Book Reviews

Mr. Nash has been at work on his Hoover biography since 1975, when the Herbert Hoover Presidential Li brary· Association of West Branch, Iowa, .picked him to carry through with a job of research that is still several years from. completion. The first installment of Nash's under taking, The Life of Herbert Hoover: The Engineer, 1874-1914 (New York: W. W. Norton and Co., 768 pp., $25.00), is at hand, a work of tre mendous detail that recreates a vanished world in a way that stresses many an irony. The world that Herbert Hoover was so busy building as a young en gineer and financier was brutally murdered, when, in 1914, the "guns of August" signalled the end of a hundred years of peace. World War I gave Herbert Hoover the opportu nity to make a reputation as a pub lic servant, but it utterly cancelled the meaning of many of the projects that had engaged his attention in the years when he was building his for tune by wresting mineral wealth from gold and zinc mines in Austra lia, coal mines in northeastern China, copper mines in Russia, and lead and silver slag piles in Burma.

Hoover's first mining labors, as a young American engineer sent to the "outback" of West Australia by the English firm of Bewick, Moreing, were to bring some order and conti nuity to gold mining in places where the yield demanded the most careful kind of cost-cutting. The trick, even 445 446 THE FREEMAN July along the so-called Golden Mile at Kalgoorlie in the "Westralian" bush, was to make low grade ore deposits pay a margin of profit over a long enough period to justify the .expense of good stamping equipment. The irony of Hoover's career in gold mining is that it presupposed a world in which gold would continue to be the "unit of account" in currency systems. But the pre-1914 world of the gold standard barely outlasted Hoover's mining engineer career. And it was England's attempt to re vive the standard at an unrealistic level after the war that helped bring on the depression that ruined the Hoover presidency.

Hoover's cost-cutting success in the Australian "outback" was repeated in China, where he took on the job of getting rid of "squeeze" in the op eration of the rich Kaiping coal mine. But political troubles doomed the ef forts of Hoover's boss, C. Algernon Moreing, to make a good thing out of any Chinese concession. It was the time of the Boxer uprising. Hoover and his young wife, Lou Henry, sur vived the Boxer troubles, but his company couldn't solve the problem of dealing with Chinese officials who had to reckon with laws that gave to the Imperial Court the ownership of all minerals in the ground. Hoover had a low opinion of the Chinese as workers-they "lacked mechanical instincts." He argued that China would never manage to accumulate The Life of Herbert Hoover: The Engineer may be received post paid, by sending a check or money order in amount of $25.00 to Her bert Hoover Presidential Library As sociation, Inc., P.O. Box 696, West Branch, Iowa 52358.

a "social surplus" for modernizing its economy until it had found a way to control its population growth. If the "squalor of Asia" depressed Hoover, he had greater hopes for Russia. In his last days in London as an engineer-financier, he played a big part, mostly behind the scenes, in putting the Kyshtim copper mines in the southern Urals on a paying basis. He helped run pools in Kysh tim stock, he raised debenture money for the enterprise, and he profited by taking stock options. He made two trips to Russia, where he approved the "humane and. progressive" atti tude of the Baron Vladimir Meller Zakomelsky in trying to improve the conditions of the peasants and work ers at the bottom of the Kyshtim "pyramid." But at a rail station in Russia Hoover caught sight ofa chain gang of prisoners headed for Siberia. The horror of the scene gave him nightmares. He felt that "some day the country would blow up." This was in 1912.

Despite the chain gangs, Hoover believed that western money and engineering expertise could do much 1983 HERBERT HOOVER: THE ENGINEER 447 for Russia. In 1913 and 1914 he backed his friend, the ebullient and optimistic Leslie Urquhart, in Rus sian ventures. Urquhart launched the Russo-Asiatic Corporation, with Hoover on his board. The corpora tion acquired three extraordinary mining concessions in Siberia, in cluding 3,000 square miles in the southern Altai mountains not far from the Mongolian border. By the summer of 1914 Hoover's Russian mining enterprises were in sight of spectacular success. Hoover also had oil interests in the foothills of the Caucasus Mountains in southern Russia. Nash quotes Hoover as saying he stood to obtain "more than is good for anybody" out of his Russian en terprises. But "it was not to be." The enterprises that Hoover and his as sociates helped to guide in the Urals and Siberia all evolved toward even tual prosperity. But the Bolsheviks got all the benefits.

Hoover's long absences from America only served to make him feel more and· more American. He took· special pains to take time off from money-making in London to become a big benefactor of Stanford University, which made him a trustee. It was Hoover who insisted on .raising the salary levels of the Stanford faculty at a time when the university was having trouble lur ing good teachers to its Palo Alto campus. If World War I had not intervened Hoover would have re turned to California, where he hoped to settle himself and his family on the Stanford campus. Nash is remarkably even-handed when it comes to dealing with Hoo ver's quarrels with his London part ner C. Algernon Moreing, who made Hoover promise to refrain from practicing his profession of mining engineer on British Empire soil as a condition of leaving Bewick, More ing to become a financier. Hoover and Moreing had always kept their dis tances from each other. Their quar rels were not always seemly on ei ther side. Nash remarks on Hoover's "marked sensitivity to criticism."

Hoover, he says, would go to "ex traordinary lengths . . . throughout his life to rebut alleged misrepre sentation." What Nash implies is that Hoover was too thin-skinned to be a politi cian. But that is something for an other volume. ® DEATH AND TAXES by Hans F. Sennholz (Centerfor FuturesEducation,P.O. Box 489, Cedar Falls, Iowa 50613),1982 105 pages. $5.95 paperback Reviewed by Brian Summers HERBERTHOOVERput it right on the line: "The American people have from the earliest moments been alive 448 THE FREEMAN to the evils of inherited economic power. Several million dollars is economic power and too often it falls into the hands of persons of little in tention to use that power for public benefit either in expansion of enter prise and employment or for public services. It is the breeding ground of playboys and playgirls of morally obnoxious and degenerating char acter." For once, President Hoover was in touch with the majority of the American people. Most Americans dislike playboys and snobs, and es tate taxes, are a good way to give them their comeuppance. Estate taxes make good political sense.

But estate taxes make no eco nomic sense. As Hans Sennholz clearly shows, estate taxes produce very little revenue (less than 1 per cent of projected 1983 federal re ceipts), consume scarce capital, dis tort the structure of production, lead to costly avoidance schemes, and promote more conspicuous con sumption than perhaps any other tax. Of course, estate taxes do not level factories like a B-29. But when the tax comes due, stocks, bonds, farms, and family businesses must be sold to pay the bill. This consumes pro ductive capital which is needed in other sectors of the economy. The old factory remains standing; the new factory is never built. Confiscatory taxation leads to avoidance and evasion. The simplest way to avoid estate taxes is to avoid leaving an estate. Sell the business, retire early, and spend it all while you can. Thus, even in the grips of recession, luxury items sell at a brisk pace, while essential industries lan guish for lack of investment capital.

Jewelry, furs, precious metals, gems, works of art, and bearer bonds are easily transferred, difficult to trace, and thus particularly amena ble to tax evasion. When all else fails, there is always the Swiss bank ac count or Liechtenstein family foun dation. Having taken such a dim view of estate taxation, it is not surprising that Professor Sennholz offers a few avoidance techniques of his own. An expert on inflation, he shows how the inflation that can destroy a family fortune can be used to facilitate the tax -free transfer of wealth between generations. These sections on fam ily annuities, limited partnerships, revocable living trusts, family mort gages, corporations, holding compa nies and other techniques are re quired reading for those who want to protect family wealth in an age of inflation and estate taxation. i Death and Taxes also is avail able and may be ordered at $5.95 from The Foundation for Economic Education, Inc., Ir vington-on-Hudson, NY 10533.