Book Reviews

Thus events that are not compre hended by politicos control the course of history in ways that mock fiscal and monetary policies. Herman Kahn, in his The Coming Boom (New 60 York: Simon and Schuster, 237 pp., $14.95), though he approves of much that the Reagan Administration has been doing, thinks that America is about to experience a revitalization no matter who occupies the political seats of so-called power. Things are happening for cyclical reasons that control individual and group psy chologies, and the spill-over into economics will be of happy conse quence no matter what transpires on the Potomac. Kahn admits that the federal spending of the past thirty-five years has been unfortunate, but he doubts that it will prove fatal. For, while the spending has doubled in con stant dollars, the Gross National Product has tripled. Expenses at the local level may be a far more trouTHE COMING BOOM 61 blesome problem. Kahn counts on a sobering period in which people will rediscover the ideas of caution and discipline. Holding a job is now something to be prized. The work' ethic is no longer despised. The feel ing that there are no overwhelming material limits of growth (as con trasted with socially imposed limits) has induced a new optimism. Books such as the Club of Rome's Limits to Growth and the Global 2,000 report that was instigated by Jimmy Carter have been discounted.

Energy costs have figured in many a recent price increase, but the OPEC energy cartel has lost much of its menace. Kahn thinks its ability to set prices has peaked, and we can count on two decades during which a $40 top for a barrel of oil will be unobtainable. Meanwhile the aboli tion of price controls will insure sig nificant discoveries of new sources of oil and gas in non-OPEC countries. The "New Class" Kahn worries a bit about the so called New Class of "liberal" intel lectuals who encourage an unwise distortion of market forces for non market purposes. As children of their own parents' affluence, the members of the New Class command incomes ranging from $25,000 to $100,000 a year. Satisfied with their own sta tus, they work to impose laws and regulations that keep others from achieving the golden circle. In the name of ecology they fight the un covering of new sources of minerals, forest products and energy. But they have been losing ground lately. Blue collar workers who are interested in holding old jobs or getting new ones -no longer follow the dictates of the "liberal" elite in matters pertaining to environmental purity. Trade-otIs have become respectable, and cost benefit analyses are the new order of the day.

Kahn puts a lot of trust in the fact that the young grow older. The chil dren of the "baby boom" period are now reaching the "nesting age," which has conservative implica tions. Faced with the need to spend on durable goods, they have a sud den interest in fighting inflation. "High Tech" Kahn is quite aware that our old basic industries-steel, automo biles-are in trouble. But we are in the early stages of a change to "high tech," which will surely expand the economy in thousands of still un plumbed ways. Using the new short hand of the silicon chip age, Kahn speaks of C412 technologies. The "C4" stands for "command, control, com munications, computing"; the 12 for "information and intelligence." The new systems make remote library access available to everybody. The advent of C412 systems add new di mensions to the procurement, pro cessing and use of intelligence.

62 THE FREEMAN January Companies such as General Electric use computers and existing tele phone networks to achieve instan taneous and inexpensive communi cations with major cities around the world, drawing at the same time upon files stored in a single location. The new dynamics of high tech are destined to pound some new com mon sense into union leaders who have spent the past thirty years in devising new ways of milking the industrial cow without feeding it. Roger Smith, the chairman of Gen eral Motors, has said that "every time the cost of labor goes up $1 an hour, 1,000 more robots become economi cal." The use of robots will probably increase by 35 per cent a year through the 1980s. Thus high tech will come to the rescue of traditional industries that are fighting hard to live in the same world with the Jap anese, the West Germans and such newly emergent industrial nations as Taiwan, Singapore and South Korea.

In matters of military defense Kahn derives solace from situations that other people have deprecated. When four or five powers besides So viet Russia and the United States have nuclear missile capacity, the need to keep a wary eye on "swing" military establishments may help mitigate the confrontational zeal of the biggest powers. Russia and the United States might even have an interest in promoting a general "freeze" that would not only extend the peace but save everyone a lot of money. Commodity Bonds and Unconventional Finance Kahn doubts that a return to the gold standard is in the immediate offing, but he thinks the United States might experiment with bonds payable in gold. He also champions what he refers to as commodity bonds. An oil bond, payable in a cer tain amount of oil, might be issued to facilitate the build-up of an oil re serve, with the stored oil providing a guarantee that the bonds would be cashable on maturity. Since pay ment would be in a stipulated quan tity of oil, inflationary worries would disappear. Bonds could be issued with mineral backing other than gold.

Kahn hasn't gotten anywhere yet with his commodity bond idea, but he has his hopes. He thinks we are just beginning to explore the wide possibilities of what he calls "uncon ventional finance." Contracts don't necessarily have to be written in terms of money-or "lowe you noth ings," as John Exter would have it, referring to the world's fiat curren cies. By the year 2,000 A.D., says Kahn, we will be able to do things that would have seemed miracles or magic 200 years ago. It is an exciting world that waits for us if the presupposi tions of The Coming Boom stand up.

1983 OTHER BOOKS 63 THE SPIRITOF DEMOCRATIC CAPITALISM by Michael Novak (An American Enterprise Institute/Simon & Schuster Publication, 1230 Ave. of the Americas, New York, New York 10020, 1982) 434 pages - $17.50 cloth Reviewed by Tommy W Rogers IF this book does not become a clas sic catalytic agent on behalf of the natural system of liberty-as op posed to the command society of so cialism-as the desirable political economy on the basis of theological reason, it will not be due to any fault of Mr. Novak. The author must be credited with a major achievement. He set for himself the task of artic ulating a moral theory and a· theo logical base for the implicit ideals of democratic capitalism. His success is to have made a credible, compelling, intellectually solid and theoretically sound presentation of the political economy of the free society. He shows it to be the spiritually and morally commendable alternative to the col lective and compulsive ethic of so cialism.

If, as Novak asserts, social forms are constructs of the human spirit, the first of all moral obligations is to think clearly. This is an objective wherein the theological proponents of socialism, whether in the form of Catholic "liberation theology" or the collectivism of Protestant theolo gians, are neither totally honest nor innocent. Novak feels it a sad com mentary that ... few theologians or religious lead ers understand economics, industry, manufacturing, trade and finance. Many seem trapped in precapitalist modes of thought ... Many swiftly reduce all mo rality to the morality of distribution .. They demandjobs without comprehending how jobs are created. They demand the distri bution of the world's goods without in sight into how the store of the world's goods may be expanded ... They claim to be leaders without having mastered the techniques of human progress. Novak first inquires into the structural dynamics which are req uisite for and, in turn, give nurture to the economic order which ex presses itself in a noncoercive soci ety, a social order within which in dividuals and peoples may realize, through the vocations to which they believe they have been called, the greatest degree of personal dignity, human freedom and personhood. The free economy requires in practice a moral-cultural ethos, and it is a fail ure of democratic capitalism not to have made a moral presentation of itself to the world. The result, as No vak sets it forth, is that capitalism ... discusses itself and allows itself to be discussed, in sheerly material and pro cedural terms. The intellectuals of those incredibly varied nations ideologically 64 THE FREEMAN tied together as the "Third World" heap upon it a burden of guilt they do not con sider attributing to themselves. There has grown up, as P. T. Bauer observes, a dis honorable international politics. It is morally wrong, not only intellectually dishonest, to cooperate with such ideas and values, and to deny before the world those moral-cultural qualities without which neither economic development nor democratic governance can be achieved.

Novak next examines the socialist idea and displays its hollowness against the backdrop of the realities and the promise of democratic capi talism. The genius of the free society is its recognition that the most pre cious of all common goods is the in dividuality of each person, and that the best way to increase the common good is to empower people through differentiated systems. Collectivism, by contrast, pits man against man. It narrows the circles of trust and goodwill as groups com peting for the same allocations run afoul of each other's interests. The end result is a zero-sum society which promotes the Hobbesian "war of all against all." Economic growth, lib erty, and opportunity for social mo bility on the other hand· promotes charity, trust, and cooperation. The third section of Novak's in quiry into the spiritual wealth of nations, and the practical import and manifestations of this wealth in quality-of-life, is devoted to an attempt to set forth a religious per spective on democratic capitalisn_ Not even a society free politically, economically and culturally holds out the promise of perfectionism or uto pia; it does not claim to represent the Kingdom realized. The finest so cial order conceivable has to be practiced by men as they are, with all the foibles and propensities for evil by which men, in reality, are characterized. Thus, constant as sessment, evaluation, modification, in the light of democratic capital ism's own ideals is desirable, possi ble, and necessary.

There has been, as Novak rec ognizes, a failure of the moral-cul tural leaders of democratic capital ism to sow widely a moral vision promotive of the system of natural liberty. While, under the capitalistic political economy bread is more abundant, more equitably distrib uted, and less scarce and dear, even here human beings do not live by bread alone. In no major sphere of life. have the traditions of theology fallen further behind. Many con· temporary theologians and other in tellectuals seek a return to the uni tary society from which democratic capitalism provided liberation. No vak has addressed attention to the life of the spirit of democratic capi talism with a solidity and insight which deserves to have a crucial and long-lasting impact. i the Freeman ·f' VOL. 33, NO.2 • FEBRUARY 1983 George Washington on Liberty and Order Clarence B. Carson 67 A review of the great truths set forth in Washington's Farewell Address.