Book Reviews

Bovard launches a relentless attack against pro tectionism masked as "fair trade." He mercilessly exposes politicians' moral posturing on fair trade as being nothing more than pedestrian concerns over campaign funding and re-election. More important, he illustrates why the concept of fair trade damages both U.S. consumers and produc ers. He manages to combine a seemingly inex haustible supply of supporting statistics, studies, and anecdotes with a razor-sharp pen, making this not only a formidable contribution to the trade debate, but a thoroughly enjoyable book. Bovard illustrates how "fair trade" works against low prices, voluntary agreement, competi tion, and "the economic values of private citizens," in favor of high prices, government coercion, state protected business, and "the moral and political values of federal policymakers." The concept of fair trade set the stage for Congress to "dictate over 8,000 different taxes on imports, with tariffs as high as 458% ," the imposition of trade barriers "costing American consumers $80 billion a year-equal to over $1,200 per family," and, in general, the impediment of economic growth by redirecting "capital and labor from relatively more productive to relatively less productive uses." The fundamental Ricardian concept of comparative advantage eludes our elected officials.

Bovard examines the various fair-trade weapons used to wage economic warfare, and their commensurate costs. His description of tariffs is both clarifyingand deliciouslysardonic: "In the 1400sin Europe, wealthy nobles could go to Rome and pur chase a Papal decree officiallyforgivingtheir most flagrant sins.Nowadays, American industries go to Washington to 'atone' for their economic mistakes by purchasing an exemption from foreign competi tion. A tariff is simplya decree from Congress offi cially forgiving an industry for all its economic sins-its incompetence, mismanagement, lethargy, contempt for its customers, and so on. If the tariff is set high enough, Congress' economic holy water willwash away all of a company's earthly failings." Bovard notes, for example, that American food producers have gained over 500 tariffs on foreign food, and he decries that policymakers apparently believe that "it is better that the poor go hungry than to allow them to eat foreign food."

Import quotas, according to Bovard, "epitomize the subjugation of economics to politics" under the presumption that "no private contract is as important as the government's master scheme to control supply." A revealing example of Congress' notion of fair trade deals with ice cream: "The U.S. exports hundreds of thousands of gallons of ice cream to Canada, yet Canadian ice cream is banned from the U.S. market." Furthermore, the "USDA [United States Department of Agricul ture] estimates that dairy import quotas, price restrictions, and marketing restrictions cost Amer ican consumers between $5 and $7 billion per year. This amounts to over $50 billion in higher con sumer costs since 1980,or roughly $800per Amer ican family.For the same amount, each American family could have bought its own cow." Accusing foreign firms of "dumping" is another protectionist weapon wielded by fair-traders, and it is perhaps the most fraught with arbitrary bureaucratic and politically motivated rhetoric.

Bovard observes: "Dumping law exists to prevent foreign companies from selling goods in the Unit ed States at 'less than fair value.' What is less than fair value? The Commerce Department's creative definitions have probably made many medieval scholastics smile in heaven." The Commerce Department's arbitrary deter mination process is perhaps best summarized by the following: "After Commerce estimates the cost of production and adds 10% overhead [even if the firm carried lower overhead costs], Com merce adds 8% profit to achieve the total 'constructed value' of the foreign product. If a foreign company earns a profit of 7% , Commerce will punish the company for selling at a loss of 1%." Under such malleable criteria, dumping cases almost always result in penalties being levied on foreign firms ... and U.S. consumers. One might say that all is fair in a trade war. Bovard debunks other fair-trade myths, such as subsidies, the notion of reciprocity, and the so called "level playing field." The damage to the consumer from the imposition of protectionist measures is clear. Bovard expounds upon the many costs, showing how current trade policy "punishes American consumers for the alleged sins of foreign governments."

Bovard goes on to point out how American industry is harmed by such measures. First, U.S. competitiveness suffers as imported inputs are restricted or taxed, thereby raising the costs and often lowering the quality of American products. Second, and more fundamental, "The fewer trade barriers the U.S. has, the more competitive Amer ican companies will be. The fewer crutches the government provides, the faster American indus try will run." The Fair Trade Fraud should enrage American consumers, and cause many Congressmen to hang their heads in shame. Bovard declares, "The histo ry of American trade policy vivifies the perennial economic illiteracy and moral irresponsibility of the U.S. Congress." Perhaps our Federal represen tatives should be assigned this book for their acts of contrition. They just might learn some basic economic principles about the benefits of free trade. D Mr. Keating is New York Director of Citizens for a Sound Economy.

THE IMPOSSIBLEH. L. MENCKEN: A SELECTIONOF HIS BESTNEWSPAPER STORIES edited by Marion Elizabeth Rodgers Doubleday, 666 Fifth Avenue, New York, NY 10103 • 1991 707 pages. $27.50cloth; $14.95paper Reviewedby Edmund A. Opitz R eading Mencken cleanses the mind of cant and drivel, raises the blood pressure, and starts the adrenaline pumping. He 283 may move us to furious dissent or cheerful agree ment, but no one reads him unmoved. He may leave us battered, our pride wounded; but we love the way he slaughters the Amalekites and Agag their king! It's not just the man's virtuosity with words, although few equal him as a literary stylist; nor is it his erudition, although it is obvious that he is genuinely learned and widely read. What makes Mencken unique and indispensable is his indepen dent stance; he wore no man's ring in his nose. And he wasfearless; no sham was off limits to his barbs, no hypocrite was immune.

Mencken never catered to any party, faction, or clique; he was not swept up into any of the popular and passing idiocies of his day; he did not bend the knee to any of our tribal idols, nor worship at the shrine of the Zeitgeist."He approached everything with a mind unclouded by current opinions. There was nothing of the superior person about him. This makes him terrifying." These words aptly charac terize Mencken, but they were written to define William Blake, quoted from T. S. Eliot's essay on the English artist and poet. Now, Blake and Mencken were about as different as two people can be, but both belonged to the same rare breed of Homo sapiens-an order composed of men and women who are completely themselves: no echoes allowed. May their tribe increase! Democracy, in its corrupt version, operates under the pretense that every man is just as good as any other-or a little better. The corresponding ethos lays down a smoke screen behind which cavort a gaudy troupe of impostors, quacks, and charlatans. Mencken spotted them in academia, in ecclesia, and in the media; they flourished in liter ary circles and enjoyed a prodigal growth in poli tics.

The politicos of Mencken's day were hisprimary target; he had at them with every weapon in his amply stocked arsenal. He was a shrewd reporter whose high-voltage prose matched his outrage. He was utterly honest and impartial, albeit a bit cruel when the occasion seemed to demand it. The mountebanks in public office were not, after all, harmless clowns;they were men with power prey ing on the multitudes of people who lacked the means to defend themselves. But Mencken also criticized the masses for their apparent willingness, nay even eagerness, to be bamboozled. Aware that the game was crooked, they played on, believing it was the only game in 284 THE FREEMAN • JULY 1992 town. They compromised their innocence by cling ing to the airy hope that a turn of events would put them in a position to do their own swindling. Mencken used the word "democracy" in its two different senses: on the one hand as descrip tive of a society of liberty and justice for all; on the other, as a label for the political racket which exercises public power for private gain-pretend ing, all the while, to be The People's friend. The closing sentences of his short book, Notes on Democracy,give us a glimpse of his thoughts on the matter. Referring to those who are short changed in the political scuffle he writes: "What I can't make out is how any man can believe in democracy who feels for and with them, and is pained when they are debauched and made a show of. How can any man be a 'democrat' who is sincerely a democrat?"

Mencken had a number of friends in public life: senators, congressmen,judges. From hisearly days as a reporter he was on good terms with the ward bosses who haunt smoke-filled rooms, and the ward heelers who lurk around the seamy edges of society.Tammany types might serve a useful role in those nooks and crannies where the rules do not fit with precision. It was not the "honest imbeci lity" of the average politico that sent Mencken's temperature up to 103. What brought him to the boiling point was the do-gooder, the right-thinker, the forward-looker in politics-"the resilient, sneaking, limber,oleaginous, hollow and disingen uous [fellow,who purveyed] ... an idealism that is oblique, confusing, dishonest and ferocious." In other words, Boss Tweed was bad enough, but the New Deal was worse! This huge tome contains roughly half a million words of Mencken's writing for the press, sparked by some transient event, turned out under pres sure, and somehow transmuted by Mencken's genius into absolutely brilliant prose. And of course the style is all his own. The pace never falters; there's always the odd or unusual word which clicks precisely into the right spot; the argument never wanders-except when dealing with some egregious cad or crook, when the ad hominem mode jumps in.

Mencken avers that democracy is the most entertaining form of government ever invented. He shares the fun with readers of this book in 172 pages of his reports on eight of the national politi cal conventions he covered from 1904to 1948.His sprightly manner conveys much,political savvy as well. We get his views on food, women, "literary gents," the American language, and music-the last especially in his essays on Bach, Brahms, and Beethoven. If his two paragraphs on Beethoven's Eroicado not double your enjoyment of this colos sal masterpiece, read his other essay on the Eroicain his Chrestomathy.Or demand your mon eyback! Mencken is a man eminently worth knowing, and there's no better wayto make his acquaintance than by poring over this wonderful collection. What kind of a man will you be taking unto your self? Hear the report of one of his friends, Albert Jay Nock: "At dinner last night with Henry Mencken at Luchows.... There is no better com panion in the world than Henry; I admire him, and have the warmest affection for him. I was impressed afresh by his superb character-im mensely able, unself-conscious, sincere, erudite, simple-hearted, kindly, generous, really a noble fellow if ever there was one in the world."

A couple of men like this in'every generation, and we need not despair of the Republic. D The Reverend Mr. Opitz is a member of the staff of The Foundation for Economic Education and is the author of the book Religion and Capitalism: Allies, Not Enemies. FORBIDDENGROUNDS:THE CASE AGAINSTEMPLOYMENT DISCRIMINATIONLAWS by Richard A. Epstein Harvard University Press, 79 Garden Street, Cambridge, MA 02138 • 1992 • 530 pages • $39.95cloth Reviewedby JeffreyA. Tucker C ontemporary political culture tolerates two positions on civilrights. The first posi tion says approved minorities need expanded "rights," which really mean privileges and quotas in hiring, mandated benefits, and high taxes to pay reparations for past injustices. This viewis held by a wide spectrum of the political left. The second position challenges this by arguing that minority rights were necessary in the 1960s, but in recent years the quest for equality of eco nomic opportunity has been transformed into equality of result, and this betrays the original vision of civilrights. This view-that modern civil rights laws are great but have been taken too far is advanced by neo-conservatives in an unending parade of opinion columns and books.

Richard Epstein, in this new book, overthrows both perspectives. Breaking out of political ortho doxy,he argues: Anti-discrimination laws have not only gone too far, they should all be repealed as capricious, expensive, wasteful, and destructive of economic freedom. His radical thesis appears in what may be the most comprehensive and system atic treatment on various forms of discrimination yet to appear. Epstein, a law professor at the University of Chicago, is one of the finest legal scholars of our time-and for his willingnessto argue this view,he also becomes the most Politically Incorrect. If this book is treated justly, it will forever change the terms of debate on civilrights. But can Epstein be right? Are modern civil rights lawsfundamentally flawed? The heart of the Civil Rights Act of 1964 is Title VII, which pro hibits discrimination on the grounds of race, color, religion, sex, or national origin. At the time of pas sage, Senator Hubert Humphrey said the act would strike a blow for merit and against preju dice. And he promised on the Senate floor that it wouldn't lead to quotas, or he would "start eating the pages" of the bill. He was, of course, complete ly wrong, and opponents of the act were correct.

The act ended up striking a blow against merit and for statemandated hiring quotas. The act not only covered hiring. That would have left too much room for evasion by businesses. Instead it created a new set of laws regulating pri vate decisions that were once left to the market: promotion, wages, and even job assignment. The civil rights bureaucracy now controls even micro details of labor market transactions that harm business and make economic relations less peace ful than they were before 1964. But how was this engendered by Title VII, which simply prohibits certain criteria from being used to discriminate against minorities? Epstein's argument is simple and profound. Title VII is actu ally a law against acting with certain motives in mind. Yet it is difficult to legally prove motivation. You need a smoking gun, as when an employer hangs a sign saying, "Blacks, Jews, and Women Need Not Apply" (or "Whites, Christians, and BOOKS 285 Men ... "). The government could easily prosecute the employer who displayed such signs. But once the CivilRights Act passed, no employer displayed obvious evidence of illegal discrimination.

Employers began to claim all decisions were made on merit. But how can regulators know for sure? The government and interested private parties then looked for other forms of objective evidence of discrimination. The easiest way was to look at the numbers: Why are there so few blacks and women in this firm? How many have been turned down recently? How come they are not being paid "enough" or advanced fast "enough"? Is the claim of merit just a pretext for discrimination? The gov ernment began to distrust the motives of every employer in the country. The employer's only protection against this game was to hire on the basis of race, sex, and national origin-the very thing prohibited in Title VII-as an effort to avert prosecution. The result of the Civil Rights Act is the plethora of minority privileges we know too well. Nowadays, if courts say a hiring test uses criteria not essential to the job, and effects a "disparate impact" on minorities, it is illegal. Even literacy tests have been deemed discriminatory, which means they must be "race normed." "Merit" is a fine criterion, so long as it is minority-friendly.

The net effect of Title VII on minorities in labor markets has been to increase the risks and costs of hiring them. Employers skim off the cream of the minority labor force, rewarding, for example, well educated, high-skilled blacks at the expense of poorly educated and low-skilled blacks. And the non-minorities that are excluded or passed over for promotions are getting increasingly angry. Such are the results of attempts to plan the pri vate economy.The constitutional legitimacyof civ il rights derives entirely from a New Deal tradition that views the commerce clause as an open invita tion to any and all invasions. Once the premise is granted that the government can interfere with private market transactions, and reward some people at the expense of others, it follows that the same can be done with the freedom to contract in employment. Today, courts and government agencies use standards that are so complex as to be incompre hensible to average businessmen. Epstein's extended discussion of the evolution of anti286 THE FREEMAN • JULY 1992 discrimination rules brings to mind the pricing methods of Soviet bureaucrats. Indeed, he argues that civil rights are a form of central planning which accepts all the assumptions of the more extreme variety practiced by the Soviet Union.

In short, the critics of the Civil Rights Act of 1964-often derided as bigots and racists-were really prophets who pointed to what the act would eventually mean for the freedom of contract. "The fears of the diehard opponents of the statute," writes Epstein, "have proved correct." He drives home the lesson that government invites social trouble when it uses motivation ("forbidden grounds") as the dominant test of legality. Epstein presents a challenge to free-market advocates. They have usually argued that the mar ket discourages discrimination by making bigots and sexists pay a premium for favored workers, even as competitors clean up on employees passed over. But Epstein finds this argument weak. In consumer markets, one person's money is as good as another's. But in labor markets, a contract implies a long-term commitment to the culture of the firm. The employer must use proxies to fore cast the long-term compatibility of new employ ees. Moreover, a homogeneous work force can often increase the efficiencyof the firm by making a uniform ambience easy to achieve.

Epstein says we should face the cultural and sociological fact that people's preferences-and thus the actions of economic agents-will tend to sort themselves into groups defined by common characteristics. One example is language. A restaurant exclusively serving Chinese-speaking customers will not do well with Spanish-speaking waiters. There are reasons for culturally homoge neous workplaces: "the music played in the work place, the food that is brought in for lunch, the hol idays on which the business is closed down, the banter around the coffeepot, the places chosen for firm outings, and a thousand other small details that contribute to the efficiencyof the firm." Is this tendency toward intra-firm homogeneity unfair? Does it violate anyone's civil rights? No, says Epstein. Discrimination is a part of the divi sion of labor, and there is no need to impose one model of fairness on the entire economy."The par tition of the market into specialized and well defined niches should increase the satisfaction of all consumers. Any anti-discrimination law cuts against that commendable objective." Which is not to say diversity doesn't have its advantages.

But the proper mix of homogeneity and diversity in the work force cannot be known before experi ence. Epstein asks us to give up egalitarian assumptions and let the market distribute labor resources as it sees fit. Civil rights advocates have oversimplified the world, he says. They assume that millions of employers have "some fundamental psychological block to their own visions" which makes them act irrationally. In fact, private parties know better than government what is sociallypeaceful. "Unless and until the contract in question poses the threat of harm to third parties ... or is procured by fraud or sharp practice, then each person is his or her own best judge both of the private costs incurred by contracting and of the private benefits obtained from the contract. Individuals have the best knowledge of their own preferences and have the strongest possible motivation to make the best deal for themselves."

The point is to move away from collective deci sions to private ones. As Epstein puts it, "the way to resolve the fundamental social disagreement is not to have a knock-down, drag-out moral fight"; it is "to allow people to go their separate ways." This would not end affirmative action and quo tas, which, he argues, are only destructive when mandated by the government. If the Civil Rights Act of 1964 and all subsequent legislation were repealed, companies could and would practice a wide variety of race and sex privileges. "The level of affirmative action or the extent of quotas should be regarded as an internal affair of the firm, and never as the affair of the public at large or the state," he writes. Economic efficiency and public attitudes would keep firms in check. Here is a case in point. A friend of mine owns a business in Richmond, Virginia, and he is para lyzed by the threat of civilrights suits. Being liber ally minded, he wants to practice private affirma tive action, hiring blacks over more qualified whites. But he can't do it because if he also fires blacks, he takes the risk of expensive lawsuits.

Repeal civil rights laws, and, if he so chooses, he could hire an all-black work force. ForbiddenGroundsalso covers sex discrimina tion, even delving into sociobiology to show why substantial work-related differences between men and women always will be with us. And it refutes the need for anti-discrimination laws for recently approved victims: the aging and the disabled. His case persuades. Epstein's astonishing, tightly argued, 530-page legal and economic treatise is a call to rethink the most explosive issues in American political cul ture. Let the debate begin. D leffrey Tucker is a fellow ofthe Ludwig von Mises Insti tute. THE LITIGATIONEXPLOSION by Walter Olson Truman Talley Books, Dutton, 375 Hudson Street, New York, NY 10014 • 1991 • 350 pages • $24.95 cloth; $13.00 paper Reviewedby William Tucker D id you know that if your spouse sues you for divorce, you can find yourself in the private company of his or her lawyer under legal obligation to answer any and all ques tions about your sex and private life?

Did you know you can volunteer to help put together a jungle gym at your child's school and find yourself being sued for several hundred thou sand dollars worth of "pain and suffering" ifa child later breaks an ankle on the set? Did you know that the standards of evidence in civil trials have been so relaxed that you can be held liable for hundreds of thousands of dollars in damages on the basis of evidence that would be inadmissible in a criminal courtroom? In this amazing book, Walter Olson documents what the "war of all against all" will eventually be like. On that day when the last pretense of civilized restraint and mutual forbearance has given way, everybody will be a lawyer. What is most remarkable-and certainly not widely known-is how different American law has become from that of the rest of the world. In all places and at all times, certain restraints have been placed on lawyers to prevent them from using the courtroom as their private racquetball court. In some places the restraints are external-the "English rule" of civil cases, for example, which requires the losing side to pay the winner's attor neys fees and keeps goingto-court from becoming a risk-free sport. In other times and places, it has been the codes and traditions of the bar itself that BOOKS 287 have prevented lawyers from litigating on their own behalf.

In America, however, all those restraints have now gone by the boards. Take the process of "discovery." Although now widely practiced, it is actually only about four decades old and completely unique to American law. Anywhere else, you must sue someone on the basis of specific evidence that you present when you go to court. Under "discovery," however, you can make vague and unspecified charges and then summon the defendant's entire personal and pri vate records, fishing for evidence. Discovery has become an essentially unlimited right to private search and seizure. Or take depositions. Once they were limited to extreme circumstances-if a key witness were on his death bed, for instance. Yet gradually, the lawyers persuaded the judges that lawsuits would resolve themselves more quickly if lawyers had better access to information. The result was an essentially unlimited power to hold private inter rogations. If someone sues you today (or even if you are a third-party witness), you must sit in a pri vate deposition with the opponent's lawyer, under legal obligation to answer any and all questions.

Your only recourse is to bring your own lawyer at your own expense. Even if the case is never pur sued, you're stuck with the legal fees. Although the law schools constantly turn out charming rationalizations for all this-and the judiciary is usually willing to accept them-there is only one real explanation: It is hugely prof itable for plaintiffs' attorneys. The entire plaintiff bar has become a swarm of "private attorneys general" inventing new wrongs such as "jobs stress injury" or "clergy malpractice," scouring the countryside for alleged victims, exacting huge "punitive" damages from deep-pocketed quarry, while keeping almost half the proceeds for them selves. If the insurance companies begin to groan under this new weight, so what? Let the govern ment take over insurancethat will only make the pot bigger. The truly amazing thing about all this is that at the exact same time the rules of civil procedure were being loosened beyond all previous measure, the criminal code was being tightened to the point of absurdity on behalf of criminal defendants.

Only a few years ago, for example, the U.S. Supreme Court ruled that a police officer had vio288 THE FREEMAN· JULY 1992 lated a burglar's constitutional rights by turning a television set to read the serial number after legally entering the burglar's apartment and finding it stashed with stolen goods. Yet at the same time, dis covery proceedings were being opened up so that plaintiff attorneys have almost unlimited access to the personal and business records of civil defen dants. The Miranda restrictions on confessions were wheeled into place at precisely the same time that civilattorneys were being given almost unlim ited powers to grill people in depositions. And hearsay restrictions were being tightened in crimi nal proceedings just as they were being almost completely eliminated in the civilcourtroom. What is the explanation? The answer is simple. In criminal proceedings, lawyers make all their money on the defense side. Public prosecutors make little more than high school teachers, while successful defense attorneys pull down six-and seven-figure salaries. On the civil side, however, it is the plaintiff attorneys who are the high rollers.

Defense attorneys have certainly benefited from the litigation explosion, but they are not pursuing multimillion-dollar jackpots. They make their money by the hour. As Olson summarizes it succinctly:"It took cen turies of struggle against arbitrary authority to establish the civilliberty safeguards that protect criminal defendants from being railroaded to pun ishment. Today the forces of irresponsible accusa tion have turned instead to the civillaw,which they like better anyway because they get to keep the proceeds .... America is now reaping the harvest of a strange and ill-considered experiment in the legal system. We have deputized our immense pro fessional body of lawyers to stir up grievances for profit." D William Tucker is author of The Excluded Americans: Homelessness and Housing Policies, winner ofthe 1991 Mencken Award for best public policy book. THE JOHN TEMPLETON HONOR ROLL FOR FREE ENTERPRISE TEACHING The Foundation for Economic Education is pleased to anounce the publication of its descriptive survey detailing The John Templeton Foundation Honor Roll for Free Enterprise Teaching for 1992.

Copies of the honor roll are available on request by contacting: Janette Brown The Foundation for Economic Education Irvington-an-Hudson, New York 10533 telephone: (914) 591-7230 fax: (914) 591-8910 THEFREE IDEAS ON LIBERTY 292 Losingthe Cold War ChristopherWhalen The great battle yet to be fought is for the soul of the United States as a free society. 300 FriedrichA. Hayek (1899-1992) PeterJ. Boettke A tribute to ProfessorHayek'swide-rangingcontributionsto economicsand classicalliberalism. 304 ToughLovefor the Needy James L. Payne The successof Habitat for Humanity demonstrates the value and efficiencyof direct, private giving. 306 The Property Rights Originsof PrivacyRights Mary Chlopecki The integrityof privacy rightsdepends upon the protection of private property rights. 310 The $100Tree Fern DonaldG. Smith An item or serviceis worth onlywhat another person is willingto pay. 311 How CapitalismSavedthe Whales James S. Robbins A reminder that technologicalprogresscan benefit the environment.