November

THEFREE IDEAS ON LIBERTY 404 Underground Government Hans F. Sennholz How "off-budget" spending circumvents the mandates of taxpayers and consumers. 412 Socialism and Incentives David Osterfeld Socialism rewards sloth and penalizes hard work. 416 The Forgotten Dream John K. Williams Free societies have departed from the dream that gave them birth. 423 The Golden Age of Opportunity Gregory F. Rehmke When people are free, adversity fosters growth and progress. 425 The Moral Foundations of Property Rights Brian Summers A preliminary discussion of the bases for private ownership. 431 Public Education: How Free? Rolf McEwen Education requires what government cannot provide. 433 Private Schools in the Inner City Howard Baetjer Jr. How can the poor afford private schools? 435 Our School System: The Dream and the Reality David Smyth What if there were no public schools? 438 A Reviewer's Notebook John Chamberlain and Richard Ebeling offer two perspectives on John Gray's "Liberalism."

CONTENTSNOVEMBER 1986 VOL. 36 NO. 11 THEFREEMAN IDEAS ON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President of the Board: Robert D. Love Vice-President of Operations: Robert G. Anderson Senior Editors: Beth A. Hoffman Brian Summers Editorial Adviser: Paul L. Poirot Book Review Editor: Edmund A. Opitz Contributing Editors: Howard Baetjer Jr. Bettina Bien Greaves Gregory F. Rehmke Joan Kennedy Taylor Production: Laurel A. Mascola The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533 (914) 591-7230. FEE, founded in 1946 by Leonard E. Read, is a nonpolitical educational cham pion of private property, the free market, and limited government. FEE is classified as a 26 USC 501 (c) (3) tax-exempt organization. Other officers of FEE's Board of Trustees are: Bruce M. Evans, chairman; Thomas C.

Stevens, vice-chairman; Joseph E. Coberly, Jr., vice-president; Don L. Foote, secretary; Lovett C. Peters, treasurer. The costs of Foundation projects and services are met through donations. Donations are in vited in any amount. Subscriptions to The Freeman are available to any interested per son in the United States for the asking. Single copies $1.00; 10 or more, 50 cents each. For foreign delivery, a donation of $10.00 a year is required to cover direct mailing costs. Copyright © 1986 by The Foundation for Economic Education, Inc. Printed in U.S.A. Permission is granted to reprint any article in this issue, except "Under ground Government," and "The Moral Foundations of Property Rights," provided appropriate credit is given and two copies of the reprinted material are sent to The Foundation. Bound volumes of The Freeman are available from the Foundation for calendar years 1969 to date. Earlier volumes as well as current is sues are available on microfilm from Univer sity Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106.

The Freeman considers unsolicited editorial submissions, but they must be accompanied by a stamped, self-addressed envelope. Our author's guide is available on request. PERSPECTIVE Privatization:1Wo Perils "Privatization" conjures up the picture of a shift of governmental activity into private hands. At first glance, this would seem to merit applause from those of us who favor the free market, private property, limited government system. After all, if noncoercive, creative "public" functions are transferred to the mar ketplace where they belong, individual liberty will flourish to the betterment of us all. Yet those who employ the euphemism of "privatization" often use the word to mask two related ideological perils: First, the term may mean the mere "contracting out" of "public services" to private entrepreneurs as a means of carrying out activities which are not the proper function of government. Second, the doctrine may encompass the premise that the private sector-the market-will be allowed to accom plish specific "publicly necessary" functions only for as long as the government determines that those endeavors are properly performed.

The State thus acts as a backstop or guarantor, a provider of last resort in the event that the mar ket fails to supply the goods or services as directed by the government. Both of these ideo logical snares pose fatal pitfalls to the princi pled student of liberty. Consider first the idea of "contracting out government services." This idea rests on the belief that the services provided or the goods produced constitute a necessary and proper governmental function, with the only quibble relating to the most effective means of carrying out this presumably appropriate "public ser vice." Such a tenet violates the principles of minimal government and unrestrained individ ual action: the proper State exists solely to repel and deter the initiation of force and the applica tion of fraud, and to afford a system of common justice capable of adjudicating otherwise insol uble disputes between citizens.

Sovereignty cannot tolerate the delegation of these destructive, outside-the-market powers to private citizens. The cloaking of private indi viduals with the compulsive powers of the State in the arena of creativity outside the narrow fences of proper governmental action cannot disguise the immorality and foolishness of the act. The State cannot delegate the monopoly of force needed to police criminal and fraudulent conduct, nor can it "contract" for a system of justice. These are the sole responsibility of gov ernment. "Contracting out" creates a confu sion of terms. By the same token, if an activity undertaken by the State penetrates the arena of creative hu man conduct, liberty lessens and slavery abides. The condition does not change for the better by endowing private citizens with the powers of government. Indeed, the "contracting out" thesis con cedes the greater efficiency of the market, al though it remains to be seen if contract employ ees retain any semblance of efficiency in noncompetitive bureaucratic enterprises. And even if we assume that contract. employees are more efficient, this fails to answer the pertinent inquiry: why help a tyrant become more effi cient and hence prolong the agony he inflicts?

Why would any honest and accountable indi vidual strike such a bargain with the traducers of freedom, and why would any defender of the voluntary way praise such nonsense? The "contracting out" concept assumes a number of slim disguises. It permeates the cha rade of "public corporations" such as the Postal Service. It appears in the euphemistic phrase, "proprietary functions of government should be operated like a business," which lies behind socialistic ventures such as the Tennes see Valley Authority. It supports the extortive process designed to buy off the beneficiaries of legal plunder. Whatever the protective garb, the theory is blatant and dangerous. Let us now turn to the second peril of privat ization: use of "privatization" to retain the State as both ultimate authority over the neces sity and wisdom of a good or service and final arbitrator of the sufficiency of the good or ser vice.

By nature, a market consists of all willing and interested participants. Each such individual "votes" in a massive "dollar democracy" for those goods, services, or ideas which most ap peal to him or her. A market exists without co ercion and without inflexible presuppositions of ultimate desirability; it caters to the wants of everyone of us who buys and sells therein. A market flourishes precisely because of the PERSPECTIVE lack of prior restraint and pre-defined limits. This simple description lays bare the incon sistency of those "privatizers', who see the marketplace as a handy smorgasbord for pur veyors of predetermined fare. If the State de cides that certain goods and services must be offered, and that the police power must pass upon the quality and quantity of those goods and services, the supposed transfer from the public coercive apparatus to the private creative process is a sham. The resulta coerced economy-does not constitute a market at all; rather, the clumsy claw of government has tin kered with the system and obliterated any sem blance of true liberty.

Those who prize freedom must not waver in their devotion to principle. We ought to praise the abatement of governmental power when ever it recedes from the creative sector. And, importantly, we must not be gulled by those who contend that the enemy is capitulating when, in fact, the State and its operatives are merely employing fifth column tactics to lessen their natural bumbling and to continue fooling the foolish. -Ridgway K. Foley, Jr. (Mr. Foley, a partner in Schwabe, Williamson, Wyatt, Moore & Roberts, practices law in Port land, Oregon.) Op-Ed Update FEE's op-ed program, inaugurated last spring, has placed adaptations of Freeman arti cles in more than 40 newspapers around the country. Dwight Lee's "The Political Economy of Educational Vouchers" (August) was re printed in The Anchorage Times and the Charleston Gazette. Among the newspapers carrying James Gwartney's "A Christian Speaks Up for Capitalism" (August) were The Phoenix Gazette, San Jose Mercury News, and The San Diego Union. "Air Transportation Safety" by John Semmens and Harry Wolfe (August) appeared in The Orange County Reg ister, The Joplin Globe, The Dayton Daily News, and The Green Bay Press-Gazette. "Li lacs" by Jack Schwartzman (September) has appeared in newspapers in Texas, Florida, Cali fornia and Tennessee.