Repressing Economic News; W. Wriston

Walter B. Wriston REPRESSING ECONOMIC NEWS EVERY business has its hazards. Peo ple in the news business complain that one of their own special hazards is taking the blame for all the bad news in the world. And since much of the bad news nowadays fre quently has something to do with governments, governments espe cially are often angry at the press. In fact there are about 90 countries in the world today whose leaders object to bad news so much that they have abolished the free press. They operate on the theory that if bad news is not reported, it doesn't exist. Editors and publishers in coun tries where the press remains free recognize this attitude for the threat that it is. They combat it constantly by defending their right to publish the news as they see it, and also by reminding the public that the First Reprinted with permission of The Wall Street Journal © 1979 Dow Jones & Company, Inc. All rights re served.

This article is adapted from remarks by Mr. Wris ton, Chalnnan of CltIcorp, to the American Society of Newspaper. Editors. Amendment is the very linchpin of our liberty. To get blamed for acts you do not commit, or for the bad news created by somebody else, is a hazard that is not unique to the news business. It happens to bankers, businessmen, labor leaders and almost anyone else involved in handling money. And we in the business community are being treated to an especially strong dose of this misdirected anger right now. The bad news that business has been reporting is inflation. The price of everything is going up, which is another way of saying that the value of our money is going down. Since only the government prints money, it does not like people being told that the value of its product is de teriorating. So we find government spokesmen traveling around the country telling people that the real villains in this inflation story are businessmen who are raising their prices or labor unions which are raising wages.

393 394 THE FREEMAN July Suppressing the Bad News But rising prices do not cause in flation, they report it. When a government--any government-starts trying to eliminate inflation by controlling wages and prices, what it is really doing is asking all ofus to suppress the bad news that it has printed too much money. The way to stop the bad news about the deteriorating value of our money, according to government, is to con ceal this from the people by freezing wages and prices. Prices and wages represent an es sential form of economic speech; money is just another form of infor mation. When the freedom of this economic speech is restricted, we are all not only penalized, we are mis led. In (Federal Reserve) Governor Wallich's words: UInflation is like a country where nobody speaks the truth." Prices enable consumers to com municate with producers and tell them what they want or don't want.

If prices are censored, or frozen, they cannot tell producers what goods or services people want or don't want to purchase. Examples abound. When the government artificially restrained prices for natural gas, the price told consumers that this form of energy was relatively cheap and in ample supply. Believing what they heard, people built homes heated with natural gas. The same controlled price told producers that people don't want much natural gas--it was not in demand--and therefore they had no incentive to increase production. Everybody was being deceived and we all know about the results in the winter of 1976-77. People are often deceived also about the nature of money. As a piece of paper in your pocket, money has no intrinsic value, it is worthless. Its only value consists in what it represents, which is a claim on a share of the world's goods and services. If the government in creases the pieces of paper" faster than the private sector can produce goods and services, then every piece of paper is going to represent a small er claim on whatever people have to sell. The only way to keep that from happening is either to increase the production of something salable, or else slow down production of the pieces of paper.

The plain fact is that the reason we have inflation in this country is that since 1967 the government has caused the money supply to grow nearly three times as fast as the goods and services that can be bought with it. That statement can be fiddled with and footnoted until everybody forgets what they're talk ing about. But the bad news will not go away. And no amount or kind of wage and price controls can make the government's paper money worth more ofthe world's goods than 1979 REPRESSING ECONOMIC NEWS 395 the world is prepared to give for it,. Governments' ability to devastate an economy and blame it on some! one else can never be overestimated. They don't even have to print their own paper. They have frequently managed to do it with gold or silver. Ancient Rome added cheap alloys to its gold coins and suffered inflation as a result. Spain had a monopoly on the riches of EI Dorado-the pre cious metals flowing into Europe from Mexico and Peru formed the basis for an inflation that in the end destroyed the Spanish Empire.

Every time a new silver consign ment arrived at Seville a ripple of price increases spread across Europe because there was suddenly more money with which to buy things. And because the effect was always felt first and strongest in Spain, that country continuously occupied top place in the inflationary table. Spanish costs became increasingly uncompetitive, and the Dutch got rich buying cheaper goods in the north and shipping them south. The Spanish solution was to sink merchant ships and hang busi nessmen. You can find the same story of unsuccessful repression of economi.c news being repeated all the way back to the Roman Emperor Diocle tian, who may have coined the best name yet for government price con trols: the argumentum baculinu"t, or the argument of the club. What Diocletian could not ac complish with the Roman legions and Philip the Second could not do with the Spanish Armada, the Council of Wage and Price Stability now proposes to do with a staff of 233 civil servants. Once again we hear repeated the rephrasing of Dio cletian's edict which began with a notable assertion, ~~Uncontrolled economic activity is a religion of the godless."

Whatever the government-any government-decides to call its price control methods doesn't really matter. Whether it's jawboning, in comes policy, voluntary guidelines, mandatory ceilings, or an economic police state, it all comes back to Diocletian's argumentum baculinum. All it means is that the govern ment threatens to hit you harder later on if you don't behave after it hits you the first time. History demonstrates that once a govern ment picks up the club, it finds it very hard to put it down again. The American press would not to lerate for one moment an attempt by the government to suppress news of riots or political demonstrations on the grounds that it wants to ~~insure domestic tranquility." The press knows a threat to the First Amend ment when it sees one. Yet on the grounds of ~cinsuring price stability," the government as sumes the power to tell us what we can be paid for our labor and what 396 THE FREEMAN we can charge for our products, and the only question asked by most of the press is: Will it work? That is the wrong question. The right question is: How does it affect individual lib erty? Is not one of the most basic human rights the right of a person to sell his or her labor at what the market will bring?

There are ten amendments in the Bill of Rights, although sometimes it seems that the press is so busy defending the first one that it is hard to get equal time for the other nine. Let me recall one of them-the Ninth Amendment-which few peo ple ever read any more, let alone de fend. It says: uThe enumeration in the Constitution, of certain rights, shall not be construed to deny or dis parage others retained by the peo ple." Is something being disparaged when the government's chief inflation-fighter tells a group of businessmen, as he did recently in Chicago, that (CWe will, with a de gree of enthusiasm that I suspect many of you may consider un seemly, identify the miscreants pub licly"? Qualifying as a Miscreant A miscreant, according to my dic tionary, is someone who is villain ous, unscrupulous and devoid of con science. And now all you have to do to qualify for that description, in the eyes of your government, is to insist on your right to decide what wage you're willing to work for, or how much to charge for whatever you're selling. I do not believe that was the kind of society the Founding Fathers had in mind, or one that many Americans will enjoy living in if it becomes a permanent condi tion-which it shows every sign of doing.

The government adopts monetary policies and fiscal policies which produce inflation in response to popular demand. Since there is no CCTruthin Politics" law we must rely on the vigilance of the press to re veal the true costs of those policies. When we come to understand what is happening, I do not believe that Americans are ready to sell their birthright of individual freedom. But someone has to make it clear that the collision course between government price and wage controls and personal liberty is inevitable because, in the end, government al location of economic resources re quires force. Someone has to point out-and keep pointing out-that every time the tide recedes a little after one of these floods of uemer gency" regulations, there is less sand left on the beach for free people to stand on. If it finally gets down to a single grain, even though that grain is labeled cCfree speech and the First Amendment," you'll find that it isn't worth much. ® Robert Higgs Blaming the Victims: The Government's Theory of Inflation IN OCTOBER, 1978, President Carter announced an elaborate program of wage-price guidelines to serve as the keystone of his administration's anti-inflation policies. What makes the President's advisers believe that the sword of guidelines can slay the dragon of inflation? Like other knights-errant, they are convinced that they understand the anatomy of the beast, that they know just where they must drive their lance in order to kill or at least disable it.