Corporate Giving; E. Crane

This trend in corporate giving is disturbing on two accounts. First, it is not in the long-term inter ests of shareholders or employees. Second, it is an abrogation of a broader societal obligation corpo rations have, as centerpieces of the free enterprise system, to promote understanding of and support for market capitalism. Americans have a much higher level of respect for the business community than most businessmen realize. Mr. Crane is president of the Cato Institute in Washing ton, D.C. The typical senior business executive who is expected to address issues of public concern is often confronted by anti-corporate activists, a skeptical (if not hostile) media, and government bureaucrats who derive great psychic income from the arbitrary power they hold over corporations. Perhaps it is therefore understandable why so many of them assume a defensive, almost apolo getic posture when it comes to speaking out. The truth is, however, that the vast majority of Ameri cans have few axes to grind with corporations.

They respect competence, innovation, productivi ty, and yes, profits. If many detractors of corporate America are motivated by envy, most Americans take genuine pleasure in the legitimate achieve ments of others, including corporations. The point is, simply, that senior executives with the courage to speak out in defense of capitalism and the role their corporation plays in our society would find a much stronger positive response than they might imagine. Corporate executives, be cause of the somewhat hostile public environment they find themselves in, tend not to recognize the moral suasion they possess. And the moral argu ment for capitalism is made all the more compell ing because it is a system based on voluntary ex change, rather than compulsion. Capitalism is a moral system. It is important to recognize that the revolutions that have occurred in Eastern Europe are less revolts against Communism-a system that has been intellectually bankrupt for decades-than they are revolts against government control of people's lives, per se. People risked their lives for the right to be free to choose, as Milton Friedman put it. They want to choose where they live, what they read, at which jobs they will work, and for how much money. The victory of capitalism over socialism is more fundamentally a victory of free dom over coercion.

Claimingthe MoralHighGround The very fact that choice (and private property) is at the heart of capitalism provides the business executive with a clear moral high ground, if only he would choose to employ it. Behind the moral pos turing of capitalist detractors invariably lie schemes to limit individual choice-to direct the workings of the marketplace by bureaucratic edict and coercive redistribution. The chipping away at our free enterprise system by critics of business should be dealt with through a principled counter assault rather than tepid protestations and finan cial handouts that only serve to embolden the adversary. The lack of a vigorous, principled business community stand in support of the free market sys tem has been a significant factor in the ominous growth of government during much of this century. The business community should, in fact, support limited government in general-not just in the economic realm-because it is the principle of limited government that ultimately protects mar ket capitalism.

More than 200 years ago Thomas Jefferson wrote that "The natural progress of things is for liberty to yield and for government to gain ground." Certainly events in the 20th century should remind us of the wisdom of Jefferson's admonition. In the early part of this century, gov ernment spending at all levels-Federal, state, and local-amounted to just 10 percent of National Income. By 1950 the percentage had risen to 26 percent. Today, the total of all levels of govern ment spending has reached 43 percent of National Income. The greater the amount of private sector money spent by the public sector, the less efficient and productive will be the market system, and the less competitive American industry will be in the international marketplace. 417 The SystemicNature of GovernmentGrowth One of the great dangers of the present ap proach to public policy undertaken by the business community is that it fails to recognize govern ment's encroachment on the private sector as a systemicproblem, the "natural progress of things"

that Jefferson warned us of. The literature from distinguished freemarket economists on the growth of government is exten sive. To begin with, there is the Public Choice School, led by Nobel laureate James Buchanan, which makes a persuasive case that bureaucrats are not the disinterested public servants our high school civics texts might have led us to believe. Like the rest of us, bureaucrats are motivated in good measure by self-interest. Indeed, the bureau cratic imperative is constantly to generate ratio nalizations for expanding existing government programs, if not creating new ones. Another Nobel laureate, Milton Friedman, has written about the "tyranny of the status quo." Friedman describes the process whereby a bill will be debated for years, even decades, only to pass in Congress by a single vote. From that point for ward, however, the only debate is over whether the budget should be increased by 5 percent or 15 per cent. The new government program is protected by what Friedman refers to as the "Iron Trian gle"-the direct beneficiaries of the program, the Congressional oversight committee, and the Fed eral agency charged with administering it. Billions of dollars are spent annually by the federal govern ment on consultants (whose existence depends on the government) to determine the value of (read: justify) these programs. To suggest that the program has proven more expensive than its proponents had claimed it would, or to challenge the efficacy of the program once it is in place, is considered somewhat ill-mannered inside the Beltway.

There are other powerful reasons for the growth of government, also unrelated to the val ue of that growth. For instance, programs typical ly dispense concentrated benefits while costs are diffuse. When that is not the case, as in the recent catastrophic health care bill (directly tied to increased taxes on the elderly), the chances of stopping the growth of the state are greatly 418 THE FREEMAN • NOVEMBER 1991 enhanced. Additionally, Congress has, through incumbent-protection legislation, created an institution virtually impervious to voter disci pline. The "culture of spending" that exists inside the Beltway and in the state capitals around the nation tends to distort the good sense of even the best-intentioned legislators. MoreThanan AcademicExercise Determining the causes of government growth and the commensurate threat to the viability of the free enterprise system is more than just an aca demic exercise. If a business is going to succeed it must not only have appropriate management sys tems in place, but also a political environment that is hospitable to capitalism and conducive to eco nomic growth.

The purpose of this paper is not to develop an exhaustive case against big government. It is to outline the most effective approach to corporate giving consistent with the interests of sharehold ers, employees, and consumers. But it would be shortsighted to ignore the systemic failures of gov ernment in areas outside of business regulation and taxation. Those failures are directly relevant to the destructiveness of government intervention in the marketplace. Business in America has, for the most part, assumed a rather myopic approach to public poli cy, lobbying for changes in this bill, influencing the mark-up of that bill, as often asking for govern ment protection and favors as fighting off unwant ed taxes and regulations. Policy-research institutes and public interest groups are more likely to receive funding from corporate America if they are on the pro-government intervention side of this fray.

This is a serious strategic error. As former Sec retary of the Treasury William E. Simon wrote in The Wall Street Journal two years ago, "we in the American business community have a right and a responsibility to steer our gifts to institutions com mitted to maintaining freedom." Moreover, this myopic approach to public policy is dated and unsophisticated. In the past decade American business has revolutionized its approach to management techniques. Faced with the reality of a global marketplace, corporations that had survived for decades employing rigid, top down management systems have come to recognize that employee involvement and feedback are essential to operating at competitive levels of pro ductivity. In a like manner, the corporate world is ready for a revolution in its 1960s-styleapproach to corporate giving. A Historyof GovernmentFailure The failure of government runs the gamut of issues.For all practical purposes government has a monopoly in the field of education. Over the past three decades real spending per pupil has tripled while test scores have steadily declined. Yet the government education bureaucracy from the Fed eral to the local level argues that the problem is a lack of funds.

The Social Security system, sold as a safety net for the indigent elderly,now provides the majority of retirement income for a majority of Americans. As a pay-as-you-go system, it has deprived the economy of true savings, and now offers individu als entering the work force a rate of return upon retirement that we estimate to range from -2 per cent to +2 percent. And that assumes a 26 percent combined payroll tax early in the next century. Added to this is the remarkable fact that, unlike a private retirement plan, individuals don't own the corpus of money paid into Social Security over their working lives. In the area of welfare, where the state has assumed a massively larger role since the Great Society programs of the Sixties, more money has led directly to larger bureaucracies and more peo ple on welfare. Charles Murray's path-breaking book, Losing Ground: American Social Policy, 1950-1980, documents the self-defeating incen tives government welfare programs have created, often severing what he calls the "tendrils of com munity" by displacingprivate charities and absolv ing capable individuals of any responsibility for their own lives.

The list of major government failures, if not endless, is nevertheless extensive. When one looks directly at government attempts to regulate busi ness the results are much the same. We estimate that deregulation of trucking has saved consumers on the order of $60 billion a year, not just in lower shipping rates but even more importantly in the ability of firms to develop just-in-time inventory systems. Airline deregulation has allowed millions more Americans every year to fly at lower rates.

CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 419 What problems of congestion remain are primarily the result of the failure to privatize the air traffic control system and the airports themselves, which have not responded to increased traffic as a market entity would, by increasing capacity. Perhaps the prime example of government fail ure in the business world is the savings and loan debacle. S&Ls have always been something of a creature of government-not a market creation. When the yield curve moved sharply negative in the 1970s,deregulation of investments and interest rates became essential. Unfortunately, Congress not only failed to deregulate Federal deposit insur ance, it actually increased coverage to make it fea sible for individuals and institutions to Federally guarantee tens of millions of dollars of deposits. Without depositor discipline, some $500 billion of bad investments were made-to be underwritten by the American taxpayer.

In the face of this remarkably unimpressive record of government involvement in society greatly transcending the limited role envisioned by the Founders-the business community in Amer ica has allowed itself to be thoroughly cowed by the opponents of capitalism. Instead of standing up to its opponents, the business community has attempted to appease them at every turn. Instead of proclaiming the moral superiority of capitalism, it has conceded the moral high ground to the likes of a Ralph Nader. Consider Nader's vision for America as revealed in a recent magazine article: " 'How's your hand?' Rosenfield asks. Nader looks at the hand he scalded in a sink a few days back in Sacramento. "'Better,' Nader says. 'That hot water was almost boiling.The government hasn't set temper ature limits in Sacramento, so that's what hap pens.' " There is a point that the business community seems not to grasp. If the problem with govern ment is systemic, then orienting one's defense to protecting the status quo is a mistake. For the sta tus quo is not a given set of programs. It is, rather, a process. And that process is leading inexorably to ever greater government involvement. It is leading to a society in which Americans will have the benevolent hand of government determine the temperature of the hot water in their hotel rooms.

Yet how often do corporate representatives and business lobbyists operate on the assumption that the latest outrage they've caved in to in order to appease anti-capitalist activists must surely be all they really want? No. They want to determinethe temperatureof the water in your hotel room. The danger of government is systemic. It cannot be fought, at least not successfully,in the long run, on an ad hoc, piecemeal, and reactive basis. It most assuredly cannot be fought by letting the oppo nents of free enterprise determine the agenda for the debate. "PoliticallyCorrect"Intimidation To be blunt, the Sixties approach to giving placed corporate America (in general-there are several commendable exceptions to the rule) in the vanguard of what has only recently been dubbed "politically correct" thinking. A piece in the New York Times last fall explained that "p.c.," as it is often referred to, reflects "a large body of belief in academia and elsewhere that a cluster of opinions ... defines a kind of 'correct' attitude toward the problems of the world, a sort of unoffi cial ideology.... " The issues in the cluster include ecology, culture, and foreign policy. The article goes on to note the "Marxist" influence on some p.c. thinking and that "The cluster of politically correct ideas includes a powerful environmental ism" and an anti-capitalist mentality.

This whole phenomenon, the article concludes encouragingly, is being challenged by intellectuals willing to stand up to the left: "But more than an earnest expression of belief, 'politically correct' has become a sarcastic jibe used by those conser vatives and c1assicalliberalsalike, to describe what they see as a growing intolerance, a closing of debate, a pressure to conform to a radical program or risk being accused of ... thought crimes.... " To the list of politically correct ideas one could confi dently add the views that corporations are "exploitative" and that profits are "obscene." It should be noted here that without some kind of mental self-flagellation and deep-seated guilt over being a part of Western civilization,one is not considered to have seen the light. Corporate America has been an especiallysensitive target for the p.c. enforcers in our society, visibly wincing when accused of being out of step. Funds to sup port p.c. causes, including anti-business agitation, have been quickly forthcoming from the corporate community for the past 30 years.

420 THE FREEMAN • NOVEMBER 1991 The Politicsof Environmentalism The collapse of the intellectual case for social ism and the planned economy has led many anti capitalist activists into a new camp: the environ mental movement. To be sure, concern over a clean and healthy environment is something most Americans share. Corporate America has not always acted responsibly with respect to the envi ronment. Advocates of the free market should support the "polluter pays" principle of protecting the environment. But there must be sensible, rational standards for what constitutes unaccept able levels of pollution. The environmental movement has, for the most part, been taken over by individuals with a po litical agenda that is considerably more ambitious than merely cleaning up the environment. What leftist environmentalists recognize that most Americans don't think about is the fact that economicactivityis inherently"polluting."It nec essarily entails the transformation of scarce resources into higher-valued objects and then into some form of "refuse." Thus, in the name of elim inating pollution, nearly all human action could be subject to regulation. But to allow the environ mental movement to micro-manage levels of pol lution and the environmental consequences of economic activity is to invite central economic planning via the back door.

It should not be considered alarmist to suggest that many leaders of the environmental movement have just such an agenda in mind. Indeed, their philosophy transcends an anti-business posture and at times seems aimed squarely at the very idea of improving the human condition. During the brief windowwhen there was height ened optimism over the viability of "cold fusion," the Los AngelesTimesinterviewed several leading environmentalists to get their viewson the subject. One might have thought that the prospect of clean, inexpensive energy would be cause for an environ mentalist celebration. But one would have been wrong. Paul Ehrlich said viable cold fusion would be "like giving a machine gun to an idiot child." Jeremy Rifkin said, "It's the worst thing that could happen to our planet." Barry Commoner, who once ran for President on a socialist platform, offered the helpful advice that we not convert our plant and equipment over to cold fusion until it is proven to work. Otherwise, he said, it would be "like starting to build a bridge over a river without knowing where the other side is." Luckily,Ameri can industry did not switch to cold fusion without first finding out if it worked.

Our point is that accommodating the environ mental movement is an endless task. There is an anti-progress (anti-human?), almost Luddite men tality behind many of the demands from this group, as the above quotes from their leadership reveal. The Earth Day slogan was "We changed the world. Now it's time to change it back." From a capitalist standpoint, there is quite literally no satisfying this movement. The accommodating approach of business to the Clean Air Act of 1990 illustrates the dangers involved here. The Act imposes an enormous bur den on our economy, which we estimate to be in the range of $30 to $40 billion a year. Further, it imposes a bureaucratic command and control sys tem on business that greatly inhibits the flexibility industry needs to stay competitive. And all this is done in the name of such problematic goals as reducing CO2 in the air in order to solve an acid rain problem that the best scientific evidence says doesn't even exist. 60 Minutes, a television pro gram hardly biased in favor of business, devoted a segment to the absurd cost/benefit ratio of the Clean Air Act. Yet the business community,rather than fighting the Act on a fundamental level, opted to accept the major premise and hustle to patch in damage-control nuances.

An even more recent example of capitulation of a major business to disingenuous lobbying by an environmental group is the McDonald's Corpora tion's agreement to cease using foam packaging at the behest of the Environmental Defense Fund. The fact that McDonald's was on the verge of a major recycling project for its foam containers or, more important, that total worldwide human pro duction of CFCs (the offending chemical) is less than 1/400of the chlorine released into the atmo sphere by sea water evaporation made no differ ence. The politically correct position won an easy victory. Indeed, solidwaste management and "waste ful" product packaging are among the latest ratio nalizations for regulating business. State and local laws are proliferating. Congress has worked on a reauthorization of the Resource Conservation and Recovery Act, which will be horrendously expensive and without tangible benefit, and the CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 421 Environmental Protection Agency has proposed expensive new regulations on local landfills. Once again, corporations appear all too ready to con cede the left's premises in the hope of winning some marginal compromises. It will not work. An examination of the premises makes this clear.

The prejudice against disposable product pack aging is actually a prejudice against consumption. The (false) claim that Americans waste too much masks a belief that Americans consume too much. The prejudice against consumption is itself based on the fallacy that resources are finite, as well as 'on a fundamental belief that human action dis turbs the natural world. Compromise will only whet the left's appetite. If these premises go unchallenged, we will move inexorably toward ever wider recycling regulations, packaging restrictions, deposit policies, and even product bans. This would be a major step toward the politicization of business decision-making. All human action involves trade-offs, and the very purpose of a market economy is to make pos sible intelligent trading off. It does so through the price system,whichencapsulates sociallydispersed knowledge about supply and demand and puts it into a form usable by all participants in the market.

The anti-market mentality is characterized by a refusal to believe that trade-offs are unavoidable. For example, recyclingis presented as a costless method of reducing waste and saving resources. No consideration is given to the resources used in the recycling process itself. The handling of sepa rated materials requires more vehicles using more fuel creating more auto emissions.The production of foam packaging, which was devised in response to the anti-paper, save-a-tree lobby,is more energy efficient and less polluting than other forms of packaging. According to research, in the United States, where there is said to be more packaging "wasted," there is less food thrown away than in countries where less packaging is used. Finally, recycling costs consumers time. Why should the environmental movement have the power to decide that consumers' time is worth less than they think it is? These trade-off considerations won't be found in the literature of the recyclists.

Government is incapable of making intelligent decisions about what kind of packaging is best; it simply doesn't have the necessary information. The factors that go into a market -based decision include the relative scarcity of the competing materials and the preferences of consumers. To insure that the price system faithfully reflects real conditions, it is necessary that all costs be "inter nalized"; that is, every scarce resource must carry a market price. Thus, regarding packaging, it is essential that landfill services and other disposal costs not be subsidized by government at any level. Such a sub sidy distorts decision-making toward more pack aging because consumers don't pay the full costs of usingit. In contrast, government efforts to increase the costs of using packaging will result in other, unintended losses (such as food, as noted above). If consumers must pay the true costs of disposal, they willmake packaging decisions consistent with their values, with their means, and, without intend ing it, with what economists call "social utility."We thus can say that the free market promotes ratio nal conservation.

As noted, the corporate response on this issue to date has not been encouraging. It has been ad hoc, material-specific, and fragmented. The very least American business could do to protect the remnants of free enterprise that we enjoy would be to move their foundation contributions from those that seek greater control over people's economic activities to those that will develop and propagate the kind of arguments outlined above. A PrincipledApproachto PublicAffairs If the free enterprise system is to survive in the United States, it is imperative that the business community develop an effective strategy for sav ing it. Without a principled counteroffensive against those forces determined to destroy it, the corporation in America has a lesspromising future than the spotted owl. The environmental move ment, egalitarian ideologues, and high-tax redistri butionists won't lose sight of their goals simply because your corporation has made an accommo dation to their latest demands.

In order to seize the moral high ground, howev er, the first thing the business community must do is stop usinggovernment to gain a temporary com petitive advantage in the marketplace. Doing so not only hurts competitors, it also imposes costs on consumers. Part of the new enlightenment of cor porate America, in addition to employee-oriented management, is a recognition that the consumer 422 THE FREEMAN • NOVEMBER 1991 (at whatever level of production) must be treated with respect. In addition, it is difficult if not impos sible to maintain an entrepreneurial spirit in the workplace while diverting corporate resources to manipulating the coercive levers of government to gain competitive advantage. Is the company's goal to make the best product at the lowest price, or to unfairly restrict competition and consumers? Cor porate America cannot have it both ways. As Paul Weaver wrote in his Cato Institute/ Simon and Schuster book The SuicidalCorpora tion:How Big BusinessFailsAmerica: The effort to grab competitive advantage from the political process doesn't work any more, for the same reason that protectionism doesn't work. The effort to beggar one's neigh bor soon becomes apparent to the neighbor, and he proceeds to do something about it. Fifty years ago and more, business's efforts in the U.S. to lobby government for advantages at the expense of many parts of the population stimulated farmers, workers, consumers, and others to organize and lobby for protection and subsidies of their own. Over the years, it worked all too well. Sooner or later the policy makers got around to giving at least something to nearly everyone. The heavy, unpredictable, economically harmful burden that government puts on American business today is the end result, direct and indirect, of a century of busi ness lobbying.

Under the pressures of a competitive global economy, American executives are beginning to face up to this shocking and disillusioning truth. As they do, I believeI hope-that they will turn away from the blind, manipulative, self destructive selfishness that is corporatism and begin to embrace the humane system of enlight ened self-interest and voluntary cooperation under law that some call capitalism. To achieve that goal, corporate representatives must be directed to take principled stands in sup port of an open-market system when testifying before Congress or lobbying in its halls. Certainly they should stop their practice of developing such close relationships with Congressmen and their staffs that they end up lobbying the corporation on behalf of government. In general, one of the most highly leveraged means of influencing the public policy debate is through support of policy-research institutes and public interest advocacy groups. Regrettably, as noted, most corporate support for such organiza tions is perversely invested. There are a good num ber of important, efficient organizations support ing capitalism and limited government that are deserving of corporate support-much more so than many groups that receive much more. We recommend the following guidelines for corporate support of policy research and advocacy groups: 1. The organization should be openly supportive of free enterprise and limited government.

2. The organization should be non-polemical and nonpartisan. 3. Its product should be professionally packaged and marketed. 4. Avoid endowed organizations unless they appear to be utilizing their income stream from the endowment efficiently. 5. The policy approach should be innovative, entrepreneurial, and designed to move the debate off dead center. Avoid supporting groups that spend a high percentage of their resources defend ing the status quo. 6. Do not support organizations that accept gov ernment funds. 7. The organization should have a high level of output and visibility relative to its resources. In his preface to Patternsof CorporatePhilan thropy,former Delaware Governor Pete du Pont wrote: If the public policy program requesting funds is designed to .change things at the margin, by five or ten percent, forget it. ... Become the entrepreneurs your companies' founders once were. Look for exciting new ideas, bold new solutions, interesting new experiments to be tried, and give them a chance, because that is where America's future lies.

During the past decade, America's corpora tions have displayed courage in managing their own affairs. While government has relied ever more on an outdated model of bureaucracy, cor porations have adapted to the new realities of the information age by cutting bureaucracy and relying ever more on market forces to dictate decisions. Now, as they look at their public pol icy philanthropy, corporations need to take a page from their own lesson books and promote CORPORATE GIVING: THE CASE FOR ENLIGHTENED SELF-INTEREST 423 a new approach to public policy, an approach that seems radical only by the standards of American government in the 1990s. In an op-ed last year in The Wall Street Journal entitled "Socialism is Dead; Leviathan Lives," James Buchanan wrote that "The death throes of socialism should not be allowed to distract atten tion from the continuing necessity to prevent the overreaching of the stateas-Leviathan, which becomes all the more dangerous because it does not depend on an ideology to give it focus." Con sistent, principled opposition to Leviathan on the part of American business can make an enormous difference. Support of free market public policy research groups should be a major part of the principled opposition.

The distinguished University of Pennsylvania historian Alan C. Kors, in discussingthe decline in importance of American universities, said in a recent interview,"But what's comingout of certain think tanks and certain foundations and certain institutes is very excitingand much more central to the real debates about the problems of American society."It is time for corporate America to decide which side of the debate it supports. D Democracy and Diversity S ome corporations have defended their grants to anti-business activists on the grounds that such grants supposedly strengthen the democratic process by encouraging "diversity." The reasoning seems to be that by supporting a wide range of opinion and thought in pol icy research and advocacy, the "best" ideas in the current policy arena will prevail. In fact, however, one of the principal reasons for this study is that diversity is the last thing being encouraged.

The federal government has provided hundreds of milions of dollars to nonprofit advocacy organizations, at least 98 percent of which promote inter ventionist economic policies, in addition to which government funding of public policy research far outstrips private, corporate funding and is biased heavily toward the left. Government agencies fund policy research that calls for a more activist government, intellectual support for which is obviously conducive to the larger budgets they typically seek. Government's predomi nant role in funding academic public policy research is an important reason why this researchand academic opinion in generalis so heavily biased in favor of state intervention. Thus, the overall funding of public affairs organizations and of public policy research is already grossly unbalanced in favor of those who espouse inter ventionist economic policy. Additional corporate funding merely augments this imbalance, exacerbating an already overwhelming anti-free enterprise bias. It does not encourage balance and diversity; it stifles them.

-THOMAS DILoRENZO from Patternsof CorporatePhilanthrophy,1990 (Capital Research Center, 1612 K Street, NW, Suite 704 Washington, DC 20006) IDEAS ON LIBERTY $ 424 Capitalism: Who Are Its Friends and Who Are Its Foes? by Donald J. Boudreaux Marxian 'alienation'is aphilosophicallyesoteric concept projectedby intellectualsonto the working class,ratherthanapassionfeltfrom withinthatclass with such intensityas to drive the proletariatto the barricades.! -THOMAS SOWELL O ne of the standard pillars of Marxist thought is that a person's economic posi tion determines his or her political beliefs. People who are wealthy capitalists or prosperous members of the bourgeoisie support public poli cies favoring "capital" over "labor," while the ever-growing working class supports pro-labor as opposed to pro-capitalist policies. As an economist, I always have been skeptical of this piece of Marxist dogma because, in a free market economy, pro-capitalist policies are not necessarily anti-labor, and pro-labor policies are not necessarily anti-capitalist. After all, capital accumulation increases the productivity of work ers' which, in tum, increases real wages. Another problem with this Marxist proposition is that most laborers in free market societies are themselves capitalists. It is not uncommon for blue collar workers to directly own stocks in corporations, or, indeed, to own their own businesses. More signifi cantly, nearly all working people in the United States own shares of corporations indirectly Don Boudreaux is studying law at the Universityof Vir· ginia.