Appendix B: Coercion and Lebensraum

Tariffs and immigration barriers as a cause of war may be thought far afield from our study, but actually this relationship may be analyzed praxeologically. A tariff imposed by Government A prevents an exporter residing under Government B from making a sale. Furthermore, an immigration barrier imposed by Government A prevents a resident of B from migrating. Both of these impositions are effected by coercion. Tariffs as a prelude to war have often been discussed; less understood is the Lebensraum argument. “Overpopulation” of one particular country (insofar as it is not the result of a voluntary choice to remain in the homeland at the cost of a lower standard of living) is always the result of an immigration barrier imposed by another country. It may be thought that this barrier is purely a “domestic” one. But is it? By what right does the government of a territory proclaim the power to keep other people away? Under a purely free-market system, only individual property owners have the right to keep people off their property. The government's power rests on the implicit assumption that the government owns all the territory that it rules. Only then can the government keep people out of that territory.

Caught in an insoluble contradiction are those believers in the free market and private property who still uphold immigration barriers. They can do so only if they concede that the State is the owner of all property, but in that case they cannot have true private property in their system at all. In a truly free-market system, such as we have outlined above, only first cultivators would have title to unowned property; property that has never been used would remain unowned until someone used it. At present, the State owns all unused property, but it is clear that this is conquest incompatible with the free market. In a truly free market, for example, it would be inconceivable that an Australian agency could arise, laying claim to “ownership” over the vast tracts of unused land on that continent and using force to prevent people from other areas from entering and cultivating that land. It would also be inconceivable that a State could keep people from other areas out of property that the “domestic” property owner wishes them to use. No one but the individual property owner himself would have sovereignty over a piece of property.

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¹Bribing is made necessary by government outlawing of the exchange; a bribe is the sale, by the government official, of permission for the exchanges to proceed.

²Ironically, the government's destruction of part of the people's money almost always takes place after the government has pumped in new money and used it for its own purposes. The injury that the government imposes on the public is thus twofold: (1) it takes resources away from the public by inflating the currency; and (2) after the money has percolated down to the public, it destroys part of the money's usefulness.

³Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), pp. 432 n., 447, 469, 776.

⁴Perhaps one of the reasons was that State mint monopolies, instead of serving customers with desired coins, arbitrarily designated a few denominations that they would mint and circulate. A coin of slightly lighter weight was then treated as an intruder.

⁵A modern example of the impossibility of keeping undervalued coins in circulation is the disappearance of silver dollars, half-dollars, and other coins that circulated in the United States during the 1960's. William F. Ricken-backer, Wooden Nickels (New Rochelle, N.Y.: Arlington House, 1966).

⁶On legal-tender laws, see Lord Farrer, Studies in Currency 1898 (London: Macmillan & Co., 1898), p. 43, and Mises, Human Action, pp. 432 n., 444, 447.

⁷In recent years, the myth has developed that usury laws in the Middle Ages were justifiable because they dealt with the consumer who had to borrow rather than with productive business. On the contrary, it is precisely the risky consumer-borrower (who most “needs” the loan) who is most injured by the usury laws because he is the one deprived of credit.

On usury laws, see Rudolph C. Blitz and Millard F. Long, “The Economics of Usury Regulation,” Journal of Political Economy, December, 1965, pp. 608–19.

⁸It is interesting to note that the bulk of “organized crime” occurs not as invasions of persons and property (in natural law, the mala per se), but as attempts to circumvent government prohibitions in order to satisfy the desires of consumers and producers alike more efficiently (the mala pro-hibita). Entrepreneurs of the latter kind constitute the generally despised “black marketeers” and “racketeers.”

⁹The workings of rationing (as well as the socialist system in general) have never been more vividly portrayed than in Henry Hazlitt's novel, The Great Idea (New York: Appleton-Century-Crofts, 1951), reissued as Time Will Run Back (New Rochelle, N.Y.: Arlington House, 1967).

¹⁰On maximum hour laws, see W.H. Hutt, “The Factory System of the Early Nineteenth Century” in F.A. Hayek, ed., Capitalism and the Historians (Chicago: University of Chicago Press, 1954), pp. 160–88.

¹¹See Man, Economy, and State, chapter 10, for a refutation of monopoly theories on the free market.

¹²For an interesting, though incomplete, discussion of many of these measures (an area largely neglected by economists), see Fritz Machlup, The Political Economy of Monopoly (Baltimore: Johns Hopkins Press, 1952), pp. 249–329.

¹³Subsidies, of course, penalize competitors not receiving the subsidy, and thus have a decided monopolistic impact. But they are best discussed as part of the budgetary, binary intervention of government.

¹⁴Ibid. On licenses, see also Thomas H. Barber, Where We Are At (New York: Charles Scribners’ Sons, 1950), pp. 89–93; George J. Stigler, The Theory of Price (New York: Macmillan & Co., 1946), p. 212; and Walter Gellhorn, Individual Freedom and Governmental Restraints (Baton Rouge: Louisiana State University Press, 1956), pp. 105–51, 194–210.

¹⁵A glaring example of a Commission's role in banning efficient competitors from an industry is the Civil Aeronautics Board decision to close up Trans-American Airlines, despite a perfect safety record. Trans-American had pioneered in rate reductions for airline service. On the CAB, see Sam Peltzman, “CAB: Freedom from Competition,” New Individualist Review, Spring, 1963, pp. 16–23.

¹⁶It is hardly remarkable that we hear continual complaints about a “shortage” of doctors and teachers, but rarely hear complaints of shortages in unlicensed occupations. On licensing in medicine, see Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1963), pp. 149–60; Reuben A. Kessel, “Price Discrimination in Medicine,” Journal of Law and Economics, October, 1958, pp. 20–53.

¹⁷For an excellent analysis of the workings of compulsory quality standards in a concrete case, see P.T. Bauer, West African Trade (Cambridge: Cambridge University Press, 1954), pp. 365–75.

¹⁸For case studies of the effects of such “quality” standards, see George J. Alexander, Honesty and Competition (Syracuse: Syracuse University Press, 1967).

¹⁹On adulteration and fraud, see the definitive discussion by Wordsworth Donisthorpe, Law in a Free State (London: Macmillan & Co., 1895), pp. 132–58.

²⁰Some people who generally adhere to the free market support the SEC and similar regulations on the ground that they “raise the moral tone of competition.” Certainly they restrict competition, but they cannot be said to “raise the moral tone” until morality is successfully defined. How can morality in production be defined except as efficient service to the consumer? And how can anyone be “moral” if he is prevented by force from acting otherwise?

²¹The building industry is so constituted that many laborers are quasi-independent entrepreneurs. Safety codes therefore compound the restrictionism of building unions.

²²We might add here that on the purely free market even the “clear and present danger” criterion would be far too lax and subjective a definition for a punishable deed.

²³See Stigler, Theory of Price, p. 211.

²⁴See Henry George, Protection or Free Trade (New York: Robert Schalkenbach Foundation, 1946), pp. 37–44. On free trade and protection, see Leland B. Yeager and David Tuerck, Trade Policy and The Price System (Scranton, Pa.: International Textbook Co., 1966).

²⁵The impact of a tariff is clearly greater the smaller the geographic area of traders it covers. A tariff “protecting” the whole world would be meaningless, at least until other planets are brought within our trading market.

²⁶The tariff advocates will not wish to push the argument to this length, since all parties clearly lose so drastically. With a milder tariff, on the other hand, the tariff-protected “oligopolists” may gain more (in the short run) from exploiting the domestic consumers than they lose from being consumers themselves.

²⁷Our two-man example is similar to the illustration used in the keen critique of protection by Frederic Bastiat. See Bastiat, Economic Sophisms (Princeton, N.J.: D. Van Nostrand, 1964), pp. 242–50, 202–09. Also see the “Chinese Tale,” and the famous “Candlemakers’ Petition,” ibid., pp. 182–86, 56–60. Also see the critique of the tariff in George, Protection or Free Trade, pp. 51–54; and Arthur Latham Perry, Political Economy (New York: Charles Scribners’ Sons, 1892), pp. 509 ff.

²⁸George, Protection or Free Trade, pp. 45–46. Also on free trade and protection, see C.F. Bastable, The Theory of International Trade (2nd ed.; London: Macmillan & Co., 1897), pp. 128–56; and Perry, Political Economy, pp. 461–533.

²⁹F.W. Taussig, Principles of Economics (2nd ed.; New York: Macmillan & Co., 1916), p. 527.

³⁰Mises, Human Action, p. 506.

³¹See also W.M. Curtiss, The Tariff Idea (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1953), pp. 50–52.

³²Many States have imposed emigration restrictions upon their subjects. These are not monopolistic; they are probably motivated by a desire to keep taxable and conscriptable people within a State's jurisdiction.

³³It is instructive to study the arguments of those “internationalist” Congressmen who advocate changes in American immigration barriers. The changes proposed do not even remotely suggest the removal of these barriers.

³⁴Advocates of the “free market” who also advocate immigration barriers have rarely faced the implications of their position. See Appendix B, on “Coercion and Lebensraum.”

³⁵Oscar W. Cooley and Paul Poirot, The Freedom to Move (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1951), pp. 11–12.

³⁶For a brilliant discussion of the anti-child-labor Factory Acts in early nineteenth-century Britain, see Hutt, “The Factory System.” On the merits of child labor, see also D.C. Coleman, “Labour in the English Economy of the Seventeenth Century,” The Economic History Review, April, 1956, p. 286.

³⁷A news item illustrates the connection between child labor laws and restrictionist wage rates for adults—particularly for unions:

Through the co-operation of some 26,000 grocers, plus trade unions, thousands of teenage boys will get a chance to earn summer spending money, Deputy Police Commission James B. Nolan, president of the Police Athletic League, disclosed yesterday. . . . The program was worked out by PAL, with the assistance of Grocer Graphic, a trade newspaper. Raymond Bill, publisher of the trade paper, explained that thousands of groceries can employ one and in some cases two or three boys in odd jobs which do not interfere with union jobs. (New York Daily News, July 19, 1955; italics mine)

See also Paul Goodman, Compulsory Mis-Education and the Community of Scholars (New York: Vintage Books, 1964), p. 54.

³⁸See also James C. Miller III, ed., Why the Draft? (Baltimore: Penguin Books, 1968).

³⁹On minimum wage laws, see Yale Brozen and Milton Friedman, The Minimum Wage: Who Pays? (Washington, D.C.: The Free Society Association, 1966). See also John M. Peterson and Charles T. Stewart, Jr., Employment Effects of Minimum Wage Rates (Washington, D.C.: American Enterprise Institute, August, 1969).

⁴⁰The withholding tax is an example of a “wartime” measure that now appears to be an indestructible part of our tax system; it compels businesses to be tax collectors for the government without pay. It is thus a type of binary intervention that particularly penalizes small firms, which are burdened more than proportionately by the overhead requirements of running their business.

⁴¹For further elaboration, see Man, Economy, and State, chapter 10.

⁴²See John W. Scoville and Noel Sargent, Fact and Fancy in the T.N.E.C. Monographs (New York.: National Association of Manufacturers, 1942), pp. 298–321, 671–74.

⁴³F.A. Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948), chap. V.

⁴⁴Municipal ordinances against “vagrancy” or “loitering” are certainly a beginning in this direction and are used to impose forced labor upon the poorest sectors of the population.

⁴⁵Isabel Paterson, The God of the Machine (New York: G.P. Putnam's Sons, 1943), pp. 172, 175. See also Scoville and Sargent, Fact and Fancy in the T.N.E.C. Monographs, pp. 243–44.

⁴⁶Paterson, God of the Machine, pp. 176–77.

⁴⁷Paul de Rousiers, Les Industries Monopolisées aux Etats-Unis, as quoted in Gustave de Molinari, The Society of Tomorrow (New York: G.P. Putnam's Sons, 1904), p. 194.

⁴⁸See United States Steel Corporation, T.N.E.C. Papers (New York: U.S. Steel Corp., 1940), II, 102–35.

⁴⁹See William M. Simon, “The Case Against the Federal Trade Commission,” University of Chicago Law Review, 1952, pp. 320–22. On basing points, see also Scoville and Sargent, Fact and Fancy in the T.N.E.C. Monographs, pp. 776–82; Wayne A. Leeman, “Review of Paul Giddens’ Standard Oil Company (Indiana),” American Economic Review, September, 1956, p. 733; and Donald Dewey, “A Reappraisal of F.O.B. Pricing and Freight Absorption,” Southern Economic Journal, July, 1955, pp. 48–54.

⁵⁰Economists have, until recently, almost completely neglected conservation laws, leaving the field to romantic “conservationists.” But see the brilliant analysis by Anthony Scott, “Conservation Policy and Capital Theory,” Canadian Journal of Economics and Political Science, November, 1954, pp. 504–13, and idem, Natural Resources: The Economics of Conservation (Toronto: University of Toronto Press, 1955); see also Mises, Human Action, pp. 652–53.

⁵¹Scott points out that this attitude rests on the contemptuous and unsupported view that future generations will not be as competent to take care of themselves as is the present generation. See Scott, Natural Resources, p. 94.

⁵²As Scott aptly asks: Why agree “to preserve resources as they would be in the absence of their human users?” Scott, “Conservation Policy,” p. 513. And further: “Most of [our] progress has taken the form of converting natural resources into more desirable forms of wealth. If man had prized natural resources above his own product, he would doubtless have remained savage, practicing ‘conservatism.’ “ Scott, Natural Resources, p. 11. If the logic of tariffs is to destroy the market, then the logic of conservation laws is to destroy all human production and consumption.

⁵³Strictly, investors will attempt to maximize their “internal rates of return,” but maximizing the present value is close enough for our purposes. On the difference between the two goals in “Austrian” vs. “neo-classical” thought, see André Gabor and I.F. Pearce, “A New Approach to the Theory of the Firm,” Oxford Economic Papers, October, 1952, pp. 252–65.

⁵⁴In some cases, however, lower time preferences and greater investment activity will deplete natural resources at a more rapid rate, if there is a particularly great demand for their use in the new activity. This is likely to be true of such resources as coal and oil. See Scott, Natural Resources, pp. 95–97.

⁵⁵Entrepreneurs with poor foresight are quickly expelled from their positions through losses. It is ironic that the “plight of the Okies” in the 1930's, widely publicized as a plea for conservation laws and the result of “cruel capitalism,” actually resulted from the fact that bad entrepreneurs (the Okies) farmed land that was valueless and submarginal. Forced “conservation” investment on this submarginal land or government subsidization of the “Okies” would have aggravated a dislocation that the market quickly eliminated.

Much American soil erosion, furthermore, has stemmed from failure to preserve full private property rights in land. Tenant farmers, moving every few years, often milked the capital of the landlord's property, wasting the resource, in default of proper enforcement of the contractual necessity to return the land to its owner intact. See Scott, National Resources, pp. 118, 168.

⁵⁶A typical conservationist complainer was J.D. Brown who, in 1832, worried over the consumption of timber: “Whence shall we procure supplies of timber fifty years hence for the continuance of our navy?” Quoted in Scott, National Resources, p. 37. Scott also notes that the critics never seemed to realize that a nation's timber can be purchased from abroad. Scott, “Conservation Policy.”

⁵⁷This system was dimly adumbrated by the Homestead Law of 1862. However, this law imposed an arbitrary and pointless maximum on the size of farm that could be staked out by the first user. This limitation had the result of nullifying the law further West, where the minimum acreage needed for cattle or sheep grazing was far larger than the antiquated legal maximum would allow. Furthermore, the maximum limitation and the requirement that the land be used for farming led to the very “ravaging” of the forests that conservationists now deplore, for it hobbled private ownership of large forest tracts.

⁵⁸See E. Louise Peffer, The Closing of the Public Domain (Stanford: Stanford University Press, 1951), pp. 25–27. On the advantages of private ownership of grazing land, see the petition of the American Cattle Growers Association, March, 1902, ibid., pp. 78–79. See also Samuel P. Hays, Conservation and the Gospel of Efficiency (Cambridge: Harvard University Press, 1959), pp. 50–51. The government's failure to extend the homestead principle to the larger areas had another important social effect: it led to constant squabbles between the users—the cattlemen and the other homesteaders who came later and demanded their “just share” of the free land.

⁵⁹For an illuminating discussion of private property rights in fisheries, see Gordon Tullock, The Fisheries (Columbia: University of South Carolina Bureau of Business and Economic Research, February, 1962). See also Anthony Scott, “The Fishery, A Sole Resource,” Journal of Political Economy, April, 1955, and idem, Natural Resources, pp. 117–29.

⁶⁰High demand for the product increases the value of the resource, and thereby stimulates its preservation, investment in it, and exploration for it. High-cost sources of supply will now be tapped, thus further increasing the effective supply of the product on the market. See Scott, Natural Resources, p. 14.

⁶¹See ibid., pp. 21–22.

⁶²There is another similarity between tariffs and conservation laws: both aim at national self-sufficiency, and both try to foster national or local industries by coercive intervention in the free market.

⁶³For an analysis of government land ownership and government ownership in general, see below.

⁶⁴On the free market, the demand curve for each firm in equilibrium must be elastic above the equilibrium price; otherwise the firm would reduce output. This does not, of course, mean that the demand curve for the entire industry must be elastic. When we refer to a possible monopoly price, the demand curve consulted by each monopolistic firm is its own.

⁶⁵Another example of government creation of a monopoly gain in land has been cited by the Georgist economist, Mason Gaffney: “City governments all over the country deliberately keep ‘dead lands’ off the market, with the avowed purpose of ‘protecting’ other land prices.” Gaffney cites the head of the American Society of Planning Officials as advising that a vacant one-third of urban land be “more or less permanently removed from private ownership” in order to keep up land values for the owners of the remaining two-thirds. Gaffney concludes: “Following this advice, many state and local governments avoid returning tax-reverted lands to use.” Mason Gaffney, “Vituperation Well Answered,” Land and Liberty, December, 1952, p. 126; reprinted in Spencer Heath, Progress and Poverty Reviewed (2nd ed.; New York: The Freeman, 1953).

⁶⁶Peffer, Closing of the Public Domain, p. 54. Senator H.C. Hansbrough also pointed out that the railroads paid $45,000 annually to a leading conservationist magazine, The Talisman, and financed the Washington conservation lobby. H.C. Hansbrough, The Wreck: An Historical and Critical Study of the Administrations of Theodore Roosevelt and William Howard Taft (1913), p. 52.

⁶⁷J.H. Cox, “Organization of the Lumber Industry in the Pacific Northwest, 1889–1914” (Ph.D. diss., University of California, 1937), pp. 174–77; cited in Peffer, Closing of the Public Domain, p. 57. See also Hays, Conservation and the Gospel of Efficiency.

⁶⁸On patents and copyrights, see Man, Economy, and State, pp. 745–54.

⁶⁹The patent was instituted in England by King Charles I as a transparent means of evading the Parliamentary prohibition of grants of monopoly in 1624.

⁷⁰Arnold Plant, “The Economic Theory concerning Patents for Inventions,” Economica, February, 1934, p. 44.

⁷¹On the inherent absurdities of the very concept of “public utility” and the impossibility of definition, as well as for an excellent critique of public utility regulation by government, see Arthur S. Dewing, The Financial Policy of Corporations (5th ed.; New York: Ronald Press, 1953), I, 309–10, and the remainder of the chapter.

⁷²Inevitably, someone will point to the plight of the railroad or highway company that must pay “extortionate rates” to the man who “merely” owns the property along the way. Yet these same people do not complain (and properly so) of the fact that property values have enormously increased in downtown areas of cities, thus benefiting someone who “merely” happens to own them. The fact is that all property is available to everyone who finds or buys it; if the property owner in these cases is penalized because of his speculation, then all entrepreneurs must be penalized for their correct forecasting of future events. Furthermore, economic progress imputes gains to original factors—land and labor. To render land artificially cheap is to lead to its overuse, and the government is then actually imposing a maximum price on the land in question.

⁷³Except that the eminent-domain thesis is on even shakier ground, since the Georgists at least exempt or try to exempt from the social claim the improvements that the owner has made.

⁷⁴See below on the myth of public ownership. As Benjamin R. Tucker pointed out years ago, the Georgist “equal rights” thesis (or eminent domain) leads logically, not to a Single Tax, but to each individual's right to appropriate his theoretical share of the value of everybody else's land. The State's appropriation of this value then becomes sheer robbery of the other individual claims rather than of just the claim of the landowner. See Benjamin R. Tucker, Individual Liberty (New York: Vanguard Press, 1926), pp. 241–42.

⁷⁵The same is true of an official license: a firm's payment for a license is the only means for it to exist. A licensed firm cannot be stamped as a willing party to the monopolistic privilege unless it had helped to lobby for the licensing law's establishment or continuance, as very often happens.

⁷⁶Historians, however, will go sadly astray if they ignore the monopolistic motivation for passage of such measures by the State. Historians who are in favor of the free market often neglect this problem and thus leave themselves wide open to opposition charges that they are “apologists for monopoly capital.” Actually, of course, advocates of the free market are “probusiness,” as they are pro any voluntary relationship, only when it is carried on in the free market. They oppose governmental grants of monopolistic privilege to businesses or others, for to this extent business is no longer free, but a partner of the coercive State.

On business responsibility for interventions generally thought to be “antibusiness,” see Gabriel Kolko, The Triumph of Conservatism (Glencoe, Ill.: The Free Press, 1963), and idem, Railroads and Regulations, 1877–1916 (Princeton: Princeton University Press, 1965). See also James Weinstein, The Corporate Ideal in the Liberal State: 1900–1918 (Boston: Beacon Press, 1968).

⁷⁷Walter Lippmann, The Good Society (3rd ed.; New York: Grosset and Dunlap, 1943), pp. 277 ff.

⁷⁸It is true that limited liability for torts is the illegitimate conferring of a special privilege, but this does not loom large among the total liabilities of any corporation.

⁷⁹See Herbert Spencer, Social Statics (New York: D. Appleton, 1890), pp. 438–39. For historical examples of successful private coinage, see B.W. Barnard, “The Use of Private Tokens for Money in the United States,” Quarterly Journal of Economics, 1916–17, pp. 617–26; Charles A. Conant, The Principles of Money and Banking (New York: Harper & Bros., 1905), I, 127–32; and Lysander Spooner, A Letter to Grover Cleveland (Boston: Benjamin R. Tucker, 1886), p. 79.