Book Reviews

The authors of the books are well aware that capitalism is not perfect. They are also aware of the fact that capitalism is, to quote editor Mark Hendrickson, "morally as well as economically superior to every known alternative, such as socialism or the welfare state. " Hans Sennholz does an informative introduction to The Morality ofCapitalism. He notes that the critics of private property never tire of berating the profit motive. The critics "rail at successful merchants and shopkeepers, at wealthy bankers, stockbro kers, and capitalists." The critics "rave at advertising, marketing, and other business practices designed to inform and influence people in making economic decisions." But capitalism has its defenders: Orval Watts, Leonard Read, Ludwig von Mises, F. A. Hayek, Garet Garrett, Israel Kirzner. Their essays on the moral issues of our times have been taken from Paul Poirot' s special editing of The Freeman over a thirty-year period.

Poirot sets the tone of the books with an essay entitled' 'He Gains Most Who Serves Best. " A businessman's profits measure his efficiency in the use of scarce and valuable resources to satisfy the most urgent wants of consumers. Ludwig von Mises notes that the consumer calls the turn. But under freedom there must be access to physical property. If the government owns all the printing presses, the possibility of printing opposing arguments becomes practically nonexistent. In his essay, "Think Twice Before You Disparage Capitalism," Perry Gresham says, "Capitalism is the one system of political economy which works, has worked, and will continue to work." The alternative system is socialism which tends toward tyranny and serfdom. Gresham has three pages of lyrical acclamation of capi talism. "It is no relic of Colonial America. It has the genius to change with the times and to meet the challenges of big industries, big unions, and big government if it can free itself from interest-group intervention, which eventuates in needless government spending. " Capitalism, an economic system which believes with Locke a~d Jefferson in life, liberty, and property, and the inalien able rights of man, denies the' 'banal dichot omy between property values and human values. Property values are human values"

(italics are Gresham's). A reason for beginning with the selections in The Morality of Capitalism becomes apparent if you turn the whole business 406 around. Immoral capitalism is theft. It is an easy way to get capital, but it can't last. The Golden Rule and The Ten Commandments must be obeyed, lest people kill each other off. Capitalism, so Gresham says, is belief in man. It recognizes the potential tyranny of any government. To quote, "The govern ment is made for man, not man for the government. Therefore, government should be limited in size and function, lest free individuals lose their identity and become wards of the State. Frederic Bastiat has called the state a 'great fiction wherein everybody tries to live at the expense of everybody else.' " Capitalism denies faith in the state to control wages and prices (see the third book in the FEE series, Prices and Price Con trois). A fair price "is the amount agreed upon by the buyer and seller. Competition in a free market is far more trustworthy than any government administrator."

Capitalism gives a poor person the chance to become rich. It does not lock people into the condition of poverty. Capitalism offers full employment to those who wish to work. A worker is free to accept a job at any wage he can get. He can join with his fellow workers in voluntary association to improve his salary and working conditions. He can start his own business. "Capitalism," says Gresham, "is a belief that nobody is wise enough and knows enough to control the lives of other people .... Capitalism re spects the market as the only effective and fair means of allocating scarce goods. A free market responds to shortages and spurs production by rising prices . . . . Capitalism is a natural ally of religion. The Judeo Christian doctrines of stewardship are re flected in a free market economy. . . . Cap italism depends on the family for much of its social and moral strength. When the family disintegrates, the capitalist order falls into confusion .... Dividends paid to those who invest capital in an enterprise are as worthy as interest paid to a depositor in a savings bank. The idea abroad that risk capital is unproductive is patently false."

"The consumer," says Gresham, "is sov407 ereign under capitalism. No bureaucrat, marketing expert, advertiser, politician, or self-appointed protector can tell him what to buy, sell, or make." Property is necessary to capitalism. Indi vidual rights are extensions of property rights. All rights depend upon property, according to the second book, Private Prop erty and Political Control, which clarifies the inadequacies of the socialist concept of rights. D Bankruptcy 1995: The Coming Collapse of America and How to Stop It by Harry E. Figgie, Jr., with Gerald J. Swanson Little, Brown & Co.•221 pages. $19.95 Reviewed by William H. Peterson S omething for nothing. A free lunch. Gov ernment as Santa Claus. How alluring! Hence nowadays a widespread defiance of the law of opportunity cost-the idea that every choice, public or private, involves a denial of the highest valued alternative ben efit. In the public sector the denial may be political but isn't such defiance at the heart of modern government's penchant for cen tral planning and deficit finance and its appalling record of mismanagement and wasted resources-of what Ludwig von Mises called "planned chaos"?

Author Harry E. Figgie, Jr., the head of the Cleveland-based $1.3 billion conglom erate Figgie International Inc., seems to agree with the thesis that government in terventionism and central planning spell trouble, that it is at best a zero-sum game and more likely a negative-sum game, that government has nothing to give save what it first takes away, that lunch is anything and anywhere but free. His book arrives as a new administration takes hold in Wash ington. Bankruptcy 1995, with dozens of tables and graphs, with a foreword by former Senator Warren B. Rudman of New Hamp408 THE FREEMAN • OCTOBER 1993 Mr. Figgie further decries what he calls "debtspeak" or "budget chicanery," a kind of Washingtonese or Orwellian language in which "yes" means "no" and a budget ,'reduction" turns out to be a budget in crease. In late 1990, for example, Congress shire and written with the assistance of University of Arizona economist Gerald Swanson, constitutes a call to arms, a de nunciation of America's growing $4 trillion national debt, a forecast that interest on the national debt, now exceeding $200 billion annually, is likely to soon become the big gest item in the federal budget, topping the outlays for the Pentagon or Social Security.

Declares Senator Rudman, stunned at the planned chaos: "We are at war economi cally. Our nation's wealth is being drained drop by drop, because our government con tinues to mount record deficits and, in order to finance its obligations, puts us at the mercy offoreign lenders. The security of our country depends on the fiscal integrity of our government, and we're throwing it away. We're doing nothing to protect it; instead, it's politics as usual." For his part Mr. Figgie decries the politics of interventionism, of free lunchism, and tells how America got into this mess. The telling adds up to a valuable lesson on why government is the problem and not the solution, on why government planning is an oxymoron. He notes how, for example, the Balanced Budget and Emergency Deficit Control Act of 1985,otherwise known as the Gramm-Rudman-Hollings Act, a carefully planned program of reining in budgetary excesses year by year, amounted to no more than a "waltz," to "public posturing." The revealing timetable of federal deficit reduc tion and actual deficits follows: Year 1987 1988 1989 1990 1991 Target Deficits $144 billion 108 billion 72 billion 36 billion o Actual Deficits $150 billion 155 billion 154 billion 221 billion 269 billion reported that its famous Capitol Hill-White House compromise budget, the one in which President Bush broke his "no-new-taxes read-my-lips" pledge, would produce sav ings of2.4 percent in 1991 and 4.8 percent in 1992. Savings? No way. Actual outlays climbed by 11.1 percent in 1991 and 16.2 percent in 1992. No wonder public opinion rates Congress in lower esteem than any other major group in society.

Still, how do we extricate ourselves from this trap? Counsels the author: Don't raise taxes-that would only blunt economic growth and encourage the spenders. And don't monetize debt-that would only mean more money chasing fewer goods, acceler ating the inflationary cycle of boom and bust. Instead, says Mr. Figgie, do cut spending, especially entitlements, and privatize, pri vatize, privatize. In sum, do declare war on fiscal irresponsibility and create a new pri vate-public task force to wage it along the lines of the earlier Grace and Hoover Com missions. The Figgie counsel makes sense but look at it from the viewpoint of politics: Would it reverse decades of successful shenanigans at budget manipulation that have driven down the U.S. dollar in real terms from 100 cents in 1941 to 10 cents in 1991? And doesn't it take two to tango-the politician and the citizen-the voter mesmerized by "free" government goodies, anxious to get his cut of the loot?

So the biggest value of the valuable Figgie book, it seems to me, may be its long-term role in helping to educate the citizen and his representatives in Washington and in other halls of government that political corruption is a function of interventionism, that priva tization is the way to go, that nothing is for nothing, that political planning is for the birds, that the only way to get more and better lunches is to earn them. D Dr. Peterson is an adjunct scholar at the Heri tage Foundation and a Contributing Editor of The Freeman.