The State Swelled and the People Shrank; W. H. Chamberlin

The people were actually enjoined from doing this by the penalty of being whipped with the dreaded knout. After remarking that freeMr. Chamberlin is a skilled observer and re porter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is· a contributor to The Wall Street Journal and numerous magazines. dom which had to be maintained with the threat of the knout could not have been worth much, Klyu chevsky pronounced this eloquent judgment on that phase of Russian history: "The state swelled and the peo ple shrank." It may seem a far cry from af fluent, technically-advanced, twen tiethcentury America to the poor, barbarous, half-Asiatic Muscovite state of three centuries ago. But statism is a disease that recog nizes no boundaries of time and space. The United States, con ceived in liberty, as Abraham Lin coln said ~ and provided by its Founding Fathers with a splendid set of constitutional checks and balances against arbitrary govern ment power - is moving visibly and with alarming speed down the collectivist path at the end of which the government is every thing, the individual nothing. We 15 16 THE FREEMAN May are approaching that condition which the brilliant and prophetic French poli tical thinker and phi 10sopher' Alexis de Tocqueville, foresaw so clearly more than a century ago: Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratifications and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if its object were to prepare men for man hood; but it seeks, on the contrary, to keep them in perpetual childhood.

It is well content that the people should rejoice, provided they think of nothing but rejoicing. For their hap piness such a government willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness. It provides for their se curity, foresees and supplies their necessities, facilitates their pleasures, directs their industry, regulates the descent of property, and subdivides their inheritances. What remains but to spare them all the care of thinking and aU the trouble of living? The will of man is not shattered, but softened, bent and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not de stroy, but it prevents existence. It does not tyrannize, but it compresses, enervates, extinguishes, and stupi ties a people, until each nation is re duced to be nothing better than a flock of timid and industrious animals of which the government is the shepherd.

I have always thought that servi tude of the regular, quiet, and gentle kind which I have just described might be combined more easily than is sometimes believed with some of the outward forms of freedom; and that it might even establish itself under the wing of the sovereignty of the people. (Italics supplied.) Managed Mediocrity It is toward this type of society that almost the entire world has been moving, at a slower pace after World War I, at an acceler ated pace after World War II. In the United States, in the memory of living men and women, there has been a tremendous shift, very much speeded up in the last years, from the traditional American conception of a society in which every member is responsible for looking after his own needs - ex pecting no help from the govern ment and not forced to give help outside his own family obligations, except as conscience, human sym pathy, and compassion may prompt him - to the kind of society which Tocqueville foresaw, with the gov ernment as the shepherd and the citizens as a "timid and industri ous flock."

Perhaps the greatest shift has been from the idea that what a man earned was his own, to be spent or saved at his pleasure and 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 17 discretion. Now the individual no lon~er works for himself,' but for an increasing horde of tax collec tors - Federal, state, municipal, and whatnot - imposing an enor mous variety of direct and indirect levies. The explanation of this change is easy. Gone is the time when the individual, in return for keeping practically all he earned, was expected to pay his own rent and his own doctor's bills' and to make reasonable provision·, for his years of retirement. Here is just a partial and limited list of the ob ligations which the solvent tax payer is now required to meet: • Safeguarding the freedom of remote peoples who may or may not have much conception of what freedom is. • Making good the deficits which regularly appear' in the balance of payments figures of former colonial countries which have gone in for planning and socialism.

• Paying a share of the rent and medical bills which, in un sophisticated earlier times, were supposed to be settled by the people who' incurred them. • Supporting in· idleness large numbers of persons who, in the unregenerate "bad old days," would have been expected to work for a living, even at hard and low-paid jobs. • Paying all sorts of expenses of states and municipalities, large· and small, necessary and unnecessary, which are subsi dized from Federal funds. "Charge it to Uncle Sam" has become the favored easy way of obtaining acceptance for every scheme of real or supposed social benefit that costs money. Which might be fine if Uncle Sam were an inexhaustible source of self generating wealth. But this is not the case. Governments by them selves create no wealth whatever. What they payout must be taken from those on whom they levy taxes. Here is an example of the kind of charge on Federal revenues (which means on your income taxes, and mine and the next man's) that would have been, un til recently, quite unthinkable. A group in the Boston suburb of Brookline thought it would be de sirable to bus school children from the predominantly Negro area of Roxbury and distribute them among Brookline schools. How much popular support this idea attracts is not clear. But the spon sors anticipated no trouble about money. Uncle Sam would pay.

Negative Thinking There was a time, not much more than a generation ago, when it was considered a social disgrace to depend on state funds for a 18 THE FREEMAN May livelihood. Today, "collecting se curity" has become one of the major unlisted industries. And there is a concerted movement un der way to carry the process of pillaging the industrious and thrifty for the benefit of the thriftless and shiftless - which be gan with the imposition of the graduated personal income tax a long stride forward by intro ducing a so-called NIT, negative income tax. This would assure every family a minimum income, tentatively put at $3,000 a year, whether it was worked for and earned or not. The cost of such an arrangement could easily run as high as $11 bil lion. In one way or another, by higher taxation or inflation, this 'would come out of the pockets and savings of the productively em ployed. As one advocate of this system remarks: The NIT would eliminate the de grading kind of means test to which applicants for public assistance are subjected in most localities. Instead of being an applicant (often almost reduced to a beggar) the individual would be a claimant by right, as in the Social Security System .... With only the same kind of spot-checking that is now done within the income tax framework, the establishment of eligibility would be handled simply and with the same degree of dignity accorded to the taxpayer at present.

Some of the consequences of the nega tive income tax, should it be enacted into law, are almost breath-taking. Some 34 million people· would become permanent state pensioners, to be maintained at the cost of the solvent taxpay ers. The incentive to work at less skilled and lower paying jobs has already been gravely weakened by. the present system of social se curity and relief payments. Under NIT, this incentive would disap pear altogether. A permanent lob by would be created for raising the income level at which people would be eligible for NIT to $4,000, to $5,000 - the sky would be the limit. Individual responsi bility, a conspicuous casualty of fashionable modern social and eco nomic theories, would sustain what might well be a final fatal blow. So, Why Work? At both ends of the economic scale the question, "Why Work?" would be asked more often and insistently. The beneficiaries of this gigantic pension system granted without regard for real need, disability, or consideration of willingness to work - would see Iittle reason to take an unskilled job paying $3,000 a year or a lit tle more if they could sit instead watching television, with occa sional trips to the nearest bar, 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 19 financed out of the regular gov ernment checks.

At the same time, the more am bitious and affiuent-the principal sufferers under the graduated in come taxes imposed by the Federal government and many states would see little incentive to work hRrd~r if whnt they earned would be largely siphoned off for such purposes as putting up some of the deserving poor at the Astor Hotel (a recent news item about this practice appeared in New York papers) or paid out under the provisions of NIT. A more effective disincentive to the hard work that is the key ele ment in national prosperity and well-being could hardly be imag ined. Yet NIT has enlisted the support, not only of some aca demic theorists, but of the Presi dent's Committee on Automation, which includes among its mem bers some prominent industrial ists. It sometimes seems as if pub lic opinion in America - the coun try of all others which offers a practical example of what can be achieved under a system of in dividual free enterprise - has be come quite bemused with the idea that, if and as the state becomes bigger and bigger and spends more and more, such social prob lems as health, education,unem ployment, and poverty will be elimina ted.

Opportunities Abound A book that appeared recently, David Sarnoff: A Biography, by Eugene Lyons (Harper and Row, $6.95) gives an excellent picture of how these problems could be and often were met long before the collectivist society was dreamed of. Coming to America as a ten-year-old immigrant with a poor family from an isola ted Jewish village in western Russia, young Sarnoff was as underprivi leged as they come. No big-brother government extended him a help ing hand. The illness and incapac itation of his father made the family largely dependent on David's earnings as a newsboy. No one paid the Sarnoffs a negative income tax or gave them state aid of any kind. But young David took to New York and its larger outlook and opportunities like a duck to water. He studied hard in school, and without asking whether the school was "integrated" or not. He read voraciously out of school as well as in school and took advantage of the lectures and courses at the Educational Alliance, an East Side settlement house. As a final Horatio Alger touch, he began at the bottom of the ladder as an of fice boy in the Marconi Company, parent of the huge Radio Corpora tion of America, of which David Sarnoff has long been president 20 THE FREEMAN May and which does business at the rate of billions of dollars a year.

Sarnoff came to America in im migrant steerage quarters; his return crossing of the Atlantic was in luxury quarters on a fa mous liner as a member of the American delegation to the con ference on German reparations in Paris in 1928. In both world wars his knowledge of electronics was of conspicuous service to his coun try and he came out of the Second with the rank of General, after having put the French radio busi ness on its feet after the expul sion of the Germans in 1944. Such a career as Sarnoff's is, of course, exceptional.· But the num ber of individuals who have risen from very humble backgrounds to the highest achievement in poli tics, business, science, and schol arship is unlimited. Most notable and famous of all is Sarnoff's boy hood hero, Abraham Lincoln, whose rise from frontier rail splitter to the highest office in the land during a period of supreme national crisis was achieved with out benefit of either Federal aid to education or an antipoverty op eration.

Inflationary Government Spending The United States seems to be succumbing to one of the oldest, most persistent, and most harmful of human delusions: that government may spend without regard for the rules of prudent finance and emerge from the experiment unscathed. Already, inflationary danger signals are flying in many sectors of the economy. Yet the country is being committed both to a war of uncertain duration and cost in Vietnam and to huge social welfare spending which, if past experience. is any guide, will grow steadily from year to year. In the name of overcoming pov erty through a vast proliferation of bureaucratic agencies the grave risk is being incurred of impover ishing everyone through an ac celerated depreciation in the pur chasing power of the dollar. The price tag is usually ignored in euphoric forecasts of growth and glowing estimates of what the government will do for almost everyone. Indeed, the biggest rate of growth is in nondefense gov ernment spending, up 60 per cent between 1961 and 1966, a far higher rate of increase than in dustrial output registered for the same period.

Education for What? United States education in the past was at most a state or local, if not altogether a personal and private, responsibility. Federal ex penditure in this field in 1945 was $291 million. But now the bars are down. This item of Federal 1966 "THE STATE SWELLED AND THE PEOPLE SHRANK" 21 spending was $6.3 billion in 1965 and will pass $8.7 billion in 1966. Apart from the pressure on the stability of the currency and the drain on the pockets of the tax payers, this orgy of spending has the markedly undesirable effect of enabling Federal bureaucrats to dictate to local schooJ boards how they must arrange the racial com position of their community schools, on pain of having Federal grants withheld. State educational bureaucrats, of course, can be just as tyrannical as Federal. Mount Vernon, Malverne, and other New York suburban communities have been split into hostile camps and generally disrupted by arbitrary orders from the state Commis sioner of Education in Albany that the neighborhood school con cept on which American education has always been based·· be sacri ficed to objectives that are not only unreasonable but, probably, in the long run, impracticable: "correcting racial imbala,nce" and eliminating "de facto segrega tion." This kind of forced integra tion is just as obnoxious, just as much of a blow to liberty, as the forced segregation which is now, happily, on the wane. This ten dency to use Federal grants as a club against local communities is another proof of the danger of vesting too much power in central authority.

The Great fiction of Paying Each Other's 8ills America, which grew great and prosperous on the principle of keeping government. off the backs of its .citizens, of leaving every individual free to go as far as his character and ability would war rant, now gives the impression of contracting what might be called Bastiat's disease. Frederic Bastiat was a brilliant French economist of the early nineteenth century whose definition of the welfare state could scarcely be improved on: "That great fiction, by means of which everyone hopes to live at the expense of everyone else." How else can one understand the apparently serious proposal in the report of the President's Coun cil of Economic Advisers that the Federal government "rebuild the cities"? As if this formula would relieve the taxpayers of the vari ous cities of the necessity of pay ing the bill for this operation! Two conspicuous factors in the decay and decline of such mighty political institutions as the Roman and Byzantine Empires were ex cessive multiplication of bureau cratic offices and overtaxation, car ried to such extremes that the peo ple were indifferent when the bar barians in the West and the 1\10 hammedans in the East broke through the frontiers. If the 22 THE FREEMAN May United States is to avoid a similar danger, there must be a swift, de cisive change of emphasis, from the government to the individual, from state help to self-help, from the society of the Big Brother state (which takes from some pockets everything it professes to put into others) to the historic American society of independent, self-reliant individuals.

One career like David Sarnoff's is worth a dozen antipoverty pro grams. ~ The Greatest Threat IN A SENSE, inflation is a moral as well as an economic issue. Inflation gets its impetus from human selfishness and greed. Deficit spending is in reality the transfer to future generations of the tax load for present-day spending. The depth of our na tional moral decay is portrayed by two common excuses, "If we don't spend it, someone else will" and "Why worry about the national debt, we owe it to ourselves." Is it any wonder that the Job Corps spends 10 to 15 times as much per student as the average public school; that the War on Poverty is degenerating into a gigantic boondoggle; that 8 to 10 million people find wel fare a more attractive way to live than working; that the air lines to Washington are jammed with local businessmen and civic leaders pleading for federal dams, swimming pools, and airports? Materialism holds sway in America today.

The ,greatest threat to the future of our nation-to our free dom - is not foreign military aggression or internal communistic subversion but the growing dependence of the people on a pater nalistic government. A nation is no stronger than its people and the best measure of their strength is how they accept responsi bility. There will never be a great society unless the materialism of the welfare state is replaced by individual initiative and re sponsibility. CHARLES B. SHUMAN, President's address to the American Farm Bureau Federation, December 13, 1965 LUDWIG VON MISES THE BOSSES of the Russian Com munist Administration are dis turbed by the fact that economic conditions in the countries which have not adopted the methods of the Communist International are by far more satisfactory than those in their own country. If they could succeed in keeping their "com rades" in complete ignorance of the achievements of Western cap italism, they would not mind the low efficiency of their own plants and farms. But as some scanty in formation about the "affluence"