Book Reviews

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN WILLIAM F. RICKENBACKER called the turn on silver in this country: it became too valuable industrially and commercially to permit' its use for currency at the rate the U. S. Treasury was willing to pay for it. A simple proposition in supply and demand. Now, in a book which bears the ominous title, Death of the Dollar (Arlington House, $4.95) , Mr. Rickenbacker says that gold is bound to go the way of silver. Once upon a time gold had two primary uses. Since it did not rust and was suitably scarce, it made the most desirable store of value that human beings could find. It kept better than cattle, tobacco, or even wampum. Ergo, it became the preferred backing for curren cies, the most satisfactory means of settling differences in interna tional trade balances. It also had the appeal that goes with great beauty. The economist doesn't have to become an esthetician to know that women and the likes of In dian princes prize gold for decora tive purposes; all he has to do is to take this a.s a phenomenon that has persisted ever since men first began to work metals.

But now, in the technological age, the properties of gold are be coming prized for all sorts of uses that have nothing to do with the monetary needs of governments and central banks, the shipping of gold bars to settle international balances, or the desires of maha rajahs for ornament. The heart of Mr. Rickenbacker's book is surely those pages about the increasing demands for gold in industry. Since this is the news in his book, let us summarize a bit of it. Gold in the Space Age There is the new science of space-age electronic circuitry, for example. All of a sudden we dis cover that 23 per cent of domestic gold consumption is in electrical and electronic applications. Gold is used in diodes, in transistors, and as small-diameter "whisker" wire. In salt or solution form it is in demand for the electroplating of printed circuits, resistors, trans ducers, silicon wafers, and connec tors. The radioactive gold isotope 701 702 THE FREEMAN November 198 is used in cancer therapy.

Gold-platinum alloys are used as rayon spinnerets. Nuclear reactors are safer when their structural parts in contact with the fuel solu tion are plated or clad with gold. This sort of catalogue could be extended beyond the capacity of this or any magazine to print it. Because the catalogue of indus trial uses grows bigger every year, it is amazing that no book has yet been written to explore its rami fications. The statistics are inter esting. Back in 1957 the industrial consumption of gold was 1.46 mil lion ounces. In 1966 the figure had jumped to 6.1 million ounces. Go ing up at the rate of 15 per cent per year, the domestic consump tion of gold for nonmonetary pur poses has more than quadrupled within a decade. It is now four times the annual U.S. domestic gold production. In the world out side the U.S. the production of gold is leveling off and may actu ally decline. Says Mr. Rickenback er, "The day of gold as the play thing of central bankers is ended."

A Knotty Problem In view of the facts, Mr. Ricken backer is amazed that Washington thinks it can hold the price of gold down to $35 an ounce. He is also amazed that great thinkers wrack their brains to come up with such self-incriminating phrases as "paper gold." In the light of his sharp and terse sections on the use of gold in industry, the somewhat overextended chapters which Mr. Rickenbacker devotes to such things as the International Mone tary Fund and the failures of the Federal Reserve Bank to copewith inflation seem somewhat windy. This isn't the fault of Mr. Ricken backer's styIe, which is always lively, impertinent, and succinct. The windiness derives from Mr. Rickenbacker's excessive use of quotations from "group think" documents and from the so-called experts. The historian may prize Mr. Rickenbacker's collection of other people's words, but the gen eral reader will find himself try ing to pry his eyes open as the New York Federal Reserve dis closes that the mechanism of in ternational payments "has been under constant study and review by a number of official bodies, in cluding the IMF, the central bankers who meet regularly at the Bank for International Settlements in Basle, Working Party 3 of the Economic Policy Committee of the Organization for Economic Devel opment (OECD) in Paris ... and national treasuries and central banks." What came out of all this "constant study and review"? The :B'ed solemnly sums it up as fol lows: "The central bankers em phasized that even strong cur1968 AS GOLD GOES • • • 703 rency defenses cannot be a substi tute for the eventual correction of major underlying payments im balances - a point heavily stressed at the IMF meetings as well. In this respect, the continued balance of-payments deficits of the United States have been a source of con cern."

In other and shorter words, the bankers say that we won't get well until we find a cure. But we knew that already. Too Many Controls As a believer in the quantity theory of money, a belief which he shares with Milton Friedman, Mr. Rickenbacker doubts that the "cure" will be found by people who try to restrain and redirect the movement of gold, goods, and serv ices across international bound aries by offering "controls." This points the way to Hjalmar Schacht ism, autarky, and declining pro duction on a world scale. It ends by substituting the gun standard for the gold standard. Controls breed more controls, and we need fewer of them, not more. The world will remain in trouble as long as the American economy, which is the strongest on the planet, remains inflationary. As currency and credit are pumped into the U.S. system at a rate that vastly exceeds annual increments in productivity, the continued "supposition" that the dollar is "equal to a fixed number of marks or francs or guilders" is simple idiocy. W:e won't solve our exter nal difficulties, and those of ~ther countries as well, until the Amer ican economy accepts Federal bud geting discipline at home. It is the domestic monetary policies of the various important nations that count, not the attempts of inter national monetary authorities to devise means of establishing new "drawing rights" and the multi plication of "paper gold."

Mr. Rickenbacker is attracted by Milton Friedman's ideas about free floating exchange rates, which would let the price of gold fluctu ate in accordance with free mar ket dictates. A new fixed price for gold, he thinks, would only create the necessity of re-pegging the dollar to gold every other genera tion. As a believer in free choice and the philosophy of libertarian ism or voluntarism (if such awk ward words must be used), I am attracted to the Friedman idea myself. But in a world that shies away from any disciplines at all, wouldn't it be a boon to get a. stable relationship between the dollar and gold at a realistic new rate even if it only promises to last for twenty years? This is the question that Mr. Rickenbacker really poses. I wish he had done more to answer it. ~ 704 THE FREEMAN November ~ THE SOVIET ECONOMY: MYTH AND REALITY by Mar shall 1. Goldman (Englewood Cliffs, N. J.: Prentice-Hall, 1968), 176 pp., $1.95.

Reviewed by Gary North UP UNTIL NOW, probably the best brief introduction to the Soviet economy has been Robert W. Campbell's Soviet Economic Power (Praeger, 1966). Now, a second must be added to the list, Profes sor Goldman's study of myth and reality in the Soviet economy. In each of the thirteen cOlnpact chapters, Goldman examines a myth. For example, he demon strates that the economy of Czar ist Russia was growing, and that by 1913 it was in no sense a back ward country economically. In fact, it was not until 1953 that the real wage income of the urban Soviet worker equalled the 1913 level! Not only was Lenin's October Revolution not a legitimate Marx ist one, by Marx's own standards, Goldman shows that subsequent economic practices of the USSR have not conformed to Marxist teachings conc~rning a "people's democracy." Planners have con tinually resorted to capitalistic measures in order to make the system function at all. In spite of Marx's hostility to the conserva tism of Europe's peasantry, Goldman thinks it unlikely that Marx ever intended that peasants should be expropriated on the scale prac ticed by the Soviets. Estimates have run as high as 10 million deaths as a result of Stalin's col lective farm program.

In recent years, the author shows, there have been moves toward decentralization of·· the economy. Such capitalistic fea tures as rent, interest, and a limited profit system have been imposed. Nevertheless, Goldman is under no illusions as to the nature of these innovations: "It is unlikely that private ownership of the means of production will ever be tolerated, except perhaps in a few small service industries or trades." Thus, chapter ten is devoted to a refutation of that in creasingly prominent myth: "The Soviet Union is becoming capital ist, and, in a few years, there will be no differences between the So viet and American systems." Un less, he fails to add, America de cides to meet the Soviets more than halfway. The book is no diatribe. Where he thinks the Soviets have ac complished something important (often by employing nonsocial istic means), he says so. This book is a healthy corrective for those myths that have as their foundation the worship of collec tivist economic practices. ~ the Freeman VOL. 18, NO. 12 • DECEMBER 1968 Know Thyself-A .Revisitation Daniel R. Dixon 707 A recognition that the unknown is infinite, affording the individual unlimited opportunity to learn and grow.