Stop, Thief! C. W. Anderson

In fact, I believe it's about time that a lot of people get angry and angry enough to fight ~ack and make some noise doing it. What should be shouted from the Mr. Anderson is President of the Employers Association in Milwaukee. hilltops, and repeated until it pen etrates even the intellectual smog on the Potomac, is the fact that there is no mystery about this erosion. It is caused by inflation. Only government growth and spending is causing it and only government retrenchment can, and must, stop it. But, let's back up and fill in a bit! It is a sad fact-and this adds to our frustration - that very few people really understand that the great promise of this free-market economy was that each passing year should bring a higher value to invested savings, not a lower value. Years ago when a man re tired, each of his dollars actually bought more in the following years than when he earned it.

585 586 THE FREEMAN Oc'tober This was the very essence of the free market and the high produc tivity which was brought about by capital accumulation. But most of our educators haven't even rec ognized this free-market principle. And because of this failure, it is today considered almost unchal lengeable that more money is nec essary for a growing economy ... that if we pump more money into the system, we'll get economic growth. Purchasing Power A corollary to this is the cur rent orthodoxy which tells us that the way to share in increased pro ducti vity is to raise wages and salaries. Nonsense! Our history clear ly shows that the free econ 0my has shared its prod ucti vity in the form of 'more valuable dol lars. Furthermore, this is the just and humane way because it auto matically benefits those who helped make this possible, including those retired on fixed incomes. Without inflation, the millions of retired people should be looking forward to increasing real income each year instead of the haunting pros pect that they will have less and less. . . . and may, in fact, face dependence on their children or on the state.

What a terrible thing we are doing to these people whose pro ductivity and savings should have brought to all of us, workers and retirees alike, a rising standard of living. Instead, they face the demoralizing prospect of depen dency - and they don't know why! A bewildering, dimensionless fog of words booms at them from newspapers, radio and TV telling them, in effect, that those in au thority who could "save" them don't know why all this is hap pening - but, they say, they are working desperately to "discover" why, and will then "order" solu tions. I repeat, this is a terrible - an immoral-thing that is happening to Mr. and Mrs. Average Ameri can. Truth and facts seem to have no place in this climate of political expediency. There seems to be a conspiracy to avoid the simple, irrefutable fact that our periods of greatest economic growth and most rapid inc~iase in the value of our money / and savings were not those when the most new dol lars were pumped into the econ omy nor when we had the most general increases in wages.

It is truly disturbing that this fact is startling news to most peo ple, even graduates in economics, and those in Washington, who propose to "save" us. But, the supporting facts are perfectly clear. They show us that the past few decades of inflation, of collec tive bargaining with massive ne1975 STOP, THIEF! 587 gotiated wage increases, were not the period of our gr~test eco nomic growth or incr~ase of real income. Far from it! Our national real income per capita rose most rapidly from 1874 to 1913. That rise, which averaged 4.7 % a year, was over twice as much as we have been able to generate since 1947 while inflation has been on the rise and negotiated wage in creases have been in the headlines. Not one person in a hundred real izes that the general price level actually dropped substantially after 1874 for most of 40 years (e.g., over 20 per cent by 1894) and only regained the 1874 level just prior to 1913. Most of us, however, are painfully aware that prices rose 100 per cent in the 26 years from 1947 to 1973 and that higher wages did not buy as much.

In other words, rising wages do not always mean rising real in come. Somehow in the confusion of inflation, the significance of real income growth and how it occurred has been lost. To those who will open their eyes, it is perfectly clear that pumping up the money sup ply (inflation) as we have been doing for over 30 years - has not raised real income nor brought security for the aging. Going back now, let's look at a typical employee who retired on a fixed income around 1900. We see why he and his 'wife could live better each year. His concern about dependency decreased each year. Contrast this with today's retiree whose fixed income lost 8.8 per cent of its value in 1973 and 12 per cent in 1974 - over 20 per cent in just 2 years - and who now is ha unted by the growing tear at dependency. Had he re tired late in 1965 on a fixed dollar income, those dollars in 1975 would buy only 60 per cent as much as they would have 10 years earlier.

Show me the humaneness or justice of this kind of treatment of those who produced and saved to be independent and who, in this process, provided the capital which should increase productivity and living standards. It is a tragic miscarriage of justice; I think they are being robbed. Political Hazards So, I am speaking as one who is angry and one who is fed up with the double talk and the mys tery that has been woven around what is happening to us. But, I am not unmindful of the political hazards of combating this or thodoxy. The "new economics" has convinced us that more money and deficit spending is beneficial and it has blinded us to the truths about real growth and its rewards to all those who worked and saved to cause the growth. Neither am I unmindful that a number of 588 THE FREEMAN Oc'tober economists who know these truths, but, believing that political forces preclude free-market solutions, suggest only compromises that they believe are politically palat able. I am completely convinced that the proposal of such expedi encies by respected economists has been responsible, at least partially, for the aura of mystery and frus tration which prevails.

How can we ever expect to set our course toward real economic growth, toward the free market and toward more security in old age, without some spokesmen for the ideal? With only politically expedient proposals, where is our true guide toward what is right and humane? Where, indeed! For as we flounder in the morass we have created, it becomes ever more apparent that spokesmen for what is right will not appear among the nation's leaders, nor will our course be set toward real, long range solutions unless more of us get disturbed and irritated enough to shout our disapproval of what is going on. When so few seem to have any notion of how things really. oug ht to be in a free-market economy, without inflation, the need for un derstanding becomes truly des perate. Aren't you a Iittle mad? Why not shout a little! , IDEAS ON LIBERTY One Man's Opinion ONE FREE MAN says frankly what he thinks and feels in the midst of thousands who by their actions and words maintain just the opposite. It might be supposed that the man who has frankly ex p.ressed his thought would remain isolated, yet in most cases it happens that all, or the majority, of the others have long thought and felt the same as he, only they have not expressed it. And what yesterday was the noble opinion of one nlan becomes today the general opinion of the 111ajority. And as soon as his opinion is established, at once by imperceptible degrees but irresistibly, the conduct of mankind begins to alter.

LEO TOLSTOY PUBLIC POLICY DARRYL R. FRANCIS IT IS A distinct privilege to be the first speaker to address the center for the Study of American Busi ness. I view the inauguration of this center as a timely event, and one that marks the beginning of a program that could have a pro found impact on the future of economic freedom in America. While my discussion will be limited to economic freedom, the ideas that I will express have a bearing on aU freedoms - economic, so-cia,l, and political. In my view the three are interdependent, and no one of them can exist without the others. Reprinted by permission from the May 1975 issue of the Review of the Federal Reserve Bank of St. Louis. Mr. Francis is President, Federal Reserve Bank of St. Louis. These remarks were deliv ered before the students and faculty of Wash ington University, St. Louis, for the dedication of The Center for the Study of American Busi ness on April 3, 1975.