Progress to Regress; H. Sennholz

In its fiscal year, 1965, the com pany sold more than $16 million of its products to foreign cus tomers. Since 1960, its sales abroad returned $55 million to the United States. Dr. Sennholz heads the Department of Eco nomics at Grove City College, Pennsylvania. It seems that some American policies are reverting to the prin ciples and doctrines of the seven teenth century_ Others are repeat ing the errors and follies of the dark Middle Ages. In 1628 the best known mercantilist writer, Thomas Mun, urged his country men always "to sell more to strangers yearly than we consume of theirs in value." In 1667 the most famous of German mercantil ist writers, Becher, advocated as 34 THE FREEMAN April a most important economic rule and axiom "that it is always better to sell goods toothers .than to buy goods from others, for the former brings a certain advantage •and the· latter inevitable damage." In 1712, Charles King in The British Merchant declared the export of finished products "in the highest degree beneficial," the export of natural products "so much clear gain," and the corresponding im port "so much real loss."

Napoleon Bonaparte applied this idea on a huge scale in his Continental System. He gave pub lic recognition, . bestowed .medals, and issued citations to Frenchmen who exported manufactured goods to England. In recent years our foreign trade policies gradually have fallen under the sway of seven teenth century economic thought. Our "unfavorable" balance of pay ments caused the Eisenhower Ad ministration to prohibit American ownership of gold in foreign coun tries. Since then, the United States government added a "voluntary" program that restricts bank and business investments abroad in order to keep money and gold in the United States. Furthermore, a punitive tax on American pur chases of foreign securities aims to curb our heavy losses of gold. Those are some of the steps al r~ady taken toward comprehensive government control over all our foreign trade and transactions. In England, comprehensive for eignexchange control dates back to the darkness of the Middle Ages. Until the reign of Charles I (1628) the office of Royal Ex changer handled. all exchange· op erations and all trade in precious metals. 1 Exportation of bullion and coin was. summarily outlawed until 1663 when the prohib,ition was narrowed to English coins only.

In France exportation of gold and silver was outlawed from the Middle Ages until the eighteenth century. Th~ usual penalty for taking coins out of the realm was death. In Spain and Portugal the export of bullion and coins went on undisturbed for more than 200 years as if no prohibitions existed, even though the penalty was death. The "Spending" Multiplier In recent months we have wit nessed a marked increase in gov ernment and private spending and a strong rise in economic activity. The demand for goods and serv ices has been stimulated by ex pansionary government and Fed eral Reserve actions. Spending; whether by governments or citi zens. is considered the powerful 1 Cf. Eli F. Heckscher, Mercantilism, Vol. II, p. 246.

1966 PROGRESS OR REGRESS? 35 engine of economic progress and prosperity. Spendthrifts of all ages have advanced similar economic doc trines. In 1686, for instance, the Austrian write,r, Wilhelm Schrot ... ter, Thomas Mun's· pupil, wrote: "The more a manufacturer causes money to pass ·from one hand to another, the more useful it is to the country, for so many people does it maintain." And at another place: "Through the exchange of money the sustenance of so many people is multiplied." Thrift was regarded as the cause of unemployment, for real income was thought to· diminish if money were withdrawn from circulation. For this reason Schrotter wrote a long discussion on "How a Prince Should Limit his Thrift." In 1695 the English writer, Cary, advo cated the same principle with even greater clarity. He stated that everybody's spending causes in come to rise. If everybody in creases his .spending, according to Cary, everybody "might •then live more plentifully."2 Export Embargoes On Jan. 21, 1966, the United States and British governments pl~ced curbs on exportation of 2An Essay on the State of England in relation to its. Trade, London, 1695: p. 148 if; cited in Heckscher.Vol II p.209. ., copper in order to protect their shares of dwindling world supplies of the· metal. The United States Commerce Department sharply ex panded its controls over exports of copper from the United States and clamped tight limits on a broad range of categories, includ ing shipments overseas of copper ores and refined copper.

In England,. this policy of "pro vision" dated back to the twelfth century and lasted until. the nine teenth. Export prohibitions on iron, copper, and bell metal were repealed in 1694. Other restric tions that were imposed by Henry II, in 1176 and 1177, lasted until 1822. The high-water mark was reached under Edward .III about the middle of the fourteenth cen tury. In· France, export restrictions were first imposed during thethir teenth and fourteenth centuries. They aimed at keeping essential materials, particularly foodstuffs, within the country. At the begin ning of the nineteenth century, Napoleon still conducted a "policy of provision" with regard to food stuffs. The first French law that' permitted their exportation was enacted in 1819.3 Early "Poor Laws" Even our war on pover.ty de clared by the present·. administra3 Ibid, p. 92.

36 THE FREEMAN April tion is not new at all. During the period of the Stuarts and of the Tudors, the English government endeavored to aid the low income classes of society. The avowed aim of an act of Parliament in 1603 was to raise the wage's of textile workers. Minimum wage rates were fixed, and manufacturers were fined one shilling for every penny of wages paid below the prescribed rates. Especially in the years 1629 to 1640, a wide "policy of welfare" was pursued. In order to prevent unemploy ment, businessmen were com pelled to continue their operations even when suffering losses. They had to keep wages high, and were imprisoned in case of disobedi ence. For the benefit of the poor, food prices were intensively con trolled. Grain was to be sold under cost price. Already in 1563, the Eliza bethan Statute of Artificers tried to regulate labor conditions in all details, and it remained on the books until 1814. In order to as sure "just" wages to the working population, wage rates were fixed anew each year by the Justices of the Peace according "to the plenty or scarcity of the time."

The Justices in turn had to con sider the cost of living by refer ring to "the prices of all kind of victuals, fuel, raiment and ap parel, both linen and woolen, and also house rent." Wage fixing in sixteenth-century London was similar in many respects to wage fixing in London today. Regulation 01 Business If you believe that government regulations of commerce and in dustry are new and progressive, you should study the twelfth cen tury English industrial regula tions. At least since 1197, the English state had tried to regulate the technique of manufacture. For the cloth industry, for instance, the English government pre scribed the various dimensions of cloth, technique of production, dye ing, stretching, finishing, the tools of trade, the packaging and label ing, and soon. Similar regula tions, more or less complete, were imposed on all other industries. In France, Louis XIV, the Sun King, appointed intendants and inspectors who were charged with the regulation of industry. From the handling of raw materials to all subsequent stages of produc tion, these servants of the king controlled the production process.

The system of control obviously necessitated a variety of penalties. Frequently, "defective" goods were confiscated or cut to pieces, money fines were imposed, or the right to practice the craft or con duct the business was withdrawn. According to a decree of 1670, the 1966 PROGRESS OR REGRESS? 37 name of the offending merchant was to be posted, and the offender himself could be placed in a pillory for public derision. In spite of countless regulations and limitations that aimed to achieve uniform standards, cor ruption and personal favoritism blunted the controls. The govern ment could make individual ex ceptions to any prescription. Per sonal influence. was as important as it is today. Mercanli'ismPersists For instance, the medical pro fession today labors under the professional discipline. of several regulatory agencies. Under the ancien regime, training and ex amination of physicians also was a serious government matter. Un der the watchful eyes of the gov ernment, ancient quackery was to be perpetuated. In some cases, per sons with no training whatsoever were practicing the business of healing and offering salves and medicaments because they curried favor with the inspectors, or suc ceeded in winning over the lack eys, valets, mistresses, and adven turesses of the Court. Royal char ters, permits from princes, and acquired titles of physicians of the king or queen, of surgeons of the navy, and the like, sanctioned all kinds of quackery.

The methods of favoritism, cur rying favors, obtaining fran chises, licenses, or. government or ders have not changed materially since the seventeenth century. Diamonds and minks, personal connections and right contacts, government positions and offices, seem to retain their significance for professional success and finan cial reward. How modern and progressive are our prevailing doctrines and official policies? A historian who attempts to dissect the so~called modern version of political econ omy may be surprised to· discover its true age. Despite claims of originality, many of the modern are of ancient origin. Some stem from the armory of Marxism and Fabian socialism as they were de veloped during the nineteenth cen tury. Others date back to the age of Mercantilism that prevailed in Western Europe from the six teenth to the eighteenth century. And still others have survived from the darkness of the .Middle Ages. Much that passes for prog ress today is but a regression into the follies of the past. • PAY TV %HE RIGHT TO COMPETE AND TO SPEAK ELIZABETH GILLETT ON NOVEMBER 4, 1964, it became illegal in California, by a two-to one vote of the people, for anyone to sell and broadcast original tele vision programs to you on your home set.