The Economics of the Barricades; A. Fisher

2Ibid., pp. 58-60. 3Ibid., p. 57. 4IJ'heEconomic Report ofthe President, 1979, p.6. 5Council of Economic Advisers, Annual Re port, 1979, p. 55; emphasis added. 6George J. Stigler and James K. Kindahl, ttIndustrial Prices, as Administered by Dr. Means," American Economic Review, 63 (Sept. 1973): 720. 7Leonard W. Weiss, ttThe Role of ConcentraAntony G. A. Fisher tion in Recent Inflation," in Yale Brozen, ed., The Competitive Economy: Selected Readings (1975), pp. 206-212; and research by J. Fred Weston, cited in Fortune (March 26, 1979): 40. 8George P. Shultz and Kenneth W. Dam, ttThe Life Cycle of Wage and Price Controls," in Economic Policy Beyond the Headlines (1977), p. 77. 9Council of Economic Advisers, Annual Re port, 1979, p. 239; latest price index values given are for November 1978. lOShultz and Dam, op. cit., p. 78. llWall Street Journal, February 16, 1979. The Economics of the Barricades A few months ago at a dinner party in London, our hostess announced she was quite ready to shoot the hospital workers. She was abso lutely sincere, referring to the strik ing members of a union which had effectively crippled hospitals throughout England, increasing the backlog of patients awaiting surgery by some 60,000. This meant untold suffering, and, in some cases, death for those who could not wait.

At other dinner tables one im agined similar housewives declaring 1979 THE ECONOMICS OF THE BARRICADES 405 equal fury at the striking truck drivers whose refusal to haul food caused tons of produce to be dumped at sea, making that which dribbled into London shops exorbitantly priced. It's not a new story. Economic disorder always divides society, pit ting one segment against another. Wat Tyler's Rebellion of 1381 was described as ((the malice of laborers" refusing to work at the low wages fixed by Parliament. In 1790 the washerwomen of Paris demanded death as punishment for the mer chants whose prices of soap had soared, and Marat responded that the people should help themselves by hanging the shopkeepers and plundering their stores. The great German inflation following World War I was first blamed on the bal ance of payments, then on the speculators, and ultimately on the Jews. Even the Greeks had a word for this: ((stasis" or creating hatred between members of society.

What is responsible for this dis ease of ((stasis" from Diocletian down to our hostess last winter? In every instance it is indirectly due to government intervening in the normal course of the market. Wat Tyler's rebels were against fixing of wages after the Black Death had so diminished the labor force the sur viving workers could get triple their former pay. There were no unions to blame, no media or communications system (they couldn't even read or write), yet an attempt to cut their pay caused a rebellion or ((strike." In 1776, American inflation brought despotic controls and punishment to ((speculators," evok ing this comment by Pelatiah Webs ter: ((we have suffered more from this cause than from any other cause or calamity. It has killed more men, pervaded and corrupted the choicest interests of our country more, done more injustice even than . . . the enemies." The reference, of course was to the enemies of the Revolu tion.

Few realize the French Revolu tion came on the heels of France's most appalling inflation and wage and price controls, enforced by the guillotine. Even the United States and Brit ain first blamed ((speculators" for the inflation of the mid-1970s, then imposed wage and price controls, ((guidelines," and ((sanctions" inter mittently to counteract the inevita ble results of government's own in flationary policies. These controls attempt to hide the rising prices which are the major symptom of inflation. They will not work, any more than breaking the thermometer will cure the flu. In spite of their history of failure, such controls appeal to the politician be cause they transfer the blame for his own profligacy to scapegoats such as organized labor or capitalists. Yet, 406 THE FREEMAN how could the 5 per cent increase permitted by Britain's recent wage restraint policy conceivably com pensate the worker whose contract was up for renewal after two years of 10 per cent per annum inflation?

Add progressive tax rates and the worker is justified in asking 12 to 14 per cent per annum increases, or 28 per cent, just to stand still! Unquestionably, British labor unions have entirely too much power, and· their members include Marxists intent upon destroying the system. But in the last 50 years Brit ish wages have' fallen from almost double German or French wages to little more than half their wages. Were the general public to under stand this, the current strikes might be considered a justifiable outrage against an unreasonable govern ment, and our housewives might be less anxious to brandish their guns. Understanding, in fact, is the only possible cure for what history indi cates might become a bloody con frontation. It is necessary to under stand that inflation is caused by government mismanagement, over spending, and the consequent print ing of money, and that controls or sanctions will not mitigate, but will exacerbate the ultimate devastation of the economy. It is imperative for people and their political represen tatives to know that the conse quence of such controls is not only a deprivation of human liberty, but a serious inhibition to human produc tivity which compounds the prob lem.

But foremost among the evils of inflation, and government's stopgap measures intended to alleviate it, is the human antagonism, the rancor within a society where each blames another for his plight. Labor versus industry, housewives versus mer chants, farmers versus bureaucrats, rich versus poor, and so forth and so on, as society sickens with aliena tion. Yet the resulting chaos is built on error: each individual is reacting naturally to an injustice perpe trated, not by his imagined adver sary, but by his government! It behooves us to get this message across before the misunderstanding destroys us. This is a lesson Ameri cans might learn from the British, if only they will listen. @ Antony G. A. Fisher, author of Fisher's Concise History of Economic Bungling, Is founder of the Institute of Economic Affairs In London, and Instru mentalin starting the Fraser Institute of Vancouver, Canada, the International Center for Economic Pol icy Studies in New York, the Fisher Institute of Texas, and the Center for Economic and Environ mental Analysis of San Francisco, all of which pub lish research on public polley issues.