Book Reviews

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN IT IS PART of our folklore that it took the Supreme Court decision of 1911 to break the grip of John D. Rockefeller's Standard Oil hold ing company on the business of transporting and refining oil. But long before the dissolution of the "oil trust," which had never been much more than a matter of dom inating the small world of kero sene marketing, the Pew family of northwestern Pennsylvania was in the business of "producing petro leum, rock and carbon oil; trans porting and storing same; refin ing, purifying, manufacturing, shipping, selling and marketing such oil. and its various products." (The quotation is from the incor752 poration statement of the Sun Oil Company of Ohio, dated 1890.) The founder of Sun Oil, Joseph Newton Pew, was not at all intim idated by the "trustifiers" of our so-called Gilded Age. In 1886, which was four years before the enactment of the Sherman Anti Trust law, the Pews were busy acquiring leases in the new trans Appalachian oil and gas field of Lima, Ohio. Sun invaded the sup posed monopolistic preserve of the Rockefellers before the "waste"

by-prQduct known as gasoline had become important to the new auto mobile economy. Uncommitted to kerosene, it was ready for the new world of Henry Ford, Ransom Olds 1975 FAITH'AND FREEDOM 753 and the other Detroiters who were, at the turn of the twentieth cen tury, about to put America on wheels. When the Spindletop gush er came in on the Texas Gulf Coast in 1901, Sun was ready to build an East Coast refinery on the Dela ware River at Marcus Hook and to transport Texas oil by tanker to markets that John D. Rockefeller could no more monopolize than King Canute could keep the tide from rising. With his family background, it is hardly a mystery that J. Howard Pew, the son of, Joseph Newton, never had any fear that America might be enslaved by an industri al oligarchy of any type. It was given to Howard Pew to carryon the work of independent forebears who found no quarrel between their deep religious convictions and the honest competition of an age that, in retrospect, I was much less of a dog-eat-dog era than we have supposed.

Biography and History In an absorbing little book called Faith and Freedom: The Journal of a Great American, J. Howard Pew (Grove City College, $6.00), Mary Sennholz has combined a sensitive biographical treatment of Howard Pew with a skilled job (she calls it a "compilation," which is over-modest) of presenting, in paraphrase and direct quotation, Mr. Pew's thoughts on religion, politics, charity, education and in dustrial enterprise. The combi nation makes for a remarkable tes tament that tells us more about an America that we are in danger of losing than can be found in scores of mQre, pretentious works. The distinguishing character istic of' Howard Pew was that he was whole-souled about everything he did. As a Presbyterian layman, he believed in the will of God and the gospel of Christ. He saw no conflict between Christianity and capitalism. It was not only good business, but good social relations, to offer a stock purchase plan to Sun employees and to refuse to make general layoffs or wage re ductions in depression years. Sun, in the-post-W orId War II years when the government was impos ing restrictive quotas on the im portation of crude oil from abroad, kept its tankers employed with smaller loads, an "uneconomic'" op eration that actually paid off by keeping an organization both in tact' and enthusiastic.

Meanwhile Sun pus1hed techno logical change as both a human and an industrial duty. It helped the French inventor Eugene Hou dry bring his catalytic cracking process to America in time to fuel more than half of all American war planes in 1942 and 1943. The Sun Shipbuilding Company was 754 THE FREEMAN December building half of all the new tank ers in the country in 1943, the peak year of the war effort. And, as a prelude to meeting the energy crisis of recent years, Howard Pew carried out the costly venture of developing a process of getting good synthetic crude oil from t'he tar sands of Athabasca in the Ca nadian province of Alberta. A Loyal Churchman To Howard Pew, obedience to the will of God meant keeping his beloved Presbyterian church from moving out of its "ecclesiastical field." The business of the clergy was to save souls, not to impose a socialism on society that would deny individual responsibilty to behave in a truly Christian man ner as a matter of voluntary com mitment. A believer in the "theol ogy of reformation," not the "the ology of revolution," Howard Pew was deeply shocked by the selec tive nature of a "social gospel"

that had much to say about Viet nam yet refused to speak out when Russians invaded Czechoslovakia or when Mao Tse-tung presided in China over the murder of mil lions of his countrymen. When he retired as the presiding operating officer of Sun Oil to go into the business of promoting good Chris tian education, he fought the many Protestant "modernists" who tried, as they are still trying, to identify morality with State compulsion in both social and eco nomic life. Charity, to Howard Pew, implied a voluntary commit ment; otherwise it was just orga nized thievery masquerading as good will. Opposed to Statism Howard Pew opposed Statism on principle. He would have been against it on grounds of conscience even if it had been compatible with industrial efficiency. Fortunately he was never compelled to go against the pragmatic evidence of the case. As a student of history he had noted that the "squirrel rifle" of the Pennsylvania fron tiersmen, produced by an individ ualist gunsmith in Lancaster who cut a spiral groove inside the gun barrel that gave the bullet a rotary movement, was far superior to the Brown Bess musket favored by both the British politicians in Lon don and the American Continental Congress. Washington had to fight the Congress for a limited supply of the Pennsylvania rifles, but he fooled the British and the Hes sians into thinking he had more of them by the trick of dressing troops in the frontier coonskin and leather of the Pennsylvanians.

The uniforming ruse was enough to start panic in the British; it could have been the determining factor in the war.

1975 FAITH AND FREEDOM 755 Howard Pew didn't object to governments for being conserva tive. But since they must be con servative to keep faith with tax payers, a point made by Ludwig von Mises in his book on bureau cracy, Mr. Pew thought they had no business invading the province of private industry, which has to be innovative to compete in the mar ketplace and to earn a dividend for investors. In his support of in stitutions such as Grove City Col lege and the Foundation for Eco nomic Education, Mr. Pew was en gaged in a principled fight for keeping the categories straight. The business of the church is to hold men to moral values. Men with moral values will obey the Golden Rule in their business deal ings. They will also live by the Parable of the Talents. The State, with its commitment to providing a just order in which free men can exercise their ingenuity, will not interfere with invention and the flow of energy. So the "freedom philosophy" will flourish.

Such was Howard Pew's credo. He lived it to the full. Faith and Freedom is available at $6.00 from The Foundation for Economic Education, Irvington-on-Hudson, New York 10533. ~ THERE'S NO SUCH THING AS A FREE LUNCH by Milton Fried man. (LaSalle, Illinois: Open Court, 1975), 330 pp., $9.95, $3.95 paper. Also published in paper by Thomas Horton and Daughters, Glen Ridge, New Jersey 07028, under the title An Economist's Protest, 2nd edition, $3.95. Reviewed by William H. Peterson ON AUGUST 17, 1971, two days after President Nixon launched his New Economic Policy on a dumbfounded world, ace Univers ity of Chicago economist Milton Friedman, past president of the American Economic Association and the Mont Pelerin Society, par ticipated (as did I) in a telephonic conference of 12 economists com menting on the President's his toric action. Ever the brilliant economist and debater, Friedman completely dominated the discussion. He pushed for floating exchange rates (which have since come to pass).

He said the President's shutting 756 THE FREEMAN December the gold window was but "window dressing," for the U.S. dollar had long been ineffect an inconvertible currency. And, above all, he em phatically predicted that the wagt:;~ price controls would fail as they had ever since Diocletian's Edict of 301 A.D., that they would prove a cloak for the deficit spenders in Congress and the easy-money boys in the Federal Reserve, that they would in fact breed greater infla tion than ever in America in the 20th century (which they most certainly have). Well, here is the genuine article, vintage Friedman, rare wine for free enterprisers, selected N ews week columns from 1966-1974 (some of which appeared in an earlier edition entitled An Econ omist's Protest). There is also his celebrated Playboy interview cov ering in one grand sweep a rather full panoply of his incisive views, plus his Fortune article on "Using Escalators To Help Fight Infla tion," his series in the New York Times on "Morality· and Controls"

and his corking analysis of our monolithic school system in his "The Voucher Idea" from the New York Times Sunday Magazine. In short, this is practically a new book, and it is capital. In all there are 97 entries under such headings as energy, central plan ning, the Post Office, education, indexation, social responsibility, gold, the voluntary army, the plight of Britain, taxation, regula tion and, of course, monetary policy. All of them are sharp and lively, full of timely examples, full of trenchant Friedman wit, full of that eternal verity that, no, Vir ginia, there is no such thing as a free lunch, that every bit of pork, every subsidy, every inflation, every poli tically-imposed ineffi ciency, is paid for, and paid for handsomely-by somebody. This vintage Friedman is, as usual, rich in aphorisms: • On inflation: "We know how to stop inflation - it isn't terribly difficult - we simply don't want to .

. . . After a while people begin to think they'd rather have the sick ness than the cure." • On pollution: "Even the most ardent environmentalist doesn't want to stop pollution He wants the right amount /' • On poverty programs: "The law of supply and demand works very generally: If there is a de mand for poor people, the supply of poor people will rise to meet the demand." • On Social Security: "If you talk about misleading labeling, So cial Security is about as mislead ing as you can get. It has nothing to do with social and it has nothing to do with the security of society. ... The employer and the employee each supposedly pay 5.85 percent, 1975 FAITH AND FREEDOM 757 but since the employer's half is part of his total wage cost, it's the employee who's really paying the whole bill." • On social responsibility: "When an executive decides to take action for reasons of social re sponsibility, he is taking money from someone else - from the stockholders, in the form of lower dividends; from the employees, in the form of lower wages; or from the consumer, in the form of high er prices."

'To be sure, the irrepressible Friedman specializes in contro versy, even among conservatives and libertarians. He is, for ex ample, no fan of gold-backed cur rency. He is the founding father of the negative income tax. He is a longtime critic of the Federal Re serve; indeed, he even blames the Fed for causing the Great Depres sion, as he spelled out in his pio neering A Monetary History of the United States (with Anna J. Schwartz). His charge today to Dr. Arthur F. Burns and the other Fed governors: Stop manipulating the money supply, and hew to a steady money stock growth form ula of about 4 percent a year. But no matter if you're a Fried manphile or a Friedmanphobe, reading his book you come away with a feeling that here is a scin tillating mind, a champion of the free market and a free society. For our money, Milton Friedman is a titan worthy of the next Nobel Prize in Economics. Voila, he has proven that while economics may be the science dismal it certainly doesn't have to be the science dull.

~ THE C9MfNG COLLAPSE OF THE POST OFFICE by Robert J. Myers (Englewood Cliffs, N.J. : Prentice-Hall, Inc., 1975), 182 pp~, $6.95 Reviewed by Melvin D. Barger THIRTY YEARS AGO, the economist Ludwig von Mises demonstrated in a commentary on bureaucracy that the only alternative to profit-seek ing business management is bu reaucratic management. There is a popular delusion that public en terprises can be set right by adopt ing the methods and managers of private business, but· Mises saw that this was impossible because of the fundamental difference be tween government and profit-seek ing private enterprise. So the an swer was to accept bureaucratic managers where necessary (say, in a police department), while at the same time curbing their pow ers by "bureaucratic makeshifts" to prevent them from becoming ir responsible spenders of public money who would disorganize the whole budget.

This was a wise observation that 758 THE FREEMAN December could have saved the United States billions of dollars; unfortunately, however, public policy is not shaped by students of Misesian economics. Nevertheless, events have a way of vindicating the wise master of the Austrian school. Robert J. Myers, in The C:)(nu Collapse 01 the Post 01lice, shows what happened when the U.S. post al system was transferred from ordinary bureaucratic management to a new government corporation that was supposed to solve all of the then current problems. Myers, pub lisher of the liberal magazine, The New Republic, indulges in some hyperbole to imply in his title that the postal collapse already has oc curred or came about only since the new postal corporation was launched on July 1, 1971. Some of us thought the postal system was in a mess under the old set-up, too. This reviewer, who had not taken the trouble to reread relevant por tions of Mises or to heed the warn ings of other libertarian stalwarts such as FEE's Leonard Read, thought that the "government cor poration" made sense and might conceivably bring needed improve ments in postal services.

But whether you call it collapse or merely confusion, the postal corpora tion has been a colossal fail ure that is providing even less ser· vice than before and at much high er cost. According to Myers, postal corporation managers have be come a self-serving elite and are now the highest paid executives in government. This reviewer remem bers that the postal unions opposed the new corporation; ironically, they have been able to get much fatter labor contracts from the new organization than they were ever able to get from the old bu reaucracy. Malinvestment is ram pant in the new corporation, ser vice is rapidly deteriorating, costs are spiraling in all directions, and mechanization programs have oft en been unsatisfactory. The cor poration was supposed to "break even," but it continues to operate at a deficit. Wha t went wrong? Myers comes very close to an accurate diagnosis of the problem, but his own con flicts of interest may have flawed an otherwise sound report. As pub lisher of a low-circulation intellec tual magazine, he defends sub sidies for publications. As the head of a magazine that rarely has a kind word for the business com munity, he voices constant critic ism of Big Business and the pro fit motive. He even attempts to portray the failure of the postal corporation as another private business failure without explain ing the significant differences be tween investor-owned companies and government enterprises.

If the book 'has an arch-villain, 1975 OTHER BOOKS 759 it is probably Frederick R. Kap pel, the retired A T & T head whose 1967 Commission Report launched the idea of a postal cor poration. Myers apparently sees the postal corporation as an ex tension of the same kind of she nanigans Kappel engaged in as chief of the Bell network, but it is noteworthy that the· average citizen would be pleased to have mail services equaling the tele phone system. Kappel's great abil ities simply did not carryover into government enterprises; in deed, his A T & T prestige may have helped foster the delusion that a government corporation would somehow "work." For that reason, he probably deserves the blame that Myers heaps on him and various postal executives. Despite his anti-business bias, Myers has high praise for the privately-owned United Parcel Service, the postal system's larg est and most successful competi tor. However, he does not identify profit-seeking as a primary factor in UPS's excellent service, nor does he really warm up to the idea of giving UPS a free hand with other types of mail.

Still, Myers does make a strong concession to the free marketplace by giving reasonable space to the libertarian argument that the Pri vate Express Statutes should be repealed, permitting anybody to carry mail. He quotes Human Events publisher Robert Kephart as an opponent of government sub sidy through non-compensatory postal rates of magazines and pub lications. "I would vastly prefer to see postal services demonopol ized; and the rise of a free mar ket competition in delivery of all classes of mail ..." According to Myers, this view has gained increasing support and respectability through the publi cation in 1974 of an American En terprise Institute monograph by economist John Haldi. Haldi points out that the statutory postal mo nopoly has no economic j ustifica tion, is no longer an important source of governmental revenue, and in no way promotes better or cheaper mail service. In fact, Haldi suggests, the monopoly prob ably impedes the development of better systems for delivering writ ten communications. Haldi's most telling argument, in Myers' view, is implied in the question: Why, if the Postal Service constitutes a "natural monopoly," does it re quire statutory protection?

In the end, Myers mentions, without advocacy, the repeal of the Private Express Statutes as one solution to the postal mess. He goes on to list other schemes, most of them variations of the intervention that has plagued the post office throughout its history.

760 THE FREEMAN December Despite its interventionist tone, Myers' book is a significant addi tion to the still-scarce current literature on postal problems and it has received considerable press attention. He should have diag nosed the failure of the new postal corporation as yet another failure of government rather than a bus iness failure such as Penn Cen tral or Rolls-Royce; after all, the executives· of the postal corpora tion are under no constraint to make a profit or to heed the other disciplines of·the marketplace. But Myers does show that government corporations are not the answ;er to the problems of government bureaucracy. He offers convincing proof that the autonomy of the government corporation becomes its undoing. Ludwig von Mises would have agreed, arguing that government bureaus such as the post office need "bureaucratic makeshifts" to keep them in line. But in a truly free market, with anybody permitted to carry.mail, nobody would need the poor pro tection of such makeshifts in the first place. ~ HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $2.50 each Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTONON·HUDSON, NEW YORK 10533 Index THE FREEMAN - Volume 25, January-December1975 Prepared by BETTINA BIEN GREAVES of the Foundation staff NOTE: In page references, the number preceding the colon designates the month, those follow ing refer to pages. All articles have at least three entries-author, subject, and title-except in a few cases when title clearly indicates subject matter. Books reviewed are listed on page 768. A AGRICULTURE On feeding the world (Beeler) 9:522-523 World food crisis, The (Pasour) 12:717-721 ANDERSON, C. W. Stop, thief! 10: 585-588 ANDERSON, Robert G. Gold is legal, but ... 1: 17-22 See also Book reviews (Pugsley) ANOTHER layer of protection? (McMunn) 7: 412-415 ANTITRUST Conspiracy economics (Cobb) 12:748-751 AUTUMN of our discontent, The (Braun) 6 :362-364 B BANKING and fractional reserves Gold standard and fractional-reserve banking, The (Cobb) 9: 569-572 Gold standards (Curley) 6: 353-361 Perfect counterfeit, A (McAdoo) 12: 722-726 BARGER, Melvin Occupational licensure under attack.