A Ford is Not a Mango; V. Nystrom

o Vaughn C. Nystrom A FORD IS NOT A MANGO THE reaction of authorities (and, in deed, the public at large) to the antics of the looters during New York's recent blackout betrays an attitude which, if it becomes wide spread, will sap this country of ev erything that has made for economic success. Certainly, most people were shocked by the violence. Yet, when pressed, many revealed feelings of sympathy toward looters: ((Well, it was their turn to get the goods." ((Many of those store owners were rip-off artists anyway." ((The poor have justly taken from the rich." In order to justify this kind of thinking, one must view economic systems, or rather the goods proMr. Nystrom, who recently earned an M.B.A. in Economics from St. John's University in New York, now manages a small manufacturing and distribut ing business in New York City. duced by such systems as items that are ((given." That's to say, economic goods are simply fruits to which no effort is applied; they simply are.

Ludwig von Mises rightly refers to such an attitude as the ((static men tality."1 Like the child, such persons see the world as a huge playpen, baubles dancing wonderfully before their eyes solely for their pleasure. And like the child, they give no thought whatsoever to the ((whence" of these toys-only the fact that they ((are." Static mentality, then, fails to see that wealth is created by man through his efforts in the economic realm. That store in the South Bronx of New York burned down by looters didn't sprout up like an oak tree. That store was built-built by someone who applied his labor and 3 4 THE FREEMAN January his capital to shape something that would be of service to him and, at the same time, to others. The problem doesn't end with people who, because of their lack of education, may be forgiven for see ing the world this way. It infects the ranks of professionals and scholars who should know better. And be cause higher-ups see things so, many high level policies-which af fect all of us-get their Uspirit" from this world view. I hope to show here how this inability to see that wealth must be created has already led us down some dangerous paths.

Property Rights Endangered If you see all the world as one big paradise, with marvelous goodies here and there, with no thought on your part where these goodies came from, you'll probably-and logically, at that-eonclude there's an awful lot of disparity among owners and the things they own. And since jus tice flourishes among the pristine, you'll also conclude there's reason to shuffle these goodies about until a more equitable arrangement is reached. (Or, if you're not justice minded, you may opt for mere con fiscation.) You'll need a legal arm to "effectthis shuftling, and so the gov ernment (always ready to oblige), according to your plan, will straighten the record. (Of course, the only thing more arbitrary than the original distribution of goods will be the final arrangement, cour tesy of bureaucratic officials. But that's O.K. Nobody really had a right to them in the first place. They were there for everybody.) This isn't solely an error of socialists and communists. How many times have you heard the.

bromide, uWe're not interested in property rights; we're for human rights"? There's a good chance that an elected official representing you at this very moment would give his life's blood to defend that statement. The fact is, human rights cannot exist in a vacuum. We are men com posed of body and spirit; and for freedom to exist in the material arena, we must have inviolable rights to property. If these rights can be abrogated, we simply are not free. Yet these property rights must not be viewed as arbitrary, of the who - got - to - the - mango - tree - fIrst type mentality. They will exist be cause the owner exerted himself in a way that enabled him, acting as a free person among other free per sons, to produce. And his possessions will be none other than manifesta tions of that personal production, either his own, or what he was able to obtain through exchange in the market place.

Seeing property as an arbitrary distribution of what uis," is only one step away from arbitrarily redis tributing it according to some pre1978 A FORD IS NOT A MANGO 5 conceived notion of equity, thereby destroying all property rights; and two steps away from deciding what will be done with the property, there by disposing of all human rights. Accent on Redistribution A random glance at the New York Times brings ample proof that ttthose who know" no longer consider prod uction to be the economic kingpin. No, this wealth about us is here, given. We need only concern ourselves with how best to redistri bute it. Thus, Soma Golden, busi ness writer for the Times writes: ttl think we have got to confront the problem of income distribution, of somehow building a mechanism whereby we can insure that people do get what is regarded as their fair share .... " (My italics)2 That phrase ttwhat is regarded" is loaded with implication: Just who is it who will ttregard" what is fair? Doesn't she really mean ttwhat is decreed"? Or t~what is legislated"? Freedom be comes a shaky affair the· moment some one person or group can decide t~what is fair" in matters of distribu tion.

In less direct ways, .sometimes in frighteningly subtle ones, this at titude pervades our media. Irving Howe, a Professor of English at City University of New York, gives us this piece of wisdom: HA distin guished economist . . . offers us the verity that there is no free lunch-to which I, a non-economist, reply: But of course there is! If you have too much provision and I not enough, then when you yield a little, I may indeed have a free lunch." (My italics)3 The key word is ~~have." Such persons no longer ask why someone uhas." He just does, they figure. The middle classes, accord ing to this view, are born, not only with silver spoons in their mouths, but also with nice clothes on their backs, and two cars in their garages. They have. The fact is, these things were created, produced, sweated for. But that is. not to say that someone has tttoo much." Of course, what the economist means in this case is that someone has made an effort in order to provide that lunch for Mr. Howe.

And since that effort has value on the market, the lunch indeed was not free. When the government engages in redistribution, taking the action away from the personal·sphere (you and me), the complexion drastically changes. The insidious feature of it all is that we don't see just who it is we're taking from. Perhaps if the Irving Howes and Soma Goldens were made to see the production processes as they really work, and then made to take first-hand from someone who had just produced a good, they might have second thoughts about asking all the ~~haves" to ~tyield a little."

6 THE FREEMAN January A BELIEF, an honest belief, that they are under the real influence of benev olence, sometimes leads men to conduct the most intrusive and tyrannical. Power is usurped for the purpose, it is supposed, of doing good .... A man fancies he knows what is best for other men.... He is thoroughly persuaded that such and such a thing is good, and being good, he will compel others to receive and adopt it. ... Yet despotism never takes a worse shape than when it comes in the guise of benevolence .... Under the shadow of this fallacy, vast masses of misery have been poured out upon the world. JEREMY BENTHAM, Deontology Spending Rather than Saving Serious students of economics un derstand the importance of savings and investment to the economy's health. An odd bit of logic accom panies the static mentality with re gard to these very areas. Because economic goods are viewed as eter nally present, any slack in the economic system-recessions and the like-must be caused, not by malinvestment, but by a lack of con sumer spending! So, when· things slow down, the ((experts" recom mend jolts of ((purchasing power" via government programs. You'll hear otherwise quite intelligent people assert that the Great Depression of the Thirties was caused by a phenomenon they call ((under consumption," the implication being that the goods were there, but the consumers hadn't enough money to purchase them!

Vance Packard's The Wastemakers roundly criticizes Big Business for carelessly using resources for profit alone. But the point missed by Mr. Packard and others is the busi nessman's constant reminder that resources are scarce. This he sees reflected in resource prices, which become his costs. He knows their value. The businessman ((spends" only when he believes there are others who'll be willing to ((spend"in turn-willing to buy the products of his business. Not so with those irresponsible planners who don't know the value of resources. Seeing all items about them as ever-present, they are quite willing to ((burn off' these items to keep the economy rolling. Such ig norance of the investment and sav ings factors is well described by Dr. George Reisman in an article, ((Pro duction versus Consumption," in The Freeman (October 1964).4 In this essay, .Dr. Reisman describes a 1978 A FORD IS NOT A MANGO 7 particular form of the static mental ity he calls the ttConsumptionist."

This fellow feels man's needs are irrevocably limited, and so the econ omy remains always on the verge of running down. He fears consumers will become sated and stop spend ing, thereby bringing the economy to ruin. 5 Without going into the rationale of consumptionist thinking, the im plications are obvious. The oft-cited quote of J. M. Keynes, in which he advocates digging holes, burying I don't remember what, redigging the holes, paying the workers, all in order to gain purchasing power, shows the depths to which such thinking can bring us. All. govern;. ment make-work schemes-and in deed most government employ ment-consists in spending without producing, spending without invest ing. In fact, the whole Keynesian system sees investment and savings as Hleakages," as virtual flaws in the continuous flow of ever-increasing spending by consumers. Of course, without investment any economy will die. New capital is needed to replace worn-out capital, and to supply the muscle to under take new economic ventures-all in an effort to satisfy man's limitless desires. This capital can only come about when someone-not spends but withholds spending! He saves.

He willingly refuses to exchange his purchasing power for immediate gratification in order to increase gratification at some future date. The 19th-Century philosopher, James Mill, rightly points. out: HA nation's power of purchasing is exactly measured by its annual pro duce." Not by its government print ing presses; or government make work; or welfare spending. As long as the deification of spending_ goes on; as long as capital is eaten away by confiscatory taxation, spending without corresponding production, or plain looting; as long as people' don't see that what is here is a result of saving and investment-we're heading down the road to destruc tion. A Ford Is Not a Mango A few years ago I had the oppor tunity to go to Hawaii, one of the tropical paradises dreamed of so often in our folklore. While there, I noticed the trees, unlike the stingy maples and sycamores of,my home town, were laden with frui~edible fruit! A friend offered me a mango.

Just like that. Plucked from the tree one minute, eaten the nex~. I had never had anything quite so cCfree" before. 6 I had only thought of fruit as the end-product in along line of economic exchanges, the last being my purchase of it in the neighbor hood market. Then I began thinking how many people, in childlike fashion, see the world as one big mango tree, ready 8 THE FREEMAN for plucking by whoever gets there first. True, it may certainly appear so when we go to large department stores and see the wares displayed, ready as it were, for plucking. But if you think that's all there is to it, you've missed everything. The many processes behind this final display, all the technological, marketing, and financial decisions that went into each product's formation, are too complex for any individual or group to comprehend. As Mr. Leonard Read has pointed out, none of us knows precisely how to make a plain old lead pencil. This most modest of instruments. requires a combination of specialized skills be yond the ken of anyone person.

Multiply that combination of pencil-skills by the countless num bers of items available to business and consumers and you've an idea just how complex is our techno logical system of production. Then throw in marketing (getting the product to the consumer) and fi nance (short-and long-term funding for each operation)-and you've at least an inkling of the economic sys tem we're dealing with. To assume that all this will go on indefinitely, with little or no thought given to the nourishment of these processes, is to close one's eyes-like a child-and just wish the best of all possible worlds into exis tence. The harmony we see in the market place around us is not the harmony of a mythical tropical paradise where abundance is effort lessly ever-present. Rather, it is a balance attained-from the recogni tion that men are free to own prop erty, to produce, and to exchange freely their production in the market place. And because the free market exerts such harmonizing influences on the economic process, you and I are able to purchase at outlets very near to our homes items as diverse as TV's, food, imported wine, an tiques, footwear, Fords-and yes, mangoes. @ -FOOTNOTESlLudwig von Mises, Planning for Freedom (South Holland, Illinois, Libertarian Press, 1974), p. 146.

2Soma Golden, uSelf-Interest Stymies Infla tion Fight," New York Times (Business Sec tion), September 22, 1974, p. 1. 3Irving Howe, uBalanchine and Larchmont," New York Times, November 27,1976, p. 23. 4See Dr. George Reisman's Essays in "Eu clidean" Economics, unpublished (on re serve at St. John's University in Jamaica, N.Y.). I am indebted to Dr. Reisman for clarifying much in terms of free-market economics. 5Harry Browne, in his How You Can Profit from the Coming Devaluation, proves quite neatly that it actually benefits the remaining members of an economy when people Ubury" their purchasing power, as long as they keep on producing. 6 Actually, the mango wasn't "free" at all. Human action, however insignificant, was in volved in obtaining the fruit.