Can We Sustain Prosperity; W. A. Paton

The cycle of great progress folDr. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan, and is known throughout the world for his outstanding work in these fields. His current comments on American attitudes and behavior are worthy of everyone's attention. lowed by decline seems to be in the process of striking illustration here in America. As to the fact of an astonishing advance there can be no question. In two centuries, roughly, the United States has moved from a scattering of settle ments, loosely affiliated, along our eastern seaboard to a country stretching across a continent, and recognized as a major world power. In this period, too, a primi tive technology has been transformed into a productive mechanism plac ing us in a forefront industrial po sition, with a· per-capita. standard of living that is unmatched, any where. In this· process hardships and difficulties were encountered by our forefathers that looked in surmountable at times, and that were mastered only by an amazing display of determination and forti tude on the part of many individ uals and families. The commitment 33 34 THE FREEMAN January of the founders of the nation to a republican form of government, as expressed in our constitution, and the accompanying atmosphere of faith in individual initiative and a free, competitive market economy, undoubtedly played a great, and perhaps decisive, role in making possible the tremendous gains that have been chalked up in such a short span of years.

But now that we've arrived, so to speak, there are ominous signs of decay and collapse. When one looks squarely at the prevailing tendencies and conditions it is hard to be optimistic about the future. With the widespread slackening of the willingness to work, and work diligently and well, exemplified right and left in absenteeism, care less performance on the job, de mands for ridiculously short week ly working hours, to mention a few of the evidences, a decline in pro ducti vity per person can hardly be avoided, even if the momentum of the technical march is maintained for a time and there is persistent abatement in the rate of population growth. Still more serious is the apparent waxing,among many, of the spirit of dependency; there seem to be few signs of reluctance to accept a place on the relief rolls and no widespread urge to get off the list of those who are living at the expense of the taxpaying group. The fearful increase in the level of serious crime, including destruction of both private and public property, the growing can cer of drug abuse, the outrageous irresponsibility and disorder on the educational front, the carnage on the highways, are examples of other factors that are rampant and that surely are having a nega tive impact on the quality of living as well as the quantity of com modities and services available for consumers.

Before going on I should point out that it would be difficult to demonstrate that mar ked material progress is inherently bound to generate a general downhill slide; but it does seem clear that we Americans have suffered a severe attack of softening-up, particu larly evident among the coddled and unruly young folks but found in varying degrees among all ages and classes. And it also seems clear that some of the serious problems with which we are con fronted could hardly germinate, to say nothing of growing like bad weeds, in the absence of a high level of economic output and pros perity. There is a chain of evi dence, too, of cyclical patterns of behavior among both individuals and groups, historically as well as currently, although there is room for argument as to underlying causes of rise and fall in particu lar situations.

1972 CAN WE SUSTAIN PROSPERITY? 35 Striding into Socialism The problems and difficulties re ferred to above are by no means the whole story of what ails us. During the past forty to fifty years the freedom of ini tia ti ve and choice that we have enjoyed, and that is so substantially responsible for the progress made, has been rapidly eroded. Government inter ference and control have been growing like the psalmist's green bay tree. Fostered by war and postwar problems', the depression of the early thirties, and the poli cies promoted during the Roose velt era, we have seen the hand of the state, at all levels, bearing down more and more heavily on the mechanism of the market, throughout the economic pipeline. Business men and politicians are still giving persistent lip service to "our system of free enterprise," but the continuing reiteration of this phrase is becoming a bit ab surd in the light of the actual state of affairs. The most discour aging aspect of the situation, for those with genuine allegiance to the view that the free competitive market is the effective means of stimulating and directing the eco nomic apparatus, is the extent of general acquiescence in the march toward a completely socialistic so ciety.

Indeed, there seems to be an in creasing tide of clamor for more and more government intervention and dictation in the process of pro duction and distribution, ranging from such fields as specifications for motor vehicle manufacture to the details of cereal packaging. This clamor gives evidence of both gross ignorance and a form of mysticism. Many act as if they were unaware of what the free market has accomplished for this country, and are equally lacking in the ability to distinguish between the essence of a· free economy and the nature of statism. And a host of people appear to believe that the ordinary humans who operate a government agency somehow be come supermen, wizards, when they put on the official cloak. Ac tually there is abundant evidence that government employment is still not regarded with great fa vor by many. of the exceptionally talented and' ambitious and that those entering the service of the state tend to become' insulated by civil service and other factors from the kind of pressures that still prevail in private business, with resulting impairment of any urge in the direction of topflight performance .•Belief in the superi ority of government operation over that of typical private organi zations is surely one of the most unjustified of all the familiar de lusions from which we are suffer ing. Experience with the mail 36 THE FREEMAN January service alone should be sufficient to cure anybody - even .the most gullible - of such a conviction.

The Poverty Bugaboo The activists in the drive against private business undertak ings and an economy depending on the market for guidance generally start their attack by questioning the position that by these means we have achieved a genuinely pros perous status. They can hardly deny the fact of an astonishing advance in technical devices and methods and an accompanying surge in the level of economic out put, but they contend that the ma-jor benefit of the improvement goes to the few rather than the many, and that the injustices in herent in the way the pie is cut and distributed are so serious as to warrant the indictment of the system rather than its support. That the mechanism of the mar ket will not work out perfectly in practice, even if not harassed or hamstrung by interventions, must be acknowledged. The American experience, .although extraordi nary, has certainly not been free from difficulties and inequities; the results, even from a neutral point of view, fall short of achiev ing an ideal state of affairs. The frailties of men have not been ov ercome; unfairness and predatory conduct have not been eliminated.

But any careful examination of the available data will show that the radical detractors, the people determined to substitute complete collectivism for a still partially free market economy, are way off base. In the first place they make the old Marxian mistake of assum ing that you can have mass pro duction without mass consump tion. If millions of bathtubs are made there must be millions of users; they can't all be crowded into the homes of the very wealthy. The truth is that capitalism has been the great leveler. In the in dustrial countries generally, and especially in the United States, the most striking feature of the trek up the hill has been the great im provement in the lot of the ordi nary, mine-run individual. With the development of machine meth ods, broad markets, and repre sentative government, it became no longer possible for a small rul ing class to skim off all the cream, leaving the masses at or near the subsistence level - the condition prevailing through most of human history.

The willingness of those work ing to destroy private enterprise and enthrone government to close their eyes to the actual situation is somewhat puzzling, and at times makes one question the sincerity of their accusations and protesta tions. It is true, of course, that 1972 CAN WE SUSTAIN PROSPERITY? 37 some people have larger incomes, better housing, and more property than others, and such a .condition may arouse envy and even hate, as well as provide powerful motiva tion for greater effort and produc tivity. But it is simply not a fact that America is a land of large scale poverty and economic dis tress. The air is full of baloney at this point. The attitudes of many remind one of the tale of the goose and the golden eggs. Present-day Americans are affluent, amazingly, when their condition is compared with the lot of their grandparents and great-grandparents, to go back no further. Let the complainers try to find examples of families at the bare subsistence level; they'll have trouble in locating a single case. When· the writer was a youngster, in contrast, .there were households in many neighborhoods where at times perhaps the only available foodstuff was corn-meal - and not much of that. And the people suffering real privation in those days were often still too proud and ambitious to expect to be taken care of by either the neighbors or any branch of gov ernment. Abject poverty - where keeping body and soul together is a problem - has almost disap peared in this country, and today we are arguing about the frills, not the necessities.

I recall flying across Appalachia one beautiful evening during the period when the hue and cry about the pathetic state of the miners and their families was at its height. It was just at dusk, but following the valleys at less than a mile up I. had a good view of hundreds of cabins and small houses, both scattered and in the villages along our route. And I was struck by the fact that there was a television tower on almost every home, including the shan ties, and one or two cars standing in nearly every driveway (and they didn't all look like jalopies). I realize that the presence of a television set and a· car doesn't demonstrate affluence, but neither does it suggest a state of acute misfortune and misery. With the campaign to abolish "poverty" now in full swing, main ly through the means of coerced transfers from those with to those without (by political definition) there is grave danger that there will shortly be an accelerating re luctance on the part of those pro viding the wherewithal to con tinue to carryon for the benefit of the idle and nonproductive, and that the resulting decline in out put will produce a crisis that will finally lead to a tyrannical dicta torship. Indeed, there is already some evidence of slackening effort, on the part of those still working and. paying taxes, in the face of 38 THE FREEMAN January the mounting burden of the "wel fare" program.

The Importance of Pressures The question propounded in the heading for these comments, how ever, should not be answered by a blunt negative. It leads into the broad problem of motivation, a subject worthy of serious study. In attempting to examine this problem very briefly, and to take note of some of the limitations of the pessimistic position outlined here, some further attention should be given, first, to the im pact of hardships and rough sled ding on the development of char acterand striving for improve ment. That pressure of some kind is required to induce man to bestir himself, vigorously and resource fully, to spur him to effort and ac complishment, seems quite clear. As somebody has put it, "when the going gets tough the tough get going." The basic, universal pres sure is the urge to survive. Among our remote, primitive ancestors this pressure was undoubtedly most urgently felt in the need to find food adequate to maintain life, and in .many parts of the planet today this need is still par amount. In the Western World, and particularly here in America, this primary pressure has receded, at least for the time being, into the background. As a result of great technical progress and other factors we are now concerned with a high rather than a bare living level, as already pointed out.

In the matter of food we have meat, dairy products, fruit, vege tables, and a great array of proc essed and packaged foodstuffs, and it would be difficult for most Americans even to imagine them selves restricted to a diet - for ex ample - of unpolished rice with an occasional dab of fish. In clothing it is style that counts, not the need to keep from freezing. In housing almost everyone has elec...; tric lights, and central heating and airconditioning are so widespread as to be commonplace. Improved streets and highways are crowded with more than 100,000,000 mo tor vehicles. Tra.vel, entertain ment, educational facilities, a flood of printed matter, are generally available. And so on. As I said before we a,re affluent, and sus tenance is not our immediate prob lem. It is difficult to judge what is the overall ~ffect of the present day release, on a substantial scale, from the threat of starva tion, and the general slackening of the struggle for the other "neces sities". That the absence of these fundamental pr'essures has a bear ing on current conditions may reasonably be concluded. One evi1972 CAN WE SUSTAIN PROSPERITY? 39 dence of the effect of the "good times", often pointed out, is found in the many cases where the sons and daughters of those who have made the grade show little of the urge to work hard, to hustle, to strive, as did their parents and grandparents. And in view of the extent to which some of the young sters are indulged this should not be surprising. Another evidence is supplied by artificial, built-in bar riers to pressure. Civil service and professorial tenure are examples of shelters that often contribute to sluggishness and poor perform ance. If the boss has no power to fire anybody why should an em ployee go all out to improve his productivity? Why should he not slow down in the traces? I once joshingly suggested to a. univer sity president that the board of regents should fire at least one full professor annually, even if he were picked by lot, as a means of keeping the teaching staff on their toes. (Of course there are cases where conscience, a developed work habit, and native ambition to ex cel, will offset the tendency to take it easy under the protection af forded by tenure.) Relieve Unnecessary Pressures Supporters of tenure, union power, and other policies, aimed at preventing dismissals, may con tend that the resulting freedom from fear, increased sense of se curity, will serve to promote rath er than check the inclination to pitch in hard at the work in hand, and this point is not utterly with out merit. Acute and continuing fear, at any rate, may not be con ducive to top performance. Thus the constant dread of' finding the pink slip of dismissal in the pay envelope, and anxiety as to arbi trary and unj ust treatment, are not favorable conditions for the stimulation of first-class effort.

But such conditions are a far cry from those. in which dismissal for serious cause - persistent absen teeism, drunkenness, sloppy work manship, sabotage, and so on - is impossible because of tenure or other restraints on management. On the market place there is broad evidence of the pressure re quirement .. Without the push pro vided by competition the market can not be expected to furnish price structures and movements that will .act as sound thermo static guides in production and dis tribution. It is beyond the scope of this piece to consider the mean ingand impact of competition, but it is not inappropriate here to in sist that the very essence of a· con dition of active competition is C'ort tinui,ng pressure in the direction of better products and services to the consumer, a.t the lowest pos sible cost.

40 THE FREEMAN January The Need for Lures Before concluding these com ments notice should also be taken of the importance of the carrot in front as well as the stick behind as a stimulant. Opportunity, en couragement, inducement, as well as hardship and difficulty, can prod men to action and increased ef fort. Thus it can be argued that the opportunity presented to early American settlers by a rela tively open continent, blessed with abundant natural resources, rath er than the obstacles and difficul ties as such, is the factor that ex plains the great forward surge in technology and productivity. Op portunity beckons, without doubt, and a hopeless outlook, with no sign of a silver lining in view, is not conducive to great endeavor. This is very evident in the areas of capital formation and invest ment; without the lure of earnings the incentive to save and invest is surely impared if not largely de stroyed.

In climbing the hill, to consider the possible effect of opportunity a bit further, every step success fully taken may provide encour agement for attempting another stride, and as the momentum of progress increases the glimpses of the possibilities lying ahead may become even more potent than the sight of the obstacles yet in the way. It is hardly practicable, and not necessary, to pass judgment on the relative weights of the im pacts of lure and pressure, but we can all agree that the presence of openings, prospects, of doors at least ajar, may well be of crucial significance in any society, at any stage of its development. Will the Upward Climb Be Resumed? Are there chinks in the clouds that have been gathering over our heads in America, and have been becoming blacker and blacker for some time? Do our current troubles constitute the early stages of a long decline into some kind of "dark ages"? As I've al ready indicated, grounds for op timism are rather hard to find.

But a turnabout - perhaps in a generation or two - shouldn't be ruled out. It is conceivable that present destructive trends will be checked, by some juncture of cir cumstances, and even reversed in due course. Many Americans still have a lot of latent spunk left, that comes to light occasionally in the heroic efforts - for example - to rescue trapped miners, children in peril, or even the cat or dog lost in a sewer. In the field of sport, too, we see the survival of a strong competitive spirit and de votion to the ideal of top perform ance. And there are other and still more impressive evidences of cour age, sacrifice, and dedication.

1972 CAN WE SUSTAIN PROSPERITY? 41 Especially needed is recognition of the plain fact that our society has done no more than climb the foothills; the mountain top is a long way off. On the technological front, .certainly, there are still challenges galore. Perhaps atten tion should be shifted from outer space to the Earth's crust. Thus far the deepest we have dug is not much more than a mile. Under ground housing has been experi mented with here and there, but there is room for a. tremendous development in this field -- as any visitor to the underground home at the last world's fair in New York will attest.! It would not be out of the question to put a whole city underground. As our reserves of basic metals and other resour ces, that we don't know how to re place in kind, become exhausted there will be increasing need for the production of substitutes from the sand and other substances that are available in inexhaustible amounts. It's unlikely, but scarce ly inconceivable, that the problem of transmutation may be solved the dream of the ancient alche mist. Our great railroad system is almost prostrate, but it could be 1 For the first outline of the possibili ties of underground construction see the author's "On Going Underground," Mich igan Quarterly Review, January, 1962, and a discussion of this article in the Sun day edition of the Detroit Free Press, March 31, 1963.

restored and greatly advanced. Why not have tubes crossing the continent through which both pas senger .and· freight trains could move at speeds of two or three hundred miles per hour? These few suggestions are only a sma.ll sample of major possibilities. And minor improvements - of the zipper class - are possible by the thousand. We still don't have a pitcher from which we can pour our cream or syrup without drip ping! Or even ·a, cereal dish with a slanting bottom, so that we can cream our corn flakes, by stages, without soaking the whole dish ful. And when is somebody going to come along with a good trans parent plastic storm window, to be hung inside on a roller, so the householder can put it on or off in a twinkling? In conclusion I feel obliged to return to the point that we can't put our feet back on the path that may lead, eventually, to the high est peak, unless we abandon the downhill track on which we are now chugging along toward the mistaken goal of complete govern ment control and operation - the socialist state. Here is the crucial _~ifficulty that must be overcome if an upward course is to be resumed.

And daydreaming, disorder, and destruction. won't help us to make the shift. I CLARENCE B. CARSON THE FOUNDING OF THE AMERICAN REPUBLIC 6 The Mercantile Impasse 42 WHAT PROVOKED the American col onists to resist British acts, to rebel against restrictions placed upon them, and eventually to de clare and effect their independ ence? To put the· matter in more conventional terms: What caused the American· revolution? Men who have spent years study ing the questions propound dif ferent answers. Some hold that the British mercantile system pro vided the provocation to revolt. Others have held that the Amer ican colonists benefited from mer cantilism and that, this being so, mercantilism was hardly at the root of the difficulty. Another thesis that has been argued, most persuasively by Lawrence Henry Gipson, is that the American col onies had attained a level of ma turity that made them no longer dependent upon Britain and no longer desirous of the connection.