Morality and Controls; M. Friedman

This article was first published in two parts in The New York Times on October 28 and 29, 1971. © 1971 by The New York Times Com pany. Reprinted by permission. 28 MILTON FRIEDMAN in the private interest of large numbers of citizens to evade the controls, and by making actions illegal that are in. the public in terest, the controls undermine in dividual morality. One of the proudest achieve ments of Western civilization was the substitution of the rule of law for the rule of men. The ideal is that government restrictions on our behavior shall take the form of impersonal rules, applicable to all alike, and' interpreted and ad judicated by an independent judi ciary rather than of specific orders by a government official to named individuals. In principle, under the rule of law, each of us can know what he mayor may not do by consulting the law and determ ining how it applies to his own circumstances.

The rule of law does not guaran1972 MORALITY AND· CONTROLS 29 tee freedom, since general laws as well as personal edicts can be ty rannical. But increasing reliance on the rule of law clearly played a major role in transforming West ern society from a world in which the ordinary citizen was literally . subject to the arbitrary will of his master to a world in which the ordinary citizen could regard him self as his own master. Contract or Status? The ideal· was, of course, never fully attained. More important, we have been eroding the rule of law slowly and steadily for decades, as government has become more and more a participant in economic affairs rather than primarily a rule-maker, referee, and enforcer of private contracts. It was, after all, the development of the private market that made possible the original movement from a world of status to a world of voluntary contract. As government has. tried to replace the market in one area after another, it has inevitably been driven to restore a world of status.

The freeze and even more the pay board and· price board of the Phase II controls are clearly an other massive step away from the rule of law and back toward· the rule of men. True, the rule of men will be under law but that is a far cry from the rule of law - Stalin, Hitler, Mussolini, and now Kosy gin, Mao, and Franco all rule un der law. The price that you and I may charge for our goods or our labor or that we may pay others for their goods or their labor will now be determined, not by any set of legislated •standards applying to all alike, but by specific orders by a small number of men appointed by the President. And jf govern mental edict is to replace market contract, there is no alternative. There are millions of prices, mil lions of wage rates arrived at by voluntary agreements among mil lions of people. The collectivistic countries have been unable in dec ades to find simple rules enabling prices and. wages to be established by any alternative impersonal mechanism.

Politics and Patriotism We are not likely to succeed. And we are not trying. Instead, the appeal is to the patriotism, civic responsibility, and judgment of political appointees, must of whom represent vested interests. How do patriotism and judgment determine that the price of a widget may rise 2.8 per cent but the price of a wadget, only 0.3 per cent; the wage of a widgeteer by 2 per cent but of a wadgeteer, by 10 per cent? Clearly they do not.

30 THE FREEMAN January Arbitrary judgment, political pow er, visibility - these are what will matter. The tendency for such an ap proach to violate human freedom is even more clearly exemplified by the present situation with re spect to dividends. The President has requested firms not to raise dividends - he has no legal power to do more. The request has been accompanied by surveillance, a calling down to Washington and public lambasting of the handful of corporations that did not con form, and a clear, implied threat to use extralegal powers. These measures have no legal basis at all. Yet I know of only one small company that has had the courage to refuse to cooperate ·on grounds of principle. The full logic of the system will not work itself out this time. Our strong tradition of freedom, the ineffectiveness of the controls, the ingen uity of the people in finding ways around them - these will lead to the collapse of the controls rather than to their hardening into a fullfledged straitjacket. But nonetheless, it is disheartening to see us take this further long step on the road to tyranny so light heartedly, so utterly unaware that we are doing something funda mentally in conflict with the basic principles on which this country is founded. The first time, we may venture only a small way. But the next time, and the next time?

A Nation ollnlormers Enforcement of the price and wage controls, as of the freeze, must depend heavily on encourag ing ordinary citizens to be inform ers - to report "violations" to government officials. When you and I make a private deal, both of us benefit - otherwise we do not have to make it. We are partners, cooperating voluntarily with one another. The terms, so long as they are mutually agree able, should be our business. But not any longer. Big Brother is looking over our shoulders. And if the terms do not correspond with what he says is O.K., one of us is encouraged to turn in the other. And to turn him in for do ing something few people have ever regarded and do not now re gard as .in any sense morally wrong; on the contrary, for doing something that each of us regards, when it affects us, as our basic right. Am I not entitled to sell my goods or my labor for what I con sider them worth as long as I do not coerce anyone to buy? Is it morally wrong for Chile to ex propriate the property of Ana conda Copper - Le., to force it to sell its copper mines for a price less than its value; but morally right for the U.S. government to 1972 MORALITY AND CONTROLS 31 force the worker to sell his labor for less than its value to him and to his employer?

By any standards, the edicts of the pay board and the price board, like the initial freeze, will be full of inequities and will be judged to be by ever increasing numbers of people. You believe that you are entitled to a pay raise, your em ployer agrees and wishes to give you one, yet the pay board says no. Will there not be a great tempta tion to find a way around the ruling? By a promotion unac companied by any change in du ties but to a job title carrying a higher permitted pay. Or by your employer providing you with amenities you formerly paid for. Or by one or another of the in numerable stratagems - legal, quasi-legal, or illegal - that ingen ious men devise to protect them selves from snooping bureaucrats. Two W fongs = Two W fongs In general, I have little sympa thy with trade unions. They have done immense harm by restricting access to jobs, denying excluded workers the opportunity to make the most of their abilities, and forcing them to take less satis factory jobs. Yet surely in the present instance they are right that it is inequitable for the gov ernment retroactively to void con tracts freely arrived at. The way to reduce the monopoly power of unions is to remove the special legal immunities they are now granted, not to replace one con centrated pOWE1!" by another.

When men do not regard gov ernmental .measures as just and right they will find a way around them. The. effects extend beyond the original source, generate wide spread disrespect for the law, and promote corruption and violence. We found this out to our cost in the 1920's. with Prohibition; in World War II with price control and rationing; today with drug laws. We shall experience it yet again with price and wage con trols if they are ever more than a paper fa<;ade. One feature of price and wage controls makes their effect on in dividual morality especially vi cious. Because these controls dis tort the use of resources, the evader benefits not only himself but society. The more rigorously 32 THE FREEMAN January the controls are enforced, the more harm they do. They render be havior which is immoral from one point of view socially beneficial. They thus introduce the kind of fundamental moral conflict that is utterly destructive of social co hesion.

Our markets are far from com pletely free. Monopoly power of labor and business means that prices and wages are not wholly a product of voluntary contract. Yet these blemishes, real and im portant though they are, are minor compared to replacing market agreements by government edict, compared to giving arbitrary pow er to a small number of appointed officials, compared to inculcating in the public contempt for the law. The excuse for the destruction of liberty is always the plea of necessity - that there is no al ternative. If indeed, the economy were in a state of crisis, of a life and-death emergency, and if con trols promised a sure way out, all their evil social and moral effects might be a price that would have to be paid for survival. But not even the gloomiest observer of the economic scene would describe it in any such terms. Prices rising at 4 per cent a year, unemploy ment at a level of 6 per cent these are higher than we would like to have or than we need to have, but they are very far indeed from crisis levels. On the contrary, they are rather moderate by his torical standard. And· there is far from uniform agreement that wage and price controls will im prove matters. I happen to believe that they will make matters worse after an ini tial decepti ve period of apparent success. Others disa gree. But even their warmest de fenders recognize that they impose costs, produce distortions in the use of resources, and may fail to reduce inflation. Under such cir cumstances, the moral case surely deserves at least some attention.

IDEAS ON * LIBERTY The Abolition of Private Property A GOVERNMENT that sets out to abolish market prices is inevitably driven towards the abolition of private property; it has to rec ognize that there is no middle way between the system of private property in the means of production combined with free contract, and the system of common ownership of the means of production, or Socialism. It is gradually forced towards compulsory produc tion, universal obligation to labor, rationing of consumption, and, finally, official regulation of the whole of production and consumption. L U D WIG VON MIS E s, The Theory of Money and Credit Can we sustain PROSPERITY W. A. PATON THOUGHTFUL contemplation of the current scene, supplemented with some scanning of the historical record, is likely to set the observer to wondering if any nation is ca pable of achieving and maintain ing a broadly affluent society. Toil ing up the slope, overcoming ob stacles and adversity, human be ings often display courage, re sourcefulness, endurance, tenacity, ability to cope and continue climb ing, but when they reach the top of the hill, have it made, many seem to have a tendency to shed their heroic trappings and become confused, disorderly, unenterpris ing, and - in some cases-down right shiftless and dependent.