Freemanthe

VOL. 19, NO. 10 • OCTOBER 1969

The Libertarian Philosophy Benjamin A. Rogge 579 Dr. Rogge explains his points of departure from conservatives, modern liberals, and the New left. The Great Depression Hans F. Sennholz 585 A survey of four distinct phases of the "great depression," with reasons and understanding that may help to avert repetition. Socialized Airwaves Jerry Emanuelson 597 How the principles of private property might help to resolve a knotty problem. Gold's Dust Gary North 599 Gold may well collect dust when properly policing a nation's monetary policies.

Read's Law Leonard E. Read 608 "No politician can fly higher in office than he flew while getting there."

The Quiet Revolution Edmund A. Opitz 611 "In quietness and in trust shall be your strength." (Isaiah 30:15)

In Doing 1l0ne's Own Thing" Henry Edward Simons 619 Radically creative, yes, but not radically destructive of traditional ways.

Problem or Opportunity? Clarence B. Carson 622 When the garbage business is monopolized by government, how do we know whether a given item is a waste or a resource?

The Anyones AI Siebert 629 A poetic plea for constructive differences among men.

Problems the Free Market Can't Solve Paul L. Poirot 630 The organized demand of something for nothing is the kind of a problem for which there is no market solution. Book Reviews: 636 "Education in America" by George Charles Roche III "The Man from Monticello: (An Intim~te Ufe of Thomas Jefferson)" by Thomas Fleming

Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding. Freemanthe

A MONTHLY JOURNAL OF IDEAS ON LIBERTY

IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230

LEONARD E. READ President, Foundation for Economic Education PAUL L. POIROT Managing Editor

THE FREE MAN is published monthly by the Foundation for Economic Education, Inc., a non­ political, nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are in­ vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work.

Copyright, 1969, The Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

Any current article will be supplied in reprint form upon sufficient de­ mand to cover printing costs. Permission is hereby granted to reprint any article from this issue, providing customary credit is given. The libertarian Philosophy

BENJAMIN A. ROGGE

I INTEND to answer a question applications of a single guiding that disappointingly few people principle. This principle is that even bother to ask. The question each man and each woman should is this: Just what is Ben Rogge's be permitted to.do his thing, singly social philosophy? Or, as some or in pairs or in groups as large have put it: "Rogge, just what as the Mormon Church or General kind of a nut are you?" Motors, so long as it's peaceful. Or I suppose one must expect to to put it another way: In Rogge's create both suspicion and confu­ world, the role of the state would sion when he demands, at one and be precisely no more and no less the same time, that the social se­ than that of the night watchman. curity system be abolished, that In the words of Thoreau, "Govern­ the laws making it a crime to use ment is an expedient by which marijuana be repealed, along with men would fain succeed in letting the laws against child labor, and one another alone." that we sell Yellowstone Park to Now to the heart of the matter. the people who operate Disney­ First, is my social philosophy land. This is indeed a mixed bag, properly described as one of the but it is my very own bag; and to competing ideologies of our day? me these apparently diverse ele­ To this the answer is no. In the ments represent simply different first place, it is so far out of fash­ ion that it can hardly be said to Dr. Rogge is Chairman of the Department of Economics at Wabash College. This article is be competing; secondly, it is from a Chapel Talk at the College on April 10, 1969. thought by many to be not of our

579 580 THE FREEMAN October day, but of the last century; and forces of history or in the' dark thirdly, I see it as not an ideology and mysterious processes of the at all but rather as the negation human mind or what-have-you. of ideology. I quote now from Webster's Look to the Means New Collegiate Dictionary: "IDE­ To the libertarian, in a certain OLOGY - the integrated asser­ sense, it is not the ends of man's tions, theories and aims constitu­ actions that count - only the ting a politico-social program." To means used in serving those ends. me, this identifies the ideologue as To each of the ideologues he says: someone, be he Christian or Mos­ "You may be right and you may lem or Marxist or Fascist or Lib­ keep on trying to convince me and eral Reformer or Monarchist, who others that you are right but the has a clear vision of what man is only means you may use are those or should be or could become and of persuasion. You may not im­ who has some kind of socio-politi­ pose your vision by force on any­ cal program for bringing about one. This means not only that you the desired state of affairs. To the are not to stone the heretic or the ideologue, the ideal social system prostitute or the hippie or the col­ is to be defined in terms of certain lege dean or the Jew or the busi­ ends or goals to be attained, such nessman or even the policeman; it as the elimination of poverty or means as well, and most impor­ the elimination of racial prejudice tantly, that you are not to get the or the maximizing of the growth policeman or the sheriff to do your rate or the establishment of the stoning for you." one true religion or the dominance In saying this, the libertarian of the master race or the imple­ is not necessarily declaring him­ mentation of the General Will or self to be agnostic in his attitude the Eternal Glory of the American toward any and all ideologies. He or the French nation. Usually, but may in fact have some clear pref­ not always, there are certain re­ erences as among ideologies. At straints placed on the means to be the same time, men who feel used, ,but the emphasis is always deeply about something are rarely upon the vision of the proper goal tolerant with respect to that some­ of man's existence here on earth, thing. I, Ben Rogge, do not use as revealed by voices from burning marijuana nor do I approve its bushes or by prophets or by the use, but I am afraid that if I sup­ magnificently objective results of port laws against its use, some science or in the massive and blind fool will insist on correcting my 1969 THE LIBERTARIAN PHILOSOPHY 581 habits. I believe that the typical style, and with· all its indeed Episcopal Church is somewhat powerful sanctions, is what makes higher on the scale of civilization the civilized life possible and than the snake-handling cults of meaningful. I am not proposing West Virginia. Frankly, I wouldn't an anarchic society; on the con­ touch even a consecrated reptile trary I am essentially a conserva­ with a ten-foot pole, or even a tive on Inost questions of social nine-iron, but as far as the Angli­ organization and social process. I can Church is concerned, I am still do believe in continuity, in the im­ an anti-antidisestablishmentarian, portant role of tradition and cus­ if you know what I mean. tom, in standards for personal conduct, in the great importance Distinctive Characteristics of the elite (imperfect though Well, so what? How does all they may be) . this set the libertarian apart But unlike the political con­ (whether for better or for worse) servative, I do not wish to see from all others? Let us first take these influences on individual be­ the traditionalist or conservative, havior institutionalized in the with whom the libertarian is often hands of the state. As I read his­ linked, largely erroneously. True, tory, I see that wherever the gen­ together they sing the chorus of erally accepted social processes damn the unions, damn the mini­ have been made into law, civiliza­ mum wage laws, and damn the tion has ceased to advance. For progressive income tax. But when one, the penalty to be paid by the the libertarian starts a chorus of innovator, which is severe even damn the tariff or damn the Sun­ without the law, and perhaps day blue.laws, he ends up singing properly so, is made so severe a solo. (even including death) as to stop Let me be careful about this. that healthy and necessary and What I am asking for is pre­ slow process of change through cisely what men like Albert Jay which civilizations move to higher Nock have asked for in the past­ levels of achievement. that the society be distinguished For another, the elite, if given from the state and that the society the power to implement their not be absorbed by the state. So­ views with the use of force, are ciety, with its full network of re­ almost certain to be corrupted by straints on individual conduct, that power and to cease playing based on custom, tradition, reli­ their essential and beneficial role gion, personal morality, a sense of in society. The pages of history 582 THE FREEMAN October are strewn with the wreckages of pIes could be multiplied indefi­ superior men who have been un­ nitely. done by the corrupting influence Now, perhaps there are real dif­ of possession of the power to ferences in circumstances that coerce. make these differences in evalua­ tion consistent. Perhaps the mod­ Modern Liberalism ern liberal is right and the liber­ Now to the modern liberal. How tarian is wrong. What I am trying does the libertarian differ from to point out is that the libertarian, the modern liberal? Well, the mod­ he he right or be he wrong, is ern liberal cuts in where the con­ opposed to intervention by the servative cuts out and cuts out state in any of the peaceful ac­ where the conservative cuts in. tions of individuals or groups, Like the libertarian, the modern whether the relationship involve liberal is all for sin, so long as sex, games, or the market place; it's peaceful. But unlike the liber­ and this sets him apart from both tarian, the modern liberal i.s per­ the modern conservative and the fectly willing to use the sheriff to modern liberal. attempt to bring about whatever outcomes he desires in economic The New Left life. Should there be a Pure Book.s, Now what of the New Left? Plays and Films Administration? Here, too, there are some family Never, says the modern liberal. resemblances, and some of my lib­ Should there be a Pure Food and ertarian friends are now involved Drug Administration? Of course, in a love affair with the New Left. says the modern liberal. If two In some ways this makes sense. consenting adults engage in an The New Left and the libertarians unnatural act in private, should share a common suspicion of con­ the law intervene? Never, says the centrated power, and particularly modern liberal. If two consenting of the power to coerce; they join adults arrive at a wage contract in not wishing to be ruled by any calling for the payment of $1.00 establishment, even of the elite; an hour to the one, should the they tend to be alike in leaning state intervene and require that toward pacificism and noninter­ the payment must be no less than vention, at least in opposing the $1.60 per hour (even if, by the U.S. involvement in Viet Nam and very act, that leads to no contract; the Russian involvement in Czech­ to no job at all) ? Of course, says oslovakia. But there the love affair the modern liberal. These exam- comes to an abrupt end. 1969 THE LIBERTARIAN PHILOSOPHY 588

To the libertarian, private prop­ to see' brought into being out of erty is an extension of the human the ashes of that which we now personality and an absolutely nec­ have. Given their rejection of essary element in the structure of capitalism. and liberal democracy, a society of free men; to most there seem to be three main possi­ New Lefters, private property is bilities: (1) an essentially anar­ largely an invention of the estab­ chic arrangement, with no govern­ lishment to suppress the free hu­ ment; (2) a syndicalist-commun­ man spirit and is a barrier to the alist-pastoral arrangement, pat­ full expression of human concern terned after the kibbutz in Israel, and relatedness. To the libertari­ with minimal government; or (3) an, or at least to Ben Rogge, the an out-and-out Marxist-socialist "politics of confrontation" of the dictatorship of the proletariat. To New Left is neither peaceful as the libertarian, the first would a means nor acceptable as an end, mean the tyranny of the strong, if the end is what it so often and life would indeed be mean, seems to be, the imposing of a nasty, brutish, and short; the. sec­ minority view on the majority by ond would mean economic chaos what amounts to blackmail. "Give and, given our dependence on the in to my demands and I'll leave goods produced by a sophisticated your office; throw me off your technology, this approach would property and you are the one who require that some eight out of is guilty of breaking the peace. every ten of us lie down and die; 'Call in the cops to protect that and the third would mean tyranny, which is yours and you are a bold and bloody and bright. Fascist pig." To the libertarian We Work with Imperfections this is no~sense, and very danger­ ous nonsense indeed. The goal of and Thus Need fo Be Free the victory of persuasion over To all of these - the conserva­ force in 'human affairs can hardly tive, the modern liberal, and the be well served by what amounts New Left - the libertarian says, to the use of force. with HuckleberryFinn,. "No thank But of course, the goal of the you, I've been there· before." He New Left is not the goal of the insists that what marks the civil­ libertarian - the right choice of ized society is not so much what means. In fact, the goals of the goals its people are seeking but New Left are difficult to identify, what means are used and accepted particularly in terms of the kind in the seeking of goals. He insists of social arrangements they wish that to the opinions and ideas and 584 THE FREEMAN October revelations of even the best of The libertarian is in no sense a men must still cling the mortal, utopian. He argues only that in the human uncertainty. If even a world in which each imperfect those who come to be least im­ individual was left free to make perfect in knowing and acting can­ his own imperfect decisions and to not be identified in advance (or act on them in any way that was even clearly identified after the peaceful, enjoying the fruits of his fact) surely it follows that each successes and suffering the agony imperfect man must be given (in­ of his mistakes, man could at least deed, has) the right to follow his fully attain to the dignity and own imperfectly selected star in tragedy and comedy that comes his own imperfect way, to march with being a man rather than a to the music that he hears and thing. And here, somewhere East not to the music that you and I of Eden, there is little more that hear. we can expect out of life. ~

IDEAS ON LIBERTY Up Through the Ranks

THERE is not of necessity any such thing as the free hired laborer being fixed to that condition for life. Many independent men everywhere in these States a few years back in their lives were hired laborers. The prudent, penniless beginner in the world labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him. This is the just and generous and prosperous system which opens the way to all, gives hope to all, and consequent energy and progress and improvement of condition to all. Nomen living are more worthy to be trusted than those who toil up from poverty; none less inclined to take or touch aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which if surrendered will surely be used to close the door of advancement against such as they and fix new disabilities and burdens upon them till all of liberty shall be lost.

ABRAHAM LINCOLN, Message to Congress, 1861 HANS F. SENNHOLZ

fBI GRIAf nIPRI~~I~N

ALTHOUGH the Great Depression order built on unhampered mar­ engulfed the world economy some kets, unbridled competition, specu­ 40 years ago, it lives on as a night­ lation, property rights, and the mare for individuals old enough to profit motive. According to them, remember and as a frightening the Great Depression proved the specter in the textbooks of our inevitability of a new order built youth. Some 13 million Americans on government intervention, polit­ were unemployed, "not wanted" in ical and bureaucratic control, hu­ the production process. One worker man rights, and government wel­ out of every four was walking the fare. Such persons, under the in­ streets in want and despair. Thou­ fluence of Keynes, blame business­ sands of banks, hundreds of thou­ men for precipitating depressions sands of businesses, and millions by their selfish refusal to spend of farmers fell into bankruptcy or enough money to maintain or im­ ceased operations entirely. Nearly prove the people's purchasing everyone suffered painful losses of power. This is why they advocate wealth and income. vast governmental expenditures Many Americans are convinced and deficit spending - resulting in that the Great Depression reflected an age of money inflation and the breakdown of an old economic credit expansion. Classical economists learned a Dr..·Sennholz heads the Department of Eco­ different lesson. In their view, the nomies at Grove City College in Pennsylvania and is a noted writer and lecturer for freedom. Great Depression consisted of four

585 586 THE FREEMAN October consecutive·depressions rolled into serve credit in 1924 constituted one. The causes of each phase dif­ what Benjamin Anderson in his fered, but the consequences.were great treatise on recent economic all the same: business stagnation history (Economics and the Pub­ and unemployment. lic Welfare, D. Van Nostrand, 1949) called "the beginning of the The. Business Cycle New Deal." The first phase was a period of The Federal Reserve credit ex­ boom and bust, like the business pansion in 1924 also was designed cycles that had plagued the Amer­ to assist the. Bank of England in ican economy in 1819-20, 1839-43, its professed desire to maintain 1857-60, 1873-78, 1893-97, and prewar exchange rates. The strong 1920-21. In. each case, government U.S. dollar and the weak British had generated a boom through pound were to be readjusted to easy money and credit, which was prewar conditions through a policy soon followed by the inevitable of inflation in the U.S. and de­ bust. flation in Great Britain. The spectacular crash of 1929 The Federal Reserve System followed five yearS of reckless launched a further burst of infla­ credit expansion by the Federal tion in 1927, the result being that Reserve System under the Cool­ total currency outside banks plus idge Administration. In 1924, demand and time deposits in the after a sharp decline in business, United States increased from the Reserve banks suddenly cre­ $44.51 billion at the end of June, atedsome $500 million in new 1924, to $55.17 billion in 1929. credit, which led to a bank credit The volume of farm and urban expansion of over $4 billion· in mortgages expanded from $16.8 less than one year. While the im­ billion in 1921 to $27.1 billion in mediate effects of this new power­ 1929. Similar increases occurred ful expansion of the nation's in industrial, financial, and state money and credit were seemingly and local government indebted­ beneficial, initiating a· new eco­ ness. This expansion of money and nomic boom and effacing the 1924 credit was accompanied by rapidly decline, the ultimate outcome was rising real estate and stock prices. most disastrous. It was the begin­ Prices for industrial securities, ning of a monetary policy that led according to Standard & Poor's to the 'stock market crash in 1929 common stock index, rose from and the following depression. In 59.4 in June of 1922 to 195.2 in fact, the expansion of Federal Re- September of 1929. Railroad stock 1969 THE GREAT DEPRESSION 587

climbed from 189~2 to 446.0, while And above all, interest rates read­ public utilities rose from 82.0 to just to reflect once more the actual 375.1. supply of and demand for genuine savings. Poor business invest­ A Series of False Signals ments are abandoned or written The vast money and credit ex­ down. Business costs, especially pansion by the Coolidge Admin­ labor costs, are reduced through istration made 1929 inevitable. In­ greater labor .productivity and flation and credit expansion always managerial efficiency, until busi­ precipitate business maladjust­ ness can .once more be profitably ments and malinvestments that conducted, capital investments must later be liquidated. The ex­ earn interest, and the market econ­ pansion artificially reduces and omy' function smoothly again. thus falsifies interest rates, and After an abortive attempt at thereby misguides businessmen in stabilization in the first half of their investment decisions. In the 1928, the Federal Reserve System belief that declining rates indi­ finally abandoned its easy money cate growing supplies of capital policy at the beginning of 1929. It savings, they embark upon new sold government securities and production projects. The creation thereby halted the bank credit ex­ of money gives rise to an economic pansion. It raised its discount rate boom. It causes prices to rise, es- to 6 _per cent in August, 1929. .pecially prices of capital goods Time-money rates rose to 8 per used for business expansion. But cent, commercial paper rates to 6 these prices constitute business per cent, and call rates to the panic costs. They soar until business is figures of 15 per cent and 20 per no longer profitable, at which time cent. The American economy was the decline begins. In order to pro­ beginning to readjust. In June, long the boom, the monetary au­ 1929, business activity began to thorities may continue to inject recede. Commodity prices began new money until finally frightened their retreat in July. by the prospects of a run-away in­ The security market reached its flation. The boom that was built high on September 19 and then, on the quicksand of inflation then under the pressure of early selling, comes to a sudden end. slowly began to decline. For five The ensuing recession is a more weeks the public nevertheless period of repair and readjustment. bought heavily on the way down. Prices and costs adjust anew to More than 100 millionshares were consumer choices and preferences. traded at the New York Stock Ex- 588 THE FREEMAN October change in September. Finally it after 1929? What prevented the dawned upon more and more price and cost adjustments and stockholders that the trend had thus led to the second phase of the changed. Beginning with Octoher Great Depression? 24, 1929, thousands stampeded to sell their holdings immediately Disintegration of the World Economy and at any price. Avalanches of The Hoover Administration op­ selling by the public swamped the posed any readjustment. Under ticker tape. Prices broke spectacu­ the influence of "the new econom­ larly. ics" of government planning, the President urged businessmen not Liquidation and Adjustment to cut prices and reduce wages, The stock market break sig­ but rather to increase capital out­ naled the beginning of a readjust­ lay, wages, and other spending in ment long overdue. It should have order to maintain purchasing been an orderly liquidation and power. He embarked upon deficit adjustment followed by a normal spending and called upon munici­ revival. After all, the financia~ palities to increase their borrow­ structure of business was very ing for more public works. strong. Fixed costs were low as Through the Farm Board which business had refunded a good Hoover had organized in the au­ many bond issues and had reduced tumn of 1929, the Federal govern­ debts to banks with the proceeds ment tried strenuously to uphold of the sale of stock. In the follow­ the prices of wheat, cotton, and ing months, most business earn­ other farm products. The GOP ings made a reasonable showing. tradition was further invoked to Unemployment in 1930 averaged curtail foreign imports. under 4 million, or 7.8 per cent of The Hawley-Smoot Tariff Act of labor force. June, 1930, raised American tariffs In modern terminology, the to unprecedented levels, which American economy of 1930 had practically closed our borders to fallen into a mild recession. In the foreign goods. According to most absence of any new causes for de­ economic historians, this was the pression, the following year should crowning folly of the whole period have brought recovery as in pre­ from 1920 to 1933 and the begin­ vious depressions. In 1921-22 the ning of the real depression. "Once American economy recovered fully we raised our tariffs," wrote Ben­ in less than a year. What, then, j amin Anderson, "an irresistible precipitated the abysmal collapse movement all over the world to 1969 THE GREAT DEPRESSION 589 - raise tariffs and to erect other American farming collapsed. In trade barriers, including quotas, fact, the rapidly growing trade began. Protectionism ran wild restrictions, including tariffs, over the world. Markets were cut quotas, foreign exchange controls, off. Trade lines were narrowed. and other devices were generating Unemployment in the export in­ a world-wide depression. dustries all over the world grew Agricultural commodity prices, with great rapidity. Farm prices which had been well above the in the United States dropped 1926 base before the crISIS, sharply through the whole of 1930, dropped to a low of 47 in the sum­ but the most rapid rate of decline mer of 1932. Such prices as $2.50 came following the passage of the a hundredweight for hogs, $3.28 tariff bill." When President Hoover for beef cattle, and 32¢ a bushel announced he would sign the bill for wheat, plunged hundreds of into law, industrial stocks broke thousands of farmers into bank­ 20 points in one day. The stock ruptcy. Farm mortgages were market correctly anticipated the foreclosed until various states depression. passed moratoria laws, thus shift­ The protectionists have never ing the bankruptcy to countless learned that curtailment of im­ creditors. ports inevitably hampers exports. Even if foreign countries do not Rural Banks in Trouble immediately retaliate for trade re­ The main creditors of American strictions injuring them, their for­ farmers were, of course, the rural eign purchases are circumscribed banks. When agriculture collapsed, by their ability to sell abroad. This the banks closed their doors. Some is why the Hawley-Smoot Tariff 2,000 banks, with deposit liabili­ Act which closed our borders to ties of over $1.5 billion, suspended foreign products also closed for­ between August, 1931, and Febru­ eign markets to our products. ary, 1932. Those banks that re­ American exports fell from $5.5 . mained open were forced to cur­ billion in 1929 to $1.7 billion in tail their operations sharply. They 1932. American agriculture cus­ liquidated customers' loans on tomarily had exported over 20 per securities, contracted real estate cent of its wheat, 55 per cent of loans, pressed for the payment of its cotton, 40 per cent of its to­ old loans, and refused to make bacco and lard, and many other new ones. Finally, they dumped products. When international trade their most marketable bond hold­ and commerce were disrupted, ings on an. already depressed 590 THE FREEMAN October market. The panic that had en­ to adopt his program to maintain gulfed American agriculture also wage rates and expand construc­ gripped the banking system and tion. He sent a telegram to all the its millions of customers. governors, urging cooperative ex­ The American banking crisis pansion of all public works pro.,. was aggravated by a series of grams. He expanded Federal pub­ events involving Europe. When lic works and granted subsidies the world economy began to disin­ to ship construction. And for the tegrate and economic nationalism benefit of the suffering farmers, a ran rampant, European debtor host of Federal agencies embarked countries were cast in precarious upon price stabilization policies payment situations. Austria and that generated ever larger crops Germany ceased to make foreign and surpluses which in turn de­ paymEnts and froze large English pressed product prices even fur­ and American credits; when Eng­ ther. Economic conditions went land finally suspended gold pay­ from bad to worse and unemploy­ ments in September, 1931, the ment in 1932 averaged 12.4 mil- crisis spread to the U.S. The fall .lion. in foreign bond values set off a In this dark hour of human collapse of the general bond want and suffering, the Federal market, which hit American banks government struck a final blow. at their weakest point - their in­ The Revenue Act of 1932 doubled vestment portfolios. the income tax, the sharpest in­ crease in the Federal tax burden Depression Compounded in American history. Exemptions 1931 was a tragic year. The were lowered, "earned income whole nation, in fact, the whole credit" was eliminated. Normal world, fell into the cataclysm of tax rates were raised from a range despair and depression. American of 11/2 to 5 per cent to a range of unemployment jumped to more 4 to 8 per cent, surtax rates from than 8 million and continued to 20 per cent to a maximum of 55 rise. The Hoover Administration, per cent. Corporation tax rates summarily rejecting the thought were boosted from 12 per cent to that it had caused the disaster, 133A: and 141/2 per.cent. Estate labored diligently to place the taxes were raised. Gift taxes were blame on American businessmen imposed with rates from 3A: to and speculators. President Hoover 33Y2 per cent. A 1¢ gasoline tax called together the nation's in­ was imposed, a 3 per cent automo­ dustrial leaders and pledged them bile tax, a telegraph and telephone 1969 THE GREAT DEPRESSION 591 tax, a 2¢ check tax, and many doubtless would have recovered in other excise taxes. And finally, short order from the Hoover in­ postal rates were increased sub­ terventions had there been no fur­ stantially. ther tampering. When state and local govern­ However, when President ments faced shrinking revenues, Franklin Delano Roosevelt as­ they, too, joined the Federal gov­ sumed the Presidency, he, too, ernment in imposing new levies. fought the economy all the way. The rate schedules of existing In his first 100 days, he swung taxes on income a,nd business were hard at the profit order. Instead of increased and new taxes imposed clearing away the prosperity bar­ on business income, property, riers erected by his predecessor, sales, tobacco, liquor, and other he built new ones of his· own. He products. struck in every known way at the Murray Rothbard, in his author­ integrity of the U.S. dollar itative work on America's Great through quantitative increases Depression (Van Nostrand, 1963), and qualitative deterioration. He estimates that the fiscal burden of seized the people's gold holdings Federal, state~ and local govern­ and subsequently devalued the ments nearly doubled during the dollar by 40 per cent. period, rising from 16 per cent of With some third of industrial net private product to 29 per cent. workers unemployed, President This blow, alone, would bring any Roosevelt embarked upon sweep­ economy to its knees, and shatters ing industrial reorganization. He the silly contention that the Great persuaded Congress to pass the Depression was a consequence of National Industrial Recovery Act economic freedom. (NIRA), which set up the Na- tional Recovery Administration The New Deal of NRA and AAA (NRA). Its purpose was to get One of the great attributes of business to regulate itself, ignor­ the private-property market sys­ ing the antitrust laws and develop­ tem is its inherent ability to' over­ ing fair codes of prices, wages, come almost any obstacle. Through hours, and working conditions. price and cost readjustment, man­ The President's Re-employment agerial efficiency and labor pro­ Agreement called for a minimum ductivity, new savings and invest­ wage of 40¢ an hour ($12 to $15 ments, the market economy tends a, week in smaller communities), to regain its equilibrium and re­ a 35-hour work week for industrial sume its service to consumers. It workers and 40 hours for white 592 THE FREEMAN October collar workers, and a ban on all which had flurried briefly before youth labor. the deadlines, sharply turned This was a naive attempt at "in­ downward. The Federal Reserve creasing purchasing power" by in­ index dropped from 100 in July to creasing payrolls. But, the im­ 72 in November of 1933. mense increase in business costs through shorter hours and higher Pump-Priming Measures wage rates worked naturally as When the economic planners saw an antirevival measure. After their plans go wrong, they simply passage of the Act, unemployment prescribed additional doses of Fed­ rose to nearly 13 million. The eral pump priming. In his J anvary South,especially, suffered severely 1934 Budget Message, Mr. Roose­ from the minimum wage provi­ velt promised expenditures of $10 sions. The Act forced 500,000 billion while revenues were at $3 Negroes out of work. billion. Yet, the economy failed to Nor did President Roosevelt revive; the business index rose to ignore the disaster that had be­ 86 in May of 1934, and then fallen American agriculture. He turned down again to 71 by Sep­ attacked the problem by passage tember. Furthermore, the spend­ of the Farm Relief and Inflation ing program caused a panic in Act, popularly known as the First the bond market which cast new Agricultural Adjustment Act. The doubts on American money and objective was to raise farm in­ banking. come by cutting the acreages Revenue legislation in 1933 planted or destroying the crops in sharply raised income tax rates the field, paying the farmers not in the higher brackets and im­ to plant anything, and organizing posed a 5 per cent withholding marketing agreements to improve tax on corporate dividends. Tax distribution. The program soon rates were raised again in 1934. covered not only cotton, but also Federal estate taxes were brought all basic cereal and meat produc­ to the highest levels in the world. tion as well as principal cash In 1935, Federal estate and in­ crops. The expenses of the pro­ come taxes were raised once more, gram were to be covered by a new although the additional revenue "processing tax" levied on an al­ yield was insignificant. The rates ready depressed industry. seemed clearly aimed at the redis­ NRA codes and AAA processing tribution of wealth. taxes came in July and August of According to Benjamin Ander­ 1933. Again, economic production son, "the impact of all these multi- 1969 THE GREAT DEPRESSION 593 tudinous measures - industrial, ing destruction of crops. Unem­ agricultural, financial, monetary ployment began to decline. In 1935 and other - upon a bewildered in­ it dropped to 9.5 million, or 18.4 dustrial and financial community per cent of the labor force, and in was extraordinarily heavy. We 1936 to only 7.6 million, or 14.5 must add the effect of continuing per cent. disquieting utterances by the President. He had castigated the A New Deal for Labor bankers in his inaugural speech. The third phase of the Great He had made a slurring compari­ Depression was thus drawing to a son of British and American bank­ close. But there was little time to ers in a speech in the summer of rejoice, for the scene was being 1934.... That private enterprise set for another collapse in 1937 could survive and rally in the and a lingering depression that midst of so great a disorder is an lasted until the day of Pearl Har­ amazing demonstration of the vi­ bor. More than 10 million Ameri­ tality of private enterprise." cans were unemployed in 1938, Then came relief from unex­ and more than 9 million in 1939. pected quarters. The "nine old The relief granted by the Su­ men" of the Supreme Court, by preme Court was merely tempo­ unanimous decision, outlawed rary. The Washington planners NRA in 1935 and AAA in 1936. could not leave the economy alone; The Court maintained that the they had to earn the support of Federal legislative power had been organized labor, which was vital unconstitutionally delegated and for re-election. states' rights violated. The Wagner Act of July 5, 1935, These two decisions removed earned the lasting gratitude of some fearful handicaps under labor. This law revolutionized which the economy was laboring. American labor relations. It took NRA, in particular, was a night­ labor disputes out of the courts of mare with continuously changing law and brought them under a rules and regulations by a host of newly created Federal agency, the government bureaus. Above all, National Labor Relations Board, voidance of the act immediately which became prosecutor, judge, reduced labor costs and raised and jury, all in one. Labor union productivity as it permitted labor sympathizers on the Board fur­ markets to adjust. The death of ther perverted the law that al­ AAA reduced the tax burden of ready afforded legal immunities agriculture and halted the shock- and privileges to labor unions. The 594 THE FREEMAN October

U. S. thereby abandoned a great tempt at packing the Supreme achievement of Western civiliza­ Court, had it been successful, tion, equality under the law. would have subordinated the Judi­ The Wagner Act, or National ciary to the Executive. In the U.S. Labor Relations Act, was passed Congress the President's power in reaction to the Supreme Court's was unchallenged. Heavy Demo­ voidence of NRA and its labor cratic majorities in' both houses, codes. It aimed at crushing all em­ perplexed and frightened by the ployer resistance to labor unions. Great Depression, blindly followed Anything an employer might do their leader. But when the Presi­ in self-defense became an "unfair dent strove to assume control over labor practice" punishable by the the Judiciary, the American na­ Board. The law not only obliged tion rallied against him, and he employers to deal and bargain lost his first political fight in the with the unions designated as the halls of Congress. employees' representative; later There was also his attempt at Board decisions also made it un­ controlling the stock market lawful to re'sist the demands of through an ever-increasing num­ labor union leaders. ber of regulations and investiga­ Following the election of 1936, tions by the Securities and Ex­ the labor unions began to make change Commission. "Insider" ample use of their new powers. trading was barred, high and in­ Through threats, boycotts, strikes, flexible margin requirements im­ seizures of plants, and outright posed and short selling restricted, violence committed in legal sanc­ mainly to prevent repetition of the tity, they forced millions of work­ 1929 stock market crash. Never­ ers into membership. Conse­ theless the market fell nearly 50 quently, labor productivity de­ per cent from August of 1937 to clined and wages were forced up­ March of 1938. The American ward. Labor strife and disturb­ economy again underwent dread­ ance ran wild. Ugly sitdown ful punishment. strikes idled hundreds of plants. In the ensuing months economic Other Taxes and Controls activity began to decline and un­ Yet other factors contributed to employment again rose above the this new and fastest slump in U.S. ten million mark. history. The Undistributed Profits But the Wagner Act was not Tax of 1936 struck a heavy blow the only source of crisis in 1937. at profits retained for use in busi­ President Roosevelt's shocking at- ness. Not content with destroying 1969 THE GREAT DEPRESSION 595 the wealth of the rich through American bank reserves to unac­ confiscatory income and estate tax­ customed levels. Reserve balances ation, the administration meant to rose from $2.9 billion in January, force the distribution of corporate 1934, to $14.4 billion in January savings as dividends subject to the of 1941. And with this growth of high income tax rates. Though the member bank reserves, interest top rate finally imposed on undis­ rates declined to fantastically low tributed profits was "only" 27 per levels. Commercial paper often cent, the new tax succeeded in yielded less than 1 per cent, bank­ diverting corporate savings from ers' acceptances from V8 per cent employment and production to to lAo per cent. Treasury bill rates dividend income. fell to 1/10 of 1 per cent andTreas­ Amidst the new stagnation and ury bonds to some 2 per cent. unemployment, the President and Call loans were pegged at 1 per Congress adopted yet another dan­ cent and prime customers' loans at gerous piece of New Deal legisla­ 11j2 per cent. The money market tion: the Wages and Hours Act or was flooded and interest rates Fair Labor Standards Act of 1938. could hardly go lower. The law raised minimum wages and reduced the work week in Deep-Rooted Causes stages to 44, 42, and 40 hours. It The American economy simply provided for time-and-a-half pay could not recover from these suc­ for all work over 40 hours per cessive onslaughts by first the Re­ week and regulated other labor publican and then the Democra­ conditions. Again, the Federal tic Administrations. Individual government thus reduced labor enterprise, the mainspring of un­ productivity and increased labor precedented income and wealth, costs - ample grounds for further didn't have a chance. depression and unemployment. The calamity of the Great De­ Throughout this period, the Fed­ pression finally gave way to the eral government, through its holocaust of World War IL When monetary arm, the Federal Re­ nlore than 10 million able-bodied serve System, endeavored to rein­ men had been drafted into the flate the economy. Monetary ex­ armed services, unemployment pansion from 1934 to 1941 reached ceased to be an economic problem. astonishing proportions. The And when the purchasing power monetary gold of Europe sought of the dollar had been cut in half refuge from the gathering clouds through vast budget deficits and of political upheaval, boosting currency inflation, American busi- 596 THE FREEMAN October ness managed to adjust to the when social and economic ideol­ oppressive costs of the Hoover­ ogies that were hostile toward our Roosevelt Deals. The radical infla­ traditional order of private prop­ tion in fact reduced the real costs erty and individual enterprise con­ of labor and thus generated new quered our colleges and universi­ employment in the postwar period. ties. The" professors of earlier Nothing would he more foolish years were as guilty as the poli­ than to single out the men who tical leaders of the 1930's. led us in those baleful years and Social and economic decline is condemn them for all the evil that facilitated by moral decay. Surely, hefell us. The ultimate roots of the the Great Depression would he in­ Great Depression were growing conceivable without the growth of in the hearts and minds of the covetousness and envy of great American people. It is true, they personal· wealth and income, the ahhored the painful symptoms of mounting desire for public assist­ the great dilemma. But the large ance and favors. It would be in­ majority favored and voted for conceivable without an ominous the very policies that made the decline of individual independence disaster inevitahle: inflation and and.self-reliance, and above all, credit expansion, protective tariffs, the burning desire to be free from labor laws that raised wages and man's bondage and to be responsi­ farm laws that raised prices, ever ble to God alone. higher taxes on the rich and dis­ Can it happen again? Inexor­ tribution of their wealth. The able economic law ascertains that seeds for the Great Depression it must happen again whenever were sown by scholars and teach­ we repeat the dreadful errors that ers during the 1920's and earlier generated the Great Depression. ~

IDEAS ON LIBERTY Mob Mind in 1928-29

AFTER the crash in 1929, a speech was made before the Chamber of Commerce of the State of New York to explain what had hap­ pened, which discussed, among other things, the phenomena of mob mind which had been so manifest in the year and a half that had preceded the crash. The speaker made the generaliza­ tion, familiar to social psychologists, that the more intense the craze, the higher the type of intellect that succumbs to it. BENJAMIN ANDERSON, Economics and the Public Welfare JERRY EMANUELSON

THE SITUATION regarding control mained useless until it was settled of the airwaves may well be the and developed by the pioneers. The closest approximation to total so­ airwaves qualify as property in cialism in the world today. The the same sense that land does. use and allocation of radio fre­ Both can be bounded, claimed, and quencies is totally regulated by controlled either by private in­ international treaties and national dividuals or by governments. With governments. Private ownership respect to land,we have applied of the airwaves is virtually non­ the private-property homestead existent. The responsibility for principle. With respect to the air­ this condition rests mainly with waves, we have resorted to so- the governments of the United cialism. . States and the other supposedly Imagine what the consequences capitalistic nations. Organized might have been if, when this communism had little to do with country was being settled, the gov­ the governmental seizure of the ernment had zoned all land and airwaves. leased it out by granting three­ The term "airwaves" actually year licenses. This would have refers to empty space, rather than been out-and-out socialism. Yet, air. Such space remains useless this is exactly the situation that until someone turns on a radio prevails with respect to the air­ transmitter - just as much of the waves in our supposedly capital­ land in the American West re- istic society. Instead of resorting to social­ Mr. Emanuelson is a licensed broadcast engi­ ism, radio frequencies could be neer and a student of electronics engineering in Colorado. considered as private property,

597 598 THE FREEMAN October with unclaimed radio frequencies Except in a few metropolitan subject to claim by anyone who areas, nearly all of the· UHF tele­ has a transmitter and wants to use vision channels are unused. Yet, the unclaimed frequency. If a just one of these UHF television hobbyist wants to transmit televi­ channels contains enough fre­ sion signals on channel 4 in an quency space for 600 AM broad­ area where that channel is un­ cast or two-way radio stations­ claimed, why shouldn't he be per­ each with a range of 30 miles or mitted to do so? The homestead­ so. Undoubtedly, much of this idle ing principle should be applied to frequency space would be put to the airwaves as well as to land. good use if the airwaves were a Unowned frequency space could commodity on the open market. be claimed in the same manner As with any other scarce and that unowned land is claimed. valuable resource, putting the air­ Radio frequencies also could be waves on the free market would bought and sold just as land is insure their most efficient and traded among willing buyers and profitable use. A "radio-home­ sellers. If a hobbyist establishes steader" hobbyist would have the sole claim to channel 4 in a given same incentive to sell or lease his geographical area, any broadcast­ frequency space to a broadcasting ing company that subsequently company as any land owner might wants to use that frequency space have to sell or lease his land to a should be free to try to buy or mining company if it contained lease it from the hobbyist. rich mineral deposits. With the current state of tech­ Strange that a country founded nology, there is plenty of fre­ on the principles of private prop­ quency space available for every­ erty and the free market should one who is willing and able to buy ignore those principles in exploit­ or build a UHF radio transmitter. ing the discovery of radio. ~

IDEAS ON LIBERTY Private Property

BARBARISM has its earmarks, and the acquisition of property through conquest or superior force is notably one of them. Civili­ zation, too, has its earmarks, and the orderly disposition of property through the medium of deeds, leases, wills, and other contractual arrangements is not only an earmark of civilization but an absolute prerequisite. EDW ARD P. SCHARFENBERGER The best way for a nation to build confidence in its curr,ency is not to bury lots of gold in the ground; it is, instead, to pursue responsible fi­ nancial policies. If a country does so consistently enough, it's likely to find its gold growing dusty from disuse. Editorial, THE WALL STREET JOURNAL (July 8, 1969)

GARY ·NORTH

WHEN I read the above sentences it should be understood, is useful for the first time, something only as a means of exchange. The clicked in my mind. That the con­ reason some particular economic clusions drawn by the editorialist good functions as money is be­ concerning the importance of gold cause it is the most highly market­ for monetary purposes are opposed able good available; it outrivals to my conclusions is neither here other items in the four properties nor there. What is important is of any monetary good: durability, that within an editorial hostile transportability, divisibility,. and to gold, the writer has hit upon scarcity. For that reason it is in one of the basic truths of the in­ demand; people are willing to part ternational gold standard. The with other scarce goods and serv­ gatheTing of dust on a govern­ ices in order to purchase money. ment's stock of monetary gold is Murray Rothbard has commented as good an indication of fiscal re­ on this unique function of money: sponsibility as 'would be the addi­ tion of gold dust to the stock. Thus, we see that while an increase In order to place things in their in the money supply, like an increase proper perspective, we must con­ in the supply of any good, lowers its sider the function of money in price, the change does not - unlike general and the size of a nation's other goods - confer a social benefit. gold stock in particular. Money, The public at large is not made richer. Whereas new consumer or capital Gary North is a member of the Economists' National Committee on Monetary Policy. goods add to standards of living, new

599 600 THE FREEMAN October money only raises prices - i.e., dilutes newly printed) money at yester­ its own purchasing power. The rea­ day's prices. Their competitors son for this puzzle is that money is who do not have immediate access only useful for its exchange-value. to the new money are forced to Other goods have "real" utilities, so restrict their purchases as supplies thatan increase in their supply satis­ fies more consumer wants. Money has of available goods go down and/or ?nly utility for prospective exchange; prices of the goods increase. Thus, Its utility lies in its exchange-value those on a fixed income cannot buy or "purchasing power." Our law ~ as much as they would have been that an increase in money does not able to buy had the new money confer a social benefit - stems from not come into existence. Some peo­ its unique use as a medium of ex­ ple benefit in the short run; others change.! suffer loss. Economic analysis as No Measure for Social Benefit such gives us no clue as to the I would prefer to modify Dr. over-all social benefit; in the ag­ Rothbard's statement somewhat. gregate, social benefits may have If economic analysis is accepted as increased, .stayed the same, or fall­ a tool for better understanding, en. But Dr. Rothbard's general then we must be careful not to point is vital: the increase of the derive ethical judgments from the total stock of money cannot be application of a supposedly neu­ said, a priori, to have increased a tral tool of analysis. This, I be­ nation's aggregate social benefit. lieve, is in line with the epistemo­ The only way such a statement could be made would be in terms logical foundations laid down by of a value-laden set of presuppo­ men like Ludwig von Mises and Lionel Robbins. What we can say, sitions which deems it socially therefore, is that an addition to beneficial to aid one group in the community (the miners, or those an existing stock of money cannot printing the money) at the ex­ be said to confer a social benefit pense of another group (those on in the aggregate. Given Professor fixed incomes). Economics as such Mises' analysis of inflation (which could never tell us this, which Dr. Rothbard generally accepts, as should encourage us to re-examine I do), we know that those who the presuppositions lying behind have first access to the new money the highly inflationary recommen­ do, indeed, gain a benefit: they dations of many of those enam­ can spend the newly mined (or ored of the "new economics." 1 Murray N. Rothbard, What Has Gov­ ernment Done to Our Money? (Pine If it is true that there is no way Tree Press, 1964), p. 13. of supporting, through the use of 1969 GOLD'S DUST 601 economic analysis, the idea that an ever for any planned increase in the increase in the money supply in money supply, for the supply to rise some way increases aggregate to offset any condition, or to follow social benefits, then certain con­ any artificial criteria. More money clusions will follow. For the sake does not supply more capital, is not more productive, does not permit of argument, let us assume that "economic growth."2 the supply of paper dollars is tied both legally and in fact, to th~ Once we have a given supply of stock of gold in the Federal gov­ money in our national gold sys­ ernment's vaults. Let us assume tem (or wampum system), we no that for each ounce of gold longer need to worry about the ef­ brought to the government, a ficiency of the monetary unit. paper receipt called a "dollar" is Men will use money as an eco­ issued to the one bringing in the nomic accounting device in the gold for deposit. At any time the most efficient manner possible, bearer of this IOU can redeem given the prevailing legal, insti­ the paper "dollar" for an ounce of tutional' and religious structure. gold. By definition, a dollar is In fact, by adding to the existing now worth an ounce of gold, and money supply in any appreciable vice versa. What will take place fashion, we bring into existence either if an addition of new gold the "boom-bust" phenomenon of is made by some producer, or if inflation and depression.3 The old the government (illegally) should cliche, "Let well enough alone," is print up a paper dollar? Rothbard quite accurate in the area of mon­ describes the results: etary policy.

An increase in the money supply, Why Gold? then, only dilutes the effectiveness of We live in an imperfect uni­ each gold ounce; on the other hand a verse. We are not perfect crea­ fall in the supply of money raises the power of each gold ounce to do its tures, possessing omniscience, om­ work. [Rothbard is speaking of the nipotence, and perfect moral na­ long-run effects in the aggregate.] tures. We therefore find ourselves We come to the startling truth that in a world in which some people it doesn:t matter what the supply of will choose actions which will money ~s. Any supply will do as well benefit them in the short run, but as any other supply. The free market which may harm others in the long will simply adjust by changing the purchasing-power, or effectiveness of 2 Ibid., p. 13. 3 Cf. Gary North, "Repressed Depr.... its gold unit. There is no need what- sion," THE FREEMAN (April, 1969). 602 THE FREEMAN October

run. The gold miner, by diluting tamper with the supply of money the purchasing power of the mone­ in order to gain their own short­ tary unit, achieves short-run bene­ run benefits. So long as that temp­ fits. Those on fixed incomes are tation exists, gold (or silver, or faced with a restricted supply of platinum) will alone serve as a goods available for purchase at protection against policies of mass the older, less inflated, price levels. inflation. This is a fact of life. The Stock of Gold Neve.rtheless, Professor Mises has defended gold as the great The collective entity known as foundation of our liberties pre­ the nation, as well as another col­ cisely because it is so difficult to lective, the State, will always have mine. It is not a perfect mechan­ a desire to increase its percentage ism, but its effects are far less of the world's economic goods. In deleterious than the power of a international terms, this means monopolistic state or licensed that there will always be an in­ banking system to create money centive for a nation to mine all by fiat. The effects of gold are far the gold that it can. While it is more predictable, because they are true that economics cannot tell us more regular; geology acts as a that an increase in the world's greater barrier to inflation than gold supply will result in an in­ can any man-made institutional crease in aggregate social utility, arrangement.4 The booms will be economic reasoning does inform smaller, the busts will be less us that the nation which gains devastating, and the redistribution access to newly mined gold at the involved in all inflation (or defla­ beginning will be able to buy at tion, for that matter) can be more yesterday's prices. World prices easily planned for. will rise in the future as a direct Nature is niggardly; that is a result, but he who gets there blessing for us in the area of mon­ "fustest with the mostest" does etary policy, assuming we limit gain an advantage. Thus, so long as there is a demand for South ourselves to a monetary system African gold, we can expect to see tied to specie metals. We would South Africa selling her gold if not need gold if, and only if, we the value of the goods she can could be guaranteed that the purchase is greater than the value government or banks would not of the gold. to her. What applies 4 Ludwig von Mises, The Theory of Money and Credit (Yale University to an individual citizen miner ap­ Press, 1951), pp. 209-11, 238-40. plies equally to national entities. 1969 GOLD'S DUST 603

So much for technicalities. What cluding shipping costs and, of about the so-called "gold stock"? course, the newly mined gold In a free market society which which keeps upsetting our analy­ permits all of its citizens to own sis), so the particular paper de­ gold and gold coins, there will be nominations are not too impor­ a whole host of gold stocks. (By tant. Result: the German firm gets "stock," I mean gold hoard, not a its marks, the American embassy share in some company.) Men gets its cars, and the middleman will own stocks, institutions like has a stock of paper American banks will have stocks, and all dollars. These bills are available levels of civil government. - city, for the purchase of ,American county, national- will possess goods or American gold directly by gold stocks. All of these institu­ the middleman, but he, being a tions, including the family mem­ specialist working in the area of ber, could issue paper IOU slips currency exchange, is more likely for gold, although the slips put out to make those dollars available by known institutions would no (at a fee) for others who want doubt circulate with greater eas.e them. They, in turn, can buy (if what is known about them is American goods, services, or gold. favorable) . I suppose that the "na­ This should be clear enough. tional stock of gold" in such a Paper Promises Easily Broken situation would refer to the com­ bined individual stocks. Money, it will be recalled, is Within this hypothetical world, useful only for exchange, and this let us assume that the national is especially true of paper money government wishes to purchase a (gold, at least, can be made into fleet of German automobiles for wedding rings, earrings, nose its embassy in Germany. The rings, and so forth). If there is American people are therefore no reason to mistrust the Ameri­ taxed to make the funds available. can government, the paper bills Our government now pays the will probably be used by profes­ German central bank (or similar sional importers and exporters to middleman) paper dollars in order facilitate the exchange of goods. to purchase German marks. Since, The paper will circulate, and no in our hypothetical world, all na­ one bothers with the gold. It just tional currencies are 100 per cent sits around in the vaults, gather­ gold-backed, this will be an easy ing dust. So long as the govern­ arrangement. Gold would be ments of the world refuse to print equally valuable everywhere (ex- more paper bills than they have 604 THE FREEMAN October gold to redeem them, their gold gold reserve in its national treas­ stays put. It would be wrong to ury. If it produces, say, bananas, say that gold has no economic and it limits its purchases of for­ function, however. It does, and the eign goods by what it receives in fact that we must forfeit storage foreign exchange for exported space and payment for security bananas, it needs to transfer no systems testifies to that valuable gold. It has purchasing power (ex­ function. It keeps governments ported bananas) apart from any from tampering with their domes­ gold reserves. If, for some reason, tic monetary systems. An ingot it wants to increase its national of prevention is worth a pound of stock of gold (perhaps the gov­ cure (apologies to Harold Wilson). ernment plans to fight a war, and Obviously, we do not live in the it wants a reserve of gold to buy hypothetical world which I have goods in the future, since gold sketched. What we see today is a stores more conveniently than short-circuited international gold bananas), the government can. get standard. National governments the gold, or it could before March, have monopolized the control of 1968. All it needs to do is take the gold for exchange purposes; they foreign money gained through the can now print more IOU slips sale of bananas and use it to buy than they have gold. Domestic gold instead of other economic populations cannot redeem their goods. This will involve taxation, slips, and since March of 1968, of course, but that is what all very few international agencies wars involve. If you spend less have access to governmental gold than you receive, you are saving stocks (or so we are told). The the residual; a government can governments create more and more save gold. That's really what a gold slips, the banks create more and reserve is - a savings account. more credit, and we are deluged This is a highly simplified ex­ in money of decreasing purchas­ ample. It· is used to convey a basic ing power. The rules of the game economic fact: if you produce a have been shifted to favor the ex­ good (other than gold),··and you pansion of centralized power.. The use it to export in order to gain laws of economics, however, are foreign currency, then you do not still in effect. need a gold reserve. You have merely chosen to hoard foreign Trading Without Gold currency instead of gold. That ap­ One can easily imagine a situa­ plies ·to citizens and governments tion in which a nation haS' a tiny equally well. 1969 GOLD'S DUST 605

What, then, is the role of gold insufficient to offset its imports of in international trade? Dr. Pat­ goods and services and exports of rick Boarman clearly explained capital. Equilibrium in the balance of the mechanism of international payments is attained not by in­ exchange·in ·The WaU Street Jour­ creasing the quantity of a mythical "world money" but by establishing nal of May 10, 1965: conditions in which autonomous The function of international re­ movements of capital will offset the net results, positive -and negative, of serves is NOT to consummate inter­ the balance of trade. national transactions. These are, on the contrary, financed by ordinary commercial credit supplied either by Some trade imbalances are tem­ exporters or importers, or in some porarily inevitable. Natural or so­ cases by international institutions. cial disasters take place, and these Of such·commercial credit there is in may reduce a nation's productivity individual countries normally no for a period of time. The nation's shortage, or internal credit policy can "savings" - its gold stock - can be adjusted to make up for any un­ then be used to purchase goods toward tightness of funds. In con­ and services from abroad. Specif­ trast, .international reserves are re­ quired to finance only the inevitable ically, it will purchase with gold net differences between the value of all those goods and services needed a country's total imports and its total above those available in trade for exports; their purpose is not to fi­ current exports. If a nation plans nance trade itself, but net trade im­ to fight a long war, or if it expects balances. domestic rioting, then, of course, it should have a larger gold stock The international gold sta-ndard, than a nation which expects like the free market's rate of in­ peaceful conditions. If a nation terest, is an equilibrating device. plans to print up millions and even What it is supposed to equilibrate billions of IOU slips in order to is not gross world trade but net purchase foreign goods, it had trade imbalances. Boarman'swords better have a large gold stock to throw considerable light on the redeem the slips. But that is perpetual discussion concerning merely another kind of trade im­ the increase of "world monetary balance, and is covered by Boar­ liquidity" : man's exposition.

A country will experience a net The Guards movement of its reserves, in or out, only where its exports of goods· and A nation w4ich relies on its services and imports of capital are free market mechanism to balance 606 THE FREEMAN October supply .and demand, imports and emergencies the gold is used, like exports, production and consump­ the guard. Theoretically, the free tion, will not need a large gold market economy could do without stock to encourage trade. Gold's a large national gold reserve, in function is to act as a restraint on the same sense that a perfectly de­ governments' spending more than signed vault could do without most they take in. If a government of the guards. The nation that takes in revenues from the citi­ requires huge gold reserves is like zenry, and exports the paper bills a vault that needs extra guards; or fully backed credit to pay for something is probably breaking some foreign good, then there down somewhere. should be no necessity to deplete its semi-permanent gold reserves. Conclusion They will sit idle - idle in the I have come, as a recent popu­ sense of physical movement, but lar song puts it, "the long way not idle in the sense of being eco­ around." What I have been trying nomically irrelevant. to explain is that a full gold coin The fact that the gold does not standard, within the framework move is no more (and no less) of a free market economy, would significant than the fact that the permit the large mass of citizens guards who are protecting the to possess gold. This might mean gold can sit quietly on the job if that the "national reserves of the storage system is really effi­ gold" - that is, the State's gold cient. Gold guards us from that hoard - might not have to be very old messianic dream of getting large. If we were to re-establish something for nothing; that is full domestic convertibility of also the function of the guards paper money for gold coins (as it who protect the gold. The guard was before 1934), while removing who is not very important in a the "legal tender" provision of "thief-proof" building is also a the Federal Reserve Notes, the kind of "equilibrating device": economy would still function. It he is there in case the over-all would probably function far better system should experience a tem­ in the long run. porary failure. That, of course, is not the world A nation which permits the we live in. Since it is not a free market to function freely is, by society in the sense that I have analogy, also "thief-proof": every­ pictured, we must make certain one consuming is required to offer compromises with our theoretical something in exchange. During model. The statement in The Wall 1969 GOLD'S DUST 607

Street Journal's editorial would be Tranquility, provide for the com­ completely true only in an economy mon defense [with few, if any, using a full gold coin standard: entangling alliances], promote the "The best way for a nation· to general Welfare, and secure· the build confidence- in its currency is Blessings of Liberty to ourselves not to bury lots of gold in the and our Posterity." To the extent ground." Quite true; gold would that a nation dep~rts from those be used for purposes of exchange, goals, it will need a large gold although one· might save for a hoard, for it costs a great deal to "rainy day" by burying gold. But finance injustice, domestic vio­ if gpvernments refused to inflate lence, and general illfare. With their currencies, few people would the latter policies in effect, we find need to bury their gold, and that the gold simply pours out of neither would the government. If the Treasury, as "net trade im­ a government wants to build con­ balances" between the State and fidence, indeed it should "pursue everyone else begin to mount. A responsible financial policies," that moving ingot gathers no dust. is, it should not spend more than it takes in. The conclusion is ac­ Which leads us to "North's curate: "If a country does so con­ Corollary to the Gold Standard" sistently enough, it's likely to find (tentative): "The fiscal responsi­ its gold growing dusty from bility of a nation's economic poli­ disuse." cies can be measured directly in In order to remove- the necessity terms of the thickness of the layer of a large gold hoard, all we need of dust on its gold reserves: the to do is follow policies that will thicker the layer, the more respon­ "establish Justice, insure domestic sible the policies." ,

IDEAS ON LIBERTY Nobody's Business

THE ESSENTIAL difference between the pre-war and the post-war gold standard was that the former had to work, because, if it did not do so, the banker went bankrupt. After the outbreak of war in 1914 the Government - not the banker - was responsible, and what is the Government's business is often nobody's business.

GEORGE WINDER, A Short History of Money Read's Law

LEONARD E. READ

IT IS becoming more and more employee tends to rise to his level fashionable for probers into polit­ of incompetence." ical economy to concoct a "law" Brozen's Law reads: "Most ob­ and tack their name onto it. viously true economic policy prop­ Doubtless, this fad stems from ositions are false."1 such famous instances as Gresh­ Rogge's Rule' tickles my fancy: am's Law.~ "Bad money drives "Whenever the government passes out good money." Or, Say's Law a law for your protection, take to of Markets: "Production geneT'ates the hills - because you are about its own purchasing power." to be had !"2 This tendency among our con­ The subject here, however, is temporaries is a humorous way of Read's Law: "No politician can presenting a serious idea, believed fly higher in office than he flew by each to be sound and original. while getting there." Nor can I fault anyone for trying This "law" has no meaning, of to have a bit of fun with what course, until we identify the point otherwise might be dismal and of reference for "higher." And foreboding. the height to which I aspire is Perhaps the best known of the freedom; that is, no restraint new ones is Parkinson's Law: "Ex­ 1 Yale Brozen, Professor of Business penses rise to meet income." Economics, Graduate School of Business, A book entitled The Peter Prin­ University of Chicago. See THE FREEMAN, June, 1968, p. 328. ciple currently heads the best­ 2 Benjamin A. Rogge, Professor of Po­ seller list: "In·a· hierarchy every litical Economy, Wabash College. 1969 READ'S LAW 609

against any creative action. In single disparaging or offensive other words, freedom is my idea reference to so-and-so. No per­ of high; socialism, statism - call sonal attack - just an incontro­ it what you will - is my idea of vertible fact revealed! low. Bear in mind that my claim has Without resort to the above to do only with an inability to fly point of reference, my "law" higher, not lower. An officeholder's would have to be stated something "ceiling" is set by his campaign like this: "N0 politician, after speeches; he can descend to any getting into office, can remove any level. I recall the campaign pre­ more restraints against freedom tensions of an aspirant to our than he promised to remove. in his highest office. He flew higher than campaign speeches." anyone since Grover Cleveland. Let me relate how handy this But once in office, he fell into a "law" is. Over the years, I have sideslip and never pulled out of it. known numerous aspirants for Let me explain how I discovered high office who, in private, endorse Read's Law. The campaign man­ the freedom philosophy all the way ager of a candidate was my close - no exceptions! I am led to be­ personal friend. Because his man's lieve, "There's my boy!" Later, as speeches were socialistic, I was I hear or read his campaign critical. "Why, he believes the speeches, I find nary a word about same as you and I do," came the the. socialism he intends to repeal reply. "He has to say what he's -if elected. Indeed, only his polit­ saying to get elected. Once in of­ ical label seems to distinguish him fice, he will practice what we be­ from his socialist opponent. If lieve." The contention was that such a candidate is sufficiently art­ his candidate would fly higher in fulat vacillation, he's elected. office than he flew while getting Then, friends of mine hopefully there. But no one was able to ask: "What achievements for free­ prove that untenable thesis; when dom are you looking forward to the last vote was in, the candidate from so-and-so?" I respond by re­ had lost. peating Read's Law: "No politi­ cian can fly higher in office than The Truth Must Prevail he flew while getting there." My This experience led me to three questioners chuckle, reflect on the important conclusions. The first is campaign speeches, and draw that no officeholder can ever over­ their own conclusions. I have an­ throw any socialistic practice un­ swered them accurately without a less there is an enormous consen- 610 THE FREEMAN October sus that it be done away with; sure what they believe when we otherwise, the practice is too see them in action - in their cam­ tightly woven into the social fab­ paigns. Candidates who thorough­ ric to be cast out by some political ly apprehend freedom principles trick. Ridding our society of TVA would not - indeed, could not - do or Social Security, for instance, is other than uphold them. When one utterly impossible unless there be knows a principle, its observation a general agreement for repeal. and practice is second nature.3 The candidates who never mention Finally, let politicians who pri­ repeal in their campaign speeches vately say they are for freedom, make no contribution whatsoever but who publicly espouse socialism to a new consensus. So, they have in order to get elected, be faithful mustered no support for it, what­ to their public pronouncements. ever their private views may be. Freedom will fare better this way. They can never fly any higher Exposing the fallacies of socialism than they flew while getting there! and explaining the principles of They are impotent. On the other freedom cannot possibly be hand, if they had been elected be­ achieved except through fidelity. cause of their advocacy of repeals, Truth can never be found by those they would then have a. popular or among those who practice dis­ mandate to so perform. simulation. Second, the candidates who pre­ Devotees of freedom have every­ tend privately to believe in free­ thing to gain and nothing to lose dom principles and who run for when campaign promises, regard­ office on other than a clear-cut less of how socialistic, are faith­ freedom platform, do not under­ fully kept. We need only remind stand these principles; they do ourselves that no politician can not know them! Conceded, they ever fly higher in office than he know about them and can recite flew while getting there. Further­ the ideas quite impressively - as more, the advancement of freedom can actors. The reason that so is not a matter of who wields many of us are deceived in our political power over creative ac­ private talks with these men is tions; rather, it depends upon the that we cannot see into their disassembling of such power. " minds as to whether or not they 3 See "When Freedom Becomes Second really apprehend the ideas behind Nature," Notes from FEE, November, their words. We can only know for 1969. The QUIET

Revolution EDMUND A. OPITZ

THE GREAT NATURALIST, John Bur­ asylum. The present mood has been roughs, wrote that "in the ordi­ captured in the familiar lines by nary course of nature, the great William Butler Yeats: beneficent changes come slowly and silently. The noisy changes, Things fall apart; the centre for the most part, mean violence cannot hold; Mere anarchy is loosed upon the and disruption.... The still small world ... voice is the voice of life and The best lack all conviction, while growth ... In the history of a the worst nation it is the same." Are full of passionate intensity. This is a time of noisy change, a time of violence and disruption, A bill of particulars is not need­ a time of perpetual crisis. There ed; any man can supply his own, is, we are told, a crisis in family from any newspaper, any day of life, a crisis in the cities, a crisis the week. And the feeling grows in race relations, a, crisis in re­ among us that the whirlwind of ligion. Doubt has been cast on all change which has scrambled our the old certainties; nothing ap­ value system has erased all guide­ pears fixed except change - and lines, all benchmarks, all stand­ the inmates are trying to run the ards. The 1960's have not dealt kindly The Reverend Mr. Opitz is a member of the with Americans, and our magnifi­ staff of The Foundation for Economic Educa­ tion. This article is from his guest sermon at cent accomplishments in outer Kirk in the Hills, Bloomfield Hills, Michigan, August 10, 1969. space serve but to highlight the

611 612 THE FREEMAN October

tragic ruptures which mar our certain sectors of our society re­ social life. We are bogged down in spond by displaying a paranoid a land war in Asia, as a phase of sense of collective guilt. And then the cycle of wars into which we there are the demonstrations, the have been locked since 1914. riots, and that crushing blow to Whereas America was once re­ our spirit - three tragic assassina­ garded by the world's peoples as tions. "the last, best hope of earth," it What has happened to people? is now reviled in many quarters. What will become of America? Latin American countries ask a What of the church in all this? Presidential emissary to call off his tour because they cannot guar­ Outward Signs of Inner rurmoil antee his safety. The nineteenth I take it as axiomatic that ex­ century trend in the direction of ternal disorder and social strife is constitutionally guaranteed liber­ a reflection of disorder in the mind ties of the citizen in his personal, and soul. For it is in the nature his social, and his economic affairs of the human condition that man slowed to a halt in the twentieth. forever seeks a harmony within The tide of totalitarianism began himself, that is, an ordered soul; to rise, and communism in Russia and secondly, he works for an· has recently celebrated its fiftieth outer order of society. Thomas anniversary, confident of its Aquinas put it this way: "Man strength, sure of the future, able has a natural inclination toward to count on the disaffected of all knowing the truth about God, and countries - including our own - as toward living in society." This is allies. to restate the Great Command­ We are uncertain about the ment given to us by the Master philosophical basis of our own when he said: "Thou shalt love form of society; Adam Smith the Lord thy God with all thy seems almost as· remote as the heart, and with all thy soul, and original Adam, and who reads The with all thy mind, and with all Federalist Papers nowadays? The thy strength. ... And thy neigh­ Executive branch has become bor as thyself." (Ma~k 12 :30-31) semi-autonomous, and the Supreme The inner and spiritual liberty Court usurps a legislative func­ proclaimed in the Gospels must tion. At the level where most of seek to realize itself and find us live there is· mounting concern proper expression in outer and so­ over increased crime·and the open cial freedom. Christianity pene­ incitements to violence - to which trates society and creates the ap- 1969 THE QUIET REVOLUTION 613 propriate political and economic "Secular Christianity" structures by means of Christian The contemporary outlook is persons who are citizens or magis­ quite different. It excludes God trates. The earth will never wit­ from its reckoning, and in a sec­ ness a fully realized Christian tor of the church we witness the society, for this would mean the paradox of a school of thought Kingdom of God, and God's King­ proclaiming "secular Christian­ dom is beyond history. But what ity:" The present outlook views we can hope for is a society Chris­ the world as self-existent and man tian in its norms, Christian in its is reduced to a mere natural prod­ understanding that man is formed uct of natural forces - autono­ to serve a transcendent end, to ful­ mous man, stripped of all attach­ fill a purpose beyond society. ments which were thought to bind Biblical religion understands him to a transcendent realm of the world as the creation of God being. Shorn of his cosmic dimen­ who looked out upon his work and sion, man is depersonalized; no called it good. It regards loan as longer the creature of God, he is a creature who bears a unique re­ reduced to a mere unit of mass lation to this God, being formed society struggling to retain ves­ in his image - meaning that man tiges of his humanity as his world possesses free will and the ability goes through a time of troubles. to command his own actions. This Secular trends have acquired free being is given dominion over such a momentum that religious the earth with the admonition to movements tumble along in their be fruitful and multiply. He is wake. Theologians talk about the commanded to work in order that death of God and the new moral­ he might eat; he is made steward ity. The New Clergy tell us that of the earth's resources and held the church must go, as they rush accountable for their economic out to man the barricades; they use. He is to respect the life of preach violence and the overthrow his neighbor and not covet his of society. "The New Clergy in­ goods; theft is wrong because tersects with the New Left," de­ property is right. When this out­ clares a writer in a recent Har­ look comes to prevail, the ground­ pers. "These men are out to work is laid for a free and pros­ remake the world," some wit re­ perous commonwealth; the City marked, "as God would have made of Man is not an end in itself, it it in the first place - except he is the proving ground for the City lacked the funds!" of God. P olitically-minded churchmen 614 THE FREEMAN October seek to shape the churches into and control, where needed, the an ecclesiastical power bloc which lives of the citizenry. The aim is would reduce religion to a mere to guarantee economic security instrument of revolutionary social from cradle to grave. change. We witness the growth of organizations, agencies, and Mistaken Methods councils designed to bring ecclesi­ It is easy for us now to see that astical leverage to bear on society, medieval churchmen were mis­ in a manner indistinguishable taken in thinking that souls could from the efforts of secular collec­ be shoveled into heaven by the tivists. Chief among these is the forced repetition of some incanta­ National Council of Churches and tion. Someday it will be just as the World Council. If social salva­ evident that present-day church­ tion were to be had from large, men are sadly misguided in their powerful, and prestigious ecclesi­ preoccupation with the reshuffling astical organizations, then we of the existing stock of economic should have been saved already. goods. Like the secular liberals But provide a religious organiza­ and collectivists, these churchmen tion with wealth and power and expect to overcome economic dis­ it begins to change into a secular abilities by political interventions. agency. The church in every age They'll never aGhieve prosperity has come under the spell of secu­ by taking this tack. Poverty can lar movements and enthusiasms, be overcome by increased produc­ to the detriment of spiritual re­ tivity, and in no other way; and ligion. Churchmen dream of a a society of free men is more pro­ large and powerful organization, ductive than any other. It follows both for the sake of the church that we maximize production and itself - as they think - and for minimize poverty only as men are the sake of what that church increasingly free to pursue their might accomplish by its influence personal aims - including their on government. In former days, economic goals - within the frame­ churchmen invoked government to work of law. Prosperity, in fact, is guarantee purity of doctrine by a by-product of liberty. Limit the punishing those who deviated into government to its proper compet­ some heresy. The aim was to get ence, so that men are uncoerced more souls into heaven. Today, in their interpersonal relations­ churchmen seek to strengthen the including their economic arrange­ hand of government and give it ments - and the general level of the power to manage the economy well-being rises. 1969 THE QUIET REVOLUTION 615

A generation ago, Dean Inge of that in every age there has been a St. Pauls foresaw a "reversion to creative and self-renewing activity political and external religion, the at work within it; and it's at very thing against which the Gos­ work there today. This is the sav­ pel declared relentless war." It is ing Remnant. The seventeenth not that Christianity regards so­ century Church of England cial progress as unimportant, the Bishop, Richard Warburton, pon­ Dean goes on to say; it is a ques­ dered these matters. Is the church tion of how genuine improvement worth saving, he wondered? may best be promoted; "the true Whimsically, he compared the answer ... is that the advance of church to Noah's ark, and con­ civilization is a sort of by-product cluded that the church, like the of Christianity, not its chief aim; ark of Noah, "is worth saving, not but we can appeal to history to for the sake of the unclean beasts support us that this progress is that almost filled it and probably most stable and genuine when it made much noise and clamor in is a by-product of a lofty and un­ it, but for the little corner of ra­ worldly idealism." tionality [Noah and family] that The church is in the world, but was as much distressed by the it is not wholly of the world. stink within as by the tempest Whenever it seeks to further social without." progress by embracing the cur­ The French have a saying: "The rently fashionable political nos­ situation is desperate; but it's trum, it not only fails to achieve not serious." The human venture its social ends by politicalizing its has always been an uphill fight. gospel, but it betrays its own na­ The biological odds were against ture as well. The church's job is the emergence of man, and the to remind man, in season and out, scales have always been weighted who he really is and what he may against man's survival. But these become; and this task, in every facts, in themselves, have never age, means some resistance to "the been grounds for widespread or world." The church must never long-continued despair; certainly marry the spirit of the age, Dean not wherever the Christian faith Inge used to say, for if she does has taken hold. she'll be a widow in the next. A certain seventeenth century New England Puritan left a jour­ The Saving Remnant nal, in which was found this en­ Sometimes we despair of the try: "My heart leaps for joy, church, but we must not forget every time I hear the good news 616 THE FREEMAN October of damnation." Now the Puritans men must choose. And because the were a peculiar people, and this universe does not jest, it has not one had an odd way of putting given man the freedom to make a things. But perhaps he is telling choice as to how he will commit us something, in his oblique way. his life without at the same time It is' good news that man possesses equipping that choice with power the gift of freedom so far-reaching to affect the ultimate outcome. that he is personally responsible This is the core of the Doctrine for the ultimate fate of his soul. of Election which a hillbilly This is not to say that man saves preacher explained to his flock in himself; it is to say that the in­ this fashion: "The Lord votes for dividual may choose to accept or you; the Devil votes against you. reject the means of grace made It's the way you vote that decides available to him, and that his act the election." Even if you do noth­ of choosing is determinative. ing, your very inaction becomes a form of action, affecting the out­ Responsibility Implies Freedom come one way or the other. This old doctrine says, first of The Power behind the universe all, that Somebody in the universe has so much confidence in man cares for us individually, one by that it has made him a free and one. Such is the basic implication responsible being. This is a basic of any system of rewards and premise of our religious heritage, punishments based on merit or but our generation, like each be­ demerit. The conviction that this fore it, must earn its heritage is a universe where, in the long anew before we can make it our run, we do get our j list deserts own. implies that we have a responsi­ The rest of creation is complete; bility for our lives; that nobody we alone are unfinished. The Crea­ really gets away with anything. tor has given the animal world all No man is held accountable for the answers it needs; answers an outcome which his actions did locked up in instinctual responses not affect one way or the other. as old as time. But man has not Responsibility implies freedom. To been given the answers; before our say that man is a responsible eyes the Creator has posed a gi­ being is to say that his freely gantic question mark. Weare made choices do cause things to handed a question, and the answer happen this way rather than that. is ours to give. We have the re­ Life's alternate possibilities of re­ sponsibility, the freedom, and the ward and punishment imply that power to respond. 1969 THE QUIET REVOLUTION 617

If these things are true at all, tion when ready is the only way they are true for everyone, but man may advance. It is in the in­ not everyone is equally able to tellect and in the moral imagina­ grasp them as truths. Organiza­ tion - that is, in the human spirit tions that are equipped with the - that men may "wait upon the blinders fastened on them by Lord and renew their strength." wealth, power, and success are The great Swiss economist, Wil­ handicapped; they come to care helm Roepke, was also a deeply more for their image than for the religious man. He fought in World truth. It is sad to observe that War I and was the first intellec­ nothing fails like success. But or­ tual exiled by Hitler. "For more ganizations and individuals who than a century," he writes, "we are not drawn into the power-and­ have made the hopeless effort more success game may advance the and more baldly proclaimed, to truth without encumbering it with get along without God. It is as themselves. They may become part though we wanted to add to the of the saving Remnant. already existing proofs of God's "Be still, and know that I am existence, a new and finally con­ God," sang the Psalmist CPs. vincing one; the universal destruc­ 46 :10). "In quietness ... shall be tion that follows on assuming your strength," said Isaiah. God's nonexistence. The genesis of (Isaiah 30:15) Victory for the the malady from which our civili­ things we want victorious comes zation suffers lies in the individ­ not with noisy demonstrations, ual soul and is only to be overcome clamorous agitation, bustling cam­ within the individual soul." And paigns, shouted slogans, heated if the care of souls is not, first discussions, passionate arguments, and foremost, the province of the emotional debates, demagogic har­ church, what - in God's name - is angues; neither will it come by a the church's main business? display of power or a show of Disorder in society reflects a strength. The only victories worth disorientation in man's inner life. winning arrive quietly, by the If there is confusion as to the slow progress of thought, by the proper end, aim, and goal of per­ refinement of moral values. "Noth­ sonal life, then bizarre social ideol­ ing is so powerful as an idea ogies will prove irresistibly at­ whose time has come," and the tractive and a sickness spreads in ripening of ideas in the corridors society. A healthy society, on the of men's minds and the transla­ other hand, is the natural conse­ tion of these into appropriate ac- quence of sound thinking and right 618 THE FREEMAN October action among men and women who heart from St. Paul, where he are pursuing the life-goals proper speaks of foolish things confound­ to human beings. ing the wise and weak things con­ founding the mighty. Paradoxi­ The church is a means for ends cally, there is a kind of strength beyond itself; and our lives con­ in weakness, and there is a kind tain potentialities which can never of wisdom in foolishness. And be fully realized on the biological there are victories in lost causes, and social planes alone. Weare in­ because God may choose them to volved in lost causes; but take work out his purposes. ~

IDEAS ON LIBERTY Man to Man Justice

THE UNIFORMED POLICEMAN does not originate right and wrong. He merely extends and reinforces the observance of those, rights and duties that stem from the Ten Commandments. In all respects he is a mere projection of the individual human conscience and in no case can he be made to substitute for it. On the contrary, a widened sense of individual conscientious responsibility can be made to shorten the policeman's "beat" considerably. It is· in this direction - the direction of a more acutely developed sense of individual conscientious responsibility - that we must constantly look for any permanent improvement in the ordered general wel­ fare of our society. It must be remembered that ninety-five percent of the peace, order and welfare existing in human society is always produced by the conscientious practice of man to man justice and person to person charity. When any part of this important domain of personal virtue is transferred to government, that part is auto­ matically released from the restraints of morality and put into the area of conscience-less coercion. The field of personal respon­ sibility is thus reduced at the same time and to the same extent that the boundaries of irresponsibility are enlarged.

CLARENCE MANION. The Key to Peace In doing !!One!s Own Thing!!

HENRY EDWARD SIMONS

As A MEMBER of the "freaked out" not come in the form of riots, and "turned on" generation, I find burning, and other antisocial ac­ little comfort in the mental atti­ tivities. The breakdown of the tUdes of some of my peers. In fact, school is the only achievement­ it is a consequence of their "drop if one feels this is a value. out" awareness that makes one Our nation is derived of differ­ fearful of the kind of leadership ent ideas and a competitive spirit. potential coming from these an­ But responsibility always has been archy-oriented visionaries. Such a factor in making constructive radicalism on campus is perhaps a change a reality. Change, for it­ sad commentary on the present ed­ self, has no merit. That is like ucational atmosphere of permis­ dumping last year's automobile be­ sive ideas and professors. cause it is not "new," or consider­ There is no "safe" campus if ing people "old-fashioned" because one equates safety and security they are over 30 years old. Some with learning fundamentals and of our most creative ideas and being free to think and experience practical inventions have come new ideas. "But," you say, "isn't because a man had experience and this what it is all about in the insight gained from years of liv­ campus mood today?" I doubt it. ing. Serious consideration of contempo­ Perhaps our youth-oriented rad­ rary values and judgments does icals do not realize that their claims of insight are far from Mr. Simons is both a teacher in the New York unique; adventures and ideals City public schools and a graduate student at New York University. have inspired men and ·events

619 620 THE FREEMAN October throughout history. But the youth flows from the discovery of po­ of today seem so determined to tential within oneself and among make history, spending their en­ one's contemporaries. ergies and abilities as if there had The inventive minds create new been no past and is to be no fu­ needs. The electrical industry ture. The need to "blow one's found itself needing people to fill mind" and identify change with jobs, which did not exist until Edi­ long hair and eight-button suits is son came along with the electric a far cry from effecting realistic light. Other examples are endless. and constructive change. The Change can be productive and ef­ "tuning out" and LSD thrills offer fective in terms of social and eco­ no escape from reality. nomic benefits. Technological changes within the past fifty years Change for the Better stagger the imagination - and Such attempts to change one's pending innovations are beyond an­ life experience lead to considera­ ticipation. But this is fruitful tions in which living becomes a change- requiring new "idea" men true hell, and the only change is and women and creative personal for the worse. There is no need to insight and motivation. Business destroy one's life in order to leaders do not want "dead-end" change the world as it appears, and thinkers! They seek creative sensi­ as it really is - the difference be­ tive people to build and to make tween the two depending on one's competitive change practical and age and experience as well as ma­ effective. A David Sarnoff or a turity. Tom Watson· or a Henry Ford­ First of all, age affords no spe­ these men brought about changes, cial insight - whether one be but socially useful changes. A per­ young or old. The capacity to care son of strong individuality and for others, to participate freely in personality, Captain Edward V. an open and competitive economy, Rickenbacker, put his stamp of and to learn from one's experi­ special concern and participation ences can be a springboard to im­ in the aviation industry. proved insight and skills. New ideas create new industries with Faith in the Future new markets to serve. Man re­ Who says we don't want change, ceives and acts upon ideas; and or that we would deny the ideals the work of applying ideas to pro­ of those individuals with faith in duction affords personal joy and the future! But faith in mankind objective rewards. Change thus is not the current rage on campus. 1969 IN DOING "ONE'S OWN THING" 621

Unfortunately, a lack of faith per­ participating in the peaceful way sists and serves as a justification of getting. things done. But theirs for anarchy and the rejection of is the most "old-fashioned" view respected institutions and ways of of all, and it is not justified. solving problems. All too common Soon, hopefully, our college gen­ in the thoughts and practices of eration may catch up to the mod­ today's college generation is the ern, yet eternal, reality that there fear that our nation cannot adapt is never a lack of desire for new to growth and change and that ways and new ideas of individual they cannot find their identity by style and merit. ,

IDEAS ON liBERTY Free to Discriminat(!

IF MAN IS TO CONTINUE his self-improvement, he must be free to exercise the powers of choice with which he has been endowed. When discrimination is not allowed according to one's wisdom and conscience, both discrimination and conscience will atrophy in the same manner as an unused muscle. Since man was given these faculties, it necessarily follows that he should use them and be personally responsible for the consequences of his choices. This means that he \rpust be free to either enjoy or endure the conse- \ quences of each decision, because the lesson it teaches is the sole purpose of experience - the best of all teachers. When one's fellow men interpose force and compulsions be­ tween him and the Source of his being - whether by the device of government or otherwise - it amounts to· interrupting his self-improvement, in conflict with what seems to be the Divine design. Man must be left free to discriminate and to exercise his freedom of choice. This freedom is a virtue and not a vice. And freedom of choice sows the seeds of peace rather than of conflict.

F. A. HARPER, Blessings of Discrimination A copy of this pamphlet is available on request from The Foundation for Economic Education. Irvington-on-Hudson. N. Y. Problem or Opportunity?

CLARENCE B. CARSON

THE DISPOSAL of trash, garbage, Many cities are running out of and refuse is becoming a major places to dump garbage. The problem, it seems. The feature countryside is dotted with auto­ page of one· Sunday newspaper mobile graveyards. The problem described the matter with this has come to national attention; in frightening headline: 1965 Congress passed a Solid Will Our Garbage Bury Us? Waste Disposal Act. A move is afoot to increase the appropria­ Indeed, newspapers and magazines tion for this activity. Something have' been devoting increasing must be done, we are told, else we amounts of space to the situation. shall founder and sink in our own We are told that policemen are waste. having to allot more and more Whether a given situation con­ time to disposing of abandoned stitutes a problem or an oppor­ automobiles. In some states, tunity is a nice question. Is a trucks used to pick up refuse given material a waste or a re­ carelessly thrown out by motorists source? Trees were once a great bear legends as to how much this obstacle to the utilization of land costs the taxpayers each year. for farming in the eastern part of Dr. Carson is Professor of History at Grove City College in Pennsylvania. Books by him include North America. They were cut The Fateful Turn, The American Tradition, down, rolled into position so that and The Flight from Reality, originally serial­ ized in The Freeman. they could be piled up, then

622 1969 PROBLEM OR OPPORTUNITY? 623 burned. They were refused, hence, looms as a burden for taxpayers. refuse. Today, of course, trees are Numerous other examples come reckoned to be a great resource, to mind of this principle. Provid­ are planted, sometimes fertilized, ing transportation in cities was and intentionally grown. Nor is once a great opportunity for pri­ time the only factor in changing vate entrepreneurs; it led to such problems into opportunities (or fabulous successes as the private vice versa) or wastes into re­ building of the New York subway sources. Of even greater impor­ system. But since governments tance is who is viewing the task haveentered more and more into or material and what object he transportation (particularly with­ has in view. This principle can be in cities), it has ceased being an readily illustrated. opportunity and become a series of When government undertakes to monumental problems for cities. perform a task, it quickly becomes The post office is a perennial prob­ a problem. When private business lem. Airports, since they are undertakes to perform a task, it heavily subsidized by govern­ is seen as, and is, an opportunity. ments, are described as problems. For example, I cannot recall hav­ So it goes with many other tasks. ing seen an article on the problem What is waste or what is re­ of making automobiles. Indeed, source depends almost entirely the basic problem of constructing upon how it is viewed. A private an automobile was long since entrepreneur will tend to view all solved, and men labored at it not material in the light of its po­ as a public problem but as an op­ tential use - he can profit by uti­ portunity. Yet, disposing of old lizing it. Governments, on the automobiles (a simpler task basi­ other hand, may be inundated by cally than constructing new ones) waste, for they do not recognize is now described as a major prob­ profit as a measure of public de­ lem. In large, this is true because mand. government increasingly monopo­ lizes the disposal industry (though Back on the Farm this does not begin to tell us why How did the refuse problem government forecloses opportuni­ come about in America? It was ty and raises problems). Dispos­ not always so. When I was a boy ing of wrecked or old automobiles growing up on the farm, we had was once a great opportunity for no waste disposal problem worth private business, but it is becom­ discussing. Indeed, we had very ing a problem for politicians and little that could be classified as 624 THE FREEMAN October waste. Leftover food was carefully ceased to give much thought to saved to be fed to the hogs. Worn further uses for their container out metal objects were saved­ than the original one. That under­ kept in a pile - against the day the states the case. They have devoted junkman came around so that they much energy to developing con­ could be sold. Buckets, cans, and tainers that can be thrown away jars had many potential uses once after one use. Second, there has they were emptied of their orig­ been a trend away from separated inal content. Sacks could not only and segregated trash and garbage. be used as containers for produce, "All the trash goes together," the but also were a source of cloth. sweeper used to say (when humor Animal wastes were returned to was not so sophisticated), as he the soil. Any large object was apt approached someone in his way. to contain lumber or other scraps What was once a jibe has become which could be used in future con­ a fact in many towns and cities; struction. Hardly anything then garbage has become a potpourri could be called waste. of boxes, cans, coffee grounds, I am aware, of course, that leftover food, papers, fourth class times have changed, that it is no mail, and what not. Hence, its vari­ longer economical to use labor in ous elements are ruined for other ways that were even then becom­ use even before they reach the ing marginal. Specialization has dump. The opposite of specializa­ proceeded apace so that it now tion has occurred. What was once may be cheaper for a carpenter to potentially usable has been made use another nail than to retrieve waste by methods of storing and one he has dropped. Containers collection. and products have poured forth in bewildering shapes and varieties. Government Garbage Collection Yet, as will be seen, this is just There are several interrelated the point. Specialization has pro­ reasons why this has come to ceeded apace in production and pass, but the most direct one is distribution; it has declined and this: Governments (city usually) atrophied in the utilization of left­ entered the business of trash and overs. Hence, the mountains of garbage collection, in many cases waste that are said to loom over establishing monopolies or near us. monopolies of this collection. Quite Two developments of import often, even if a citizen did not use have occurred regarding leftovers. the service, he would still have to One is that manufacturers have pay. When governments took over 1969 PROBLEM OR OPPORTUNITY? 625 trash collection, production and takes considerable ingenuity and distribution were separated from labor to reclaim materials from an disposal. A large rent occurred in earlier use for another one. There the economic fabric. Private en­ is the cost of collection, the labor terprise continued to produce and of getting them ready for use, distribute (sell) goods, but these and the intelligent employment or functions were no longer inte­ reproduction for reuse. Almost any grally related to further uses or material sufficiently sturdy to be disposal. Specialization has pro­ in the way could be put to some ceeded with great vigor in produc­ productive use. But costs may tion and distribution. It is grind­ discourage this. The crucial fac~or ing to a halt in reuse of materials here has been government inter­ and their final disposition. ference in the labor market. This The reason for this is not far interference has been by way of to seek. The disposal of leftovers minimum and union wages, com­ was taken out of the economic pulsory education, partial exemp­ realm and placed in the political. tions from the draft for attending In the economic realm, leftovers college, the subsidizing of idle­ offer an opportunity for further ness in old-age pensions, and so use and profit; in the political forth. Moreover, labor costs have realm, leftovers are only a prob­ been made more expensive to the lem. Moreover, force had been in­ employer because of required so­ troduced in the affair; one had to cial security payments, by pay­ pay for the service whether he ments into the unemployment would or not, and was frequently fund, by the cost of bookkeeping denied alternatives. Not surpris­ to keep up with all these, and by ingly, the citizen lost interest in regulations on t~e use of labor. separating and segregating his These costs explain, in part, why leftovers. After all, why should potential labor and various ma­ he bother with it? Why not lump terial resources are not utilized, it all together? This is what he hence, why they become waste. did, when he could, and politicians There is a deeper dimension to began to acquiesce - in pursuit of the mounting piles of waste. They votes. are mute indicators of the wasted lives among us; they are a much The Cost of Labor truer measure of the unemploy­ Another reason for the mounting ment in America than the figures waste is the cost of labor. There is released by government agencies. no blinking the fact that it often This writer does not know, of 626 THE FREEMAN October

'course, how many people should from tying up garbage disposal in or could be productively employed, cities and towns. They have long or at what, but it is reasonable to realized the possibilities of hurt­ suppose that some portion of them ing people by tying up production could render leftovers into goods, and distribution. The stopping of and would do so were they not disposal may he even more potent. subsidized in idleness. The concentration of this service The main reasons why the dis­ because of government monopoly posal of leftovers has become a renders cities prostrate before problem, then, are these: govern­ their demands, or very nearly so. ment pre;.,emption of garbage col­ lection, the consequent separation Return the Responsibility of production and distribution of to Individuals and Families goods from the disposal of left­ There is a way out of this mess overs, the decline in specialization which offers possibilities of better in dealing with leftovers, the prospects. To put it in its simplest lumping of all "trash" together so form, it is this, Return the re­ as to render it unfit for further sponsibility for' the disposal of use, the changing of disposal from leftovers to individuals and fami­ economic opportunity into politi­ lies. I am aware that this proposal, I cal problem, and the pricing of in its blunt and simple formula­ labor out of the market which tion, is unlikely to gladden many might deal more effectively with hearts. Many a housewife would "'''hat is otherwise refuse. throw up her hands in despair. As The prognosis, given current if she doesn't have trouble enough conditions, is that the waste situ­ already getting her husband to ation will continue to worsen. set out the garbage cans, now Looming ahead are probably gov­ there is to be no pick-up service! ernment regulations on manufac­ Yet, such a reaction does not take turers and distributors as to ma­ into account the response of pri­ terials to be used in dispensing vate enterprise and the market. I their goods. When government do not know all the myriad ways undertakes to provide a service, the market would respond, nor am it cannot be long before more I sure that in particulars I am force is applied to make the way right about a single one of them. of the user harder and the task of After all, mine is only one mind, government easier. Already, labor and many minds would be loosed unions have begun to perceive the by this change to provide solutions diabolical possibilities for leverage to the problem. Still, it is worth- 1969 PROBLEM OR OPPORTUNITY? 627 while to explore some of the possi­ centers for many items that other­ bilities. wise become debris, especially if One thing we may be sure of, the stores and customers could see however, is that the householder a way to profit in the process. would not be left to his own de­ Stores are patrons of manufac­ vices to dispose of his leftovers turers. Manufacturers might be once the responsibility became his. expected to give attention to mak­ Indeed, the massive resources of ing their packages reclaimable. It private enterprise would be mus­ is this function that has been neg­ tered to serve him as a customer. lected because of the present ar­ Ingenuity might be expected to rangements. Delivery truckS, be devoted to producing containers which otherwise return empty that could be reused, could be re­ from their rounds, could be used turned, could be easily discarded, to return the containers to collec­ or some combination of these. tion points for reprocessing plants. If containers became of greater concern to consumers, existing A Specialized Service and potential technology un­ What is being discussed is, in doubtedly would be employed in the broadest terms, the restoration this way. of specialization to disposal of One of the important changes leftovers. If restrictions on the that might be expected to occur if use of labor and other resources private enterprise took over re­ were removed, a great deal of spe­ sponsibility for disposal from gov­ cialization might be expected to ernment is that positive incentives develop in the collection of what would be substituted for force and is now refuse. Many of these left­ penalties in trash collection. It overs have potentialities for reuse might still be appropriate for gov­ as matters now stand: edible ernments, in the interest of health scraps, fats, metals, bottles, paper, and safety and for the protection rags, and the like. There would un­ of property, to make rules re­ doubtedly be a residue of just garding the burning or disposal plain trash to be carted away and of trash, and to enforce these with burned, buried, or converted. It penalties. But private enterprise would, however, have been reduced would try to attract its customers to quite manageable proportions to dispose of their waste in help­ once private businessmen put their ful ways. minds to it. One of the possibilities is that It may be objected that all this stores might become collection sounds like too much trouble for 628 THE FREEMAN October the householder, and for the sided as it is often presented­ others. There are two considera­ what to do about the waste. It has tions which should reduce if not another side - how best to employ entirely remove this objection. our resources. And, as pointed out, One is that a variety of incentives we add to the material waste the would be employed to induce peo­ wasted lives of those denied pro­ ple to perform the tasks of col­ ductive employment by govern­ lection. Not only might stores offer ment policies. True, it is possible rewards for the return of their to waste time by reclaiming some containers but also the householder objects to use. For some people it might well be paid for some of his may be a waste of time to sepa­ leftovers picked up at his home. rate their leftovers for further At the least, a token payment use. What is and is not waste can­ should be made for food scraps, not be settled a priori, and it I magazines and newspapers, scrap should not be settled by govern­ metal, old furniture, rags, and ment policy. Instead, it should be such like. Part of the payment left to an integrated market where might be made in hauling away the matter of what is irreclaim­ free the refuse that remained. It able waste can be decided by cal­ is amazing what trouble people culation. This results in prudent will go to for a little reward, as saving and reclamation as well as the popularity of trading stamps economic decisions as to what is to attests. For those who find the be thrown away. whole business distasteful, they The foregoing suggestions as to should be free to lump all their how leftovers might be effectively leftovers together and pay to have collected and used or disposed of it removed. may be debatable. They are sub­ mitted only to awaken the imagina­ Waste Not, Want Not tion to the myriad possibilities of There is another consideration, positively dealing with what is to­ however. It is the matter of moral­ day described as a growing prob­ ity. Waste not, want not, is a lem. But there can be no reason­ venerable adage. The fact is that able doubt that once responsibility we are wasting potential resources is placed on the individual, once in astonishing quantities today by private enterprise is mobilized to making containers without atten­ serve him as a consumer, what tion to their further use and by have been problems become oppor­ the methods of disposing of left­ tunities and what was waste will overs. The problem is not one- much of it become resource. ~ Anyone can destroy. Anyone can take a life. Anyone can steal. Anyone can cause strife.

Anyone can complain. Anyone can fear defeat. Anyone can slander. Anyone can lie and cheat.

Anyone can hurt feelings. Anyone can say "It can't be done." Anyone can be unfriendly. Anyone can spoil fun.

Anyone can hold back. Anyone can look the other way. Anyone can be lazy. Anyone can waste his life away.

Anyone can count on wishes. Anyone can see sin. Anyone can use force. Anyone can give in.

Anyone can see weakness. Anyone can act upset. Anyone can be slow. Anyone can play hard to get.

Anyone can leave the work to others. Anyone can wait to be saved. Anyone can blame his brother. Anyone can be enslaved.

Anyone can bury his talents. Anyone can run. Anyone can earn his life -by not being "Anyone."

AL SIEBERT

629 I S LVE

PAUL L. POIROT

How OFTEN, and in what varia­ tunities. A successful entrepreneur tions, we hear the old theme: "The is one who sees and seizes the government should intervene be­ opportunity when there is a prob­ cause private enterprise has failed lem, turning available resources to solve the problem!" The follow­ into goods and services most ing list is far from complete, but wanted by others, serving their will serve to illustrate: needs and helping himself in the The social security problem bargain. Private enterprise in­ The farm problem volves cooperation between a per­ The unemployment problem son with a problem and a person The housing problem who views it as an opportunity. The transportation problem Socialism, on the other hand, is The school problem a pooling of persons, all of whom The medicare problem have the same problem: they The poverty problem want something for nothing. The population problem Such a demand affords an entre­ The slum problem preneur no opportunity to serve The conservation problem himself by serving others. Hence In a sense, every need felt by the cry: "Private enterprise has each and every person in the world failed, the govern'ment must inter­ is a problem - for that individual. vene!" Check again the foregoing The person who sees a way to sat­ list, or any other situation that isfy a given need looks upon the has now become a major public situation as an opportunity rather problem. Does it represent an or­ than a problem. That's what pri­ ganized demand for something for vate enterprise is: a process of nothing? If so, private enterprise converting problems into oppor- can't solve it-not on those terms;

630 1969 PROBLEMS THE FREE MARKET CAN'T SOLVE 681 but neither can it be resolved by remarkable record of material resort to force. achievements when, and to the ex­ The problem ever has been a tent that, the market economy has relative scarcity of the resources been tried. required to satisfy the multiplicity of human wants - insufficient Our Wants May Deceive Us know~edge and will and energy to In a sense, the infinite expansi­ combine available resources in bility of wants is one of the main­ ways that would fulfill every per­ springs of human progress. His son's wishes. Because there is a unsatisfied desires drive a man to cost of producing or acquiring work and plan and invent and pro­ everything of an economic nature duce. They also render him vul­ that man wants, it has been nec­ nerable to promises of something essary to determine in some way for nothing-launch him on flights or other what is mine and what is from reality that may destroy the thine. source of goods and services to That determination, during most which he owes his rising expecta­ of recorded history, has been by tions, if not his life. It is not the force - the strong lording it over comparative records of perform­ the weak, some men enslaving ance under freedom or under others 'and confiscating their prop­ slavery that cause men to turn erty. Only in relatively recent from competitive enterprise back times, and only in parts of the toward coercive socialism. It is not world, have men ever tried the al­ that competitive enterprise has ternative of getting what they failed to deliver to every man his want from one another by serving due; competitive enterprise is re­ that other's interest, instead of jected by thoughtless men because stealing from or enslaving him. it has not delivered everything This is the system of private own­ that irresponsible demagogues ership and control .of resources, promise. Such persons fail to con­ with open competition in the mar­ sider that the demagogues neither ket, and with government limited have been able to nor can they to the protection of peaceful per­ ever fulfill their promises by the sons and their property. methods they espouse. Such competitive private enter­ The person who demands that prise has not afforded instant private enterprise solve the social utopia on earth. Man's wants have security problem, else he will re­ multiplied much faster than his ject private enterprise, is demand­ capacity to fulfill them, despite the ing that a way be found for a 632 THE FREEMAN October person to have reasonable income of the total (which is unrealisti­ and resources when retired with­ cally referred to as the OASDI out his having saved anything of Trust Fund) has been spent for value prior to his retirement. other purposes of government. In There is no way for man to per­ other words, not a penny of the form such a miracle. The govern­ amount any worker pays as social ment only appears to do so when security taxes is saved or invested it takes property from those who to yield a return to him when and have earned it and gives some of if he retires. Such payment, if he it to those who have not. ever gets it, still must come from The compulsory social security those younger workers currently program was launched in the employed and subject to taxation. United States in 1935 primarily as a device to induce oldsters to Shortages and Surpluses give up jobs in order that young­ No; private enterprise cannot sters might be employed. Few at solve the social security problem that time bothered to ask what which government intervention had caused the widespread depres­ has created. Neither can the gov­ sion of economic conditions and ernment solve it. Private enterprise the heavy unemployment. "A fail­ does afford the individual the ure of private enterprise," they maximum opportunity to prepare assumed; whereas, in fact, prior for his own retirement. And that government intervention had is a far better chance than any granted special privileges to or­ intervening government would al­ ganized labor, had tampered with low him - after taxes. supplies of money and credit, had What government has done, with artificially depressed interest rates, regard to social security, is to es­ and generally had erected barriers tablish a price ceiling. The offer, to industry and trade. in essence, is "free" social security Nevertheless, over the years benefits to anyone over 65. In from 1935 through mid-1968, the other words, the price to be paid Federal government collected some by him is zero.1 Whenever the $219 billion dollars in the name of government establishes terms like social security from those younger 1 Many proponents of the social secur­ persons who had found jobs in ity idea will contend that the payment of covered occupations. Most of that taxes during working years entitles one money has gone in benefit pay­ to a handout after he retires. But courts seem not to interpret either the Constitu­ ments to those who had retired. tion or the Social Security Act in that The balance, perhaps an eighth way. 1969 PROBLEMS THE FREE MARKET CAN'T SOLVE 633 that, private enterprise cannot and than prevailed when nearly every­ will not do the job. one farmed as a matter of self­ Price fixing by government is subsistence. the classic way of creating short­ Naturally, mechanization works ages and surpluses. The price, if from industry back into agricul­ set lower than the market would ture. As specialization and trade have determined, creates an im­ develop in a given society, a mediate surplus of would-be con­ smaller percentage of its popula­ sumers and a shortage of willing tion is needed to produce food and suppliers. Everyone would like a fiber. Agriculture appears to bea lot of something for nothing; no depressed industry over the many one wants to supply anything at decades generally involved in the that price. On the other hand, a shift from a 90 per cent agrarian price, which is set higher than the to a 90 per cent urbanized and market would have determined, industrialized economy. This is the results in a rash of suppliers and competitive market manner by a dearth of buyers. which workers and other scarce The social security "problem" resources are drawn from less at­ is a surplus of retired persons tractive to more attractive em­ hoping someone else will provide ployment opportunities - from old their livelihood during their flight industries to new. This is why ag­ from reality. riculture was a chronically de­ While no attempt will be made pressed industry in the United to discuss here the details of the States over much of the past cen­ various other "problems" the mar­ tury - why there came to be a ket allegedly has failed to solve, "farm problem" and a demand for the nature of shortages and sur­ government intervention. pluses may be clarified somewhat Fortunately in a way, much of by brief reference to "the farm the intervention inadvertently had problem." the effect of speeding farm speci­ alization and mechanization. The The farm Problem price supports and other farm The farm problem is at least as subsidies by and large were made old as the industrial revolution, payable to the most successful when businessmen found ways of farmers; the pittance paid to attracting personal savings for in­ smaller and less efficient operators vestment in factories and ma­ was not enough to appreciably chines and tools that would afford slow the movement of workers better employment opportunities from farming into other industry. 634 THE FREEMAN October

American agriculture today is too low results ina shortage. And fully mechanized and well capital­ the marginal buyers and sellers ized - on a par with other indus­ thus excluded from the market are tries. The shift of population from the very ones who can least with­ rural to urban employment is stand such discrimination. largely accomplished in the United States. Actions and Reactions So, the government farm price Causes have consequences, and support programs of the twentieth no particular injection of force century in the United States have into the economy ever ends at that accidentally eased rather than ag­ point. As suggested above, the gravated the chronic surplus of farm programs that drove work­ farm operators. How these and ers off farms were blended with other government interventions other' interventions that denied combined to yield a prolonged and them more productive employment general unemployment and waste opportunities. Wage and hour of manpower will be discussed laws, special privileges to unions, shortly. Meanwhile, let it be noted and various relief programs turned that the farm subsidy programs unemployment into a way of life did create serious surpluses of for some - at everyone's expense. wheat, cotton, corn, peanuts, rice, Men who are paid as much for not tobacco, potatoes, milk, butter, working as for working are likely eggs, wool, and various other farm to remain unemployed; but who commodities. Scarce resources can believe that he's still a man were wasted to the extent that whose .life depends· on the dole? government price-fixing held such These ever-expanding voting farm produce above the reach of blocs of nonworkers demand their consumers in U.S. and world mar­ "rights." And government officials, kets. And there were other conse­ who do not understand the im­ quences. For instance, a part of portance of defending private the world market demand for cot­ property, continue to tax the ton that American growers other­ savers and workers in a futile at­ wise might have supplied thus was tempt to give those others their diverted to foreign growers or to something-for-nothing. Meanwhile, manufacturers of synthetic fibers. businessmen are urged to cooper­ And the same is true with respect ate and develop employment train­ to other commodities under price ing programs - apparently, with­ control. A price arbitrarily set too out capital and without prospect high creates a surplus; a price set for profit. Private enterprise sim- 1969 PROBLEMS THE FREE MARKET CAN'T SOLVE 635 ply can't solve that kind of a prob­ nel to service the demands of those lem: ;;t surplus of subsidized non­ who are paid to be sick. workers. Private enterprise did not solve Nor can private enterprise build the problem of landing two men low-cost new housing as fast as on the moon in 1969, because pri­ the government can condemn ex­ vate enterprise did not have a $25 isting structures and bulldoze billion charge account against the them down. Rent controls, zoning market's limited resources in ex­ regulations and restrictions, tax change for a small packet of moon exemption or abatement, and privi­ dust. But the fact that a govern­ leges granted to building trade ment can force 200 million citi­ unions artificially boost'" the de­ zens to ship two of their number mand for housing and render it to the moon and back does not impossible for anyone to supply mean that the government can such housing at a profit. either measure or fulfill the more There is no way on earth for urgent of the infinitely varied private enterprise to supply all the wants of the 200 million. freeways drivers would like. Or all If the problem is to exchange the bridges or ferries or subways something for nothing, private en­ or airports or commuter transpor­ terprise can't solve it. Government tation consumers would use if may pretend to do so up to the someone else could be made to pay limit of the property and the pa­ the cost. tience of long-suffering workers Private enterprise cannot build and taxpayers. But if the problem costless schools as fast as finan­ is to exchange something for cially irresponsible boards of edu­ something in ways that best allo­ cation, teachers' unions, and stu­ cate scarce resources to the wil­ dents can outmode and destroy lingness and satisfaction of those them. involved, then government's only It is impossible to build enough role is to protect private property, hospitals or to train enough doc­ leaving all else to free men and tors and nurses and other person- the free market. (j

IDEAS ON LIBERTY Edmund Burke

To PROVIDE for us in our necessities is not in the power of gov­ ernment. It would be a vain presumption in statesmen to think they can do it. A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

EDUCATION IN AMERICA

DURING the 1968-69 academic year nation that has gone all out for hardly a week passed without news "aid to education." of some new outrage perpetrated Libertarians could have pre­ by the Students for a Democratic dicted it: when immense sums are Society, or, as cartoonist Al Capp deployed out of the public treasury prefers to call them, the Students to subsidize something, it is scarce­ for a Decomposing Society. Spoiled ly surprising that the recipients of bratsposing as revolutionaries got the bounty should take it lightly. off with the lightest penalties - or What is a broken window or a even none at all-for such palpably smashed desk when the taxpayer illegal acts as trespass, destruction is there to provide for its replace­ of property, the theft and spolia­ ment? And why should professors tion of documents, and the physical be respected when they spend half manhandling of deans. College ad­ their time working on political ministrators and faculty members projects, turning their marking seemed paralyzed by the attacks, chores over to graduate students and some professors and even a whose main concern is to have the couple of university presidents ac­ statistics ready for tabulation on tually condoned the rioters. It was punch cards that the professors an amazing spectacle, particularly mayor may not see? noteworthy in that it occurred in a Our philosophical disarray

636 1969 EDUCATION IN AMERICA 637

started long before there was a sity world because there has been Students for a Demonic Society a prior breakdown in discipline at nonorganized organization. In one home. He surveys a situation in sense, the SDS-ers, ugly and stupid which our "mass" oriented insti­ though they may be in the tactics tutions run the risk of being they have chosen, are more victims merely "custodial" rather than than victimizers: they are the chil­ educational. The child passes from dren of the Age of Relativity, the hands of the baby sitter to the which is dedicated to the principle teacher as "adolescent sitter," and - or the nonprinciple - that there in the shuffle of massive enroll­ are no fixed truths, no values worth ments the "custodial" teacher has cherishing. Educational values are no impulse (unless he happens to not possible in a college world that have an unusual conscience) to lacks convictions and reference teach the individual to think for points, and it is to the lack of values himself within a framework of the that George Charles Roche III has quest for truths that are open to addressed his main inquiry in a those who are diligent students of brooding book, Education in Amer­ the past. ica (Foundation for Economic Ed­ ucation, $3.50 cloth, $1.75 paper). The Multiversity Complex: Publish or Perish Permissiveness at Home and School Dr. Roche levels some of his Dr. Roche has many things on most telling shafts at the big "mul­ his mind. There are the parents, tiversity" that prizes what passes for one thing. The worst offenders for modern research more than it on the campuses happen to be the prizes an individual relationship sons and daughters of middle-class between teacher and student. He affluence, kids who have never seen thinks the student has a legitimate from close-up what happens in gripe against the big"superspecial­ lands where State enterprise has ized" university where "a mass of replaced the individual organizer. trivial research tends to contami­ It is a cliche, and an untrue one to nate the atmosphere." The stu­ boot, that a generation gap exists dents in quest of instruction feel between the revolting campus "lib­ "betrayed by an educational struc­ erals" and their parents: for the ture which has become increas­ most part they stand for the same ingly unresponsive to their aca­ permissiveness. demic needs and oppressive to their Dr. Roche is convinced that development as responsible adult there is no discipline in the univer- individuals." Ortega was right: the 638 THE FREEMAN October professor who is ignorant of many penalty,' 'group-acceptance,' etc., facets of human existence'! "reacts etc., abound in articles, speeches, as an unqualified mass-man" out­ meetings, and school ,catalogues. side of his specialty. Together with other ideological di­ Dr. Roche quotes an unnamed rectives, they constitute the af­ Stanford psychologist as saying firmation that God and individual that before the year 2,000 is onr us men do not exist apart from the we will have to take ":t;aQical ac­ collectivity. Moreover, they imply tion" to "limit the outpouring of that man's adjustment to the col­ specialized and often trivial pub­ lectivity is the supreme guarantee lications that even now all but that he is not in error." inundate the offices of every aca­ The late Benjamin Stolberg put demician." The prestigious conege it simply: "One doe'S not think in of the future, says this Stanford committee." observer, "win begin by making Dr. Roche's book is enough to rules forbidding their professors make devil's advocates of all of us. to publish until they have been on The spectacle of the educational the faculty five or even ten years. world that he has anatomized con­ They win thus create a campus firms meln my belief that the way culture in which publishing is con­ to do a boy or a girl a good turn I sidered not good form." is to keep him out of our more prosperous educational institu­ Committee Mentality tions. There should be less public Then there is the "committee "aid to education," fewer billions mentality" to combat. As Dr. poured out by state and munici­ Roche says, the highest campus pality. Let those who hunger for awards seem to go to organizers knowledge get it on their own; if and co-ordinators rather than to they can manage to do this, they genuinely creative and original will appreciate it. Better to send a minds. Thomas Molnar's observa­ boy or girl to one of the smaller tion is pertinent here: "One glance colleges - Ben Rogge's Wabash, at pedagogical literature," says say, or John Howard's Rockford - I Mr. Molnar, "reveals the collec­ where the "publish or perish" fet­ tivistic preoccupation: 'Commit­ ish has not gone to Berkeleyan ex­ tee,' 'cooperation,' 'integration,' tremes. 'teamwork,' 'group-project,' 'ma­ And a word for the big corpora­ jority-objectives,' 'peer-group,' tions: Let them do more of their 'group-process,' 'group-imposed recruiting in the high schools, regulations,' 'group-determined where they will be able to find stu- 1969 EDUCATION IN AMERICA 639 dents who have not yet been cor­ better off if it were forced to go rupted by what passes for univer­ back and scratch for its funds. sity teaching. If Dr. Roche is right Who knows, if the public "aid to about the educational world whose education" shibboleth is scotched, devalued state he has so trench­ we might get some good propri­ antly criticized, we would all be etary colleges. •

Bound volumes now available-

EDUCATION IN AMERICA by George Charles Roche III

CHAPTER TITLES:

1. What Has Happened? 2. Freedom, Morality, and Education 3. Scientism and the Collapse of Standards 4. The Decline of Intellect 5. Discipline or Disaster? 6. The Perpetual Adolescent 7. Why Institutionalize Our Errors? 8. ,The Multiversity 9. Academic Freedom for What? 10. Revolt on Campus 11. Creativity 12. A Philosophy of Growth

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~ THE MAN FROM MONTICELLO the White House are remembered (An Intimate Life of Thomas Jef­ only for that reason, but this was ferson) by Thomas Fleming (New only one of Jefferson's claims to York: William Morrow & Com­ fame and one which he did not pany, Inc., 1969), 409 pp., $10.00. even choose to mention on his Reviewed by Robert M. Thornton headstone. Limiting himself to a one-vol­ NONE OTHER of the Founding ume work, Mr. Fleming has to be Fathers is invoked more often selective in what he tells of J ef­ than Thomas Jefferson by those ferson; nevertheless, he offers a arguing the political questions of fine and readable portrait of the our day. He is variously claimed Sage of Monticello. Fleming, like by conservatives and "liberals," Albert Jay Nock, sees Jefferson as progressives and agrarians. Mr. perhaps the most civilized man Fleming does not try to enlist our ever produced in this nation, of a third President for this cause or stature to equal such a world fig­ that, but his Jefferson clearly dis­ ure as the great European, Goethe. trusts the all-powerful state and But Fleming, unlike ·Nock, does actively opposes high taxes and not see Jefferson as being always wasteful spending by the gov­ the disinterested philosopher and ernment. Fleming barely touches statesman. Jefferson was, after all, on the role of Jefferson as states­ human; he had his loves and hates man, focusing instead on the great and anxieties and on occasion was patriot off his pedestal. We see known to lose his temper. Jefferson as thinker, politician, Anyone wishing to become bet­ farmer, scientist, inventor; as hus­ ter acquainted with one of the band, father, grandfather, and greatest of all Americans, and one great grandfather; as host and of the most charming, could do no neighbor, horseback rider and vio­ better than to read this book along linist; as correspondent, traveler, with Nock's Jefferson and Eliza­ and diarist. Many occupants of beth Page's The Tree of Liberty.,