THEFREEMAN IDEAS ON LIBERTY

FEATURES

460 The Pine Barrens Parousia: A Reporter's Notebook by Matthew Carolan Feisty landowners fight land-use regulation on Long Island. 462 Transfer of Development Rights: Top-Down Planning in Disguise by Sarah Foster Beware "market-based" or "market-oriented" regulatory schemes. 467 Government Funding for Not Training Doctors: Another Odd Program by Herbert London An idea as flawed as agricultural subsidies. 469 Fore: Watch Out for Government Golfl by Raymond J. Keating What's wrong with amateur golf-and what could go wrong with pro golf. 472 Henry Grady Weaver's Classic Vision ofFreedom by John M Hood Honoring the fiftieth-anniversary edition of The Mainspring ofHuman Progress. 479 "From Small Beginnings": The Road to Genocide by James A. Maccaro How the German medical profession came under the total domination ofthe Nazi regime. 482 Government: An Ideal Concept-Leonard Read's Formula for Freedom by Esler G. Heller Reassessing a classic. 488 Why Managed Trade Is Not Free Trade by Robert Batemarco A crucial distinction. 491 One Life for Liberty by BeckyAkers The story ofNathan Hale. 496 Anne Robert Jacques Turgot, Who First Put Laissez-Faire Principles into Action by Jim Powell A champion ofreligious toleration, free expression, sound money, and prudent government. 511 The Undiscountable Professor Kirzner by Roger W Garrison A look at Israel Kirzner's Essays on Capital and Interest.

COLUMNS

Center NOTES from FEE--coercivists and Voluntarists by Donald J. Boudreaux 465 IDEAS and CONSEQUENCES-Deregulation: Coming to a Utility Near You by Lawrence W Reed 477 POTOMAC PRINCIPLES-Is Voluntarism Enough? by Doug Bandow 508 ECONOMICS on TRIAL-Has Capitalism Failed or Succeeded? The Tale ofTwo Graphs by Mark Skousen

DEPARTMENTS

458 Perspective-W 1. Brogdon, Jr., George C. Roche III 514 Book Reviews Red Flag Over Hong Kong by Bruce Bueno de Mesquita, David Newman, and Alvin Rabushka, reviewed by George C. Leef; Facts, Not Fear: A Parent's Guide to Teaching Children About the Environment by Michael Sanera and Jane Shaw, reviewed by Gregory F. Rehmke; Up From Poverty: Reflections on the Ills of Public Assistance, edited by Hans F. Sennholz, reviewed by Dale Matcheck; Libertarianism: A Primer by David Boaz, reviewed by John Attarian; Epitaph for American Labor by Max Green, reviewed by David Kendrick. THEFREEMAN IDEAS ON LIBERTY PERSPECTIVE Published by A Private-Enterprise The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Gold Standard? Phone (914) 591-7230 FAX (914) 591-8910 E-mail: [email protected] How can a business with international sales FEE Home Page: http://www.fee.org protect itself from fluctuations in exchange President: Donald J. Boudreaux rates caused by monetary policy? One small Managing Editor: Beth A. Hoffman Guest Editor: Raymond J. Keating custom-automobile builder in England is try­ Editor Emeritus ing a simple, if radical, solution: Marlin Cars Paul L. Poirot Lewisburg, Pennsylvania ofCrediton, Devon, has announced prices for Book Review Editor their handmade cars in ounces ofgold. Marlin George C. Leef Adjunct Professor ofLaw and Economics, cars combine modern engines, transmissions, Northwood University Editorial Assistant and suspension systems with traditionally Mary Ann Murphy styled aluminum bodies and box-girder steel Columnists Doug Bandow frames. In preparing to fill sales orders from Cato Institute, Washington, D. C. various countries, Marlin has become caught Lawrence W. Reed Mackinac Center for Public Policy up in the growing controversy over European Midland, Michigan Currency Units. Mark Skousen Rollins College, Winter Park, Florida Terry Matthews, Marlin's director, said, Contributing Editors Charles W. Baird "We're sick and tired of all this posturing by California State University, Hayward politicians, pundits, and economists over Peter J. Boettke New York University whether the U.K. should opt in, opt out, or Clarence B. Carson even 'twin-track'-so we've decided to go it American Textbook Committee Wadley, Alabama alone. We're more than happy to cut short the Thomas J. DiLorenzo Loyola College, Baltimore, Maryland debate by quoting the international prices of Joseph S. Fulda our cars in gold." Ms. Matthews says that the New York, New York Bettina Bien Greaves company is valuing a basic Marlin Hunter Resident Scholar, FEE two-seat sports-tourer with electric windows, John Hospers University of Southern California manual gearbox, and a Ford DOHC 2.0 liter Tibor R. Machan Auburn University engine at 85 ounces of gold. Ronald Nash "This means that a customer anywhere in Reformed Theological Seminary Edmund A. Opitz the world only needs to check this figure Chatham, Massachusetts against the prevailing local rate for gold James L. Payne Sandpoint, Idaho bullion to get an actual price of one of our Jim Powell Westport, Connecticut cars," she adds. "As a standard, the quantity William H. Peterson in circulation is relatively stable; no one can Adjunct Scholar, Heritage Foundation, Washington, D. C. easily print more of it to satisfy short-term Sheldon Richman economic or political goals. As a unit ofvalue, Foundation for the Future ofFreedom Jane S. Shaw gold is recognized the world over as a hedge PERC, Bozeman, Montana Richard H. Timberlake against monetary uncertainty." University of Georgia Strong historical evidence shows that gov­ The Freeman is the monthly publication of The Foundation for ernments consistently inflate money in an Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is a non-political, educational effort to obtain more taxes. This has been true champion ofprivate property, the free market, and limited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. at least back as far as the Roman Empire, Copyright © 1997 by The Foundation for Economic Education. Permission is granted to reprint any article in this issue, except when Rome began making coins of less valu­ "Turgot," provided credit is given and two copies of the reprinted material are sent to FEE. able alloys. The problem is becoming acute in The costs of Foundation projects and services are met through dona­ tions, which are invited in any amount. Donors of $30.00 or more receive Europe, where the search for a common a subscription to The Freeman. Student subscriptions are $10.00 for the nine-month academic year; $5.00 per semester. Additional copies of this currency has revealed in stark detail the issue of The Freeman are $3.00 each. For foreign delivery, a donation of reluctance of nearly every country in the $45.00 a year is suggested to cover mailing costs. Bound volumes of The Freeman are available from The Foundation for European Union to give up control of their calendar years 1972 to date. The Freeman is available in microform from University Microillms, 300 N. Zeeb Rd., Ann Arbor, MI 48106. money. Conservative economists have tried 458 PERSPECTIVE for years to get governments to readopt the consolidation of power in the new dispensa­ gold standard, with little success. Such deci­ tion has steadily advanced. sions are more political than logical, and there In Frank Chodorov's words: "The present are many monetarist economists who think disposition is to liquidate any distinction that returning to the gold standard would be between State and Society, conceptually or disastrous. It certainly would wreck their institutionally. The State is Society; the social active monetary policies, but it could give a order is indeed an appendage of the political stable basis for exchange, with low interest establishment, depending on it for suste­ rates for borrowing and the ability to save with nance, health, education, communications, security. and all things coming under the head of the Is it possible to establish a "private" gold pursuit of happiness." standard, that is, one independent of gov­ Such a system gives far too little to man's ernment action, one dependent on markets freedom or personality. The state swallows alone? This little company believes it is, the individual. Even if such centralization strongly enough to become the spearhead of were efficient in the satisfaction of human a movement to quote prices in gold. The wants, which it is not, the means used to beauty of Marlin's policy lies in the inability achieve the end would still be unacceptable of· any government to forbid it. Countries simply because they are incompatible with can forbid private ownership of gold, but human freedom. can't prevent their citizens from using the Even more dangerous, perhaps, is the risk price of gold as a standard for exchange. that the very concept of freedom itself can The danger of this concept lies in the become so misused and distorted within such fluctuations in gold prices with respect to a society that no individual dare lay claim to local money. Yet that very danger becomes any rights or dignity having a higher source a strength when measured against a cur­ than the society in which he lives. At that rency of declining value. With all the debate moment, the guarantees developed by West­ about establishing a gold standard and ern civilization to protect the individual from multinational fiat money, why can't busi­ the arbitrary exercise of power have in effect nesses simply quote the prices of their all been swept away, no matter what label that products in gold? Why indeed can't they society might give itself. establish a de facto gold standard? One tiny Once such checks upon the exercise of company is betting that it can be a start. power have been removed, all the internal -We J. BROGDON, JR. vitality and freedom within such a society are open to destruction in the name of "order." Bill Brogdon, a retired captain in the U. S. Coast Soon the preservation of "order" or the Guard, resides in Cape Cartere~ North Carolina. pursuit of the "greatest social good" is iden­ tified with whatever action the wielder of centralized power deems suitable. Resistance State and Society against the exercise ofsuch power comes to be viewed by society not as an expression ofhuman Some astute observers, such men as Nietz­ individuality and free choice, but as an assault sche and Burckhardt, were warning as long upon the public good, a crime of the selfish ago as the mid-nineteenth century of the individual against the selfless community. dangers stemming from the new mass-man -GEORGE C. ROCHE III and the new mass-state. Social critics of our The Freeman, August 1967 own time, of the stature of Wilhelm Roepke adapted from "Power" and Ortega y Gasset, have pointed to more and more signs of the dangers inherent in the Dr. Roche, a former FEE staff member, is centralized modern state. Meanwhile, the president ofHillsdale College.

459 THEFREEMAN IDEAS ON LIBERTY

The Pine Barrens Parousia: A Reporter's Notebook by Matthew Carolan

ircling the corner of Doe Run in Manor­ sale, next to beautiful new homes currently C ville, New York, my guides and I came valued at around $300,000. across a young married couple discussing with Indeed, all sorts ofparousia-like exceptions their landscaper the finer points ofdecorative have been made for certain people in the Pine rock gardening. Just another idyllic day here Barrens. Certain town parcels, school districts, on the East End of Long Island, it seems, a and large real estate developers' plots have stone's throw from the lovely Peconic River. been magically declared out ofthe ecosystem; Right behind the couple's home, however, market-value cash payments have been made stands a large parcel ofland, which belongs to to other large corporate landowners; and cash­ Gloria Hendricks, a Manhattan resident. Ms. strapped landowning boy scouts have received Hendricks will never be able to do rock big checks in photo-ops with the governor, placement with her landscaper, though, or and disappeared without a complaint. even cut down a pine tree on her property. Meanwhile, other landowners, many of Despite being in the same neighborhood, in them elderly, get no cash, no exemptions, the same "ecosystem," and on top ofthe same and have no place to go. aquifer as her neighbors, an environmental These small landowners are the victims of "emergency" has led to the suspension ofher years ofregulatory warfare waged on them by property rights, in a display of public policy their government. It started to reach critical that can only be compared to a parousia. mass back in the early-to-mid-1980s, when the A parousia is, biblically speaking, a phe­ first newspaper articles appeared touting the nomenon where "one will be taken, the other importance of the Pine Barrens aquifer, a shall be left behind." Translated into land-use water supply, it is alleged, threatened by terms it means some will be allowed to build development on the East End. What's more, or get bought out, others won't. Translated lawsuit after lawsuit came from environmen­ into constitutional terms, it means a violation talist visitors to the island, to protect the of equal treatment under the law. "open space" or "viewshed," and the dwarf Take Doe Run, for example. My guides and pine, the harrier hawk, and the buck moth. I observed several choice building plots for The end result of all this agitation, spear­ headed by the Long Island Pine Barrens Society, has been the passage by the state of Matthew Carolan is executive editor of National New York in 1993 of the Long Island Pine Review. For additionalinformation, contact the Civil Prop­ Barrens Preservation Act. The act has been erty Rights Associates, P. O. Box 202, Brightwaters, sold as essential to protect Long Island's NY 11718, (516) 665-2020. drinking water. That is not true. Studies by 460 461 consultants to the Suffolk Water Authority Indeed, on two occasions the county has have shown not only that one-acre develop­ raided sales-tax monies set aside for cash ment throughout the county could occur with compensation to the landowners to balance no damage to the water supply, but also that its budget-once under a Republican, once there is another lower glacial aquifer that is under a Democrat. virtually incorruptible and can supply the The county has also picked up many parcels county for centuries. (There are also options ofland ofdead people, or by tax default, or by like private water rights and markets, which sheer exhaustion. Russell Furia, who had no one seems to have explored.) signed contracts worth millions for the devel­ The landowners have no representative on opment of his 75 builder's acres, saw land­ the newly created "Pine Barrens Commis­ owners across the street from him protected sion," an unelected body comprised of the from upzoning and regulation, while he ended supervisors ofthe three major East End towns up pleading with county planners to develop (Riverhead, Southampton, and Brookhaven), 30 houses. Then 12, on two-acre plots, and the Suffolk County Executive, and a repre­ again on one-acre plots, both times with land sentative of the governor. Some of those mem­ donation. Then one-with land donation. bers rarely attend the meetings, sending subor­ Each time he was told no. They knew they had dinates instead, all the while coordinating with him over a barrel; he couldn't afford the taxes technocratic zeal the massive project of elimi­ for long. After ten long years he sold out to nating development in the Pine Barrens-even them at what he estimates was a total loss. though they have never read the entire Pine Edwina Foster tried to complain. She, two Barrens law. They also rely on the town boards, sisters, and a brother, who were left land by many of whose members also have never read their grandmother, put up a sign denouncing the two-inch thick document to "upzone" the the zoning law changes, tax hikes, arbitrary land; that is, increase the minimum number of applications of state law, and the dubious acres that any home must be built on, to reduce transfer of development rights-the "Pine Bar­ its value, and thereby reduce the compensation rens Land Theft"-that had deprived them of due landowners, in cash (unlikely) or payment their familial compound. Forthat sign theywere in dubious transfer of development rights (see called into court for violating the zoning law. related story, p. 462). Meanwhile, the landown­ I have personally met some of the land­ ers pay taxes on the original pre-zoning value of owners-a handful of feisty elderly people, the land, and those taxes are regularly raised by members of the Civil Property Rights Asso­ the towns. ciates. So desperate are they for help that they "As a political official I'm often invited to drove over an hour to a diner near my home regulatory seminars," says Gary Vegliante, to talk with me. One nonagenarian, who has Republican mayor of Westhampton Dunes, battled the county for decades, had wanted to and one of the few politicians critical of the come too, but the others feared for his health. Pine Barrens legislation, "and you'll hear They have scraped together everything they government agency officials, regardless of have for a suit which at this writing is in their political disposition ... get up there and federal court. Some of them talk wistfully say, 'well, upzoning is an excellent way of about the Suitum case, hoping that it will reducing the value of an area, and later if mean the end of transfer development rights. you're looking through the condemnation Perhaps then, the motley band of environ­ process you'll acquire it more cheaply.'" mentalists, craven politicians, and snobby Not that condemnation is an option here. anti-growth types will measure their own Transfer of development rights is the vogue passionate version of the public good against because, as Suffolk County planner Lee Kop­ the Framers' demand for cash compensation. pleman advised back in the 1980s, condem­ But right now these poor folks have virtually nation means ceding control over the fair nowhere to turn. I'm not sure what I can market value to a judge, exactly what the do-except tell every person I know about cash-strapped county does not want. this tyranny. 0 THEFREEMAN IDEAS ON LIBERTY

Transfer of Development Rights: Top-Down Planning in Disguise by Sarah Foster

adicals ofthe 1930s had a favorite saying: TDR is, in essence, a system of land des­ R Take it easy, but take it. That is to say, ignation, with certain parcels being catego­ a step-by-step, easy-does-it approach is the rized either as "sending" or "receiving" sites. most efficient and palatable way to implement Development is restricted or completely de­ socialism. Their intellectual heirs understand nied on the first, while permitted on the latter. the principle even better, and have had over As described by city planner Rick Pruetz: 60 years to perfect strategies. Although the "Using TDR, development rights which are idea of centralized economic planning is cur­ not used at a sending site can be transferred rently out of favor and there is resistance to to a receiving site where additional develop­ "top-down" policies, the effort to increase ment is consistent with community objectives."l governmental control over our lives and prop­ TDR rests on the concept that "title to real erty has never slackened. estate is not a unitary or monolithic right, but The most successful strategies today are ... a 'bundle ofindividual rights,' each one of processes that demand active public partici­ which may be separated from the rest and pation, thereby creating an illusion ofpopular transferred to someone else, leaving the orig­ control and "bottom-up" policy- and deci­ inal owner with all other rights of owner­ sion-making. One such tactic is to insert ship."2 Mineral rights are an example. In trading or selling mechanisms into blatantly practice, here's how it works. Property owner socialistic schemes and label them "market­ A wants to build an apartment house, but his based" or "free-market-oriented." parcel is zoned for a single-family home. The use of transfer of development rights Across town, owner B is told she can't develop (TDR), which city councils across the country . her land because a species of endangered fly are making part of the local building-permit lives there. Not to worry. The government process, is the strategy adapted to land-use grants the owner of the fly-specked parcel regulation. For every case where a property permission to sell the rights she's forbidden to owner's rights and the land itself have been exercise to the man who wants to build an trampled by agents from the U.S. Fish and apartment house. Ifeach learns of the other's Wildlife Service or Army Corps of Engineers, plight and A buys the ersatz rights from B, thousands of quiet "takings" are exacted by owner A can build to a greater density than local governments using TDR. otherwise allowed. In other words, B has sold a zoning variance to A, probably for "pea­ Ms. Foster is an associate a/the Western Journalism nuts." B still owns the land and must continue Center. paying taxes on it. 462 463

Dodging "Just Compensation" That could change. In Februaryofthis year, the U.S. Supreme Court heard Suitum v. Proponents admit TDR is a way for gov­ TRPA, which both sides agree is the most ernments to take land out of use while dodg­ important "takings" case in half a decade. ing the "just compensation" requirement of Though in a wheelchair and nearly blind, the the Fifth Amendment. According to Pruetz: 82-year-old plaintiff, Bernadine Suitum, made the trip from her home in Sacramento to Often, communities are reluctant to restrict Washington, D.C., to hear her case argued by development on the sending sites without pro­ viding some kind of compensation to the prop­ attorney R. S. Radford ofPacific Legal Foun­ erty owner, and usually there is little orno public dation. The Sacramento-based public­ funding to provide this compensation. TDR interest law firm is well known for its success­ solves this problem by providing transfer of ful handling of such cases as Lucas v. South development rights as compensation. The com­ Carolina Coastal Council and Dolan v. City of munity saves the sending site with little or no public expenditure.3 Tigard, Oregon. Mrs. Suitum had taken on one of the most TDR is used not only to preserve open powerful regulatory agencies in the country: space, historic landmarks, agricultural land, the Tahoe Regional Planning Agency and natural areas like hillsides and streams, (TRPA), a bi-state entity formed in 1970 as a but also to force "densification" and "urban­ compact between Nevada and California, ization" when a city council or other agency with approval by Congress. TRPA exercises decides people ought to live downtown in­ virtually complete control over land use in the stead of in suburbs. It can be the primary Tahoe Basin through a particularly complex system of land-use regulation, a substitute and draconian TDR program. for-or used with-zoning power. Whatever In 1987, ostensibly to improve the clarity of the goal, the agency simply designates "send­ Lake Tahoe, TRPA developed a new general ing" and "receiving" areas or sites. "We only plan designed to limit the number of houses. set the policy," the planners say. "You, the About 10 percent ofthe Basin's 204,000 acres public, are free to work out the details in the were designated as "stream environment marketplace." zones" (SEZ), and off limits to development. Since the purpose of TDR is to force partic­ The empty parcels within these zones, argues ipation in government-created "markets," ex­ TRPA, are "sponges" that filter storm runoff cessive controls on land use are necessary. As so contaminants don't get into the lake.s Pruetz puts it: "Successful TDR programs Mrs. Suitum owns such a parcel, a 2/5th­ strongly encourage transfers by making devel­ of-an-acre lot she and her late husband ac­ opment difficult or impossible on sending sites quired in 1972 in Incline Village, Nevada. ... [and] ... making it difficult or impossible to When, in 1989, she was financially able to achieve additional density on receiving sites build her long-deferred dream house, she was without using the TDR method."4 told her tiny parcel was in a SEZ and anynew The TDR idea was introduced in the 1960s, "land coverage," such as a house, was pro­ but it's taken time for it to catch on among hibited. Never mind that hers was almost the local governments. Not surprisingly, as more only vacant lot in a now completely built-up and more people find themselves in "sending" residential area and has houses on three sides. areas and would-be developers of "receiving But though Mrs. Suitum had to leave her sites" suddenly discover the additional per­ land vacant as an alleged public benefit, mitting costs and requirements, resistance is TRPA refused to admit this was a "taking" growing. But in anticipation of such public and denied her claim for just compensation. awareness, the architects of TDR set up Worse, she was not even allowed to contest it roadblocks on the usual avenue for redress: in court. Normally, when a government entity the courts. To date, it's been difficult, if not wants your land, say, for a school or road, and impossible, for an aggrieved property owner you say "No," it seeks a condemnation order to have a "takings" hearing. in court. Then follows a lot of haggling, and 464 THE FREEMAN • AUGUST 1997 you mayor may not receive "just compensa­ since Mrs. Suitum has been denied access to tion," but at least you get something. the courts on the question of compensation. In the case of "regulatory taking," where In late May the High Court ruled unani­ government wants a particular property kept mously in her favor on the "due process" in a natural or otherwise restricted state for issue, opening the way for her long-deferred the "public good," doesn't want to pay for it, day in court. It's now up to a Nevada judge to and has passed a regulation preventing de­ decide if Mrs. Suitum is entitled to compen­ velopment or other use, the property owner sation. Left unresolved, however, is the asks the court to determine if a "taking" has broader issue of TDR since she did not occurred. If the court says one has, price challenge the validity of the land use regula­ wrangling can begin. tions that underlie the process. The Court In Mrs. Suitum's case, the lower courts noted, "... her only challenge to the TDRs ruled that since Mrs. Suitum had not partic­ raises a question about their value, not about ipated in the quasi-sales process made avail­ the lawfulness of issuing them. Suitum seeks able through TRPA, it was impossible to not to be free ofthe regulations but to be paid determine if a "taking" had occurred. There­ for their consequences." fore, she'd have to go through that process Though the decision is not as far-reaching first. as many hoped it would be, the case has TRPA had given Mrs. Suitum three kinds brought the issue of TDR to the foreground of TDRs and basically said "Go peddle 'em." of discussions on property rights and govern­ But not to just anyone. No, the buyer or ment processes. As long as the State claims a buyers must be certified eligible by TRPA and "right" to take property for whatever rea­ any sale had to be TRPA approved. Specifi­ son-and the public agrees to the principle­ cally, she was granted one Land Coverage the proper place for dispute and settlement is Right of 183 square feet (about the size of a the courtroom, not the marketplace. The bedroom), a Residential Development Right face-off should be between the individual and (representing a single-family house or unit), the State, not between individuals forced to and the "right" to participate in a yearly participate in phony market schemes to lottery for a Residential Allocation. TRPA achieve government "goals." admits her chance of winning this last is This leads to the deeper issue of goal­ about one in five. None of these so-called setting by the State. What right have planners rights enables Mrs. Suitum to build her home and government officials to set goals of any on her own lot. kind for the "community"? Why should Mrs. Suitum sued, claiming that despite people be forced to participate in their TRPA's claims, her property had been ren­ implementation? Matters of land use, child dered worthless and the TDRs were of no care, education, or any of a host of other value since there's no real market for them. concerns-none of these are areas for gov­ How was she, an elderly person in a wheel­ ernment involvement, let alone goal-setting. chair, expected to sell such intangibles? Was This is centralized, top-down planning in she to go door to door asking folks if they disguise, foisted on an all-too-complacent needed a credit to build an extra bedroom? populace. That's the basic issue in the TDR TRPA officials were shocked at the chal­ dispute and what must be challenged. 0 lenge. "She's asking to take away some of the tools that are used to make the world a better place," announced one outraged TRPA at­ 1. Rick Pruetz, Putting Transfer ofDevelopmentRights to Work in California (Point Arena, Calif.: Solano Press, 1993), p. i. torney, in effect speaking for bureaucrats and 2. Jerome G. Rose, et aI., The Transfer ofDevelopment Rights: planners everywhere. A New Technique ofLand Use Regulation (New Brunswick, N.J.: Center for Urban Policy Research, Rutgers University, 1975), The case has focused on the Constitutional p.3. issues of denial ofjust compensation as guar­ 3. Pruetz, p. 3. 4. Pruetz, pp. 2-3. anteed by the Fifth Amendment and denial of 5. Sacramento Bee, February 23, 1997, p. AI. due process guaranteed by the Fourteenth, Ideas and Consequences by Lawrence W. Reed

Deregulation: Coming to a Utility Near You

ne of the most important policy debates starters. Various self-anointed consumer O of 1997 concerns deregulation of the advocates predicted that when President nation's electrical power industry. The issue, Reagan eliminated the last of the controls on a hot topic at both the federal and state levels natural gas in 1985, prices would skyrocket. of government, boils down to a simple ques­ They also said that the United States would tion: If this protected and tightly controlled experience a shortage of gas. They were industry is thrown to the marketplace, who wrong. Prices plunged and no one these days will benefit and will prices rise or fall? wonders if we're going to have enough of the If deregulation of natural gas, telecommu­ stuff. Adjusted for inflation, wellhead prices nications, railroads, airlines, and trucking are fell by 60 percent between 1984 and 1995. any indication at all, consumers have nothing Residential and commercial customers saw to worry about. The experience in those their gas prices drop by at least 32 percent. industries strongly reinforces what econo­ Consumers are also better off because of mists have been telling us for decades: Com­ the deregulation of the trucking industry, petition is good; ifallowed to work its wonders which began in 1980. The number of carriers it will improve service and efficiency while doubled in the first six years. Prices are down cutting costs to consumers. That's the mes­ between 28 percent and 56 percent, Crandall sage of a very important study circulating in and Ellig show. Washington and in state capitals as the elec­ Railroads suffered under the thumb of tricity debate intensifies. federal rules longer than any other American The study, published a few months ago by industry-since 1887, in fact. Regulations the Center for Market Processes at Virginia's stifled competition, boosted costs, reduced George Mason University, was written by management flexibility, and left railroads un­ economists Robert Crandall and Jerry Ellig. able to compete effectively with alternative, Titled "Economic Deregulation and Cus­ and often subsidized, modes of transporta­ tomer Choice: Lessons for the Electric Indus­ tion. The result of decades of regulation was try," it has received wide attention and high widespread shrinkage of the industry and the acclaim since its release. It prompted News­ bankruptcy of many individual companies. week columnist Robert Samuelson to observe Along came railroad deregulation in 1980. that when deregulation is done right, "it pays Since then, prices have declined 44 percent. big dividends." Delivery time has improved dramatically. The Take the deregulation of natural gas, for industry is showing some life again. Since telecommunications was opened to Lawrence W. Reed, economist and author, is presi­ dent of the Mackinac Center for Public Policy, a competition and market forces in the early free-market research and educational organization 1980s, long-distance prices have been cut headquartered in Midland, Michigan. almost in half. Spurred by competition, tele- 465 466 THE FREEMAN • AUGUST 1997 communications providers have invested a Electric Light Association (NELA), a major fortune in fiber optics-replacing copper utility trade group, was to "show the public wires with technology that permits far greater that competition in public utilities was unfea­ efficiencies and higher quality service. sible." Finally, airline deregulation has worked Insull's first strategy was to "heighten fears wonders, too. Far more Americans are flying of socialism in order to promote acceptance today than before deregulation, largely be­ of government-regulated monopoly as a less­ cause prices have dropped by almost one­ undesirable alternative." The NELA ad­ third since 1978. Planes are safer than ever vanced its agenda, according to Olasky, with before. Now, if only governments would de­ the unwitting help of the news media: regulate the airports they own, or sell them, "Annual payments of $84,000 from Insull's we can cure the remaining problems that NELA allowed Hofer [an Oregon public plague air travelers on the ground. relations firm] to send out almost 13,000 What are the free-market lessons here? newspaper articles annually. The articles "Within ten years of deregulating each indus­ usually appeared as unattributed, 'original' try," write Crandall and Ellig, "prices were at editorials." least 25 percent lower, and sometimes close to In addition, Insull and other utility execu­ 50 percent lower." tives lobbied local newspapers and politicians Already, electric utility deregulation in persistently to support the idea that regulated Great Britain and New Zealand has resulted private monopolies were good for industry in greater supplies of electricity and lower and for consumers. Utility officials even paid prices. Electrical deregulation in the United to have chapters promoting natural monopoly States can be a certainwinner too, butwe may included in textbooks and, reports Olasky, first have to expunge from the debate a "moved to excise from government and eco­ longstanding myth about why government nomics textbooks passages opposing regu­ became involved in this industry in the first lated monopoly." place. Greg Rehmke of the Free Enterprise In­ Foryears, most people thought that electric stitute in Houston, an authority on the history power could not be a competitive enterprise ofhigh-school debate competition, says that a with multiple providers operating in the same Missouri utility executive once sent a col­ market. To prevent price gouging and other league to investigate the judging of St. Louis abuses, it was widely assumed that govern­ high-school debates concerning electric rail­ ment would either have to own electric com­ ways because the debates had been won by panies or heavily regulate the rates and prac­ those critical of the regulated monopoly po­ tices of private ones. sition. This executive reported back the dis­ Utility monopolies were once considered quieting truth, says Rehmke, that the anti­ "natural" because it seemed more efficient if monopoly debaters were winning because one firm provided the electricity for a given they had better arguments. area, rather than having two or three firms Between 1905 and 1934, 40 states estab­ string power lines through neighborhoods. lished public utility commissions to protect The acceptance of the concept of natural established utilities from new competition monopoly, however, did not proceed from and to regulate them as "natural" monopo­ careful, objective study. lies. Economist G. A. Jarrell, in the October In the early 1900s, electric utility pioneer 1978 Journal ofLaw and Economics, showed Samuel Insull of Chicago Edison led a na­ conclusively that utility regulation was the tionwide public relations campaign to con­ direct result of the utilities themselves lobby­ vince politicians, the media, and the general ing for legislation that would protect their public that utilities should be regulated as profits by keeping rates high and freezing monopolies rather than be subject to compe­ newcomers out. tition. Historian Marvin Olasky has found In almost every state today, the debate over that Insull's goal as president of the National electricity deregulation is in full swing. Legal GOVERNMENT FUNDING FOR NOT TRAINING DOCTORS 467 barriers that have prevented customers from other states thatwill want to enter the market. purchasing electricity from anyone but the New companies no one can yet envision may local utility monopoly may soon be abolished. also spring up. You can bet that better service That means customers can then choose from and lower prices will be the result. competing providers, much as they now The world is entering a new era of global choose which long-distance telephone service markets-highly competitive and driven not they want. by central planners but by the forces ofsupply, The companies which have long enjoyed demand, and technological advance. In that protected monopoly status granted by state environment, there's nothing about electricity and local governments will have to prove that that makes it anything but a prime candidate they can do the job better than firms from for vigorous deregulation. D

Government Funding for Not Training Doctors: Another Odd Program by Herbert London

n a plan many health experts describe as plan. "I've never heard anything like this I "brilliant" and "innovative," federal reg­ before. But I really can't find any fault with it. ulators announced recently that for the next Maybe this is one of the first rational collab­ six years they would pay New York State orations between hospitals and the Govern­ hospitals not to train physicians. ment." Of course, this plan isn't unprecedented. This plan was devised and proposed by For years the federal government paid farm­ officials of the Greater New York Hospital ers to let fields remain fallow. Now, the 41 Association, with the active compliance of teaching hospitals in New York State will be prominent politicians. Since New York trains paid $400 million not to train new physicians. 15 percent of the nation's doctors and the The purpose behind this proposal is to federal government finances that training to reduce the surplus ofdoctors and save money. the tune of $100,000 a year for each resident, Dr. Alan Hillman, a professor ofhealth policy the argument is made that fewer training at the University ofPennsylvania, is quoted in residents will result in a net financial benefit the New York Times as an endorser of the for the hospitals. Dr. London is John M Olin Professor ofHumanities Amid the congratulations and the backslap­ at New York University, New York. ping is a scheme as flawed as the nation's 468 THE FREEMAN'. AUGUST 1997 agricultural program. If anything, this plan United Kingdom. Even when these entities demonstrates yet again that politicians and ceased to have an economic rationale for health administrators know almost nothing their existence, government funds sup­ about economics. Leave aside the absurd ported them. subsidy for the training of physicians, which As an explanation for their enthusiastic the market could easily address without gov­ embrace of the plan, hospital executives said ernment intervention; by paying hospitals not the program would encourage them "to wean to train new doctors, health costs will be themselves from their dependence on the artificially increased. After all, dramatically cheap labor of residents." This, too, has an more doctors in an environment with modest odd ring to it. Hospitals currently receive population growth will in time decrease the large subsidies for doctors-in-trainingwho are cost of medical care. then paid a modest wage for a 90-hour work What about the experts who say they can't week. The logic is that these residents are find fault with this plan? Perhaps they also being trained on the job. But as hospital believe itwas rational to subsidize farmers for administrators readily admit, residents en­ not growing food. If this is a logical plan for gage in tasks that could easily be performed by hospitals and farmers, why stop there? There less highly trained personnel or even machines. are probably too many telephone carriers; Far better, it seems to me, to eliminate the after all, the price of long-distance calls has government subvention and put hospitals in been decreasing continually over the last the position of training or not training resi­ several years. Should carriers be subsidized dents as they see fit. There isn't any reason to for not installing new lines? assume that medicine must be treated differ­ Invariably there is the politician who be­ ently from unsubsidized professions. lieves he is smarter than the market. There is Should a free-market scenario be consid­ always the naysayer contemptuous of the ered, there would be physicians without gov­ "invisible hand." So enthralled are pols with ernment assistance and generally lower med­ the New York plan that they have already ical expenses when hospitals apply the objected to the "limited scope" of the pro­ efficiencies of the marketplace. As things gram. stand, the advertised public approval of the So this is how tax dollars are to be em­ fee-for-doing-nothing plan is a function of ployed. Presumably health-maintenance or­ economic ignorance and political back­ ganization standards and medical innovations scratching. which reduce hospital stays and the number of Admittedly, many farmers benefit from occupied beds will lead to further subsidies parity pricing that encourages idle fields. But for hospitals that are operating at the margin. just as surely, Americans are generally not The logic of this plan leads inevitably to a better off with food prices rising artificially situation similar to Soviet manufacturing or and tax subsidies to hospitals for not training government-subsidized coal mines in the doctors. D THEFREEMAN IDEAS ON LIBERTY

Fore: Watch Out for Government Golf! by Raymond J. Keating

oliticians love invoking sports metaphors Harding, and Wilson ranked as serious dev­ P in speeches almost as much as they relish otees. FEE founder Leonard Read was a doling out subsidies to professional sports like better-than-average golfer who occasionally baseball, football, hockey, and basketball. used golf anecdotes in his writings. But the Political rhetoric is sprinkled with such golf metaphor stays as rare in politics and sports-laced phrases as playing defense or economics as a double-eagle on a par 5. going on offense; protecting a lead; throwing Second, golf terminology would seem to a Hail Mary pass; long shots versus favorites; lend itselfto the ups and downs ofthe political fumbling legislation; the political line-up; world. For example, birdies, bogies, eagles, winning by a nose; hitting a home run; playing hooks, slices, buried lies, the rough, traps and hardball; and, of course, three strikes and bunkers, the left-to-right fade, the right-to­ you're out. At times, economists use such left draw, the yips, the dreaded shank, and of metaphors as well. course, gimmes, would seem to offer a wealth But other than the standard "par for the of metaphoric opportunities. course" cliche, which is used in general con­ Third, the actual manner in which golf is versation, golf rhetoric stands neglected in played should provide metaphorical grounds political and economic discourse. Such ne­ as lush as any fairway at Pebble Beach. More glect is rather peculiar for several reasons. than any other sport, golf should appeal as a First, golf is quite popular among politi­ rhetorical tool for free-market economists. cians and economists. For example, as Shep­ After all, the PGA Tour golfer stands as a herd Campbell and Peter Landau note in their model of the rugged, individualistic entrepre­ book Presidential Lies, all but four U.S. pres­ neur. Don't let those manicured greens and idents since William H. Taft have enjoyed the whispering television announcers fool you. game of golf with varying degrees of success Market judgment on the tour is swift and and enthusiasm. According to the authors, unequivocal. In few other sports is compen­ Presidents Kennedy, Ford, Eisenhower, sation on a week-to-week basis so closely tied Franklin D. Roosevelt (prior to contracting to performance. When a player labors in a polio), Bush, and Reagan generally possessed slump lasting a few weeks during the baseball the best games, though Clinton, Nixon, Taft, season, for example, he still gets paid. In golf, a severe slump means missing the cut, and not Mr. Keating, this month's guest editor, serves as chief getting paid at all. On the other hand, winning economist for the Small Business Survival Founda­ tion, andis the authorofNew Yarkby the Numbers: or finishing in the top ten at a tour event State and City in Perpetual Crisis (Madison Books, translates into a tidy profit. 1997). On the PGATour, big bureaucracies do not 469 470 THE FREEMAN • AUGUST 1997 exist. Each golfer's support staff is largely However, a rather dramatic change will limited to a caddy. Some pros might have an occur in 2002. The venerable U.S. Open­ instructor and an agent as well. The golfer is one ofgolfs four "majors"-will be played on a lean and mean sole proprietorship. the Black Course at Bethpage State Park in In addition, the ever-varying terrain of the New York. golf course should serve as a sound metaphor Not only will it be the first municipal course for changing conditions in the marketplace. to host the U.S. Open, but Bethpage State From course to course and hole to hole, the Park also ranks as the largest government golf market changes and shifts, requiring plan­ complex in the nation. Indeed, Bethpage rep­ ning, creativity, and innovation. resents what is wrong with amateur golf, and Market economists could also use golf to what could go wrong with professional golf. point out the woes of the welfare state. For The Bethpage golf center on Long Island has example, in golf a "gimme" means taking a been decades in the making. In 1929, the state short putt without actually putting the ball of New York bought the Lenox Hills Country into the hole-Le., a gimme is something for Club. Three more courses were added in the nothing. The entire welfare state is built on 1930s, courtesy of the renowned golf architect the concept of gimmes. A. W. Tillinghast and federal taxpayers through Also, amateur golf subscribes to the hand­ FDR's Works Projects Administration. An­ icap system, whereby players are given a other course was added in the 1950s. (In total, certain number ofstrokes per round based on New York State owns 17 golf facilities which skill levels. The worse your game, the more include 23 18-hole courses.) Bethpage is the strokes you are granted. This handicap system "big dog" of government golf centers. supposedly allows golfers of varying abilities However, the government body with by far to compete together. the largest number of golf courses under its However, what the handicap really control is the U.S. federal government. The amounts to is welfare for noncompetitive feds own more than 300 golf courses, with golfers, i.e., a subsidy for bad golf. The some 230 under the Department of Defense handicap is a crutch for golfers lacking the (DoD). The DoD asserts that it needs these necessary ability, drive, and hardwork it takes golf courses for morale purposes. Of course, to actually compete and excel. there is no reason that members of the Still, politics and economics are disciplines military cannot play on the same golf courses as barren of golf references as Scottish links the rest of us do. The federal government are of trees. Unfortunately, government is claims it makes money on its golf courses, but certainly not absent from the business ofgolf. outside groups have noted thatwhen properly accounting for all costs, these courses lose The Business of Golf about $60 million per year. Across the nation, according to the National I have written in these pages before about GolfFoundation, there are a total of15,703 golf government's extensive involvement in pro­ courses, ofwhich 4,746 are private clubs, 8,416 fessional sports, particularly through the own­ are privately owned courses open to the public, ership and financing of stadiums and arenas. and 2,541 are government owned. In 1996, 850 Golf is a little different in that government is courses were under construction or being ex­ almost completely, and refreshingly, absent panded, including 115 municipal golf courses. on the PGATour, but is quite pervasive at the At construction costs ranging from $3-$10­ amateur level. million percourse, taxpayers are onthe hookfor Currently, only one ofthe 43 PGATourstops a considerable sum-at least $345 million-for each year is played on a municipal golf course. courses under construction. The Buick Invitational ofCalifornia takes place In the end, there is no justification what­ at the TorreyPines GolfClub, owned by the city soever for government involvement in the golf of San Diego. Otherwise, the tour has been business. Even ifone subscribes to the idea of blissfully free of government golf courses. "marketfailure," certainly none ofthe criteria FORE: WATCH OUT FOR GOVERNMENT GOLF! 471 for such failure-i.e., monopoly, public tion ofall government golf facilities across the goods, external costs, or inadequate informa­ nation in theory could generate more than $10 tion-exist in the case of golf courses. The billion-probably far more). The golf busi­ only reasons for the existence of government ness would be invigorated by enhanced com­ golf courses are patronage (another oppor­ petition, and golfers would see real benefits in tunity for politicians to dole outjobs), special­ terms ofhigher quality for their golfing dollar. interest pressures (some golfers want cheap After all, in the private sector incentives exist golf, courtesy of the taxpayers), and govern­ to better serve the customer, while in govern­ ment revenue (politicians believe they can ment incentives promote big budgets and make money with golf facilities). more employees. In reality, affordable golf, played on well­ Another reason exists to get government maintained, high-quality golf courses, can be out of the golf business as quickly as possible, and is provided by the private sector. Note and it brings us back to the professional level. that 54 percent ofall golf courses in this country The United States Golf Association's are privately owned and open to the public. (USGA) decision to bring the U.S. Open to a Meanwhile, government golf courses usu­ municipal course in 2002 should serve as a ally are not as well kept as private facilities, warning sign. As noted earlier, the PGATour and lose money just as often as they make for the most part plays on private-sector golf money. In either financial instance, the pri­ courses. If government continues building vate sector should prevail. If a municipal golf courses, it may not be too long before the course makes money then why not shift it into professional golf tour starts demanding that the private sector of the economy? If it loses governments finance new courses for their money, the private sector will either turn it to tour events, or even demand funding for the profitability or find a better use for the land events themselves. In the case of Bethpage's and other resources. Black Course, the USGA will be investing In certain aspects, though, private golf about $2 million of its own funds in course courses operate at a disadvantage with gov­ improvements and upgrades. How long be­ ernment courses. Government facilities can fore that equation is reversed, though (as in artificially drive down the price of a round of the case in other sports), and the USGA or golf, and also fall back on the taxpayers when PGA Tour start asking government for such losses are incurred. "investments," under the threat of otherwise As an answer to government golf woes, moving their golf tournaments elsewhere? many argue that the operations of municipal As a free-market golfer, I want to see golf golf courses should be contracted out to the course privatization occur for another reason. private sector. While a step in the right I get depressed hearing about the two greatest direction-examples abound of private golf golfers of all time-two of my personal he­ course management firms turning around gov­ roes-getting involved in government golf. ernment golf facilities-this is but a small step. Jack Nicklaus's golf course design firm, for Full-scale privatization is the only answer to example, is laying out four new courses in government golf courses. In an era when various Tennessee state parks, and Arnold rhetoric about smaller government can be Palmer's firm-Arnold Palmer Golf Manage­ heard from many corners, continued govern­ ment-is under contract to operate the Pre­ ment ownership and construction of golf sidio Golf Course in California for the U.S. courses is a sobering development. This is a Department of the Interior. simple issue: the private sector is more than Right now, the golf and government mix capable of building, owning, and operating means extensive government involvement in golf courses in an efficient manner. the golf business, and the underutilization of Indeed, privatization of municipal golf golf metaphors by elected officials and econ­ courses is a win-win scenario. The resulting omists. It's time to reverse this situation. What government revenues can be used to retire we need are more golf metaphors and fewer outstanding government debt (the privatiza- government golf courses. D THEFREEMAN IDEAS ON LIBERTY

Henry Grady Weaver's Classic Vision of Freedom by John M. Hood

n 1947, a slim volume written by a largely discussions of the impact of business on I unknown General Motors corporate ex­ society that has ever been written. ecutive was issued by a small publishing house Weaver was writing to an American public under the title of The Mainspring ofHuman that had just endured almost two decades of Progress. The book, which began with an desperation, economic hardship, social up­ intriguing chapter entitled "Puzzling Ques­ heaval, and war. There was a sense of eupho­ tions of Vital Concern to 2,155,000,000 Indi­ ria after the surrender of Germany and Japan viduals," led off with this curious paragraph: in 1945, a commonly held belief that the United States had managed to extricate itself For 60 known centuries, this planet that we call Earth has been inhabited by human beings from turmoil and disaster to unparalleled not much different from ourselves. Their desire strength and influence around the world. At to live has been just as strong as ours. They have the same time, however, fears and doubts had at least as much physical strength as the were beginning to surface about some of average person of today, and among them have America's traditional institutions and princi­ been men and women of great intelligence. But down through the ages, most human beings have ples. The apparent vitality of the Soviet gone hungry, and many have always starved.1 Union, which had itself fought back from the brink of destruction to a glorious victory, was The author, Henry Grady Weaver, served unsettling. The lingering economic controver­ as director of customer research for GM. sies from the New Deal-about the role ofthe Blind in one eye, he nevertheless spent much federal government in society and the ability of his life peering over data. He was a of capitalism to provide jobs and opportuni­ number-cruncher, not a philosopher or po­ ties for the common man-had been left lemicist. His writing experience had consisted unresolved during a half decade ofworld war. mainly of penning articles on psychological Indeed, the growth ofthe federal government research. But The Mainspring of Human during World War II and the unprecedented Progress, an amateur's paean to freedom and role it assumed of directing and managing the individual ingenuity, remains one ofthe finest wartime economy was just being realized and John Hood is the president of the John Locke debated. Foundation in Raleigh, North Carolina. He is the Weaver was a practical man as well as a author ofThe Heroic Enterprise: Business and the vigorous defender of American business. He Common Good (Free Press, 1996). understood that, in order to persuade his This essay is an expanded version ofMr. Hood's introduction to the third edition ofThe Mainspring readers that the free enterprise system was of Human Progress by Henry Grady Weaver, pub­ worth preserving, he would have to eschew lished in May 1997 by FEE. elaborate theory and focus instead on historic 472 473

fact and common sense. So, he began his book a letter instantaneously to another city oreven with a discussion of the condition shared by another country. Indeed, the average Amer­ most human beings throughout most of hu­ ican now consumes about twice as many goods man history-hunger. The ancient civiliza­ and services as families did in Weaver's day­ tions extolled by historians and philosophers, and he thought his contemporaries enjoyed Weaver pointed out, consistently failed to an extremely high and unprecedented stan­ keep their people fed. Egyptians and Greeks dard of living! (We might well say the same sometimes killed their babies because they today: Studies of household consumption couldn't feed them. The Roman Empire col­ show that poor families today live very much lapsed in famine. French peasants were dying like middle-income families did in the 1950s in of hunger when Thomas Jefferson bought terms of housing and amenities.)5 Louisiana from Napoleon Bonaparte. As late A devout Southern Baptist husband and as the 1840s, the Irish were starving to death father of two, Weaver was no materialist. He from a potato famine. In Weaver's day, fam­ would not (nor should anyone) interpret the ines continued to plague significant portions mere possession of conveniences and luxuries ofAsia and Africa. But by 1947, in the United as proof of social well-being. At the same States, there were only periodic, geographi­ time, however, Weaver lacked the elitist's cally limited episodes of hunger? And after disdain for the importance of material com­ Weaver's time (he died in 1949), the "Green fort. He carefully studied human nature, Revolution" of unparalleled agricultural pro­ specifically consumer preferences, and under­ ductivity in the 1960s essentially eradicated stood the revolutionary impact of economic hunger as a serious problem not only in the progress on the lives of the middle class and United States, but throughout much of the poor. Nor did Weaver have much patience for developed and developing world.3 those who tried to interpret American Weaver was fascinated with the sudden, progress in ethnic or racial terms. "That amazing productivity of agriculture, as well as sounds fine in after-dinner oratory and goes with other pleasant surprises of modern life. over big at election time," the Georgia native "Why did men, women, and children eke out wrote perceptively, "but the argument is dif­ their meager existence for 6,000 years [of ficult to support. Our own ancestors, includ­ recorded history], toiling desperately from ing the Anglo-Saxons, have starved right dawn to dark-barefoot, half-naked, un­ along with everyone else.,,6 Instead, Weaver washed, unshaved, uncombed, with lousy argued, the mainspring of human progress hair, mangy skins, and rotting teeth-then was freedom itself. The United States, by suddenly, in one place on Earth there is an allowing the most individual freedom to pro­ abundance ofsuch things as rayon underwear, duce goods and services and sell them to nylon hose, shower baths, safety razors, ice consumers for profit, had unleashed the cream sodas, lipsticks, and permanent greatest degree of invention and ingenuity, waves?" he asked.4 resulting in social benefits for all. Imagine what Weaver might think ofAmer­ In Weaver's time, this simple statement of ican society today, where a family of modest the virtues of a capitalist economy, while means might have access to a cornucopia of increasingly rare in the ivory towers ofAmer­ foods and treats, dozens of television chan­ ican academia, was hardly incongruent with nels, access to thousands of movies, inexpen­ public sentiment. During the 1940s and 1950s, sive clothes and cosmetics, a luxurious (by the most Americans held business as an institu­ standards of 1947) home with air condition­ tion in high esteem (as well as, it should be ing, microwave ovens, digital stereo, a medi­ noted, other institutions such as government, cine chest full oflife-saving orpain-alleviating organized religion, and the press). The media, drugs, several reliable automobiles, and a too, often viewed business and corporate magical desktop machine capable of balanc­ leaders with at least equanimity, if not actual ing a checkbook, drawing a picture, publish­ approval. Media analysts Robert Lichter, ing a newspaper, playing a game, and sending Linda Lichter, and Stanley Rothman point 474 THE FREEMAN • AUGUST 1997 out that many television and motion-picture Needless to say, if Weaver had lived long plots of the 1950s featured businessmen in enough to see Sabrina, he would have rooted positive, sometimes heroic roles. Wise, hon­ for Bogart's crusty but insightful businessman est, and trustworthy fathers Jim Anderson of over Holden's irresponsible playboy. Nor "Father Knows Best" and Ward Cleaver of would he have been alone. Movie audiences "Leave It to Beaver" were an insurance were supposed to root for Bogart, who gets the salesman and an accountant, respectively. girl in the end (while Holden learns respon­ Nick Charles, "The Thin Man," was a pub­ sibility and prepares to shoulder his weight in lisher. Herbert Philbrick, the hero of the the family business). popular 1950s TV adventure series "I Led Three Lives," was a pipe-smoking advertising The Backlash Against Business executive, a Communist Party worker, and an FBI counterspy. Bruce Wayne, a.k.a. Batman, But even in the comparatively conservative was a wealthy industrialist. Even into the 1950s, there was a significant undercurrent of 1960s, television series continued to portray skepticism and revisionist thinking about the those in business as "good guys." Westerns role ofbusiness in society. These ideas flowed were one surprising source ofpositive images through universities, and bubbled up through about business: Remember that Ben Cart­ the legal system in a series of court decisions wright of"Bonanza" ran a sprawling ranching that redefined the purpose and responsibili­ and mining empire on the family's 1,000-acre ties of the American corporation. Social Ponderosa estate?7 movements, responding to problems such as In most cases, however, while these busi­ racial injustice and environmental degrada­ ness characters were portrayed positively, tion, began to view business as a corrupt, they were rarely portrayed in the actual amoral institution in which a few greedy practice of doing business. The Beaver spent individuals profited at the expense of the little time at his father's accounting firm. broader community. By the 1960s and 1970s, Bruce Wayne even donned a mask and fought the undercurrent of revisionism about busi­ crime at night so as to distinguish Batman ness became a raging river of criticism, pro­ from the CEO of Wayne Enterprises. There test, incriminations, and hostility. were some notable exceptions. The hit 1954 The mass media both reflected and influ­ film Sabrina-in which brothers played by enced these public perceptions. Investigative Humphrey Bogart and William Holden vied journalism became a heroic, even romantic, for the. affections of Audrey Hepburn-has calling, with the name of the game being to several memorable scenes with both major "catch greedy corporations in the act" of and minor characters bouncing up and down polluting the water, selling shoddy and over­ on a new plastic, to be manufactured out of priced products, exploiting workers and fam­ sugar cane and sold by the brothers' family ilies, and sacrificing the public's health, safety, firm. Holden, a hedonist with little interest in and welfare to make a quick buck. On tele­ business, asks his workaholic brother why he vision and in the movies, business executives was spending so much time dabbling with increasingly became the villains, to be chal­ plastic rather than having fun. "Whatwill that lenged by heroic lawyers, policemen, report­ prove?" he demands, pointing to the strip of ers, and activists. In a study of the 100 plastic. Bogart replies: top-grossing films selected from Variety list­ Prove? Nothing much. A new product has been ings, researchers found that nearly nine out of found, something of use to the world. So a new ten business characters were portrayed posi­ industry moves into an underdeveloped area ... tively before 1965, but two out of three were People who never saw a dime before suddenly portrayed negatively thereafter. After 1975, have a dollar, and barefoot kids wear shoes and the proportion of negative business charac­ have their teeth fixed and their faces washed. 9 What's wrong with the kind of an urge that gives ters rose to three out of four. Such films as people hospitals, libraries, baseball diamonds, The China Syndrome, Norma Rae, Silkwood, and movies on a Saturday night?8 and Wall Street might serve as examples ofthis THE MAINSPRING OF HUMAN PROGRESS 475 trend, in which antisocial or even criminal sponsibilities of the Businessman by Howard corporate behavior could be challenged only Bowen. In 1963, a textbook for colleges and by the heroic actions ofcrusading lawyers and universities by business professor Joseph journalists or brave whistleblowers. Lichter, McGuire appeared, entitled Business and So­ Lichter, and Rothman found the same pattern ciety, and by the 1970s the field was a full­ for television characters. While small business fledged academic discipline, which could owners were treated about the same over the boast programs in major business schools and decades, the percentage of big business char­ dozens of major books.IS acters portrayed as villains rose from 31 Ofcourse, corporate social responsibility as percent before 1965 to 58 percent afterward. an American movement in the latter half of The authors compared, for example, the pos­ the twentieth century is only a modern man­ itive portrayals of the Cartwright family in ifestation of an older, even ancient, debate "Bonanza" to the largely corrupt and immoral among philosophers and theologians in many Ewing family of "Dallas."IO lands and cultures about the morality of Public sentiment, influenced by social ac­ commerce itself. Is economic competition the tivism and media images, also began to enemy of compassion and community? Is change toward business. In 1965, almost 60 commercial activity a necessary evil or a percent of Americans believed that busi­ desirable good? To whom do traders and nesses made a "reasonable profit," vs. 24 merchants owe their loyalty? Do capitalists percent who thought businesses made too exploit their workers and the poor? Is it moral much. By 1975, the trend lines had reversed­ to sell basic human necessities at a profit? The more Americans calling profits excessive greatest thinkers ofhuman history have wres­ rather than reasonable.ll Even in 1939, as the tled with these questions. Aristotle wrote economic stagnation ofthe Great Depression about trading and business profits in his lingered, 56 percent of Americans said that Nicomachean Ethics and Politics. Major por­ the interests of employers and employees tions of Old Testament books such as Deu­ were "basically the same," while only 25 teronomy contain rules for ethical business percent said they were opposed. But by 1994, practice. Adam Smith's The Wealth ofNations more Americans thought the interests of the is usually thought of as a treatise on econom­ two groups clashed than thought they coin­ ics, but it also discusses in depth the social cided.12 Much of the change has occurred in context and impact of commercial activity. public perception ofbig business; in one 1992 Smith was, after all, a theologian and ethicist, poll, 64 percent ofAmericans rated the moral not a businessman or economist. Karl Marx and ethical standards of small business own­ was no economist, either, and had never set foot ers as excellent or good, while only 31 percent in a factory, but his critical analysis of business said the same about "business executives.,,13 behavior changed the course of history. It was during this same period of social In the United States of the late nineteenth upheaval and changing media·images about century, the issue sharpened as defenders and business that a movement began among busi­ critics of the so-called "robber barons" ness scholars, journalists, issue-oriented ac­ clashed over the role of profit, exploitation, tivist groups, and some corporate executives and immoral business practices in the devel­ to shift the goals and principles of American opment of the West, the growth of industry, business away from a focus on profits and and the accumulation of vast fortunes. Over return to shareholders and toward serving the the next century, the debate about such con­ interests of a broader constituency of so­ troversial businessmen as Cornelius Vander­ called "stakeholders"-workers, customers, bilt, Leland Stanford, Jay Gould, J.J. Hill, J.P. neighbors, and society at large.14 Variously Morgan, and John D. Rockefeller continued called "corporate social responsibility" or to rage. Were these men exemplars of the "socially responsible business," the modern evils of unfettered, greedy capitalism? Were movement is dated by many of i~s adherents they, instead, great innovators whose impact to 1953, with the publication of Social Re- on society justified their wealth? 476 THE FREEMAN • AUGUST 1997

This debate continues today in academia insignificant in comparison with the tremen­ and among political elites. But the argument dous overall benefits shared by millions of for the moral and social value of business people" from his innovative steel plow that needs to be carried further to average Amer­ made prairie agriculture, and thus westward icans. One Roper organization poll in 1991 expansion, viable, he observed. "It's just pos­ asked respondents to rank the responsibilities sible that good old John Deere wouldn't have of business. At the top of the list were both bothered his head about the plowing problem tasks Americans believed corporations were if he hadn't been living in a free country, doing well (such as "producing good quality where an ambitious blacksmith had a chance products and services" and "protecting the to become a prosperous manufacturer."18 health and safety ofworkers") as well as tasks In reality, the business world is populated Americans believed corporations were doing more by heroes like John Deere than by the poorly (such as cleaning up pollution). Lower villains who make the morning newspapers, on the list of perceived business responsibil­ are vilified on the evening newsmagazines, or ities were "developing new products and who act out Hollywood's unrealistic and silly services" and "keeping profits at reasonable fantasies about American society. Weaver's levels." Neither omission is surprising. The classic work showed how the real story of innovation and invention inherent in busi­ American business can and should be ness, and so crucial to social progress, rarely told. 0 gets much press or public attention. And on the latter point, Americans have for many 1. The Foundation for Economic Education, 1984 (13th years exaggerated the size of corporate prof­ printing), p. 11. its, telling pollsters that they believe the 2. Ibid., pp. 11-12. average profit ofU.S. firms is 34 percentwhen 3. See Nicholas Eberstadt, "Population, Food, and Income: 16 Global Trends in the Twentieth Century," in Ronald Bailey, in reality it is only about 4 percent. editor, The True State ofthe Planet (New York: The Free Press, Whether business can and will be viewed as 1995), pp. 7-48. 4. Ibid., p. 12. a positive force for good in our society is a 5. Karl Zinsmeister, "Payday Mayday," The American En­ matter of great importance if free enterprise terprise, September/October 1995, p. 48. 6. Ibid., p. 15. is to survive and thrive. Henry Grady Weaver, 7. S. Robert Lichter, Linda S. Lichter, and Stanley in the heady and unsettling days after World Rotham, Video Villains: The TV Businessman 1955-1986 (Washington, D.C.: Center for Media and Public Affairs, War II, understood this well. Writing about 1987), pp. 17-21. great American entrepreneurs such as Eli 8. Lichter, Lichter, and Daniel Amundson, "Does Holly­ wood Hate Business or Money?" Center for Media and Public Whitney (the father not only ofthe cotton gin, Affairs, 1994, p. 27. but of much of mass production itself), John 9. Ibid., p. 26. 10. Ibid., p. 28. Deere, Thomas Edison, and Henry Ford, 11. Karlyn H. Bowman and Everett Carll Ladd, editors, Weaver pointed out that their contributions "Public Opinion and Demographic Report," The American Enterprise, NovemberlDecember 1993, pp. 86-88. to American society were far in excess of that 12. Bowman and Ladd, "Opinion Pulse," The American of many political or military leaders better Enterprise, January/February 1995, p. 106. 13. Bowman and Ladd, 1993, p. 86. known to the public. Indeed, even early 14. Edwin M. Epstein, "The Corporate Social Policy Process: American political heroes such as Benjamin Beyond Business Ethics, Corporate Social Responsibility, and Corporate Social Responsiveness," California Management Re­ Franklin, Thomas Jefferson, and Thomas view, Vol. 29, No.3, Spring 1987, p. 101. Paine were important inventors and entre­ 15. Donna J. Wood and Philip L. Cochran, "Business and 17 Society in Transition," Business and Society, Spring 1992, p. 1. preneurs in their own right. 16. Bowman and Ladd, 1993, pp. 84, 88. Americans were and are an inventive peo­ 17. Franklin invented a stove, the rocking chair, bifocal spectacles, and experimented with electricity. Jefferson's innova­ ple, Weaverwrote, because ofthe very system tions ran the gamut from botany and agricultural technique to of free economic competition based on profit engineering, architecture, and law. Paine drew up the plans and supervised the construction of the first single-span iron bridge and reward. "No matter how much money with crisscross struts. Weaver, p. 234. John Deere may have made, it would be 18. Ibid. Potomac Principles by Doug Handow

Is Voluntarism Enough?

s the Age of Politics (historian Paul dents to "volunteer" in order to receive a A Johnson's label for the twentieth cen­ diploma from high school. Some Summit tury) winds down, even liberals are champi­ attendees, led by the President, supported this oning civil society. Herds of politicians now attempt to make compassion compulsory, the say that families and communities, not gov­ worst sort of oxymoron imaginable. It makes ernments, hold the answer to America's social a mockery of the Summit's very premise. problems. At the very least, they advocate Similarly, proposals abound to use the tax private-public "partnerships," rather than law to bludgeon business into doing what grand new government social programs. government considers to be "responsible" To promote such service the Summit for behavior. Some advocates of this approach America's Future convened in April. Repre­ would add voluntarism to their indicia of sentatives from volunteer organizations, busi­ corporate responsibility. But "philanthropy" nesses, and churches, along with local gov­ motivated by such threats would be extortion, ernments and Indian tribes, gathered in not voluntarism. Philadelphia to, in the words of the sponsors, Even truly voluntary contributions are mobilize "millions of citizens and thousands viewed by many firms more as a tool of public of organizations from all sectors of society in relations than an exercise of moral responsi­ order to ensure that every young American bility. However, that doesn't diminish the has access to resources considered essential good that can be done by business. Companies for achieving healthy, fulfilling and productive have an enormous capacity to aid those lives." In response companies promised around them. money, services, and products to nonprofit Nevertheless, encouraging firms to volun­ enterprises. tarily drop a few dollars on the less fortunate Enlisting civil society to help mentor and should not blind us to the most important tutor at-risk youth, improve health care, sup­ issue. Government stands in the way of help­ port families, assist elder-care and more is ing the needy at almost every turn. obviously a good thing. As long as it is truly Business performs its most important ser­ voluntary. The distinction is important, since vice to the poor by doing what it is constituted the government has a way of making invol­ to do: employ people and provide goods and untary the supposedly voluntary. services. To the extent that it does so success­ For instance, the state of Maryland and a fully, it will reduce the incidence of poverty number of local school districts require stu- and alleviate attendant social problems. Moreover, as business succeeds, it generates Mr. Bandow, a nationally syndicated columnist, is a seniorfellow at the Cato Institute and the author and wealth for others-workers in related indus­ editor ofseveral books, including Tripwire: Korea tries, pensioners, and more. and U.S. Foreign Policy in a Changed World. Not that politicians ever understand. Ob- 477 478 THE FREEMAN • AUGUST 1997 serves T.l. Rodgers, president and CEO of moral (and religious) duty to care for those in Cypress Semiconductor, over the last two need. As Marvin Olasky, author of The Trag­ decades "government meddling [has] metas­ edy ofAmerican Compassion, points out, com­ tasized to the point that business can no passion meant "to suffer with." To fulfill one's longer provide workers with ever-higher responsibilities as a citizen and a human being wages." No one gains when the state grows required involvement in the lives of others. in this way. Notes Rodgers, "subordinating Since then, however, people have taken shareholder value to 'social responsibility' compassion to mean, first, writing a check, invariably cheats both shareholders and and more recently, making other people write society at large." checks. Indeed, in response to President Clin­ Government meddling most hurts those ton's call on every church to employ one low-cost, labor-intensive enterprises which person now on welfare, the Reverend Albert provide employment and services to poor Pennybacker of the National Council of communities. The minimum wage puts un­ Churches argued that "Our job is not to skilled employees out of work. Local public compensate for the failure of government to transportation monopolies forbid inexpensive do its job." jitneys that enable lower-income people to But the Reverend Pennybacker has it all find and hold jobs. Burdensome zoning re­ wrong. The Biblical model is clear: the able­ quirements and building codes, special­ bodied are to work and support themselves interest licensing laws, and other regulations and their families; churches are to nurture, aid, impede the development of small businesses and empower their members; finally, people of that are critical for lifting people out of faith are to "do good to all people" (Gal. 6:10). poverty through work. The fundamental Christian duty is responsibil­ Thus, political leaders concerned about the ity for themselves and charity to others. To the disadvantaged should eliminate barriers to extent government has a role, it is as the business doing what it does best. This isn't ultimate safety net to catch those falling through enough, however. In many cases government mUltiple private ones. Political society should is to blame for the problems in the first place. act only when civil society fails to do so. Before exhorting others to help, public offi­ Many people still do serve: nearly half of cials should get their own policies right. the adult population volunteers, spending an Consider education. Illiteracy is rife among average of 4.2 hours a week in service activ­ inner-city kids, so volunteers are now sup­ ities. But the Reverend Pennybackers of the posed to teach students to read. But how world have been willing to slough significant about dealing with a public educational sys­ responsibility off on government, which, as tem that is turning out illiterates? The answer the most imperialistic of institutions, has here is really not voluntarism, but privatiza­ avidly filled the void. Thus, politicians serious tion: parents should be able to choose among about restoring civil society must say "no competitive educational alternatives, ensur­ more." Public officials would do more for ing that their kids end up able not only to read, voluntarism by emphasizing the primacy of but to learn the values necessary to become private assistance and the moral responsibility responsible citizens in a free republic. Yet the of every human being for his or her needy politicians who speak loudest about helping neighbors than attending summits. the poor most strongly resist even any change Equally important, policymakers should in the public school monopoly. reform government policies that discourage People devoted to the poor also need to voluntarism and impede community develop­ help shift the perception that responsibility ment. Mother Teresa's religious order for solving social problems lies with the state, dropped a planned AIDS facility because and eliminate the barriers now created by New York City insisted that the building government to individual, family, and com­ include a costly and unnecessary elevator. munity initiative. For most ofAmerica's early Labeling requirements in Los Angeles pre­ history, people recognized that they had a vent restaurants from giving food away to the "FROM SMALL BEGINNINGS": THE ROAD TO GENOCIDE 479 homeless. The federal government threatened Today's Summit participants must reach to put Salvation Army rehabilitation centers out deeper issues to ensure that the latest effort of business when it proposed applying the doesn't go the same way. Rewarding the minimum wage law to participants. successful who throw alms to the poor is fine. Well-publicized volunteer programs are a But better would be lowering the barriers to staple of politics. A succession of presidents success, helping those in need to help them­ have undertaken one or more such initiatives. selves. Public officials need to answer for the But, like the much ballyhooed "Hands Across failings of their own policies. For civil society America" more than a decade ago, none has to do more, political society must do had much impact. less. D

"From Small Beginnings": The Road to Genocide by James A. Maccaro

r. Leo Alexander, a prominent American of their communities, and expected to find D psychiatrist, was the chief U.S. medical many examples of doctors who used their consultant at the Nuremberg War Crimes prestige to resist the Nazis. Yet he found no Trials that judged Nazi leaders following such evidence. In shocking contrast, Dr. Al­ World War II. One question in particular exander discovered that the German medical perplexed him: Why was the German medical profession fully cooperated with the Nazis profession unable to effectively resist the and, indeed, was responsible for some of the Nazis? most disturbing outrages of the Nazi regime. As he searched in German archives, Dr. Dr. Alexander was forced by the facts to Alexander was puzzled by the lack of docu­ change the focus of his research to an exam­ mentation of resistance by doctors. He as­ ination of the process by which the German sumed that German physicians, as scientists medical profession came under the total dom­ devoted to relieving human suffering, were ination of Hitler's government. He set forth appalled by the Nazis. He knew of the high his findings in the July 14, 1949, issue of The regard the German public had for doctors, New England Journal of Medicine. In this who were typically among the leading citizens remarkable study, "Medical Science Under Dictatorship," Dr. Alexander described how Mr. Maccaro practices law on Long Island, New the German medical profession, in the words York. "Medical Science Under Dictatorship" has of Malcolm Muggeridge, "sleepwalked to the been reprinted as a 32-page pamphlet which can be obtained for $2.00 (which includes postage and collectivist-authoritarian way of life." handling) from Bibliographic Press, P. O. Box 5433, Dr. Alexander discovered that the Nazi Flushing, NY 11354. Holocaust began with "a subtle shift ... in 480 THE FREEMAN • AUGUST 1997 attitude" that accepted a philosophy of gov­ [The victims] were selected from the various ernment that judged people based upon their wards of the institutions according to an exces­ perceived costs and benefits to the state. The sively simple and quick method. Most institu­ tions did not have enough physicians, and what first manifestation of this was the open dis­ physicians there were were either too busy or did cussion during the time of the Weimar re­ not care, and they delegated the selection to the public, prior to Hitler's takeover ofGermany, nurses and attendants. Whoever looked sick or of government schemes for the sterilization was otherwise a problem was put on a list and and euthanasia of people with severe psychi­ was transported to the killing center. The worst thing about this business was it produced a atric illnesses. By 1936, medical extermination certain brutalization of the nursing personnel. was widely and openly practiced, and the They got to simply picking out those whom they category of those deemed to be a burden to did not like, and the doctors had so many patients that they did not even know them, and the state and therefore socially unfit to live 2 had expanded to encompass all people with put their names on the list. chronic illness. It is estimated that 275,000 Germans were On September 1, 1939, euthanasia was exterminated in the killing centers; this pro­ officially recognized as state policy and two vided extensive opportunities to perfect the government agencies were established to methods that were later used in the concen­ carry out the killings in an efficient manner. tration camps. Theywere cynically named the "Reich's Work The next step taken by the German medical Committee of Institutions for Cure and profession was the accumulation and use of Care," which dealt with adults, and the human material obtained from the extermi­ "Reich's Committee for Scientific Approach nated for medical research. For instance, one to Severe Illness Due to Heredity and Con­ physician obtained 500 brains for use in his stitution," for children. Separate organiza­ neurological research. This was soon followed tions were created to transport patients to by the use of live people for "terminal human killing centers and to collect the cost of the experiments," a practice that was openly ac­ killing from the next ofkin, who were told that cepted by the German medical profession.3 the victim had died of natural causes. Doctors were required to report on all "A Life Not Worthy to patients who had been sick for five years or Be Lived" more or who were medically unable to work and unlikely to recover. The decision about Dr. Alexander demonstrated in Medical whether someone should be put to death was Science Under Dictatorship that by the early generally made by psychiatrists who taught at 1940s, the German medical profession had leading universities. These "consultants" become fully implicated with the Nazi regime never examined or even saw the patient and and its death camps. Moreover, he outlined based their decisions on brief questionnaires, how this monstrous outcome originated which contained information about race, eth­ "from small beginnings." It started with ac­ nic origin, marital status, next of kin, financial ceptance of the "progressive" and "rational" resources, and whether and by whom the idea that some people had "a life not worthy patient was visited. to be lived" and were a burden to society and What began as a slow acceptance of"mercy to the state. Once this idea was acted upon, killings" in rare cases of extreme mental and physicians became accustomed to it, the illness soon expanded to mass extermination extermination system expanded to include all on an unprecedented scale. Among those people considered for any reason to be a killed were people with epilepsy, infantile financial burden to the state, followed by all paralysis, Parkinson's disease, depression, those considered to be disloyal or a threat to multiple sclerosis, and various infirmities of the government and, ultimately, anyone con­ old age. In short, all people who were unable sidered undesirable by the government. Once to work and not considered rehabilitable were the first German mental patient was put to killed. 1 One physician later admitted: death, a chain of events was begun that only "FROM SMALL BEGINNINGS": THE ROAD TO GENOCIDE 481 ended with destruction on a nearly unfath­ subordinated to the state and its interest to omable scale, including the murder of the maximize "utility." majority of European Jews. Dutch physicians unanimously refused to Dr. Alexander contrasted the actions ofthe comply. When the Nazis threatened to revoke German medical profession with those of uncooperating doctors' licenses to practice, doctors in the Netherlands under German all doctors returned their licenses and closed occupation, who refused to take the first small their offices, but continued to see patients in step to genocide. private. The Nazis then arrested 100 Dutch In December 1944, an order was issued by doctors and sent them to concentration the Nazi authorities to all Dutch physicians: camps, but the medical profession refused to "It is the duty of the doctor, through advice back down. The result was that no Dutch and effort, conscientiously and to his best doctor participated in a killing and the Nazi ability, to assist as helper the person entrusted plans for medical exterminations in the Neth­ to his care in the maintenance, improvement erlands were not carried out. and re-establishment of his vitality, physical Dr. Alexander concluded: efficiency and health. The accomplishment of this duty is a public task."4 It is obvious that if the medical profession of a small nation under the conqueror's heel could This statement might appear on first read­ resist so effectively, the German medical pro­ ing to be unobjectionable and innocuous. fession could likewise have resisted had they not However, the Dutch medical profession, taken the fatal first step. It is the first seemingly which was aware of the extermination system innocent step away from principle that fre­ in place on the other side of the Dutch­ quently decides a life ofcrime. Corrosion begins in microscopic proportions.5 0 German border, recognized that this order would serve as a basis for the promulgation of 1. Leo Alexander, Medical Science Under Dictatorship (Flush- a new standard of care that would place first ing, N.Y.: Bibliographic Press, 1996), p. 9. priority upon the return of patients to pro­ 2. Ibid., p. 10. 3. Ibid., pp. 17-21. ductivity for the state, rather than the relief of 4. Ibid., p. 24. suffering. Physicians would consequently be 5. Ibid., p. 25.

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Government: An Ideal Concept­ Leonard Read's Formula for Freedom by Esler G. Heller

he reviewer begs the reader's indulgence of this work is logical, consistent, and neither T for combining a book review with an circular nor abstruse. appreciation of the author. Yes, Leonard Read is never a polemicist but warns Read is my guide and inspiration, and I was against provoking antagonism with unneces­ thrilled to learn of the republication of Gov­ sary personal attacks and criticisms of error, ernment: An Ideal Concept (FEE, 1997, $12.95 when what is needed is self-improvement and paperback). This book is to me much like the demonstration of truth. Although he says fruits of scripture. Government: An Ideal Concept is an essay in In 1982, I wrote to Read asking if he still clarifying his own thinking, he writes with the believed what he had written in 1954. His authority and serenity of someone already reply: "Just the other day I re-read Govern­ possessed of a truth. ment: An Ideal Concept. Today I wouldn't Not at the Constitutional Convention of change a word ofit. All ofmy books have been 1787 nor when Read wrote Government: An consistent with this book you like." Ideal Concept, says Read, was there "any I have read all of Leonard Read's books; well-defined ... principled, spelled-out ideal they are consistent. Read is constant in char­ theory of government or liberty." The acter and consistent in thought. Given his founders attempted to limit government, but premises, his "freedom philosophy," as he "lacking was a well-defined theory or positive called it (to disassociate himself from the rationale as to why limitation."! anarchists who had appropriated his earlier Read was familiar with political and phil­ use of "libertarian"), is consistent and cor­ osophical ideas from earliest writings to the roborated by history. Read has grasped and present. Yet he was convinced that extant described a natural law. theories of liberty and government were in­ In Government: An Ideal Concept, he limits adequate and that this lack would have to be himself to basics and a few clear examples. supplied before American society could se­ Other issues and secondary points he leaves cure the "Blessings of Liberty" cited in the for other books, other writers. The argument preamble of the U.S. Constitution. Read's plan is to try to justify government, an effective but surprising strategy for one Mr. Heller is an auctioneer in southern New Jersey. who sees that government, the immune sys- 482 GOVERNMENT: AN IDEAL CONCEPT 483 tern of society, designed to protect from skepticism of big government, government­ internal and external dangers, has itselfgrown run schools, and the welfare state. And we are unhealthy, and, by proliferation, become an lengthening and improving the quality of the agent of social dysfunction. He seeks to later years of life, thus enlarging the pool of understand the healthy state ofgovernment in human experience and, hopefully, wisdom. society as the ideal-a key word in this book's title. Properly limited government, he asserts, The Ideal Role of Government because it is necessary, must be a positive good rather than a necessary evil. As we suffer the consequences of past Fundamental to Read's theory of limited errors, we can see the need to make finer government is his analysis of social versus distinctions in ethics, politics, and econom­ individual problems, and the role offorce and ics.3 In Government: An Ideal Concept, Read coercion in society. By definition, government has defined the ideal role of government, the is organized force. It monopolizes the legal rule on which such distinctions are based. We use of force in those geographical, social, and still need improved, refined definitions of economic areas under its jurisdiction. Read liberty, theories of government, and analyses posits, "Man's purpose on earth is to come as of social problems, old and new. Yet liber­ near as possible in his lifetime to the attain­ tarians are urged by anarchists to throw out ment ofthose creative aptitudes peculiarly his the good with the bad. own." He then explains why all of creative This is the fallacy of philosophical anar­ human emergence can only be a personal, chism. In Government.' An Ideal Concept, voluntary undertaking. This leaves those "ac­ Read shows why limited-government libertar­ tions of man which impair the source of ianism is as radical as we can get in approach­ creative energy and stifle its exchange, and ing liberty. Beyond it lies a resumption of the also the actions which are parasitic on the belief that might makes right. By showing the flowing energy" as the only social problem. To necessity oflimited government, Read proves remove these "inhibitory actions," it is nec­ that no government and no taxes are no essary to restrain aggressive force and/or formula for liberty. penalize those persons who indulge in it. It has been wisely said that all important Read explains why force can only restrain, questions are ultimately religious. A primary nevercreate. Therefore, the only proper use of axiom underlying a theory of liberty and force is to restrain aggressive use offorce and limited government confirms the religious fraud. faith that God created man and woman in Only the widest possible social base is God's image, only a .little lower than the adequate to bear the responsibility for the use angels. It is the rational, secular, empirical offorce. 2 This means that the social authority observation, elucidated by Mises, Hayek, and for defense must be vested in a strictly limited other classical-liberal thinkers that human­ government to be overseen, funded, and con­ kind, regardless of individual variations, trolled by all society, a burdensome but un­ shares a common human nature ofreason and avoidable duty for citizens aspiring to free­ emotion making it possible to take an opti­ dom. mistic view of society. This optimism assumes In earlier times, before the American Rev­ that sinfulness is not so prevalent as to olution, nearly all governments were tyranni­ preclude our living in a higher degree of cal and most of their laws unjust. Even in the liberty than we have yet experienced. twentieth century, exemplary governments The pessimistic view, that most of us are are rare. To be anti-government then was to hopelessly depraved and must be driven and be pro-freedom. Today, in spite of some restrained to do the right thing by those discouraging problems, in many ways we are stronger and wiser, implies an elitist theory of nearer to achieving liberty than ever before. supermen and underclass, masters and slaves. It's a healthful exercise to count our blessings Pending the moral regeneration of mankind, in this regard: increased understanding and it leaves no hope in this world for peace or the 484 THE FREEMAN • AUGUST 1997 flowering ofhuman potential. Such pessimism aries, Read's work and vision are not burdened is belied by history. As Read observes else­ with distracting baggage. He is remarkably where, civilization exhibits periods of evolu­ lucid, leaving little likelihood of confusion. tion and devolution, progress and regress. But We can use his writings for outreach without over time and space, what most persons the need for explanations, cautions, apolo­ regard as progress has predominated. gies, and extensive interpretation. Read's faith in the virtue of people, volun­ tary followers of uncommon women and men, Emergence is implicit in his insistence on personal re­ sponsibility, integrity, and devotion to free­ Read's vision captures the only way there dom's ideals. can be liberty and justice in the world: man­ Leonard Read is a Christian believer. He kind's purpose on earth-emergence.4 Emer­ acknowledges God, the Creator, Judge, Infi­ gence depends on the free flow of creative nite Consciousness, and Supreme Intelli­ human energy. Liberty is the free flow. of gence. He characterizes Jesus as "the Perfect creative human energy. The free market is the Exemplar." In an interview he stated that you free flow of creative human energy. There,;. don't have to believe in God to believe in fore, the free market is liberty. Liberty, jus­ freedom, but if no one believed in God there tice, equality before the law, and the free would be no freedom. In Government: An market are one. These different words have Ideal Concept, Read reveals the foundation differing abstract definitions, but in reality and framework ofthe rest of his life's work. It identify the identical condition-liberty­ is a systematic exploration of the social (as seen from different perspectives. separate from the personal) aspects ofhuman Interestingly, Government: An Ideal Con­ life. To my knowledge, it is the most if not the cept (1954) predates Hayek's The Constitution only systematic book he ever wrote, and a fine ofLiberty (1960) with its memorable dictum: example of that beautiful American idiom "Butwhile the uses ofliberty are many, liberty unique to Leonard's voice and pen. is one. Liberties appear only when liberty is Read often acknowledges (not in these lacking." Liberties are but the opportunity to words) that he is a crow who followed many exercise natural human rights. If liberties plows. His distillation and synthesis ofothers' appear only when liberty is lacking, then rights ideas, combined with his own insights, are appear only when the human right, the right to fruitful and offer us the gift ofa harvest we could live in liberty, is shackled. Thus, "the human not gather on our own. We stand not in his right" joins liberty, justice, equality before the shadow, but on his shoulders, facing the light. law, and the free market as a synonym. There Freedom or liberty (synonymous to Read) is a corollary: The human right, the rightto live is defined in Government: An Ideal Concept as in liberty, must subsume, qualify, and test any "... man not playing God, individually or other proposed human right, and as the free collectively, through government or other­ market is synonymous with liberty, so also wise." Elsewhere in his writings he rephrases must be access to the free market, for a market it as "No man-concocted obstacles to the cannot be free when access is arbitrarily release and exchange of creative human en­ denied to individuals or groups. ergy." He leaves no doubt as to the difference Read does not explicitly speak to the unity between creative and destructive or obstacle­ of liberty, the human right, the free market, placing energy. In these definitions and in the justice and equality before the law, but given body of his writings he avoids contradictions, his theory and arguments, it appears to be the ambiguities, idiosyncrasies, and the dated inescapable conclusion. As Read would say, context that limit the usefulness of earlier "That's what it is, and that's all it is." essays and definitions of Locke, Humboldt, Read perceived what many overlook or J.S. Mill, Spencer, Henry George, and other deny. "Not all mankind's deviltry originates in classical liberals. A worthy companion and men themselves being devils." "[T]oo many successor to these earlier libertarian vision- people have, for the time being, adapted them- GOVERNMENT: AN IDEAL CONCEPT 485

selves to governmental interventionism." "Most as those who paid the piperwould surely call [reviewer's emphasis] of the troubles among the tunes. But, he says, "the faults with men are set in motion by ill-advised institu­ voluntary financing of government are not tions-that is by men faultily organizing them­ the really valid reasons for favoring taxa­ selves." Herecognized thatwell-intentioned but tion, or for contending that taxation does foolish ideas, rather than evil schemes, lead to not classify as aggression against the liberty harmful and corrupting attitudes and institu­ of citizens." tions. Thus acceptance ofwiser ideas could, by "Every one of us exists by reason of a changing incentives and reducing temptation, division of creative energy and its exchange." initiate a reversal ofthis sequence. Behavior can This is the free market, and ideal government improve while human nature more or less is the just, organized agency for defense ofthe remains the same. In otherwords, a practicable free market, employed by and responsible to approach to liberty need not wait on the·moral the sovereign people, whose right to live in regeneration of mankind. liberty it is government's duty to protect. The universal interdependence of human Taxes are an acknowledgment of the rela­ beings, never better expressed than by John tive freedom and sovereignty of the people. Donne in the seventeenth century-"No man is They focus our attention on our govern­ an island"-is a fundamental and recurrent ments-be they good or evil. In this sense, theme in Read's expositions.5 He does not taxes are disciplining, if unwelcome. This explicitly disclaim his theory ofgovernment and helps to explain why taxes need to be com­ liberty as inappropriate for small groups or pulsory, but the basis of Read's argument is exceptional situations, but it is obvious that still more fundamental: fairness. "[W]hile different rules must apply in families, the mili­ what we do with our creative potentialities is tary, disaster scenes, and similar circumstances. strictly a matter of personal decision, the fact It is for the large, mostly anonymous society, thatwe ourselves are alive is due to the degree dependent on and coordinated by the free ofperfection of the exchange equation which market in goods, services, and ideas that liberty has preceded us. and government, as he defines it, is necessary. "There are two sides to this coin. True, we inherit not only the benefits but also life itself, Taxation which division of labor and exchange confer. But by the same token, we inherit the obli­ Government being necessary, how is it to be gation its maintenance and perfection de­ funded and staffed? Is all taxation theft?6 mand. In this single respect, we are as much Is conscription for national defense justi­ members ofthe society which has been respon­ fied? Read's answer to the last question: "No sible for this as we are individual human beings. ideal agency ofsociety can conscript any ofits [my emphasis] This membership in the soci­ members for any kind of employment." So etal organization that inhibits the social ob­ much for conscription ofmilitary, ofjurors, of stacles to creative energy and its exchange is bookkeepers, and of tax collectors. Read's one's own. That which is one's own isn't justification of taxation to support limited anyone else's. And it is not merely one's own government is a powerful argument which for harvesting its blessings; it is one's own to alone ought to motivate every libertarian to support for precisely the same reason that it read his book. Read warns us, "One of the is everyone else's to support. One cannot deny first, important and assuredly controversial his parentage by the simple expedient of points the foregoing theories will raise has to saying: 'I don't want any parentage.' Nor can do with taxation." He rejects voluntary fund­ one deny his societal obligation by the simple ing of limited government, not because it expedient of saying: 'I choose not to have would be inadequate-he thought it would be inherited any obligation.' The inherited obli­ oversubscribed-but because he saw it as an gation is a fait accompli. To support or not to invitation to plutocracy. The democratic ideal support a limited organization of society, ofequality before the law would be subverted based on right principle, is logically exterior to 486 THE FREEMAN • AUGUST 1997 the area of free choice, unless, of course, one pointing out that ours is not a numbers nor a chooses to absent himself." propaganda problem. We do not have to sway Read pointed out: "Some opponents of any multitudes. First, we have to get our own ideas organization by society refer to government as right. This is a personal problem. Reflect on 'slavery' and to taxation as 'robbery.' These the waste of bloodshed and treasure and epithets appear not to be correct. When human suffering caused by trying to popular­ society's agency goes beyond its authentic ize or impose faulty systems. We must first functions of defending all of society's mem­ bring our product to the point where it can bers equally and without favor and is em­ withstand the most severe scrutiny. In Gov­ ployed as an agency ofplunder to 'help' some ernment: An Ideal Concept, Read deals with members at the expense of other members, the role of government, not its structure. then and only then can the action of the Apparently he is reasonably satisfied with the agency be called slavery. Likewise, plundering U.S. Constitution, condemning only black the honest fruits ofone's labor for the 'benefit' slavery, tariffs, the "elastic clause," and the of others classifies as robbery-legal perhaps income tax amendment. but robbery nonetheless." Now, on the eve of the next millennium, it Based on the general will to live and the is appropriate to ask, "What is the Holy Grail, right to life and livelihood, Read proceeds to the end and purpose of political science, describe an implied contract between each political philosophy, political economy?" Is it individual and the rest of society to employ not to discover and explain the ideal, the and pay limited defensive governments. This principles ofthe political and economic struc­ contract provides for the delegation of the ture most helpful to the further flowering of personal right of self-defense to government imperfect but improvable man and woman? because it "cannot properly [and in justice] be Liberty, as Read describes it, is the embodi­ attended to as individual projects." ment of those principles. His vision is that Read, of course, condemned the progres­ ideal. sive income tax. He did not offer alternatives. The correctness of this vision is demon­ This task he left for us. So, having rejected the strated again and again. As true liberty has twin fallacies of no taxes and oppressive and been approached, the lot of humanity, across discriminatory taxes, we are now free to, and its fullest spectrum, has improved, its age-old obligated to, seek and propose a better tax miseries ameliorated. To enjoy the "blessings system. The public at large accepts Poor of liberty" is not a vague or idle phrase, but Richard's verdict on the inevitability of man's noblest earthly ambition. taxes, and has no patience with the anarchist Read's brief Government: An Ideal Concept delusion to the contrary. This confused area may well be a milestone in political thought. of libertarian thinking is, I believe, one of By virtue of giving us this readily accessible, the remaining obstacles to its popular ac­ most highly advanced definition ofliberty and ceptance. ideal theory of limited government, Leonard It may be argued that Read's theory of Read is, despite lack of formal scholarship limited government, being categorical, is so and academic credentials, the pre-eminent idealistic as to be inapplicable to the incre­ political philosopher of his time. Add to this mental nature of practical affairs. We need his founding and staffing of the Foundation the theory for a compass, the vision for a map. for Economic Education, recruitment of its The exploring party must still search to find its trustees, 37 years as its president, staffing and way. Mindful that human affairs cannot be publication of The Freeman, rediscovery of mathematically exact, the categorical may be Bastiat, support of Mises, cooperation with modified into a very strong but rebuttable Henry Hazlitt, authorship ofthirty-odd books presumption in its favor (against government and extensive worldwide travel, everywhere intervention in creative actions), leaving stat­ planting fertile seeds ofliberty to supplant the ists with a heavy burden of proof. choking weeds of servitude. Who in his time Read eschews discussion ofstrategy beyond did more than Leonard Read to advance the GOVERNMENT: AN IDEAL CONCEPT 487 cause of liberty without ever impeding its racy, goon squads, corruption, and conflict-a house divided against itself. Only a consensus on the proper use of force can progress?7 lead to peace. To approach a consensus, the use of force in Readers of this article should not imagine society must be limited to defense of life, liberty, and prop­ erty-that is, the free market, the fountain from which we all that here is abstracted all of Read's wisdom. drink. Limited government must have a society-wide, tax­ This is only an overview, a few comments and supported base. 2. See Isabel Paterson, The God ofthe Machine (New York: (I hope) a little logic. This is the book that G.P. Putnam, 1943). every libertarian should keep at hand as both 3. Among the fine but vital distinctions: a.) The difference in nature, not degree, between the a guide and a challenge. It deserves careful necessary exercise of force and all other social trans­ and repeated study. actions. b.) The difference between self-defense and aggression. To see an impending disaster and not warn c.) The difference between collecting a just debt and theft. others is immoral. To receive knowledge and d.) The difference between just and unjust, efficient and inefficient taxation. insight and not share it is to be unworthy of e.) The difference between private and personal matters the gift and disqualified for further blessings. and the public economic arena. f.) The difference between children and adults. These are Leonard Read's principles. To g.) The difference between absolute and conditional rights. spurn offerings of insight is a parallel fault. h.) The politically intimidating effect of many laws. 4. See Wilhelm von Humboldt, The Limits of State Action, "Unto whomsoever much is given, of him edited by J. W. Burrow (Indianapolis, Ind.: Liberty Fund, 1969). much is required." In Government: An Ideal 5. The Limits ofState Action contains numerous parallels in Concept, that vision is our challenge and an eighteenth-century context. 6. It is a measure of the difficulty and seriousness of these duty. 0 questions that in 1984 the libertarian writer, the late Roy A. Childs, in a conversation confessed to me that he had never been able to resolve the funding question to his own satisfaction. 1. Except for Government: An Ideal Concept, I don't know 7. From the time ofhis conversion from a supporter ofFDR's where to find such a definition and theory today. Overwhelming New Deal in the early 1930s to a libertarian. This occurred in might, whether right or wrong, always prevails. Our ideal is that perhaps an hour-long discussion with W. C. Mullendore, head of right and might coincide. Who pays the piper calls the tune. Southern California Edison. Who could have foreseen the Plural, private defense forces are divisive, a formula for plutoc- consequences of that pivotal conversation?

Say Not the Struggle Naught Availeth ay not the struggle naught availeth, S The labor and the wounds are vain, The enemy faints not, nor faileth, And as things have been they remain.

If hopes were dupes, fears may be liars; It may be, in yon smoke conceal'd, Your comrades chase e'en now the fliers, And, but for you, possess the field.

For while the tired waves, vainly breaking, Seem here no painful inch to gain, Far back, through creeks and inlets making, Comes silent, flooding in, the main.

And not by eastern windows only, When daylight comes, comes in the light; In front the sun climbs slow, how slowly, But westward, look, the land is bright! -ARTHUR HUGH CLOUGH (1819-1861) THEFREEMAN IDEAS ON LIBERTY to ensure that they provide customers the best deal notby improving the package they provide, but by getting the government to hamper the WhyManaged ability of their competitors to provide a better deal. Foreign competitors make an especially easy target for such government· restrictions. Trade Is Not Thus, government restrictions on interna­ tional trade are of a piece with domestic restrictions on competition. They share the Free Trade same goal: to redistribute income from the many to government's chosen few and to substitute its own preferred allocation of by Robert Batemarco resources for that of the market. Indeed, by restricting tradewith foreigners, governments close off an important means ofmitigating the impact of their domestic restrictions. This is he British historian Thomas Babington what John T. Flynn had in mind when he said, T Macaulay observed that free trade, one of "The first condition of a planned economy is the greatest blessings which a government can that it be a closed economy. ,,3 bestow, "is in almost every country unpopu­ lar."1 Indeed, sound economics often makes Free Trade: The Real Thing for unsuccessful politics. That free trade is a In establishing a free economic system for great benefactor is one of the most convinc- the United States, the Framers mandated free 2 .ingly established truths of economic science. trade among all the states in the union. They The economic case for free trade is essentially spelled this out in Article I, Section 9, of the the case for voluntary exchange in general: no Constitution: one freely enters into an exchange, whether as buyer or seller, unless he expects to emerge No tax or duty shall be laid on articles exported from any state. No preference shall be given by better off as a result of that exchange. Fur­ any regulation of commerce or revenue to the thermore, the ability to exchange a single ports of one State over those of another: nor product one has produced for the many things shall vessels bound to, or from, one State, be one would like to consume makes possible the obliged to enter, clear, or pay duties in another. division of labor and the manifold expansion At 54 words, this was the original North of production capacity that it permits. There American Free Trade Agreement. As we shall is no economic reason why these gains do not see, the 1994 agreement that goes by that apply equally to potential traders on different name makes a travesty of free trade. sides of national boundaries. The damage done by restrictions on inter­ The political liabilities associated with free national trade became clear to most people trade stem from the vigorous competition it during the debacle of the 1930s. Once World promotes. Competitors who do not provide War II had ended, the popularity offree trade the best deal for consumers fail. Far from surpassed Macaulay's fondest hopes. Yet in sugarcoating this unwelcome fact, free trade many ways truly free trade was not in keeping demonstrates it in no uncertain terms. Rather with the tenor ofthe postwar times. Free trade than looking to improve their own shortcom­ requires neither complex laws nor ponderous ings, many of the losers in the competitive bureaucracies. With the establishment of the process seek to derail the process. They seek United Nations, the World Bank, and the Dr. Batemarco is director ofanalytics at a marketing International Monetary Fund, the world was research firm in New York City and teaches econom­ moving in the opposite direction. So postwar ics at Marymount College in Tarrytown, New York. governments sought managed trade rather 488 The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: [email protected]

August 1997 Coercivists and Voluntarists

ategorizing a political position ing political views. A better strategy for according to some simple left-right helping to improve political discussion is Cscale of values leaves something to to devise a set of more descriptive terms. be desired. Political views cover such a There is much to be said for a sugges­ wide variety of issues that it is impossible tion offered by Professor Richard Gamble, to describe adequately anyone person who teaches history at Palm Beach merely by identifying where he sits on a Atlantic University. Richard proposes that lone horizontal line. instead of describing someone as either Use of the single left-right scale makes "left" or "right," or "liberal" or "conserva­ impossible a satisfactory description of lib­ tive," we describe him as being either a ertarian (and classical-liberal) attitudes centralist or a decentralist. This 1/centralist­ toward government. Libertarians oppose decentralist" language would be a vast not only government direction of econom­ improvement over the muddled "left­ ic affairs, but also government meddling in right" language. the personal lives of peaceful people. Does Unfortunately, "centralist-decentralist" this opposition make libertarians "right­ language contains its own potential confu­ ists" (because they promote free enter­ sion-namely, "decentralist" might be prise) or "leftists" (because they oppose taken to mean someone who is indifferent government meddling in people's private to what Clint Bolick calls "grassroots affairs)? As a communications tool, the tyranny." Is there an even better set of left-right distinction suffers acute anemia. labels for a one-dimensional political spec­ Nevertheless, despite widespread dis­ trum? I think so: "coercivist-voluntarist." satisfaction with the familiar left-right-or At one end of this spectrum are coer­ "liberal-conservative"-lingo, such use civists. Coercivists believe that all order in continues. One reason for its durability is society must be consciously designed and convenience. Never mind that all-impor­ implemented by a sovereign government tant nuances are ignored when describing power. Coercivists cannot fathom how someone as being, say, "to the right of individuals without mandates from above Richard Nixon" or "to the left of Lyndon can ever pattern their actions in a way that Johnson." The description takes only sec­ is not only orderly, but also peaceful and onds and doesn't tax the attention of night­ productive. For the coercivist, direction by ly news audiences. sovereign government is as necessary for Therefore, no practical good is done by the creation of social order as the meticu­ lamenting the mass media's insistence on lous craftsmanship of a watchmaker is nec­ using a one-dimensional tool for describ- essary for the creation of a watch. At the other end of the spectrum are tive who applauds government regulation voluntarists. Voluntarists understand two of what adults voluntarily read, view, or important facts about society that coer­ ingest. Both parties believe that social civists miss. First, voluntarists understand order will deteriorate into chaos unless that social order is inevitable without coer­ government coercion overrides the myriad cive direction from the state as long as the private choices made by individuals. basic rules of private property and volun­ Voluntarists are typically accused of tary contracting are respected. This endorsing complete freedom of each indi­ inevitability of social order when such vidual from all restraints. This accusation is rules are observed is the great lesson nonsense. While they oppose heavy reliance taught by Adam Smith, Ludwig von upon coercively imposed restraints, sensible Mises, F.A. Hayek, and all of the truly voluntarists do not oppose restraints per see great economists through the ages. Voluntarists, in contrast to coercivists, rec­ Second, voluntarists understand that ognize that superior restraints on individual coercive social engineering by govern­ behavior emerge decentrally and peaceably. ment-far from promoting social harmo­ Parents restrain their children. Neighbors ny-is fated to ruin existing social order. use both formal and informal means to Voluntarists grasp the truth that genuine restrain each other from un-neighborly and productive social order is possible behaviors. The ability of buyers to choose only when each person is free to pursue where to spend their money restrains busi­ his own goals in his own way, constrained nesses from abusing customers. by no political power. Coercive political A free society is chock-full of such power is the enemy of social order because decentrally and noncoercively imposed it is unavoidably arbitrary-bestowing restraints. Indeed, it is the voluntary ori­ favors for reasons wholly unrelated to the gins of such restraints that make them values the recipients provide to their fel­ more trustworthy than coercively imposed low human beings. And even ifby some restraints. A voluntary restraint grows miracle the exercise of political power decentrally from the give and take of could be shorn of its arbitrariness, it can everyday life and is sensitive to all the never escape being an exercise conducted costs and benefits of both the restraint in gross ignorance. It is a simpleton's fan­ itself and of the restrained behavior. But a tasy to imagine that all the immense and coercive restraint too often is the product detailed knowledge necessary for the suc­ not of that give and take of all affected par­ cessful central direction of human affairs ties but, instead, of political deals. And can ever be possessed by government. political deals are notoriously biased Society emerges from the cooperation of toward the wishes of the politically well­ hundreds of millions of people, each acting organized while ignoring the wishes of on the basis of his own unique knowledge those unable to form effective political of individual wants, talents, occupations, coalitions. What's more, members of the and circumstances. No bureaucrat can political class often free themselves from know enough about software design to the very restraints they foist upon others. outperform Bill Gates, or enough about Coercively imposed restraints are not retailing to successfully second-guess the social restraints at all; rather, they are arbi­ folks at Wal-Mart, or enough about any of trary commands issued by the politically the millions of different industries to privileged. outdo people who are highly specialized The true voluntarist fears nothing as in their various trades. much as he fears coercive power-whether The coercivist-voluntarist vocabulary is exercised by those on the "left" or the superior to the left-right, or liberal-conser­ "right." vative, vocabulary at distinguishing liber­ ty's friends from its foes. Support for high taxes and intrusive government commer­ cial regulation is a "liberal" trait. A sup­ porter of high taxes and regulation is also, Donald J. 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than free trade. While the establishment of (Vnder true free trade, there is one tariff the proposed International Trade Organiza­ rate-O percent.) The agreement does have tion was avoided, free trade was not restored. trade-liberalizing features, to be sure. Con­ While far from the ideal, the managed­ sisting ofa 10 percent reduction in tariffs to be trade regime that followed World War II was phased in over 15 years, however, they are all a measurable improvement over the beggar­ but buried under the profusion of controls thy-neighbor protectionism which preceded NAFTA also establishes. that conflict. For a while even, the interna­ In the first place, the benefit from those tional bureaucracies that managed trade tariff reductions are jeopardized by the agree­ seemed to move the world in the right direc­ ment's "snap-back provisions." Those permit tion, generally lowering tariff rates. Managed pre-NAFTA tarifflevels to be restored against traders seemed to resemble free traders. imported items which "cause or threaten However, as memories of the folly of Smoot­ serious injury to domestic industry."s In other Hawley4 faded, politically well-connected words, NAFTA supports free trade as long as firms sought shelter from the cold winds of it does not promote international competi­ international competition. As bureaucrats re­ tion which is too hot for favored domestic verted to empire-building form, managed firms to handle. In addition, NAFTA's rules trade became a fig leaf for protectionism. A of origin are designed to divert trade from rundown of the major vehicles of managed the world's most efficient suppliers to North trade illustrates this. America's most efficient suppliers. This hob­ bles the international division oflabor instead Mechanisms of Managed Trade of expanding it, as true free trade does. GATT The importance of NAFTA clauses that keep out foreign goods came to light as V.S. The General Agreement on Trade and clothing manufacturers railed against the im­ Tariffs (GATT) came about largely by default. port of wool suits from our NAFTA partner Established on an interim basis, to be super­ Canada. The suits in question were made seded by the International Trade Organiza­ from third-country wool not covered by tion, it ended up lasting four decades when the NAFTA rules oforigin. Since Canadian tariffs proposed ITO failed to muster the votes to be on foreign wool were lower than U.S. tariffs passed by Congress. GATTbasically provided (10 percent vs. 34 percent),6 Canadian suits for tariff reduction based on multilateralism. sold for less and soon claimed a large share of While it did achieve a number of piecemeal the V.S. market. The fact that the entire steps in the direction of freer trade, its weak discussion of this issue centered on closing link was that it played into the popular notion this "loophole" in NAFTA rather than on that unilateral relinquishing of trade barriers lowering the injurious V.S. tariff on wool was at best a mixed blessing. The idea that a should prove how devoted NAFTA's support­ country should not "give up" its trade barriers ers are to free trade. shifted the focus to "striking a deal" and away Free trade does not depend on interna­ from the merits of free trade itself. tional bureaucracies, yet NAFTA creates sev­ eral of them. Its Commission for Environ­ NAFTA mental Cooperation was set up to enforce the environmental aim of sustainable growth. The North American Free Trade Agree­ One tactic it uses is to prevent countries from ment (NAFTA) is the quintessential man­ trying to create a friendlier environment for aged-trade vehicle sold under the rubric of investors by relaxing any extant environmen­ free trade. The first tip-off should be its size. tal regulations.7 Such rules are to be enforced While we earlier saw how 54 words in the U.S. by trade sanctions and fines, with the latter to Constitution established free trade among the go into a slush fund for "environmental law states ofthe Union, NAFTAweighs in at over enforcement."s NAFTA also created a Labor 2,000 pages, 900 of which are tariff rates. Commission, whose purpose is to "level the 490 THE FREEMAN • AUGUST 1997

playing field" between trading partners with come by countries with the least restrictive regard to labor costs. To repeat, free trade this measures ratcheting them up to the level of the is not. most restrictive (known as upward harmoniza­ tion). Clearly, the goal is not worldwide free WTO trade based on the division of labor, but rather of a worldwide welfare state based on the faith The crowning jewel ofmanaged trade is the that bureaucrats know best how to run busi­ World Trade Organization. Instituted to re­ nesses in which they themselves have no stake. place GATT, its 29,000-page treaty is a bu­ reaucrat's dream corne true. Its driving force Conclusion comes from those who see government's job Free trade means the ability ofproducers to as "civilizing" the market (which they believe exchange their wares with anyone on the would otherwise operate as the law of the globe for other goods without some govern­ jungle). While those 29,000 pages say little ment standing in the way of some of those about deregulating trade, they say a great deal exchanges due to the country of origin of the about regulating everything else. Whereas goods involved. It requires no more laws or GATT had been a voluntary forum for na­ institutions than are necessary to provide tions seeking mutual agreements to lower standard protection of the property rights of tariffs, the WTO has enforcement powers, all involved·in the exchange. It is the appli­ with trade sanctions chief among them. cation of laissez faire across international The treaty and other enabling legislation borders: nothing more, nothing less. creating WTO overflows with such Orwellian Multivolume documents paying lip service verbiage as "systematic denial of worker rights to free trade but forbidding transactions by in order to gain a competitive advantage is an parties whose competitive advantages are unjustifiable trade barrier.,,9 In other words, considered by some to be unfair are the people in poor countries are allowed to partic­ antithesis of free trade no matter how many ipate in international trade as long as they don't times the words "free trade" appear in their offer to sell goods cheaply enough that anyone pages. That managed trade proponents hide would desire to purchase them. Indeed, many the nature of their policy preferences under within the WTO bureaucracy support extend­ the cloak of free trade reveals their utter ing minimum-wage "protection" to poor na­ shamelessness. It also suggests that the free tions in which they would wreak even more trade side is winning the battle of ideas. D havoc than they do in the"advanced" nations where they are already in force. 1. Cited by Lindley H. Clark, Jr., "The GATT Struggle The WTO agreement also expands the Continues," the Wall Street Journal. 2. A compendium of the successful refutations of economic reach of anti-dumping laws, another favorite theories which purported to find exceptions to the general tool ofentrenched multinational corporations benefits of a free trade regime can be found in Douglas Irwin, Against the Tide (Princeton, N.J.: Princeton University Press, .to shield themselves from the competition of 1996). Third World upstarts. Technically defined as 3. Cited by Llewellyn H. Rockwell, Jr. in "Who Killed Free Trade?" The Free Market 14, April 1996, p. 2. exporting goods below costs, the very concept 4. The Smoot-Hawley Tariffwas passed in 1930 supposedly to of dumping is problematic, given costs' subjec­ prevent the loss of American jobs to foreigners. It raised tariff rates to unprecedented levels and ended up crippling world trade tive nature. Any determination of a firm's costs and contributing to the severity of the Great Depression. by one not involved in the decision-making 5. James M. Sheehan, "Nafta-Free Trade in Name Only," the Wall Street Journal, September 9, 1993. process must by definition be arbitrary. 6. Christopher J. Chippelo, "Fight Looms over Canada's Suit The concept of harmonization is another Exports," the Wall Street Journal, August 7, 1996, p. A2. 7. For example, article 1114 forbids relaxing environmental buzzword beloved by the managed trade ma­ regulations "as an encouragement for establishment, acquisition, vens of the WTO. The idea here is to achieve expansion or retention in its territory of an investment or investor." Sheehan, ibid. uniformity of labor laws, environmental and 8. Matthew C. Hoffman and James M. Sheehan, The Free health regulations, and a host of other such Trade Case against NAFTA (Washington, D.C.: Competitive Enterprise Institute, 1993), p. 3. restrictions on enterprise. And surprise, sur­ 9. William H. Lash III, "Labor Rights and Trade Policy," The prise-achievement of this uniformity is to Journal ofCommerce and Commercial, May 17,1994. THEFREEMAN IDEAS ON LIBERTY

One Life for Liberty by Becky Akers

British artillery park, Sunday, September worked on a different, larger manuscript, that A 22, 1776. It wants an hour to noon, but of the American Revolution. the sun glares mercilessly on the cannon, and Historians often distort the Revolution into the Redcoats milling about mop their brows. a class war ofmerchants against farmers, with There's not much breeze, but what there is independence from England the Patriots' only stinks of smoke: It blows from the south, aim. But contemporaries knew exactly what where New York City lies smoldering after the Revolution was about. Its commander-in­ yesterday's fire. chief was famous for calling George III "a In front ofthe park is a tree. A cart and horse tyrant," his government a "diabolical minis­ wait under it. A noose dangles overhead. try," for exhorting his troops to "show the In the cart stands a young and outrageously whole world that a Freeman, contending for handsome man. He's serene, confident, almost liberty on his own ground, is superior to any cheerful. His hands are bound behind him. slavish mercenary on earth."1 The Congress OthelWise, no one wouldguess he's aboutto die, running it was comprised ofmembers like the like a murderer, like a thief. Adamses, who lived, breathed, and dreamed The hangman scrambles into the cart beside liberty. ("But while I do live," John Adams him, tugs the noose tight around his neck, tells said during debate on the Declaration of him ifhe's got anything to say, he better say it Independence, "let me have a country, and now. that a free country." Cousin Sam had written He sweeps the British with eyes as blue as the in 1772, "The natural liberty of man is to be East River behind them. free from any superior power on Earth, and "I only regret that I have but one life to give not to be under the will orlegislative authority for my country. " of man, but only to have the law of nature for With those words, Captain Nathan Hale of his rule.") Then there was the English convert the 19th Connecticut Regiment of the Conti­ cheering it on with such sentiments as "Gov­ nental Army is hanged for espionage. He is 21 ernment, even in its best state is but a years old. necessary evil; in its worst state an intolerable Old enough to have starved and marched one.,,2 A man showed how much he valued for a year in Washington's army. Too young freedom, how he wanted to live free ofexcises to have left anything but mundane letters and and restrictions on travel and regulations a matter-of-fact journal of his months as a about how and where he conducted business, Continental officer. just by joining up. Captain Hale wrote no inspired treatises on liberty, no books extolling freedom. He Who Was Nathan Hale?

Becky Akers has written a novel on Nathan Hale for As the Revolution has been twisted, so have which she is seeking publication. Nathan Hale and his last words. Today he is 491 492 THE FREEMAN • AUGUST 1997 largely forgotten or dismissed as a bumbling read-such authors as Cicero and Aristotle. farmboy who let his enthusiasm carry him He also showed an athleticism that awed his away. But again, his contemporaries under­ friends: "I have seen him," Lieutenant Elisha stood what motivated him. They even en­ Bostwick reported, "follow a football & kick graved it on his memorial tablet: "Resign'd his it over the tops ofthe trees ... (an exercise he life a sacrifice to his country's liberty." was fond of)." Colonel Green recalled that he Nathan Hale was as extraordinary in life as "[w]as exceedingly active-would jump from he was in death. Colonel Samuel Green the bottom ofone hogshead up and down into recalled that he was "peculiarly engaging in a second and from the second up and down his manners-... old & young exceedingly into a third like a cat-used to perform this attached to him-respected highly by all his feat often-would put his hand on a fence acquaintance-fine moral character. Every­ high as his head, and jump over it." Legend body that knew Hale was attached to him­ says he made such a prodigious broadjump on 'that's the fact.'''3 Mrs. Elizabeth Adams New Haven's green that the marks were Poole, whose family boarded Hale while he preserved for years. taught school in New London, Connecticut, At commencement, Nathan and three remembered that his "appearance, manners, classmates debated, "Whether the Education & temper secured the purest affection of of Daughters be not without any just reason those to whom he was known. . .. On the more neglected than that of Sons?" There is whole I then thought him (& his tremen­ no record ofwhich side each graduate argued. dous"-Le., shameful: spies were then con­ But it is likely that Nathan spoke against sidered the worst of criminals-"fate has not restricting school to boys as he was teaching weakened the impression) one of the most a class of girls less than a year later. perfect human characters recorded in history or exemplified in any age or nation." Mrs. Schoolmaster ... Poole wrote this in 1837, when people liked their heroes unblemished. Still, it is hard to Schoolteaching demanded a strong arm, for fault Nathan Hale. Everyone spoke of him Whippings were as much a part of the curric­ with overwhelming affection, and unlike some ulum as reading and writing. But according to champions of liberty, he never violated the Colonel Green, Master Hale broke with that ideals of freedom. tradition: "Children all loved him for his tact Born June 6, 1755, in Coventry, Connect­ and amiability ... wonderful control over icut, he was one of ten children (two more boys-without severity ..." Mrs. Poole died as infants) raised by Richard "Deacon" agreed: "... the mildness of his mode of Hale and his wife Elizabeth Strong. The instruction, was highly appreciated by Par­ family was already distinguished. Nathan's ents & Pupils." And there was his class for great-grandparents, John and Sarah Hale, girls, which met from 5:00-7:00 every morn­ helped end the Salem witch trials, and both ing, before the start of the regular school the Hale and Strong families were spangled day. Educating females was a liberal notion with ministers, the celebrities of Puritan New in 1774, but Master Hale mentions it non­ England. chalantly in a letter to his uncle: "20 young Deacon Hale prospered enough on his ladies" attended his class, "for which I have farm to educate several of his eight sons. received 6s [shillings] a scholar, by the Nathan and his brother Enoch were tutored quarter." by Coventry's minister, the Reverend Joseph He was teaching in New London, Connect­ Huntington, whose brother Samuel would icut, in April 1775 when couriers from the later sign the Declaration of Independence. Massachusetts Committee of Safety spread Nathan enrolled at Yale College when he the news ofLexington and Concord. Not only was 14. Admission required fluency in Latin had mere farmers confronted British Regu­ and Greek, so Nathan had already read-and lars intent on raiding a colonial arsenal, but for the next four years would continue to those farmers and hundreds of their neigh- ONE LIFE FOR LIBERTY 493 bors then sent the Regulars skedaddling back men, trying to force them to stay. But Captain to Boston under withering fire. Town meet­ Hale used a free-market approach. He paid ings were called all over New England to his company out of his own pocket to remain discuss this disarming of free men. Years until new recruits arrived. later, Leverett Saltonstall wrote about the Finally, in March of 1776, General Sir gathering in New London, "related to me by William Howe, Commander of His Majesty's my aged friend, Capt. Richard Law, who at Land Forces in North America, admitted that time was [Nathan Hale's] pupil ... Mr. defeat. Farmers watched in jubilant disbelief Hale [said] 'let us march immediately and as the world's best army boarded transports never lay down our arms untill we obtain our and abandoned Boston. Independence.' ... Capt. Law states that he Patriot morale soared at the British depar­ was very young at that time ... [but he was] ture (though everyone knew Howe and his struck by the noble demeanour of Hale, and Redcoats would return, probably to New the emphasis with which he addressed the York City, so Washington hurried his troops assembly, [and] he enquired of his Father, there). It rose even higher in July, when what it meant." As well he might. Few were Congress published the Declaration of In­ advocating independence from England at dependence. Here was lyrical, logical justi­ that time. Even George Washington and John fication for rebellion: when "any form of Adams hoped for reconciliation. It was not government becomes destructive" of lib­ until Common Sense burst on the Colonies erty, "it is [the people's] right, it is their eight months later that independence from duty, to throw off such government." With England was accepted as the best way to such encouragement, men continued to safeguard liberty. enlist, more than could be outfitted and fed. Their spirit was hardly dampened when Soldier ... Howe's fleet, augmented by fresh troops from England and German mercenaries, Nathan Hale enlisted as a lieutenant with was sighted south of New York. Even an the Connecticut militia that July and, a few epidemic of typhus fever did not quell their months later, was commissioned a captain in enthusiasm. the Continental Army. But the problems with payroll and supply Meanwhile, the Rebellion proceeded glo­ that had plagued the army at Boston followed riously. Patriots had not only chased the them to New York. So Captain Hale led a Redcoats back to Boston, they kept them detachment to capture a British supply sloop besieged there for the next eight weeks. When from under the 64 guns of a man-of-war, thus the British tried to break out at the Battle of arming and feeding the Continentals after Bunker Hill, the Americans ceded the hill but months of scanty provisions. wounded or killed half the Redcoats. Better In August 1776, after the successes of yet, the siege resumed apace. Lexington and Concord, the battle at Bunker There were problems, to be sure. One was Hill, and the evacuation of Boston, Ameri­ the disorganization of the Continental Army, cans suffered their first defeat when Howe's especially the quartermaster's department. army squared off against them in the Battle of Food, pay, even ammunition and weapons Brooklyn. The British found an undefended were in short supply. The recruiting office was pass on the Americans' left and swept in almost as bad. Men had enlisted through the behind them. At day's end, the Continen­ end of the year, and as December 1775 tals-or what was left of them: 2,000 out of approached, the hungry, unpaid, musketless 19,000 were casualties-huddled in their for­ Patriots gathered around Boston would go tifications on Brooklyn Heights, trapped. The home-en masse. The British would sit un­ East River lay behind them, and Redcoats opposed in Boston, free to invade the coun­ were building siege tunnels a few hundred tryside. Some officers, such as General yards in front. A siege was the classic way to Charles Lee, berated and threatened their end a battle-and, in this case, the war. 494 THE FREEMAN • AUGUST 1997

Barring a miracle, the besieged could look Washington may have talked to the Rang­ forward to thorough defeat. ers himself, or he may have asked Knowlton But Washington and "a kind Providence" to handle it. Either way, finding a spy would worked that miracle. Rain fell the next three be difficult. Few menwould volunteer for such days, wetting gunpowder and preventing fur­ ignominy. ther fighting. The storm also kept the British But Captain Hale did. Navy from sailing up the East River to bom­ His friends tried to dissuade him. "I [told bard the Americans' rear. Washington thus him]," wrote Captain William Hull, who had had time to orchestrate a daring retreat. known Nathan at Yale, "that it was an action Under cover of darkness, he ferried his army ... [whose] propriety ... was doubtful ... the across the East River, back to Manhattan, employment was not in keeping with his right under British noses. character. His nature was too frank and open Still, defeat loomed. Sooner or later the for deceit and disguise." British Army would follow them across the "After the retreat of our army from Long river, the British Navy would surround Man­ Island," Sergeant Stephen Hempstead re­ hattan Island. Washington's force of 30,000 called, "[Captain Hale] informed me, he was began deserting until only 10,000 terrified sent for to Head Quarters, and was solicited farmers and shopkeepers remained. With this to go over to Long Island to discover the number, the General had to defend Manhat­ dispositionofthe enemy's camps, &c., expect­ tan's 18 miles of accessible coastline from ing them to attack New York, but that he was Howe's 35,000 professionals. Obviously, if too unwell to go, not having recovered from Washington knew the time and place of the a recent illness; that upon a second applica­ British beachhead, he could mass his troops, tion, he had consented to go." Asher Wright, maybe even hold New York. a boyhood friend who had followed Hale to He needed a spy. war as his attendant, thought it folly: "He was too good-looking to go so. He could not Spy deceive. Some scrubby fellows ought to have gone. He had marks on his forehead so that Espionage in those days before James Bond anybody would know him who had ever seen was considered neither sexy nor glamorous. him-having had powder flashed in his face." One Continental officer called it "moral deg­ Neither illness nor his friends' disapproval radation" and added, "Who respects the char­ kept the Captain from his mission. Sergeant acter ofaspy, assuming the garb offriendship Hempstead accompanied him as he "... left but to betray? ... Let us ... not stain our our Camp on Harlem Heights ... Capt Hale honor by the sacrifice ofintegrity." So heinous had changed his uniform for a plain suit of was it that years later, when President Wash­ citizens brown clothes ... [afterwards] we ington wanted to honor some of the Revolu­ parted for the last time in life." This is our tion's surviving agents with a dinner party, final glimpse ofHale until British logs note his they declined rather than admit their involve­ arrest. ment to family and friends. We know nothing of his activities behind In early September 1776, then, with the the lines. Likewise, there are no eyewitness British preparing to cross the East River and accounts of his capture. Many suspected false finish the war, Washington turned to Colonel play: "... betra'd he doutless wass by some­ Thomas Knowlton of Connecticut for help. body," his father wrote. "[H]e was executed After the debacle in Brooklyn, Knowlton had about the 22nd of Sepetember Last by the formed about 100 men, the creme de la creme Aconts we have had. A Child I sot much by but of the army, into a corps of Rangers. He he is gone...." Some thought that Nathan's recruited four captains, one of whom was cousin Samuel, a Tory from New Hampshire Nathan Hale. Their main duty was reconnais­ who was serving as Howe's Deputy Commis­ sance, to make sure the British never again sary of Prisoners, had recognized and be­ surprised the troops as they had in Brooklyn. trayed him. According to other stories, he ONE LIFE FOR LIBERTY 495 gave himself away. His brother Enoch's jour­ with gentle dignity, in the consciousness of nal says, "... Being suspected by his move­ rectitude and high intentions.... He said, 'I ment [that] he wanted to get out of N York only regret that I have but one life to lose for [he] was taken up & examined by the Genl my country.'" [Howe] & some minutes being found with him This extract, from Hull's memoirs, was orders were immediately given that he should written decades after the Revolution. By then, be hanged." a country and government that were already British Lieutenant Frederick Mackenzie abusing the people's hard-won liberties had corroborates the interrogation by General been established. But in 1782, just six years Howe: "A person named Nathaniel Hales after Nathan Hale's death, an article ap­ [sic] ... this day made a full and free confes­ peared anonymously in the Boston Chronicle. sion to the Commander in Chief of his being Evidence suggests that Hull was its author. employed by Mr. Washington...." Howe Here he quotes Captain Hale's last words as, probably offered the prisoner his life to turn "'I am so satisfied with the cause in which I his coat. Although we would not condemn a have engaged, that my only regret is that I man's efforts to save his neck by switching have not more lives than one to offer in its sides and then deserting, an eighteenth­ service.' " century gentleman would never stoop to that. Obviously, the shorter version packs a Such a choice for Nathan Hale was no choice greater punch, but it also changes "cause" to at all. "country." Nathan Hale was no nationalist. Still, it is remarkable that he refused.· From He gave his life for the cause ofliberty, not for his vantage, the Revolution was finished. a collection of state governments that hardly Howe had devastated the Continentals at the existed and was not venerated once it did. Battle ofBrooklyn one month ago; during the In one of the Revolution's darkest hours, week or ten days that Captain Hale was Nathan Hale stood firm for liberty. He re­ behind their lines, British forces had invaded fused to renounce its ideals though it cost him New York City with only token resistance his life and though the Continental Army from the shattered Patriots; Howe's well-fed, faced annihilation. His courage in the face professional army outnumbered Washing­ of such hopelessness inspired that army ton's rabble three to one, besides the British during the fall and winter of 1776, as they navy cruising New York's bay, ready to shell lost battle after battle but continued to Continental fortifications. Itwas only a matter regroup and fight. It inspires to this day. So of time until the Redcoats marched north "why is it," Sergeant Hempstead marveled, from the city (then occupying the southern tip "that the delicious Capt Hale should be ... of Manhattan Island) to Harlem Heights, forgotten?" 0 mopping up the Continentals as they went.

Yet Captain Hale stayed true to his cause. 1. George Washington, General Orders, Headquarters, New On the gallows, Mackenzie reported, "he York, July 2, 1776. 2. Thomas Paine, Common Sense, 1776. behaved with great composure and resolu­ 3. Quoted in The Documentary LifeofNathan Hale by George tion." William Hull recalled that"... [British Dudley Seymour, 1941, p. 158. Seymour's biography was privately printed and so is extremely hard to find. It consists of original Captain John Montresor] came to our camp, sources as well as secondary articles on Captain Hale. In the under a flag oftruce and informed [us] ... that nineteenth century, Nathan Hale and the other heroes of the Revolution were romanticized, and biographies that were really Captain Hale had been ... executed that hagiographies appeared. Seymourwas the first serious biographer morning ... [Montresor] was present ... and of Hale. Although he admired Hale intensely, he never accepted legend as fact but carefully researched and verified all original seemed touched by the circumstances ... accounts before including them in his Documentary Life. Subse­ [Captain Hale] was calm, and bore himself quent quotations in this article are from Seymour's book. THEFREEMAN IDEAS ON LIBERTY

Anne Robert Jacques Turgot, Who First Put Laissez-Faire Principles into Action by Jim Powell

y the mid-eighteenth century, a number scarcely ever seen a man more lovable or B of authors had expressed the liberating better informed." Jean Baptiste Say, who vision that came to be known as laissez faire. inspired so many French libertarians during Anne Robert Jacques Turgot put it into the nineteenth century, declared, "There are action. hardly any works which can yield to the As regional administrator and later comp­ journalist and to the statesman an ampler troller-general of France, a nation which had harvest offacts and ofinstruction than may be succumbed to absolute monarchy, he took found in the writings of Turgot." Pierre­ giant steps for liberty. He spoke out for Samuel Du Pont de Nemours, a French religious toleration. He granted freedom of champion of laissez faire and founder of the expression. He gave people freedom to pur­ American industrial family, paid his friend sue the work of their choice. He cut govern­ Thomas Jefferson the supreme compliment ment spending. He opposed inflation and by calling him "the American Turgot." made a case for gold. He abolished some Turgot displayed remarkable vision. For onerous taxes and trade restrictions. He abol­ instance, he predicted the American Revolu­ ished monopoly privileges. He abolished tion in 1750, more than two decades before forced labor. George Washington and Benjamin Franklin Turgot was respected by leading thinkers saw it coming. In 1778, Turgot warned Amer­ for liberty, including the Baron de Montes­ icans that "slavery is incompatible with a good quieu, the Marquis de Condorcet, and Ben­ political constitution." He warned that Amer­ jamin Franklin. Referring to Turgot, Adam icans had more to fear from civil war than Smith wrote that "I had the happiness of his foreign enemies. He predicted that "Ameri­ acquaintance, and, I flattered myself, even of cans are bound to become great, not by war his friendship and esteem." After meeting but by culture." Turgot warned French King Turgot in 1760, Voltaire told a friend: "I have Louis XVI that unless taxes and government spending were cut, there would be a revolu­ Mr. Powell is editor of Laissez Faire Books and a tion which might cost him his head. Turgot seniorfellow at the Cato Institute. He has written for warned about the dangers of fiat paper the New York Times, the Wall Street Journal, Barron's, American Heritage, and more than three money, and when it was resorted to during the dozen other publications. Copyright © 1997 by Jim French Revolution, the result was ruinous Powell. runaway inflation and a military coup. Turgot 496 ANNE ROBERT JACQUES TURGOT 497 showed how people could make the transition century authors like Joseph Addison, Samuel from absolutism to self-government. Johnson, and Alexander Pope. He translated Although few of Turgot's writings were David Hume's essay "On the Jealousy of published in his lifetime, he was ablaze with Trade." ideas for liberty. "Turgot was much too able Turgot's first writing on economics was an a man to write anything insignificant," ob­ April 7, 1749, letter to his friend Abbe de served intellectual historian Joseph A. Cice. He attacked the doctrines of the Scot­ Schumpeter. Commenting on his most impor­ tish financier John Law, who moved to France tant work, a slim volume, Schumpeter noted and in 1716 began promoting what became a that it contains "a theory ofbarter, price, and disastrous inflation. Defending gold, Turgot money that, so far as it goes, is almost faultless wrote: "It is ridiculous to say that metallic ... comprehensive vision of all the essential money is only a sign of value, the credit of facts and their interrela~ions plus excellence which is founded on the stamp of the king. of formulation." This stamp is only to certify the weight and the title. Even in its relation to commodities the Early Life metal uncoined is of the same price as that coined, the marked value is simply a denom­ Anne Robert Jacques Turgot was born in ination. This is what Law seems to have been Paris on May 10, 1727, the third and youngest ignorant of in establishing his bank. son of Michel Etienne Turgot and Madeleine "It is then as merchandise that coined Fran~oise Martineau. His father was a gov­ money is (not the sign) but the common ernment official who helped build the Paris measure of other merchandise, and that not sewage system. An awkward child, Turgot by an arbitrary convention, founded on the didn't seem to get along with his mother, who glamour of that metal, but because, being fit reportedly cherished fine manners above all. to be employed in different shapes as mer­ The family, which had Norman roots, lived chandise, and having on account of this prop­ comfortably. erty a saleable value, a little increased by the Early on, Turgot acquired a love for learn­ use made of it as money and being besides ing. He attended the College du Plessis where suitable of reduction to a given standard and he discovered the theories ofEnglish physicist of being equally divided, we always know the Isaac Newton. It was traditional for the value of it. Gold obtains its price from its youngest son to become a priest, and accord­ rarity." ingly Turgot enrolled at the Saint-Sulpice While at the Sorbonne, in December 1750, seminary, where he earned his bachelor of Turgot wrote a Latin dissertation ("On the theology and became known as Abbe de successive advances of the Human Mind") Brucourt. He then enrolled at the Sorbonne. which provided an early view of human A fellow student named Morellet remarked progress. that "The remembrance ofTurgot is sweet to Turgot hailed American optimism: "Let us all who have known him personally. Already turn our eyes away from those sad sights, let his mind announced all the qualities it after­ us cast them on the immense plains of the wards unfolded of sagacity, penetration, and interior of America.... The soil, hitherto profoundness. He had the simplicity of a uncultivated, is made fruitful by industrious child, yet it was compatible with a kind of hands. Laws faithfully observed maintain dignity." Despite a striking physical appear­ henceforth tranquillity in these favoured re­ ance, Turgot was shy around women. He gions. The ravages ofwar are there unknown. never married. Equality has banished from them poverty and Turgot learned English, German, Greek, luxury, and preserves there, with liberty, vir­ Hebrew, Italian, and Latin. He translated into tue and simplicity of manners; our arts will French works by Caesar, Homer, Horace, spread themselves there without our vices. Ovid, Seneca, Virgil, and other classical au­ Happy peoples!" thors, as well as writings by eighteenth- By this time, Turgot had second thoughts 498 THE FREEMAN • AUGUST 1997

about entering the priesthood. He confided to to subjugate it? We regard with indignation his friend Du Pont de Nemours (1739-1817) the inflictions which, in Italy and in Spain, that "it is impossible for me to give myself up, obstruct the rights of conscience; the least all my life, wearing a mask." Turgot obtained reflection should prevent our feeling less for his father's permission to pursue a law career, the conscience of our own citizens." and he left the Sorbonne. Meanwhile, Turgot had befriended Jacques With his obvious intelligence and learning, Claude Marie Vincent, Marquis de Gournay he met many of the leading thinkers of the (1712-1759), whom intellectual historian day, including political philosopher Charles Joseph A. Schumpeter called "one of the Louis de Secondat (Baron de Montesquieu), greatest teachers of economics who ever philosopher Claude Adrien Helvetius, and lived." Widely traveled throughout Europe mathematician Jean Le Rond D'Alembert. In and especially knowledgeable about English January 1752, Turgot secured an appointment and Dutch business practices, the Marquis de to a minor government post, deputy council­ Gournay was a follower of Richard Cantillon, lor of the procurator-general. The following the author of Essai Sur La Nature Du Com­ year, he was appointed-presumably after merce En General, which offered perhaps the having paid a consideration-to the "royal first comprehensive view of free-market op­ parliament," which functioned as a court. erations. There wasn't any elected legislative assembly. In 1748, Gournay had come into an inher­ itance, retired from business, and bought Early Work himself a government position as inspector of factories. Between 1753 and 1756, he invited Turgot's first published work, Le Concili­ Turgot to join him as he visited companies in ateur, appeared in 1754. It was a pamphlet Anjou, Bourgogne, Bretagne, Dauphine, protesting plans to renew religious persecu­ Languedoc, Lyonnais, Maine, and Provence. tion. As a Catholic addressing Catholics, he Turgot could see that commerce was crucial. wrote: "I know of how many wars heresies Moreover, Gournay's free-trade principles have been the source, but is not this because had an impact on Turgot. we have persisted in persecuting them? The The year Gournay died, Turgot wrote his man who believes earnestly believes with still Eloge de Gournay [Elegy for GournayJ in more firmness if we would force him to which he explained why government ofIicial.s change his belief without convincing him; he couldn't run an economy. For instance: "Ifthe then becomes obstinate, his obstinancy kin­ Government limits the number of sellers by dles his zeal, his zeal inflames him; we wish to exclusive privileges or otherwise, it is certain convert him, we have made of him a fanatic, that the consumer will be wronged and that a madman. Men, for their opinions, demand the seller, made sure of selling, will compel only liberty; if you deprive them of it, you him to buy dearly bad articles. If, on the other place arms in 'their hand. Give them liberty, hand, it is the number of buyers which is they remain quiet, as the Lutherans were at diminished by the exclusion offoreigners orof Strasburg. It is then the very unity in religion certain persons, then the seller is wronged, we would enforce, and not the different opin­ and if the injury be carried to the point when ions we tolerate, that produces trouble and the price cannot cover his expenses and risks, civil wars." he will cease to produce the commodity, its "If the prisons of the Inquisition were regular supply will thus be endangered, and a terrible," he continued, "France itself has had famine may be the consequence. The general only too many which have echoed the cries of liberty of buying and selling is therefore the the oppressed conscience. If the former were only means to insure on the one side to the unjust, why should the latter be authorized? seller a price sufficient to encourage produc­ We who condemn with horror the minister of tion; on the other side to the consumer the the Church who, by torture, compelled the best merchandise at the lowest price." mind, should we give to our king the right still "To desire that government should be ANNE ROBERT JACQUES TURGOT 499

obliged to prevent fraud from ever occurring 'laws' inherent in the nature of man and would be to desire it to provide head pads for governing supply and demand." On Septem­ all children who might fall. To assume, by ber 17, 1754, the king issued an edict abol­ regulations, successfully to prevent all the ishing all restrictions on trade in wheat, rye, possible malversations of this nature, is to and corn, but a subsequent crop failure led to sacrifice to a chimerical perfection the whole higher prices, and there was a clamor for progress of industry." restoring controls. The edicts were rescinded on December 23, 1770. The Physiocrats The political philosophy of the Physiocrats was perhaps best expressed in the 1767 book Turgot defended economic liberty in "Fon­ L'ordre natural et essentiel des societes poli­ dations" ["Foundations"] and "Foires et tiques [The Natural and Essential Order of Marches" ["Fairs and Markets"], articles for Political Societies] by Pierre-Paul Mercier de Denis Diderot's famous and widely influential la Riviere (1720 -1793). "Do you wish a 17-volume Encyclopedie (1751-1772). Some­ society to attain the highest degree ofwealth, where along the line, Turgot had become population, and power? Trust, then, its inter­ familiar with the views of the "Physiocrats." ests to freedom, and let this be universal. By Economist, editor, and government official means of this liberty (which is the essential Du Pont de Nemours (1739-1817) coined the element ofindustry) and the desire to enjoy­ term from the Greek words physis ["let na­ stimulated by competition and enlightened by ture"] and kratein ["rule"]. His book Physi­ experience and example-you are guaranteed ocratie appeared in 1768. The brash, bold Du that everyone will always act for his own Pont de Nemours became a close friend of greatest possible advantage, and conse­ Turgot, who was godfather to his third son quently will contribute with all the power of and suggested the name of this boy­ his particular interest to the general good, Eleuthere Irenee ("freedom and peace")­ both to the ruler and to every member of the destined to launch the family colossus, E.!. du society." Pont de Nemours & Cie. On August 8, 1761, Turgot was appointed "Physiocrat" referred to ideas popularized an intendant (chief administrator) for the by Fran~ois Quesnay (1694-1774), a noble­ provinces of Angomois, Basse-Marche, and man's son who made himself a surgeon and Limousin, a region in central France later bought his post as physician to King Louis XV known as Limoges. As the nineteenth-century and his influential courtesan Madame de historian and thinker Alexis de Tocqueville Pompadour. Historians Will and Ariel Du­ explained, "The intendant was in possession rant wrote that although Quesnay "was a of the whole reality of Government. All the self-confident dogmatist in his works, he was powers which the Council of State itself in person a kindly soul, distinguished by possessed were accumulated in his hands. integrity in an immoral milieu." Like the Council he was at once administrator Quesnay attacked taxes and trade restric­ and judge. He corresponded with all the tions in his articles for the Encyclopedie Ministers, and in the province was the sole (1756), his own little book Tableau economique agent ofall the measures ofthe Government." (1758), and elsewhere. There will be prosper­ Limoges was among the poorest regions of ity, he insisted, if "each person is free to France. Almost all the approximately 500,000 cultivate his in fields such products as his people were peasants who lived on chestnuts, interests, his means, and the nature of the rye, and buckwheat. According to the Physi­ land suggest to him." ocrat Marquis de Mirabeau (1715-1789), According to historians Will and Ariel peasants dressed in rags and lived in huts Durant, "Louis XV asked Quesnay what he made of clay with a thatch roof, and the most would do if he were king. 'Nothing,' answered prosperous Limoges farmers could afford to Quesnay. 'Who, then, would govern?' 'The slaughter only one pig a year. Historian Hip­ laws'- by which the physiocrat meant the polyte Taine, who gathered a tremendous 500 THE FREEMAN • AUGUST 1997 amount of material on living conditions, re­ reaucrats, and other things, which determined ported that many peasants used plows which the amount of tax revenue needed. They were no better than those of ancient Rome. demanded about the same portion of taxes Turgot remarked, "I have seen with pain that from each district as they always had, even in some parishes the curate alone has signed, though there had been an economic decline in because no one else could write." some districts, which effectively meant higher Peasants in Limoges, as elsewhere, were tax rates. crushed by taxes. Economic historian Florin Turgot attributed the economic decline of Aftalion reported there were some 1,600 Limoges to high taxes. He asked that his customs houses throughout France to collect district's tax quota be cut by 400,000 livres. It traites as goods passed various points along was cut 190,000. Year after year for the 13 roads and rivers. For instance, explained years that he was an intendant in Limoges, he Cornell University scholar Andrew Dickson pleaded for tax cuts. White, "on the Loire between Orleans and Turgot did have the power to abolish the Nantes, a distance of about two hundred corvee-forced labor-which was the most miles, there were twenty-eight custom­ hated tax on peasants. A remnant ofserfdom, houses; and that between Gray and ArIes, on this originated as a feudal obligation for the rivers Saone and Rhone, a distance of peasants to perform a certain amount oflabor about three hundred miles, the custom­ without pay. The corvee became a demand houses numbered over thirty, causing long that peasants work as much as 14 days a year delays, and taking from twenty-five to thirty on the king's roads, breaking, carting, and per cent in value of all the products trans­ shoveling stones. Often this came at the worst ported." time, such as when peasants were busy with There were a host of other taxes, including their harvest. Landlords, who stood to gain one on salt. The taille amounted to about a more from roads, contributed nothing. As sixth of the income ofpeasants. This came on might be expected, forced labor resulted in top of feudal duties and church tithes. Peas­ poor work, and the roads were terrible. ants got to keep about a fifth of their income. Turgot hired competent contractors to The taille, from which some 130,000 clergy­ build and improve roads, and some 450 miles men and 140,000 aristocrats were exempted, of roads were built in Limoges. He defrayed was based on a tax collector's estimate of a the costs with a moderate tax. Clergymen and peasant's ability to pay, which meant appear­ aristocrats remained exempt, but at least ances. Du Pont de Nemours observed: "they peasants were free to work their land. Li­ [the peasants] did not dare to procure for moges became known as a district with supe­ themselves the number of animals necessary rior roads-"the wonder of all travellers," as for good farming; they used to cultivate their Turgot biographer W. Walker Stephens put it. fields in a poorway so as to pass as poor, which Turgot did much to help improve agricul­ is what they eventually became; they pre­ ture. Because tons of grain were lost to the tended that it was too hard to pay in order to grain moth and corn weevil, he helped the avoid having to pay too much; payments that Limoges Society of Agriculture find better were inevitably slow were made still slower; storage methods. To help diversify food they took no pleasure or enjoyment in their sources, he urged that peasants grow pota­ food, housing, or dress; their days passed in toes. As the Marquis de Condorcet observed deprivation and sorrow." in his biography of Turgot, "The people at Turgot focused on the most obnoxious first regarded the potato with disdain and as taxes, starting with the taille. It wasn't within beneath the dignity ofthe human species, and his power as a regional official to abolish the theywere not reconciled to it till the intendant taille, but he did what he could. Traditionally, [Turgot] had caused it to be served at his own national government finance officials had table, and to the first class ofcitizens, and had guessed how much money they were going to given it vogue among the fashionable and spend on wars, maintaining Versailles, bu- rich." ANNE ROBERT JACQUES TURGOT 501

Turgot was in touch with others who em­ other merchandise, by the balance of supply braced ideas of liberty. He dined with the and demand: thus, when there are many Scottish moral philosopher Adam Smith borrowers who need money, the interest of when he visited Paris in 1765, and laterTurgot money becomes higher; when there are many helped supply Smith with books for his work holders ofmoney who offer to lend it, interest on The Wealth ofNations. But as intellectual falls. It is, therefore, another mistake to historian Peter Groenewegen has shown, Tur­ suppose that the interest of money in com­ got had little impact on Smith's writing, since merce ought to be fixed by the laws of Smith had already formed his principal views. Princes." Like the Physiocrats, both men believed in During the famine of 1769-1772, he mort­ economic liberty, and unlike the Physiocrats, gaged his estate to get money for famine they recognized the importance ofcommerce. relief. He organized relief efforts financed In 1766 Turgot wrote an 80-page summary almost entirely by voluntary contributions. ofhis views for two Chinese students in Paris. French treasury officials claimed taxes were This became Reflexions sur la Formation et la due from Turgot's relief organization because Distribution des Richesses [Reflections on the its records weren't written on stamped paper. Formation and Distribution of Riches]. It He issued an ordinance suspending the stamp explained much about how free markets work tax laws in Limoges. The bakers' guild of and made a case for laissez-faire policy. Limoges moved to raise bread prices, and Although Turgot wasn't a Physiocrat, he Turgot responded by suspending their mo­ shared their commitment for economic lib­ nopoly privileges. He encouraged people to erty. Du Pont de Nemours published bring bread from other towns, and they did. Reflexions in the November and December He insisted that the best remedy for famine 1769 issues of Ephemerides du Citoyen, the was free trade. Physio'cratic journal. But without consulting Turgot further defended laissez faire by Turgot, Du Pont de Nemours made a number writing Lettres sur le commerce des grains, of changes, and Turgot wasn't pleased. seven letters to Comptroller-General Abbe Turgot made clear his opposition to slavery: Terray. Turgot warned that government is "This abominable custom of slavery has once incapable of guaranteeing economic security. been universal, and is still spread over the He declared: "Government is not the master greater part of the earth." ofseasons, and they should be taught that they He affirmed the importance of sound mon­ have no right to violate the property of the ey: "Thus, then, we come to the constitution agricultural labourers or the dealers in corn." of gold and silver as money and universal Terray was deaf to Turgot's appeal. In money, and that without any arbitrary con­ December 1770, the Comptroller-General vention among men, without the intervention ruled that grain could be sold only in govern­ of any law, but by the nature of things. They ment-controlled marketplaces. Speculation are not, as many people have imagined, signs was outlawed. A subsequent measure out­ ofvalues; they have themselves a value. Ifthey lawed grain trading by any merchant who are susceptible of being the measure and the didn't have a license. Grain monopolists re­ pledge ofothervalues, they have this property gained their power. in commonwith all the other articles that have Abbe Terray asked Turgot for help pro­ a value in Commerce. They differ only be­ tecting iron smelters, and Turgot replied with cause being at once more divisible, more a letter known as Sur la Marque des Fers [On unalterable, and more easy to transport than the Mark of Iron]. The title referred to the the other commodities, it is more convenient stamp on iron indicating that it was smelted in to employ them to measure and represent the France, partofthe effort to keep out iron from values." other countries. "I know no other means of Turgot banished the ancient dogma that quickening any commerce whatever than by interest was immoral. "The price ofborrowed granting to it the greatest liberty," Turgot money is regulated," he wrote, "like that ofall wrote, "and the freedom from all taxes, which 502 THE FREEMAN • AUGUST 1997 the ill-understood interest of the Exchequer tects, 47 musicians, 56 hunters, 295 cooks, 886 has multiplied to excess on all kinds of mer­ nobles with their wives and children, plus chandise, and in particular on the fabrications secretaries, couriers, physicians, and chap­ of iron." Then, talking about how trade re­ lains, and some 10,000 soldiers who guarded taliations back fire: "The truth is, that in aiming the place. Almost every week, there were two at injuring others, we injure only ourselves." banquets, two balls, and three plays held at Versailles. Conscription Marie Antoinette aggravated the public by her extravagance with taxpayer money. Mar­ Turgot had to deal with the consequences ried to an impotent king, she squandered of military conscription. "The repugnance to large sums at card tables and lavished costly service in the militia," he wrote the Minister gifts on her court favorites. She spent hun­ of War in January 1773, "was so widespread dreds of thousands of livres on dresses. Aus­ among the people, that each drawing was the trian ambassador Mercy d'Argentau warned signal for the greatest disorders throughout her mother, Maria Theresa: "Although the the country, and for a kind of civil war King has given the Queen, on various occa­ between the peasantry; the one party seeking sions, more than 100,000 ecus' worth of to escape the drawing, taking refuge in the diamonds, and although her Majesty already woods, the other, with arms in hand, pursuing has a prodigious collection, she nevertheless the fugitives, in order to capture them and resolved to acquire ... chandelier earrings subject them to the same lot with themselves. from Bohmer. I did not conceal from her Loss oflife and minor outrageswere common. Majesty that under present economic condi­ Depopulation of many of the parishes, with tions it would have been wiser to avoid such cultivation abandoned, often followed. When a tremendous expenditure, but she could not the time came to assemble the battalions, it resist." was necessary for the syndics of the parishes The Parlements of Paris protested taxes. to lead on their militia-men escorted by the This body, whose members bought their way horse-police, and sometimes bound with in, was the most influential of 13 French cords." Turgot let people voluntarily contrib­ parliaments. It had acquired the prerogative ute cash to a pool for those conscripted, and of approving royal edicts on taxes before they many enlisted for the money. could go into effect. Ifthe Par~ement opposed There was much resentment against the a tax edict, there would be a lit de justice: practice of forcing local people to provide members would meet the king in his throne room and board for soldiers, and Turgot took room, and he would make a final decision action. He rented some buildings as barracks which everyone must obey. But this proceed­ and spread the cost among all the taxpayers. ing was widely resented. Military discipline reportedly improved. Louis named the 73-year-old Count de On May 10, 1774, King Louis XV died of Maurepas as his chief adviser. He had held a smallpox. He was succeeded by his awkward, number of official positions until 1749, when timid 19-year-old grandson, who became he was dismissed on suspicion of having Louis XVI. His queen was the 19-year-old written some lines critical of courtesan Ma­ Marie Antoinette, a beautiful and frivolous dame de Pompadour. But Maurepas knew daughter of the arrogant Austrian Empress how to pull strings. As royal playwright and Maria Theresa. historian Jean Fran~ois Marmontel described At the time, France had the biggest gov­ him, "he possessed a lynx-eye to seize upon ernment in Europe except for Russia. The the weak or ridiculous in men, and an imper­ French government was in desperate shape, ceptible art to draw them to his purposes ... having incurred massive debts during the he made sport of everything, even of merit Seven Years War (1756-1763) with Britain. itself." Maurepas knew that with his scandal­ The royal palace of Versailles was an enor­ ous reputation, he needed some respected mous drain. On the payroll were eight archi- figures in the government, and his wife rec- ANNE ROBERT JACQUES TURGOT 503 ommended Turgot. On July 20, 1774, Turgot "To meet these three points there is but one was nominated to a minor post, Minister of means. It is to reduce expenditure below Marine. revenue, and sufficiently below it to insure In Limoges, as biographer Leon Say re­ each year a saving of twenty millions, to be ported, the aristocrats "could not forgive applied in redemption of the old debts. With­ Turgot for having broken with traditions out that, the first gunshot will force the State which had hitherto been favourable to them into bankruptcy. ... it was not the same with the peasantry. His "The question will be asked incredulously, departure was announced publicly from the 'On what can we retrench?' and each one, pulpit by all the cures of the province, who speaking for his own department, will main­ celebrated mass everywhere on his account. tain that nearly every particular item of ex­ The countrymen suspended their work in pense is indispensable. They will be able to order to be present, and all cried: 'It is wisely allege very good reasons, but these must all done by the king to have taken M. Turgot, but yield to the absolute necessity of economy. it is very sad for us that we have lost him.'" "It is, then, of absolute necessity for your During the few weeks that Turgot was Majesty to require that the heads of all the Minister of Marine, he spoke out for taxpay­ departments should concert with the Minister ers against the politically powerful French of Finance. It is indispensable that he should shipbuilding industry. He recommended that discuss with them, in presence of your Maj­ the government buy ships in Sweden rather esty, the degree of necessity for all your than France, which would cut costs· 40 per­ proposed expenses. It is above all necessary, cent. Turgot countered protectionist objec­ as soon as you, Sire, shall have decided upon tions by observing that the Swedes drank the strictly necessary scale of maintenance of French wines and wore French clothes. each department, thatyou prohibit the official On August 24, 1774, Louis met with Turgot in charge of it to order any new expenditure and discussed the country's economic situa­ without having first arranged with the Trea­ tion. Prodded by Maurepas, the king named sury the means of providing for it. ..." Turgot as Comptroller-General. Turgot rec­ Turgot's top priority was to establish free­ ognized that the kind ofspending and tax cuts dom of the grain trade, as he had done in he envisioned would encounter ferocious op­ Limoges. On September 13, 1774, Turgot position, and he had to have the backing ofthe issued an edict and wrote: "it shall be free to king, so he sought an interview. all persons whatever to carry on, as it may The king promised his. support, and after­ seem best to them, their trade in corn and ward Turgot sent him this memo: "I confine flour, to sell and to buy it, in whatever places myself to recall to you these three words­ they choose throughout the kingdom." "No Bankruptcy. Voltaire was incredulous: "I learned that a "No Increase of Taxes. Minister ofStatewho was neither a lawyer nor "No Loans. priest had just published an edict by which, in "No bankruptcy, either avowed or dis­ spite of the most sacred prejudices, it was guised by illegal reductions. permitted to every Perigourdin to sell and buy "No increase of taxes; the reason for this wheat in Auvergne.... I saw in my canton a being in the condition ofyour people, and still dozen oflabourers, my brethren,who read the more, in that ofyour Majesty's own generous edict. 'How then?' said an old man; 'for sixty heart. years I have been reading these edicts which, "No loans; because every loan diminishes in unintelligible language, have always always the free revenue and necessitates at stripped us of natural liberty; now here is one the end ofa certain time, eitherbankruptcy or that restores us our liberty, and I can under­ the increase of taxes. In times of peace it is stand every word without difficulty. This is the permissible to borrow only in order to liqui­ first time a king reasons with his people.'" date old debts, or in order to redeem other France had long penalized foreigners, and loans contracted on less advantageous terms. in .November 1774, Turgot overturned some 504 THE FREEMAN • AUGUST 1997 of the worst laws. For instance, the law which On April 20, 1775, corn riots erupted in held that the property ofa deceased foreigner Dijon, reflecting fears that grain produced in would revert to the government. Such laws, that region might be sold elsewhere-and observed Du Pont de Nemours, "debarred the wouldn't be available to relieve hunger in settling in France of a great number of clever Dijon. Rioting quickly spread to other cities. men and industrious artists, ofcapitalists, and Mobs stormed through the countryside, yell­ useful merchants, who would have desired ing "Monopoly!" and "Famine!" They broke nothing more than to make France the centre into markets, demanding corn and flour for of their affairs, and which debarred even less than what merchants were charging. By retired foreigners of wealth attracted by the May 2, mobs marched on Paris, and an pleasures of society and the agreeableness of estimated 8,000 people raided flour stores the climate." Du Pont emphasized that Tur­ around Versailles. The Parlement of Paris got proceeded without demanding "reciproc­ issued a decree and posted notices urging ity, since the good of its operation would be people to petition the king for lower bread certain for France, and the evil would be but prices, and he gave in. Turgot advised the king for those countries which did not imitate her." that violence must be put down swiftly, and he In January 1775, Turgot suffered an attack was given command of a 25,000-man force of gout which involved inflammation and which protected an orderly flow ofgrain to the severe pain in his legs. During the next four markets. He had parliament's notices re­ months, he was carried in a chair to the king's moved. His rivals at the royal court weren't working quarters. From there, he directed a pleased. quarantine of regions devastated by cattle­ Between June and August 1775, Turgot plague. The king agreed to pay a third of the issued edicts abolishing duties imposed by value of diseased animals which were slaugh­ major towns like Beaune, Bordeaux, Dijon, tered and buried, and this frustrated efforts to and Pontoise. control government spending. Turgot set new standards for integrity. For Freedom of Speech instance, it had long been the custom for the Farmers-General, the private firm which col­ Turgot practiced freedom of speech. For lected a substantial amount of tax revenue, to instance, financier and politician Jacques give the Comptroller-General about a Necker wrote a pamphlet Sur la Legislation et 100,OOO-livre bribe upon signing a new con­ Ie Commerce des Grains which criticized lais­ tract. Turgot declined the bribe and abolished sez-faire views and defended government the practice. restrictions on the grain trade. Turgot let it be Turgot worked to curtail the rapaciousness published. of bureaucrats. "People complain also," he Although Turgot never challenged the le­ wrote, "of the embarrassments they are gitimacy ofa monarchy, he became convinced thrown into by the extreme severity of the that people should prepare for self­ penalties, often for the slightest faults. It is government. Together with Du Pont de indispensable to remedy this, .as well as the Nemours, he outlined a plan for parish as­ inconveniences manufacturers suffer from the semblies, village assemblies, district assem­ contradictions in the regulations, and to blies, provincial assemblies, and a General shield them from the abuse ofthe authority by Assembly. Participation would be open to the Bureaux of Inspection." Then issuing those who owned land (any amount) and orders: "You are not to seize anything be­ earned at least 600 livres per year. Individuals longing to them [workers and small manufac­ earning less than 600 livres ofland would have turers], any stuff or merchandise, on the fractional votes. Unfortunately, with every­ pretext of its faultiness. You will confine thing else going on, this plan was never yourselves to exhorting these poor artificers to presented to the king. make the things better, and to indicate to The king's coronation brought Turgot into them the means of doing so." conflict with the establishment. Traditional- ANNE ROBERT JACQUES TURGOT 505 ists wanted the coronation at the magnificent Two were ofmonumental importance. Tur­ cathedral of Rheims, and the clergy wanted got would abolish the jurandes-guilds­ the king to take the oath for intolerance, "I which monopolized various trades. Like mod­ swear ... to exterminate, &c., entirely from ern labor unions, they enforced barriers to my States all heretics ... condemned by the entry for the enrichment of members. Con­ Church." Church officials insisted, "It is re­ sequently, there were few skilled workers, and served for you to deal the last blow to Calvin­ they concentrated on making luxury goods. ism in your kingdom. Order the schismatic Turgot would permit anyone, including for­ assemblies ofthe Protestants to be dispersed; eigners, to enter any trade except barbering exclude the sectaries without distinction from and wig-making. The reason for exceptions all the branches of public administration. was that Turgot offered to compensate people Your Majesty will thus assure among your for the loss of their special privileges, and subjects the unity of the Catholic worship." because of the government's financial situa­ Because the government was deep in debt, tion it wasn't possible to compensate mem­ Turgot wanted a much cheaper coronation in bers of these two professions. Paris, and he objected to the oath. He wrote Turgot's second crucial edict would abolish a memo to the king, Sur la tolerance, saying the the cOlVee, the practice of forcing peasants to oath was a bad idea even if nobody seriously work on roads without pay. He proposed that contemplated a murderous Inquisition. "The all property owners, the primary beneficiaries prince who orders his subject to profess a of road improvements, pay a tax which would religion he does not believe," Turgot wrote, provide money for hiring road contractors. "commands a crime; the subject who obeys Turgot thought ofmaking these explosively acts a lie, he betrays his conscience, he does controversial proposals more politically pal­ an act which, he believes, God forbids. The atable by presenting them with four other Protestant who through self-interest or fear proposals which had more support. He pro­ makes himself a Catholic, and the Catholic who posed abolishing restrictions on the grain by the same motives makes himselfa Protestant, trade within France. He wanted to discharge are both guilty of the same sin." The king officials who imposed restrictions on the op­ decided to throw budgetary considerations to eration of Parisian markets, ports, and docks. the wind and be coronated at Rheims. He He recommended abolishing the Caisse de agreed to the dreaded oath, but he mumbled it, Poissy, a tax on the cattle and meat industry. and nobody could make out the words. Finally, he proposed to cut the tax on suet. There seemed to be a favorable omen for During the last several months of 1775, Turgot when the king followed his recom­ Louis XVI weighed the compelling case for mendation and appointed Chretien La­ these edicts and the firestorm of opposition moignon de Malesherbes as Maison du Roi they would surely provoke. Turgot suffered (Minister of the Royal Household), a post another attack of gout and was absent as which put him in a position to influence the opposition intensified. Malesherbes cau­ king and help curb extravagance at Versailles. tioned Turgot to go slow, but Turgot, then 48, The budget was a bitter battleground. At replied: "The needs of the people are enor­ the beginning of 1775, the government had mous, and in my family, we die of gout at revenue of 337 million livres, but only 213 fifty." million was left after interest on the debt. The Over the objections of his brothers and all costs of government would be 235 million­ of his advisers except Turgot and Males­ hence, a deficit of22 million livres. Turgot cut herbes, Louis XVI endorsed the six edicts, many expenses, including sinecures for idle and on February 5, 1776, he presented them aristocrats. to the Parlement of Paris. They resisted, and Meanwhile, Turgot had become convinced the king declared, "My Parlement must re­ that the severity of his country's problems spect my wishes." required decisive action. He conceived what The Parlement supported guilds because became known as the "six edicts." many ofthe members were red-robed lawyers, 506 THE FREEMAN • AUGUST 1997 and guilds were a lucrative source of litiga­ danger that your· authority and the glory of tion. One notorious case between the guild of your reign were incurring, and the impossi­ tailors and the guild of used-clothes dealers bility ofmy continuing to serve you unless you had dragged on for more than 250 years. Led give me your firm and steady support. Your by the Prince de Conti, who expected to lose Majesty has not deigned to reply to me.... about 50,000 livres annually if the guilds were Your Majesty gives me neither assistance nor abolished, local officials went on the attack to consolation. How can I believe that you any protect their special privileges. longer esteem me? Sire, I have not deserved As if these six edicts weren't enough of a this...." The king didn't reply. challenge for the establishment, Turgot pre­ On May 12, 1776, Turgot was dismissed. He sented another which would abolish laws reportedly warned Louis XVI: "Remember, restricting the wine trade. In Bordeaux, for sire, that it was weakness which brought the instance, it was illegal to sell and drink wine head of [England's King] Charles I to the from another district. Wines from Languedoc block." couldn't be shipped down the Garonne River Voltaire expressed the feeling ofmany who before St. Martin's Day. Wines from Peri­ hoped for reform. "Ah, mon Dieu, what sad gord, not before Christmas. Turgot declared: news I hear!" he wrote three days after "It is the interest of the whole kingdom we Turgot's fall. "France would have been too have to consider, the interests and the rights fortunate.... I am overwhelmed in despair." ofall our subjects, who, as buyers or as sellers, The Marquis de Condorcet wrote: "Adieu! have an equal right to find a market for their We have had a beautiful dream." goods and to procure the object oftheir needs Government spending zoomed out of con­ on the terms most advantageous to them." trol. Guilds regained their monopoly power. Lawyers, noblemen, monopolists, clergy­ Restrictions again throttled trade. The regime men-all were against Turgot. Maurepas, brought back forced labor. who had appointed Turgot, criticized him in Turgot had probably achieved as much as public and maneuvered behind his back. As any human being could without organizing biographer Douglas Dakin explained, "Mere­ popular support to buck special interests. His ly by refraining from defending Turgot, and experience revealed how fragile were reforms merely by confirming Louis's growing suspi­ which depended on the goodwill of a ruler. cions with a word here and there, he was Edicts, it turned out, were no substitute for bound in the long run to achieve his object. education of the people. For everything that came to Louis's ears­ Turgot moved to a house on the rue de facts endlessly distorted, fortuitous happen­ Bourbon, Paris, and he quietly studied sci­ ings which in normal times would have had ence, literature, and music. For Benjamin little significance, the fatuous lies concocted Franklin, representing American interests in by Turgot's detractors-all came to assume a Paris, he wrote Memoire sur l'impot to explain unity and to take on the character of incon­ his laissez-faire economic policy. trovertible evidence...." Marie Antoinette, In one of his last surviving writings, a outraged at Turgot's efforts to sack incompe­ controversial March 22, 1778 letter to English tents and cut spending by the royal household, radical minister Dr. Richard Price, Turgot schemed against him. She had no interest in expressed his support for American indepen­ ideas. "I must admit I am lazy and dissipated dence, although he didn't think the French when it comes to serious things," she told her government could afford to provide financial mother. help. Turgot criticized American state con­ "I cannot conceal from your Majesty," stitutions for establishing a strong executive­ Turgot wrote the king on April 30, "the deep "an unreasonable imitation ... of the usages pain I have suffered by your cruel silence of England"-rather than lodge all power in towards me on Sunday last, after I had in my a legislature. Turgot denounced chimerical preceding letters described to you so distinctly state taxes and tariffs. He urged that Ameri­ my position, your Majesty's own position, the cans "reduce to the smallest possible number ANNE ROBERT JACQUES TURGOT 507

the kinds of affairs of which the Government people suffered through runaway inflation, of each State should take charge...." He the Reign ofTerror, and the military takeover declared that "The asylum which America by Napoleon Bonaparte who plunged the affords to the oppressed of all nations will country into more than a decade of war. console the world." The letter provoked John Turgot's steadfast friend Du Pont de Adams to make his case for a separation of Nemours, who had been scheduled for the powers, writing the three-volume Defense of guillotine the very day the Reign of Terror the American Constitution which wasn't pub­ ended and was later rescued by Madame lished until 1787, after Turgot's death. Ad­ Germaine de Stael, made sure he wouldn't be ams, prickly pear that he was, liked Turgot forgotten. After emigrating to America, Du and described him as "grave, sensible, and Pont de Nemours edited a nine-volume edi­ amiable." tion of Turgot's works (1808-1811). Another Turgot suffered more attacks of gout, and French edition ofTurgot's works appeared in after 1778 he could walk only with crutches. 1844. And there was G. Schelle's Oeuvres de His situation became critical in early 1781. He Turgot et documents Ie concernant (1913­ died at home around 11:00 P.M., March 18, 1923), with many documents from the Turgot 1781. He was 53. His friends Mme. Blondel, family. More than a dozen books about Tur­ the Duchesse d'Enville, and Du Pont de got were published during the nineteenth Nemours were by his side. century. Having rejected Turgot's peaceful reforms, Turgot inspired the economist Jean­ the French government stumbled from one Baptiste Say who, in turn, helped inspire the crisis to another. By 1788, military spending resurgence of libertarian writings in Europe. took a quarter of the budget, and half the Leon Say, Jean-Baptiste's grandson, wrote in budget was needed for payments on the his 1887 biography of Turgot: "if he failed in national debt which had soared to 4 billion the eighteenth century, he has in fact domi­ livres. There were riots against taxes. The nated the century following. He founded the government was broke, and the king and political economy of the nineteenth century, queen were a pitiful sight as they handed over and, by the freedom of industry which he , their silverware to the royal mint. Desperate bequeathed to us, he has impressed on the for funds, the king agreed to summon the nineteenth century the mark which will best Estates-General, an assembly of nobles, characterize it in history." In recent years, clergy, and taxpayers, which hadn't met for Turgot's most ardent admirer has been intel­ one-and-a-half centuries. This became the lectual historian Murray N. Rothbard who National Assembly, to which Du Pont de affirmed that "Ifwe were to award a prize for Nemours had been elected. It rebelled against 'brilliancy' in the history ofeconomic thought, the nobles, and the king made the fateful it would surely go to Anne Robert Jacques decision to back the nobles. The National Turgot." Assembly abolished guilds and some of the He had a liberating vision. He told the worst taxes, and it confiscated church prop­ truth. He pursued justice. He was fearless in erties. Hatred bred ofoppression boiled over, challenging special interests who everywhere as Turgot had anticipated. On January 21, capture government power. He showed why 1793, Louis XVI was led to a Paris guillotine liberty is absolutely essential if the poorest and beheaded. Marie Antoinette-ridiculed among us are to improve their lives. He as "Madam Deficit"-followed him to the displayed the courage and compassion to help guillotine on October 16, 1793. The French set people free. 0 Economics on Trial by Mark Skousen

Has Capitalism Failed or Succeeded? The Tale of Two Graphs

"Yet, in the aftermath of the Keynesian nomic growth and development in the back revolution, too many economists forgot that pages. classical economics provides the right answers to many fundamental questions." The Volatility of Capitalism? -N. Gregory Mankiw1 If you look at Graph #1 at the top of the he Great Depression ofthe 1930s brought next page, you might agree with this focal T us Keynesian economics and a broad shift point: The business cycle appears to be vol­ in emphasis from the classical study of eco­ atile and the primary problem facing the nomic growth to concern about economic United States. This graph, published in Mi­ fluctuations and how to subdue the boom­ chael Parkin's popular textbook, shows real bust business cycle. Postwar textbooks, led by GDP fluctuations from 1869 to 1992. Paul Samuelson's Economics, focused pri­ Graph #1 suggests that the U.S. economy marily on the ups and downs of the capitalist has run amok, suffering untold boom and bust system and how government policy could over the past century and a half. According to ameliorate the business cycle. Keynesian the critics, capitalism has failed and needs to economists stressed "countercyclical demand be tamed. management" and "compensatory fiscal pol­ Is this an accurate picture of the U.S. icy" to "iron out the business cycle, with boom economy? We all know that games can be surpluses canceling out depression deficits.,,2 played with charts and graphs. Darrell Huff, Economists taught the "New Economics" of in his classic book, How to Lie With Statistics "automatic built-in stabilizers," "discretion­ (W. W. Norton, 1993 [1954]), described the ary fiscal policy," and "fiscal drag." Even distortions that can occur with a "one­ free-market economist Milton Friedman fo­ dimensional" picture. cused his research on ways to stabilize the economy through monetary policy. The Long-Term View Favors Indeed, according to the new conventional Economic Growth wisdom, the primary purpose of studying economics was to achieve "short-run stabili­ Now let's look at Graph #2, which tells zation" of the capitalism system. Postwar quite a different story. This graph highlights textbooks abound in the study of cyclical real GDP, 1869-1992, rather than changes in fluctuations, while burying the study of eco- real GDP. Amazingly, Graph #2 also comes from Dr. Skousen is an economist at Rollins College, Department of Economics, Winter Park, Florida Parkin's textbook. It uses the same statistics, 32789, and editor ofForecasts & Strategies, one of but paints an entirely different picture. Here the largest investment newsletters in the country. the overwhelming conclusion is not that the 508 HAS CAPITALISM FAILED OR SUCCEEDED? 509

Graph #1: Real GOP Fluctuations, 1869-1992

40. WorldWorll The uneven pace of increase of :u real GOP is illustrated by tracking I \ its fluctuation measured as the 30. percentage deviation of real GOP j from trend. Rapid expansion of WI 20. real GOP' which occurred during .j both world wars, puts real GOP above trend. Decreases in real ~ 10. GOP, which occurred during the 1890s recession, the Great Depression, ind the three most recent recessions, puts real GOP below trend. The real GOP nuctu­ t:. alions describe the course of the .j business cycle. 1-20 • ~ ~ recession ~ -30. Greal Depression (,!) 1-40. •• 1869• 1889• 1909• 1929• 1949• 1969• 1989 Year

Source: Michael Parkin, Economics, 2nd ed. (Addison-Wesley, 1994), p. 596. U.S. economy is subject to violent fluctua­ sion is dwarfed by unrelenting economic tions, but that it has grown dramatically over progress over the long term. The key point is the past century or more. In this graph, the that Americans have enjoyed a dramatic in­ periods of inflationary booms and recessions crease in their standard of living over the past are relatively minor. Even the Great Depres- century. Capitalism works! Graph #2: Real GOP, 1869-1992

7000. Between 1869 and 1992 real GOP OPEC recession grew at an annual average rate of 3.3 percent But the growth rate was not the same in each year. In some periods, such as the years WoridWorll during World War II, real GOP ...... expanded quickly. In other peri­ 1991 recession ods, such as the Great Depression and, more recentlv, following the OPEC oil price hikes, the Volcker interest rate increas­ / es, and in 1991, real GOP Greal Depression declined. There were several Trend' periods of decline in the nine" teenth century as well, one of which is marked in the figure. 1890s recession

1869• 1889• 1909• 1929• 1949• 1969• 1989•• Year

Source: 1869-1929: Christina D. Romer. -The Prewar Business Cycle Reconsidered: New Estimates 01 Gross National Product 1869-1908: Jourllal of Political Ecollomy97.1198911-37; and Nathan S. Dalke and Robort J. Gordon. "The Estimation or Prewar Gross National Product: Methodology and New Evidence." Joumal of Political ECOIlOmy97. (1989) 38-92. lhe data used are an average or the estimates given in these two sources. 192!1-1958: Ecollomic ROPOIt of "'0 Prosidolll. 1991. 1959-1992: EcollOmic Report of tll8 Presidenl. 1993. Tho data lor 1869 to 1958 alo GNP lind those lor 1959 to 1992 arc GOP. The dillerence between these two measures is small and is explained in Chapler 23. pp. 619-620.

Source: Michael Parkin, Economics, 2nd ed., p. 595. 510 THE FREEMAN • AUGUST 1997 The Economics Profession distribution. Greg Mankiw, a new Keynesian Alters Its Viewpoint at Harvard, is a case in point. He places the classical model of economic growth upfront For decades, the American economics pro­ in his Macroeconomics textbook, ahead of fession worried about recession, unemploy­ Keynesian business-cycle theory. He high­ ment, and income inequality. Economists lights the success stories ofcountries that have endorsed "compensatory" fiscal policy (defi­ grown dramatically since the end of World cit spending and government expansion) as a War II. It's another sign that free-market way to tame the business cycle. Meanwhile, economics has triumphed in the academic economic growth slowed relative to other worl~ D nations. Now the pendulum has swung back. More and more economists are recognizing the paramount importance of economic growth 1. Gregory Mankiw, Macroeconomics, 2nd ed. (Worth Pub­ and rising standards of living rather than lishers, 1994), preface. 2. Paul A. Samuelson, Economics, 8th ed. (McGraw-Hill, business fluctuations and inequalityofincome 1970), p. 337.

Back in Print! GOVERNMENT-AN IDEAL CONCEPT by Leonard E. Read New Introduction by Hans F. Sennholz

To Leonard Read, government was neither a manager of economic activity nor an almoner of gifts to the people, but a necessary instrument of social order. Its only basis is justice, not pity. Government is represented by agents who are expected to enforce and defend man's natural rights and protect him against wrongs of his fellowmen. But these agents should not do what the individual must not do. The agents of government should be men and women of integrity. Unfortunately, Read observed, political office tends to rob a person of modesty, humility, and integrity, which make it advisable never to accept a political office.

Leonard Read's eloquent discussion of the nature of government and a new beginning in freedom will endure as a principled work of great value. It is a guidepost for readers seriously interested in the limits of public regimen and the cause of liberty. 152 pages, indexed, paperback $12.95 A few years before Leonard E. Read authored this book, he created The Foundation for Economic Education. He was convinced that every generation must defend its freedom anew against the intellectual forces that seek through ever new devices to enslave it. Therefore, he dedicated his great strength and ability to the study and dissemination of freedom ideas. He managed the Foundation from its beginnings in 1946 until his death in 1983. THEFREEMAN IDEAS ON LIBERTY

The Undiscountable Professor Kinner by Roger W. Garrison

ugen von Bohm-Bawerk, whose name must put into perspective this new offering by E has come to be virtually synonymous Professor Kirzner. with "roundaboutness" (of capital-using pro­ The significance of this volume is not duction processes), penned the original Aus­ diminished by the fact that all its separate trian perspective on capital and interest. He parts, except for the 12-page introductory wrote three volumes (History and Critique, essay, have been published before. With Positive Theory, and Further Essays) over a greater accessibility and appearing now to­ span of a quarter of a century (1884-1909). In gether, these Essays provide a virtual histo­ 1959 the 1,200-plus pages of Capital and ry-andpre-history-ofthe modern Austrian Interest were translated into English by Hans resurgence. Three decades ago, well before Sennholz and George Huneke. Ludwig von the resurgence began, Professor Kirzner Mises reviewed the new translation in The wrote An Essay on Capital. The four parts of Freeman, where he described this "monumen­ this book (on "Unfinished Plans," "Stocks and tal work" as "the most eminent contribution to Flows," "Capital and Waiting," and "Measur­ modemeconomic theory."l Mises went so far as ing Capital") read like the work of a lone to suggest-as only Mises could-that no citi­ scholar trying-and succeeding in most in­ zen who takes his civic duties seriously should stances-to satisfy himself. The 1966 Essay, exercise his right to vote until he has read possibly the most underrated of all his con­ Bohm-Bawerk! tributions, appears anew as the longest of the And now we have Israel Kirzner's Essays on 1996 Essays. Capital and Interest (Edward Elgar, 1996, 166 In late 1974, Professor Kirzner presented a pages, $59.95). There is no intent on the part paper titled "Ludwig von Mises and the of the author or the reviewer to station this Theory of Capital and Interest" in a special volume between the voter and the voting symposium at the Southern Economic Asso­ booth. However, the position that this book ciation meetings in Atlanta. At that time, a occupies on the Austro-neoclassical land­ year after Mises's death, and the year that the scape is an eminently strategic one-so stra­ resurgence began (with a conference in Ver­ tegic as to warrant our issuing a Mises-style mont at which Professor Kirzner was a key taboo, not to voters, but to all economists who participant), there was a small but eager adopt the Austrian perspective. But first we audience for his Austrian perspective. Pro­ fessor Kirzner shows how Mises's theory differs from Bohm-Bawerk's and how it com­ Dr. Garrison is professor of economics at Auburn pares favorably to the theories of J. B. Clark University. and F. H. Knight. In part a stocktaking, in part 511 512 THE FREEMAN • AUGUST 1997

a research agenda for himself and for others, If interest is to be understood in terms of this paper was first published in 1976 along time preferences, capital is to be understood with other papers at the SEA symposium and in terms of multiperiod plans. An Austrian published again in 1979 along with other subjectivist perspective on capital features the writings by Professor Kirzner. Its appearance plans ofindividual entrepreneurs-plans that in the presentvolume provides a perfect segue are subject to revision as the attempts to carry between his early work on the theory of them out reveal conflicts with reality and with capital and his later work on the theory of the unfolding plans of other entrepreneurs. interest. As Professor Kirzner demonstrates time and The final essay, "The Pure Time­ again, the forward-looking, plan-oriented Preference Theory of Interest," first pub­ account of a capital-using economy wins lished in 1993, is clearly the work of a well­ out over the alternative accounts that focus seasoned scholar. Professor Kirzner's good on some isolated slice of time or on the scholarship shines through in all his writings, physical productivity ofthe produced means but here we see him as a veteran of many of production. symposia and conferences completewith their Professor Kirzner's perspective on capital unyielding question-and-answer sessions. His and interest constitutes the essential differ­ work now has a growing and challenging ence between Austrian economics and neo­ audience. He responds to criticisms as if he classical (particularly Chicago) economics has heard those criticisms many times in many and the essential bridge between Austrian different forms-because he has. The ex­ microeconomics and Austrian macroeconom­ changes with allies and critics over the years ics. The book itself contains much about the have allowed him to clarify his own ideas and essential difference but contains little about to offer them in the most rhetorically effective the essential bridge. The reason for this ways. lacking is not difficult to explain. While con­ Ralph W. Pfouts, who offered a generally tributing importantly, along with F. A. Hayek favorable assessment of the 1966 Essay in the and Ludwig M. Lachmann, as a bridge­ American Economic Review, suggested that builder, Professor Kirzner has never actually the Austrian perspective is not "the magic crossed the bridge himself. The short intro­ wand that makes all mysteries disappear."z ductory essay includes a brief explanation of Professor Kirzner, with his newly published his reluctance to cross over into macroeco­ Essays, and especially with his essay on the nomics. According to Professor Kirzner theory of interest, shows that it is very nearly (p. 2), "recent Austrian work on Hayekian that. Interest is always and everywhere a cycle theory [and presumably on Austrian matter of time preferences. The primordial macroeconomics generally] seems, on the preference for the sooner over the later is the whole, to fail to draw on the subjectivist, basis for a unified treatment of intertemporal Misesian, tradition which the contemporary exchange-whether the exchange is with na­ Austrian resurgence has done so much to ture or with other economic actors and revive." whether or not it involves the use of capital. We can guess what he has in mind here. Tracing out the consequences of the systemic Austrian macroeconomics features the inter­ discounting of the future provides us with a temporal structure of production, the struc­ Copernican account of an economic phenom­ ture being defined as a temporal sequence of enon that otherwise would have to be ex­ stages of production. For concreteness, the plained by what we might justifiably call sequential stages are commonly identified Ptolemaic interest-rate theory. Capital­ with broadly defined industries, such as min­ productivity theories and waiting-as-a-factor ing, refining, manufacturing, wholesaling, and theories appear strained, partial, and oblique retailing. Too quickly, all the multiperiod in comparison to the pure time-preference planning that goes on within and between theory-that magic wand so skillfully wielded these stages are allowed to gel into a simple by Professor Kirzner. Hayekian triangle-'-with its summary repre- THE UNDISCOUNTABLE PROFESSOR KIRZNER 513 sentation ofthe relationship between the time the Kirznerian perspective that keeps the element in the production process (the round­ triangle adequately subjectivized. Quite to the aboutness of production) and the market contrary, it is precisely our understanding of value of final output. the process that Professor Kirzner elucidates, The right triangle, which Hayek introduced the ongoing attempts on the part of many in his Prices and Production,3 gave him a leg entrepreneurs to carry out their individual up on Keynes, who paid no attention to multiperiod plans (as guided by market rates production time. Consumer spending was of interest or as misguided by the central represented by one leg of the triangle. This bank's rate of interest), that breathes subjec­ macroeconomic magnitude had the attention tivist life into those otherwise meaningless of both Keynes and Hayek. The other leg triangles. tracks the goods-in-process as the individual Professor Kirzner may well believe that if plans of producers transform labor and other our Mises-style taboo keeps would-be macro­ resources into the goods that consumers buy. economists from crossing the bridge without The Hayekian triangle allows us to show that first reading the Essays, then the book itself (1) increased saving can make for more will dissuade the readers-as it has dissuaded output but only in the more-distant future and its writer~from crossing the bridge at all. (2) monetary expansion can deceive the mar­ Others, however, may believe that even the ket and derail the process that would other­ fullest compliance with the taboo will allow­ wise keep production plans on track with even facilitate-some subjectively respect­ intertemporal consumption preference. All able bridge crossings. Austrian macroeco­ this is well and good. But once the theory has nomics is not the oxymoron that some have been recast as a Hayekian triangle that can be long suspected it of being. While those prac­ reshaped by preference changes and distorted titioners among us will quickly forgive Pro­ by policy activism, it is all too easy for the fessor Kirzner for never crossing over into Austrian subjectivist to become a not-so­ macroeconomics, they can offer nothing but Austrian geometrician. This is Professor praise for the job of bridge-building that he Kirzner's lament. has done so well. D And so now it is time for our Mises-style taboo: No Austrian economist who takes his subjectivism seriously should draw a 1. Ludwig von Mises, "Capital and Interest: Eugen von B6hm­ Hayekian triangle until he has read Professor Bawerk and the Discriminating Reader," Freeman, vol. 9, no. 8 (August) 1959, p. 52. Kirzner's Essays! There is no inherent clash 2. Ralph W. Pfouts, Review ofAn Essay on Capital,American between the macroeconomic theorizing that Economic Review, vol. 58, no. 1 (March) 1968, p. 98. 3. Friedrich A. Hayek, Prices andProduction, 2nd ed. (Clifton, the Hayekian triangles facilitate (including N.J.: Augustus M. Kelley, Publishers, 1967 [originally published, the Austrian theory ofthe business cycle) and 1935]).

Attention, Teachers: Recent issues of THEFREEMAN for classroom use

ere's a wonderful opportunity to introduce your students to ideas on liberty-at no cost to you or your school. We are offering cartons of H past Freeman issues free of charge, postpaid. Each carton contains over 100 copies of a single issue. Simply send your request, with shipping instruc­ tions, to: FEE, 30 South Broadway, Irvington-on-Hudson, New York 10533. 514

and some portion of market freedom. Hong Kong will not be as tightly controlled as the rest ofChina, BOOKS but neither will it be the free and vivacious place it has been for the past half a century. The political and economic landscape will be filled with uncer­ tainty, cronyism, lost freedoms, and more corrup­ Red Flag Over Hong Kong tion than has been known in the recent past. It is a bleak picture indeed." They make a persuasive by Bruce Bueno de Mesquita, David case for their pessimistic outlook. Newman, and Alvin Rabushka Hong Kong predicting has become a thriving Chatham House. 1996 • 208 pages. $25.00 mini-industry (proving again how politics can alter cloth; $17.95 paperback the allocation of resources) and Bueno de Mes­ quita, Rabushka (both of the Hoover Institution), Reviewed by George C. Leef and Newman (of Lingnan College) readily ac­ knowledge that a case for optimism can and has been made, but, after a careful examination of the or decades, Hong Kong has been a favorite political and economic realities in China, find it to Fsubject among those of us who teach econom­ be much more likely that things will deteriorate ics. To demonstrate the importance of private significantly. property, economic liberty, and minimal, nonco­ The optimists argue that China needs a thriving ercive government, Hong Kong was simply ideal. Hong Kong for its own economic growth and Here we have a small, rocky, resource-poor bit of therefore will refrain from tampering with it. The land where the above conditions prevailed. Next authors counter that there are many contending door is the resource-rich colossus ofthe misnamed factions in China-which is apt to become a more People's Republic of China (PRC) where you find fragmented country in the years ahead-and that statism, corrupt autocratic rule, and pervasive those that are threatened by the "bourgeois hostility to personal liberty. (As the authors note, liberalism" of Hong Kong are more likely to prior to the assault on pro-freedom demonstrators prevail. in Tiananmen Square in 1989, the rallying cry ofthe The Chinese military, for instance, will play an Communist Party was "Oppose Liberalism.") The important role in the future development of the wealth and progress enjoyed by the people of PRC. Many readers will be surprised to find out Hong Kong stands in dramatic contrast to the that the "People's Liberation Army" (PLA) is backwardness and poverty that characterizes life thoroughly immersed in profit-making business. in the PRC. Much ofthe transportation of goods takes place in Alas, this wonderful experiment in the impor­ military vehicles. The navy is thought responsible tance of freedom is jeopardized by the impending for much ofthe piracy that takes place in the waters transfer of control over Hong Kong from the off China. But, the authors say, "The gravy train British to the communist rulers in Beijing. On July enjoyed by the military can persist only as long as 1, 1997, British governance ends and the least China is ruled by corruption instead of law. Some authoritarian government on the planet (according members of the PLA, therefore, have strong in­ to Heritage Foundation's 1997 Index ofEconomic terests in protecting the status quo." A free Hong Freedom) will be replaced by.... By what? The Kong, showing the results of an economy based on PRChas promised to allow Hong Kong to continue contract rather than power would be regarded as a its free-market economic system and liberal soci­ dangerous anomaly by many PLA officers. ety; it has promised free elections and a high Also, there are many Communist Party officials degree of autonomy for Hong Kong. But will it who retain the Maoist hatred of capitalist ideas. abide by these promises? They ordered the massacre in Tiananmen Square That is the crucial question that the authors and persist in arresting people who have the explore in Red Flag Over Hong Kong. They con­ temerity to speak out against their regime. These clude that the takeover by Beijing is a grave threat tyrants may not hold on to power in the long run, to the free and prosperous little enclave: "Hong but they certainly can and probably will reshape Kong is in for a rocky road in the years ahead. Hong Kong to please them as long as they have it. Future treatment of Hong Kong will be caught up In fact, the Chinese attack on Hong Kong's in the political competition for control of China. freedom has already begun, well in advance of the Victims of that competition will include the free transfer date. The authors give numerous telling press, academic freedom, open and fair elections, examples, such as Beijing's declaration that the BOOKS 515

Hong Kong press should practice "self-discipline" mental issues is often tilted, it is difficult to provide and be "respectful" of the sentiments of the a balanced overview without sounding tilted the Chinese rulers. That's a hint not likely to be missed. other way. People-and particularly parents-are Even more evidence of Beijing's hostility to free­ naturally wary of books that seem extreme. dom in Hong Kong has surfaced since the publi­ So as I read Facts, Not Fear, I tried to read not cation of the book. (See, e.g., "Hitting on Hong only for my own information about environmental Kong," the Wall Street Journal, January 22, 1997, issues and textbook teachings, but also with friends p. Al 4.) and relatives in mind who have children in school. The authors remind us how remarkably free Did an argument seem oversimplified? A conclu­ Hong Kong has been. The government consumes sion overstated? Was an environmentalist's posi­ less than 20 percent ofthe Gross Domestic Product tion presented fairly? My conclusion is that Facts, (compared to over 40 percent in the United Not Fear does a good job of mainstreaming its States). It imposes no minimum wage law. There message. It succeeds in explaining environmental are no business subsidies or pointless regulations. issues in straightforward and uncomplicated lan­ There is a flat 15 percent tax on salaries, and no tax guage. Sections on population, natural resources, on interest, dividends, or capital gains. The cur­ rain forests, and wildlife all begin with quotations rency is stable. Those are virtual laboratory con­ from school textbooks and then calmly compare ditions for a demonstration of the creative power gloomy textbook perspectives on these topics with of capitalism, but, sadly, they are about to be the research of leading scholars. Facts, Not Fear altered for the worse, the authors contend. Hong demonstrates convincingly that school textbooks Kong may still provide us with useful economic are misinforming young people about environmen­ lessons, but the comparison will be between the tal issues. old, free Hong Kong and the new, more regi­ The authors maintain an even and careful tone mented Hong Kong under Beijing's thumb. while pointing out the disparity between what Red Flag Over Hong Kong is a fascinating book, textbooks try to teach children, and what scientific revealing the unsavory political struggle that will and economic research suggests should be taught. determine the fate of the six million people of In the beginning of the book, the established Hong Kong. Congratulations to the authors on a experts that have reviewed each of the chapters on job well done. D environmental topics are listed along with their academic affiliations. Leading economists re­ viewed sections on population, natural resources, George C. Leef is the book review editor of The Freeman. and water, and a variety of scientists reviewed sections on forests, wildlife, greenhouse warming, the ozone layer, acid rain, and pesticides. Detailed notes and references for each chapter make it easy Facts, Not Fear: A Parent's Guide to for skeptical readers to check out key sources Teaching Children About the themselves. The chapter on natural resources makes clear Environment that much misinformation is a consequence of by Michael Sanera and Jane Shaw textbook authors not understanding economics. Regnery Publishing. 1996 • 300 pages. $14.95 "You may face mineral shortages in your lifetime" paperback writes the author of one textbook. "At the current rate of consumption, some scientists estimate that Reviewed by Gregory F. Rehmke the world's known supplies of oil, tin, copper, and aluminum will be used up within your lifetime," says another. Well, yes, lots ofthings might happen n Facts, Not Fear: A Parent's Guide to Teaching in a student's lifetime. An asteroid might hit the I Children About the Environment, Michael San­ earth, aliens might invade, or the moon might fall era and Jane Shaw cover a wide spectrum of out ofthe sky. But future resource shortages are far environmental issues and contrast the research of more likely to be the consequence of government leading scientists and economists with assertions price controls than any future inability to locate, found in textbooks and environmental books for extract, and deliver resources to consumers. children. These fears ofa coming resource shortage come This task is especially challenging because the from comparing proven world resource reserves parents who are the target audience hold their own with annual world consumption rates. This is environmental beliefs. Since reporting on environ- misleading. As Sanera and Shaw explain, "proven" 516 THE FREEMAN • AUGUST 1997 reserves are the reserves of a mineral that compa­ in thinking about this more realistic and upbeat nies currentlyknow about, and thus they depend on view of the future. how much effort and technology companies have so Perhaps the first few chapters will be hardest for far invested in looking. This, in turn, depends on skeptical readers. The authors begin the book with the expected price of a resource. Ifprices begin to their critique of the way environmental ideas are rise or if new technologies allow companies to taught in schools and layout the basics of free­ search less expensively for reserves, then more market environmentalism. Perspectives and con­ reserves are likely to be discovered-and "proven" clusions are presented without having room to reserves increase. include the full analysis presented later in the book In addition, it is useful to realize that today's (readers are many times referred to later chapters). natural resources are yesterday's rocks and rubble. The alternative would have been to just launch into Until entrepreneurs and engineers discovered how the chapters on specific environmental issues. to make use of the stuff of the world, peat, bogs, Perhaps in recommending Facts, Not Fear to coal deposits, oil, natural gas, and all manner of someone skeptical of market-oriented ideas it ores were of little use to mankind. Oil, the authors would be best to point them first to chapters on point out, was a liability to farmers, lowering the particular environmental issues. value of their land and harming crops and pasture This is a book worth buying for ourselves, and until the technology was developed in 1859 to distill worth buying to share with friends and relatives it. Entrepreneurs and inventors search to make who have children in school. I know of no better today's sand and rubble into tomorrow's valuable step-by-step economic and scientific critique ofthe natural resources. Textbook statements thatwe are standard doom and gloom environmental world running low on key minerals are wrong or at least view. In countering environmental beliefs found in misleading, and the implication that resource textbooks and taught to children, Sanera and Shaw shortages might cripple the economic future of our address a disturbing consequence of the environ­ children is indefensible. mental movement-the filling ofyoung minds with Sanera and Shaw detail the fascinating U.S. a deep and p~rvasive pessimism about their own Geological Survey (USGS) figures of "ultimate future. [] reserves"-the amount of recoverable resources estimated to be in the top-half mile of the Earth's Mr. Rehmke is director of educational programs at crust and the total amounts of particular minerals the Free Enterprise Institute in Houston. thought to be in the entire Earth's crust. These are big numbers and show how absurd textbook pre­ dictions of shortages are. Consider the aluminum that many textbook authors say may run out. Up From Poverty: Reflections on the Instead ofthe 23 years that textbooks come up with by dividing known reserves by annual consump­ Ills of Public Assistance tion, the USGS estimates, by dividing ultimate edited by Hans F. Sennholz recoverable resources by annual consumption, Foundation for Economic Education. 1997 • that aluminum will last for the next 68 thousand 208 pages. $14.95 paperback years! Future technologies will increase even this num­ Reviewed by Dale Matcheck ber by searching deeper in the Earth's crust for minerals. How much total aluminum is there in the Earth's crust? According to the USGS, enough for his timely collection of essays is a rich and 38.5 billion years! Perhaps pessimists will still Tdiverse anthology united by a recurring theme, complain, "Butwhatwill we do then?" Butfor most namely, that the welfare of a human being contains people a few thousand years is enough ofa cushion, spiritual as well as material components. A com­ and is a far cry from the 23-year deadline textbooks pelling case is made that the proper role ofthe state give children for aluminum (and 45 years for in promoting this welfare is to provide the envi­ copper, 21 years for zinc, and so on). ronment in which people are free to strive, to In chapter after chapter, Sanera and Shaw achieve, and to live with the expectation that they steadily cut through textbook misstatements and may enjoy the fruits oftheir own labor. The articles misinformation. In addition to replacing fears with represent some of the best writing that has ap­ facts about the environment, the authors suggest peared in The Freeman on the subject of the at the end ofeach chapter exercises and activities welfare state. that parents might use to engage their children In his excellent introduction, Hans Sennholz BOOKS 517 argues that the era of experimentation with social­ understand the social, economic, and political ism and welfare statism is coming to a close, and impacts of the welfare state will find this collection that the passage of federal welfare reform in 1996 of essays a valuable resource. D is a harbinger ofmore changes to come. What these changes are, Sennholz does not specify, but he Dale Matcheck is assistantprofessor ofeconomics at makes it clear that it will be difficult for recipients Northwood University, Midland, Michigan. ofpublic assistance to move into private-sectorjobs unless the legal obstacles that destroy so many entry-level opportunities are removed. He reminds us that transfer payments are not the only "en­ titlements" created by the welfare state. Compul­ Libertarianism: A Primer sory unionism, heavy payroll taxes and mandated by David Boaz benefits, minimum wages, occupational licensing, The Free Press. 1997 • 228 pages. $23.00 and other constraints imposed on labor markets have greatly reduced upward mobility among the Reviewed by John Attarian poorest members of society. Furthermore, the public school monopoly has left so many young people without basic skills ith statism's failures obvious, and Americans' necessary to compete in today's labor market. Wdisgust with statist government and politi­ However, if we are to judge by the recent debate cians burgeoning, David Boaz's accessible book is concerning the minimum wage, the Congress is not a handy and timely introduction to an appealing prepared to pass, nor is the public prepared to alternative. accept, the reforms necessary to create a truly free Opening with a brisk presentation of essential labor market. The new direction of public policy ideas, Boaz defines libertarianism as "the view that remains very much in doubt. Already, there are each person has the right to live his life in any way proposals to replace welfare with workfare, while he chooses so long as he respects the equal rights some have suggested a simple privatization of the of others." Government's proper role is to protect entitlement system, with private nonprofit agencies our rights to life, liberty, and the pursuit of happi­ replacing the state bureaucracies. ness, not initiate the use of force. Courageously, The authors represented here would clearly take Boaz rightly contends that "the most important issue with the idea that forcible redistribution of political value is liberty, not democracy." All political income can produce desirable effects on society, no theories are essentially one question: "Who is going matter who is administering the system or what the to make the decision about this particular aspect of work requirements may be. William Graham Sum­ your life, you or somebody else?" ner's classic essay "The Forgotten Man" calls into Concisely but comprehensively, Boaz presents question the morality of even well-intentioned the history oflibertarianism, tracing it to a drive for redistribution schemes, while Henry Hazlitt's essay religious freedom and including the contributions "False Remedies for Poverty" explains clearly why of St. Thomas Aquinas, the Scholastics, and the the goals of such programs are so rarely realized in Levellers, as well as more familiar figures like John practice. Other articles chronicle the unfortunate Locke and Thomas Paine. His explication ofrights consequences of these policies using historical is likewise superb. Self-ownership and property examples from ancient Rome to modern Sweden. rights are cogently spelled out, and the nonaggres­ The final article in the collection is must reading for sion axiom-"No one has the right to initiate every American high school student. In it, Bertel aggression against the person or property of any­ Sparks uses examples drawn from the American one else"-receives due prominence. His detailed experience to support his contention that effort treatment of the justice of distributions arrived at made by individuals, striving to improve their lot in through just means and his argument that property life, continues to be the surest route out of the rights are human rights, and indispensable since we "poverty trap." live and act in a material world, are especially The implication of this anthology is clear: free­ valuable. To his credit, Boaz insists on equality of dom is a necessary component of any true measure rights only, not opportunity or outcomes. There is of individual welfare. As Milton Friedman has also a fascinating, thought-provoking treatment of observed, government programs that seek to ex­ emergencies. Acknowledging that dire situations pand the material well-being of citizens at the (e.g., natural disasters) may arise where rights expense of their freedom are likely to end up might not apply, Boaz nevertheless commonsensi­ providing less of both. Readers seeking to better cally concludes that we do live in mostly normal 518 THE FREEMAN • AUGUST 1997 situations, so "Our ethics should be designed for Epitaph for American Labor our survival and flourishing in normal conditions." His treatments ofmarket processes, civil society, by Max Green law and the Constitution, health care, and the costs AEI Press. 1996 • 207 pages. $24.95 and failures of America's burgeoning Leviathan are other strong points. In showing that most Reviewed by David Kendrick American "poor" are affluent by historical stan­ dards and that before welfare, Americans took care of their own with numerous mutual-aid societies, rom a former New York representative of the Boaz ably rebuts the charge thatwelfare is essential FAmerican Federation of Teachers (AFT) because charity won't suffice. comes Epitaph for American Labor, which, accord­ Also welcome is his explication of what liber­ ing to its author, Max Green, "testifies to a reversal tarianism isn't. "Libertarianism is neither libertin­ of my own thinking.... Whatever was true of ism nor chaos." "Libertarians never suggested that yesterday's [union] movement, today's movement people be 'emancipated' from the reality of the practices a variety of reactionary leftism that world, from the obligation to pay one's own way opposes America's values and interests." With Big and to take responsibility for the consequences of Labor conspicuously flexing its political muscles one's own actions." these days, a book that deflates its pretensions is A weakness in the book is that Boaz's case for most welcome. liberty is overwhelmingly economic and technocratic: It was not always like this, Green writes, as he it makes us prosperous and promotes technological recalls the pragmatic nature of organized labor's progress. "The biggest issue for most Americans in leadership pre-New Deal: "Through its first cen­ the 1990s is preseIVing economic growth." Oh? The tury, the American trade union movement was biggest concern for many of us is, arguably, our distinguished by its rejection of socialism." This disintegrating social fabric and rising barbarism. The moderation was due primarily to the leadership of Information Age will, he confidently predicts, make Samuel Gompers, founder of the American Fed­ the clumsy state "obsolete." Government's "discoor­ eration of Labor (AFL), who, perceiving the state dination of the market process is making us less as the "executive arm of the dominant economic prosperous than we could be" and impeding class ... saw nothing to be gained by bringing progress; high-tech entrepreneurs will increasingly government into the equation between business just bypass it. In a nutshell: Out of the way, govern­ and labor." ment, you're obstructing progress! Indeed, Green points out, the union move­ Because ofthis focus, Boaz skates over the tough ment's "top priority during the Gompers era was social issues. Boaz's technocratic economism will the passage of legislation to keep government out not convince religious conservatives who do not see of labor-management disputes," culminating with consumption as their purpose in life and who hope the 1932 Norris-LaGuardia Act exempting union for Heaven rather than a high-tech Brave New officials from antitrust lawsuits. (Unfortunately, World. Their concerns are valid, but left unad­ organized labor had succumbed to the temptation dressed. to resort to politics by this time-Norris­ Given the reality of evil, and the imperative of LaGuardia also outlawed antitrust lawsuits, "yel­ preserving a safe, wholesome living environment, low dog" contracts under which employees agreed prudential constraints on conduct in the public as a condition of employment not to join a union.) square, as opposed to one's home (which Boaz sees, As late as 1938, union officials in the Gompers rightly, as one's castle), make sense. Laws against tradition opposed a minimum wage, according to indecent exposure and inciting to riot, say. Perhaps Green, "out of fear that if government could Boaz will engage conservative concerns in future impose a minimum wage, it could also impose a works. He doesn't here. maximum wage." Contrast that early opposition of But overall, he performs ably. As a concise, union leaders to the incessant, multimillion-dollar competent introduction to libertarianism, Boaz's campaign in which the AFL-CIO hierarchy suc­ primer can't be beat. Perhaps "the libertarian ceeded in bludgeoning enough Republican con­ moment" has arrived. If libertarianism seizes its gressmen to raise the minimum wage last year. moment, it will be thanks in no small part to this While this turn in the union hierarchy's attitude book. D toward state intervention has been well­ documented, Green breaks new ground in our Dr. Attarian is a freelance writer in Ann Arbor, understanding ofBig Labor's role in the Cold War, Michigan. taking issue with the often-expressed idea that the BOOKS 519 unions were important in the victory over commu­ have made much ofthe AFL-CIO's support for the nism. Solidarity trade union as a factor in bringing down As the Cold Warwas beginning in the late 1940s, the Iron Curtain, Green points out that the peri­ David Dubinsky, president of the International odic and futile labor protests which had continued Ladies Garment Workers Union, proclaimed that in Poland since 1956 would probably have "con­ "whether democracy was to revive in the countries tinued indefinitely had it not been for ... a overrun by Hitler and Mussolini lay in the trade transformed Catholic Church." unions." By this rationale, the principal weapons In the wake of Pope John Paul's 1979 visit to against the expansion ofSoviet hegemony lay in the Poland, Solidarity leader Lech Walesa recounted herding of workers into union ranks, and such that "millions of unorganized and unaffiliated so-called "democratization" schemes as the expro­ Poles had suddenly seen themselves as a commu­ priation of privately owned land for redistribution nity under the leadership of the church-an expe­ by the state, or "land reform." rience that a year afterward had led to the creation In Vietnam, for example, the redistribution of ofSolidarity." According to Green, this outpouring land, intended to "win hearts and minds," but of emotion, coupled with a new alliance between imposed on the South Vietnamese people by the the Church and dissident intellectuals "formed the United States at the AFL-CIO's insistence, led to basis for the birth of Solidarity as a liberation "resentment, felt at several levels of Vietnamese movement, as distinguished from an ordinary trade government and society, of interference by for­ union." Thus, Solidarity's role in liberating Poland eigners." In the end, Green concludes, these social had far more to do with the unification of all Polish efforts to undermine the internal insurgency of the society than it did with traditional trade unionism. Viet Cong were just "a sideshow diverting atten­ Union officials have coerced and even terrorized tion from the harsh but essential task of meeting millions of workers they claim to represent, but the military challenge from the North." their big-government, socialistic agenda is contrary During the 1980s, the Reagan Administration to their interests. There are no more excuses to sought to rebuild U.S. defenses while reducing the disregard the natural right of employees to decide budget deficit. But the AFL-CIO's executive coun­ for themselves if a union deserves their financial cil insisted, first, on smaller increases than what support. D Reagan thought was necessary, then later in the decade, that "ifvital [domestic] programs are to be David Kendrick is program director for the National cut or frozen, defense spending must also be Institute for Labor Relations Research, a charitable frozen." And in 1983, six of the AFL-CIO's ten organization providing research and analysis on the larg~st unions supported the nuclear freeze. social and economic inequities ofcompulsory union­ While unionists and their more avid supporters ism.

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