Libertarian Forum

7~r~.b- ::C)PY Special Issue On The Freeze THE Libertarian Forum Joseph R. Peden, Publisher Murray N. Rothbard, Editor VOLUME 111, NO. 8 September, 1971 75c The End Of On August 15, 1971, economic freedom died in America. has appeared has been timid and wistful, with a nary a And the terrible thing is that everybody cheered. Where mention of the dictatorship that has suddenly buried our was the opposition? Where are the people who, for four economic freedom, and scarcely a fraction of the righteous decades now, have been denouncing wage andprice controls? indignation with which they greeted Mr. Nixon's grandstand Where are the businessmen? For decades, the business announcement of his trip to Communist China. Human community has been proclaiming its devotion to free enter- Events expressed the hope that the controls would not be prise, to the free price system. For decades, they have permanent; and the nation's most prominent conservative, been attacking direct controls on prices and wages. Where William F. Buckley, in a dithering column of August 19, are they now? They are the loudest and most delighted of stated that the controls were not necessary but that, on the the cheering squad for Mr. Nixon's New Totalitarian Eco- 2ther hand, Mr. Nixon saw that controls could work for an nomic Policy. On the day after Nixon's sudden and dra- intermediate length" of time, even though they cannotwork matic price freeze, the Washington Post reported that the either in the "short" or the "long" run. By what principles mood of the business and banking community was "almost or what precise length of time we can enjoy "intermediate" euphoric." Wwp- 1-d&. he%-.the Na.faal success with price and wage controls, neither Mr. Nixon Association,.of-Manufactu$rs,-e_xpr_e_es_s~dd,his8d~~q66the nor Mr. Buckley has bothered to let us know. 5age:price freqze;-and. ,Ge_orge G. ,Hagedorn, chief ecogp And where are the nation's economists? For at least two mist of the-N-AM, and who has many times proclalm_ec-.his decades, virtually all the nation's economists, let alone dev7itjo;- to*the free- marlcrtj-'joined in the Sosannahs The Arthur Burns, Paul McCracken and the other Administration Ghamber of Co@=rFe of tIie-United'~~eg,~~hicUUkeconomists who have led us to the destruction of the free ha_d.jssued a_repor~~~57ZZ~~ice Cont~ol,dernan~* economy, have told us, with all the certainty of which they strating that price and wage controls do not work and impme are capable, that price and wage controls do not work, that -."a Terrible burden om -the economy; was scarcgly 'less they tackle only the symptoms and not the causes of inflation, enthusiastic in hailing the program.. - -- that controls do not halt inflation but ._qnly .bxing aboat 'On August 24, furthermore, Secretary of Commerce -shortages;- distortions, disruptions, ZnX black markets. Yet, Maurice Stans met with eleven of the heads of the nation's virtually all of them have jumped on the control bandwagon, biggest corporations; Stans reported delightedly that all of with no hesitation whatever - even Professor Samuelson, 2ur biggest businessmen not only hailed the controls, but whose own best-selling textbook reveals the unworkability want to be sure the program does not terminate on Nov. of direct price controls on the market. It is no wonder that 12". In fact, not a single businessman of any stature, not virtually the only economist to champion controls all along - me, has been reported to be anything but enthusiastic about 3. K. Galbraith - has hailed Mr. Nixon as a "repentant :he wage-price freeze. And so where is all the talk about sinner"; he could have included the nation's economists in the free enterprise system? Where are the men to rise and the gibe. There have only been a few honorable exceptions to iefend our lost economic freedom? the stampede: Milton Friedman mildly criticized the controls The conservatives of this country have scarcely done any as unworkable - but without denouncing the invasion of Jetter. For decades, they too have opposed "creepingsocial- freedom involved. And 16 Chicago School economists headed ism" and have been particularly vehement in attacking by Allen Meltzer of Carnegie-Mellon University, did issue iirect controls over wages and prices and their dictation a statement denouncing wage and price controls as "in- .o the individual on what price or wage he may charge or pay equitable, wasteful, inefficient and destructive of personal In the market. Where are the conservatives now? For the freedom". But that is literally all. How ironic that the only nost part, we have heard only a resoundingsilence. In fact, large-scale and determined attack on the wage-price freeze nany conservatives have simply joined in the cheering, have was launched by the very Democrats and labor unions that iailed the dramatic move by our "strong" President, and had been calling for controls for many months! Some of the lave curiously forgotten their supposed devotion to "strict" union rhetoric was impassioned and even denounced the con- :onstruction of the Constitution as a protection for our trols as dictatorial and unconstitutional - th& reminiscent iberties. The slight amount of conservative criticism that of the conservatives and businessmen of days gone by. Page 2 l'he Libertarian P'orum September, 1971 Leonard Woodcock, head of the United Automobile Workers, the federal government that has been merrily increasing the even charged that "Nixon's is the hand that held the dagger" supply of money, to 'stimulatev the economy, to finance its but that the Democrats, in passing the authorization for own now enormous budget deficits, to help out favored controls in the first place, had put the dagger into his hand. borrowers, to lower interest rates, or for any other reason. But it is highly unlikely that the nation's unions, despite Note then the stance of the government, whether it is the their passion and their early talk of non-compliance and a Nixon or Johnson or any other administration in the history general strike, will be the instrument to save American of inflation. First it pumps more money into the economy, freedom. For the unions, after all, have long championed and continues to do so. Then, as the new money inevitably such controls, and merely resent the fact that profits spreads throughout the society, and as prices and wages and weren't frozen as well. Furthermore, they are already rents inevitably increase in response, the government it- showing indications that if unions are given their share as self becomes increasingly possessed with righteous in- partners in a tripartite control arrangement, such as ruled dignation. It issues edicts, bellows about social responsi- the country during the days of NRA and World War I1 - a bility, and denounces various groups in turn for supposedly tripartite rule of big business, big unions, and big govern- causing the price inflation. Business is denounced for rais- ment - they will end their outcry. In short, labor unions ing prices, labor unions for asking and obtaining wage in- hardly oppose the controls in principle; they just want a creases, landlords for raising rents, and sometimes con- bigger share of the pie. sumers for spending too much. But never, never does the ,- -~ government bother to point to its own responsibility for The Cause of Inflation (2 the whole problem. Instead, it continues to pour more money into the system, and then to wax indignant when prices and The controls won't work. The prime reason why they wages rise in inevitable response. The White Knight of won't work is that they do not tackle the c ause of inflation, government, with its myriad of experts and advisers, but only lash out at the symptoms. Let us see why. Every marching out to man the ramparts of the "fight against price is simply the terms of an exchange on the market, an inflation", turns out to be the very culprit who is the source exchange with money on one side and some good or service and origin of the whole problem. on the other. When I buy a newspaper for a dime, ten cents How does the government increase the money supply7 The in money is being exchanged for one newspaper; when I buy old candid days of simply printing more greenbacks, such a hat for $5, five dollars in money is being exchanged for as caused inflation during the Revolutionary War and the one hat. And so the key to what makes prices high or low is Civil War, is now hopelessly out of date. For one thing, the the relationship between the supply of goods available and process was too clear, and when the "Continental dollar" the supply of money which can be used to purchase them. printed in massive lots during the American Revolution Suppose, for example, that by some magic process, the quan- became virtually worthless, it was clear to almost every- tity of money available in the country doubles overnight. one that the unlimited printing press of government was the The supply of goods remains the same, for nothing has responsible agent. It was from tkat experience, by the way, really happened to lower or raise them. But then we will that the old American phrase, Not Worth a Continental", all enter the market with twice as many dollars burning originated. The current inflationary process is much more a hole in our pocket as compared to yesterday. And if subtle, though no less effective, andhence understood by very consumer tastes remain about the same, this means that few non-economists. It works something as follows: twice as much money will be bidding for the same amount The controller and virtual dictator of the money and bank- of goods, and all their prices will approximately double; ing system is the Federal Reserve Board, appointed by the we will all have to pay twenty centsfor the same newspaper President.

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