The Market or the Welfare State; P. L. Poirot

The Market PAUL L. POIROT THE open market is a highly vul nerable institution, for it rests primarily upon faith that each individual may dispose as he chooses of whatever is his own and that he will not coerce, de fraud, or otherwise forcefully in terfere with other peaceful per sons. In air terminals one may note signs to this effect: "Paying Pas sengers Only Beyond this Point." In other words, the object is to exclude free riders, stowaways, bunko artists, saboteurs, hijack ers, or worse. Passengers and bag gage may be screened against weapons. The open market is some thing like that - wide open to all willing sellers and buyers, but hopefully closed to anyone who would exercise coercion to gain something for nothing. " Note carefully, however, the price of admission to the open market. It is not free - that is, the goods and services are not free for the taking; they are eco nomic resources, which are scarce and valuable enough to be worth owning. In other words, the price of admission to the open market is the ownership of something customers are willing to buy or recei ve in exchange.

Alongside the gate to the open market, however, is another en trance which many have found en ticing. Behind it lies the Welfare State and the allure of something for nothing. The owner of any scarce and valuable resource is always in a serious minority situation, pos sessing what so many others would enjoy having; they can easily 621 622 THE FREEMAN October muster an overwhelming majority to take his property if he doesn't give it to them. And this is pre cisely the manner in which the larder of the Welfare State is stocked. Organized interest groups prevail upon the tax collector to take some or all of the property from those who would enter the market, th us providing the goodies dispensed to welfare clients. Superficial observation of those entering the gates of the market indicates that many are coming empty-handed, with no property to trade. But closer inspection re veals that what such a person brings are his hands - his labor always scarce and always valuable, property which he can trade for the things more valuable to him than his leisure.

Marketing One's Labor The nature of human labor does present marketing problems. Its value is quite variable, it lacks uniformity, it is perishable, not easily transported or stored. These shortcomings are especially con spicuous in international trade where citizenship requirements, immigation restrictions, language differences, racial prej udices, and national customs more or less close the market to foreign labor ers. Furthermore, there are vast differences in the skill various laborers bring to a particular job - or the skill required for the job. One man's labor mayor may not substitute satisfactorily for that of another - or it may serve in one situation but not in others. So, what the laborer especially among market participants ur gently requires is a reliable medi um of exchange, a wage paid in money that can readily be traded to satisfy his wants - even across national boundaries. Yet, so un certain and variable are the qual ities of labor that a viable market economy begins to evolve only as men develop tools and skills and become specialists in various pro ductive activities and occupations.

This increases the incentive for exchange, and increasing special ization and trade increases the need for money, that is, for a commodity more acceptable in trade than are most other goods or services. Thus do market activ ities lead to the development and use of money, because it facilitates trade. And chief among the bene ficiaries of a market-originated monetary system are the laboring poor who have nothing to sell but their services. With money, they can pull supplies through barriers which they could not negotiate in person. Thus is a man's range of choice expanded, thus are multi plied his opportunities for self improvement - all within the con1973 THE MARKET, OR THE WELFARE STATE 623 text of the open market and its monetary system. IIRising Expectations/l This growing affluence, of course, has not escaped notice by the seeker of something for noth ing. His increasing envy is some times referred to as "rising ex pectations." Pressure upon the tax collector to "soak the rich"

builds to the point of soaking ev ery participant in the market, ev ery owner of property, including the laboring poor. There is no better illustration of this ten dency than the regressive income tax collected in the name of so cial security. Every employee en gaged in "covered employment" which includes almost every job and every worker - is subject to a tax of 11.7 per cent on the first $12,600 of his annual earnings. (That higher base takes effect January 1, 1974.) Earnings above that anl0unt are exempt from the social security tax - which means that the effective tax rate for a wage earner in the $25,000 bracket is only half the rate for a worker earning the minimum or less. What the tax collector withdraws from the wage earner in the mar ket is then siphoned into the cof fers of the Welfare State. Thus is the worker tempted to leave the market promptly at age 65. There is another law which bars from the market any laborer un willing to earn, or incapable of earning, the "minimum wage."

The coercive activities of labor unions also have the effect of clos ing the market. But there shall be no attempt here to explore in de tail the countless ramifications and manifestations of governmen tal intervention parading as wel farism. 1 The one further aspect that should be mentioned again, and further examined, pertains to what the government has done to our money. We have seen how important it is to all traders, and especially to the seller of his own labor and skill, to have a market-originated and market-regulated medium of exchange. But the trader's pur pose and use for money is by no means the same as that of the per son who wants to regulate and control how other people are to live and act. The tax collector has no intention of earning the prop erty he takes from the market. His object is something for noth ing; and in monetary matters the most instant process is to create a fiat money and declare it "legal tender" in place of the money chosen by traders.

Perhaps the best definition of a 1 For further treatment of the matter see two books by Henry Hazlitt: Man vs. the Welfare State (New Rochelle: Arling ton House, 1969), and The Conquest of PoveTty (Arlington House, 1973).

624 THE FREEMAN October trader is "one who is gainfully employed." One simply does not voluntarily trade unless he sees gain for himself in the trans action, especially so if he is to re ceive money in exchange, whether it be in cash or as credit. So, the trader wants money that will either advance in purchasing pow er or at least hold its own while in his possession. But in any transaction involving credit, the debtor would be delighted to pay later in depreciated legal tender. So the deficit-backed dollars pumped into the market by the Federal government seem for a time to be sheer debtor's delight, affording something for nothing. However, bad debtors drive cred itors from the market. Who wants to try to trade with a dead beat? As Gresham expressed it: "Bad money drives out good." In other words, fiat money tends to dry up the market - first at the level of international trade (our govern ment can not force foreigners to accept our legal tender) and even tually domestic trade as well.

Traders retreat to barter, and further back toward self-subsist ence. And those who stand most to lose from the closing of the market are the laboring poor. Un able to sell their services, they are reduced to serfdom or slavery. There comes a time when a man must stand - alone, if necessary in defense of the open market and the trader's opportunity to be gainfully employed. ~ IDEAS ON LIBERTY Revolt Against Nothingness THE GREAT TASK of the present age, in the field of morality, is to convince common men (uncommon men never fell into the snare) of the inane foolishness which envelops this urge to revolt, and make them see the cheap facility, the meanness of it; even though we freely admit that most of the things revolted against deserve to be buried away. The only true revolt is creation - the revolt against nothingness. Lucifer is the patron saint of mere nega tivistic revolt. JOSE ORTEGA Y GASSET Mission of the University Enw ARD COLESON ~~~s~C~~ and MORALITY "NOTHING is more unpopular today than the free market economy, Le.