November

THEFREE IDEAS ON LIBERTY 404 The Great BankingScandal Hans R Sennholz Why is Congress.skirtingthe real issuebehind the S&L mess? 406 Boomnme for State and LocalGovemment John Hood The truth about state and localspendingin the 1980s. 409 Environmentalism:Freedom'sFoe for the '90s RobertJames Bidinotto Cleaner air and water are not the onlyitemson the agenda of the environmental movement. 421 Markets and Pseudo-Markets DonaldJ. Boudreaux Argumentsin favor of "the market" are not necessarilyargumentsin support of classicalliberalvalues. 424 The Mythof PubliclPrivate"Cooperative Enterprises" BarbaraR. Hunter A transfer paymentis a transfer paymentis a transfer payment. 426 Sweden:No Modelfor Eastern Europe Eric Brodin Why newlyemergingdemocraciesshouldnot view Swedenas the ideal welfare state. 429 The Two-EdgedSwordof Chaos Gary McGath Before askingwhether a mathematicalmodelfails in its predictionsbecauseit is chaotic,we shouldask if any such modelis validin the firstplace.

433 RisingPrices:The Market'sWay of ConservingOil JorgeAmador Have oil companies"gouged" consumersduringthe most recent Mideastcrisis? 436 The Nature of Government Fred Dekkers The more the power of the state is concentratedin fewer hands,the greater the danger of abuse. 438 Book Reviews John ChamberlainreviewsThe Politicsof Plunder:Misgovernmentin Washingtonby Doug Bandow;alsofeatured: Free MarketMorality:The PoliticalEconomy of the AustrianSchoolby Alexander Shand. CONTENTS NOVEMBER 1990 VOL. 40 NO.11 THEFREEMAN IDEASON 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; Philip M. Spicer, vice-chairman; Paul L. Poirot, secre tary; 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 "The Great Bank ing Scandal" and "Environmentalism: Free dom's Foe for the '90s," 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 Cover art © Washington Post Writers Group. PERSPECTIVE Sweden In a societywhere individualscannot easilyin creasetheir income,or accumulateprivatewealth by ordinary work, they turn increasinglyto the zero-sumgame of·transferringincomesfrom one another rather than engagingin the positive-sum game of producingincomethrough work, capital accumulationor productiverisk-taking.The prob~ lemisnot that itisimpossibleto getrichin Sweden, but rather, that it is difficultto remain so through honestproductiveactivities. Problemsassociatedwithpublicsectormonop olies,suchas slackmanagementand largebureau cracies,·are also typicalin Sweden.The notion of uniformityseems attractive to egalitarianspirits, but apart fromthe normalproblems,thiscreatesa new problem in a contractionaryeconomywhen governmentbudgetshave to be reduced.It is dif ficultto findalternativesourcesofsupply.Thisfos terstensionsin societysinceit becomesimperative for each pressuregroup to gain accessto politiCal power at the expenseof others. Since part of the welfare state concerns distribution over the life cycle,one shouldadd that groupsseekingto gain benefitsfromsomeprogramsmayhurt theirfuture positionif present gains accrue at the expenseof programsfavoringthe elderly.

-PETER STEIN, writingin the Journalof EconomicGrowth (Vol. 2, No.4) (Note:Pleaseseepage426for Eric Brodin~ "Swe den: No Modelfor EasternEurope.") The PennissiveSociety If everyonemust be equal and no one is to feel inferior,moral distinctionsare no less objection ablethan intellectualor socialones,and the surest way ofeliminatingthemis by denyingthat there is any moral difference between competingvalues and modes of conduct.You cannot, for instance, criticizeruthlessnessin businessif there is nothing wrong with sacrificinghonesty to the pursuit of success. Similarly, if it is true that individuals shouldbe free to gratifytheir impulsesin any way they choose,withoutriskingsocialor moralsanc tions,it impliesthat the idea of an objectivemoral lawis anillusion,otherwisemoralneutralitywould be indefensible. You cannot, after all, condemn adultery ifit is considered that the pursuit of sexual pleasure justifies breaking your marriage vows. It is consequently more than a coincidence that most left-wing intellectuals combine an attachment to socialism with hostility toward "conventional morality." What adds fuel to the cultural fire is that the process of moral and social decomposition set in train by the Left has been reinforced in recent years by a mistaken conviction among political lib ertarians that the permissive society is the moral corollary of the free societya logical extension of freedom into the moral sphere.

-PHILIP VANDER ELST, FreedomToday,April 1990,published by the Freedom Association, London, England. MonitorUpdate The September 1988Freemancarried scuba div er Gary Gentile's account of his lengthy struggle with the National Oceanic and Atmospheric Ad ministration to gain permission to explore the wreck of the Monitor.On July 4, 1990,having won his court battle, Gary led a team that photo graphed the remains of the Civil War ironclad. Administrative Law Judge Hugh J. Dolan hand ed down the pivotal decision that allowed Gentile to make his dive. In his decision, Dolan quoted the Idaho Law Review (1980): "A venturesome mi nority will always be eager to get off on their own, and no obstacles should be placed in their path; let them take risks, . . . let them get lost, sunburnt, stranded, drowned, eaten by bears, buried alive under avalanches-that is the right and privilege of every free American."

No Peanuts If your father grew peanuts in the 1940s,there is a good chance that you or your siblings have a gov ernment-granted entitlement known as a peanut quota. Should you not inherit a peanut quota, you can expect to pay rather dearly if you wish to ob tain one. Today peanut quotas on farm land are usually far more valuable than the land itself. The nation's 44,000 peanut-quota owners are protected against any and all competition, domes tic and foreign. Moreover, they are guaranteed a PERSPECTIVE $631.47per ton support price by the federal gov ernment. This is approximately twice the price on world markets, and about twice the growing costs of efficient U.S. growers. The national quota for foreign-grown peanuts is 850tons a year. This is less than one-tenth of 1 per cent of U.S. consumption. Thus, for all practical purposes, foreign-grown peanuts are forbidden to U.S. consumers. However, U.S.-grown peanuts are available to foreign consumers at about half (or less) the price to U.S. consumers.

American farmers who grow peanuts without a Federal quota are "free" to sell their crops in the domestic market onlyfor peanut oil or meal. If they cannot selltheir crops in these markets or to foreign consumers, they must tum them in to the govern ment for $149.75per ton-less than 25 percent of the floor price for the peanuts of quota owners. Is this equality? Is this freedom? Can this really be America? -c. F. FISCHER, III Dothan, Alabama Fightingthe WrongEnemy I gave a lecture to about 200 people at the Uni versity of the North in South Africa, which is a black university. A black student stood up and said, "I'm a Marxist. I believe in Marxism and so cialism." I said, "Fine, may I ask you a few questions?" I asked him, "Do you think you ought to be able to open up a business wherever you want to?" He said, "Yes." "Do you think you ought to be able to indepen dently negotiate your wages with an employer?"

He said, "Yes." I said, "Do you think you ought to be able to live wherever you want to live without interference by a third party?" He said, "Yes." Then I said, "You're really for laissezfaire cap italism. The problem you have been fighting all these years is Communism, because Communism means government ownership and/or control over the means of production." -WALTER WILLIAMS, speaking at The Fraser Institute, February 19,1990.