The Gullible Society; W. A. Paton

THERE IS some justification for saying that this is an age of rea son in the physical sciences and engineering, but in the realm of economics it is a time of well-nigh unpreceden ted folly. Currently many Americans appear to have thrown their stock of common sense to the winds. It is true, of course, that man has suffered acutely throughout most of what we know of his history from su perstition, religious quackery, tyr anny, and fallacious notions about his physical environment. Al though the only form of life on the planet capable of careful scru ~,tiny and pondering with respect w. A. Paton is Professor Emeritus of Account ing and of Economics, University of Michigan. He is author (or co-author) of a score of books and many articles, largely in the field of ac counting. Since his retirement at Michigan, he has continued his writing and lecturing activ ities and has done part-time teaching at a dozen colleges and universities, in ten states.

to himself and his surroundings, llomo sapiens has often proved to be an easy mark for the witch doctor, the soothsayer, the spell binder, and other nonsense ped dlers. But I doubt if at any earlier period were people generally so susceptible to economic pipe dreams and pie-in-the-sky pro posals as we are today. If we don't go beyond American history the case is clear. Our forefathers, at no stage, vV'ould have widely accepted the view that the road to prosperity, the abundant life for all, is by ,vay of blocking early entry to the working ranks, an enforced 4lO-hour - or less - work week, 'with the trimmings of minimum vvage laws, paid vacations, feather bedding and soldiering, and retire rnent with a handsome pension 3 4 THE FREEMAN January after thirty years of service, cou pled with a program of govern ment handouts on a vast scale to those .unemployed for almost any reason or excuse. They were ad dicted to hard work, recognized that we can't consume what we don't produce, and were skeptical of all schemes to pick ourselves up by our bootstraps. And they would be shocked by today's widespread tide of vandalism, violence, and disorder, which is becoming a se riousobstacle to efficient utiliza tion of available resources and increasing - or even maintaining - the level of economic output.

It should also be noted that the astrologers, fortunetellers, seers, gurus, ESP experts, and assorted cult leaders - as well as the eco nomic con men - are flourishing these days. In short, as an adjective to de scribe present-day attitudes, aims, and' popular proposals for dealing with current economic problems, real or pseudo, the term "gullible" is a much more appropriate label for our society than "good" or "great." Contributing Changes There are explanations and ex cuses for the current state of eco nomic confusion aside from the persistent streak of susceptibility to humbug to be observed in man kind. To refer again to the American scene, the fantastic changes in economic conditions and meth ods that have occurred in a few generations - often pointed out and also often forgotten - have undoubtedly contributed heavily to present-day misunderstanding and blindness regarding funda mental principles and require ments. The tremendous increase in production and standard of liv ing resulting from the pioneering spirit, an excellent endowment of natural resources, and the tech nological surge, has beguiled many into thinking that the sky is the limit, that the well will never run dry, that all that is necessary to secure an abundance for every body is taking from the haves and giving to the havenots, that hard work and slow saving are out moded.

A partial explanation of thE willingness to accept economic programs that are largely poppy cock is also found in the growing complexity of the economic struc ture, with its network of markets, elaborate fabric of banking anc related facilities, multitude oj business organizations, corporatE and otherwise, and so on. Even ir my boyhood days the state of thE economy was so simple, with thE family farm still a dominant fea ture, that there was less eXCUSE for becoming befuddled as to th4 basics of economic behavior. II 1971,- THE GULLIBLE SOCIETY 5 those days we all knew that we had to work and produce to live. A sidelight that perhaps should be noticed is the availability of improved communication facili ties. One of the great wonders of our time, surely, is the develop ment of means making possible virtually instant communication to everybody, everywhere. But our radios and TV sets can be used for spreading folly as well as en lightenment, and the proponents of economic nostrums have not neglected to take advantage of this fact. Back in 1896, when William Jennings Bryan first ran for president, he made a great impact with his wonderful voice and oratorical skill, although his "free-silver" monetary program was sheer tommyrot. If he had had the radio at his command - as did Franklin Delano Roosevelt in presenting his "fireside chats,"

likewise largely nonsense - he might well have won the election. These few comments, obviously, are an inadequate account of the factors which have resulted in the shift in points of view and the growth of economic illiteracy in the past sixty to seventy years. They leave largely unanswered the crucial question: why have the majority of our citizens become willing to support and accept an array of socialist programs, while still giving lip service to the coneept of an economy featuring pri vate enterprise and a system of free markets? I have a few sug gestions to offer that have a bear ing on this phenomenon. The Great Delusion The outstanding delusion with 'which Americans have become af lflicted, and which also plagues a host of our contemporaries in other countries, is the belief that economic problems can be dealt 'with most effectively by turning them over to the machinery of government. Indeed this belief in the power of government has be eome so embedded in many minds, throughout our population, as to eonstitute an article of faith, so to speak, to be taken for granted, ilmmune to critical examination.

.A..nd this delusion is· also our tap root folly, the fountainhead of unsound views and policies. Upon elose scrutiny it will be found that most of our misconceptions in the economic field, and the specific proposals and programs that promise what they can't deliver, are rooted in the almost mystic view that resort to the apparatus of government is the ultimate so lution for all economic difficulties and ailments. I The hold that this delusion has upon us is rather amazing in view of the historical record, and the very obvious limitations inherent 6 THE FREEMAN January in government. Any form or level of government is implemented. by one or more human beings who has either seized power, by one means or another, or been granted power by some process in which at least some of the folks to be governed have participated. There is nothing mysterious or super natural involved. The person or persons functioning as an arm of government-the people that make up any bureau, commission, de partment, court, cabinet, city council, and the like or fill seats in such bodies as our national and state legislatures - don't take on heroic proportions, don't become supermen, simply by putting on the .governmenta.l mantle. At the best they are conscientious indi viduals trying to carry out the duties that presumably go with their positions. At the worst they are tyrants and crooks interested only in power for what they can get out of it, or fanatics and mes siahs obsessed with the notion that they have the right to rule and know all the answers.

A Sorry History The history of all forms of gov ernment to date is a sorry one. Governments generally have been inefficient, bloody, lacking high moral standards, and not dedi cated to the best interests of the governed group. But a common human failing is the tendency to put on dark glasses when it comes to the lessons that history might teach us. Having power is a ticklish as signment, in any activity, and restraints are required if those with power are to be kept within bounds. Our founding fathers un derstood this, and fashioned a re markable governmental structure, designed to keep both kings and mobs at bay, and to be restricted to a limited set of controls and functions. They would certainly be appalled if they could take a look at the sprawling octopus of co ercion that has developed, with tentacles of authority reaching in all directions. The central concept that is so widely overlooked is that govern ment, like other institutional ar rangements, should be regarded as a specialized instrument, not a do-everything mechanism. The in trinsic function of government is to serve as the domestic policeman and to resist aggression from out siders. ·And if the world were peopled exclusively by individuals wholehea.rtedly committed to re specting the rights of their fellow men, coercive government might well fade away to the vanishing point. In the prevailing state of affairs I grant the need for some government, but it would be a blessing if this necessary appa1974 THE GULLIBLE SOCIETY 7 ratus would tend to its knitting, not butt into the business of rais ing potatoes or building automo biles - to say nothing of going to the length of becoming guardian and guide over all our personal activities and welfare from the cradle to the grave.

Moreover, as government be comes overextended, takes on the role of Jack-of-all-trades, it tends to become increasingly inefficient. Anyone who has had any consid erable experience in governmental control and operation of business knows very well that this is the case. No government agency is free from the political influences that tend to thwart attempts to improve methods and procedures. Lack of planning, inflexibility, waste, delay, are familiar features throughout government, at all levels. There is also an inherent tend ency for those in government busi ness, even if well intentioned at the start, to become increasingly indifferent to their clients or cus tomers. The history of the U. s. Post Office affords a notorious ex ample. And as citizens become accustomed to the faults of gov ernment service, and to "the obsta cles in the way of making com plaints felt, they gradually learn to put up with bad treatment, to take their lot for gran ted, to lose their inclination to resist.

It should also be noted that ,government interference in busi ness operation, even if stopping short of a complete takeover, has the unfortunate effect of putting a damper on the initiative and ingenuity of owners and manag ers, and their technical staffs. An outstanding illustration is afforded by the long history of blundering in the regulation of our railway system. Our Socialist Trend - Why? But in spite of the plain evi dence of government incompetence all about us, and the chilling im pact of government interference and regulation on private initia tive, many Americans - including a lot of folks who should know better - clamor for more of the same. Why have we become so benighted? Why do we believe we can have our cake and eat it too? Why is there so much fence strad dling, often without awareness? I'll attempt a brief answer to this query. First, let's take note of the efforts of the dedicated and per sistent Fabians and Marxists who have long been in our midst. When I began systematic study of eco nomics back in 1912 at the Uni versity of Michigan, there were a few avowed socialists on the fac ulty, and a sprinkling of their like in the student body. These 8 THE FREEMAN January people were not taken very seri 0usly' however, by most of the campus population, and were cer tainly not regarded with great anxiety, as a possible menace to our way of life. But these advo cates of the socialist state were indefatigable in efforts to spread their brand of gospel, and may have had some impact, at least as seed sowers. And perhaps they laid a groundwork that later on facili tated the growth of a swarm of procommunists, fellow travelers, and assorted "anticapitalists,"

bent on destroying the American system of government and private business enterprise. Although capitalism has often been accused of fostering armed conflict between nations, the fact is that a condition of war is in compatible with a free-market economy. War inevitably expands the authority of central govern ment and puts a brake on individ ual initiative and decision-making. It seems very clear that our par ticipation in World Wars I and II, and subsequent serious military involvement in the Far East, plus the overhanging fear of armed conflict and resulting vast "de fense" expenditures, is the major explanation of the growing sub servience to government power that we have been experiencing. And in between the two great war efforts, and in part induced by postwar turmoil and adjustment, came the "Great Depression" of the early 1930s, and the resulting programs for relieving distress, of which President Roosevelt was the master architect - programs that failed so miserably as to en courage said architect to push us into a second tremendous military adventure.

In view of this history, indeed, the great expansion of the mecha nism of government, and the en croachment of government into the processes of both production and distribution throughout the economic pipe line, is hardly sur;.. prising. Perhaps the wonder is that we still have some vestiges left of a free society. A Weak Defense The defense of economic liberty, too, has been feeble and ineffec tive. Especially from the depres sion days on, the teaching of economics has been increasingly socialistic in most colleges and universities, taking the form of either downright condemnation of business and the market system or damning capitalism with faint praise. Religious leaders general ly~ never too well-disposed to pri vate enterprise, have also becomE more aggressive with their half baked attacks on American busi· ness. And many journalists and writers, growing up in war anc 1974 THE GULLIBLE SOCIETY 9 depression days, have joined in the chorus of criticism. Even busi ness executives, nominally sup porters of economic freedom, have made a sorry showing. I' find it hard to forget the way business leaders generally rushed to get on the bandwagon in the days when the effort was made to establish synthetic socialism, almost over night, through adoption of the NIRA codes. Happily this effort failed because of a decisive ruling of the U.S. Supreme Court of that time. But many business leaders, with a seeming lack of clear com:"

prehension of the essentials of a market economy, still participate in sawing off the limb they are sitting on while continuing to prate about "our system of free enterprise." Perhaps it should also be noted that the socialist trend in Amer ica in the last few decades has been disguised as a great human itarian movement. We have been making the trek into socialism under the banner of assorted wel fare programs, caring for the ailing and unfortunate and the needs of "senior citizens," guard ing the interests of consumers, conserving natural resources, cleaning up the environment, and :so on. Even at this stage an avowed socialist or Marxist couldn't be elected president in the United States, but a clever chap who promises that govern lment will control the bad boys in business, and see that we are all 'well-housed, well-fed, and have an adequate standard of living in other respects, and be our pro tector, counselor, and guide in all our activities, may well make it.

The current outlook is rather bleak from the standpoint of those w'ho believe that individual initia tive and responsibility are charac teristics worth preserving in our society. But it's still important to keep the leaven of that point of view alive in the loaf. , IDEAS ON ~ LIBERTY Reprints of this article available, 10 cents each. The Constitution of Liberty THERE can be little doubt that man owes some of his greatest suc cesses in the past to the fact that he has not been able to control social life. His continued advance may well depend on his deliber ately refraining from exercising controls which are now in his power. FRIEDRICH A. HAYEK The Voluntarists Role RIDGWAY K. FOLEY, JR. THE COMMITTED LIBERTARIAN abides on at least two levels. Ini tially, a practitioner of freedom must understand that which he practices. We never cease being students of liberty. Noone can truly say that he has fully mas tered the art, for the process ap pears to be an ongoing endeavor.