VIII. The Key: Communication

THE DEFECTS in the present system of representative government may be traceable to successive extensions of the franchise, motivated by vote-hungry politicians who sought additional voters for their election or re-election with little concern for the consequences in decades to come. As Professor Hutchison has remarked of the biggest extension of the franchise in Britain, that of 1867, ‘on the supply side it emerged from the rival manoeuvring of political entrepreneurs seeking to create and get hold of a future political market....’¹

The same was true of the 1884 extension which finally brought about virtually complete adult male suffrage, and in 1918 (however convincing the justification) the ultimate inclusion of women. Moreover, an identical motive can be seen to be determining the currently engineered extension of the franchise to the 18-year-olds in Britain and the United States.²

Universal suffrage having been achieved, the required conditions for freedom and the protection of minorities under proletarian supremacy which were perceived and enunciated by J S Mill, even’ more clearly by Tocqueville, and by others, can be restored only via the general acquiescence of the masses. Can that acquiescence be won? Far-reaching institutional reforms are essential. These reforms will have to conform to the historical law that all great, peaceful changes in the arrangements of mankind have occurred in such a way that the old form has remained while a new reality has come into being. And in turn the method must be that of working for ‘politically possible’ reforms in the direction required but always accompanied by recommendations based on the assumption – explicitly presented as such - that alternative reforms which could promote the interest of the people still more satisfactorily happen to be ‘politically impossible’, i.e. incapable of being so explained that a majority of voters (or the opinion-makers on whom they rely) could be expected at the time to recognize their merits.

The purpose of the democratic form of representative government is to permit the changing of governments peacefully and in such a way as to minimize misuse of state power. In particular, democracy has the purpose of preventing the withholding of opportunities from any class or from the masses generally, i.e. of ruling out opportunities for oppression or exploitation via governmental power. That the proletariat now has ultimate sovereign power is the supreme merit of the system. That that power has not yet been limited in the manner that the kingly power formerly came to be limited in the world’s monarchies is the source of its vices. Democracies do not appear to have learned yet how to prevent discrimination against the politically weak, whether they simply lack relative numbers, or shrewd leadership, or for other reasons the ability to exploit the power of a ‘swing’ voting group.

The proletariat’s interest in capital

The efforts at power-acquisition by politicians who promise exploitation of the ‘haves’ are facilitated by the patent sincerity of a mass of disinterested supporters. But their campaigns are universally accompanied by grotesque factual distortion, reliance on the ignorance and indoctrination of those led and (in the USA, at least) the deliberate engendering of envy and violent feelings. Their appeals are basically effective, however, because, in the short run, it is obviously possible for some ‘have-nots’ to benefit through expropriation of the ‘haves’ via income transfers. And relatively few among the classes believed to benefit are much concerned with the long run, while the consequences are not apparent to the generous-hearted acquiescent citizens who are not beneficiaries. Under universal suffrage, if the improvident are in the majority, or if they constitute a determining ‘swing vote’, they are in a position ultimately to pauperize a nation as long as politicians can rise to wealth and power through outbidding one another in generosity at the taxpayers’ expense.

The situation must confirm Schumpeter’s misgivings if we are convinced that it is impossible to do anything effective to communicate with the masses (via the ‘opinion-formers’ or otherwise) in their own interests. For it is not for the benefit of proletariats anywhere that investors be robbed of their savings, whether wholly or partially, irrespective of whether it happens through sudden dispossession or via progressive taxation; while even inheritance taxes tend to be poverty-creating rather than poverty-mitigating if they are accompanied by the squandering of the people’s own capital. We have tended to acquiesce too uncritically in the suggestion that there is no effective way of convincing electors generally of the burden on the poorest caused by progressive taxation – its ultimate regressive consequences — when it is accompanied, as it universally is, by dissipation of the wealth transfers effected, the extermination of wage-multiplying assets.

It is not impossible to show the people of Western Europe and the United States that attempts to redistribute income through direct and indirect vote-buying must tend in the long run to hold back what could have been a far more rapid advance in their material well-being. Moreover, they could be shown that, if taxation and other policies had aimed explicitly at the encouragement of thrift and enterprise, the accumulation of wage-multiplying assets could have won even more prodigious benefits for the ‘have-nots’. It is not beyond the bounds of imaginative common sense to suppose that the message could be communicated. There is no reason to be cowed by the fear that it would be ‘politically impossible’ because it would be difficult

The attempt could be launched in the first place by an adequate number of economists beginning, steadfastly and unobtrusively, to resort to ‘the dual form of exposition’. The advantage will lie partly in the incomparably stronger emphasis laid on the assumption of ‘as things are’ in recommendations. Those arguing for any policy so proposed and those opposing it will both know that its proponents are influenced by their observation and judgment of specific weaknesses in the electoral system – weakness alleged to be responsible for ultimately remediable misconceptions on the voters’ part; and that very knowledge can be expected to have important reactions. The economists will then be quietly exposing the responsibilities of that small group of people whose private interests block the path to more freedom and material well-being for mankind, namely, the legislators and ministers of all parties who, necessarily entrusted with massive powers in a free society, have been inadequately restrained by constitutional provision or tradition.

Direct and indirect education

Whether the communication occurs most appropriately via ‘the opinion-formers’, or whether it is more effective when aimed directly at the voters is important. In both Western Europe and the United States the bulk of ‘the opinion-formers’ are, for reasons which Schumpeter discussed at length, even more indoctrinated than the masses. To use a phrase of Professor Hayek, they are largely ‘dealers in second-hand ideas’. Their reaction to notions which conflict with accepted convictions tends to be emotional rather than critical. Schools and universities of the last few decades have failed to instill in the minds of the intelligentsia the habit of open-mindedness and willingness to understand and weigh unfamiliar theses.

Moreover, many of the apparent ‘opinion-formers’ are in practice almost professional opinion-followers. As we have seen, they are necessarily so in some measure when they are allied (by loyalty or contract) to the parties. They will stubbornly resist ‘conversion’. It will be essential to disturb long-inculcated stereotypes and prejudices. The intelligentsia may sometimes have to be by-passed.

The range of the ‘politically possible’ could be widely expanded if economists could transmit conceptual clarity in a few simple but fundamental considerations, which opinion-formers and the masses could understand. Editors, columnists and commentators generally have yet to be shown, for example, that the loss-avoidance (or profit-seeking) incentives have nothing ‘sordid’ about them; that reliance on such incentives means that, provided the appropriate governmental agencies are carrying out their essential role in the functioning of the free market,³ ultimate economic power is vested in the people through a democratic ‘consumers’ sovereignty’; that when producers and consumers co-operate through intermediaries, the former are disciplined by the market so that each economic objective is sought up to the point that other objectives become more important; that free scope given to ‘loss-avoidance’ incentives does not rule out the achievement of any human objective up to that point; that thrift is in no sense correlated with lack of generosity, but is an expression of responsibility for one’s individual and family future; that there is nothing predatory or disorderly about the process of competition⁴ (as distinct from practices which, in tendentious or loose writing, are often called ‘competition’); and that the rights of substitution which make up the competitive process are society’s protection against selfishness and acquisitiveness or lack of concern by some for the good of others. If these truths were effectively communicated, attitudes towards current attempts to achieve distributive justice via the strike-threat or taxation and hand-outs would be incomparably more critical.

It may well be that, because of the impossibility of effectively informing voters of the true causes of all sorts of ‘social evils’, we have to accept them as for the time being inevitable. Slums, urban decay and poor housing persist chiefly because the public acquiesce in rent controls, housing subsidies, short-sighted property taxes, repression of interest rates and ‘make-work’ restrictions in the building and construction trades. But such public acquiesence is itself a product of a dogmatic belief that it is ‘politically impossible’ to enlighten the electorate.

In the western world, all political parties now seem to compete by promising to alleviate the ‘poverty’ (in the sense of relatively low incomes for some) which seems pertinaciously to plague us, and for which everywhere the opposing party (or ‘economic forces beyond our control’) are typically held to blame. Yet we are told that it would be ‘suicidal’ for any candidate to promise positive steps to remove any of the causes which aggravate inequality of incomes, such as, to mention the two major factors operative in the western world, legally enacted minimum wage-rates and strike-threat consequences. In particular, it was assumed almost universally until recently that it would be ‘political dynamite’ for a party openly to discuss, however tactfully or obliquely, any really effective curbing of strike-threat power, although it is known to reduce the flow of wages, to render the distribution of that flow less equal and less equitable, to harm the workers’ employment security, status and independence, to destroy pride in workmanship and service, and to cause inflation to be politically expedient. It can be shown that the use of strike-threat power has not redistributed a solitary penny from the rich in general to the poor in general in the long run, and that it has merely won gains for particular groups at the expense of consumers and laid-off workers or excluded comrades.⁵ Some ‘poor’ have gained in the process, but the majority making up the lower-income groups have advanced more slowly than inventive’ genius, technological progress, managerial ingenuities and wise entrepreneurial prediction and risk-taking (together with the thrift of others) could otherwise have achieved. The ‘rich’ have been harmed, but not for the long run benefit of the lower-income groups. Yet we are told, in effect, ‘It is no use pointing all that out. It is irrelevant in any “politically conceivable” platform. Nothing can be done about it.’

We are all to blame in some measure for accepting the myth that inflation is ‘politically inevitable’ – simply because no statesman of the present era has yet told an electorate any truth that might be difficult to explain. In an inflationary world, it is of course exceptionally difficult for a country to refrain from following any international trend. But Britain and the United States, and particularly the latter, have been the chief initiators of world inflation since World War II, despite many other nations’ worse record. We have become resigned to continuous inflation because we have been brain-washed into believing that it cannot be avoided without either recession or vote-losing measures which would anger organized labour. But we economists are to blame. In our desire for sophistication and our hope to be able to offer ‘operational’ advice, we have been led to present our analysis in a limited setting. We have purportedly limited ourselves to ‘economic’ issues — the influence of market factors within the framework left to them — when the crucial consideration has been the framework itself and the desirable changes in it.

The notion that inflation is the only path to prosperity is a myth. It is possible for a nation to enjoy all the advantages of a money unit of defined value (and even a unit of constant purchasing power) together with ‘full employment’ and ‘prosperity’. Such a money unit is even compatible with more productive (nearer to optimal) kinds of employment and so an even more satisfactory ‘prosperity’. The obstacle is simply the individual interests of the related handful of private persons who form parliaments, governments or shadow cabinets, who (in whatever party) must be primarily concerned with getting themselves elected in the most effective way. Organized labour can be blamed for making inflation expedient; but the politician cannot renounce blame when he prefers expediency to principle and shrinks from confrontation with the unions over their methods of labour pricing.

It is generally accepted that the British Corn Laws were repealed in 1846 because the voters wanted cheap bread; and it is significant that the symbol of the cheap loaf remained an important selling device for the Liberal Party in Britain down to 1914. If inflation were once abandoned and the wages-reducing and income-reducing activities of the unions effectively curbed, the consumers’ interest might again become a paramount election-winning factor. And we might experience a government retaining office mainly because it could show that the cost-of-living index had not risen during its period of office.

Confronted with the present situation, it is the economists’ duty to begin to treat the electoral system as an integral part of the world of markets, prices and incomes, with the vote-gathering activities of politicians realistically recognized as an influence similar to the activities of entrepreneurs exploiting advertising and ‘public relations’ in the production and marketing of goods and services. ‘The dual form’ in which I have suggested recommendations of economic significance should be made, implies no dichotomy between the ‘economic’ and the ‘political’ or between the ‘economically possible’ and the ‘politically possible’. The individual is to be regarded as seeking his economic objectives through two channels: firstly, through the market place, exercising his rights under the democratic form of consumers’ sovereignty, and, secondly, through the electoral process, exercising his rights under democratic political sovereignty. In the market, his voting rights are limited in proportion to the value of his contribution to the common pool of output (i.e. determined by the value of his personal services and the services rendered by the assets he owns). In the electoral process, his voting rights are usually equal to those of every other citizen irrespective of how much he contributes to the common pool. In the market, his power is exercised through his ability to buy or refrain from buying what different entrepreneurs are offering. At elections, his power is exercised through his ability to vote for those who will, he thinks, govern best.⁶ But we have noticed that, as the system is working at present, this all too often means voting for those who are expected either to take least from his income for the benefit of others or else to add most to it at the expense of others.

My concluding reflection to all ‘opinion-formers’ is that no policy which is for the advantage of the people is incapable of being effectively explained to them. It will of course take time and persistence to convince a majority. In the meantime compromise will be needed whenever urgent steps are required. But compromise, while it is the politician’s privilege and necessity, is the scholar’s deadly sin — unless it is presented clearly and unmistakably as compromise and is always accompanied (a) by a non-compromising proposal and (b) an explicit explanation of the vote-procurement reasons for the compromising proposal. That is the justification for the thesis of this book.

FOOTNOTES TO PART VIII

¹ Hutchison, Markets and the Franchise, op. cit., p. 14.

² The unchallengeable justice of the effective extension of the franchise to Negroes in the United States must not blind us to the truth that the same political motives inspired the reforms. That is why no concurrent steps were taken to restrain politicians and other power-seekers from seeking profit out of the scope which political equality would create for fostering racial suspicions, resentments and enmities.

³ This role covers primarily the prevention of ‘restrictive practices’ — or the role of what in the United States is called ‘anti-trust’. Included under this heading also are such things as independent quality-certification of products, control of weights and measures, and so forth. Emphasis on this role meets the common objection, ‘Yes, but markets do not always work.’

⁴ ‘Competition’ is the substitution for consumers’ benefit of the least-cost method of producing and marketing any commodity (or of achieving any other objective involving scarce means), irrespective of the institutional arrangements necessary for the realization of that result.

⁵ W H Hutt, Theory of Collective Bargaining, 1930, reprinted 1954. I am engaged on another book in which I propose to deal with arguments to the contrary. Broad confirmation will be found in the late Henry Simons’ Some Reflections on Syndicalism, in his Economic Policy for a Free Society, and in Chapters 9 and 10 of F Machlup’s impressive Political Economy of Monopoly.

⁶ In the sense of providing the best framework of legislation for society and providing most efficiently those services deemed to be appropriately supplied through collective initiative.