June

THEFREE IDEAS ON LIBERTY 204 The EconomicWisdomofA ConnecticutYankee RussellShannon Mark Twain'sadditionto the literature on the benefitsof free markets. 206 Takingthe train to Metamora WilliamB. Irvine Surveyingan economiclandscape. 209 The Theoryof Due Reparations RidgwayK. Foley, Jr. How the doctrineof specialtreatment for specialharms threatens liberty. 213 From Ganglandto Corporate America WilliamGranville,Jr. Groominginner-cityyoungstersfor a successfulfuture. 219 Perestroika'sMissingIngredient E. C. Pasour,Jr. So longas the lessonfrom the socialistcalculationdebate goes unheeded, perestroikais doomed to failure. 222 ConsumerSovereignty BettinaBien Greaves How Captain Consumerdirectsproduction. 224 Solidarityand Labor Law Reformin the 1990s CharlesW Baird The differencebetweenPolishSolidarityand Americanunionism. 226 The Genesisof IndustrialPolicy ThomasJ." DiLorenzo The philosophicaland ideologicalroots of socialisticeconomicpolicy.

231 Wealth,Freedom,and Philanthropy PeterFrumkin Philanthropyneeds both economicand culturalfreedomfor its survival. 233 "That's Already Been Settled" EarlZarbin Or has it? 235 Book Reviews John ChamberlainreviewsReligion,Wealthand Povertyby Father James VincentSchall.Other books:Individualsand TheirRightsby Tibor R. Machan, Economics:Work and Pr,osperityby RussellKirk,and FederalSupportof HigherEducation:The GrowingChallengeto IntellectualFreedomedited by Roger E. Meinersand Ryan C. Amacher. CONTENTS JUNE 1990 VOL. 40 NO.6 THEFREEMAN IDEAS ON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President of The Board: Bruce M. Evans Vice-President: Robert G. Anderson Senior Editors: Beth A. Hoffman Brian Summers Contributing Editors: Bettina Bien Greaves Edmund A. Opitz Paul L. Poirot Copy Editor: Deane M. Brasfield 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 champi on 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: Thomas C. Stevens, chairman; Ridgway K. Foley, Jr., vice-chairman; Paul L. Poirot, sec retary; Don L. Foote, 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. Addi tional single copies $1.00; 10 or more, 50 cents each. For foreign delivery, a donation of $15.00 a year is required to cover direct mail ing costs. Copyright © 1990 by The Foundation for Economic Education, Inc. Printed in the U.S.A. Permission is granted to reprint any article in this issue except "From Gangland to Corporate America," 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 1971 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. FAX: (914) 591-8910 PERSPECTIVE IndividualRights The term "human rights" is the semantic mon strosity of the day. There are no human rights, only individual rights. Clearly, humanity has no rights. The ultimate reality of existence imposes on everyone obligations to one's self and to those with whom one shares the existence. Individual mem bers of the human species therefore enjoy rights in relation to other individuals, in both the collective and individual sense. But to suggest that one en joys certain rights over and above these interrela tional rights just by being born into the human race is to promote the kind of fuzzy semantic thinking that leads to indolence and the belief that "the world owes me a living." It just may be that it is this semantic confusion that has brought about the re cent tendency away from holding each individual accountable for his behavior.

-MILLER UPTON Delavan, Wisconsin The Lure of Socialism Socialism has always proved attractive, and it has been with us in one form or another since the dawn of civilization. When one notes the promise of socialism, it can be readily understood how it is so easily sold to the masses. For socialism promis es a utopia, a sharing of goods produced, a "se cure" existence, equality for all, full employment and adequate food, clothing, shelter, medical treat ment, and old-age benefits. It should be noted that slaves were afforded the same sustenance. Humankind continues to overlook the fact that as we are provided "security" by the government, so also are we losing our freedom ever so gradually, and we become wards of the government. -RAYNOLDJ.THmoDEAux Nederland, Texas Violatingthe Commandments The laws of Judeo-Christian ethics still underlie most of our direct man-to-man relations. Acting individually, we practice, or at least seek to prac tice, the Commandments. In our social contacts we endeavor to live by the strictures of the Com mandments. But most individuals act differently as soon as they take part in the body politic. Acting in political concert, they behave in a way they would not dare to act in direct interhuman rela tions. They live by the motto: Thou shalt not steal-except by majority vote. Thou shalt not kill or coerce-except by majority decision. Thou shalt not bear false witness-except in politics.

-HANS F. SENNHOLZ,speaking at a February 6, 1990,chapel lecture, Grove City College Soviet"Prices" The idea that the Soviet Union has stable whole sale prices is a myth. At great pain to the economy, we maintain low prices for fuel and raw materials, while having long since lost control of prices in pro cessing industries. Resentments among miners and other producers of raw materials have boiled to the surface, and our country has been hit by a wave of damaging strikes. The only way to move away from economic ruin is to rationalize our price structure, which means creating the first real prices in this country's history. And real prices mean that we finally admit that an item doesn't cost what a bureaucrat says it does but what a customer is will ing to pay for it. - VASILYSELYUNIN,a Soviet economist, writing in the January-March 1990issue of Glasnost The Benefitsof ForeignInvestment Historically, foreign investment played an im portant role in helping to build the United States, and it is providing investment capital today. For eign direct investment (FDI) builds plants, em ploys U.S. workers, and promotes the transfer of foreign technology and management practices to the United States. U.S. affiliates of foreign firms provide over 3 million jobs and have an annual payroll over $90 billion; they account for about 8 percent of U.S. spending on plant and equipment and 21 percent of U.S. exports; and they spend $6 billion a year on research and development and PERSPECTIVE pay $9 billion in Federal income taxes annually.

Foreign direct investment increases the benefits from trade by facilitating trade in goods, services, and technology. FDI encourages the specializa tion of production, permitting firms to achieve a larger and more efficient scale of production. FDI also tends to increase competition to the ben efit of the consumer. Foreign direct investment is an important source of capital to the United States. If FDI were re stricted, much of this capital would be lost, at least to the extent it is not redirected into portfolio in vestment. The loss of these funds would result in a fall in the value of the dollar and increases in U.S. interest rates. The former would make the United States poorer by increasing the price of imported goods and services. And increasing U.S. interest rates would harm U.S. competitiveness by restrict ing the funds necessary for expanding economic growth. -SUSAN W. LIEBELER, testifying before the House Ways and Means Committee, January 25, 1990 The CivicGenius The deadliest enemies of nations are not their foreign foes: they always dwell within their bor ders. And from these internal enemies civilization is always in need of being saved. The nation blest above all nations is she in whom the civicgenius of the people does the saving day by day,by acts with out external picturesqueness; by speaking, writing, voting reasonably; by smiting corruption swiftly; by good temper between parties; by the people knowing true men when they see them, and prefer ring them as leaders to rabid partisans or empty quacks. Such nations have no need of wars to save them. Their accounts with righteousness are al ways even; and God's judgments do not have to overtake them fitfully in bloody spasms and con vulsions of the race.

-WILLIAM JAMES, from alecture commemorating Robert Gould Shaw and his 54th Regiment of black soldiers, May 31, 1897 204 THEFREEMAN IDEASON LIBERTY The Economic Wisdom of A Connecticut Yankee by Russell Shannon W hile Mark Twain's fame rests largely on his tales of youths growing up in mid-19th century America, he also wrote an incisive demonstration of the superiority of free market economics over the regulated and hierarchical society of English manorialism. This fact may be less surprising when one recalls that, although Twain (born Samuel Clemens) grew up in Missouri, he spent much of his adult life writing at Nook Farm near Hartford, Connecticut, where he was a neighbor of Harriet Beecher Stowe. Unlike Tom Sawyer and Huckleberry Finn, Twain'slater work, A Connecticut Yankee in King Arthur's Court, is set in medieval England, where the protagonist of the story, Hank Morgan, sud denly finds himself in Camelot. Morgan sets about establishing such elements of Yankee ingenuity and enterprise as a telegraph, a soap factory, and advertising. In the end, of course, all these anachronisms are destroyed, but in the meantime Twain has been able to make some telling points about the superiority of laissezfaire and individual initiative over regulation and rigidly.customary procedures.