in her own human being can ever undertake!" right, didn't care to be called upon to pare This message is repeated in several ofhis the potatoes or chop the vegetables while 27 books, written largely between 1954 and he put on the finishing touches, they agreed 1982, sometimes two volumes in one year. that each one would prepare his or her He did not compromise in matters of prin­ dishes from beginning to end. For many ciple no matter how the world censured him years, Leonard used to don a cook's hat for his strict and unyielding position. His and prepare his Chicken Livers Leonardo answer was uncompromising: "Principle for appreciative guests. does not lend itself to bending or to com­ Until his death at the age of 84, Leonard promising. It stands impregnable." continued to combine a youthful sense of Leonard kept a journal of his labors and wonder and curiosity with the profundity principles, never missing a day of entry and erudition that are the fruits of many since he began on October 16, 1951. In his years of experience and labor. journal entry of 9/5/54 he explained his In the early hours of May 14, 1983, reason for this activity. "Recording what Leonard E. Read died peacefully in his one does and thinks each day is more of a sleep. He had spent the day before at his discipline than one would at first suspect. desk, preparing for the annual meeting of Not that it isn't possible to do or think what the FEE Board of Trustees scheduled for one does not record. But there is a forceful the following week. At the age of84, he left tendency to act only in ways that are re­ his grand creation, the Foundation for Eco­ cordable." On the 22nd anniversary of his nomic Education, in sound condition intel­ first entry, he reminisced: "I have kept you lectually and financially. He left his family faithfully for all of these years, never miss­ as he left the Foundation, well ordered and ing a day. In a word, you are ajoy to me or well instructed. this would never have been accomplished." Leonard Read was one of the most nota­ Among his achievements, Leonard was ble social philosophers of our time. His proud of his performance and accomplish­ name will forever be associated with the ments in his favorite sports: golfing and rebirth of the freedom philosophy. The curling. He learned to play golf as a young Foundation for Economic Education con­ Chamber ofCommerce executive in Seattle stitutes an enduring monument to his energy and later played when time and weather Md~~. D THEFREEMAN IDEAS ON L1BERlY

From Leonard Read: A Legacy ofPrinciples by Melvin D. Barger

he first time I ever read anything by political movements or felt that a single T Leonard Read-in the late 1950s-1 election or candidate would either doom thought he was arbitrary, opinionated, and us or save us. He consistently followed his reactionary. carefully honed set ofprinciples, and it was Within a few years, however, I was fol- . always possible to find this consistency in lowing his ideas with close attention and his writings. Three Readian principles stand was also contributing to The Freeman. And out in my own memory of him, and almost when I met him personally in March of define the way he thought about life and 1961, I had come to view him as principled, the world. Though Leonard expressed these focused, and visionary. Today, nearly thir­ ideas in many forms, I have chosen here to teen years after his passing, I view him as a word them as I perceive them: great pathfinder in my own life, and, more 1. Anything that's peaceful should be importantly, as a social philosopher who permitted. will shape the future. 2. Coercion is never creative and cannot What brought about this changing view­ bring about continuing human progress. point? . Only freedom does. It wasn't any change in Leonard, because 3. Each ofus is some part ofthe Universal he hardly ever wavered from the principles Consciousness and can achieve greater he championed when establishing the Foun­ good for ourselves and others through self­ dation for Economic Education in 1946. The improvement, which comes by expanding change was my own. First, more reading the individual consciousness. and thinking about our general social orga­ How well do these principles work in nization brought about a realization that practice? Here are examples of my experi­ we needed new moorings and a better sense ence with them: of direction in human affairs. I also became Anything that's peaceful should be per­ disillusioned by the failures ofideas in which mitted. Leonard Read's views on peace I had believed. It became clear, too, that were nothing short of radical, but they a large number ofour leaders may have lost would please few ofthe radicals who march their way. for peace and hold other demonstrations While Leonard Read often wrote on for it. Nor would Leonard have believed timely subjects, he was never caught up in that many of those who advocated peace Mr. Barger is a retired corporate public relations were really peaceful in their own thinking or representative and writer who lives in Toledo, in the way they wanted to deal with others. Ohio. Since most ofthem were really interested in 355 356 THE FREEMAN • MAY 1996 using government power to impose their action against a peaceful Amish farmer with views on the rest ofus, Leonard would have the manhunt to get the notorious and dan­ regarded such advocates as being anything gerous Dillinger. But since the Amish but peaceful. farmer had become a lawbreaker, police One of Leonard's radical ideas is that power had to be appliedjustas it was against government power is organized force that deliberate felons. As a last resort, the fed­ should be used sparingly; actually, only to eral agents could have used deadly force had protect individuals from crime and fraud, to the Amishman carried his protest too far. enforce lawful contracts, to protect prop­ Leonard's view on this is useful to re­ erty, and to defend the country. In doing member when considering current actions this, it is maintaining peace and acting ofthe IRS orfederal agents in general. Time peacefully. and again, we hear about the arbitrariness But when government expands its powers and high-handedness of the IRS, but we into other areas, it cannot and does not act don't hear much support for real elimination peacefully. In redistributing income, for of taxation or the lavish spending which example, it must use police power to take makes it necessary. And when we hear from one in order to benefit another. This criticisms ofothergovernment actions, such process goes on in countless ways and has as the Waco Branch Davidian catastrophe many supporters, but Leonard saw it as or the killings at Ruby Ridge, we still do not violence, even if the police officers do not have many people pointing out that such actually appear to collect the taxes. Any tragedies are likely to occur as a result ofthe other government action must also be en­ relentless expansion of government police forced by violence if certain individuals or power. groups refuse to go along with it. If we believe that the coercive powers of But Leonard had little sympathy for those government should be used to address every who objected for the wrong reasons when social problem, we can expect various un­ the government appeared to be abusing or wanted consequences. Government power exceeding its powers, when they protested must be enforced at gunpoint. So, if we about specific incidents of power abuse don't like it when the guns really appear and without facing the underlying causes that are used, then we should get back to basics had put such abuses in motion. and place strict limits on the power and In 1961, for example, there was a great scope ofgovernment. Limited government, outcry when the Internal Revenue Service as Leonard saw it, would require only spar­ seized horses belonging to an Old Order ing use of police power. Amish farmer in Pennsylvania who had But even as the debates over government refused to pay his Social Security taxes. The actions continue, Leonard's basic principles IRS agents who confiscated and sold the serve as a useful guide when considering horses for taxes were seen by the public other issues. In recent years, for example, as villains. But Leonard rightly pointed out I've written about government subsidy of that the agents were doing precisely what the arts. It's clear that government support they should have done. "This agency of ofthe arts is not a peaceful action: coercive government is not in the business of decid­ means are used to take money from taxpay­ ing the rightness or wrongness ofa tax," he ers to support forms of art which are spon­ wrote. "Its job is to collect regardless of sored and defended by various pressure what the tax is for." He even went on to groups. Whether we approve of the art or suggest that in carrying out their duties as not is irrelevant; we simply have no real law enforcement officers, they had to treat choice in the matter of supporting it. this gentle Amish farmer just as they would When recent controversy arose over the have treated John Dillinger or some other nature of some subsidized art, there were infamous bank robber. cries of "censorship" because elected offi­ It seemed quite a stretch to compare an cials took a stand against certain shocking FROM LEONARD READ: A LEGACY OF PRINCIPLES 357 examples. But elected officials have a right continuing human progress. Only freedom and even a duty to exercise judgment over does. Leonard had great admiration for the tax-supported projects. Had this been pri­ geniuses ofthe past who had brought about vately funded art, however, any government the industrial revolution and other modern criticism or interference would have been miracles. But creativity could not be co­ wrong and certainly in violation ofthe First erced; it had to flow from the voluntary Amendment. The protesters, unfortunately, efforts and thought processes of people were so addicted to government grants as a working together in harmony. "right" that they could not understand the He stated this in various essays, but his difference between "public" and private classic was "I, Pencil," in which he argued funding of the arts. The correct solution that no single individual knows how to make would have been to end all government a simple pencil, and yet we produce billions support of the arts while continuing to fight of them every year. Years later, the noted the battle for artistic freedom on Constitu­ economists Milton and Rose Friedman used tional grounds. this wonderful example in their popular 1979 Leonard's principle of permitting "any­ book, Free to Choose. If nobody knows thing that's peaceful" is also a model for enough to make a pencil, it is equally true personal behavior. It can help us steer clear that nobody knows everything that's re­ ofwrong actions when our so-called friends quired to produce all the other things we try to enlist us in bad practices. Shortly after now enjoy and use. The market takes care of I began writing for The Freeman, for exam­ progress, if people are permitted to think, ple, I had a visit from a man who organized invent, produce, and sell without undue telephone campaigns against left-leaning interference or outright prevention of their school teachers in his district. The method activities. was to harass and hound them until they And where there was outright prevention were forced to quit or asked to resign. While of economic activity, Leonard could easily not in agreement with the teachers, I could cutthrough the confusion. For the past fifty not condone this method of dealing with years, for example, there has been rising them. It was an abusive and practically concern about the mediocre performance of violent tactic that no real student of liberty the government-owned postal service, with would endorse. frequent attempts to modernize and reorga­ In adopting this principle of acting only nize it. Despite considerable effort and the peacefully, it's also necessary to determine talents of some fine managers, the postal whether ornot a certain practice is peaceful. service still ranks low in the public's esteem The late Ben Rogge, who taught often at and loses business to those entrepreneurs FEE, would uphold "anything that's peace­ who are permitted to compete with it in ful, " and then go on to point out''that we're some types ofservices (but not in first-class not being peaceful ifwe build a fire and allow deliveries). the smoke to drift into our neighbors' Leonard believed that the answer to the yards." This explanation would seem to postal confusion was simply to "letanybody justify all the wretched actions the· govern­ carry mail." There was no real reason that ment has taken in the name ofenvironmen­ the government should have a legal monop­ tal protection. But I think both Ben and oly on first-class mail, thus preventing other Leonard would have argued that people who delivery services from trying their luck in really believe in peaceful actions will also the field. He would point to the market's practice common sense, good ethics, and success in bringing telephone messages courtesy, whether tending to a backyard fire across the country in fractions of seconds, or a large factory. while mail deliveries continued to be A second idea I acquired from Leonard clogged and inefficient. (and other FEE writers) is that coercion With Leonard's approval and the support is never creative and cannot bring about of Freeman editor Paul Poirot, I wrote 358 THE FREEMAN • MAY 1996 several articles about the post office, sug­ ers that were causing so much misery in the gesting that free-market mail was the'an­ world. swer. These articles were considered quix­ But time would prove Leonard right, at otic and downright impractical in the 1960s least to my satisfaction. The decline of and '70s, but time has vindicated them. At Communism is an outstanding example. the same time, Leonard's belief that any­ Back in the 1960s, most of us in Leonard's body should be permitted to carry mail is circle offriends were appalled by the aston­ now being seriously considered and would ishing hold Communism seemed to have even soon become lawful ifnot for the fierce over large areas and populations. We could opposition of the postal unions. not see any light at the end ofthis tunnel, and But the market is taking steps of its own there was a paralyzingfear that this demonic to deal with the postal monopoly. Even if force would eventually enslave the entire letter mail continues to be a government world. It did not seem possible that Com­ monopoly, the fax machine and E-mail are munist power could ever be broken without now competing effectively with postal de­ .armed rebellion or perhaps a preemptive liveries. Both developments were just com­ war by democracies. Indeed, during those ing onto the scene during Leonard's final years people did argue that the United years, but he would have cited them as more States had the right to strike preemptively proof of the creativities that lie in the free against the Soviet Union to save our own marketplace. freedom. The third important idea I learned from Fortunately, we never took such a course, Leonard is that each ofus is somepartofthe . which would have been terribly wrong in Universal Consciousness and can achieve Leonard's view as another case of using greater good for ourselves and others guns to carry out something that comes only through self-improvement, which comes by by a change of consciousness on the part expanding the individual consciousness. of many people. To some, this sounds a mite religious, but And .thus came the change. Though the I never learned anything about Leonard's threat of retaliation also slowed the Com­ church affiliations or matters of that sort. munist advance, at work was another pro­ His approach was simply to point out that cess-year by year, gradual shifts in the' we didn't create ourselves or bring about way citizens in the Communist countries the intelligence that is in all things. We also viewed' themselves and their governments. have an earthly purpose, which is the im­ The process was so slow that only a few provement and advancement ofthe individ­ people realized it woul~ someday reach a ual consciousness. We cannot really im­ critical mass and topple one government prove others except by offering them our after another, and without a great deal of perceptions of the truth and also by setting bloodshed. The toppling began in the late good examples in our own lives. Any coer­ 1980s in the Eastern European countries. cive effort outside the individual is bound to When the Soviet government finally yielded fail in the long run, since it is only our own to this process, we discovered that the personal acceptance ofideas that gives them people required no educating about the lasting power and effectiveness. nature of Communism nor informing that I had good reason to go along with Leon­ Marx and Lenin were just as responsible ard's position on this, because my own for its horrors as such perpetrators as Stalin background as a recovering alcoholic had and his henchmen. From bitter experience prepared me for it; indeed, I outlined these they understood Communism better than points in a 1961 Freeman article titled "The we did. And really, it would not have Lessons of Lost Weekends." But lingering collapsed without a general "change in con­ in the back ofmy mind were doubts that the sciousness." individual consciousness could have any This fall of Communism took place after real impact on the formidable political pow- Leonard's passing and is not yet complete. FROM LEONARD READ: A LEGACY OF PRINCIPLES 359

'Leonard Read in his office in 1954 with his secretary, Bette Fletcher. But he would have understood it, and also the world seem to be caught up in fear, would not be surprised that considerable corruption, hatred, and envy, Leonard had crime, chaos, and ethnic strife followed in hope for the future. He believed that many ofthe formerly Communist countries. "thoughts rule the world," and even gave

° These problems, too, grow out of the indi­ that title to one of his books of essays. He vidual consciousness and can only be elim­ felt that the United States and other democ­ inated when people come to realize their racies, ensnared by many ofthe same prob­ errors and make the appropriate changes lems that cause havoc elsewhere, should not in their political environments. The current preach or interfere with others. problems in the former Soviet Union and But he had immense faith in the final Yugoslavia also show that the coerced to­ triumph offreedom that would come about getherness did nothing to change the real with a change in human thinking. This, in feelings of the people involved. Even with tum, would bring about the elimination of seventy years in power, Communism in the the coercive, destructive practices that are Soviet Union could only keep the lid on raging because people are not really pursu­ ethnic rivalries; it could not remove them. ing peace. Also, there is no dearth of good And it is probably beyond the reach of any thinkers we can look to for the ideas we need intervening country, however well-inten­ to create a peaceful, prosperous, and happy tioned, to force permanent changes in the society. As examples, Leonard listed such world. We have learned, to our sorrow, that great thinkers as Confucius, Socrates, there are strict limits to what guns can Jesus, Epictetus, John Locke, Edmund accomplish in dealing with world strife. Burke, Bastiat, Cobden, Bright, Adam While Communism was always an orga­ Smith, Washington, and Marcus Aurelius, nized threat, our real problems continue to among many more. be the human failings that go back to the It's a great list. My only change would be beginning of timoe. to add one name: Leonard Read. The world Yet, though millions ofpeople throughout owes him more than we will ever know. D

THEFREEMAN IDEAS ON LIBERTY The Moral Dimension of FEE by Gary North

" ... man playing God is a prime evil, an public as The Freeman's publisher more evil seed that must grow to a destructive than as an organization with a comprehen­ bloom, however pretty it may appear in sive program, one aspect of which is a its earlier stages." monthly magazine.. We do not think of the Leonard E. Read! Harvard Business School primarily as the publisher of the Harvard Business Review. quarter of a century ago, Jerome Tuc­ We do think of FEE primarily as the pub­ A cille wrote a book, It Usually Begins lisher of The Freeman. This has elevated With Ayn Rand. For some people, this may The Freeman to special status, both for FEE have been true in 1971. But far more true and for the libertarian movement. even then was this statement: "It usually begins with a copy of The Freeman." For over three decades, I have asked people: A Brief History of "How did you get into the conservative The Freeman movement?" More than any other answer, In the 1920s, Albert Jay Nock had edited I have heard this one: "Somebody gave a magazine called The Freeman. Frank me a copy of The Freeman. I don't remem­ Chodorov, Nock's disciple, revived the ber who." name in the late 1930s for the magazine he When we think of the Foundation for edited for the Henry George School. He Economic Education, we think ofThe Free­ was soon fired, and the name went with man. The two are completely intertwined. him. 2 It was revived again in 1950 when The Freeman is much better known than Henry Hazlitt and John Chamberlain began FEE. Yet this was not always the case. publishing a magazine that replaced Isaac FEE began in 1946. It had no magazine for Don Levine's Plain Talk. 3 George Nash almost a decade. But more important for writes of this effort: the purposes of this essay, FEE had little recognition prior to The Freeman. It was By the end of its first year of publication, an unknown organization. The Freeman is The Freeman had attained a modest circula­ what put FEE on the map and has kept it tion of about 12,000. This rather low figure there. does not, however, adequately reflect eitherits In this sense, The Freeman has repre­ influence orits significance in the early 1950's. sented FEE to the public far more than Here at last was a respectable journal ("a fortnightly for individualists") which was pro­ most journals represent their publishers. viding a regular forum for hitherto dispersed For four decades, FEE has appeared to the writers. Here at last was a periodical apply­ Dr. North is president ofThe Institutefor Chris­ ing libertarian theories to daily realities. Not tian Economics in Tyler, Texas. He was FEE's only professional journalists but also scholars director ofseminars in the early 1970s and has like Hayek, Mises, and Germany's neo-liberal served as a member ofthe board oftrustees. economist Wilhelm Ropke appeared in its 362 363

pages. Men as diverse as Senators Harry Byrd but by then it.had become an outlet for and John Bricker, John Dos Passos, Roscoe defenders of a conservative variety of fiat Pound, and General Albert Wedemeyer ac­ money inflation. The year before The Free­ claimed its value. It is difficult to convey a manbegan, Buckley launched National Re­ sense ofthe crucial role ofThe Freeman at the view. He had wanted to use the name, The height ofits prestige, between 1950 and 1954. 4 Freeman, but FEE's trustees refused to FEE anonymously took over publication surrender it. There was Christian Econom­ of this Freeman through its Irvington Press ics, a tabloid funded by Calvinist-libertarian entity from 1954 until its demise in late 1955. multimillionaire J. Howard Pew of Sun Oil. In January 1956, the modern Freeman was It had begun in 1950. It was sent free of born under the then anonymous editorship charge to American clergymen. The Satur­ of Paul Poirot. This 64-page magazine was day Evening Post and the Chicago Tribune formatted somewhat like Reader's Digest. were conservative in tone and both pub­ Like Reader's Digest in those days, The lished conservative and libertarian authors, Freeman contained no outside advertising. but neither publication was openly ideolog­ Even today The Freeman only accepts ad­ ical. So, in 1956, there were few outlets for vertisements related to the overall purpose conservatives .and libertarians. of FEE. Our memory of FEE prior to The Free­ In 1953, Chodorov founded the Intercol­ man is sketchy, at best. FEE put out nu­ legiate Society ofIndividualists, with young merous pamphlets and short books, but William F. Buckley Jr. as its first presi­ there was no regular pattern of publication dent. 5 At that time, lSI had no regular for nine years. Leonard Read assembled a publication, but it sent books and articles staffofcompetent but unknown free-market to college students around the nation. This economists out of Cornell University's De­ organization was another key player in the partment of Agriculture: F. A. ("Baldy") revival of conservatism. What should be Harper, who was not very bald, W. M. apparent is that Frank Chodorov, a defender ("Charley") Curtiss, and in 1949, two of of Henry George's single tax on increased their former Ph.D. students, Paul Poirot and land value, a non-interventionist foreign Ivan Bierly. Orval Watts, another key figure policy, and the free market, was the key on FEE's original staff, probably had more figure in the revival of both conservatism to do with teaching Read his economics than and libertarianism, yet few people remem­ anyone else. Dean Russell and the two ber him today. Of his three .surviving lega­ Cornuelle brothers, Richard and Herbert, cies-The Freeman, lSI, and Buckley­ also were on board. There was also a young only the first retains Chodorov's forthright woman who would later become better commitment to the unhampered free market known as Mary Sennholz. Ludwig von and non-interventionist philosophy gener­ Mises would journey up from New York ally. City to give lectures at FEE, but he was never on FEE's full-time staff. Neither was Oasis in a Desert Henry Hazlitt. The staff's early contributions are now The publishing world was an intellectual forgotten in the mists of time. What is . desert for conservatives and libertarians in remembered is The Freeman. The impor­ 1956. The number ofconservative American tance of The Freeman was not just the publications was so small and their influence quality ofthe articles that appeared in it, but so minimal that it is difficult to remember its very survival. It has survived for four them. Human Events had begun in 1944, a decades, just as National Review has sur­ joint effort of Frank Hannigan, Felix Mor­ vived; and between these two journals, we ley, and William Henry Chamberlin.6 It was can identify and trace the history of post­ a libertarian newsletter, not the tabloid it War American conservatism's two factions: is today. There was The American Mercury, libertarian and conservative. Their survival 364 THE FREEMAN • MAY 1996 has been basic to the origins and extension profit organization devoted to spreading the of the conservative movement. story ofthe free market. It had a monopoly. That original monopoly, like all monopolies, Positioning has faded, and it has faded rapidly since the mid-1960s. There have been many imitators. To survive and prosper in a highly com­ This is a positive development. As Read liked petitive market, a product, service, or com­ to say, "You never know if your idea has pany has to become known for its unique been successful until someone repeats it to contribution to the consumer. This is known you without knowing where it came from. " in modem advertising as positioning. To In 1946, FEE's unstated unique selling position itself, an organization needs what proposition was obvious: "The world's only has been called a USP: a unique selling free-market think-tank." Of course, the proposition. In non-profit circles, it proba­ phrase "think-tank" had not yet come into bly should be known as the unique service existence, but you get the idea. Neverthe­ proposition. An organization's USP is that less, that USP was highly vulnerable: as unique service which no other company can soon as FEE was imitated, FEE could no offer equally well, or at least no other longer claim that USP. It can still claim that company can offer without appearing to be it was the world's first free-market think­ a copycat. One ofthe most famous USP's in tank, but in a culture devoted to the latest history is the one for M&M candies: "Melts fad, this is not a particularly awe-inspiring in your mouth, not in your hand." Another claim. But because of The Freeman, FEE famous one is Federal Express's, which offers has not needed a USP. As the publisher of next-day delivery''when it absolutely, pos­ The Freeman, FEE has always had one. itively has to get there overnight." The unique selling proposition shapes both the development and operations of the organi­ The Moral Dimension zation. If it unofficially changes its USP, or Leonard Read once heard a speech by one if its operations do not testify to and rein­ ofFEE's most popular speakers, Ben Rogge force its USP, a successful firm's success (pronounced "ro-guee''). Rogge had stated will almost always depart. The most famous something to the effect that it is a shame that recent example of a near-suicide in this socialism doesn't work, since it is a good regard was Coca-Cola's decision to change ideaethically. According to Read's account, its formula. The re-introduction of the old he challenged Rogge on this point after his formula under the name Coca-Cola Classic speech. Read told him, and continued to tell saved the company from a disaster. audiences for years thereafter, that he There has never been a systematic effort would hate to live in a world in which a good, to produce a USP for FEE. The Freeman moral idea produces harmful results. That has always had a slogan: ideas on liberty. would mean that an idea which produces But a slogan is not a unique selling propo­ better results-the free market-could be sition. Nevertheless, The Freeman has al­ immoral. The reason that socialism pro­ ways had an unarticulated USP: duces bad results is because it is an immoral The only magazine that introduces newcomers idea. Or, as he wrote, "Buteven ifsocialism to the idea of the free market as a moral were the most productive of all economic institution, not just as a means of efficient system.s, it would not meet with my ap­ production. proval. Socialism de-emphasizes self­ . Notice that this USP conforms to the old responsibility, and, thus, is contrary to my box-top contest rule: "25 words or less." major premise which is founded on the The Freeman's editors have never departed emergence of the individual.' ,7 This state­ from this unarticulated USP. If there is a ment encapsulated Read's moral vision. miracle of FEE, this is it. Read gave FEE its operational slogan in the In 1946, FEE was unique: the only non- title of his book, Anything That's Peaceful. THE MORAL DIMENSION OF FEE 365

But a slogan is not a USP. A slogan does not and have called for programs of coercive convey to the observer what the, organiza­ wealth redistribution in the name of the tion's unique service is in the competitive downtrodden. This moral appeal has always marketplace. been stronger than the economists' precise There are numerous free-market think­ technical arguments regarding the two sys­ tanks today. Most ofthem present academic tems' comparative rates ofoutput perunit of extensions of formal economics, most no­ resource input. Even today, in the wake of tably the University of Chicago's depart­ the collapse of the Communist economies, ment of economics. They may be oriented socialism's moral appeal is still dominant. It more toward policy than academics, as the asks some variation of this rhetorical ques­ Heritage Foundation and the American En­ tion: "Would you let the poor starve?" terprise Institute are. They may be both aca­ FEE has always responded to this moral demic and policy oriented, as the Cato Insti­ claim in terms of a rival moral claim. It has tute is. They may be strictly academic, as the had this moral response to socialism's rhe­ Mises Institute is. They may be ideological, torical question: "The pathway to wealth, as the Center for Libertarian Studies is. But long term, is not theft but personal respon­ none of them can say, as The Freeman sibility. Theft in the name ofthe poor is still implicitly announces in the name of FEE, theft." The Freeman has been FEE's monthly report: "How has political plunder The only organization that introduces new­ failed? Let me count the ways." The goal comers to the idea ofthe free market as a moral institution, not just as a means of efficient has not been to count the ways merely to pile production. up examples of socialism's technical fail­ ures; the goal has been to provide evidence Academic free-market economics is tied that coercion for noble purposes must pro­ self-consciously to a value-free theory of duce ignoble results. knowledge. The standard slogan is this: From the beginning, FEE has defended "Economics is not good or bad; it is either the market in terms of the high moral true or false. " What has distinguished FEE ground. In an era of pragmatism, this posi­ for half a century has been its commitment tioning has not impressed many academics, to another worldview: "Economics is either whether of the free-market persuasion true or false to the extent that it is moral (''value-free'') or the socialist persuasion. or immoraL" This outlook has always rel­ Yet the ultimate pragmatism, in FEE's uni­ egated FEE to the fringes of academic verse ofmoral cause and effect, should lead discourse. At the same time, however, it people to accept the high moral ground. has given FEE a unique position within Freedom works. It delivers the goods. So­ conservative and religious communities that cialism fails. This failure became visible to are convinced that value-free anything is a all but hard-:-core Communists and socialists myth, either an academic myth or a cover with the collapse ofEurope's socialist econ­ for a hidden agenda. For those who take omies, followed within months by the fall seriously the words, "thou shalt not steal," of the Soviet Union in 1991. Nevertheless, FEE has offered a well developed body of freedom must be defended, not because it literature to support this moral assertion. It works but because it is right. FEE's position has been doing this for fifty years. has always been that we must not get the Defenders ofthe free market have faced a pragmatic cart before the ethical horse. This major obstacle for over a century: the so­ outlook has always distinguished FEE from cialists and economic interventionists have its many imitators. always claimed possession ofthe high moral ground. They have been able to appeal to The Non-Miracle of the Market people's better instincts in their defense of coercive State power. They have pointed to FEE has never really believed in the the effects of capital shortage-poverty- miraculous quality of what has often been 366 THE FREEMAN • MAY 1996 described as "the miracle of the free mar­ -the sustenance of life being nothing more ket. " For teaching purposes, Leonard Read nor less than the fruits of o'ne's labor. ,,8 liked to speak of such a miracle, but that When this principle was progressively was because he dealt with readers and and haltingly put into practice on both sides listeners who were entranced by the myth of the Atlantic after the American Revolu­ of the State. The so-called miracle of the tion, the "miracle ofthe market" appeared: free market has seemed miraculous to those the phenomenon of compound economic who assume that socialism is a good idea growth. Into the hands of the poor were and ought to work. The non-miracle of the placed low-cost technological wonders that market rests on this fact: personal respon­ were beyond the dreams of kings in 1776 sibility, the desire to improve one's condi­ or even 1906. As Will Rogers put it in the tion, and minimal civil government work middle ofthe Great Depression ofthe 1930s, together to allow the productivity of the "America is the first nation where a person most precious of all scarce economic re­ goes to the poorhouse in an automobile." sources, human creativity. The so-called ~iracle of the market is nothing more and The Road to Unserfdom nothing less than the outworking of "thou shalt not steaL" In the words of Clarence Carson's series 'The miracle is not the market; the miracle in The Freeman, the world has been caught is that two centuries ago, English-speaking in the grip of an idea: socialism. Our world political rulers began to· change their minds is still in the grip of that idea. This grip is regarding the supposed benefits of govern­ looser today than it was in 1946, and it is ment coercion. Beginning in the late eigh­ called something else than socialism, but it teenth century, decision-makers for the is still far tighter than it was a century ago, British Empire decided that less regulation in that golden age described best by this might be beneficial after all. The American phrase: "After indoor plumbing but before Revolution had' persuaded them that they the income tax." Prior to World War I, as would have to reduce regulation in this Robert. Nisbet has said, the only contact that hemisphere. Both sides decided .that re­ most American had with the fed~ral govern­ duced trade barriers were necessary if both ment was the Post Office. 9 countries were to benefit. Adam Smith's Today, the promises men live by are still The Wealth ofNations (1776) justified intel­ government promises. Whether in the field lectually what Jefferson's Declaration of of education, health care, retirement in­ Independence (1776) soon produced: an in­ come, or any of a hundred other areas of ternational trading zone in which British modem man's dependence on government, bureaucrats would no longer set the terms of the reigning faith has not changed: In Gov­ trade. Had they never attempted to set the ernment We Trust. This faith has been terms of trade, there probably would not challenged, but nowhere more eloquently have been a revolution. than in the pages ofThe Freeman. This faith This was a revolutionary concept on both has also been challenged by events. It will sides ofthe Atlantic in 1776. Itwas grounded be challenged in the next century by the in Jefferson's moral vision: life, liberty, and inability of governments to make good on the pursuit of happiness. This concept iIi their promises, at least not in money with tum rested on the long accepted but rarely today's purchasing power. This is why FEE honored idea that man is responsible before and The Freeman must continue to play a God for his own actions. This moral vision prophetic role by sounding the alarm. Eco­ includes economics but is not limited to nomic events will eventually catch up with economics. As Read wrote: "Our revolu­ the unchanging moral premise ofFEE: thou tionary concept was economic in this sense: shalt not steal. Again, this is a matter of that if an individual has a right to his life, it positioning. He who sounds the alarm in follows that he has a right to sustain his life advance and provides cogent testimony for THE MORAL DIMENSION OF FEE 367 his case is in a better position to exercise morally speaking, that have produced very leadership in the midst of the crisis that he bad results, economically speaking. To a predicted. lesser extent, it has offered positive case Men cannot predict the future course of studies where liberty has worked. But in an events. But we can say this in confidence: age that is caught in the grip ofthe socialist ifcertain practices continue, certain conse­ idea, the economy's successes have been quences will follow. We live in a universe of attributed to socialism and the failures have moral cause and effect. Bad policies will been attributed to the free market. This was eventually produce bad results. This takes especially true prior to the late 1960s. Even time, but it is the law of liberty. Societies today, the welfare State-the State as break it at their peril. healer, meaning the State as Savior-is still Where are those who will respond to widely believed in by most people, though FEE's message? Where is the Remnant? We not in its more obviously tyrannical forms. cannot know for sure, any more than most To refute this error, The Freeman has pub­ of us can remember who it was who gave lished many articles that demonstrate that us our first copy of The Freeman. But we the failures should be attributed to some can make informed guesses. We can ask variant of political plunder. ourselves this question: Who among us has Because so many people have spent their begun to break with the religion of the lives as targets of government propaganda, Savior State? Who has begun to unplug from which includes the propaganda of the gov­ dependence on the State for his future? I ernment school system, reading The Free­ suggest the following groups: (1) parents man has been a liberating experience. They who have pulled their children out of the have felt as though they have been set free. public schools; (2) investors who have de­ The Freeman has put into clear, cogent cided that Social Security is going to default language the case for liberty. New readers before they die; (3) users ofthe Internet who have responded again and again: "I always have begun to explore alternative sources of suspected this, but I was all alone. Now I information; (4) churches that have never know I have allies." For some readers, The accepted the Social Gospel; (5) full-time Freeman has served mainly as ammunition foreign missionaries who are in the field, in the war against government coercion. But trying to show people a better way to live; for others, it has been more like a religious (6) small businessmen who are tired of the experience: making the connection with government red tape that strangles them and others who share their views. In the words who are ready to forfeit government subsi­ ofone ofthe characters in Shadowlands, the dies to get out ofthe trap. Members ofthese movie about C. S. Lewis, "I read to know groups are obvious candidates for the unof­ that I'm not alone." For those who do not ficial office, liberator. intend to remain alone, giving away copies of The Freeman has been an obvious solu­ Personal Evangelism tion. For many years, FEE sent out The Free­ The appropriate response of any new man free of charge. In recent years, FEE believer is evangelism. This is why so many has limited this free subscription to three people have been handing out copies of The months. FEE also asks donors to provide Freeman for over four decades. They have gift subscriptions. Both approaches have recognized that The Freeman is a means of advantages. The important thing is that evangelism: "good news" for people who those who want to continue to read The have grown weary of the seemingly endless Freeman can do so, either by paying for pleas that civil government intrude into the it or, in the case of students, through the economic affairs of individuals. generosity of subscription donors. The For over four decades, The Freeman has evangelical impulse is valid and should be offered case studies of very bad ideas, yielded to, but it must be paid for. 368 THE FREEMAN • MAY 1996 What Is to Be Done? sor. FEE has maintained its unique service proposition longer than any other organiza­ By Whom? tion on the American right. Leonard Read always said that improve­ Will this continue? That depends. As ment begins with self-improvement. Plans Leonard Read used to say, "FEE is doing to reform the world must begin with plans just fine: it gets all the money that people to reform my assigned segment ofthe world. think it's worth." If FEE's supporters con­ The answer to the question, "What is to be tinue to be pleased with what FEE is doing, done?" should begin with "What am I FEE will survive. It flourished during the prepared to do?" So, I can begin by asking first two decades of Read's tenure for two myself these questions: reasons: first, it had an operational monop­ Have I made a list of people I know who oly; second, because Read was the incar­ might want to read a copy of The Freeman? nation of a unique service proposition. He Have I bought extra copies ofThe Freeman had the remarkable ability to raise lots of to send out with a personally signed cover money without appearing to raise money, letter or to hand out personally? a skill he combined with his even more Am I ready to donate money to FEE to pay remarkable refusal to acknowledge any ex­ for three student subscriptions? ceptions to the free market's principle of Do I know of any private high school that voluntarism but these: defense against vio­ might be ready to assign The Freeman or other lence, enforcement of contracts, and pros­ FEE publications? ecution of fraud. Do I know any physician or other profes­ Unlike the other libertarian think-tanks, sional who would place copies ofThe Freeman in his office's waiting room? FEE has avoided the pitfalls of political Am I prepared to sponsor a local chapter of cheerleading or behind-the-scenes policy­ FEE's network of discussion clubs? making. Read's original vision has been maintained. This also makes FEE unique. In Read always spoke of a majority of one: what today appears to be a time ofpolitical the self-governed individual. I control this fruit-gathering after all the decades of wan­ majority. I have the only vote that counts. It dering in the wilderness, FEE's stand is does no good for me to curse the darkness clear: anything that's peaceful. IfFEE con­ unless I am prepared to light a candle. Am tinues to maintain this stand, it will continue I prepared to buy a candle? Am I prepared to prosper. But even if FEE's non-political to give away an occasional candle? The stand were somehow to lead to its demise, Freeman is a very bright candle. that would surely be better than the alter­ native. As Read would say today, "Buteven Conclusion if political cheerleading were the most pro­ ductive ofall fund-raising systems, it would There is no doubt that FEE is the grand­ not meet with my approvaL" D daddy of the conservative movement in the post-World War II era. It has been in 1. Leonard E. Read, Anything That's Peaceful: The Case public service longer than any other orga­ for the Free Market (FEE, 1964), p. 57. nization. Human Events has been published 2. George H. Nash, The Conservative Intellectual Move­ ment in America Since 1945 (New York: Basic Books, 1976), longer than FEE has existed-by about two p.16. years-but FEE is more than a publisher, 3. For a brief history, see John Chamberlain, A Life with The Printed Word (Chicago: Regnery, 1982), ch. 12. however much the success of The Freeman 4. Ibid., p. 27. makes FEE appear to be merely a publisher. 5. Ibid., p. 30. 6. Ibid., p. 14. The Freeman has been published longer 7. Read, Anything That's Peaceful, p. 46n. than any other libertarian journal, even if 8. Ibid., p. 14. 9. Robert A. Nisbet, The Present Age: Progress and we do not view the post-1955 Freeman as Anarchy in Modern America (New York: Harper & Row, an extension of its five-year-old predeces- 1988), pp. 2-3.

THEFREEMAN IDEAS ON UBERTY

The Freeman: Ideas on Liberty by Paul L. Poirot

enry Hazlitt (1894-1993), on the hun­ first year in Irvington, but there continued H dredth anniversary of his birth, most to be heavy ~()sses for the "subscription" deservedly was designated "journalist of magazine. the century." He also was the last survivor At a' special meeting of the trustees in of the founding trustees of the Foundation ·November 1955, The Freeman was merged for Economic Education. The fortnightly with FEE's Ideas on Liberty journal. The magazine, The Freeman, began publication mailing lists were combined, and in January in 1950 with Hazlitt and John Chamberlain 1956, in a new digest size with 64 pages, the (1903-1995) as co-editors. Hazlitt continued first issue ofThe Freeman: Ideas on Liberty writing for the magazine after it became appeared. It has been published ~egularly the Foundation's monthly journal of ideas since that time, offered to all FEE donors on liberty in January 1956. John Chamber­ and others who want it in the expectation lain, until shortly before his death in 1995, . that most of them will want to help cover contributed a lead book review each month. expenses with donations to FEE. So it is fitting and proper that· these two The Freeman is the oldest and most giants of liberty, along with Leonard Read, widely circulating periodical devoted to the be commemorated in this story of The Free­ study offree societies. One ofthe principles man, published continuously since 1950, of freedom Leonard Read brought into the and by FEE since 1956. Foundation was a primary emphasis on As a biweekly "subscription" magazine ideas rather than personalities..No name­ in the early 1950s, The Freeman was oper­ calling or blanket condemnation of per­ ating at a loss of about $100,000 annually. sons and organizations but a clear, non­ In order to save it, several of the trustees, technical, attractive explanation of the also serving on the Board of FEE-Henry ideas underlying the free market and limited Hazlitt, Leo Wolman, Claude Robinson, government. Among students of liberty, and Lawrence Fertig-brought Leonard the teaching would be by example and Read into the picture. With enthusiasm and without coercion, all learning and accep­ self-assurance and the support ofhis board, tance strictly voluntary. So The Freeman he offered to purchase the magazine. at FEE became primarily an attractive pre­ For a year and a half The Freeman ap­ sentation of the ideas and principles of peared monthly in an 8" x 11" format under freedom more than a news report of U.S. the editorship of Frank Chodorov. The cir­ and international economic and political culation rose from 14,000 to 24,000 in that affairs. Leonard Read's ideal role for gov­ ernment was to police the market to keep it Dr. Poirot served as managing editor of The Freeman from its acquisition by FEE in 1956 open, and to protect private property, leav­ until his retirement in 1987. He also served as ing individuals otherwise free to do anything secretary of FEE's board. that's peaceful. 371 372 THE FREEMAN • MAY 1996

then an entire monthly issue might be de­ voted to a single topic, various authors each offering his or her special expertise, but never invited or encouraged by the editor to present opposing views. Now and then, and sometimes without alerting the editor, an astute Henry Hazlitt ·or Hans Sennholz or Clarence Carson would start a topic that simply had to be continued in the following issue and eventually might run to a dozen or more chapters of a book. Many of The Freeman authors over the years have been distinguished academicians in their respective fields of economics, law, philosophy, political science, banking, medicine, and other disciplines. But their common mark of distinction has been the capacity to express their ideas and expla­ nations not in the jargons oftheir trades but in the clear language of the layman. These exp~rts from the academy have shared the pages ofthe journal with other experts from Paul L. Poirot any and every walk oflife, perhaps a house­ wife, a lawyer, a merchant, and yes, prob­ For the economics of freedom, Read, ably a thief, since there have been articles by FEE, and The Freeman relied heavily upon prisoners. the Austrian School writings and teachings The editor's guide for acceptance was the of Dr. Ludwig von Mises. In 1938, Hazlitt clearevidence ofthe author's understanding introduced Mises to American audiences and capacity to shed special light on one or in a New York Times review of the book another facet of liberty. Not that editors Socialism-''the most devastating analysis made no mistakes. But never was there an of the system ever written." editorial view that one "good turn," or When Mises moved from Europe to New explanation, deserves equal space or time York City in 1940, he became a close friend for the contrary opinion. Financial support of Hazlitt, of Leonard Read, and of the of the Foundation is not for the purpose of Foundation. Among the followers of Mises airing opinions counter to freedom. are outstanding professors such as Hans Sennholz and Israel Kirzner and a host of their students whose works also have graced The Freeman. Leonard Read was the author most fre­ quently seen in The Freeman, though his name appeared on the masthead not as editor but as President of FEE. The man­ aging editor, of course was free to accept -or reject-the President's offerings. Roughly half of the articles and reviews in a typical issue would have been written by the staffofFEE, a few on some special topic by commission, and others chosen from the many free-lance submissions. Now and The Freeman in the 1960s. 373

Over the last fifteen years, editorial and opinion pages have played an increasingly important role in the discourse of the national political culture. Therefore, FEE has sought to influence public opinion through the placement of shortened Freeman articles as opinion pieces in newspapers in the United States and throughout the world. The articles are chosen to make a principled case for a free society. FEE's newspaper outreach began in April of 1986 under the direction of Brian Summers, at the time Senior Editor of The Freeman. Mr. Summers developed and expanded the program during his tenure at the Foundation. Since January 1995, the op-ed program has been managed by Greg Pavlik, who is currently Associate Editor of The Freeman. The success of the program is testament to the appeal of FEE's message. Opinion pieces based on Freeman articles have appeared in many of the nation's leading newspapers, from the Washington Post to the Wall StreetJournal. Local and suburban papers have featured Freeman articles. Grassroots newsletters and magazines of various political creeds have utilized Foundation material. Freeman articles have even appeared in the religious press. Through this program, the Foundation has reached a vast spectrum of audiences across the country. Every month, millions of readers across the country are exposed to the Foundation's message. And the number of papers that use material from FEE continues to grow. The latest area of expansion for FEE's newspaper program has been in its international efforts. Many articles from The Freeman have been adapted to highlight the benefits of a free market economy to readers around the world. Translations of Freeman articles-prepared at FEE-have appeared in Spanish-language newspa­ pers throughout Central and South America. The demand for essays from The Freeman has been explosive. From Argentina to Guatemala, the message of freedom is spreading. Perhaps the most impressive sign of the effectiveness of FEE's newspaper outreach effort is the feedback from individuals who contact the Foundation as a result of a Freeman essay they have read in their paper. Many readers request information about FEE and subscriptions to The Freeman. Some just write to thank FEE for having the courage to stand on principle.

I had joined the staff of FEE in 1949 and also had the time and wisdom to help decide served as managing editor from 1956 until which articles seemed best. my retirement in 1987. Other members of Robert Anderson gave up college teach­ the Foundation staff, in addition to contrib­ ing to rejoin the staff as business manager uting articles, were often consulted about when Curtiss retired. Like Curtiss, Bob manuscripts under consideration. found time now and then to draft an article, The scholarly Reverend Edmund Opitz always excellent. After Leonard Read's served as book review editor and stood death in 1983, Bob was there to help hold the always at hand to lend moral and spiritual standard during a succession of presidents guidance. He also had a firm understanding until Dr. Sennholz agreed to assume that of economic issues. position. But perhaps the outstanding con­ Mrs. Bettina Bien Greaves was well tribution Bob Anderson made to The Free­ schooled in "the gospel aceording to man was to bring Beth (Herbener) Hoffman Mises," helping to look for "leaks" in any aboard as production editor. Eventually she article. She also was the expert expected, became managing editor, with guest editors and willing, to research any questionable now helping to compile each issue. fact or opinion. Brian Summers worked with Beth as w. M. Curtiss saw to business and finan­ co-editor for a time, developing a rapport cial affairs to cover authors' fees, printing with newspapers and other publications in bills, and other cos,ts of The Freeman. He the United States and abroad that were 374 THE FREEMAN • MAY 1996 interested in reprinting Freeman articles. One ofhis contacts'was with Reader's Digest, which eventually offered him more as an associate editor than FEE could afford. Aside from the memory banks of·a Beth or a Bettina, there has been no cumulative index of topics covered in the pages of The Freeman. But the value ofthose back issues as a reference shelfis not to be denied. This is why numerous readers over the years have spoken with pride 'of their monthly files, or annual bound volumes, orboth. The reader fortunate enough to have accumu­ lated a complete set since 1956 now pos­ sesses a total of 485 issues, or more than 30,000 pages or over 14 million words of Brian Summers andBeth Hoffman, senior editors ofThe text skillfully crafted into essays by more Freeman during the 1980s. than 1,400 different authors explaining the many aspects of freedom. moral foundations of capitalism, political Dr. Clarence Carson is one·of those who interventionism, individual spirit, free trade has written articles in a series in The Free­ and world peace, the formation and function man. Early on, he offered The· American of market pricing, money, inflation, bank­ Traditiorz with chapters on constitutional­ ing, private property rights, taxation, con­ ism, republican government, federalism, servation of resources, education, medical individualism, equality, rights· and respon­ care,agriculture, unionism, crime, and more. sibilities, voluntarism, free trade, interna­ The Freeman since 1950 consistently and tionalIsm, virtue and morality, and so on. continuously has stood against the fallacies In a sense, his list covered the subjects most and cliches of politics, not by bitter de­ often tackled in The Freeman. In a later nunciation, but by reasoned and attractive series, he described The Flightfrom Reality, explanations of the better way of limited the departure from tradition, beginning in government, private ownership, voluntary the mind of the reformer-the intellectual exchange, moral· behavior, and self-im­ turn-then emerging as the domestication provement. The golden rule of the market­ of socialism, capturing and remaking the place is that the person who gains most is hearts of men, and finally manifesting as a one who best serves others. D political flight. In more recent years, especially at the nudging of Dr. Sennholz, FEE has pub­ lished a regular series ofFreeman "classic" An Honor Roll ofall Freeman authors books. Each volume is devoted to a given publishedsince 1956 appears on pages subject and draws from the wealth ofknow1­ 412 to 416. We salute these writers for edge contained in some forty years of The their commitment to sound economic Freeman. Having started with The Freedom education and the principles ofa free Philosophy, the series contains books cov­ society. ering a wide range of ideas, including: the THEFREEMANIDEAS ON UBERlY

The Function of The Freeman by Henry Hazlitt

Editor's note: Henry Hazlitt wrote this piece not stand alone, that there is high hope for several years after he and others revived their cause. It is imperative that all such The Freeman in 1950. Although it pre-dates men and women keep abreast of current the magazine's merger with FEE's Ideas developments and know their meaning in on Liberty, Hazlitt's message faithfully re­ relation to the cause of freedom. It is im­ flects the continuing mission of FEE and perative that, through constant criticism The Freeman. of each other's ideas, they continue to clarify, increase, and perfect their under­ n the positive side, of course, our standing. Only to the extent that they do this Ofunction is to expound and apply our can they be counted upon to remain true to announced principles of traditional liberal­ a libertarian philosophy, and to recognize ism, voluntary cooperation, and individual collectivist fallacies. Only ifthey do this can freedom. On the negative side, it is to the believers in freedom and individualism expose the errors of coercionism and col­ hope even to hold their ranks together, and lectivism of all degrees-of statism, "plan­ cease constantly to lose converts, as in the ning," controlism, socialism, fascism, and past, to collectivism. communism. But the function of a journal of opinion We seek, in other words, not only to like The Freeman only begins here. The hearten and strengthen those who already defenders offreedom must do far more than accept the principles ofindividual freedom, hold their present ranks together. If their but to convert honestly confused collectiv­ ideas are to triumph, they must make con­ ists to those principles. verts themselves from the philosophy ofcol­ A few ofourfriends sometimes tell us that lectivism that dominates the world today. a periodical like The Freeman is read only by those who already believe in its aims, and A Lesson from the Enemy that therefore we believers in liberty are merely "talking to ourselves." But even if They can do this only if they themselves this were true, which it isn't, we would still have a deeper and clearer understanding be performing a vital function. It is imper­ than the collectivists, and are able not only ative that those who already believe in a to recognize the collectivist errors, but to market economy, limited government, and refute them in such a way that the more individual freedom should have the constant candid collectivists will themselves recog­ encouragement of knowing that they do nize, acknowledge, and renounce them as errors. A friend of free enterprise is hardly Henry Hazlitt (1894-1993), author of Econom­ ics in One Lesson, The Failure of the "New worth having if he can only fume and sput­ Economics," and other classics, was afounding ter. He must know the facts; he must think; trustee ofFEE. he must be articulate; he must be able to 375 376 THE FREEMAN • MAY 1996 convince. On the strategy of conversion, by the· Fabians. Since the beginning of the our side can take at least one lesson from the twentieth century it has been difficult to find . enemy. The task of the Bolsheviks, Lenin an outstanding novelist or playwright, from once wrote, is "to present a patient, sys­ Bernard Shaw to H. G. Wells, or from tematic and persistent analysis." And our Anatole France to Andre Gide, who did not own cause, the cause offreedom, can grow proudly proclaim himself a Socialist. in strength and numbers only if. it attracts The late Lord Keynes, in the last pages of and keeps adherents who in turn will be­ The General Theory ofEmployment, Inter­ come, not blind or one-eyed partisans, but est, and Money, a book not always distin­ enlightened and able expositors, teachers, guished for wisdom or sense, pointed out disseminators, proselytizers. one fact that is profoundly true. To make this possible, it is essential that The ideas of economists and political philos­ there should exist a prospering periodical ophers [he wrote] both when they are right and with the aims of The Freeman. We must when they are wrong, are more powerful than restore "conservatism" and the cause of is commonly understood. Indeed the world is economic freedom to intellectual repute. ruled by little else. Practical men, who believe They .have not enjoyed that repute, in the themselves to be quite exempt from any intel­ eyes of most "intellectuals," for many lectual influences, are usually the slaves of years-perhaps since the beginning ofthe some defunct economist. Madmen in author­ twentieth century. ity, who hear voices in the air, are distilling "We are all Socialists now," said Sir their frenzy from some academic scribbler of William Harcourt in 1894, and he was not a few years back. joking as much as his listeners, or he him­ The irony and tragedy of the present is self, supposed. We must never forget that, that Keynes himself has become the chief in the long perspective of human history, "academic scribbler" and "defunct econo­ "capitalism"-Le., individualism and a mist" whose ideas dominate the "madmen free-market economy-is the newest form in authority" and the intellectuals today. of economic organization. Communism is The restoration ofeconomic, fiscal, or mon­ the most primitive form; it is as old as etary sanity will not be possible until these primordial man. Feudalism, a regime of intellectuals have been converted or (to use status; rigid State and guild control; mer­ a word coined by Keynes himself) debam­ cantilism; all these preceded the emergence boozled. of economic liberty. Socialism as a self­ conscious "intellectual" movement came The Inftuence of Intellectuals into being a century and a halfago with such writers as Saint-Simon, Owen, and Fourier. Who are the intellectuals? They include In its Marxian form it made its official debut, not merely the professional economists, but so to speak, in the revolutions of 1848 and in novelists, playwrights and screen writers, the Communist Manifesto ofthe same year. literary and music critics, and readers in And it was not, contrary to popular myth, publishing houses. They include chemists the proletarian masses or the starving mil­ and physicists, who are fond ofsounding off lions who were responsible for either orig­ on political and economic issues and using inating or propagating socialist ideas. It the prestige gained in their own specialty was well-fed middle-class intellectuals. This to pontificate on subjects of which they are description applies not only to Marx and even more ignorant than the laymen they Engels themselves, but to the epigoni, and presume to address. They include college to the literati who were chiefly responsible professors, not merely of economics but of for parroting and popularizing the socialist literature, history, astronomy, poetry. They doctrines. Intellectual hostility to capitalism include clergymen, lecturers, radio com­ was made fashionable by the Carlyles and mentators, editorial writers, columnists, re­ Ruskins ofthe nineteenth century, and later porters, teachers, union leaders, psychoan- THE FUNCTION OF THE FREEMAN 377

The 1955 "Chodorov" Freeman. alysts, painters, composers, Broadway and the immense practical influence for evil Hollywood actors-anybody and every­ that has been exercised by Karl Marx's Das body who has gained an audience beyond Kapital, we should also recall the immense that ofhis immediate family and friends, and practical influence for good exercised by whose opinions carry kudos and influence Adam Smith's The Wealth ofNations. Ifthe either with other intellectuals or with the intellectual leaders can themselves be con­ man on the street. verted or reconverted, they can be counted To consider this group of intellectuals is on, in turn, to take care of the task of mass to recognize that it sets the fashion in conversion. For the masses do respect and political, economic, and moral ideas, and follow intellectual leadership. that the masses follow the intellectual lead­ Above all, we must keep in mind the rising ership-good or bad-that it supplies. generation, which will comprise both the Clearly also there is a hierarchy within this future masses and the future intellectual hierarchy. The ballet dancer, say, gets his leaders, and whose ideas and actions will be ideas from the pages ofThe New Yorker, and heavily determined by what they are taught The New Yorker from some vague memory today. of Veblen; the popular leftist novelist gets Few practical businessmen realize how his notions from The Nation or the New economic and social ideas originate and Republic, and these in turn from the Webbs, spread, because they are not usually them­ the Harold Laskis, or the John Deweys. selves students or readers. It is perhaps The hopeful aspect of this process is that unrealistic to expect them to be. There is a it can also be used to revise or reverse ideas. necessary division of labor in society, and If the intellectual leaders, when they go most businessmen have enough to do in wrong, can have a great influence for harm, improving their particular product to satisfy so, when they are right, they can have a consumers, in reducing costs and in meeting great influence for good. When we consider competition. But one result of the preoccu- 378 THE FREEMAN • MAY 1996 pation of business leaders with their own who reason from them, form part of the immediate problems is that they hardly climate of opinion in which particular radi­ become aware ofthe existence and power of cal proposals come to growth. Even com­ ideas-conservative or radical-until some petent experts in their special fields are legislative proposal that would destroy their usually not aware that some proposal they business is put before Congress, or until are combatting is merely part of a whole the labor union in their own plant makes system of thought. That is why their argu­ some ruinous demand. Then they are apt to ments against it, often unanswerable in think that this demand comes from the detail, are as often ineffective. It is a com­ rank-and-file of the workers, and that it can prehensive though confused philosophy that be answered by some statistics showing the we have to meet, and we must answer it by smallness of profits compared with wages. an equally comprehensive philosophy. But usually neither the assumed origin nor Above all we must combat the superstitious the assumed cure is correct. The demands belief that the coming of socialism is inevi­ come, not from the working rank-and-file, table. but from labor leaders following a sugges­ It is the aim of The Freeman to address tion thrown out in some college classroom, itself specifically to the leaders and molders or by some radical writer; and the practical of public opinion and to thinking people businessman, even though he knows the everywhere, in order to help create a health­ immediate facts of his own business, finds ier climate for the preservation of free en­ himself at a heavy disadvantage in these terprise and the liberty and moral autonomy controversies because he cannot answer, of the individual. It is our aim to point out and perhaps is even unaware of, the general the fallacies in the basic premises of the premises on which the contentions ofthose collectivists of all degrees up to the totali­ hostile to business really rest. tarian. These general premises, seldom explicitly It is our aim, above all, to expound the stated or even clearly formulated by those foundations of a philosophy offreedom. D

THEFREEMAN IDEAS ON LIBERTY

The Foundation for Economic Education: Success or Failure? by Benjamin A. Rogge

he question before us is this: Has the as "mere" as you might think. Never un­ T Foundationfor Economic Education, in derestimate the significance of the simple its first twenty-five years, succeeded in its fact ofthe continuing existence of an island mission? Most speakers on such occasions of sanity in an increasingly insane world. are capable of supplying only one answer Whether this sanity can eventually turn the to such a question. Tonight, at no extra cost battle is still moot and will be discussed in a to you, I intend to give you/our answers to moment, but its simple existence is a very this question. They are in order: yes, prob­ present help in time of trouble. ably no, almost certainly no, and unquali­ I am reminded ofTolstoy's description of fiedly yes. Are there any questions? the role of the Russian commander, Prince The reason I can give you four answers Bagration, in the battle of Schon Grabem. to this one question is that the phrase, Although himself in doubt of the outcome "succeeded in its mission," is capable of and aware ofhow little he really knew ofthe at least four meaningful interpretations, battle's progress, the Prince stood serene each calling for its own answer. and confident in the view of all, answering One possible interpretation is that the each report of the action, whether encour­ mission of any organization, at first in­ aging or discouraging, with a sonorous, stance, is quite simply to survive. That FEE "Very good!" -as if even the local defeats has survived is testified to by our presence were part ofan overall pattern ofevents that here tonight. Nor should any of us think foretold ultimate victory. As Tolstoy put it: lightly of this accomplishment. Given the Prince Andrew noticed that ... though what general social and economic climate of the happened was dlJe· to chance and was inde­ immediate postwar period, the survival pendent of the commander's will, his [Bagra­ chances of any organization committed to tion's] presence was very valuable. Officers individual freedom and limited government who approached him with disturbed counte­ could well have been described in 1946 as nances became calm; soldiers and officers two in number: slim and none. greeted him gaily, grew more cheerful in his presence, and were evidently anxious to dis­ So much, you might think, for the crite­ 1 rion of mere survival-but survival is not play their courage before him. As with these soldiers, we grow more Dr. Rogge (1920-1980) was Dean and Professor cheerful in the presence of FEE and Leon­ of Economics at Wabash College in Indiana and a long-time trustee of FEE. This essay is ard Read, more anxious to display our an adaptation of his remarks at FEE's twenty­ limited courage. Believe me, this is some­ fifth anniversary celebration in 1971. thing; even though the battle itself were to 380 381

Summer seminar group picture, July 1966. Lecturers and FEE staff (front row, left to right): W. M. Curtiss, George Roche (director ofseminars), Edmund Opitz, Percy L. Greaves, Jr., Bettina Bien Greaves, Ben Rogge, Paul Poirot, and Leonard Read. be already lost, as it well may be, FEE as spirit, something quite different from what it the island of sanity to which we repair for now is. Moreover, the chances are that that warmth and comfort, may still be counted a spirit will be significantly alien to the spirit great and significant success. that now moves this organization. A second way to evaluate an organization When that day comes, ifany ofus are still is to examine its chances for survival in the around, let us have the courage and good long run. Do we have here an organization sense to give FEE a decent burial, rather so significant and successful that it will live than yield to a pagan attachment to a body through the centuries (or at least the de­ from which the spirit has already fled. The cades) ahead? world of organizations is cluttered with de­ Not only do I answer, "Probably no," to formed and defaming relics ofnoble causes; this question but I add "and I hope not" to let FEE not be one of them. that answer. The real danger to an organi­ zation of this kind is not that it will simply Turning the Tide disappear, but that itsform will long survive its soul. We turn now to a third possible interpre­ Do not misunderstand me; I am not fore­ tation of success as it relates to the work of casting an early end to FEE. It is true that FEE. Has FEE succeeded in its mission in even Leonard Read is not immortal, but the sense of being a part of an action that Read's leaving will not mean the end ofthis promises to actually turn the tide ofbattle in organization. It will carryon, and for x the direction offreedom? My answer to this number of years continue to be a center of is, "almost certainly no." strength in the cause of freedom. I offer this not as a criticism of the work But times change, and people change, and of FEE but as what seems to me to be the institutions change; it is as certain as death only realistic appraisal ofwhere the current itself that sooner or later FEE will be, in of events is tending in this world. The 382 THE FREEMAN • MAY 1996 situation in this world, as it relates to indi­ best critiques of this approach I know, an vidual freedom, is almost certain to become article in The Public Interest, the author much worse, before and if it ever becomes writes as follows: "Those who call for any better. Why must I adopt this appar­ immediate action and damn the cost, merely ently defeatist line and on this should-be because the spiney starfish and furry crab gladsome occasion in particular? populations are shrinking, are putting an My own none-too-original analysis ofthe infinite marginal value on these creatures. trend of events tends to bring me into This strikes a disinterested observer as an agreement with the many friends and foes of overestimate. ,,2 capitalism alike who believe that the odds But the voice ofreason is rarely raised and are very much against the survival of capi­ is shouted down by the new romantics (and talism in the decades immediately ahead of the new barbarians) as soon as it is raised. us. Lady Chatterley's lover, once a hero of This is not the time or the place for a the young and the teachers of English liter­ detailed presentation of the analysis that ature for his sexual acrobatics, is now their leads me to this conclusion. Moreover, my hero as the man who said, "It's a shame, thesis has been more cogently reasoned and what's been done to people these last hun­ more ably presented in the works ofSchum­ dred years: men turned into nothing but peter, Mises, Hayek, Popper, and others. labor-insects, and all their manhood taken I offer only the following straws in the away....I'dwipe the machines offthe face wind. First, there is the incredible recrudes­ of the earth again, and end the industrial cence of the most primitive forms of utopi­ epoch absolutely, like a black mistake." anism. Young people (and old) possessed It is symptomatic of the times that a call of superior intellectual equipment (as mea­ like this for over 90 percent of those now sured by aptitude tests) are every day re­ living in the Western world to be wiped out peating to me, in one form or another, the (for such would be·the effect of such a chiliastic musings of Marx in his German proposal) is hailed as a voice of humanitar­ Ideology: ianism and love, while those who dare to In communist society, where nobody has an offer even gentle caveats are derided as exclusive sphere of activity but each can gross and disgusting materialists. become accomplished in any branch he So much for the treason of the intellectu­ wishes, society regulates the general produc­ als, a treason that Mises and Hayek and tion and thus makes it possible for me to do one Schumpeter forewarned us of, and one that thing today and another tomorrow, to hunt in is now largely a fact. If FEE is to be judged the morning, fish in the afternoon, rear cattle by its success in swinging the intellectual in the evening, criticize after dinner, just as I vote, then it has failed indeed. have a mind. What of the businessman? Surely FEE I am not surprised to find that the young and its companion organizations have been are enchanted by visions ofa do-your-own­ able to make secure for freedom this section thing New Jerusalem, complete with almost of the American public! At this point, it is continuous love-play; after all, even the difficult to know whether to laugh or cry. brightest of the young tend to think largely There is not one piece oflunacy put on paper with the heart and the loins. What shocks by some academic scribbler or spoken by me is that supposedly mature scholars either some public demagogue that is not to be encourage them in their daydreaming or found in at least one, if not more, of the hesitate to bring their schemes to full and published statements of the self-designated vigorous and rational challenge. spokesmen for the business community. For Nowhere is this denial of reason, of pro­ reasons that I don't have time to develop cess, of rational choice more clearly re­ here, it is also clear that the larger the firm, vealed than in the approach of the more the more certain is its leaders' commitment demented environmentalists. In one of the or at least lip service to the philosophy of THE FOUNDATION FOR ECONOMIC EDUCATION: SUCCESS OR FAILURE? 383

On an airplane trip in 1980, Ronald Reagan took time to read The Freeman, while Mrs. Reagan napped. statism. Study the changing character ofthe impression, it is the "little man," the mem­ business firms that have contributed to FEE ber of the masses who, far from being the over the last twenty-five years. In the first exploited victim under capitalism, is pre­ years, at least a dozen of the largest, best­ cisely its principal beneficiary. Under all known firms in this country were making other arrangements, those possessed of in­ direct contributions to FEE. Less than a telligence, high energy, and a strong desire handful are still on the list ofdonors. Those to achieve (Le., precisely those who tend to socialists and those defenders of capitalism become the entrepreneurs, the businessmen who expect the average American business­ under capitalism) get ahead by using their man to put up a desperate fight in defense of positions in the political orcaste or religious the system are simply out oftouch with the hierarchy to exploit the masses. Only under situation as it really is. capitalism can the stronger get ahead only Yes, even the businessman is more likely by serving the weaker-and as the weaker to be a part of the problem than a part of wish to be served! (Ralph Nader to the the solution, and FEE's failure, so judged, contrary.) could not be more obvious orcomplete. But The strong tend to survive and prosper of course, contrary to the popular impres­ under any system, and strength does not sion, there is no reason to expect the busi­ necessarily carry with it a sophisticated nessman to be more committed to the sys­ understanding of systems. The American tem ofeconomic freedom than anyone else. businessman has probably been, on balance Not only is he not the greatest beneficiary (wittingly or unwittingly), the most impor­ ofthat system-he is not even the principal tant single force working against the capi­ beneficiary. Again contrary to the popular talist system. 384 THE FREEMAN • MAY 1996

This brings us to another of the straws in have been going (as ~eems likely), we are the wind. If further evidence of where we going to move further and further away from seem to be headed is needed, I offer you reasonable prosperity and substantial free­ the current [Nixon] administration in Wash­ dom, and toward stagnation and authoritar­ ington, D.C. It is manned by a number of ianism. intelligent, capable public servants of Ifany ofyou have seen FEE's mission as roughly conservative outlook and headed by that of winning now and winning big, then an intelligent, well-meaning man of sound you have no choice but to label it a failure. conservative instincts [sic] . Yet I am pre­ But as I have understood him, his thinking, pared to wager that history will reveal that and the organization he brought into being, no administration in modem times did more I have always believed that Leonard Read to move the country away from freedom saw his mission as something quite different and toward socialism and authoritarianism from (and quite superior to) that ofwinning than the one now in power. I say this in tomorrow's election or next week's idea sorrow, not anger, sorrow at the fact that popularity poll. He seems little interested in the prevailing ideology ofthe day traps even triumphs as spectacular and as short-lived the apparent foes into serving its cause, as the hula hoop. once they acquire political power. If the Again let us be honest with each other. I prevailing climate is interventionist, a con­ suspect (I know) that this aspect of FEE's servative administration will not only be thinking has been occasionally irritating to compelled to serve that climate of opinion many of you and particularly to the more but will be able to command a larger con­ activist-minded of you. Read must have sensus for interventionist actions than an been about as satisfying to you at times as openly left-wing administration could ever would be a football coach at your alma mater command. In addition, the man on the street who asked for fifty years to do a rebuilding (who, in my opinion, also has generally job with the team. Who knows, they might conservative instincts) is less on his guard not even be reporting the scores to the local when a group identified as conservative is in papers where Rogge and Read and many of power-and is thus largely unaware as one you will be fifty years from now. You would socialist scheme after another is imposed like to see (and in person) the old scoreboard upon him. light up and read, Christians, 100; Lions, In other words, wherever we look-to the Zero. Ifthat really is your goal, then you are intellectuals, to the businessmen, to the at the wrong dinner for the wrong man.. political leaders-we find the score to be Not only does Read not promise us a win Lions, 100; Christians, Zero. If FEE's mis­ in the near future; not only does he not sion has been to win such games in the here guarantee us a win in the distant future; he and now, then it is indeed a one-hundred has the unmitigated gall to tell us that we still carat failure. Not only has FEE not turned don't even fully understand the game orhow the tide ofbattle, the situation in this coun­ to recognize a win when we see one. Finally, try has gotten steadily worse in everyone of he refuses us even the consolation of the the last twenty-five years and promises to assurance that while we may not know the get even worse in the next twenty-five. full truth, he does and will tell us all about Am I predicting that we are inevitably it. Stop worrying about such things, he tells headed for a great, all-encompassing crisis us; "the readiness is all." Here are some at some time in the next few decades? I am typical statements from this strange and not. In the first place, nothing is inevitable. difficult man: What has happened has happened because Not a man among us is entitled to look down of decisions made by human beings and his nose at any other; scarcely anyone has could be undone by the decisions of human more than scratched the surface. And there are beings in the years ahead. I am simply reasons aplenty: the complexities of this sub­ saying that if things continue to go as they ject are akin to the mysteries of Creation. THE FOUNDATION FOR ECONOMIC EDUCATION: SUCCESS OR FAILURE? 385

Always skeptical of activist efforts, I have, teaching induce in others what Aristotle until this moment, agreed that our own work termed 'activity of soul'?" has only long-range prospects-preserving the It is to this question that the final and remnant, as it were. Now I see it the other way unqualified and only significant "yes" can around; the chance ofgetting results here and be given. Throughout this country, through­ now lies exclusively in the study and exposi­ tion of ideas on liberty. out the world there is "activity of soul" underway that would never have been un­ The freedom idea is in fact a recent, ideal­ dertaken butfor the work and the inspiration istic, elevated acquisition ofthe human mind. of Leonard Read and the Foundation for Not being rooted in tradition and having little Economic Education. Some ofit all ofus in in the way ofsecond-nature behaviors working this room know about and can identify with for its security, it lacks stability; it is easily lost; freedom concepts are fragile, wonderful FEE; some ofit is known to only one or two ideas, few of which we've yet embraced by of those in this room; the greater part, and second nature within our relatively uncondi­ probably the most important part, is totally tioned consciousness. unknown as yet to any of us (including Leonard Read) and will come to light only in Freedom will always be insecure; it will the decades and centuries ahead-and much forever be touch-and-go. Even eternal vigi­ of it will be done by people who will never lance and devoted effort can do no more than to set the trend aright, as high an aim as we have heard of this foundation and will have should embrace. And this expectation is war­ no awareness that the activity of soul in ranted only if we view our problem realisti­ which they are involved is the last link in a cally, see it as profound and difficult as it really long chain that goes back to something that is. To assess it superficially, to think of it as was started by this foundation in the middle requiring anything less than practices conso­ of the twentieth century. nant with freedom becoming second nature, I close with a piece ofverse that seems to is to waste our time and energy, to spin our me to capture what I have been trying to say. wheels, as the saying goes. It is from the remarkable poem by W. H. Is this too dismal a prospect? Not to those Auden, "September 1, 1939," written at among us who enjoy a challenge; it's magnif­ another dark moment in the history of the icent! Western world. Here is the final stanza: How can he call magnificent a challenge where the odds-makers have installed the Defenceless under the night Lions as tOO-point favorites? Because, he Our world in stupor lies; tells us, "it is the effort, not the outcome, Yet dotted everywhere, that counts in the life of the human being." Ironic points of light "Cervantes' 'The road is better than the Flash out wherever the Just inn,' should serve to remind aspiring men Exchange their messages: that there isn'tany inn for them, but only the May I, composed like them road, now and forever. It is the effort along Of Eros and of dust, the trail that matters." Beleaguered by the same Negation and despair, The Measure of Success Show an affirming flame. For these twenty-five years of showing And now the final interpretation of the a brilliant and never-failing and affirming phrase "succeeded in its mission": Leonard flame, our most serious and total apprecia­ Read's own definition of how the success of a FEE (of a Leonard Read) should be tion, Mr. Leonard Read. D measured: 1. Tolstoy, War and Peace, Inner Sanctum ed., p. 193. "To measure a teacher's success, to eval­ 2. Larry Ruff, "The Economic Common Sense of Pollu­ uate his work, one must ask: Does the tion," The Public Interest, Fall 1970, p. 74.

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1 The Foundation for Economic Education, Trustees and Staff, 1946--1996 The names of current trustees and staff members are asterisked (*). The names of those who are deceased are italicized. Daggers (t) signify honorary trustees.

Trustees *E. A. Gallun, Jr. Hughston M. McBain Clayton R. Gaylord James E. McCarthy Paul L. Adams Robert M. Gaylord John T. McCarty Robert G. Anderson P. W. Gifford James A. McConnell Dominick T. Armentano David M. Goodrich Glenn McHugh John S. Autry Pierre F. Goodrich Donald H. McLaughlin *Manuel F. Ayau Laurence M. Gould Donald R. McLennan, Jr. *Edward Barr Perry E. Gresham Robert A. Millikan Olive Ann Beech H. Frederick Hagemann, Jr. Roger Milliken William B. Bell ErIe P. Halliburton tMargit von Mises Ezra Taft Benson Henry Hazlitt Martin J. Moore Henry T. Bodman Wesley H. Hillendahl *Paige K. Moore Isaiah Bowman *Harry H. Hoiles Ben Moreell Karl Brandt Paul E. Holden Robert M. Morris Donaldson Brown Wayne J. Holman, Jr. W. C. Mullendore Yale Brozen *John S. Howell Gary North Levin H. Campbell, Jr. A. R. Huckins, M.D. *Edmund A. Opitz tJohn Chamberlain *Ethelmae Humphreys Bernard L. Orell George Champion J. P. Humphreys *Jane M. Orient, M.D. Norton Clapp Samuel H. Husbands David H. Padden· J. Reuben Clark, Jr. B. E. Hutchinson Thomas I. Parkinson J. W. Clise J. Hugh Jackson W. A. Paton Joseph E. Coberly, Jr. Whipple Jacobs *Ron Paul, M.D. William Coberly, Jr. C. L. Kay *Lovett C. Peters T. Jefferson Coolidge Arthur Kemp Sylvester Petro Herbert C. Cornuelle *David H. Keyston J. Howard Pew Jasper E. Crane Russell Kirk Clarence E. Philbrook F. C. Crawford Israel M. Kirzner Paul L. Poirot Herrell DeGraff Vincent Lanfear *J. S. Pritchard, M.D. Gottfried Dietze *H. F. Langenberg Eugene C. Pulliam u. G. Dubach William D. Laurie, Jr. Leonard E. Read E. W. Dykes William L. Law *Lawrence W. Reed Bruce M. Evans James H. Lorie John T. Rettaliata Fred R. Fairchild Robert D. Love Donald R. Richberg Lawrence Fertig Harold W. Luhnow . Claude Robinson Lamar Fleming, Jr. *Gregg C. MacDonald George C. Roche, III William H. Fletcher He·nry G. Manne Benjamin A. ~ogge *Ridgway K. Foley, Jr. Thomas W. Martin Herbert H. Rogge Don L. Foote William Mathews tP. Dean Russell Richard R. Gallagher A. C. Mattei *Ronald A. Schiavone

388 TRUSTEES AND STAFF 389

A 1990 meeting ofFEE's trustees in the library-boardroom.

*Hans F. Sennholz *Sally von Behren *Janette Brown t Mary Sennholz W. Allen Wallis Muriel Brown C. H. Shaver John P. Weyerhaeuser, Jr. Eleanor Buckhout J. Nelson Shepherd Charles M. White Helen Bucklew Charles B. Shuman Ernest L. Wilkinson F. Reid Buckley John Slezak John Dana Wise Bella Campbell *Ralph Smeed Leo Wolman Elizabeth Campbell Robert B. Snowden David McCord Wright Helen Cartier Franklyn Bliss Snyder Henry M. Wriston John Chamberlain *Mark Spangler Ben E. Young Frank Chodorov Bertel M. Sparks Russell J. Clinchy John C. Sparks Staff Herbert C. Cornuelle Willard A. Speakman, Jr. Richard Cornuelle *Willard A. Speakman, III Robert G. Anderson Vernelia Crawford *Philip M. Spicer Joan Astuto Mallory Cross Celestin J. Steiner, S .J. Howard Baetjer Jr. W. M. Curtiss Thomas C. Stevens Margaret Battaly *Helen Dalzell Arthur W. Stewart *Harriet Bender Dominick D'Ambrosio Robert W. Stoddard Katherine Benson Michael Darcy *Steve D. Symms Ivan R. Bierly Jeannette Morrison Davies *Don L. Taylor Irving Borders *Barbara Dodsworth *Thomas C. Taylor, Jr. Scott Brokaw Roger Duclos *John B. Threlfall Shirley Brokaw Lonnie Dufford Miller Upton Stanley Brokaw Helen Dumich *John C. Van Eck James H. Brown Elizabeth Glenn Eastburn 390 THE FREEMAN • MAY 1996

Bruce M. Evans Don Lipsett Gregory F. Rehmke M. Stanton Evans Jean Liptak Anna Reilly Nick Fesij *Felix R. Livingston Mary Reilly Margaret Fitzsimons Martha Reilly Livingston John Robbins Bette Fletcher Robert D. Love George C. Roche, III William Fox Margaret Kramer Lundy James M. Rogers Samuel T. Gilchrist Ellen McGregor P. Dean Russell Sandy Goldberg Laurel Mascola Frances DiChiara Scapperata Amy Van Laar Gordon Rose Mazacone *Thomas Schrader *Bettina Bien Greaves E. Victor Milione *Hans F. Sennholz Percy L. Greaves, Jr. William Miller *Mary Homan Sennholz Perry E. Gresham Ludwig von Mises *Marion Sheehan Charles H. Hamilton *Kevin Morrissey Thomas J. Shelly James Hance *Linda Morrissey Ann Simonelli Drew Hansen *Mary Ann Murphy Elizabeth Smith F. A. Harper Florence Murray Valerie Smith *Beth A. Hoffman Marion S. Norrell Mark Spangler Jacob G. Hornberger Gary North John C. Sparks Evelyn Hough *Renate Oechsner Jane Stark Mary Housman Edmund A. Opitz James Stover Madelyn Shepard Hyde Eleanor Orsini Brian Summers *Royce Janszen *Gregory P. Pavlik Kyle S. Swan A. Ranney Johnson Samuel Pettengill Joan Kennedy Taylor Howard Johnson Paul L. Poirot *Kathleen Walsh William Johnson Harry Price *William J. Watkins, Jr. Peter Jones Angelina Raimondo v. Orval Watts Zelda Kapner Leonard E. Read John K. Williams George Koether Dorothy Reale Alvin Wingfield, Jr. Mike Krenza Roger R. Ream Charles H. Wolfe Ellis Lamborn Lauren Regan Laura Zabaronick

THEFREEMAN IDEAS ON UBERTY The Literature of Liberty by Edmund A. Opitz and Robert Batemarco

Part I is rhetoric, which engages the imagination, the emotions, and the will. The written ords were the tools ofLeonard Read's word, when seriously employed, also does W trade-spoken words, and words this and much, much more. A good book written. He was a gifted platform man, and aims at the intellect, relying mainly on starting in the mid-1930s became much in reason and logic, using rhetorical devices demand as a speaker before all kinds of only to buttress the argument, and employ­ audiences, large and small, in all parts ofthe ing examples from history and common nation. The Chamber ofCommerce was his experience to drive a point home. primary base of operation until he estab­ An ordinary speech, after thirty or forty lished the Foundation for Economic Edu­ minutes, vanishes into thin air, except for cation in 1946. Lecture engagements multi­ the fragments which linger in the memory. plied, and he continued to speak at FEE And memory is fallible, as every speaker functions until shortly before his death, four is painfully aware when reading the recon­ months before his 85th birthday. struction of his remarks by a reporter, even Despite Leonard's facility with words and by a reporter who is both trained and sym­ his knack for establishing an empathic bond pathetic. Once the speech is ended, a lis­ with audiences, he would often say that tener cannot easily refresh his memory ofa "public speaking is just about the most specific point ora marvelous illustration that useless activity I know of. " He put a speech faded in an over-extended attention span. in the same category as an advertising pitch The written word is different. A book may or the spiel of the barker outside the side­ become a permanent possession which you show-an inducement to buy a product or a can turn to again and again to better grasp ticket. Or it's a morale booster or a locker the argument used by the writer to reach his room pep talk. conclusion-which so impressed you at the Leonard's point was that a speech is little time, but which you now cannot recall! Find more than entertainment unless it persuades the right page, the matter becomes clear listeners to head for the library and hit the and the author's point clicks into the right hooks. The main tool of the spoken word slot in your memory bank. Thus did Leonard, in the course ofa very The ReverendMr. Opitz, a contributing editor of The Freeman, was a senior staffmember ofthe successful career as a public speaker, reach Foundation for Economic Education until his the conclusion that The Book is the most retirement in 1992. He was book review editor of successful tool of genuine education. He The Freeman for many years. decided to found an institution whose major In addition to editing the book review section purpose would be the publishing of books ofThe Freeman, Dr. Batemarco is a marketing research manager in New York City and teaches expounding the freedom philosophy in the economics at Marymount College in Tarrytown, contemporary American idiom. New York. Some ofthe great classics ofliberty were 393 394 THE FREEMAN • MAY 1996 available in the mid-1940s: The Wealth of of Lane's book cover ground fairly familiar Nations by Adam Smith, The Federalist to most readers, but chapter ten on the Papers, and some ofthe writings ofThomas Saracens is an eye-opener. Islam is one of Jefferson and James Madison-all in eigh­ the three great monotheistic religions; it is teenth-century prose, which differs some­ world-wide, and has made contributions to what from twentieth-century American! western art, philosophy, literature, and sci­ John Stuart Mill's On Liberty was available, ence, especially during the Middle Ages. but Herbert Spencer's Man versus the State The Holy Qu'ran offers spiritual guidance for was almost impossible to obtain in the 1930s all Muslims, and it also deals with the laws, in this country. Late in that decade Jim morals, and customary practice incumbent Gipson, the dedicated publisher in Idaho, in every Islamic society. It has much to read Albert Jay Nock's essay on Spencer teach members of other faiths as well. and persuaded Nock to re-edit Man versus The Foundation" opened for business" in the State and provide a new introduction. mid-1946; its first publication followed The book got one appreciative review in a shortly. This was a book on wage theory by nationally syndicated column, but sales the head of the economics department at were meager. And then came an order for Yale, Fred Fairchild, a founding trustee of 500 copies from the Los Angeles Chamber! FEE. Fairchild's name is well remembered Thenceforth, as Leonard relates, he took as one ofthe authors ofthe most widely used cartons ofthe book to every meeting of the economic texts ofthe 1920s and early 1930s, Chamber members and laid them under Principles of Economics, in two fat blue heavy persuasion to buy a copy ofSpencer's volumes, by Fairchild, Furness, and Buck. classic collection of essays. A series of pamphlets began to roll off In 1943 three dauntless women, friends of FEE's presses, on economic topics of im­ Leonard, wrote challenging books on their portance: tariffs, inflation, price controls, own, opposing collectivism and upholding and the like. These were staff-written, in the ideal of individual liberty. In alphabeti­ excellent prose, timely, and attractively cal order they were Rose Wilder Lane's The printed. Nothing quite like them was avail­ Discovery of Freedom; Isabel Paterson's able and the after-market orders came in by The God of the Machine; and Ayn Rand's the tens of thousands. The Fountainhead. This last, a novel, has Leonard had accumulated a small mailing attracted a large following and-together list of friends and acquaintances from his with Ms. Rand's later writings-constitutes years with the Chamber, and people who the cement binding together a significant had been impressed with one or more ofhis movement of our time. The God of the speeches and left a card. They responded to Machine was remaindered in 1946, but is his modus operandi: FEE would be a small now back in print with an excellent and group of scholars doing independent re­ comprehensive new introduction. The Dis­ search and writing which, after surviving covery of Freedom was reincarnated by peer criticism, would be issued as a pam­ Henry Grady Weaver, and self-published phlet. Each publication would be sent to as Mainspring. FEE bought the rights to those on the mailing list, and to others on this book, expanded the title to The Main­ request. Leonard had faith that if FEE's spring of Human Progress, and has sold work was worthy, it would arouse interest, about a million copies. Lane turns first to the which would lead to financial support (a neat ancient Israelites, the people of the Old bit of symbiosis), and it worked. Leonard Testament, who planted the first seeds of wrote a pamphlet with an intriguing title, freedom. Herfinal section explores our own "Students of Liberty." It was part confes­ sector ofthe planet where those early seeds sion, along the lines of: We ofthe FEE staff came to fullest expression in America's set out to be teachers, but the more deeply founding documents and the political insti­ we delved into the complex issues ofhuman tutions they projected. These two sections freedom the more we realized that we were THE LITERATURE OF LIBERTY 395 only learners-at best! We will do our best Dr. Paul Poirot assumed editorship ofThe to learn, and we invite anyone interested in Freeman with the January 1956 issue. Every this learning process to look over our shoul­ month for thirty years Paul Poirot sifted ders and share our results. At the first through a pile of manuscripts, published indication ofyour interest your name will be the essays and reviews consistent with added to our mailing list without cost or FEE's purpose, and wrote graciously to obligation. ... those whose manuscripts he rejected. Leonard abhorred fund-raising, but he did Bound volumes of The Freeman have ap­ have a low key way of informing the FEE peared annually since 1965, each carefully readership that FEE depends on voluntary indexed: a veritable encyclopedia. contributions. For example, he'd enclose a The literature produced by the Founda­ reply envelope with this typical colloquy: tion-pamphlets, books, its journal-plus "How's The Foundation doing financially, its hundreds of seminars and summer Leonard? ... We're doing as well as you schools began to affect public opinion. Here want us to do; if you want us to do better, and there a professor, ora clergyman, began tuck your check in the attached reply en­ to feel a kinship with our "freedom philos­ velope!" This seemed to work well for the ophy." More and more young people began first thirty or so years of FEE's operation; to question the collectivist consensus. The but time, and the mores, change. Intercollegiate Studies Institute (then called FEE got into the book business early. the Intercollegiate Society ofIndividualists) on. Henry Hazlitt, a founding trustee, had began its operation from an office on FEE's written Economics in One Lesson, which third floor, circulating FEE's literature to was published by Harper and has been one college students. The word continued to of the best-selling economics texts ever­ spread; new journals appeared, thinkers of well over a million copies world-wide, in our persuasion began to teach and write; twelve languages, with about a third ofthese and the intellectual climate began to change, sold by the Foundation. to the point where even some mainstream Frederic Bastiat (1801-1850) was a publishers produced an occasional book French politician and economic journalist. "ofour kind." Now FEE's book catalogue Leonard came under Bastiat's spell, espe­ stocks more than 400 titles! Under President cially his essay on The Law, which carefully Sennholz's energetic publishing program, elucidates the proper role of government FEE continues to expand its own releases. in society. The mid-nineteenth-century Brit­ A sampling, herewith, ofthe current FEE ish translation was unsatisfactory, so a FEE catalogue: staffer was asked to put The Law into Ludwig von Mises is acknowledged by modem American idiom. Dean Russell's many as the greatest economic thinker of lively prose transformed the book into a best our time; perhaps ofall time. Before coming seller, with sales ofmore than half a million to the United States in 1940, Mises had made copies. a name for himselfwith his Theory ofMoney In the early 1950s FEE published four and Credit, Socialism, and other volumes of books: F.A. Harper's Liberty: A Path to Its like stature. After arriving on these shores Recovery; W. M. Curtiss's The TariffIdea; he contacted Henry Hazlitt, who had re­ Dean Russell's The TVA Idea; and Read's viewed Socialism in the New York Times, Government: An Ideal Concept. During this and with whom he had corresponded. Haz­ same period, FEE began to anthologize litt introduced Mises to Leonard Read, who material previously published as pamphlets, later enlisted Mises as an adviser for the (and, later included selections from The Foundation. Freeman). Thus began the series of vol­ Mises' masterpiece, Human Action, was umes, of about 400 pages each, called Es­ in gestation at this point, and in 1949 it was says on Liberty, volumes I through XII, published by Yale University Press, but published from 1952 to 1965. only after FEE had agreed to buy a sufficient 396 THE FREEMAN • MAY 1996 number ofcopies to coverpublication costs. The FEE catalogue lists fourteen Mises titles in addition to Human Action. Hans Sennholz earned his doctorate un­ der Mises at New York University, as did· FEE Trustee Israel Kirzner, who is now a professor at that university. Selections from both appear in the catalogue. Adam Smith's 1776 The Wealth of Na­ tions is also listed, along with two seminal eighteenth-century works of political phi­ losophy: Edmund Burke's Reflections on the Revolution in France, and our own classic, The Federalist Papers. During the latter part of the nineteenth century there appeared two books which, taken together, represent the fountainhead of the Austrian School: Carl Menger's The Principles of Economics, and Bohm-Bawerk's three­ volume Capital and Interest (English trans­ lation by Sennholz). Nobel Prize Laureate Hayek studied with Mises in Vienna, and is represented in the catalogue with The Road to Serfdom, The Constitution of Liberty, and eight other Edmund Opitz was FEE's resident theologian and titles. Hazlitt's Economics in One Lesson Freeman book review editor until his retirement in 1992. is there, along with eight other titles and a 350-page anthology of his writings. And a collection of readings. She spent years there's the late Murray Rothbard's compre­ of research in completing Mises: An Anno­ hensive Man, Economy and State in two tated Bibliography. I myself, a long-time hefty volumes. FEE staffer, am represented in the cata­ When a revived Freeman was launched in logue with two books dealing with those New York in 1950, John Chamberlain was sectors of society where economics, politi­ one ofits three editors, and was writing most cal theory, and theology interact. of the book reviews. The Foundation took In the early days of FEE some words of overthejournalin 1955 and moved its offices Albert Schweitzer were at work in the to Irvington. Chamberlain, one of the na­ hinterland ofLeonard's mind: "Civilization tion's finest book critics, continued his bril­ can only revive when there shall come into liant Freeman reviews until his death in being in a number ofindividuals a new tone 1995. Four ofhis books are in the catalogue. of mind independent of the one prevalent George Roche left the FEE staff to be­ among the crowd and in opposition to it. ... come President of Hillsdale College. His A new public opinion must be created pri­ Legacy of Freedom was written while he vately and unobtrusively." This was· the was at FEE. It is carried by FEE along with tactic of liberty as Leonard expounded it. eight other titles. Veteran FEE staffer Bet­ Behold how it works! tina Bien Greaves has spent a lot of time Leonard Read's dream of a library of with her typewriter (now computer), and books expounding the literature of liberty in research. She spelled out basic Austrian has been fulfilled ... and more. His own economics in two folio volumes: one, a book contribution to. that library began in 1937 of theory, listing activities for classroom with his first book, The Romance ofReality. or personal instruction, and the second, Twenty-seven more books followed, books THE LITERATURE OF LIBERTY 397 of essays in the Emersonian vein, distilling cades of undeserved obscurity. A confer­ the wisdom he had gained in a lifetime of ence on Austrian Economics held in South work in the vineyard. Leonard left the body Royalton, Vermont, in June 1974 was a in 1983, but his inspiration lingers on in the major event in the formation of a new thousands ofpeople who live now at higher generation of Austrian economists. Later levels of achievement because of their en­ that year, F.A. Hayek was awarded the counters with him. -EAO Nobel Prize in economics, reviving interest within the economics profession at large. Part II Conferences and prizes are all well and good, but neither compares with books in y initial encounter with The Freeman terms of laying the groundwork for a deep M took place in the fall of 1974 when I understanding of what is meant by a free saw an issue in the magazine display case at society, how far we have strayed from that Georgetown University's Lauinger Library. ideal, and how to return to it. Certainly It was a memorable time for partisans of books were what did it for me. Let me share liberty. For us, 1974 was that darkest part with you some of the books that were of the night which comes before the dawn. instrumental in shaping my development as The year in which Richard Nixon was forced an economist and an adherent of FEE's from office for the least of his misdeeds freedom philosophy. Although my initiation marked the end of a decade in which gov­ into the literature of liberty is a mere sam­ ernment made stepping beyond its proper pling of an exhaustive body, I hope other bounds into an art form. developing expositors of freedom will find The most conspicuous encroachments of this list helpful. that era included the welfare state programs The first steps ofmy transformation from of the so-called Great Society, the sending a college graduate who had but an inchoate of half a million conscripts to fight a war feeling that something was wrong with the having no direct bearing on our national Keynesian economics he had recently security, spoiling the achievement of elim­ learned to a full-fledged Austrian were taken inating government-sanctioned constraints under the guidance of Henry Hazlitt. I read based on race (Jim Crow) by establishing his The Failure of the "New Economics" others (affirmative action), creating govern­ side-by-side and chapter-by-chapter with ment agencies like OSHA and the EPA to Keynes's The General Theory of Employ­ micromanage the affairs of private busi­ ment, Interest and Money, which Hazlitt's nesses, the explicit adoption of Keynesian­ work so brilliantly took to task. Not only did ism as a guide for management of the econ­ Hazlitt make clear to me what a powerful omy, abandonment ofthe last vestiges ofthe engine ofanalysis Austrian economics was, gold standard, and the imposition of wage he even permitted me to understand Keynes and price controls. more clearly than the English inflationist's By 1974, the effects ofthese policies were own murky prose was capable of doing. starting to manifest themselves: the emer­ Another book which not only deepened gence of an underclass typified by welfare my economic understanding, but also chan­ dependency and unprecedented rates of il­ neled it in directions far afield of anything I legitimacy, rising unemployment, high in­ had heard in a university classroom was The flation, a plummeting dollar, and long wait­ Foundations ofModern Austrian Econom­ ing lines for gasoline. The one bright note ics, edited by Edwin G. Dolan. This book in this rhapsody of ruination was that more contained the papers presented by Murray fingers were pointing at government as the Rothbard, Israel Kirzner, and Ludwig culprit than at any time since the reign of Lachmann at the aforementioned South George III. Royalton conference. I was already aware, At this same time, Austrian Economics through Hazlitt, that the Austrians had their was starting to re-emergeafter three de- own theory of business cycle. This book, 398 THE FREEMAN • MAY 1996 with its many discussions of methodology mund Opitz spelled out the relationship and the role of values in economic science, between revealed religion and economics set me to thinking about a whole new set of in Religion and Capitalism: Allies, Not issues distinguishing the Austrian approach Enemies (1970). The confusion of Christian from the standard fare served up in most charity with the welfare state has not only universities' economics departments. caused too many Christians to reject free­ The case for the free market does not market economics, but has also caused too rest on economics alone. The moral case many free-market economists to reject for capitalism is even more important, es­ Christianity. By spelling out the unbridge­ pecially in a century where interventionists able nature of the chasm between Christian and socialists of every stripe have had so charity and the welfare state, Opitz helped much success in usurping the moral high to reduce both types of rejections. He also ground. Ayn Rand's greatest appeal to me showed the inadequacy of purely material­ is that she refused to let them get away with istic conceptions ofthe production process, it. Never much drawn to novels, I made my citing Mises' claim that, "[p]roduction is a acquaintance with her powerful ideas spiritual, intellectual, and ideological phe­ through two of her books of essays: The nomenon." New Left: The Anti-IndustrialRevolution and The spiritual side of production was also Capitalism: The Unknown Ideal. Her smit­ emphasized by George Gilder in his influ­ ing of collectivism root and branch and her ential paean to the supply side, Wealth and defense of reason versus the adulation of Poverty. While somewhat flawed in its mac­ emotion, which so dominates our culture, roeconomics, this book put the future­ made an immediate and lasting impression. oriented, risk-taking behavior of the entre­ She and her other contributors, especially preneur in its rightful place as the key to Robert Hessen and Alan Greenspan, put a economic prosperity. The sheer creativity revisionist spin on such issues as antitrust of entrepreneurs precludes either modeling legislation, the gold standard, and American and describing an economy accurately with economic history. I was fortunate to have the contents of the econometrician's tool­ read her works, and doubly fortunate to box or ofrunning it from the command post have done so when I was old enough not of the central planners. With a plethora of to have been infected by her hostility to irresistible examples to flesh out the sources religion and personal charity, as were many of wealth and poverty, Gilder brings to life who first read her in their impressionable the entrepreneurs who make prosperity pos­ teen years. sible. Indeed, the more I understood about I already mentioned that even in my free market capitalism, the more I realized undergraduate days, I knew that something that it ultimately rested on the biblical in­ was wrong with the Keynesian macroeco­ junction "Thou shalt not steal. " One author nomics I was taught, even ifI could not quite who hammered this point home to me put my finger on precisely what. It was not most effectively was Frederic Bastiat. His until a few years later, when I was on the Selected Essays on Political Economy con­ other side ofthe desk as a college professor, tains such classic essays as "The Law," that I could no longer sidestep the inade­ "What Is Seen and What Is Not Seen," quacies of standard microeconomic theory. "The State," and "Property and Plunder." The book which most clearly elucidated the With ineluctable logic, he strips away the nature of the problem to me was Friedrich pretensions which delude people into be­ Hayek's Individualism and Economic Or­ lieving that pillage is "less criminal because der. It was here that I read the clearest it is carried out legally and in an orderly explanation I've seen to date of how the manner," by the state, of course. standard model ofpure competition actually While the religious basis of Bastiat's justifies the suppression of competition in moral case for capitalism was implicit, Ed- the name ofcompetition. His incisive treat- THE LITERATURE OF LIBERTY 399 ment of the nature and role of knowledge Of course, saying that there are tenden­ in economic activity permitted me to under­ cies for the government to grow is not the stand the workings of the economy in a same as saying that such growth is auto­ totally different way. His chapters on the matic. Government cannot grow without socialist calculation debate provided a clas­ many people choosing for it to grow. The sic application of his theoretical insights. recent demise of various socialist regimes Clearly, if these books are right, a great around the world indicates more and more portion of the economics profession is people choosing for it not to grow. In this wrong. And if those trained in economics country, the headlong rush to grant ever can't get it right, one might expect non­ more power to the state has been, if not economists to be totally at a loss. But not in stopped, at least slowed. Perhaps the ideas the case of Paul Johnson. That journalist's in the aforementioned books have had some monumental history of the twentieth cen­ consequences which were not unintended. tury, Modern Times, explains much of the More people, including some in positions of tragedy that has befallen those years as the power, seem to possess sound economic inevitable consequences of moral relativ­ ideas, strong convictions regarding the ism. It is one ofthe few histories I have ever sheer immorality ofthe redistributive appa­ read which embraces sound economics. ratus of the state, and the ability to foresee Finding his chapter on the depression of the inevitable results of the state extending the 1930s to lean heavily on Murray Roth­ its tentacles into myriad activities where it bard's America's Great Depression was a does not belong than was the case in that pleasant surprise. In laying bare the ties that pivotal year of 1974. All ofthe books whose link socialism and fascism, in showing how influence I have cited have helped contrib­ Third World despots ravaged their home­ ute to that outcome. lands while pinning blame on a West only And the Foundation for Economic Edu­ too eager to plead guilty, and even in reha­ cation has helped by disseminating these bilitating the tattered image of President books and others. Henry Hazlitt was a Warren G. Harding, who with seventy years founding trustee of FEE, which published of hindsight turns out to have been a sur­ the most recent edition ofhis Failure ofthe prisingly tough act to follow, Johnson is at "New Economics." The Foundations of once informative, entertaining, and icono­ Austrian Economics features contributions clastic. by Israel Kirzner and Murray Rothbard. While Johnson looks at some of the root Kirzner long served as a trustee of the causes of this century's worldwide plunge Foundation and has contributed many arti­ into statism, Robert Higgs takes a different cles to The Freeman over the years, while approach. He wields public choice theory Rothbard has also had a number of pieces with consummate skill to show the oppor­ grace the pages of FEE's monthly. The tunistic nature of the state in Crisis and translation of Bastiat's Selected Essays in Leviathan. His theme of government Political Economy that I read was published growth feeding upon crisis helps us to un­ by FEE. Edmund Opitz, author ofReligion derstand not only how government arro­ and Capitalism: Allies, Not Enemies, gates ever more power to itself, but also why served many years on the Foundation's it seldom relinquishes that power once the staff; and Robert Higgs, Crisis and Levia­ precipitating crisis is over. The historical than's author, is a contributing editor ofThe record he thus analyzes illustrates this pro­ Freeman. While neither Gilder, Hayek, cess occurring regardless of the party in Johnson, nor Rand had any official relation­ power. In so doing, it makes clear how much ship with FEE, those works oftheirs which more important are the similarities which I mentioned are currently carried in the FEE bind such presidential pairs as Hoover and book catalogue. Roosevelt and Johnson and Nixon than the May FEE's next fifty years build upon the differences which distinguish them. framework it has laid in its first fifty. -RB

A REVIEWER'S NOTEBOOK reprinted from The Freeman, November 1964

The Case for the Free Market

John Chamberlain's monthly "Notebook" by John Chamberlain graced our pages for more than three decades.

very fourth year we get involved in the are marketable only at the end of the police Efrenzied madness of a presidential club. He doesn't consider that people think election. Watching the quadrennial show, well in committee. He refuses to vote when Leonard E. Read correctly estimates that the choice is between two trimmers. He politicians are powerless of themselves to challenges the idea that the government is change things. The politico, when he is peculiarly fitted to run the post office, or to running for office, is a mere resultant of maintain schools, or to plan the coming of forces. The way to move society on its axis either a good or great society. In short, his is not to play politics. It is to persuade opinions are such that he couldn't be elected teachable people to think as you do. And the to the office of dog catcher, let alone win a best way to do this is to be a good personal state primary. living example of the philosophy you hope Nevertheless, Mr. Read, by insisting that to spread. the state should not intervene to keep people Leonard Read is not running for office, so from doing anything at all that's peaceful, he can freely say what some people would is beginning to shake up American society describe as the damnedest things.- His book, as no political figure has ever managed to Anything That's Peaceful: the Case for the do. I know this because I have witnessed Free Market wouldn't! get him through the the come-back of the freedom philosophy New Hampshire primary. He believes that over the past twenty years. Mr. Read began government should be limited to such things in the nineteen forties as a still, small voice. as keeping the peace, preventing fraud, He had a few accomplices then. There were dispensing justice, and fending off attacks a couple of emigrant economists of the by foreign powers. He says it is violent Vienna neo-liberal school taking issue with coercion to force Social Security on any­ the dominant Keynesian hosts. Three wom­ body. He thinks that Robin Hood, who en-Ayn Rand, Isabel Paterson, and Rose advocated taking money from one set of Wilder Lane-were wondering what had people to give it to another, should properly gotten into men to make them think that the be called Robin Hoodlum. He argues that way to release energy was to deliver every­ any type ofgovernment economic interven­ body to the dictates of a public planning tion forces human energy into shapes that authority. The columnists, radio commen­ Mr. Chamberlain (1903-1995) wrote the lead tators, and magazine writers who believed book review for The Freeman for more than in economic freedom could be counted on a thirty-five years. couple of hands. When the writer of this 401 402 THE FREEMAN • MAY 1996 review teamed up with Henry Hazlitt and power, but it is getting tougher to sell huge Suzanne La Follette to start The Freeman, river development schemes to the public. he was told by an old friend, his first night During the twenty years I've known him, city editor, that he had better consult a Mr. Read has not, to the extent of my psychiatrist, for surely he was sick, sick, knowledge, ever argued for or against any sick. specific Congressional bill as such. He has All of this was scarcely a generation ago. not attacked or supported specific men for Mr. Read still sounds extreme to the con­ specific public office. This is not because ventional way ofthinking when he says that he values tax exemption for his foundation, education would be improved if there were for it is part of his fundamental creed. He no tax-supported public schools. But pri­ can't have voted very often in his lifetime, vate schools throughout America have for he believes that it is justas wrong to vote started to come back in recent years with for a small-scale trimmer as it is to vote for a rush. a big one. As this country reckons things, he Mr. Read doesn't think you necessarily is the completely nonpolitical man. He even have to forbid socialistic enterprise by law argues that we might do better ifwe were to to restore freedom. Take this matter of the choose our Congressmen for non-recurring federal monopoly of mail delivery, for in­ terms by lot, for by such a method we would stance. Mr. Read is satisfied that if the law get representatives who would have no were changed to permit private corporations stake in buying voters with their own to undertake the delivery of mail, and if an money. Such obliviousness to the emotions unsubsidized Post Office were to be put on that are unleashed in most breasts in a an accounting basis comparable to that campaign year is a marvel to behold. forced on private industry, some ingenious Yet I do not doubt that Mr. Read will one free enterprisers would soon compete the day be a chief architect of a change in this government out of the mail business. For country that will have a profound effect what, so Mr. Read asks, is so difficult about on our philosophy of government. He is a delivering mail? The telephone company, in positive force, and, being such, he shapes transporting the human voice three thou­ the adaptation of other people without but­ sand miles from New York to San Fran­ tonholing them, ordemanding that they vote cisco, does something that takes much more for this or that bill or this or that man. ingenuity. And, so Mr. Read adds, the I say this with profound admiration, even American Telephone and Telegraph Com­ though I have often, in my lifetime, voted pany showed a profit of$22 billion when the for the man whom I have regarded as the Post Office was losing $10 billion. "lesser evil." I have always been hopeful That the climate has changed since Mr. that a "lesser evil" might, in office, be more ­ Read, with a handful of confederates, likely than a "greater evil" to see the light started to preach the freedom philosophy is on the Road to Damascus. Almost invari­ proved by the lip service that is now being ably I have been disappointed, yet I persist paid to libertarian generalities. A candidate in coming back for more. But contact with for vice president resigns as co-chairman Mr. Read has done much to make me serene ofthe socialistic Americans for Democratic in the face of continual disappointment in Action and makes a sudden appearance the electoral process. Even "greater evils" before a number of important businessmen can be forced, by changes in the intellectual to assure them that he isn't anti-business. climate, to slow the pace toward socialist An occupant of the White House invites a goals. And when the natural listeners and prominent publisher to Washington to as­ followers in the middle begin to listen to the sure him he is all for self-made men. The intellectuals ofthe right instead ofthe intel­ TVA may still be regarded as sacrosanct, lectuals of the left, even the greatest of even when it bums· coal to add to the "evils" will begin a new career oftrimming electricity that is made by use of water in the right direction. 0 THEFREEMAN IDEAS ON UBERTY

Bastiat, Liberty, and The Law by Sheldon Richman

"The state is that great fiction by which mist is to insufficiently appreciate him. Bas­ everyone tries to .live at the expense of tiat was a legal philosopher ofthe first rank. everyone else." What made him so is a slim volume that has -Frederic Bastiat undoubtedly turned more than a few young American "conservatives" into full-fledged rederic Bastiat (1801-1850) holds a spe­ libertarians. That book is The Law (1850). 3 Fcial place in the hearts and minds ofthe Writing as France was being seduced by friends of liberty. There is no mystery here the false promises of socialism, Bastiat was to be solved. The key to Bastiat's appeal is concerned with law in the classical sense; he the integrity and elegance of his message. directs his reason to the discovery of the His writing exhibits a purity and a reasoned principles of social organization best suited passion that are rare in the modem world. to human beings. He always wrote to be understood, to per­ He begins by recognizing that individuals suade, not to impress or to obfuscate. Bas­ must act to maintain their lives. They do so tiat, like his spiritual descendant, Henry by applying their faculties to the natural Hazlitt, is usually referred to as an economic world and transforming its components into journalist. If that is meant as derision, Bas­ useful products. "Life, faculties, produc­ tiat's admirers may take comfort in the fact tion-in other words, individuality, liberty, that the obscurants who talk to themselves property-this is man," Bastiat writes. 4 in ever more arcane academic journals are And since they are at the very core ofhuman never called economic journalists. 1 nature, they''precede all human legislation, Through the device of the fable, Bastiat and are superior to it." Too few people deftly shattered the misconceptions about understand that point. Legal positivism, the economics for his French contemporaries. notion that there is no right and wrong prior When today, in modem America, we con­ to the enactment oflegislation, sadly aftlicts tinue to be told, by intellectuals as well as by even some advocates of individual liberty politicians, that the free entry of foreign­ (the utilitarian descendants ofBentham, for made products impoverishes us or that de­ example). But, Bastiat reminds us, "Life, structive earthquakes and hurricanes create liberty, and property do not exist because prosperity by creating demand for rebuild­ men have made laws. On the contrary, it ing, we are seeing the results of a culture was the fact that life, liberty, and property ignorant of Frederic Bastiat.2 existed beforehand that caused men to make But to think of Bastiat as just an econo- laws in the first place." For Bastiat, law is a negative. He agreed Mr. Richman is the author ofSeparating School and State: How to Liberate America's Families with a friend who pointed out that it is (Fairfax, Va.: The Future ofFreedom Founda­ imprecise to say that law should create tion, 1994). justice. In truth, the law should prevent 403 404 THE FREEMAN .' MAY 1996 injustice. "Justice is achieved only when rality have been set at odds. "Whenlaw and injustice is absent." That may strike some morality contradict each other, the citizen readers as dubious. But on reflection, one has the cruel alternative ofeither losing his can see that a free and just society is what moral sense or losing his respect for the results when forcible intervention against law. " Bastiat points out that for many individuals does not occur; when they are people, what is legal is legitimate. So they left alone. are plunged into confusion. And conflict. As long as it is admitted that the law may be Defending Life, Liberty, diverted from its true purpose-that it may and Property violate property instead ofprotecting it-then everyone will want to participate in making the The purpose of law is the defense of life, law, either to protect himself against plunder liberty, and property. It is, says Bastiat, or to use it for plunder. Political questions will "the collective organization of the individ­ always be prejudicial, dominant, and all­ ual right oflawful defense." Each individual absorbing. There will be fighting at the door of has the right to defend his life, liberty, and the Legislative Palace, and the struggle within property. A group ofindividuals, therefore, will be no less furious. may be said to have "collective right" to Sound familiar?7 pool their resources to defend themselves. Bastiat finds another motive-besides the "Thus the principle of collective right-its desire for booty-behind legal plunder, or reason for existing, its lawfulness-is based socialism: "false philanthropy." Again, he on individual right. And this common force sees a contradiction. If philanthropy is not that protects this collective right cannot voluntary, it destroys liberty and justice. logically have any other purpose or any The law can give nothing that has not first other mission than that for which it acts as been taken from its owner. He applies that a substitute." If the very purpose of law is analysis to all forms of government inter­ the protection ofindividual rights, then law vention, from tariffs to so-called public ed­ may not be used-without contradiction­ ucation. to accomplish what individuals have no right Should the law be used to provide edu- to do. "Such a perversion offorce would be cation? Bastiat replies: ... contrary to our premise." The result would be unlawfullaw.5 But the law is not, in itself, a torch oflearning A society based on a proper conception of which shines its light abroad. The law extends over a society where some persons have law would be orderly and prosperous. But knowledge and others do not; where some unfortunately, some will choose plunder citizens need to learn, and others can teach. In over production if the former requires less this matter ofeducation, the law only has two effort than the latter. A grave danger arises alternatives: It can permit this transaction of when the class ofpeople who make the law teaching-and-Ieaming to operate freely and (legislation) turns to plunder.6 The result, without the use offorce , or it can force human Bastiat writes, is "lawful plunder." At first, wills in this matter by taking from some of only the small group oflawmakers practices them enough to pay the teachers who are legal plunder. But that may set in motion appointed by government to instruct others, a process in which the plundered classes, without charge. But in this second case, the rather than seeking to abolish the perversion law commits legal plunder by violating liberty and property. oflaw, instead strive to get in on it. "It is as ifit were necessary, before a reign ofjustice Bastiat's words are as fresh as ifthey were appears, for everyone to suffer a cruel written today. He explains that one can retribution-some for their evilness, and identify legal plunder by looking for laws some for their lack of understanding." that authorize that one person's property be The result of generalized legal plunder is given to someone else. Such laws should be moral chaos precisely because law and mo- abolished "without delay." But, he warns, BASTIAT, LIBERTY, AND THE LAW 405

which the commonwealth has come into being." Bastiat echoes Adam Smith's condemna­ tion of the "man of system," who sees people as mere pieces to be moved about a chessboard. To accomplish his objectives, the legislator must stamp out human differ­ ences, for they impede the plan. Forced conformity (is there any other kind?) is the order of the day. Bastiat quotes several writers in this vein, then replies:

Dh, sublime writers! Please remember some­ times that this clay, this sand, and this manure which you so arbitrarily dispose of, are men! They are your equals! They are intelligent and free human beings like yourselves! As you have, they too have received from God the faculty to observe, to plan ahead, to think, and to judge for themselves!

Mterquoting several ofthose writers who are so willing to devote themselves to re­ inventing people, Bastiat can no longer control his outrage: "Ah, you miserable creatures! You think you are so great! You Frederic Bastiat, author ofThe Law. whojudge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That would be sufficient "the person who profits from such law will enough." complain bitterly, defending his acquired Nor does Bastiat allow unrestrained de­ rights," his entitlements. Bastiat's advice is mocracy to escape his grasp. With his usual direct: "Do not listen to this sophistry by elegance, he goes right to the core of the vested interests. The acceptance of these issue. The democrat hails the people's wis­ arguments will build legal plunder into a dom. In what does that wisdom consist? The whole system. In fact, this has already ability to pick all-powerful legislators-and occurred. The present-day delusion is an that is all. "The people who, during the attempt to enrich everyone at the expense of election, were so wise, so moral, so perfect, everyone else." now have no tendencies whatever; orifthey The world view that underlies the distor­ have any, they are tendencies that lead tion of law, Bastiat writes, holds man as a downward to degradation. ... Ifpeople are passive entity, lacking a motor of his own as incapable, as immoral, and as ignorant as and awaiting the hand and plan of the wise the politicians indicate, then why is the right legislator. He quotes Rousseau: "The leg­ of these same people to vote defended with islator is the mechanic who invents the such passionate insistence?" And "if the machine. " Saint-Just: "The legislator com­ natural tendencies of mankind are so bad mands the future. It is for him to will the that it is not safe to permit people to be free, good of mankind. It is for him to make men how is it that the tendencies of these orga­ what he wills them to be." And the razor­ nizers are always good1" sharp Robespierre: "The function of gov­ Bastiat closes his volume with a clarion ernment is to direct the physical and moral call for freedom and a rejection of all pro­ powers of the nation toward the end for posals to impose unnatural social arrange- 406 THE FREEMAN • MAY 1996 ments on people. He implores all "legisla­ and Influence (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1965). We can be grateful that the tors and do-gooders [to] reject all systems, Foundation for Economic Education has seen that Bastiat's and try liberty." work remains available. 2. Among Bastiat's immortal works, see his pre-Keynes In the years since The Law was first refutation of Keynesianism, "What Is Seen and What Is Not published, little has been written in the Seen" in Selected Essays on Political Economy, trans. Sey­ mour Cain, ed., George B. deHuszar (Irvington-on-Hudson, classical liberal tradition that can approach N.Y.: Foundation for Economic Education, 1964). its purity, its power, its nearly poetic qual­ 3. Trans. Dean Russell (Irvington-on-Hudson, N.Y.: Foun­ dation for Economic Education, 1990 reprint). (All quotations ity. Alas, the world is far from having are from that edition.) FEE first published the book in 1950, 100 learned the lessons of The Law. Bastiat years after the first publication. 4. The gap between the maintenance of life and issues of would be saddened by what America has morality and rights was bridged about a century after Bastiat become. He warned us. He identified the by Ayn Rand. See "The Objectivist Ethics" in The Virtue of Selfishness (New York: New American Library, 1964), pp. principles indispensable for proper human 13-35, in which she writes, "It is the concept of 'Life' that society and made them accessible to all. makes the concept of 'Value' possible. It is only to a living entity that things can be good or evil" (p. 16). In the struggle to end the· legalized plunder 5. Hayek's distinction between law and legislation is valu­ of statism and to defend individual liberty, able in this context. See F. A. Hayek, Law, Legislation, and Liberty, vol. 1, Rules and Order (Chicago: University of how much more could be asked of one Chicago Press, 1973). See also Bruno Leoni, Freedom and the m~? D Law, expanded 3d ed. (Indianapolis, Ind.: Liberty Press, 1991), showing the connection between judge-found law and the free 1. Those who think that Bastiat's work lacks depth are market, on the one hand, and legislation and central planning, referred to James Dom, "Law and Liberty: A Comparison of on the other. Hayek and Bastiat," The Journal ofLibertarian Studies 5 (Fall 6. "Whena portion ofwealth is transferred from the person 1981):375-97 (in which Bastiat comes out the better), and who owns it-without his consent and without compensation, Murray N. Rothbard, Classical Economics: An Austrian Per­ and whether byforce orby fraud-to anyone who does not own spective on the History ofEconomic Thought, vol. 2 (Brook­ it, then I say that property is violated; that an act ofplunder is field, Vt.: Edward Elgar, 1995), pp. 444-48. Rothbard called committed" (p. 26). Note the conjunction andbetween consent Bastiat the "central figure" ofthe French laissez-faire school; and compensation, indicating that forced but compensated he hailed Bastiat's rejection ofthe classical distinction between transfers also qualify as plunder. the productive creation ofmaterial goods and the unproductive 7. Bastiat pointed to the United States as exemplary in creation of immaterial services, and his emphasis on the confining the law to its objective purpose, except for two consumer, as "great steps forward toward Austrian theory." glaring lapses: slavery and tariffs. (Ibid., p. 501.) See also Dean Russell, Frederic Bastiat: Ideas THEFREEMAN IDEAS ON LIBERTY

Classics Reconsidered

We asked several Freeman writers and book with politics, Babbitt fingers the true source of reviewers to select a significant book, or a our woes: man's infinite appetites and moral personal favorite, published or reprinted indolence. Hence his peerless explanatory power. within the last fifty years. Their choices are Many observers now lament our decadence. revealing and, in some cases, unexpected. None matches Babbitt's profundity. Who would understand modernity must read this book. 0 All are worth sharing. Dr. Attarian is afree-lance writer in Ann Arbor, Michigan. John Attarian: Democracy and Leadership Leonard P. Liggio: by Irving Babbitt The Servile State Liberty Fund, 1979 (1924) by Hilaire Belloc Liberty Fund, 1977 (1913) irst published in 1924, Irving Babbitt's De­ Fmocracy and Leadership remains one ofthis ilaire Belloc (1870-1953) was indeed an century's greatest works ofpolitical philosophy. H Edwardian Radical as described in John Combining philosophy of history, a philosophy McCarthy's biography (also published by Lib­ ofcivilization, deep reflection on human nature, erty Press). The Servile State represented Bel­ and keen insights into the psychology ofbelief, it loc's disgust with politics after serving in the diagnoses modernity with matchless prescience. House of Commons. He found politicians in For Babbitt, man's noblest characteristic is control oforganizing any new industries; cabinet "a will to refrain." Like Burke, he recognized officers determining which businessmen would that social existence requires checks on desire control new industries. If capitalism were abso­ and impulse, and that true liberty therefore rests lutely recognized, according to Belloc, govern­ on self-control. Unfortunately, since the Renais­ ment-created monopolies could not continue. sance the West has seen ever-increasing indul­ But, from inside parliament, he saw "executive gence in desires and emancipation from author­ statesmen" determining which group of busi­ ity, culminating in Rousseau's advocacy ofman's nessmen would operate that sphere of industry. natural goodness and yielding to one's desires. The system described by Belloc in 1913 Rousseau's expansive egoism gained domin­ emerged most fully as the corporatism of the ion because, Babbitt divined, man's main need is 1930s; it extended from Berlin to Washington. "to keep in good conceit with himself. " Unwill­ F. A. Hayek in The Road to Serfdom saw Belloc ing to discipline himself to standards, preferring as a prophet; and Robert Nisbet, in his introduc­ to "expand freely along the lines ofhis dominant tion to this edition, notes "just as Belloc pre­ desire," man accepted Rousseau's view "not dicted, we find the real liberties of individuals because it is true, but because it is flattering." diminished and constricted by the Leviathan we Babbitt foresaw in consequence increasing self­ have built in the name of equality." indulgence and lawlessness; the advent of polit­ Belloc's attempt to place The Servile State ical adventurers; substitution of "compassion­ in a historical causation does not succeed, any ate" feelings for self-control as the index of more than his foray into economic theory. But, virtue; and the rise of prophets of social service he saw clearly what was happening around him, ravening for power and curtailing freedom. that business leaders were the ones who wished Babbitt's analysis rings truer daily. Skirting to replace private institutions with state systems the pervasive errors of philosophical material­ of social security and unemployment insur­ ism, economic determinism, and preoccupation ance-to replace liberty and free markets with 407 408 THE FREEMAN • MAY 1996

The Servile State. Thus, he showed that the Murray Weidenbaum: socialist, the reformer, the politician, and the The Constitution of Liberty state-connected industrialist, whatever their phi­ by Friedrich A. Hayek losophies, all are channeled into legislating The The University of Chicago, 1962 Servile State. D riedrich Hayek's Constitution of Liberty Dr. Liggio is Distinguished Senior Scholar ofthe F surely merits front rank in any list of out­ Institute for Humane Studies, George Mason standing books on liberty, free market econom­ University . ics, history, and political philosophy. What is especially remarkable about the work is that it makes important contributions in each of these RaymondJ. Keating: areas. Wealth and Poverty Personally, I have always been taken by the by George Gilder broad-minded view that Professor Hayek les Press, 1993 (1981) brought to his writings. Surely, this classic work strengthens the case for the free market. Yet, as hroughout much of the twentieth century, a fine scholar, Hayek volunteers the notion that T economists seemed destined to make them­ the marketplace can adjust to a substantial selves irrelevant. Emphasis on aggregate demand amount of government intervention. management and input-output economic models Not that he advocates a large role for govern­ came to dominate the discipline, truly making ment, but he brings to bear a special wisdom in it a dismal science. Though many outstanding examining such controversial questions from a economists fought nobly against this trend, by truly scholarly viewpoint. That rare trait is es­ the 1970s the Keynesian victory of macroeco­ pecially helpful in reaching those who now hold nomics over microeconomics seemed almost different viewpoints. D complete. Itis against this backdrop that George Gilder's Dr. Weidenbaum is chairman ofthe Center for Wealth and Poverty was published. One should the Study of American Business, Washington University, St. Louis. not underestimate what Gilder accomplished in this volume. He helped smash the Keynesian demand management model of the economy and replace it with a supply-side model centered Dwight R. Lee: on individual actions. Government as the life­ "The Use of Knowledge in Society" blood ofthe economy gave way to the entrepre­ by Friedrich A. Hayek neur as the true source ofeconomic dynamism and (reprinted in Individualism and Economic growth. Order, Routledge and Kegan Paul, 1949) Gilder even put to rest the idea that economics had to be dull, plodding, and increasingly narrow f you want to learn as much as possible about in focus. In Wealth andPoverty, Gilder managed I economics fromjust one article, read Friedrich to spark the reader's imagination. Wealth and A. Hayek's "The Use ofKnowledge in Society," Poverty called for the economist to understand published in the September 1945 issue of The much more than mere mathematics and GDP American Economic Review. First, no other numbers; he must be willing to examine the entire article explains the economic problem as clearly. human condition-history, psychology, technol­ Second, none provides a better understanding ogy, business, and faith-as Adam Smith had ofthe superiority ofmarket economies. Third, it done. exposes one of the most deplorable fallacies in Much of the moribund economics discipline the standard approach to teaching economics. still fails to acknowledge the merits of Gilder's Finally, it throws a spotlight on the dangerous Wealth and Poverty-to the detriment of both ignorance of economic planning. themselves and, unfortunately, their students. In Hayek points out that sensibly allocating contrast, I have come to view Wealth and Pov­ scarce resources requires knowledge dispersed erty as a vehicle ofredemption-saving the soul among many people, with no individual or group of economics, if you will. D of experts capable of acquiring it all. Informed economic decision-making requires allowing Mr. Keating is chief economist with the Small people to act on the information of "time and Business Survival Foundation. place" that only they have, while providing a CLASSICS RECONSIDERED 409 system of communication that motivates us Hazlitt warns the Keynesians against their and informs us on how best to do it. Market forgetting that everybody's income is somebody exchange and prices generate the information else's cost, against their cavalier downplaying and motivation. Yet economics students are of excessive wage rates as a key cause of unem­ invariably taught that the market works properly ployment, against their temptation of deploying only if all participants have perfect knowledge. cheap money and deficit spending to even out the This is nonsense, as Hayek explains. Ifeveryone business cycle. But do the Keynesians and their had perfect knowledge, the case for the market friends in· high places listen, even at this late would largely disappear. The market is essential date? D precisely because it allows people to benefit from widely dispersed knowledge when no one has Dr. Peterson is DistinguishedLundy Professor of more. than the smallest fragment of that knowl­ Business Philosophy Emeritus at Campbell Uni­ edge, not even government planners. Every time versity, North Carolina. a government plan restricts market exchange, ignorance is substituted for knowledge. Read Hayek's article and you will approach James L. Payne: your future reading with a more informed per­ spective on what economics is about. D The Right and Wrong of Compulsion by the State and Other Essays Dr. Lee is Ramsey Professor ofEconomics at the by Auberon Herbert University ofGeorgia, Athens. Liberty Fund, 1978 he Right suffers from an awkward presenta­ William H. Peterson: T. tion of its vision. It declares itself for "lib­ The Failure of the "New Economics" erty," a word that for most people means "the power to do as one pleases." So a great deal of by Henry Hazlitt effort is spent repudiating this meaning and Van Nostrand, 1959; The Foundation for asserting that liberty means "not under physical Economic Education, 1995 compulsion." Couldn't a more effective case n the beginning was Say's Law-supply cre­ against government be made if we set the term I ates demand. But that was the "old econom­ "liberty" to one side and declared that avoiding ics." Now, glory be, we're blessed with the the use of force is our aim? "New Economics"-demand creates supply­ Auberon Herbert proves that it can. This late thanks to the "new" dazzling 1936 paradigm of nineteenth-century English "voluntaryist" The General Theory oJErnployment, Interest and countered the emerging socialist movement by Money by John Maynard Keynes. Lord Keynes questioning its foundations in coercion. "In the stood Say's Law on its head, and so the business long dark history of the world," he asks, "what cycle has been mercifully repealed once and for real, what permanent good has ever come from all, of course. the force which men have never hesitated to use Imagine, jobs for virtually everybody all the against each other?" He explains how the gov­ time. All central governments everywhere have ernmental approach breeds anger and conflict: to do is maintain "national income" at the level "As long as we believe in force there can be no of "full employment.', No big deal. Fine-tuners abiding peace or friendship among us all; a merely have to apply Keynes' equation (Y = C + half-disguised civil war will forever smokerin our I + G) and make sure macrodemand sustains midst." Coercive approaches typically hide adequate macrosupply through the magical "G" problems, instead of solving them: "An evil in the formula. G stands for government outlays, suppressed by force is only driven out of sight for economic-and political-paradise. So as under the surface-there to fester in safety and to Marx was a god in the nineteenth· century, take new and more dangerous forms." Keynes became a god in the twentieth. In his moving defense of the voluntary prin­ Hazlitt devastates the "New Economics." G, ciple, Herbert exhibits a remarkable patience and says Hazlitt in a backcast and forecast ofpersis­ humility-a model to those of us sometimes too tent inflation and recurrent recessions, leads but short-tempered for our own good. D to "a constant race between the money supply and the demands ofthe trade unions-but it does Dr. Payne is Bradley Fellow at the Heritage not lead to long-run full employment." Foundation in Washington, D.C. 410 THE FREEMAN. MAY 1996

Matthew Carolan: tive, to consider the implications of Meyer's Modern Times thesis. D by Paul Johnson Dr. Dennis is Senior Program Officer at Liberty HarperCollins, 1983 Fund, Inc., in Indianapolis. "BY the 1980s, state action had been respon- sible for the violent or unnatural deaths of over 100 million people, more perhaps than it Jane S. Shaw: had hitherto succeeded in destroying during the Knowledge and Decisions whole of human history up to 1900." by Thomas Sowell This one statement has remained with me Basic Books, 1980 and has influenced me more than any othe; statement I have ever read. It is from Paul hysicists tell us that a solid rock is mostly Johnson's Modern Times, a history ofthe twen­ Pempty space interspersed with occasional tieth century-a book which I received as a dense specks of matter. "In much the same Christmas gift some years ago. Ithelped me then, way," says Thomas Sowell, "specks of knowl­ as a young college student, to understand with edge are scattered through a vast emptiness of chilling clarity the world into which I was born. ignorance, and everything depends upon how With a masterful combination of fact and solid the individual specks ofknowledge are, and anecdote, Johnson chronicles the century of on how powerfully linked and coordinated they "social engineering," which turned both ideas are with one another." and persons into mere clay for the political class. Knowledge and Decisions takes us on a tour He shows us the awful hubris ofmen like Stalin, through the vast emptiness ofignorance to show and Hitler, and Mao, among others, and explains how dispersed knowledge forms the architecture their kind ofthought, which is unfortunately still ofhuman institutions. Building on F.A. Hayek's with us. Johnson offers no bright vision of the insights in "The Use of Knowledge in Society," future, but does us a service nevertheless by re­ Sowell analyzes economic, political, and legal minding us ofthe errors, and evils of the past. D decisions in terms of their use or neglect of this knowledge. The book includes page after page of Mr. Carolan is Executive Editor of National lapidary examples, from discussions ofrent con­ Review. trol, affirmative action, and intelligence tests to the reasons that people dislike "middlemen." Sowell also addresses American history over the past century. Because the United States is William C. Dennis: now a nation of employees (rather than self­ In Defense ofFreedom and employed farmers), many people do not bear the Related Essays consequences of their decisions directly. With by Frank S. Meyer feedback from their decisions weakened, they tend to demand political changes that reduce Liberty Fund, Inc., 1996 (1962) others' freedom and ultimately their own. And n 1962, Frank S. Meyer, then Senior Editor "experts," who have incentives to ignore dis­ I at National Review, published his small, but persed knowledge, "solve" problems by over­ controversial tract, In Defense of Freedom: A turning alternatives that people have found to be Conservative Credo (Henry Regnery). Here more valuable. Meyer argued that what American conservatives Sowell addresses other aspects of decision­ had to conserve was largely an Anglo-American making, such as constraints, trade-off's, and in­ tradition of liberty. The purpose of the political centives. But knowledge is paramount, partly order was to preserve individual liberty, Meyer because few understand its importance. As this maintained. Questions ofvirtue were to be left to book achieves greater recognition, that under­ the institutions ofthe great civil society. But only standing should grow. D individually free-willed acts could produce vir­ Ms. Shaw is a senior associate at PERC in tue; so freedom and virtue were necessarily allies Bozeman, Montana. not enemies. In this day of continued conservative faction­ alism, it would still profit people of good will on the right, particularly the younger conserva- CLASSICS RECONSIDERED 411

Peter J. Boettke: nist conservative intellectual and political move­ Human Action: A Treatise on Economics ment in the United States around a book that by Ludwig von Mises represented a direct challenge to Marx's works Yale University Press, 1949; Contemporary on a technical, philosophical, and polemical Books, 1966; The Foundation for Economic level. If the left had Marx, the right had-and Education, 1996 has-Mises. Third, Mises was one of the main intellectual he most important work published since inspirations behind the rebirth of classical polit­ TFEE's founding in 1946, in my opinion, is ical economy, and the unification of related dis­ Ludwig von Mises' Human Action: A Treatise ciplines through a common means of analysis­ on Economics, published in 1949. Human Action methodological individualism. This movement­ is the English rewrite (not just translation) of seen in the work ofJames Buchanan and Gordon Mises' 1940 German work Nationalokonomie: Tullock in political science, as well as James Theorie des Handelns und Wirtscha/tens. This Coleman in sociology-is still developing better is Mises' magnus opus-combining the great insights not only into the operation ofeconomies, contributions to economic science he made in but to the social world in general. Mises' Human The Theory 0/Money and Credit (1912), Social­ Action was the first systematic treatise to push ism (1922), and Epistemological Problems (1933) the economic approach beyond market exchange into an integrated treatise on economics and into all realms of human action. social theory. F.A. Hayek described Nation­ Future historians ofthe resurgence ofclassical alokonomie as having such "width of view and liberalism in the later half of the twentieth cen­ intellectual spaciousness" that it reminds one tury will have to accord Mises' great book its of the great works of the eighteenth-century rightful place as the visionary treatise around philosophers rather than those of the modern which a movement rallied and grew and boldly specialists. faced off against Communism at a time when it The publication of Human Action led to sev­ was assumed that Communism had not only eral important intellectual movements in the grabbed the higher moral ground but also the second halfofthis century-all ofwhich possess economic ground as well. Mises exposed the an important claim to our attention. First, Mises' fallacies ofCommunism and socialism, as well as book brought Austrian economics to America the contradictions of statism in general. more than any other work. The book directly Mises' great work still inspires legions of influenced the research path ofMurray Rothbard young minds, and its finer points of analysis and Israel Kirzner-the leading scholars ofmod­ provide fodder for more mature minds to wrestle ern Austrian economics-but it also brought the with and mull over again and again. It is a rare public policy wisdom of the Austrian version of work. Many great books have been written by neoclassical economics to American audiences scholars and intellectuals since 1946, but none as represented in the essays of Henry Hazlitt, approaches the breadth, depth, and boldness of Hans Sennholz, Percy Greaves, and others. Mises' Human Action. 0 Mises' great intellectual system more than any other became the inspiring vision behind the work of free-market intellectuals and scholars. Dr. Boettke teaches economics at New York Second, Mises' book rallied the anti-Commu- University. 412

The Freeman, Richard C. Baker Peter J. Boettke William L. Baker Charles Boewe c Honor Roll Jayne B. Ball Cecil E. Bohanon of Authors, Doug Bandow Ben W. Bolch Sigfredo A. Cabrera 1956-1996 Eric-Charles Banfield Clint Bolick Leland P. Cade Dean Banks Arch Booth Jane Cage (Authors of historical Richard Barbarick Michael· Bordelon William E. Cage importance whose works Mitchell Bard Christy Borth George F. Cahill have been reprinted are Melvin D. Barger Grace Bosworth John P. Cahill listed in italics.) Ben Barker Karoline Bota Stephen Cain Harry Elmer Barnes Donald J. Boudreaux Joseph L. Call Andrew E. Bamiskis Karol Boudreaux Howard Callaway Stephen G. Barone Lemuel R. Boulware John W. Campbell Patrick Barrington James Bovard Joseph M. Canfield A Bruce Bartlett Philip J. Bowers Vincent W. Cangello Sidney Abelson Jacques Barzun William B. Boyd Bryan Caplan Paul L. Adams Diane Carol Bast Shawn A. Bozarth Anthony M. Carilli Rodney Adams Joseph Bast Spruille Braden Erica Carle Michael Adamson Frederic Bastiat Marceline Bradfield Alexander S. Carney Jonathan H. Adler Dupuy Bateman, Jr. M. E. Bradford Matthew Carolan Victor Aguilar Robert Batemarco Ralph Bradford Ben H. Carpenter James C. W. Ahiakpor Charles R. Batten Berton Braley Warren Carroll Mark Ahlseen Peter T. Bauer Harllee Branch, Jr. Clarence B. Carson Bjorn Ahlstrom James R. Bauknecht Barbara Branden Alan Caruba John Ahrens Thomas F. Bayard Karl Brandt T. N. Carver Armen A. Alchian William W. Bayes Al Braun Edward Case Susan Alder Daniel A. Bazikian Thomas J. Bray Morley Cassidy Samuel R. Aldrich Robert G. Bearce Harold Brayman Steven B. Caudill Holmes Alexander Jes Beard Norman V. Breckner William Chadwick Scott Alexander M. Robert Beasley Edward Y. Breese Alejandro Chafuen Howard D. Aley Dennis Bechara Michael Brewer Bill Chaitow Ruth B. Alford Michael Becker Jean A. Briggs John Chamberlain Alfred K. Allan Dick Beeler Paul Luther Brindle Park Chamberlain Candace Allen David Beers Evelyn F. Brines William Henry Chamberlin William R. Allen E. Calvin Beisner Eric Brodin John L. Chapman Alvaro C. Alsogaray David T. Beito Wayne G. Broehl, Jr. Julian Chase Wilfred Altman Henry E. Belden Colm Brogan J. E. Chesher Jorge E. Amador Montgomery Belgion George Bronner Roy A. Childs, Jr. Bruce N. Ames Bernard Iddings Bell Warren T. Brookes Mary Chlopecki Beverly K. Anderson Albert R. Bellerue Wayne T. Brough Christine Chmura C. W. Anderson Alberto Benegas Lynch, Jr. David M. Brown John Chodes Dagmar M. Anderson Daniel Benjamin Frances West Brown Frank Chodorov Gary M. Anderson Sir Ernest Benn Harold O. J. Brown Gregory B. Christainsen Gordon T. Anderson Bruce Benson Joseph E. Brown N. C. Christensen Henry Anderson Ezra Taft Benson Montgomery B. Brown Richard Christenson Martin Anderson Herbert Berger Robert E. Brown Jim Christie Maxwell Anderson Ronald J. Berkhimer Susan Love Brown S. J. Cicero Paul Anderson David Bernstein Tim Brown Blake Clark Robert G. Anderson Arnold Berwick Wendell J. Brown George M. Clark Sarah Anderson Ralph M. Besse Leland Browne, Jr. John A. Clark Terry L. Anderson Margaret Bidinotto Allan C. Brownfeld Neil M. Clark William L. Anderson Robert James Bidinotto Yale Brozen Peter Clayton Donald H. Andrews Ivan R. Bierly Vera Brubaker Carl Clegg Paul M. Angle W. Watts Biggers Max E. Brunk Grover Cleveland. D. T. Armentano Donald B. Billings August W. Brustat Paul A. Cleveland Larry Arnhart K. L. Billingsley Barbara H. Bryan Andrew Cline E. Barry Asmus John G. Bills, Jr. William Cullen Bryant Roger M. Clites Francis H. Aspinwall Charles Bilodeau Frank W. Bubb Ronald H. Coase Jonathan Athens Herbert S. Bird James M. Buchanan Joe Cobb John Attarian Edgar Bissantz Hart Buck Richard B. Coffman Robert Awenius Kenneth A. Bisson William Alvadore Buck Lloyd Cohen Manuel F. Ayau Scott W. Bixler Henry Thomas Buckle Michael B. Cohn Ronald M. Ayers William Blackstone Brian Buckles J. Brooks Colburn James E. Blair M. Northrup Buechner Julio H. Cole Robert Blake Howard Buffett Edward P. Coleson Ernesto E. Blanco Helen Bugbee Robert A. Collinge B Gordon B. Bleil RaymQnd Buker Ray L. Colvard Robert A. Baade Walter Block Randall E. Burchett Robert A. Condry David L. Babson Roger M. Blough Duke Burgess William B. Conerly Frederic S. Bacon, Jr. Walter J. Blum Edmund Burke Gordon Conklin John A. Baden Patrick M. Boarman . Ruth Burke G. Courtney Conover Neera Badhwar David Boaz Raymond M. Burnham, II Frank H. Cooey Howard Baetjer Jr. Victor Bobb William D. Burt Oscar W. Cooley Dale G. Bails Alan W. Bock Marten Butler Roger B. Cooley Charles W. Baird R. W. Boehm Earl L. Butz Ronald F. Cooney Jean L. Baker Phil Boerner Lord Byron Richard A. Cooper 413

Helen B. Copeland Donald M. Dozer Leonard Franckowiak Donald Grunewald Clayton A. Coppin Vincent A. Drosdik, III George Frank Robert L. Guarnieri Terence Corcoran Michael Bixby Dudley John Frantz Eugene Guccione Roy E. Cordato Michael R. Duff Gaylord A. Freeman, Jr. John F. Gummere Robert Coulson Jeffry W. Duffy Roger A. Freeman James D. Gwartney Michael L. Coulter Robert G. Dunlop Ludwig W. Freier Frank M. Covey, Jr. Dianne L. Durante Douglas E. French Tyler Cowen Salvatore J. Durante George Friedman H Edward H. Crane Wyatt B. Durrette, Jr. Milton Friedman Jasper E. Crane Charles Dykes Rose D. Friedman Alfred P. Haake M. E. Cravens E. W. Dykes Jo Ann T. Frobouck David Haarmeyer Frederick C. Crawford Richard L. Fruin Jay Habegger C. Brandon Crocker Peter Frumkin George Hagedorn George N. Crocker Joseph S. Fulda Eric W. Hagen David Crockett E Richard W. Fulmer Scott W. Hahn Mallory Cross Robert H. Eagle David A. Fyfe Arthur P. Hall, II Brian Lee Crowley Richard M. Ebeling Willis H. Hall Richard H. Crum William L. Edelen Charles H. Hamilton Kevin Cullinane J. Ollie Edmunds Judy Hammersmark Christopher L. Culp James Rolph Edwards G Richard D. Hammond Edward F. Cummerford Timothy P. Ehrgott Sean Gabb Ruth E. Hampton Hannibal Cundari Arthur A. Ekirch, Jr. Wayne Gable Edward Hand Jill K. Cunningham Tom Elkins Gilbert R. Gadzikowski Learned Hand Steven R. Cunningham Jerry Ellig Gary M. Galles Julian H. Handler Vincent Curcio Nicholas Elliott E. Smythe Gambrell Steve H. Hanke Charles Curley George Ellis Martin Gardner C. Howard Hardesty, Jr. W. M. Curtiss Terrill I. Elniff Scott Gardner Harriet Harper Harold B. Elsom Al Gamer F. A. Harper A. Wayne Elsten Garet Garrett James W. Harris Jerry Emanuelson Roger W. Garrison T. Franklin Harris, Jr. D Cliff S. Emeny Leonard Gaston C. Lowell Harriss Linda Darling Richard S. Emrich Robert L. Gates John Hasnas Steven E. Daskal Sarah Erdmann Edson I. Gaylord L. Hatzilambrou John A. Davenport Timothy Eshleman John R. Gearhart Jerzy Hauptman Anna David Cyd Essock Walter Gelhorn William R. Hawkins Nicholas Davidson Robert Ethier Gary Gentile Nathaniel Hawthorne. Harold S. Davis Alexander Evanoff Kenneth L. Gentry, Jr. Friedrich A. Hayek John Jefferson Davis Edwin Barlow Evans Paul Georgia Dale M. Haywood J. Edward Day Medford Evans Frederick Giarusso Thomas W. Hazlett Ruth Dazey Ken S. Ewert Alice Stephen Gifford Henry Hazlitt Joel Dean Shari Gifford Judy Anne Headlee Macabee Dean Elizabeth Gillett Gerald Heard Fred DeArmond John Gillis K. Maureen Heaton Michael DeBow F Thomas A. Giovanetti John Heffernan C. Austin DeCamp Edward C. Facey Kurt Glaser Peter S. Heinecke Herrell DeGraff Charles I. Faddis David Glasner Ben W. Heineman Paul de Hevesy Deidre Susan Fain Stephen Gold Ron Heiner George B. de Huszar Benjamin F. Fairless Samuel Gompers Rae C. Heiple, II Fred Dekkers Michael W. Fanning Rodolfo Alejo Gonzalez' Robert Hellam Robert W. Demers John D. Fargo Charley Goodman Esler G. Heller Christopher DeMuth Catherine Farmer Mark Goodman Carl O. Helstrom, III Douglas J. Den Uyl Peter Farrell Sandra L. Goodman David R. Henderson Kimberly O. Dennis Tim W. Ferguson Gerald Gordon Hanford Henderson William C. Dennis Peter J. Ferrara Harold C. Gordon Mark Hendrickson John V. Denson Romulo A. Ferrero Paul Gottfried Carlos Henkel Herbert J. Denton, Jr. Lawrence Fertig Ira Gottlieb Charles M. Hepburn Eugenie Dickerson Elmer A. Fike Eugene L. Gotz Jeffrey Herbener William Dickneider John P. Finneran Haven Bradford Gow Arthur R. Hercz Charles Dickson C. F. Fischer, III Ed Grady Ronald S. Hertz Gottfried Dietze Antony G. A. Fisher W. H. Graham James Herz Anna Dillenberg Sam R. Fisher William Granville, Jr. Karl Hess, Jr. Thomas J. DiLorenzo John Fiske Rowland Gray-Smith Paul Heyne Daniel R. Dixon Geraldine Fitch Bettina Bien Greaves Robert Higgs Lev E. Dobriansky Harold M. Fleming Percy L. Greaves, Jr. Cherry Hill Barbara Dodsworth Antony Flew Harry W. Green Jason D. Hill James L. Doenges John T. Flynn Crawford H. Greenewalt Peter J. Hill Brian Doherty Fred E. Foldvary Edward W. Greenfield Wesley H. Hillendahl Roger Donway Ridgway K. Foley, Jr. Robert Greenslade Stephanie Hiller James A. Dom Burt Folsom Bowen H. Greenwood Joe Hochdertfer James L. Doti Roger Nils Folsom Perry E. Gresham Jean Hockman George H. Douglas Frederick C. Foote Rose Grieco Hope Hodson Jack D. Douglas Ed Fortier Mark Gring Ole-Jacob Hoff W. Earl Douglas Sam Walter Foss Patrick Groff Trygve J. B. Hoff Stephen J. Dow P. M. Fox Elgin Groseclose Beth A. Hoffman Daniel Patrick Doyle Willard M. Fox Cecil V. Grove Matthew Hoffman Dorothy Palmieri Doyle Darryl R. Francis K. E. Grubbs, Jr. R. C. Hoiles 414 THE FREEMAN • MAY 1996

Randall G. Holcombe Ellis W. Lamborn Dennis H. Mahoney Roland W. Holmes K Robin Lampson John Majewski Earl P. Holt, III Lynn Landrum Jan Michal Malek William Holtz Donald Kagan H. F. Langenberg Charles H. Malik David Honigman J. Kesner Kahn Lao-Tze Helga Malloy David Hood Geoffrey Kain Daniel Lapin Yuri N. Maltsev John Hood Shyam J. Kamath Hannah B. Lapp Allen Malz Robert E. Hood Paul D. Kamenar Elizabeth Larson Frederick A. Manchester Glenn E. Hoover Zelda Kapner Ronald Larson David J. Mandel Jacob G. Hornberger George G. Kaufman William L. Law Clarence E. Manion Carl F. Horowitz Greg Kaza David Lawrence AmyS. Mann Ronald M. Horwitz Raphael G. Kazmann Donald R. Leal William M. Manoogian Steven Horwitz J. R. Kearl Roy Lechtreck Alexei M. Marcoux John Hospers Karl Keating Walter Leckrone Kenneth L. Marcus Irving E. Howard Raymond J. Keating Brad Lee Henry Margenau John A. Howard Davis E. Keeler Cynthia D. Lee Herbert E. Markley Joseph P. Howard Frank B. Keith Dwight R. Lee Jack Markowitz Craig Howell John Kell Jeffery G. Lee Morris J. Markovitz William E. Howell Edward A. Keller George C. Leef Ramona Marotz-Baden Robert R. Hoyt David Kelley Robert LeFevre Max S. Marshall Elbert Hubbard Donald L. Kemmerer M. R. Lefkoe Leonard W. Martin Gary C. Hudson E. W. Kemmerer Thomas E. Lehman Thomas L. Martin Alex Huemer Arthur Kemp Sam Lehman-Wilzig Joseph P. Martino Michael Huemer C.D.Kemp Morris I. Leibman Lowell B. Mason David C. Huff Walter H. Kemp Kurt V. Leininger Douglas Mataconis Gregg B. Hughes Alfred Anderson Kennedy Gordon B. Leitch Milton H. Mater Nelson Hultberg Grace Lee Kenyon Peter J. Leithart Don Mathews Todd S. Hultman Livingston Keplinger Anthony Lejeune Scott C. Matthew Jeffrey Rogers Hummel WilliamS. Kern Pierre Lemieux Buddy Matthews Betty Knowles Hunt Howard E. Kershner Mark Edward Lender Jack Matthews David P. Hunt Charles F. Kettering Richard L. Lesher Marty Mattocks Richard E. Hunt John Maynard Keynes Grey Leslie George I. Mavrodes Barbara R. Hunter Carl A. Keyser Philip Lesly Richard R. Mayer W. L. Hunter Matthew B. Kibbe Michael Levin Ruth Shallcross Maynard Sam H. Husbands, Jr. James J. Kilpatrick Ted Levinson James E. McAdoo Ralph W. Husted William K. Kilpatrick Allan Levite Hughston M. McBain E. F. Hutton David C. King M. L. Levy Robert McBurney Fulton Huxtable Hugh P. King Edward A. Lewis James M. McCaffery Thomas A. Hyatt N. Stephan Kinsella Leonard P. Liggio Sarah J. McCarthy Rudyard Kipling Stephen E. Lile James E. McClure Russell Kirk Daniel Lin R. C. McCormick R. Cort Kirkwood Charles A. Lindbergh Jack McCroskey I Israel M. Kirzner John D. Lindl J. G. McDaniel T. J. Iijima John B. Kizer Sarah H. Lindsey Kenneth McDonald T. Robert Ingram Daniel B. Klein Lloyd J. Linford Stanley C. McDonald William B. Irvine Peter G. Klein Calvin D. Linton Edwin McDowell Mark D. Isaacs Thomas C. Klein Ed Lipscomb Wendy McElroy Jo Anne Klemmer Dean Lipton Rolf McEwen Zak Klemmer Shih Cheng Liu Gary McGath Malcolm A. Kline Felix Livingston Robert W. McGee J Thomas W. Knepher Robert M. Lloyd Nils McGeorge Stephen L. Jackstadt Harry C. Knickerbocker, Jr. Charles H. Logan John D. McGinnis Paul H. Jacobson Donald J. Kochan Herbert London Gary McGrath Victor Jacobson George Koether Wellington Long Daniel F. McInnis Reginald Jebb Elizabeth Kolar Eric Longley Richard B. McKenzie Thomas Jefferson Roger Koopman Steve Lopez Donald McLaughlin Kent Jeffreys S. J. Kornhauser John R. Lott, Jr. A. Neil McLeod H. P. B. Jenkins Ross C. Korves Harry M. Love Earl W. McMunn Frederick B. Jennings, Jr. Alex Kozinski Lewis Love Edward L. McNeil John Jewkes David J. Kramer Robert D. Love William J. McNicoll O. B. Johannsen Dianne Kresich Yale Jay Lubkin Robert F. McNown August E. Johansen Erik von Kuehnelt-Leddihn Walter A. Lunden Loyal Meek Arnold W. Johnson Cecil Kuhne Roger Meiners Bruce Alan Johnson Garvan F. Kuskey Francois Melese Charles W. Johnson Jo Kwong Daivid Mellinger Darryl W. Johnson, Jr. M Sheila Melvin Erik A. Johnson Jack Mabley John Merline Orien Johnson Douglas MacArthur John C. Merrill Paul Johnson L Hugh Macaulay Leonard A. Metildi Teresa R. Johnson David N. Laband James A. Maccaro Marc S. Micozzi Thomas L. Johnson John V. LaBeaume Tibor R. Machan Stephen B. Miles, Jr. Brent M. Johnstone Jack Lacy J. Gresham Machen E. Victor Milione Charles G. Jones Charles R. La Dow Russell Madden John Stuart Mill Richard Jones Stephen Lai James Madison Alexis T. Miller Alexander T. Jordan Gary Lamb Lee G. Madland Jerry Millett David Starr Jordan Lance Lamberton Francis E. Mahaffy Richard Miniter HONOR ROLL 415

Ludwig von Mises Louise Omdahl Daniel J. Popeo Tommy W. Rogers J. Wilson Mixon Edmund A. Opitz Albert Porter Benjamin A. Rogge Arthur S. Mode Jane M. Orient Bruce D. Porter E. Merrill Root Michael C. Monson Susan J. Osburn David J. Porter Tom Rose David Montague David Osterfeld Patrea Post Ernest G. Ross JohQ Montgomery Muriel Osterhaus Barry W. Poulson Kelly Ross Zach Montgomery John Otterson J. Enoch Powell Edward A. Rossit Clytia C. Montllor Lee Ownby Jim Powell Murray N. Rothbard Robert Moon Rayasam V. Prasad Ingrid Rottinghuis Arthur P. Moor Joanne H. Pratt Koil Rowland Robert C. Moore p Sartell Prentice, Jr. Paul Roy Stephen Moore Howard Preston Vermont Royster Wilma J. Moore Don Paarlberg Frank J. Primich Robert J. Rubanowice Jack Morano Benedicto Padilla Stu Pritchard Allen W. Rucker Max More Michael C. Paganelli Herbert V. Prochnow Merryle Stanley Rukeyser Ben Moreell Scott D. Palmer A. R. Pruit R. J. Rushdoony Jay Morrison Hon. William Palmer Daniel R. Pruzin Craig Russell Steven W. Mosher Melchior Palyi David L. Prychitko Jim Russell George B. Mueller Lawrence M. Parks John A. Pugsley P. Dean Russell William C. Mullendore E. C. Pasour, Jr. Mark S. Pulliam Louis Ruthenburg James W. Muller W. A. Paton Robert W. Pulsinelli Archibald Rutledge Robert R. Mulqueen James C. Patrick Evelyn Pyburn Paul Rux Sharon B. Mulwitz Jim Patrick Russell G. Ryan Toshio Murata William Penn Patrick Sven Rydenfelt Douglas J. Murphey Judd W. Patton Kenneth W. Ryker Dwight D. Murphey Robert Patton R Charles Murray Ron Paul Randall R. Rader John T. Murray Gregory P. Pavlik Ralph Raico Gerald Musgrave James L. Payne Ralph A. Raimi S Dayis Muth Scott Payne Jess Raley Dick Sabroff Archie Peace Ayn Rand Joseph T. Salerno Glenn L. Pearson Salim Rashid Barbara SaIl Gary M. Pecquet Douglas B. Rasmussen Richard M. Salsman N Mario Pei Ben Asa Rast James Saltzman Ralph Nader Jackson Pemberton Robert K. Rauth, Jr. Jonathan Sandy Ronald Nash William R. Perl Ian Ravenscroft Michael Sanera Timothy G. Nash Philip Perlmutter Leonard E. Read Andrew V. Santangini Philippe Nataf Mark J. Perry Norman S. Ream Lois H. Sargent Jean L. Natale Rick Perry Roger R. Ream Larry W. Sarner Jo Nathan Lawrence Person Doug Reardon George D. Scarseth Agustfn Navarro J. H. Peters Lawrence W. Reed Thomas E. Schaefer Phil C. Neal Lovett C. Peters Michael Reed Martin F. Schaffer Robert J. Needles Daniel Carl Peterson Gregory F. Rehmke Herbert L. Schaller Willie E. Nelms Dennis L. Peterson Ralph R. Reiland D. Eric Schansberg A. Z. Nelson Elmer T. Peterson Anthony M. Reinach Edward P. Scharfenberger John O. Nelson Mark Peterson George Reisman Robert J. Schimenz Robert H. Nelson Mary Bennett Peterson Richard C. Renstrom Reid Schlager John E. Nestler Robert A. Peterson Donald L. Repp Harold E. Schlichting, Jr. Luman N. Nevels, Jr. William H. Peterson Morgan O. Reynolds Emerson P. Schmidt Philip W. Newcomer Sylvester Petro Saralee Rhoads Marvin M.· Schmidt Robert K. Newell Joseph E. Petta Donald R. Richberg Fred Schnaubelt David H. Newhall Samuel B. Pettengill Sheldon Richman Steven J. Schneider V. M. Newton, Jr. J. Howard Pew William F. Rickenbacker John M. Schoeph Lee Nichols John-Peter A. Pham Wesley Allen Riddle David J. Scholl Ralph G. Nichols Towner Phelan Richard Stanton Rimanoczy Jack Schreiber Rosalie Nichols Thomas W. Phelps H. J. Ritscher Robert Schuettinger Hoffman Nickerson H. B. Phillips E. J. Ritter, Jr. Kurt Schuler George W. Nilsson J. Brian Phillips Jose Rivas-Micoud K. Fritz Schumacher Albert Jay Nock James R. Phillips Jennifer Roback George S. Schuyler William Noland James Picerno James S. Robbins Barry J. Schwartz Lawrence Noonan Sue Pick John W. Robbins George Schwartz Christopher North Michael Pierone L. Edward Robbins Harry Schwartz Gary North David A. Pietrusza Charles S. Roberts Jack Schwartzman Frederick Nymeyer Diane D. Pikcunas John J. Roberts Leopold Schwarzschild Vaughn C. Nystrom William E. Pike Constance Robertson Claire Scoltock Daniel J. Pilla John Robson Graham Scott Juliana Geran Pilon George Charles Roche III Richard T. Scott Roger Pilon Llewellyn H. Rockwell, Jr. L. S. Scruggs 0 W. H. Pitt Charles H. Roe Alastair Segerdal Robert Lincoln O'Brien R. Carter Pittman Reese Roeder Nancy Seijas Thomas F. O'Connell Thomas K. Plofchan, Jr. Wilhelm Roepke George A. Selgin Richard D. Obenshain Paul L. Poirot A. M. Rogers John Semmens Robert K. Oldham Raymond Polin Ann Weiss Rogers Donald J. Senese Mike Oliver Ivan Pongracic Donald I. Rogers Nassau Senior Rebekah Deal Oliver Nancy W. Poole James M. Rogers Hans F. Sennholz Robert T. Oliver Robert Poole, Jr. Michael Rogers Mary Sennholz 416 THE· FREEMAN • MAY 1996

Thurman Sensing J. D. Steelman, Jr. Jerome Tuccille Timothy J. Wheeler Robert L. Sexton C. J. Steiner, S.J. Jeffery A. Tucker Andrew Dickson White Edna Shaker Jose ftalo Stelle William Tucker Lawrence H. White Russell Shannon Brian H. Stephenson Catriona Tudor Richard A. White Jane S. Shaw Howard Stephenson Charles Turnbull Rick White Jeremy Shearmur Paul Stevens Charlotte Twight Norman Whitehouse Richard Shedenhelm Richard W. Stevens Robert C. Tyson James H. Wiborg Thomas J. Shelly Bob Stevenson Richard W. Wilcke Arthur Shenfield Robert Louis Stevenson Aaron Wildavsky Sudha R. Shenoy Thomas Stevenson V-V Joan Wilke Thomas R. Shepard, Jr. Daniel K. Stewart Carlton Williams Amy L. Sherman David M. Stewart Walter L. Upson Charles W. Williams Donald Walter Shorock Judith Anne Still Miller Upton David A. Williams Charles B. Shuman Robert M. Stocking James B. Utt Gary Williams Morris Shumiatcher Louis Stone Paul Valery John K. Williams Samuel A. Siciliano Sid Streicher Stephen R. Vallance Roger J. Williams Al Siebert Adam K. Stricker, Jr. Martin Van Buren Walter E.. Williams Bernard H. Siegan David S. Strickler T. Norman Van Cott W. Rulon Williamson Ann Signor John Strohm Jeff Van Drunen Elizabeth W. Wilson Bob Signor Robert Strother Charles Van Eaton Nicholas Silia, Jr. Richard L. Stroup Granville Wilson Hendrik Van Loon Robert C. Wilson Julian L. Simon William G. Stuart John V. Van Sickle Henry Edward Simons John Stull George Winder L. John Van Til Franz E. Winkler Randy Simmons A. M. Sullivan Laurence M. Vance Duncan A. Simpson John Sullivan Henry W. Vanderleest Alexander Winston Ambrose Pare Winston Jeffrey A. Singer Lawrence Sullivan Gustavo R. Velasco M. W. Sinnett Jacob Sullum Robert P. Vichas Gerald Wisz Robert A. Sirico, CSP Brian Summers King Vidor Dale Witham David Skidmore William Graham Sumner Edwin Vieira, Jr. Samuel Withers Aeon J. Skoble George Sutherland Patrick J. Vincent Mrs. H. L. Witmer Mark Skousen Kyle S. Swan W. G. Vollmer Peter P. Witonski G. Sumner Small Gerald J. Swanson Enders M. Voorhees Christopher Witzky Gary V. Small John E. S}Vearingen Frank Vorhies James A. Woehlke Samuel Smiles Lois Swearingen Charles Hull Wolfe Gene Smiley Virgil Swearingen Gregory Wolfe Bradford B. Smith Richard Sylla Harry P. Wolfe Donald G. Smith Susan Marie Szasz W Gary Wolfram Elwood P. Smith Thomas S. Szasz H. Keith Wade Jarret B. Wollstein Fred L. Smith, Jr. Daniel F. Walker Leo Wolman Harry Lee Smith Deborah Walker Keith Wood Marcella Smith T Francis Amasa Walker Anthony Woodlief Menlo F. Smith Frederick Walker Ralph L. Woods Philip Smith Mack Tanner Harold Blake Walker Thomas E. Woods Jr. Robert T. Smith Jeff A. Taylor Michael Walker Benjamin N. Woodson Roland B. Smith Joan Kennedy Taylor W. Allen Wallis Robert L. Woodson Stuart Smith Lola H. Taylor David Walter Karina Worlton Dan Smoot Robert Taylor Edward Walter James J. Worman David Smyth K. S. Templeton, Jr. June I. Ward Anne Wortham G. M. Snel Grove Marten ten Hoor Donald Warmbier Robert Wren Leslie Snyder Glen Tenney Terree P. Wasley David McCord Wright Joseph Sobran Ann Terrill Sheldon Wasserman Kenneth W. Sollitt Donald R. Terry Hal F. Watkins Walter B. Wriston Louis H. Solomon W. Ross Thatcher William J. Watkins, Jr. Rolf E. Wubbels John W. Sommer Edward Theberton George M. Wattles William H. Wyman Pitirim A. Sorokin Adam D. Thierer V. Orval Watts Mark B. Spangler Clifford F. Thies Donald E. Weast Bertel M. Sparks Robert Thomas Richard M. Weaver y-z John A. Sparks Donna Thompson Charles E. Weber John C. Sparks Grant Thompson James A. Weber Dirk Yandell Edgar B. Speer Ivan Thorn Daniel Webster Bruce Yandle Herbert Spencer Mark Thornton Edward J. Webster Stanley Yankus Steven N. Spetz Robert M. Thornton James Wei Steven Yates H. E. Spitsbergen John W. Tietz Murray Weidenbaum George Yossif Arthur B. Spooner Jacquelyn Till Michael D. Weiss Anthony Young W. E. Sprague Lynn Tilton E. F. Wells F. Clinton Young R. C. Sproul, Jr. Richard H. Timberlake Donald R. Wells John Wesley Young F. R. Sproule William Tolischus John T. Wenders S. David Young Alexander St.-Ivanyi Leo N. Tolstoy Douglas E. Wentz Robert Youngblood Sam Staley Bill Tomlinson Walter J. Wessels Walter R. Youngquist William J. Staley Alexis de Tocqueville Edwin G. West Earl Zarbin Maurice H. Stans Joseph C. Towle Rebecca West Michael F. Zaremski Dean Stansel Martha Treichler John V. Westberg Pujie Zheng Tom Starkweather Phil Trieb D. M. Westerholm Robert Zimmerman Lewis Steams Vollie Tripp Paul Westman M. L. Zupan Peter F. Steele D. Elton Trueblood Christopher Whalen Benjamin Zycher