Part 1 - Principles and People

We Americans hav(f no Crown, no Lords Temporal or Spiritual, and no Emllire. Our institutions were create~ in a vastly shorter period than were England's. But they are nevertheless rooted in! the verities of human nature .and of human nature in Am¢rica. They are derived .from and are the embodiments of principles long tested and cherished by human beings. We h~ve projected living principles into massive institutions. These principles which we live by are in part inherited and in part the product of ourexperience.here as.a nation. 3 Principles We Live By They assure our unity, our national security, and our com mon happiness. They should guarantee the permanence of our republic. Unless our immediate objectives are sought in terms of the principles behind our institutions, we will lose not only our objectives but our institutions as well. Principles by Inheritance CONSTITUTIONAL GOVERNMENT The creation of constitutional government is a most sig nificant mark of the distrust of human beings in human na ture. It signalizes a profound conviction, born of experience, that human beings vested with authority must be restrained' by something more potent than their own discretion. When exacted from a ruler, a constitution is a guarantee of rights which may not be denied, even by the sovereign who granted it. When adopted by a majority, it is a manifestation of self denial. It is law and the source of law. With us, the Consti tution is the repository of sovereignty. And since it is the creator of our Federal government, its terms govern the institutions of that government.

For the most part the Constitution of the United States is an inheritance from a body of principle, built up over many generations by Englishmen here and in their native land. That body of principle became in America a guide to associated living. Those who created the Constitution in 1787, and subsequently adopted the Bill of Rights, extracted from the inheritance known as the English Constitution a number of provisions and made written record .of them with some important adaptations of their own, based upon colonial experience. Hence,. our constitution is not an ex pression of all the liberties and rights of those Englishmen who became Americans. They, like those who remained be hind, were still bound by the broader principles that dis4 Principles by Inheritance tinguish Anglo-American civilization. In that inheritance of constitutional principle, as well as in the common law,lie the precepts under which we live together as a nation.

The purpose of constitutional government is descI[ibed very well by Cornelia LeBoutellier in her American De~oc racy and Natural Law: "Greg~rious and social and political, loving to be free, man builds a state, the cornerstone of which is his inherent liking for his fellowman. Along with this inherent liking goes inherent faith, and a shrewd ap praisal of his fellowman as a good sort, hut a sort ,vho 'wants watching.' So he sets up machinery for watching his fellow man through the ministrations of constitutional democracy and charges the state with the solemn duty both to keep him free and to hold him safe, insofar as this is possible." 1 THE REIGN OF LAW The concept of constitutional government was born of a venerable principle-the supremacy of law. Bracton said in 1250: "Right is derived from what is unwritten and that which usage has approved." This was fixed in the medieval conscience, despite the ascendancies of various forms of re ligious and political authority. Law is not the offspring of the state, but the reason for the state. The instruments of government should merely give effective application to law.

As we search through antiquity for the origin of law, we lose a sense of the state in the interminable successi~n of authorities that have vainly conceived themselves masters of men's conduct. But we do find patterns of action, guided by some vague but positive rules. And because their roots are hidden in mystery, it seems sometimes that these rules were . shaped by an unconscious process. Law, says Edward Jenks in' his Law and Politics of the Middle Ages) is "an authority which for some reason or an1 Cornelia LeBoutellier: American Democracy and Natural Law (New York: Columbia University Press; 1950 ), p. 55. 5 Principles We Live By other, great masses of men feel themselves bound to follow, not because they choose, but because they must. And yet certainly it is not a command of the State, direct or indirect. Upon critical examination, it may turn out to be the work of a mere private composer. Why do men obey it? Further back again, we find a purely impersonal document, com piled, no one exactly knows how, or by whom; and yet it is the. controlling force which shapes the daily conduct of men.

. . . It is not the work of the State, it may not be recognized by .the State, there may be no State to recognize it. Yet the essential ideas of Law, the evident ancestors of our modern juristic notions, are clearly there." 2 Thus, law in its essence is neither the act of a legislature, the proclaimed will of a sovereign, nor "judge-made." It is the creation of individuals, countless individuals, making patterns of action and relationships that rest one upon an other likes the mites that make up a coral reef. The power that guides such individuals may be-indeed is believed by a .great proportion of men to be-divine. But whatever the guiding power-the "right reason" of men or supernatural inspiration-it has manifested itself in the will and obedi ence of men ..This power grows as men give it obedience. 3 Perhaps that is why law is so often called the product of public opinion and why that law which violates public opin ion is soon broken and liquidated.

2 Edward Jenks: Law and Politics in the Middle Ages (London: John Mur ray; 18g8), pp. 2,3. 3 The following is an excellent definition of the natural law as understood by those who hold to the doctrine of its divine origin. It was written by Ed ward F. Barrett of the School of Law, Notre Dame University: "The Natural Law is as old as Man himself. In ancient days Chinese sage and Hebrew Prophet, Greek philosopher and Roman jurist, alike caught the vision of a Su preme Law transcending and therefore necessarily informing the laws men make for men. From that Law resulted certain basic human rights. These rights the State was morally competent to implement and protect but not to \impair or destroy. Nor could the State's commands be the sole criteria of right and wrong, for, independent of the State there existed an objective Standard, rationally ascertainable, by which the final value of all human laws can and must be tested."

6 Principles by Inheritance The goal of law is justice ..The need for definition brings into being courts of justice and so-called "lawmakers." Lord Coke spoke of reason as the life of law, . The earlier enemies of the concept of a right above the written law were the "positivists." They held that there was only positive orman-made law and that the laws made by the state or governm'ent were the only directions of conduct binding upon men living in society. Various applications of pragmatism and other denials of natural law have all but captured American thinking. Prag mat.ism, instrumentalism, behaviorism, economic determin ism, and rationalization have been the more recent spear heads of the attack on the verities of the past~ Because law is essentially the expression of what individ ualsdeem best for their guidance, it has been and is a jealous guard against encroachment by those in political authority.

"If justice be thy shield and it be broken, whence cometh thy succour?" Liberty under law is an old and useful maxim. But it implies a separation that does not exist. Law is .the individual's expression of liberty in his relations with his fellow men. This comment on the nature of law has a special applica ti,on for the United States. For in no other country has the influence of men· trained in the law been greater in creating and developing political institutions. The dominant influ ence in making the Constitution was that of the lawyer. Our legislative assemblies have proverbially been dominated by lawyers. Most of the presidential successors of Washington have been lawyers. THE CONSENT OF THE GOVERNED The great customary constitutional principl~ of the con sent of the governed means something quite different from, and more important than, majority rule. Majority "rule" is not in fact a principle of our constitution, f~r a majority does, 7 Principles We Live By not rule but governs. It performs certain functions under the terms of fundamental law.

What, then, is consent? Is it mere resignation to the in evitable? Is it impotent acquiescence? Is it agreement secured under duress? Is it agreement obtained as the result of prom ises that, under proof, can be shown to be deceitful and fraudulent? In the long history of the common law, which is in large measure the application of common sense and the fruits of experience to human situations, these questions are answered largely in the negative. Consent is not valid when it is given under duress, physical or even political. It is not valid if obtained by false representations. Nor do I believe it to be valid when it is obtained by political bribery. And I cannot believe it to be valid consent when a people submit because they can find no way to refuse. Consent is real when those involved freely, knowingly, willingly, and with a part in creating the situation, enter into the benefits and responsibilities of the decision.

Consent is not present when a decision is made in the face of a virile and sizable opposition. We often see such decisions and we learn how futile they are. Sumptuary laws whose dic tates are neither respected nor believed in by a large part of the population become either dead letters or sources of cor-: ruption and blackmail. The consent of the governed is not only a basic principle of a free society but a corrective for injustice and oppression. It is essentially a principle demanding that government pro ceed in pace with the slow evolution of public opinion. It is the assurance of stability and public order. PERSONAL RIGHTS Like the recurrent theme in a great symphony, the con cern for personal liberty runs through and through the lanS Principles by Inheritance guage of the Constitution. The very climax of the Preamble is "to secure the Blessings of Liberty to ourselves and our Posterity." There are numerous protections in the body of the document. Subsequently, the Bill of Rights specified the traditional liberties. And, as if the authors were. prone to linger on the theme and sum up everything in a sentence, the final, Tenth Amendment embodies an all inclusive stricture: "The powers not delegated to theU nited States by the Con stitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." .

The specified rights in the Bill of Rights of the Constitu tion are life, liberty, and property. This trilogy was· carried over from the English tradition, well expressed by the phi losophy of John Locke, who was ]effersonts major inspiration. These rights were affirmed and in fact established in the second half of the eighteenth century. That was the half century of Rousseau, of Chatham, of Burke, of Paine, of Jefferson the philosopher, of Hume, of Diderot, of Voltaire, of Adam Smith, of the· American Constitution-makers, and of two great revolutions. It was a half-century when, under the prodigious assault of intellectual· giants and of popular revolt, absolutism crumbled in the Western world and the state was mastered, tamed, and reduced to the status of a domestic servant. It was an era in which the individual was delivered from captivity and proclaimed to have inalienable political rights.

These rights were based in part upon the concept of his possession of an immortal soul and in part upon the rational concept that, unless a state is built with the powerful and resilient fiber of human personality, it cannot endure and grow. The state had been stolen by selfish men and, under the guise of unproved right, in the darkness of human igno rance, and under the cover of armed might, it was an engine of exploitation, superstition, and oppression. The unity and integrity of the concept of individual rights 9 Principles We Live By are shown by the singular parallelism in. all the great expres sions of human rights which marked victories over state power. In the specification of rights-those imprescriptible per sonal rights which no state could either give or take away but cbuld only protect-property was invariably linked with all the rest. The American Constitution linked life, liberty, and property. The French Declaration of Rights of 1793 specified equality, liberty, security, and property. These rights were equal, indivisible, and interdependent. Equality meant that men were born equal and were equal before the law.

The eighteenth-century revolution in political rights and practices was accompanied by a parallel and related revolu tion in economic principle. Adam Smith and his successors conceived of economic liberty as the freeing of individual enterprise from the restraints and compulsions of govern ment. To them, the pursuit of personal good in a free market was the ideal means of attaining the general good of all. This 'was the concept of political democracy, couched in economic terms. That is, the sum total of individual well-being is not only best for the individual, but best for the nation. According to John Locke, "the preservation of property" is "the end of government." Property that the individual "re moves out of the state that nature hath provided and left it in, he hath mixed his labor with, and joined it to something that is his own." This property therefore becomes indivisible from his other liberties and rights.

There can be no hierarchy of values among human rights. They stand or fall together. CONTROLLED AND BALANCED POWER The most vivid proof that the American Constitution was created in the light of a profound knowledge of human na10 Principles by Inheritance ture is in its meticulous distribution, division, and balance of the power of government. It drew its wisdom from centuries of experience of man's way with man. Its creators resolve~ that once and for all they would guard essential Hberties from destruction at the hands of those vested with the powers of government. It has been aptly said that the principle of balanced power is a "Gothic principle." The architects of· the Constitution contemplated that with the three branches of government and with the Federal establishment and the states nicely balanced, one· against the other, there would remain broad scope for free action by those who lived under the system~ To govern must mean to exercise power. Ultimately,a government must have physical 'power. But the sources of power appear in many forms, corresponding to the charac teristics of human nature~ambition, appetite, gratitude, fear, pride, hatred, and revenge. In politics the manifesta~ion of power is in the capacity of those who exercise it to per suade people to give them support.~ In government it mani fests itself in the use of law and administrative action to compel people to act or not actin accordance with the pur poses of those who have authority.

That governmental power is a dangerous thing to entrust to frail human beings is proverbial. Power is a toxic draught. It may activate dormant but dangerous traits in humanchar acter. It impairs judgment, closes the windows of the mind, creates illusions, and deadens sensibilities .. Long possession of power may completely transform character. Anyone who has been near the high seats of government and who has himself escaped the infection deeply realizes these effects. The literature of statecraft is full of warnings. There has been no better .delineation of the need for checks upon power .than by the experienced wisdom of Hamilton and Madison in T he Federalist: 11 Principles We Live By The great security against a gradual concentration of the sev eral powers in the same department, consists in giving to those who administer each department the necessary constitutional means and personal motives to resist the encroachments of the others. . . . Ambition must be made to counteract ambition .

. . . It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be nec essary.... In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions. This policy of supplying, by opposite and rival interests, the defect of better motives, might be traced through the whole system of hu man affairs, private as well as public. We see it particularly dis played in all the subordinate distributions of power, where the constant aim is to divide and arrange the several offices in such a manner as that each may be a check on the other that the private interest of every individual may be a sentinel over the public rights.

INDESTRUCTIBLE STATES The principle that ours is a union of indestructible states has been galvanized by experience. The Constitution and all of its judicial interpretations hold that the Federal govern ment is vested with limited and specified powers and with only such unspecified powers as are implied or necessary to specified powers. By the same authority, states reserve all other powers not given to the Federal establishment or de~ nied to the states. Jefferson expressed it as a means "to make us several as to ourselves but one as to all others." The vast size of. the nation, the diversity of its characteris tics and interests, the vital need that the people have their 12 Principles by Custom and Experience government within reach, the great value of experimenta tion in government· in many states, all add the logic of facts to this constitutional guarantee. Add to this the clear value to individual liberty when government power is .cut into so many units.· The states are in truth our best security against revolutionary change.

Jefferson, echoing the prevailing sentiment of his time, wrote: "Were not this cOllntry already divided into States, that division must be made that each might do for itself what concerns itself directly." He wrote also: "A single consoli dated government would become the most corrupt govern ment on earth." Nothing in present conditions invalidates the truth of these judgments. Experience has in fact strengthened them. Principlesby Custom and Experience THE ENDLESS GROWTH OF PRINCIPLE It would be absurd to claim that the quest for perfect institutions ended with the adoption of the Constitution. History went its way, and out of the slow growth of custom there came adaptations shaped partly by special conditions in America and partly by the growth of human enlightenment. These were not abrupt breaks with the past. They were, in fact, in keeping with the past. New principles of government spring from all sorts of sources. They perish, or. they enter the structure of a free society. Only rarely do they come from the heights of formal authority. They are bdrn humbly and move outward into an area of general acceptance. Ultimately they become the ex pression and the tools of statesmen. For political leaders do not create; they discover and exploit.

In this respect our system contrasts most violently with 13 Principles We Live By the Communist world. There the Marxian ideology came as the tool and the weapon of a revolutionary elite that came to power amid chaos. The people themselves knew little of the alien principles that governed them. And so the ideological pattern has had to be kept by the iron discipline of police power. The modifications of our system, to a degree, have been associated with the names of such statesmen as Washington, Jefferson, Marshall, Lincoln, Theodore Roosevelt, and Wil son, not because those men originated the innovations but because they gave them the sponsorship of high office. Em bodied in these innovations, new principles came to be im pressed upon the mind and conscience of the nation. THE PRESIDENCY AS THE EMBLEM AND AGENT OF NATIONAL UNITY ,If George Washington had fallen in the Revolution, it is possible that there would have been no new constitution for many years after independence. Certainly, if he had not been before the eyes of those who made the Constitution, they would. have created a quite different Presidency. The office was given vast power and prestige only because it was self evident that Washington would be the first President and as such would create the pattern and customs of the office. For the men who had revolted against the British Crown were fearful of executive power. They felt that in Washington power would be associated with restraint.

They were right, for Washington not only lent incom parable prestige and dignity to his office, but by almost regal detachment from faction established himself as an embodi ment of national unity. His Farewell Address, in which he solemnly warned his country against factionalism, height ened the impression thus created. And his refusal to accept more than two terms was an emphatic reminder that a re14 Principles by Custom and Experience public was best served through the principle of limited tenure. His example was frozen into a custom that lasted for a century and a half and has now been legally established by constitutional amendment. There have been Presidents who lent themselves to the lesser level of partisanship. Some have descended to the arena of class conflict and have joined some Americans in contend: ing with others. But despite these perversions, the office has kept the essential attributes of a chief magistracy, a final re course for the mediation of great domestic conflicts and a potential source of unity when all else fails.

THE PARTY SYSTEM The liberties so carefully guarded in the Constitution gave to individuals and interests full rights to organize movements to secure governmental policies and actions favorable to them. The field for party action was thus left open under the Constitution, although specific provision for parties was wisely omitted. The statesmen of that· day were of course quite aware of the inevitability of party action, and in fact in their several experiences. they had no little part in creating it. But since the creation of party alignments inevitably fol lows changing conditions and situations, it was left for the free' action of citizens to determine what those alignments should be. But there were sharp warnings, by Washington and Madi son and others, of the dangers inherent in factions. It is clear that by this term was meant not national parties but smaller minority-interest groups. For when two parties made their appearance, they were vastly more than factional groups.

They were, and for the most part continued to be, so broad in their base that they came to be unifying rather than divi sive forces in our society. It is not without reason that history has attributed to 15 Principles We Live By Jefferson and Hamilton the major contribution in the creCl tion of the first parties. These were class-dominated only to a degree, for the country was already too big for any single class or faction to capture the national government. And because the Constitution was so contrived and the division of the nation into states so effective, a mere majority was unable to exercise absolute power. This has been of inesti mable value in the preservation of our free life. The parties can be valuable agencies for popular govern ment. They should be vehicles for the use of like-minded people in attaining their objectives. They should provide co hesion in activating a government that is based upon a sharp division of powers. And they should serve over the genera tions to awaken the consciousness of people to common in terests and ideals.

THE INDEPENDENCE OF THE JUDICIARY When John Marshall boldly asserted the power of the Supreme Court to invalidate an act of Congress, his author ity to do so was sharply challenged. It was claimed then, and has repeatedly been claimed since, that this is a clear usurpa tion of power by one branch of government over two others. Marshall based his case on the proposition that when he had to choose between a constitutional provision and a law made by Congress, a creature of the Constitution, he was compelled to respect and uphold only the higher law. The progeny, he inferred, must step down for the progenitor. This was disputed on two notable grounds, one based upon tradition and the other upon logic. Considerable au thoritysaid that Anglo-American custom had never allowed a court to invalidate a legislative act. Also, it was claimed that the determination of whether the act of Congress was incompatible with the Constitution was just as logically within the power of Congress as within the power of the Supreme Court.

16 Principles by Custom and Experience Marshall, however, won his case with posterity. Slowly the massive force of public opinion accepted the principle of the independence, not to say the supremacy, of the Supreme Court and made it a national conviction. The Court rose to be a monumental institution. The strength of this convic tion revealed itself generations later, when Franklin D. Roosevelt, an immenselypopnlar President sought in Igg7 to bend the Court to his will. Public opinion through Con gress sustained the Court as an institution. Butonly a superficial view of history can regard the deci sion of Marshall as pure innovation. Throughout Anglo American history since the. Magna Charta, and in the strug gles of Lord Coke and others with the Crown, individuals had relied upon the concept of justice embodied in the au thority of the courts. In the choice among executive author ity, legislative bodies, and the courts, the instinct of freemen turned to the courts. We cannot completely fathom the basis of this choice. But it maybe ventured that since in the exec 'utive-notably, the Crown-people saw personal selfishness, and in legislative assemblies the play of faction, ignorance, and chicane, they turned to judges who, although not always pure or wise, pursued in the main a quest for a fair balance of conflicting interests, for peace among men, for the re straint of the strong, for the protection of the weak, for the righting of wrong, and for a decent respect for precedent and tradition.

THE INDISSOLUBLE UNION Woodrow Wilson, writing as a historian twenty years be fore his Presidency, has this to say about the growth of. the principle of an indissoluble union: The legal theory upon which secession proceeded was one which would hardly have been questioned in the early years of the government, whatever resistance might then have been offered 17 Principles We Live By to its practical execution. It was for long found difficult to deny that a State could withdraw from the federal arrangement, as she might have declined to enter it. But constitutions are not mere legal documents; they are the skeleton frame of a living organism; and in this case the course of events had nationalized the govern ment once deemed confederate. 4 Since the principle asserted by Abraham Lincoln and acted upon by him as President was finally and tragically sealed in blood, it is hardly necessary to summarize the long debate over the primacy of Union or states.· The common sense of it is that the makers of the Constitution favored the perma nence of the Union, made it the first objective of the Pream ble, and no doubt prayed for its success. Nevertheless, there was over the years strong opinion North and South that the sovereignty retained by the states entitled them to leave the Union. Opinion against it was equal, perhaps preponderant.

The pity ,is that extremists on both sides finally precipitated the ordeal by arms. But military force, however overwhelming, is a poor, inde cisive method of resolving an issue of principle. It has been, rather, the force of common and supervening interests and ideals, the increase in economic interdependence, the habit of peaceful solution of differences in Congress and among the states, and the widening of national culture that have ce mented the Union beyond any chance of division. It is well, however, to remember that union among equals, , not consolidation, is our national ideal. WORLD RESPONSIBILITY Woodrow Wilson is widely believed to be the major archi tect of the principle of America's world responsibility. It is true that the military and legislative conflict in which he 4 Woodrow Wilson: Division and Reunion (New York: Longmans, Green & Co.; 1909), p. 211. 18 Principlesby Customand Experience figured gave a new meaning to the principle. But any can· ception of American isolation before the first World War must be drastically revised in the light of the facts. The United States has been a factor in world politics and world politics has been a factor in our public policy for a long, long time. It was more than an urge to assure our security that pushed the national boundaries to the .Pacific, that waged wars of conquest against Mexico and Spain, that purchased Alaska and annexed Hawaii. A destiny, however "manifest,"

has constantly attracted America to· the far reaches of the world. Occasionally we have been diverted from world interests by internal strife or internal development, but generally our foreign policy has not been isolationist. A long succession of Secretaries of State and Presidents maintained a far-reaching concern beyond national boundaries. Seward, .Hamilton Fish, Blaine, Hay, Theodore Roosevelt, Root, Hughes, and Hoover stand with Wilson and Franklin D. Roosevelt in the history of our foreign policy. But these statesmen were discoverers, not creators, of the principle of world responsibility. The diverse origins of our people, our maritime importance, our immense· economic re sources, have made us a world power. Neither thrust upon us nor sought for, this destiny lies in what 'o/e are and where we are. A CLASSLESS SOCIETY The principle of a classless society dominates the. mind and spirit of the American nation. It. asserts the ideal if not the fact that one man is as. good as another, that given .the appropriate and due opportunity one person can achieve as much as another, and that self-reliance is the major key to success.

Whatever the origins of· this ideal may have been, our 19 Principles We Live By nation's conditions and resources have provided rich nourish ment for the growth of a classless society. The stratification of a people in fixed classes is impossible in a society con stantly in process of expansion, of internal flux, and of allur ing personal opportunities. No society can stratify in the face of a constantly enlarging geographic and economic fron tier. And that frontier is fortunately still far from the im mobility that characterizes those of many older nations. A nation in which a Walter Chrysler can build a mighty indus try from a beginning in the work-clothes of a mechanic is still enjoying lusty youth. The signs of national youth are innumerable. There is personal independence, guiding vigorous minds to uncon ventional· and imaginative purposes. There is plenty of wholesome and sometimes unfortunate disrespect for author ity. There is always belief in another chance, another op portunity. And there is optimism, high thinking, daring, and aggressiveness.

In such an atmosphere, the principle of a classless society has found a firm home in America. This defies the philoso phy of Marx and his school, for the concept of a systematic remaking of classes.can find few converts in a society where groups have no fixed boundaries. Principles and Institutions as Safeguards These conservative safeguards were, in part, designed to pro tect democracy against itself. Farsighted men realized that a broad franchise and popular political institutions might al low a popular tyranny even more sinister than that of royal absolutism or aristocratic privilege. For the real enemies of liberty were recognized as the perversions and selfishness of human nature, whether attired in royal raiment or in the 20 Principles and Institutions as Safeguards rags and tatters of the masses. There had been many remind ers .of this danger, from Plato and Aristotle to Jefferson and Burke.

There lived in the mind of Jefferson, along with a passion ate faith in the noble instincts of free men, a deep apprehen sion concerning their original sins of selfishness and affinity with power. In his early Notes.on Virginia}he wrote of the dangers of masses in cities swayed by passion and infected by demagogues. He noted that men in the mass might ruthlessly invade the liberties of minorities and ultimately lend their great power to a tyrant. The evolution of government from democracy to tyranny was well known. Jefferson thus appre ciated the fearful danger of what later came to be known as "the tyranny of the majority." He feared a majority that might. create first a tyrannical legislature and then a tyranny of an executive. He said in a letter to Madison: The tyranny of the legislative power is really the danger most to be feared and will continue to be so for years to come. The tyranny of the executive power will come in its turn, but at a more distant period.

The penetrating and prophetic Tocqueville in the 1830'S gave us further and more detailed warnings. "The very es sence of democracy," he wrote, "consists in the absolute sovereignty of the majority." Legislatures become the tools of this majority. The executive can lose all stability and in dependence under the impact of a majority. Arid law made under its influence can .violate all the fine theories of parlia mentary deliberation. "This," Tocqueville continues, "comes to the same thing as if the majority of the populace held its deliberations in the market place." This tyranny-and it is tyranny-of the majority exercises "a prodigious actual authority and a moral force which is 21 Principles We Live By scarcely less predominant." Of what value is legalized free expression of opinion if majority rule can crush complaints to earth? In a complex society, various institutions serve by internal oppositions to counterbalance each other and provide stabil ity. Many of these institutions are mentioned by Tocque ville. With the malign Paris Commune in mind, he noted that the strength of America did not lie in a single great capital city. He laid great stress on education. He pointed to religion and the great organized churches as conservative forces. The profession of law was another. Private associa tions of various sorts were on his list.

Most important among Tocqueville's safeguards was local and state self-government as a balance against a national es tablishment. Next were the courts, in the exercise of their power to interpret legislation. Jefferson also looked to these great fortresses of liberty, and he added another, the great national political parties. Today these safeguards in the United States are con fronted with formidable and dangerous threats. Principles Are an Entailed Inheritance Edmund Burke, in one of his memorable passages, observes that "From Magna Charta to the Declaration of Rights, it has been the uniform policy of our Constitution to claim and as sert our liberties as an entailed inheritance derived to us from our forefathers, and to be transmitted to our posterity." This moral stricture never had more immediate meaning than it has to Americans today. In our haste to achieve objectives, however worthy, we have strained our constitutional principles to the breaking point. We have set up new and strange interpretations of democracy which have seriously impaired the structure of 22 Principles Are an Entailed Inheritance the republic. We have greeted what some of our leaders have called "the great majority" (of those who have chosen to vote) as a divinely ordained authority, despite the fact that constitutional government restrains all; including majorities.

We have, to borrow'a phrase from Burke, considered human progress as a "problem in arithmetic." If our folly prompts us to create new principles for suc ceeding generations, and if by some miracle we succeed, we should be robbing those generations of their own freedom of choice. Our wisdom should suggest that something be left to the hands and hearts and ingenuity of those yet to come. To name ourselves arbiters of history is to invite the pitiless judgment of the future. Common sense, as well as a consideration of our puny im portance in the stream of history, should bring us to realize that the past and the future constitute an indivisible whole. A backward glance can instill in an American· a sense of be longing to a distinguished tradition. Those who prepared our way were illustrious men who conserved what they had and multiplied it for our use. In a world shaken by folly and violence, they held firm the best of their past. We, their heirs, have a responsibility to guard the future. Our inherit ance is entailed. It is morally inalienable.

We are not creators, we are trustees. We serve in an end less succession of watches at· the citadel of liberty. 23 CHAPTER II Economic Liberty, Limited by Law An Undetermined Principle The ultimate in socialism is a condition in economic life in which the concerns of the individual are rigidly determined for him by authority over which he has only vague and in direct control. l The ultimate in liberty, superficially con sidered, is the antithesis of such restraint, in which every individual pursues his interests in utter freedom. Such a concept of individual freedom, however, implies a chaos in which very few individuals have any freedom at all. The development of restraint and regulation in economic life has been a major problem of authority from the beginning of civilization and is a major purpose of government. True eco nomic liberty, therefore, must always be limited and defined by law. The determination of the proper sphere of law in the economic field involves the creation of a principle that has never been accurately defined or firmly fixed in public policy.

1 In using the word "ultimate" I realize that theoretical socialists will reply that their "ultimate" is the stage when the state withers away. However, that is a consummation that has never been attained. The complete domination of the state is the ultimate, so far as experience has provided any evidence. 24 An Undetermined Principle What a· true believer in liberty is seeking in economic life is that minimum of government restraint, aid, and control which will leave the largest possible scope for· the exercise of individual initiative and effort, and for reward. It is not easy to define a boundary between individual economic freedom and government intervention, and it is still harder to secure a general recognition of such a bound aryin the making of public policy. In the past three quarters of a century we have witnessed a conflict over this issue. The intensity of this conflict arises from several factors.

Economic interests grow more confused, complex, and in terwoven. An individual may be the owner of real estate in a home, the employee of a g!eat corporation from which h,e receives a stated wage, a dues-paying member of a labor un ion that has not only economic but political objectives, a member· of a local school board sitting beside a banker and the physician who cares for his children, and the owner of an insurance policy in a company that owns bonds in a pub lic utility corporation from which he purchases electric power. The individual's interest in what government does to protect these diversified interests is mixed, confused, and almost undefinable. The claims of two or more economic interests may conflict and overlap. The determination of what is a fair value of capital invested, of services performed-whether in manual labor or judgment or skill--depends, in the mind of the in dividual concerned, upon personal predilections. And such judgments are almost impossible to reconcile.

There is also the superimposed interest of government it self. The ideal is a government· holding the scales as an ar biter in economic affairs. The reality is a government operat ing as a positive, independent force. It has the incentive· of seeking power. It is not a selfless agent but something that has claims for itself. It talks of a "public interest," but tends to identify its own ambitions and concerns with. the "public 25 Economic Liberty, Limited by Law interest." It becomes another interest against whose selfish ness there must be protection for the individual. The nature of this conflict' and the decay of the true liberal ideal' of the early nineteenth century can be well described in terms of British experience. Our course in this movement has lagged many years behind that of Britain, but it has followed the same general pattern. The Decline and Fall of British Liberalism The great enlightenment of the second half of the eighteenth century in Europe and America asserted the rights of the in dividual. His liberty was to be bounded only by the liberty of others. Government and law were to be devices for the protection of liberty.

In England this concept was later to be subjected to more ~han a century of revision, until the liberal faith of, say, 1910 was so compromised that it bore little resemblance to the great doctrine of the eighteenth-century revolution. It was a frail, anemic prospect for the virus of socialism. Jeremy Bentham, James Mill, and his son, John Stuart Mill, were the leaders of the earlier stages of this revision. They were eagerly abetted by others of a more practical po litical strain. In their enthusiasm over the discovery of a state based upon political democracy, they conceived it wise to vest that state with an ever growing authority. They felt that such a people's government could work no wrong. In pursuing the greatest happiness for the greatest number, the Utilitarians, operating by a rule of thumb, would hasten the progress of the state by a mass of law and an army of bureau crats. No man with intelligence and conscience, as he looks back, can blame those reformers for their objectives, for there was plenty of need for reform, much stark injustice to correct, in a new, raw industrial civilization. They little real26 The Origins of Government Intervention ized, however, the need for protections against protection and for the reform of reform.

In 1846 the repeal of the Corn Laws marked the summit and the point of decline of the free market. From that point, government rode in the saddle. The Liberal Party of Gladstone, Asquith, and Lloyd George, like··every party, was on the trail of votes. Holding fast to the good nam~ "liberal," it compromised the liberal faith with each passing year. Ultimately, socialism, embodied in the Labor Party, engulfed the Liberal Party, its desIccated faith, its followers, and its mission. In the latter years of the nineteenth century, a final vain cry was raised by a great liberal, Herbert Spencer. Viewed in the light of today, his criticism of all social legislation is black and hopeless. But his prophecy can be read after seventy-five years with profit for all of us. He said: The laws made by Liberals are so greatly increasing the com pulsions and restraints over citizens that ... it may by-and-by happen that the Tories will be· the defenders of liberties which the Liberals, in pursuit of what they think popular welfare, trample under foot.

That prophecy has· come true. The Tories of whom he spoke, despite their mistakes, held to a body of principle. They yielded the necessity of some intervention in economic life and, since they had no sacred vow not to use government to right wrongs, they were able to enact reform without revolution. Now they are the defenders of the liberty de serted by the Liberals. They have temporarily at least, check mated socialism with the aid of the middle class-,-once the very bone and marrow of Liberalism. The Originsof GovernmentInte!vention It is ironic that government intervention in the United States should have been introduced by one of the revered 27 Economic Liberty, Limited by Law architects of our. constitutional system, Alexander Hamilton. In the second year of the Republic, 1791, the first Secretary of the Treasury presented his famous "Report on Manufac· tures" to the House of Representatives. It was a bold asser· tion of the desirability of government intervention in the free market, at the very moment when laissez faire was gain ing ascendancy over the old practices and theories. Adam Smith had published his Inquiry into the Nature and Causes of the Wealth of Nations only fifteen years before and had himself died only the year before. The impact of that classic statement of economic freedom was very great, mingled as it was with all the other great revolutionary forces of the time.

Against this tide moved Hamilton's appeal, an earnest argu ment for government intervention against the prevailing growing belief in full economic liberty. Like most of those who urge more intervention now, Hamilton based his case, in part at least, on precedent. He granted the reasonableness of those who stood for a free market and who asserted that government help distorted the natural course of the economy and produced the evils of monopoly. But he claimed that, since the policies of nations had never been based on the ideal of a free economy, it would be inadvisable to follow theory in this instance, which he claimed to be exceptional. Foreign nations were offering aid to their own manufactures. Manufacturing in the United States, which he wanted government to encourage and sub sidize, was essential to a growing nation, he said. And he claimed that his plan for subsidizing domestic manufactures out of special tariffs could be authorized aunder the welfare clause of the Constitution. He made clear, however, unlike many who now invoke the welfare clause in the Constitu· tion, that his proposed bounties had general and not local purposes, and fully fitted the intent of that constitutional provision.

28 Accepted Types of Government Action Since'tariffs, bounties, and subsidies thus found a foothold in national policy, and continued through the generations, the concessions made for the manufacturing interests of Hamilton's time became the basis of arguments for miscel laneous aid of all sorts. From that day to this, every suppliant for government aid had· claimed that "business has always had it." It is perhaps idle to note that once the free market was violated by a tariff for protection of favored parts of the economy, the way was ·opened· far down the years for the threat of socialism that we now face. Accepted Types of Government Action By tradition and general acceptance, government activities can be classified roughly in two groups:' first, services; and second, restraints and regulations. Typical of government services are lawmaking, enforcing, and judging; coinage and regulation of currency; defense and police; postal service; care of the helpless and unfortu nate; provisions for recreation; building of streets, roads, and highways; preservation of public health; and conservation of essential natural resources. There are also many purely in formational services essential to the general public and speci fied interests, such as the census, health information, data for business, labor, agriculture, commerce, and scientific re search.

Essential, sound, and safe government regulations limit and protect our freedom on every side, from the traffic light on the corner to the registration of security issues. . It would be false and futile to deny that it is r~ght and necessary to maintain these economic services and economic restraints and regulations. The evolution of more complex relationships between buyer and seller, employer and. em29 Economic Liberty, Limited by Law ployee, investor and investment, and generally between the individual and the economy as a whole, demands some inter vention of government. Practically everyone recognizes this. Even those whose property interests are most affected acknowledge the fact of more government. The 1950 statements of the National As sociation of Manufacturers and the United States Chamber of Commerce would in 1goo have been regarded as radical. Limits and ·Conditions of Government Intervention In approaching a general principle of what our future course should be in determining economic liberty limited by law, the following propositions should be useful: 1. The guiding ideal should be a free market.

2. Individual responsibility and voluntary cooperation, freely arrived at,. are the characteristics of true economic lib erty. They should be.recognized as the ideal in the fields of agriculture, labor relations, and in business generally. Gov ernment can and should promote this ideal by suggestion and encouragement. 3. To promote this ideal to the fullest extent, those en trusted with government should always be detached and judicial in their attitude. Political alliances with specific groups destroy this role of impartiality, and by impairing the integrity of the executive and the Congress as courts of last resort invite class struggle and chaos. 4. When individual and cooperative efforts fail and gov ernment assumes regulatory power, its function should be the making of rules generally prohibiting, not compelling. It is valid for government to tell a man not to do something against another man; it is not only impracticable but a denial of liberty to tell him exactly what he should do for another.

The lurking danger in all government regulation is like that SO Limits and Conditions of,Government Intervention in press censorship. The censor. will never be content to tell people what not to print. He will ultimately tell them what to print. 5. Government should not inject its will into matters that are within the realm of business judgment. It is not qualified to do that. The role of government as a judge, a mediator, and a regulator has been established over the cen· turies. Methods of operating in that capacity have been per· fected. They are governed by principles, tested by experi· ence, and fixed in' common and statute law. It has been proved over the years that' the proper exercise of this func· tion is not only consistent with liberty but is an indispensa ble means of preserving liberty. On the other hand, government administration of the activities generally known, as business-manufacturing, buy· ing, selling, lending, and the like-has not only in modern times been regarded as an improper function of a free gov· ernment but has been casual and incidental as well. No body of skill or experience has been established.

6. In all government regulation, the essential structure of our constitutional system should be respected. Federal regulation is appropriate only in matters that are truly inter state in character or are genuinely related to other Federal powers. Regulation, 'like other government processes, is at its best when those responsible are close to and familiar with the problem they seek to solve. 7. Since economic life is in a state of constant change, regulatory laws should frequently be reconsidered and re vised. In fact, they may well be regarded as temporary in vasions of economic liberty, subject to withdrawal when nor· mal, free relations are restored. 8. All groups and interests should be held equally ac countable to the public interest. Corporations, trade associ ations, and labor unions should be subject to the same or similar regulations. 31 Economic Liberty, Limited by Law 9. Regulation should have as its objective the preserva tion of fair and measurably free economic relations and, above all, free competition. Free competition was the key stone of classical liberal doctrine. Beyond that, the regulator should not use his power to further his personal notions of what the nature of economic institutions should be. For ex ample, business regulation should have as its objective fair practices and healthy competition among units of all sizes.

Bigness per se should not be regarded as monopoly. 10. The measure of the value of an economic system is its capacity to produce wealth; i.e., the goods that make for higher living standards, and the material means for human happiness. Government regulation should have this objec tive constantly before it. Thus, it should avoid unreasonably limiting by' law the span of the individual's working hours and life. It should also restrict to a minimum the number of persons in nonproductive government employment. It should not curb efficiency or check the flow of capital. 11. Government regulations, moreover, should· not con tradict each other. At the moment, dozens of cross-purposes prevail. 12. In the bestowal of government benefits, aid, and relief, there should generally be required a demonstration of actual need. This principle is bitterly contested. It is demanded that aid be given as a matter of right. This is dangerous for t"vo reasons. Generalized aid results in expenditures far be yond the resources of any nation. And promiscuous benefits destroy the moral fiber of those who receive them. The de mand that aid be given as a matter of right is the adoption of the principal tenet of socialism-equal shares, equal ev erything. There are special forms of aid, such as compensa tion for industrial accidents, in which a means test is not necessary or appropriate and in which experience has shown no danger to economic liberty.

Government aid and relief are for genuine emergencies. 32 Limits and Conditions of Government Intervention They are for the prevention Q£ disaster, economic or personal. There is grave doubt whether the Federal government should directly exercise· those powers at' all. Generally, they should be exercised by states or local government, with per haps some Federal help. , 13. In the conservation of natural resources, there are al luring temptations for the undue exploitation of govern ment power. It is self-evident that some natural resources, especially those in the public domain, are limited in amount and are essential to the economy as a whole. Government in tervention, even acquisition, under fair terms is generally recognized as legitimate. This should apply to national parks and other time-tested government institutions and services. Government, .however, should generally aetas a trustee of property belonging to the people, ultimately to be used by them under conditions of private ownership and develop ment and not to be exploited for the enlargement of govern ment power as such.

14. The imposition of taxes should always be Jor the ex clusive purpose of raising necessary revenue. The use of the taxing power for regulation or reform is self-defeating, un just, and destructive. 15. Since the Federal government must have the power of issuing and regulating the value of money, its concern should be stability. As in the case of the taxing power, it should not use it$ control over currency to achieve regulation and reform. 16. Those who administer a public trust should believe in a free. economy. A disparity between the nature of an econ omy and the beliefs of its administrators is dangerous. Former socialist Prime Minister Attlee has said: "A socialist party cannot hope· to make a success of administering the capitalist system because it does not believe in it." 17. The operation of a business by government is the deadly enemy of economic liberty. In competition with pri33 Economic Liberty, Limited by Law vate business, government has overwhelmingly decisive ad vantages that lead to private ruin and state socialism.

David E. Lilienthal, for many years an advocate of a more "dynamic" government and an administrator first of govern ment electric power and then of atomic energy, apparently has grown to recognize the, deadly danger of government monopoly in such ~elds. He calls for the removal of the heavy hand of government monopoly 'from this form of en ergy and for putting it "back on the American track," on which the motive power is composed of "the great prizes of satisfaction, prestige and profit that have always spurred men on in every other new chapter of American industrial his tory." We need, he continues, "development know-how ... based on wideopen competition of ideas, providing an open and free field for any man's idea of a be~ter way to do some thing." 2 He expresses a principle of progress which can be applied to every aspect of economic life. 18. The test of all government intervention should be whether it truly contributes to the freedom, development, and security of the individual. What the lover of liberty must seek in the face of growing government and complex economic relationships is more and more voluntary coopera tion among all the interests of the country, based on personal responsibility.

The foregoing propositions should be the' guiding ideals in holding the line -between a necessary measure of govern ment authority and the freedom of the individual. s Liberties are indivisible. If economic liberty is not at tained and held, the entire structure of principles, inherited and developed by experience, must fall. 2 David E. Lilienthal: "Free the Atom," Collier's~ June 17, 1950, p. 13. 3 Elaborations and illustrations of these propositions will be found in many of the sections of Chapter VII. 34 CHAPTER. III Our Middle Interests and Their Stakes in Liberty We Have Interests without Classes It is an elementary rule of politics that people group them selves according to their "interests." When we speak of eco nomic interests, we mean common concern within a group about a·matter of economic value. There are, of course, man ifold interests-religious, sectional, or other forms of shared cultural, emotional, or idealistic concerns .. These interests prOilide the incentive for group formation, consciousness, and action in politics.

The diversity of American society, its extreme fluidity, in which individuals· constantly shift about within the scale of fortune, the absence of real barriers to ambition and compe tence, and our fundamental· equalitarian philosophy have al ways prevented groups with common interests from harden ing into what other countries know as classes. When in the United States a group or class has become the subservient inferior of another class, such a distinction has later disappeared, not only because it was in conflict with the temper and moral sentiments of our people but because it proved to be highly inefficient and impractical. The tragedy of the South before the Civil War was its progressive eco35 Our Middle Interests and Their Stakes in Liberty nomic decline, which has been attributed to the institution of slavery. The major plea in Helper's celebrated book, The Impending Crisis) published in 1860, was the economic blight of slavery.

From time to time, however, some interest has succeeded in achieving, under law or otherwise, a favored position over other interests. In political oratory we hear this called a "vested" interest. While, as is habitual in political debate, there has been reckless exaggeration of the "privileges" un der attack, it goes without saying that in any human society and under any man-made law, unfair advantages are likely to be seized by some groups at the expense of other groups. In the course of our history, groups engaged in manufac turing, banking, or possessed of other forms of property in terest have acquired for a limited period such privileged positions. In· our own time, also, we have seen new vested interests appear. Pensioners with a statutory or constitu tional first claim on specific tax receipts, labor leaders with legal exemptions not accorded to management, political bosses operating under election laws of their own fashioning, groups of individuals who find employment, preference, or undue profit from government connections, and many other "special" or "vested" interests, old and new, might be cited.

It is the task of statesmanship, however, to eradicate spe cial privileges, since they threaten the internal integrity and safety of the state. In undertaking that task, caution must always be exercised to avoid creating new privileges to offset old ones ..The great defect in the Wagner Labor Relations Act lay in its assumption that because employers had enjoyed an unfair advantage in the past, there should be inequitable advantages for organized employees. Much of that lack of balance was ultimately corrected by the Taft-Hartley Act. A constant examination of the operation of laws, by vigilant political parties and legislators and fair-minded administra tors, can eradicate special privilege. 36 The .Marxian Middle .Class Statists, however, following the line of Marx,regard inter est groups as, classes and seek to inculcate class consciousness in such groups. This is the very essence of demagoguery. It is a major threat to our institutions.

The· Marxian Middle Class ,Karl Marx and his school based their predictions and direo tives on the assumption that classes have always prevailed in society. Since Marx was intent upon creating a formula that would be readily understood by the masses, he made his classification of society exceedingly simple, disregarding its infinitely complex nature. Hence, he defined three classes......... the capitalists, or owners of the means of production; the unpropertied "slaves" or the "proletariat"; and between these, .the. middle class. Even Marx was very vague in assignio ing specific interests to this middle class, and his' followers were . even more vague in defining it~ However, Marxian dogma disposed of. the middle class by assigning .it to obliv ion; it would be broken up and absorbed; chiefly by the proletarians on the D-Day of the class struggle. Socialists' have held the middle class to be inimical to their purposes because, as John· Spargo, an American socialist, put it, "the members of the middle class would prefer to haveall class conflicts cease." Spargo went on to ac:cuse the middle class of talking too much about the "essential unity of the interests of the workers and their employers."

'Thus, even the socialists recognized, in their way, the fun damental concern of the middle class with stability and in ternal peace, and for that reason they hated this petite bourgeoisie and resolved to destroy it. For, as long as it stood· firmly,. it proved a most certain barrier to the consummatiOn of the class struggle and the dictatorship of the proletariat. The Irishman Sean O'Faolain thus expressed the frustration 37 Our Middle Interests and Their Stakes'in Liberty of the radical: "Between England and the revolution there will always stand an army of bowler hats." The American Middle Interests The Marxists' hatred for and fear of what they call the mid dle class can easily be understood when we consider the na ture and distribution of wealth among Americans, as well as the interests, economic and otherwise, and the ideals of those who are neither rich nor poor. For not only does the pre ponderant part of the nation's wealth lie with this middle group, but the preservation of national '\Tell-being utterly depends on the maintenance of individual liberty and the limitation of the power of government. Moreover, the na ture and size of the interests of this group make it the ap propriate trustee and defender of the interests and ideals of ,the nation itself.

In defining the group that shares the middle interests I would be adopting the basic fallacy of the socialists if I were to attempt a hard and fast definition based upon economic status. We are a nation of interdependent groups, not a frag mented collection of independent, mutually antagonistic units. The most common bases for defining distinctions are either income or property ownership. If we adopt those criteria we find a gradation from very small to very large individual or family income or ownership. The broad picture of our society is a small fringe at either end, with the vast mass in the mid dle. The superficial impression is that of great, almost mono lithic stability. But the real situation is not so simple. Many hired workers have high incomes and many own property. Many employers and property owners have low incomes. The earnings of 38 The American Middle Interests many small· businessmen come in part from their own per sonal labor and in part as a return from capital invested, with no clear distinction between these two sources. The bulk of American families have annual incomes between two and five thousand dollars. They form a fluid mass, constantly fed from above and below, and constantly losing members in both directions. Nearly every working American passes into or through this income group some time in his life: young men starting from scratch work up; old men reaching the age of retirement come down; men in the prime of· life enter or leave the middle group according to their business fortunes.

Members of this middle group do not depend exclusively on income from property or from business or from their own labor, and their earnings from labor are not exclusively wages. They combine the characteristics of the theoretical proletariat and the theoretical bourgeoisie and have interests in common with the lower income levels and the higher ones. Some of the contrasts and resemblances between the middle income group and the extremes at both ends are illustrated in Table A.1 It will be observed there that all of the various types of income are received by persons in both' the lowest and highest groups, although in different proportions, and that creditors and debtors, savers and dissavers, are found in all income groups. It is this great diversity of interests which precludes any arbitrary, exact definition of the great middle group in the United States or a description of that group in terms of pre cise dollar-incomes or property values. It suffices for my pur pose to describe the middle group in economic terms as people of what are commonly known as average means. The interests of this group, economic and otherwise, I call mid dle interests. The property of this. group, measured either in terms of income or of capital values, comprises the great bulk 1 See pp. 43-4.

39 Our Middle Interests and Their Stakes in Liberty of the nation's wealth. The property interests involved are diverse, but almost without exception they are dependent upon the conditions of a free economy. Perhaps after th.e foregoing discussion it is unnecessary to deny any inconsistency in arguing on the one hand against political appeals to so-called class interests, while at the same time attempting to convince those who share the middle in terest~ to become politically active in protecting free institu tions and private property. What I deplore are appeals to specific elements within our. society-farmers, workers, or what not. These appeals are divisive. They create hatred and strife. On the other hand, an appeal to the interests of the. middle group is to remind people of the concerns that really unite them. For the middle interests are truly national. They cut through all so-called class lines. They traverse occupa tional, sectional, religious, and racial boundaries. They are neither vested, nor special, nor privileged in the ordinary connotations of those terms.

The significance of the middle interests and of those who share them will clearly stand out in the following review of the nature and distribution of the income and property of the nation. 2 Income Groups The Federal Reserve Board Survey of Consumer Finances estimated the following percentages of "spending units," 3 which roughly means families, according to annual incomes before taxes: 2 It is important to consider, in reading the figures presented in this chapter as well as elsewhere in this book, that the distribution of property and income is constantly and rapidly changing. The changes since the dates of my figures, however, could not materially alter the nature of my conclusions. 8 Federal Reserve Bulletin,June--December, 1950. 40 Income.Groups Under $1,000 14% $1,000-$1,999 19% $2,000-$2,999 21% $3,000-$3,999 19% $4,000-$4,999 I1% $5,000-$7,499 I 1% $7,5° 0 and over 5% The hulk of our voting population ·and the center of po litical power is therefore probably in the range of incomes between $2,000 and $5,000.

However, we must not assume, as has been the practice, that there are essential economic antagonisms among such .groups as wage earners, farmers, and independent propri etors. Farm proprietors have average incomes between $2,000 and $3,000. White-collar workers in such occupations as banking earn, on the average, less than automobile"work ers. The average annual wages of workers in the pipeline transportation industry~aristocrats of the "working class" amounted to $4,296 in 1950. Insurance agents and related office employees earned about 14 per cent less than that. Workers in water transportation-also "aristocrats" -earned $4,413 in 1950. Employees of religious organizations fell far short of most industrial workers; they got $2,276. Employees in.public education, which means for the most part teachers, earned $2,420. Moreover, the increases in wages since the prewar year 1939 have been far greater among industrial workers than among the white-collar group. In 1939 workers in the auto mobile and automobile-equipment manufacturing industry received average annual wages Of$1,762. In 1950 the figure was $4,007. Adjusted to the 1939 value of the dollar, the latter would be, at the end of 1950, approximately $2,120.

That is.a gain in. purchasing power of 20 per cent. The pipe line worker· mentioned above is 18 per cent better off, and 41 Our Middle Interests and Their Stakes in Liberty the worker in water transportation is 50 per cent richer in real income. On the other hand, the employee of a religious organiza tion is 7 per cent behind 1939 in real income, and employees in public education are only 9 per cent better off. The real incomes of retired people living on fixed incomes are, of course, deplorably reduced. There has been a tremendous process of readjustment which has pushed wage earners into the middle groups, a process that is creating fundamental changes in their politi cal sympathies and outlook. Who Owns What? The facts about the income and property ownership of the people of the· United States deny not only the dialectical as sumptions of socialist theoreticians, but most of the calcula tions of politicians. The complexity and the fluid conditions revealed in property ownership are difficult to portray, al though they clearly provide the basis for a number of simple conclusions. The best brief summary that I have seen on in comes and property ownership arranged by income groups is by the able economist, Rufus S. Tucker. 4 The Federal Reserve survey was based on "spending units," and includes a sampling of cases. There are approxi mately fifty-two million such "units" in the United States.

The following conclusions in the survey help to show the relatively great material stakes of those who share the middle interests. Four out of ten American families have assets worth $5,000 or more. One out of ten has assets worth $25,000 or more. 4 This appears as Table A on pp. 43-4. In the interest of simplicity, in the pages that follow the· table I have used for illustration only one of Mr. Tucker's sources, the 1950 Survey of Consumer Finances, published by the Fed eral Reserve Board in the Federal Reserve Bulletin, June-December, 1950. 42 Who.Owns What? TABLE A, BY RUFUS S. TUCKER 5 to 10 44 to 51 5 to 8 5 to 12 1 to 2 7 to 14 2 to 4 19 to 35 25 to 26 20 to 23 1.6 to 31 o to I 53 to 71 29 to 47 8 to 12 10 to 12 12 to ~5 43 to 44 9 to 14 4 to 5 7 to 12 25 to 26 24 to 26 19 to 22 17 to 21 o to I 65 to 78 22 to 35 44 to 48 27 to 29 10 5 to 6 9 to II 3 to 41 49 to 84 9 to 13 4 to 6 I to 3 7 to 9 12 to 15 24 to 31 32 to 40 Showing Comparisonsbetween Certain Income Groups, 19,49 Relative Importance of Groups Income Range Under 11,000 13,000-14,000 Over 110,000 Per cent of total population 14.0 to 19.0 19.0 to 20.0 2.6 to 3.0 Per cent of money income 2.0 to 2.7 19.0 to 20.0 15.6 to 16-4 Per cent of total income 2.7 to 3.7 18.9 to 19.9 15.5 to 16.2 Percentage of Units in Each Group with Specifie~ Characteristics Occupationsoj Head oj Unit Under $1,000 13,000-11,000 Over 110,000 Professional and semiprofessional 1 to 2 4 to 8 19 to 22 Managerial and self-employed (except farm) Clerical and sales Skilled and semiskilled Unskilled and service Farm operators In armed forces, students, housewives or not employed Compositionoj Unit Single person Two persons Three persons Four persons Five or more No earners Single earner Two or more Units with Childrenunder 18 None One Two Three Four or More Buying Habits: Percentage of units buying in 1949 House (nonfarm) Automobile New Used Other durable goods..* Television sets 76.2 9·5 6.0 3·3 5.0 Under 11,000 5 r 4 17 I 40 •6 23·3 20.6 9.0 6·5 13,000-14,000 5 24 7 18 46 8 51 •6 21.5 16.1 7·4 2·4 Over 110,000 6 t 37 t 25 t II t 54 l' 14 t 43 Our Middle Interests and Their Stakes in Liberty COMPARISONS BETWEEN CERTAIN INCOME GROUPS (cont.) Source of Income Under $1,000 $3,000-$4,000 Over $10,000 Wages or salaries 46 to 47 78 to 92 60 to 65 Self-employment 24 to 48 9 to 17 28 to 52 Pensions, annuities, alimony, gambling, relief, gifts, etc. 26 to 38 10 to 23 6 to 9 Interest, dividends, trust funds, and royalties 4 to 9 7 to I I 43 to 54 Rent, other than roomers and boarders 4 to 7 6 to 9 20 to 23 Age oj Head Under 25 6 to I I 4 to 6 ° 25-64 40 to 54 88 to 90 88 to 92 65 and over 35 to 53 5 to 6 8 to 12 Ownership Home or farm 5° 46 66 t (Per cent of nonfarm homes owned) (43) (50) (71) t Other real estate 9 16 44 t Business interest 3 to 13 6 to 9 29 to 36 Corporation stock 2 to 3 5 to 7 3 0 to 54 Liquid assets 44 to 48 74 to 78 96 to 99 t Automobiles 19 to 24 62 to 63 89 t FinancialCondition Had liquid assets 44 74 99 t Liquid assets exceeded liabilities 92 92 100 t Had some debt 34 58 48 t Net savers during year 29 to 31 70 to 73 85 t Net dissavers 45 to 52 12 to 29 7 to 15 t Decreased debts 5 I I 6 t Increased debts 20 33 19 t Increased liquid assets 9 28 47 t Decreased liquid assets 28 35 26 t Per cent of nonfarm owned homes mortgaged 16 53 46 to 47 t *Including television sets, radios, furniture, refrigerators, washing machines, stoves, other electri cal appliances.

t Over $5,000; more detailed breakdown not available. t Over $7,500; more detailed breakdown not available. Sources: 1950 Survey of Consumer Finances (Fed. Reserve Bull., June-Dec. 1950). Report on Consumer Income, U.S. Census, Series P-60, NO.7 (Feb. IS, 1951). Statistics of Income for 1947, Preliminary Report, U.S. Bureau of Internal Revenue. Statistics of Income for 1948, U.S. Treasury Dept. Press Release No. S-2497 (Nov. 10, 1950). 44 Who Owns What? Only one in ten has, debts greater than assets. And strange though it may -seem, red ink _is relatively more common among people in higher-income groups. The ownership of automobiles is very generaL It ranges from 24 per cent in· the lowest. group to 89 per. cent in the highest. The relatively low percentage in the lower groups m.ust be partly accounted for by the presence in those groups of many elderly retired people. But in the groups with in comes from $1,900 to $3,999, automobile ownership from 1949 to 1950 made a spectacular increase.

One half of all nonfarm families, or approximately twenty one million, owned their own homes. Among the various income groups, the percentages of home. owners were as follows: Income Under $1,000 $1,000-$ 1,999 -$2,000-$2,999 $3,000-$3,999 $4,000-$4,999 $5,000-$7 ,499 $7,5°0 and ovet: Percentageof Home ~wnership 5° 32 4° 46 55 62 66 Members of .all groups had considerable holdings of real estate other than their own homes.N ine per cent of the low est income group, and 15 per cent in the group between $2,000 and $5,000, owned "other real estate." The tabulation of ownership of "other real estate" follows: Income Other Real Estate Under $1,000 $1,000-$1,999 $2,000-$2,999 $3,000-$3,999 $4,000.....:$4,999 $5,000-$7,499 $7,5°0 and over 45 9 12 II 16 18 26 44' Our Middle Interests and Their Stakes in Liberty Since the most serious threat of statism is to that kind of savings known as "liquid assets," it is most important to com prehend the distribution of that form of property.

First, let us see the percentage of each group that owns liquid assets, which include U.S. bonds, checking and savings accounts in bank~, postal savings, shares in savings-and-Ioan ,associations, and credit unions. Currency is not included. Income Under $1,000 $1,000-$1,999 $2,000-$2,999 $3,000-$3,999 $4,000-$4,999 $5,000-$7,499 $7,5°0 and over PercentageOwning "Liquid Assets" 44 54 68 74 86 94 99 The tabulation of ownership in some "business interest," which includes "whole or part ownership in a nonfarm un incorporated business or privately held corporation" is also significant: Income Under $1,000 $1,000-$1,999 $2,000-$2,999 $3,000-$3,999 $4,000-$4,999 $5,000-$7 ,499 $7,500 and over Business Interest 3 5 5 6 10 15 36 The ownership of the industrial plant of the United States by various groups is shown in the figures of ownership of corporate stock. This includes all common and preferred stock open to investment by the general public. It excludes 46 Who Owns What?

stock of privately held. corporations, .U.S. government securi ties, and bonds of all kinds. The following figures show the percentage of each group reporting such ownership for early 1949 and early 1950: Income Under $1,000 $1,000-$ 1,999 $2,000-$2,999 $3,000-$3,999 $4,000-$4,999 $5,000-$7,499 $7,5°0 and over PercentageOwning CorporateStock 1950 1949 2 r 3 2 3 5 5 7 6 10 9 10 15 30 36 The decline in stock ownership in the higher-income groups suggests that over the· years there has been a ihifting of stock ownership from high to lower incomes. A ~ompari son of 1949 and 1950 can hardly be relied· on to prove that point, because in an inflationary rising stock market, there is likely to be a lively, speculative interest in stock by people of lower incomes. Moreover, in the Federal Reserve survey, as well as in income tax returns, people owning only· a few shares are not likely to report them. Stock owners, ·however, have greatly increased in number over the years. Mr. Tucker estimates that in 1916 not more than 2,500,000 people owned stock and possi~ly not more than 1,000,000 did so. His rough estimate for 1950 is 11,5°0,000.5 5 On this point Mr. Tucker makes these observations: "I have studied this matter of the number of stockholders very carefully for a number of years, and the nearest I can come to a statement is that in 1916 not over 2,500,000 owned stock; perhaps not more than 1,000,000 did so. In 1949 at least 4,500,000 spend ing units or at least 6,000,000 individuals owned stock according to the Federal Reserve Board's survey. The income tax statistics combined with certain rea sonable assumptions might make the number of individuals as high as 11,500, 000. The number of spending units might be in the neighborhood of 8,000,000, and the number of voters· in the neighborhood of 10,000,000. In any sample 47 Our Miif;dleInterests and Their Stakes in Liberty Along with this increase in the number of people who own the American industrial plant, there has been a shift in own ership from individuals with high incomes to those with lower incomes. The statistics of income issued by the United States Treasury provide proof of this.

This relative decline in the ownership of corporate stock among individuals with large incomes is mainly due to the fact that they have had less to invest after taxes. 6 It is also due to the fact that under present tax laws they can get only a small percentage of the earnings of companies in which they own stock. An individual with an income of $5°,000 could realize only 1.325 per cent on his investment in, the company. If his bracket was $200,000, he would get 0.461 per cent on his investment. This is on the assumption that the company earned not over 12 per cent on its capital. If it earned more, the return would be affected by the excess profits tax. This suggests why risk capital is so hard to find. Some of the Material Stakes in Our Society The foregoing section has shown the wide distribution of property among the various income groups, including those in the very low brackets. Since there is this diffu'sion of property, it is unnecessary survey it is the universal experience that people in the upper-middle and high income brackets are less willing to co-operate and that people in the lower income brackets are inclined to understate their incomes and to omit small items unless very carefully questioned. Since it is easy and quite common for persons receiving less than $100 in dividends to refrain from mentioning them on their income-tax returns, they would be inclined not to mention them to a survey field worker. At least $1,000,000,000 of dividends escapes income taxa tion every year; and if they were all received in amounts less than $100 there would be 10,000,000 stockholders in addition to the 3,449,000 who reported dividends in 1947. A few large evaders would reduce this number, but on the other hand the average dividend received by those who received less than $100 would. probably be around $50. Therefore you can choose any number be tween 6,000,000 and 26,000,000 without exceeding the bounds of possibility. My own choice is 11,500,000."

6 See pp. 56--60., 7 These calculations are based on the Revenue Act of 1951. 48 \ Some of the Mdterial Stakes in Our Society , and irrelevant to identify the specific property interests of the middle groups, even if. such data were available ·and reliable. An effort, however, to list the specific property holdings of the middle interests would be a long and tedious process. It will suffice to present a few important examples: The ownership of life insurance policies is most character istic of people of moderate means. The impact of statist poli cies of heavy spending, government debt, and inflation fall with crushing force on this form of property. Recent figures show 83,000,000 life-policy, holders. These people own 203, 89°,000 policies, of which the face value is $23°,000,000,000. i There' are 3,355,000 annuity contracts in effect with insur ance companies alone. The face value of all these policies I shall later consider as savings.

There are 20,000,000 prospective and present beneficiaries under pension and insurance plans whose "security"depends on private and government agencies and employers. (This is exclusive of government social security.) Under the present trerid toward' industrial pension plans, this number is rapidly increasing. There are now 95,000,000 persons on the social security rolls, and more than 12,000,000 will be added .under the 1950 act. A total of 3,600,000 are now receiving benefits; 20," 000,000 would not have to work anymore to receive benefits; and an additional 49,000,000. are classified as fully insured but would have to. work longer to receive full' benefits. The liquid savings of individuals on January 1, 1951, were approximately $226,4 81 ,000,000. This figure included $5'9, 255,000,000 in time deposits, $14,°38,000,000 in savings and loan institutions, $58,019,000,000 in U.S. Savings Bonds, and $4 I, 169,000,000 in government trust funds. The "present value~' of life insurance policies (which constitute savings) was $54,000,000,000 in 1951.

8 8 The source of these figures is the National Industrial Conference Board. 49 Our Middle Interests and Their Stakes in Liberty It will be pointed out by politicians now in power that there has been a spectacular increase in savings since 1945. Individual savings represented by the surrender value of life insurance policies, time deposits, U.8. Savings Bonds, savings and loan association assets, and pension and trust .. funds rose from $168,578,000,000 in 1945 to $226,481,000,000 in 1951. This is an increase of 34.3 per cent in dollars. Several fac tors, however, need to be considered before we assume that Americans are actually better off. On that subject, Table B has been prepared for me by L. Robert Driver, who was for merly of the U.S. Bureau of Internal Revenue and the Se curities Exchange Commission, and is now a tax consultant. TABLE B Individual Savings Represented by Surrender Value of Life In surance, Time Deposits, U.S. Savings Bonds, Savings and Loan Association Assets, and Government Pensions and Trust Funds.

All Amounts Are Cumulative and at End of Each Year Per Capita Amountsin Millions Popula-in Dollars Consumer tion in .Current 1945 Tear Savings Credit * Balance Thousands Dollars Dollars 1945 $168,578 S 5,627 $162,95 1 139,586 $1,168 $1,168 Index 100 100 100 100 1946 183,566 8,677 174,889 141,235 1,238 1,141 Index 108·9 107.3 106.0 97·7 1947 196,006 11,862 184,144 144,024 1,279 1,°32 Index 116·3 113.0 109.5 88.4 1948 208,079 14,366 193,713 146,571 1,322 992 Index 123.4 118·9 113.2 84·9 1949 217.076 16,809 200,267 149,21 5 1,342 1,01 7 Index 128.8 122·9 114·9 87.1 1950 226,481 t 20,102 206,379 151,400 1,363 964 Index 134·3 t 126·7 116·7 82·5 : *The Consumer Credit balances are from the Federal Reserve nank's Statistics and cover in stallment credit, charge accounts, and personal bank-loans. They do not include personal business debt. These items are proper deductions from gross amount of savings to arrive at the net savings.

t Preliminary as to amount of savings. t General Note: It will be noted that the published amount of savings, which was calculated before deducting the debts, had at the end of 1950 increased 34.3%, but on a per capita ba~is had decreased 17.5 % after being adjusted for the decrease in the purchasing power of the dollar SlOce 1945. 50 The Farmers and the Middle Interests Unlike most calculations of savings, Table B takes account not. only of the total dollars in savings, but of individual in debtedness in the form of consumer credit. It reduces these savings to· a per capita basis. Finally, it calculates the savings in terms of purchasing power. The conclusion is that the per capita savings of the American people have been whittled down 17.5 per cent in five years. That is at the rate of 3.5 per cent a year.,9 To describe in any detail the range of large and small businesses would take volumes. Here again, I merely offer specimen figures. There were about 700,000 corporate busi nesses in the United States in 1950, and 10,599,000 active proprietors of unincorporated enterprises, including farms.

The 1950 Census reports that in nonfarming enterprises which, it may be assumed, means corporate and unincorpo rated businesses--5,oI0,OOo persons were employed as man agers, officials, _and, proprietors. There were 10,516,000 em ployed in. clerical, sales, and kindred work. There were 4,944,000 professional technical and kindred workers. Finally, there were employed in the various units of gov ernment, 7,9°0,000 men and women. All these people are vitally and adversely concerned with government policies that produce inflation and high taxes. All except the government workers ihave a direct stake in private enterprise. The Farmers and the Middle Interests In 1950 there were 4,381,000 farm owners. In addition to the owners, there were working on these farms 1,427,000 members of the owners' families. There were 2,154,000 hired hands. The farmers traditionally·· have had a vital stake in the 9 The purchasing power of such dollars has declined since 1939 from 100 cents to 54.8 cents. Since 1945, the decline has been from 100 cents to 70.7 cents (January 1951).

51 Our Middle Interests and Their Stakes in Liberty middle interests of the nation. According to the following figures of the Department of Agriculture, they have done pretty well over the past decade and a half. Farm income in 1950 was about $13,687,000,000. This includes the estimated rental value of their owner-occupied homes, the estimated value of the food grown and consumed on the farm, and other items. It also includes return on capital, the value of the services of the unpaid proprietors and unpaid full-time family workers. The total return was $2,357 per unpaid worker. Farm owners and workers have certain distinct concerns that provide a ready invitation for statism to single them out and thus seek to create a serious fissure in the structure of our society. Government has probably extended more con trol and paternalism there than elsewhere, particularly dur ing the past seventeen years. Here the line between the inter est of individual farmers in government benefits and their interest in a free economy·is hard to draw. In Jeffersonian po litical philosophy the farmer was the very embodiment of in dividualism. He was a man of property. He was an9-still is a man who deals in business terms of profit and loss and in the conservation of land. He demanded and received protection from government, but he remained free and self-reliant. Ag riculture is still a vital part of the middle interests.

But farmers are a minority within the middle groups, as well as within the total voting population. Thus, they are in real danger, despite their government benefits, unless they ap preciate their common interest with all other middle groups. Wage Earners and the Middle Interests In 1950 there were 4°,93°,000 full-time employees in private industries. 1 An estimated 15,000,000 of these workers were members of labor unions of various kinds. 1 u.s. Department of Commerce, Survey of Current Business, National In come Supplement, 1951. 52 Wage Earners and the Middle Interests When we measure the economic and SOCial~status of the people who used to be identified as the middle "classes'; and compare it with the present status of wage e rrters in the more. fort~n~te ranges of their grou~s, striki~g sim~larities appear. MIllIons of workers, both unIon and qonunlon, are now receiving incomes that compare favorablYfith those re ceived by small independent business, profess onal, and so called white·collar workers. Their status as pr perty owners is also favorable by comparison. .

That being true, their sympathies, their asso iations, their standards. of intelligence and culture and those of their chil dren are merging with those who in earlier ays were re garded as much more fortunate. 2 Their politi al outlook is rapidly approaching that of the other middle roups. They can no longer confidently be expected to vot as a "labor" group. This changed status should be thoroughly grasped by conservative political leaders. In fact, by tradition a large proportion· of union members have never voted as their lead ers and others have expected and hoped they would. In a day when their status was much less· fortunate than it is now, Theodore Roosevelt said the Republican Party could nor mally expect to receive about a third of the vote of union members. John L. Lewis before one election rather bitterly remarked that, while he could tell his people how to vote, there was no assuran~e that they would do so.

The political shift of labor was clearly shown in the re sults of the 1950 Senatorial election in Ohio. In the face of stupendous efforts by the United Labor League of Ohio, which was composed of the political arms of the A.F.L., the C.I.O., the railway brotherhoods, and other labor organiza tions, Senator Taft carried his appeal to the workers them selves.He carefully avoided the implication that there wa~ any issue at all between him and wage earners. He avoided identifying "labor" with the leaders who opposed him. In 2 See p. 41. . 53 Our Middle Interests and Their Stakes in.Liberty fact, he clearly made a differentiation between the workers, including union members, and the official heads of the un ions. He carried every industrial county. Excellent evidence of what happened is in the results in Cuyahoga County, a great part of which is occupied by the city of Cleveland. I am familiar with that county, since I was born· and lived many years in what was then its rural sec tion. Our Congressional district comprised part of the county outside Cleveland, together with a section of Cleveland that was regarded as "silk stocking." It was heavily Republican.

In sixty years only two Democrats had been elected to Con gress, for only one term each. In recent years, notably since 1940, thousands of industrial workers have moved out into the nonurban parts of Cuya hoga County. Many large industrial plants have been estab lished there. The economic and cultural status of all those new residents is indistinguishable from the status of those who have been· there for a generation. They all share in the life of the various communities, own property, and send their children to high school and college. In the election campaign of 1950, 'however, the political arms of labor unions, believ ing that these suburban wage earners were still excellent ground for vote-hunting, made a vigorous attempt to carry a majority in this old Republican district, not only against Taft, but for a Congressional candidate who himself was a labor union official. The result was a large majority for the Republicans. Labor union members simply did not vote· as their leaders told them to vote.

There is irony in this. Most of the leaders of organized la bor have worked for many years to get better wages for their mem bers, to shorten their hours, and to increase their bene fits. Only in the past decade and a half have they disregarded Samuel Gompers's judgment ·that labor should remain po litically independent and have organized political auxilia ries. In doing so and in pressing a purely political drive to 54 Wage Earners and the Middle 'Interests elect only those who do their bidding, they have lost the con· fidence of their dues,~paying members. To a degree, the eco nomic objectives that they helped to gain have destroyed their capacity to attain their newly formed political objec tives. The "exploited, downtrodden" working people have acquired a vital concern in the middle interests and are, to a degree, capitalists. Well-paid workers are quite conscious of this change, far more so than are their leaders. They have a new outlook and new political sympathies. They do not vote as a working class.

For two reasons it will little avail political leaders to at tempt to· hold the loyalty of these workers .by reminding them of how hard union officials worked to raise theireco nomic standards. First, it is not a human habit to vote in pay ment for past favors. Votes are cast for what is· ahead. And second, it can be demonstrated-and it is known by, most workers-that union leaders have been only partially respon sible for the rise in the standard of living of workers. Re sources out of which higher wages and benefits could be paid had to be, created before union leaders could gain by bargaining. The basic reason why living standards can be higher lies in the industrial process, itself-in efficiency of production, in skillful management, and in scientific prog ress. Another vital weakness in the effort of·labor leaders to in fluence the voting of dues-paying members lies in the out dated nature of their·· appeals. The jargon in their oratory and printed propaganda dates back to another generation.

The ,rvast profits" of "a few capitalists" are still standard phrases. The "empty" or "wrinkled" bellies of workers are prominent in the speeches of Walter Reuther and John L. Lewis. The "grinding heel" of industry is still mentioned. Ca~toons in labor papers still portray fat capitalists in the best Hearst tradition of the 1900'S. The intelligence of the 55 Our MiddleInterestsand·TheirStakesin Liberty modern, well paid industrial employee cannot seriously ac cept these political chestnuts. The Vanishing Rich The economic position of the so-called rich, the perennial whipping-boys of radicals, has vastly changed in the past three or·four decades. The emergence of a managerial· group has materially lessened control over economic life by owner employers and capitalists. The proportion of the national in come that goes to individuals in the higher brackets has pre cipitously declined. And as I have indicated' earlier, the ownership of the industrial plant has been moving downward in the scale of incomes.

The process of expropriation that is now invading the middle interests first affected the rich and fully justifies my use of the adjective "vanishing." Three sets of figures prove this. The first of these include the incomes of people in two of the high brackets in 1927 and 1947.3 The total income of those reporting $'100,000 or over in 1927 was $2,833,000,000. In 1947, it was $2,311,000,000. This was a drop of 18.4 per cent. The total income of those reporting $500,000 or over in 1927, was $979,000,000. In 1947, it was $438,000,000. This was a decline of 55.2 per cent. These totals, however, are before taxes are deducted. After tax, the decline is much greater. After tax in 1927, the total income of those reporting $100,000 or over was $2,386,000,000. In 1947 it was $1,037·, 000,000. The drop was 56.6 per cent. For those in the brackets of $500,000 or more in 1927, S.lt should be noted that in these figures there has been no correction for the decline in the real value of dollars. If that were done, the decline would be much greater.

56 The Vanishing Rich there remained after taxes $816,000,000. In 1947 there re mained $166,000,000. The decline was 80 per cent. The proportion of all personal incomes received by those with more than $100,000 was 3.8 per cent in 1927 and 1.2 per cent in 1947. The corresponding percentages for those above $5°0,000 were 1.3 and 0.2. That was before tax. After tax, the percentages for those above $100,000 in 1927 and 1947 were 3.2 and 1.1. For those above $500,000, the percentages were 0.7 ando.ls. 4 Another set of figures showing the same trend is. in the in CO:Q:le tax returns of 1916 and 1948}~ A comparison of those years shows the following percentages of increases and de creases in the number of returns: Incomes over $ 50 ,000 plus 303% " " 100,000 pIUS'I46% " ,~ 15°,°00 plus 79%,,' " 3°°,°00 plus 17% " " 500,000 minus 3% " " 1~000,000 minus 23% The best way to indicate the relative real income of the in dividuals in these groups for the years 1916 and 1948 is to show the value of the combined income of those reporting in 1948 after taxes (and with the purchasing power. of the dol lar corrected for 1948) compared with the value of their in comes in 1,916.6 The combined incomes in· 1948 of all persons receiving over $5°,000 were worth, in the purchasing power of the dol4 It is important to note that these statistics for 1927 were classified as "net income." Those for 1947 were "adjusted gross income." If "net income" had been used for 1947, the. decline in these high brackets would have been much greater.

5 These figures for 1916 andl 1948 were assembled and tabulated for me by L. Robert Driver. ' 6 To simplify the somewhat complicated character of this comparison, I pre sent it in a series of sentences, rather than in tabular form. In all cases, the fig ures are after tax, and the relative purchasing power of the dollar is taken into consideration. 57 Our Middle Interests and Their Stakes in Liberty lar of 1948, 76 per cent of the combined incomes of all per sons in the same brackets in 1916. For the brackets above $100,000, the proportion in real value was 45 per cent. For those above $15°,000, the proportion in real value was 34 per cent. Above $3°0,000, it was 24 per cent. Above $5°0,000, it was 20 per cent. Above $1,000,000, it was 15 per cent. A third set of figures, already alluded to, shows the trend. These are stated in a summary, by Dr. Arthur F. Burns of the National Bureau of Economic Research, of a study of income by Dr. Simon Kuznets of the same institution: 1 In 1929 the highest 5 per cent of the income recipients obtained 34 per cent of the total disposable income of individuals-that is, the total of personal incomes, inclusive of any capital gains but after deducting Federal income tax payments. By 1939 their share had dropped to 27 per cent of total income, and by 1946 to 18 per cent .... If we now compare 1929 and 1946, we find that the share going to the top 5 per cent group declined 16 points. Had perfect equality of incomes been attained in 1946 the share would have dropped from 34 to 5 per cent, that is, by 29 points. In other words, the income share of the top 5 per cent stratum dropped 16 points out of a maximum possible drop of 29 points; so that, on the basis of this yardstick, we may be said to have traveled in a bare two decades over half the distance separating the 1929 distri bution from a perfectly egalitarian distribution. If we turn to the top 1 instead of the top 5 per cent group, the results are still more striking. The share of the top 1 per cent group in total income was 19.1 per cent in 1929 and 7.7 per cent in 1946. Since the share of this group dropped 11.4 points out of a total possible drop of 18.1 points, we have traveled since 1929 on the basis of this yardstick almost two-thirds of the distance towards absolute income equality.

7 National Bureau of Economic Research, 31st Annual Report, May, 1951, P·4· 58 The Vanishing Rich This tremendous shift in the ownership of wealth is, as Dr. Burns puts it, "one of the great social revolutions in his tory." His further observations are most important: These conclusions of Kuznets'. investigation have great signifi cance for the American people. If we are to look forward con structively to a material, reduction of income inequalities in the future, we must seek to attain it principally by raising the produc tivity of those at the bottom of the income scale rather than by transferring income from the rich to the poor.... Thus the up per income 'stratum suffered a substantial decline in money in come and a still larger decline in real income. The social experi mentation of our own and other countries suggests that private incentives to embark on new and venturesome investments are more firmly.rooted than was generally believed to be the case a quarter of a century .or even a decade ago; but there can be no doubt that as high incomes are cut, a point must come when pri vate investors have neither the will nor the power to launch major innovations. Substantial further redistribution of incomes may therefore affect adversely the size of the national income, while it cannot improve appreciably the living conditions of the ··great masses. The paramount source of the rising living standards of our workers and farmers has always been an increasing volume of production, and in the years ahead it bids fair to become the only source.

Perhaps the foregoing figures will· show why the expensive luxuries enjoyed by people with high incomesin past years have been less obvious, why those people have so much less to invest in new industries and, what is very important, why they can contribute only a small fraction of what they did to various cultural and scientific causes. For the burden of such responsibilities must now fall. upon those with smaller in comes. And since the process of expropriation moves relent lessly into the middle groups, they, in turn, will be unable to sustain these responsibilities. The interests of the so-called "rich" therefore become 59 Our Middle Interests and Their Stakes in Liberty more and more at one with those of the middle interests. A very large majority of all income groups are facing the same problem. The remaining "rich" and the middle groups are at one in seeking to preserve the economic and political sys tem under which they were born.

Some Material Conclusions After the foregoing detailed and perhaps confusing deline ation of the economic affairs of the people of the United States, it may be. helpful to draw some simple conclusions: 1. When we classify families or "spending units" accord ing to annual incomes, a substantial majority fall between $2,000 and $5,000. Somewhere within this range is the cen ter of real economic and potential political power. 2 • Included in this middle range are people from all sorts of occupations and social groups. 3. Property ownership in this country is so widely spread in quantity and kind that efforts such as those of Marx and milder species of statists and politicians to portray our society in terms of mutually antagonistic groups are not only false in fact, but inimical to the essential interests of all. 4. Even with respect to the ownership of our vast indus trial system, the major premise of statism falls before the on slaught of fact. Ownership of the industrial plant is moving from the hands of the rich· and well-to-do to lower ranges in the scale of incomes.

5. The stake of an immense majority of our people in var ious kinds of savings is very great and vital. Hence, the trend of statist policies toward the appropriation of those savings is agrim threat to that immense majority and not, as politicians and statist propagandists would have it, an "equalization" of wealth and opportunity. 6. Farmers, always identified with the solid, conservative elements in our population, are still essentially tied into the 60 Some Material Conclusions middle interests. And despite special benefits from' the gov ernment, they. are losing .or stand to lose their security through the spread of· statist policies. 7. Wage earners are moving rapidly into the middle groups. Their sympathies and ties with other groups are growing stronger, their political behavior shows that they are beginning to'realize it. Their true interest is in a free society. 8. The share of the so-called "rich" in the nation's wealth has been melting away over a considerable number of years at avery rapid rate. An immense redistribution has already taken place.

9. I have shown by my statistics of the distribution of wealth why an assertion that "a third of our people are i11 fed, ill-housed and ill-clothed" is and was when it was sol emnly pronounced, a gross misstatement that served to di vide our people in the interest of political obje.ctives. It is even more inaccurate today. The falseness of such a concept is revealed in the figures of the very government whose po liticalhead pronounced that judgment. Even those who seize the figures showing the large number of people receiving incomes of, say, $2,000 or less to "prove" that such people are unable to sustain a decent living stand ard are engaged in statistical chicanery. 'For the Federal Re serve figures on incomes and assets make clear that a great, many of those people own considerable property. The per centage of people in the lowest income group-"under $l,ooo"-who own their own homes is 50, which is higher than the three groups above them and nearly equal to the $4,000-$4,999 group. These home owners have the benefit of relatively free tent,not counted as income. Considerable per centages of this low income group own other types of prop erty, especially "liquid assets." The fallacy in assuming that this group is in dire need lies in failing to recognize that many of them' are retired and living on self-made means of security, and that others do not care to work, either because 61 Our Middle Interests and Their Stakes in Liberty they do not need to or because they are willing to forego earnings for the joy of a lazy life. The latter, as any Ameri can knows, are numerous.

10. The fact of rapid and continuous change in the distri bution of property and income is outstanding over the past few years. There is no reason to assume that this shift is not continuing at this momen~ and will not continue in the im mediate future. The figures for 1948 or 1949 may already be an understatement of the facts upon which these conclusions are based. But since the constant direction of this change can be assumed, new data will only strengthen· the foregoing con clusions. Who~s Who in the Middle Interests Let us now consider the middle interests in terms of a typi cal American community, a large village or a small city, and enumerate people and typical organizations. There are retailers of various sorts, automobile-agency heads, builders, bankers, doctors, dentists, contractors, pho tographers, lawyers, the publisher of a newspaper, service people such as plumbers, barbers, beauty-parlor proprietors, farm organization officials, utility officials, farm equipment and feed dealers, railroad and express agents, school super intendents, principals and teachers, ministers, rabbis and priests, movie exhibitors, advertising people, managers of manufacturing plants, insurance agents, real estate agents, the postmaster and his employees, organization secretaries, and others.

Then consider the various organizations in such a place. There are the service clubs, women's organizations, locals of farm organizations and 4-H clubs, a chamber of commerce, a junior chamber of commerce, labor unions, veterans' lo cals, fraternal societies, YWCA and YMCA and affiliated groups. 62 The Middle, Interests in American History There are also the ~any employees of these people and or ganizations, employees ~who in many cases' identify their in terests with those of the rest of the community. There are friends and neighbors. Then consider how many such typical villages or cities there are in a Congressional district and add those whose bus iness carries them afield, such as salesmen of all sorts. The reasons why this vast population exercises so little po liticalpower are manyfold. In nearly every community peo ple divide party-wise only in local elections. But the great issues that concern us· here, have little to do with local gov ernment. In such communities, divisions on national lines simply destroy the capacity of the people to protect their real interests in the nation. Other reasons for their political weak ness, of course, are indifference and ignorance. Indifference may often be the result ofa sense of frustration or of helpless ness. That is what has been called "the fatalism of the mul titude."

The Middle Interests in American History While all the facts disprove its identity as a class, that great group in our society the members of which are neither rich nor poor has exercised a definitive and moderating role in our history. From the beginning of our national history in 1789'to the election of 1828, the tone and leadership of our political life was aristocratic, despite the democratic ideas of Jefferson. Jefferson himself was, as Woodrow Wilson put it, "an aris tocrat and yet a philosophical radical . . . a patron of the people; appealed to the rank and file, believed in the'm, but shared neither their tastes nor their passions." After Jackson, the great land and slave owners of the South dominated the Democratic Party.and through it, for 63 Our Middle Interests and Their Stakes in Liberty the most part, the policies of the Federal.government. After the Civil War and until recent times, the influence of great and growing financial and industrial powers was decisive in the Republican Party.

It is not strange that since about 1935 other minorities, awakened to their power to tip the balance in a divided elec torate, have been so strong. For many reasons that we need not recite here, it has been altogether too simple for minori ties to achieve great, undeserved, and occasionally ruthless power. Nevertheless, the tone and character of our political life~ the generally conservative nature of prevailing· policies and legislation have until recently been favorable to the interests of the middle group. Most of our political leaders and states men have come from that group. And no political movement or party that a Marxist might call proletarian has ever reached an important national status, although in some states and localities such elements have been powerful and, for short periods, dominant. The essential political weakness of the middle group lies in several circumstances. It has had a tendency to split its po tential between the two parties. This has been especially true since there has been a Solid South. The shopkeeper in Mem phis votes for Truman. A shopkeeper in Indianapolis, with exactly the same economic concerns and social outlook, votes for Dewey. A machine member in Chicago and a pensioner in Los Angeles count more than both shopkeepers.

Another factor contributing to the political weakness of the middle group has been the complex, almost indefinable nature of its economic concerns. Politics requires interpreta tion of these shared concerns in broad, easily understandable terms. It is easy to describe and activate the interests of cattle raisers or cotton growers. But it is not easy to describe the in terwoven common concerns and economic kinship of cotton and cattle growers with New England shopkeepers or with 64 "The Forgotten Man" skilled workmen in a watch factory in Lancaster, Pennsyl vania. Politicians have fished in cloudy waters and have prof ited by complex relationships. Since this has been true" the tactic of self-seeking politics has been to split the middle group by appeals and promises to specific minorities. Two of these minorities have been farmers and wage earners. The "means for achieving this di vision has been to stress the factors that set these minorities off from others, rather than the great ties that bind them to others. Demagogues, in appeals to farmers and wage earners, portray their prospective adherents as the very salt of the earth, the foundations of economic life, and the only "indis pensable ingredients" in society. By means of ·cajolery, prom ises, and plenty of infusion""of minority class-consciousness, the substantial middle group has been divided and rendered impotent to unite on the. broad issues that might" have pro vided unity and real political power.

~<The Forgotten Man:!:! It is one of the great ironies of American history that at the very outset of Franklin Roosevelt's New Deal the phrase "Forgotten Man" became a major slogan and rallying cry. It so happened that I provided him with the phrase and wove it into an early pre-campaign speech. I took it from a great, perhaps immortal essay by William Graham Sumner, written in 1883. It is well to recall that it was meant to apply by its author, by me, and, I believed, by Roosevelt to the members of a large and substantial group in society, which, inciden tally, included all self-dependent farmers and wage earners, as well as many others. I may add, further, that it represented exactly the people I thought· the New Deal was going to 'benefit and exactly the group I am writing about in this chapter. 65 Our Middle Interests and Their Stakes in Liberty "N ow, who," wrote Sumner, "is the Forgotten Man?"

Sumner defined him as the man who earned his living by productive work, who paid taxes, who accumulated a little capital, who was neither the object of help from government nor the beneficiary of artificial or politically bestowed advan tage, who lived up to his contracts, and never asked for favor. The Forgotten Man is delving away in patient industry, sup porting his family, paying his taxes, casting his vote, supporting the church and the school, reading his newspaper, and cheering for the politician of his admiration, but he is the only one for whom there is no provision in the great scramble and the big di vide. . . . He works, he votes, generally he prays-but he always pays-yes, above all he pays. . . . He keeps production going on. . . . He is strongly patriotic. . . . He gives no trouble. . . . He excites no admiration. . .. He is not in any way a hero . . . 'or a problem ... nor notorious . . . nor an object of sentiment . . . nor a burden . . . nor the object of a job . . . nor one over whom sentimental economists and statesmen can parade their fine sentiments .... Therefore he is forgotten. 8 It was for him that the New Deal was originally conceived.

Later, because -of political expediency, Roosevelt shifted his appeal to a congeries of small segments of the voting popula tion. The early New Deal ended in an alliance of minorities. The Nonmaterial Middle Interests I have described the material interests that should bind to gether the people who share them in the generation of great political power. By this concentration of attention on mate rial matters, I do not mean to imply that voters are IIl:oved only by such things. The economic interpretation of the mo tives that have made history has been overern phasized in the 8 William Graham Sumner: The Forgotten Man and Other Essays (New Haven: Yale University Press; 1918). 66 The Nonmaterial Midd{e Interests , historical and political literature of the past fifty years. It is certainly overstressed in practical politics. People are moved by many impulses other than those with roots in stomachs and pocketbooks. Human beings are en dowed with the sentiments of idealism, loyalty and pride as sociated with the home, the family, -the local community, friends, ancestry, tradition, religion, and patriotism.

These sentiments find expression in thousands of songs, stories, pictures, bits;of folklore, associations, memories, and daydreams. They fill a large part of life. To evoke them in others is to give,pleasure and to enrich. They make hardships endurable" mistakes tolerable, inconsistency understandable, and even failure bearable. Within them is the heart of politi cal conservatism. It is hard for the statist to contend with these imponder ables. His appeal must be almost wholly a portrayal of the virtues and advantages of change---<:hange to an unknown life, with only promises of new material gains at its center. When he appeals for mass action by the "underprivileged," he pictures the better life of the "privileged" as an emotional summons. The most potent way to move those who share the middle interests to protective action is to stress that the good life must hold as well as have. It must keep as well as give. It must conserve as well as acquire.

In place of deeply rooted spiritual values, statism proposes a sterile, disciplined,vitamined adequacy. That prospect is a flat plateau of uniformity over which ride the inspectors, reg ulators, and police of an uninspiring bureaucracy. Socialist jargon is a dry discussion of jobs, subsidies, grants, wage gains, escalators, and pensions. In the Marxian dream there is no portrayal of the good life. It stresses only the goods of life. Those whose condition is intolerable, shorn of peace and certitude, can be moved to radical change. But the bitter 67 Our Middle Interests and Their Stakes in Liberty frustration of the radical takes place after he has effected his redistribution, when he finds that he has made new recruits for conservatism. The conservative can, if he will, appeal to a thousand priceless values, to loyalties, to pride, to the treasured past, and the best of the present. . A century ago, Benjamin Disraeli appealed to these values in reconstructing a Conservative Party in opposition to a lib eralism whose message was largely a compilation of statistics derived from what someone called the "dismal science" of economics. Disraeli glorified institutionalism, which meant to his hearers precious associations of endu~ing value-the EngUsh constitution and its liberties, the church, the' great universities, the imperial crown, the bright chronicles of English victories in war and in peace, the great prestige of the tight little island whose flag was raised over the seas and in every continent. He took his appeal from the court of eco..

nomics to the supreme tribunal of patriotism. And in so do ing he staked his whole future on the belief that he could carry with him not only those whose vested interests made conservatism a matter of self-preservation, but the newly en franchised masses whose deeper sentiments he sought to evoke. Andre Maurois writes of the statesmanship of Disraeli: "For him to be a Conservative was not just to uphold with an apologetic smile a Constitution held to be out of date; it was a proud and romantic attitude, the only intelligent one, the only one that loyally took into account the authentic Eng land, those villages grouped around the manor house, that vigorous, obstinate breed of small squires, that aristocracy at once so venerable and so assimilative, nay, history itself." 9 Disraeli himself said: "This respect for precedent, this clinging to prescription, this reverence for antiquity, which 9 Andre Maurois: Disraeli, A Picture of the Victorian Age (New York: D. Appleton and Co.; 1928), p. 106.

68 The Nonmaterial Middle Interests are so often ridiculed by superficial and conceited minds, ap pear to me to have their origin in a profound knowledge of human nature." To him, as Maurois puts it: "A nation is a work of art, a work wrought by time. It has a temperament like that of an individual. The greatness of England in particular. is sprung, not from its natural resources, which are mediocre, but from .its. institutions. The rights of Englishmen are older by four full centuries than the Rights of Man.••.The duty of a conservative leader was to have the courage to defend the past so far as it was living and likely to live." Time justified the faith of Disraeli in this appeal to rooted sentiment. Perhaps the present Conservatives might learn from this the doubtful value of attempting to match the promises of the Socialists. Careful analysis will reveal institutional ties in America just as powerful, though different in kind from those upon which Disraeli based his appeal. These ties are very strong among those related to the economic middle interests. M.ost important is the American Constitution, the guarantor of a republican form of government, of limited government, of private rights, of the inviolability of the states, and' of the au..

thority of the judiciary. These are not only constitutional principles, but together they make up a great body of tradition to which creeping so cialism is a menace. The atmosphere· that envelops them is one of freedom, of informed but recognized relationships that cluster around the middle interests, of local self-govern ment, of social and economic custom, of a broad but not un limited sense of equality, and of aspirit of .live and let live, unshackled by law. There has always been in our national character, moreover, an undying distrust of government, of unlimited tenure ··of office, of prying police and· official pre sum ption. Whether this trait has deteriorated is open to question. If so, it is a very dangerous change. 69 Our Middle Interests and Their Stakes in Liberty The Middle Interests and National Security The prosperity, integrity, and political power of the mid dle groups can be the firm assurance of the prosperity, integ rity, and political power of the nation. The ramifications of these interests through the country offer means of stability.

The identification of these interests with such concepts as self-help, personal liberty, individual enterprise, and oppor tunity make the people associated with them the most appro priate spokesmen for the nation. They can be, if they will, the possessors of deserved political power during the long years ahead. The mobilization of poli~ical power in and around these middle interests is the central problem and the urgent ne cessity of American politics. The philosophy of statism seeks now to split these interlocked interests into minority groups. Such minority groups, the statist believes, can be bought by government and can be infected by the poison of opposition to, and hatred of, other groups. Thus divided, conquest by state power is possible. The strategy of those who would conserve our free institu tions must be to awaken the people in middle groups to a consciousness of their shared concerns and to infuse them with a realization of the peril that confronts them.

Resistance, as I shall show in subsequent chapters, is best mobilized through citizen action, for the moment on the lo cal and district level; and, sooner or later, by national action. through a truly national party. This great middle group is actually united in its economic interests. The great task before -it is to find political unity. 70 PART TWO TOWARD THE POINT OF NO RETURN CHAPTER IV Origins, Theories, and Motives of Statism Sources of American Statism THE PERVERSION OF THE PROGRESSIVE MOVEMENT In the first years of the twentieth century the most important political movement in America was what was then known as progressivism. It arose from many almost spontaneous upris ings against the excesses of capitalism and protests against the presence of poverty and injustice in the vitals of an incom parably rich nation. Enormous and unbridled concentrations of private property lived cheek-by-jowl with insecurity and need.