Book Reviews

His book abounds in singularities. He has discovered, for instance, that the Depart ment of Education doesn't teach a single one of our children-and only contributes six percent of the massive cost of education. States and districts account for the rest. The Department of Transportation covers less than half the cost of our roads. The Depart ment of Energy doesn't pay our electricity, oil or gas bills. The Department of Health and Human Services doesn't furnish a ma jority with any medical care. The Depart ment of Agriculture provides services to farmers whose number decreases every year, even as the number of its bureaucrats increases. So where does the money go? The old answer was that it went to buy my baby clothesjust to keep her in style. But this was a gag. The money goes to buy aircraft and limousines to keep government employ ees-mainly bureaucrats-rolling through the skies and on the ground. Their wives must roll, too. New buildings go up in Washington and New York "like in the Roman Empire." The census counters do more than count individuals every tenth year of their supposed mission. In between times they may inspect what you keep in your freezer.

Anyone could lead the House of Repre sentatives in opening prayers-but the House Chaplain gets a salary of $155,300 and this, says Gross, is "no typo." Washington's biggest growth industry is the Congressional Committee-today there are approximately 300 committees in the House and Senate. Joint committees have proliferating sub-committees, each with its own chairman, staff, office, and perks. We're talking, says Gross, about a small army: "7,800 people in the House and 4,000 in the Senate-a total of almost 12,000 federal employees." Each Senator has 40 aides, not counting those on his Commit tees. The growth of staff has pushed Congress into looking for still more space. In addition to the three House Office Buildings (Can non, Rayburn, and Longworth) and three Senate Buildings (Hart, Dirksen, and Rus sell), Congress has taken over two more buildings near the Capitol and renamed them in honor of former Speaker Tip O'Neill and former President Gerald. Ford.

Besides the Washington office, each Con gressman has also up to three offices in his home district. Says Gross, one district office is enough for any Congressman. The others should be closed. Then there is "the shadow empire. " This 34 consists of outside consultants who get up to a thousand dollars a day with the taxpayers footing the bill. Reagan considered this scandalous. But instead of getting angry, all Jimmy Carter and Reagan had to do was to sign an executive order outlawing all con sulting contracts. "Just a stroke of the pen," says Gross, who adds, "We're still wait ing." The General Services Administration has allowed one' Congressional leader to pay more than $3,000 for a single desk. So how much is spent on furniture and decorating each office? "Noone in the government really knows," says Gross. There have been 11,000members of Con gress, with some 800 still alive. About 600 belong to the U.S. Association of Former Members of Congress, which makes them "super lobbyists." They are privileged to walk on to the House floor at all times.

Armed with status and access to former buddies "even in the House or Senate cloakroom, dining room, gym, or swimming pool, " the super-lobbyist can accomplish miracles. Gross says we are in terrible shape with a federal debt that has passed the four trillion dollar mark. In 1993, it will cost us $315 billion just in interest. We do crazy things, such as spending nearly one billion dollars for unwanted honey just to keep beekeepers happy. In one year we gave away the total honey crop while the American people bought the same amount of honey from overseas. We have stored a billion dollars worth of helium underground, enough to last to the twenty-second century. And the jun kets go on, with no real demand for travel to distant places. One hundred people went to the Paris Air Show for $200,000. The $4 trillion debt looms like Mount Everest until we come upon Gross's item about land purchases. The government, he tells us, owns thirty percent of all land in the United States. At this point, one is inclined to say, "Wow!" If we were to sell the land to taxpaying people we'd be out of debt, wouldn't we? Yes, but it isn't going to happen. Congress has just paid $1.9 billion, or $50,000 an acre, for raw forest land.

35 Pork takes up considerable space in Gross's book. Do we really need to spend $107,000to study the sex life of the Japanese quail? Or $60,000 for Belgian endive re search? Or $84,000 to find out why people fall in love? Gross quotes Senator Proxmire as saying, "I have spent my career trying to get Congressmen to spend money as if it were their own, but I have failed." Gross's own cure for the whole business of waste is to suggest the creation of two executives to run the government in the president's' name. One would be Chief Op erating Officer; the other would be Chief Financial Officer. Their big function would be to by-pass the cabinet. With "ZBB," or Zero Based Budgeting that pays no attention to last year's appropriations, and with the president having a line-item veto, we might have real reform. On the other hand, only a limitation of the terms of officefor Senators and Representatives (twelve years for Sen ators, eight for Representatives) could spread the fear of God through Capitol Hill. D The Radicalism of the American Revolution by Gordon S. Wood Knopf. 1991 • 447 pages. $27.50 Reviewed by Doug Bandow T"he American Revolution is traditionally thought of as a rather conservative affair, a bourgeois revolt against imperious royal rule that kept public affairs out of the hands of the masses. And "if we measure the radicalism of revolutions by the degree of social misery or economic deprivation suffered, or by the number of people killed or manor houses burned, then this conven tional emphasis" is warranted, writes Gor don Wood in The Radicalism of the Amer ican Revolution. But Wood, a professor of history at Brown University, contends that however tame the actual rebellion against Great Britain, the ultimate social results were far more dramatic than could have ever 36 THE FREEMAN • JANUARY 1993 been imagined. Injust a few years the events of the 1770s had dramatically transformed American society, turning it into one "un like any that had ever existed anywhere in the world," writes Wood.

Wood begins by sketching colonial life, focusing on the political, economic, and social hierarchy that stemmed from the monarchical system. His summary of a society that seems almost as archaic as Medieval Europe makes for a delightful read. The fount of authority in America before the Revolution was the British king. Be cause of the tendency to emphasize the differences between life in Britain and the colonies, observes Wood, "we have often overlooked how dominantly British and tra ditional the colonists' culture still was; in deed, in some respects colonial society was more traditional than that of the mother country. " Around the monarchy was ar rayed the aristocracy, the patrician class thought destined to rule the plebeians. It is true that Americans were considered uncouth, unruly, and often defiant. But this neither distinguished them from their British counterparts nor meant the monarchy was irrelevant. True, the crown worn by George III was different from that worn by James I.

,'Yet, however superficial and hollow, it was still a monarchical society the colonists lived in, and it was still a king to whom they paid allegiance," explains Wood. Some of the affectations of monarchy seem particularly ironic today. The con sumer is now "king," but before the Rev olution the king's servants scorned com merce. True gentlemen might dabble in economic affairs, but they "were not de fined or identified by what they did, but by who they were," observes Wood. To work-as a doctor, lawyer, merchant, printer, or whatever-in order to live indi cated a low social station. Once one's repu tation as a gentleman had been established, however, one could engage in a commercial activity so long as it was seen as an avoca tion rather than a vocation. Colonial America was also noteworthy for the role of patriarchy, which, argues Wood, "may even have been stronger in America than in England precisely because of the weakness in the colonies of other institutions, such as guilds." Although pri mogeniture was not uniformly followed in colonial inheritance law, the first-born male was usually the favored heir. Hierarchy was also strengthened in early America by the institutions of slavery and indentured ser vitude.

A society like this operated naturally through the practice of patronage. Personal relationships dominated both economic and political relations. "The world still seemed small and intimate enough that the mutual relationships that began with the family could be extended outward into the society to describe nearly all other relationships as well," writes Wood. Yet as pervasive as were both monarchy and hierarchy in colonial America, chal lenges began to emerge before the formal rebellion against London. Republican prin ciples were gaining adherents, eroding not only support for the king but also the many institutions, such as an established church, that buttressed his rule in a monarchical society. The colonies were "therefore a society in tension, torn between contradic tory monarchical and republican tenden cies," observes Wood. As a result, "the connectedness of colonial society-its ca pacity to bind one person to another-was exceedingly fragile and vulnerable to change."

And change it did when the Revolution shattered the traditional bonds between people. There was none of the conditions typically thought to give rise to revolution the oppression, poverty, and war that char acterized Czarist Russia, for instance. To the contrary, the colonists were, in the main, relatively prosperous and free. But they seemed to see their success as terribly precarious, especially as what had been a well-ordered, hierarchical society began to break down. "Men who had quickly risen to the top were confident and aggressive but also vulnerable to challenge, especially sen sitive over their liberty and independence, and unwillingto brook any interference with their status or their prospects," writes Wood. Because monarchical ties were as impor tant economically and socially as they were politically, the Revolution's assault on those relationships had far-reaching effects on colonial society. But, Wood emphasizes, "this social assault was not the sort we are used to today in describing revolutions."

Rather than proletarians versus bourgeois ie, for instance, they were' 'patriots versus courtiers, ' , the latter being the primary beneficiaries of the patronage of a hierar chical society. To replace patronage the leading revolu tionaries hoped to establish new bonds, principally what Wood calls the notion of "benevolence," the natural ties that all men should have to one another. But what was envisioned as a form of republican virtue was itself doomed, if not by human nature, then by the other social forces, such as demands for equality, loosed by the Revo lution. In fact, argues Wood, "the Revolu tion resembled the breaking of a dam, re leasing thousands upon thousands of pent-up pressures," which the classical po litical theories of the revolutionary leaders were unable to contain. To the horror of those who wanted the government to be "based on virtue and disinterested public leadership," in Wood's words, the system instead quickly focused on factions and interests, primarily commercial. Artisans organized slates for city council elections; representatives of other professions as well as ethnic and religious groups quickly fol lowed suit. Farmers and creditors were no different.

The perceived lack of public-spiritedness had important political implications. "By the 1780smany of the younger revolutionary leaders like James Madison were willing to confront the reality of interests in America with a very cold eye," writes Wood. The federal Constitution was crafted to both limit the power of factions and enhance the role of the disinterested in serving in gov ernment. Yet it didn't take long for interest group politics to dominate national as well as local politics. As the theory of a disinBOOKS 37 terested elite governing the nation became increasingly illusory, pressure rose to ex pand the suffrage and destroy, at least in the North, what remained of American aristoc racy. One positive development of the break down of traditional patronage was the rise of voluntary associations, something noted by Alexis de Tocqueville, among others. Ob serves Wood: "In the three or four decades following the Revolution newly independent American men and women came together to form hundreds and thousands of new vol untary associations expressive of a wide array of benevolent goals." The result of the Revolution was not much-maligned atomis tic individualism, but rather new, voluntary forms of social cooperation. Nevertheless, Wood argues that the chief ties between Americans became commercial-that even the "Great Awakening" revivals early in the nineteenth century did not bring people together so much as did financial interest.

Wood is surely right that business played a much more important role in the U.S. than in most European nations at the time. Still, in an age when families were thriving, as sociations were forming, and churches were reviving, he seems to overemphasize the importance "of interest and money as the best connecting links in society." The fact that government was not the organizing agent in society was something of which the revolutionaries could be proud. Perhaps Wood's most important observa tion is that while "no one was really in charge of this gigantic, enterprising, restless nation" in the early 1800s, there was no disarray. To the contrary, "the harmony emerging out of such chaos was awesome to behold." It is, in fact, a testament to the sort of spontaneous order that Friedrich Hayek wrote about earlier this century, the natural result of a free society. Yet Wood is probably right to conclude that the founders of the American Republic were less than pleased with their handiwork; many of those who lived on into the next century, he writes, "expressed anxiety over what they had wrought." Even Thomas Jefferson, no defender of aristocratic privi38 THE FREEMAN • JANUARY 1993 lege, "hated the new democratic world he saw emerging in America-a world of spec ulation, banks, paper money, and evangel ical Christianity."

The irony is that the disillusionment felt by America's revolutionaries over the course of America's revolution was quite different from that felt by English (and American) liberals over the course of the French Revolution. There was no murder, oppression, and tyranny in the new United States. Rather, the classical republican ideal gave way to what the original revolutionar ies perceived to be crass, commercial, and interest-bound democracy. Wood admits that there was a price to be paid for the sort of political system that developed, but he still celebrates the "real earthly benefits it brought to the hitherto neglected and de spised masses of common laboring people." And it surely has done so for many years. Alas, those benefits began to shrink as the constitutional design created by the revolu tionaries to contain the power of faction started breaking down by the middle of the nineteenth century. Today we are seeing the deleterious consequences of a government that, despite the best efforts of the founders, has become a captive of clamorous interest groups. 0 Doug Bandow is a Senior Fellow at the Cato Institute and the author of The Politics of Plun der: Misgovernment in Washington.

Liberalismin ContemporaryAmerica by Dwight D. Murphey Council for Social and Economic Studies, 6861 Elm Street, Suite 4H, McLean, VA 22101, 1992 • 320 pages. $25 paperback Reviewed by William H. Peterson L iberalism, that cover word for the American Left, the powerful intellec tual movement that has swept over this country through most of this century, takes a most optimistic regard of government interventionism from federal bank deposit insurance and Social Security in the New Deal days to the Environmental Protection Agency and national health insurance to day. These liberals peddle-plainly but soft ly-a Planned Society. Today their demigod Karl Marx has been put into the closet with the demise of Euro communism, but their more recent demigod John Maynard Keynes has been resurrected so as to repeal the cycle of boom and bust once and for all. And for all their talk of "Democracy, " they elevate centralization and reduce the individual to a pawn on the chessboard of a New World Order.

Dwight Murphey, professor, lawyer, au thor of Understanding the Modern Predic ament, does a splendid job dissecting liber alism. He does so mainly through reporting the stands and slants, including flip-flops, on current events of the flagship liberal journal , The New Republic, from its inception in 1914 to early 1985. The Murphey strategy is sound. Events such as the Sixteenth Income Tax Amend ment, World War I, Prohibition, the Great Depression, the New Deal, World War II, McCarthyism, the Eisenhower Administra tion, Vietnam, the new Left, Reaganism, and so on have to be liberally interpreted, even perhaps orchestrated, for the broader media. The New Republic and The Nation (also treated by Murphey) seemed to have given marching orders to such bigger circu lation opinion makers as The New York Times, Washington Post, Los Angeles Times, Time, Newsweek, CBS, ABC, NBC, and so on. This is liberal revisionism on the march, telling America what to think.

Dwight Murphey gives us quite an intel lectual journey through the years as liber alism reveals relativism and dissimulation in the thoughts of such movement liberals as Woodrow Wilson, Herbert Croly, Thorstein Veblen, John Dewey, Stuart Chase, John Kenneth Galbraith, Robert Heilbroner, and Michael Harrington. Right along through the decades these thinkers have consistently departed from the role model of limited government set forth by the Founding Fa thers in the Declaration of Independence, the Constitution, and the Bill of Rights. The Ninth Amendment, which reserves to the people powers not specifically delegated to the federal government, is foreign to them. They glorify the State. Liberty, which shares with liberal the same etymological roots in the Latin word liber meaning free, is hardly in their vocabulary. No surprise, then, that the liberals long had quite a love affair with the Soviet Union even to the point of turning a blind eye to Stalin's death-by-starvation of the Kulaks in the early 1930s. The Soviet Union, after all, was the zenith (or was it?) of a Planned Society and a counterforce to the rise of Nazi Germany. But the love affair turned sour, notes the author, with the Hitler-Stalin Mutual Nonaggression Pact of August 1939 which was quickly followed by Hitler's invasion of Poland from the west, soon matched by Stalin's invasion of Poland from the east. Once again, the editors of The New Republic had to cover their tracks.

Similarly The New Republic was initially very friendly to the takeover of Cuba by Fidel Castro. With the influence of writer reporter Herbert Matthews of The New York Times who had interviewed Castro in his Sierra Maestra stronghold, The New Republic editors described Fidel in 1957 as "nationalistic, socialistic, anti-American, and noncommunist. " But by 1960 the mag azine was forced to declare that "Commu nism has crossed the Atlantic and now squats 90 miles offshore." So it goes, with the liberals calling many shots in American opinion, sometimes in accurately, always illiberally. Historian Otto Scott decries in the foreword "the modern liberal tendency to shout down opposition, to engage in ad hominem meth ods of argument, [and] to engage in black listing and censorship." Dwight Murphey's labor of love is a contribution to right thinkers, telling them to continue to be on guard against the slings and arrows from the outrageous Left.

Dr. Peterson, an adjunct professor with the Heritage Foundation, holds the Lundy Chair of Business Philosophy at Campbell University, Buies Creek, North Carolina. BOOKS 39 Short-Term America: The Causes and Cures of Our Business Myopia by Michael T. Jacobs Harvard Business School Press, Boston. 268 pages. $24.95 Reviewed by Hal Gordon O ne of the most quoted aphorisms of Sony's Akio Morita is that in Japan, managers think ten years ahead; in America, ten minutes. Superficially, the criticism is valid. Amer ican business executives are short-term profit maximizers, and this country's long term ability to compete in world markets has suffered as a result. But why? Are American managers inherently myopic, avaricious, or just plain stupid? Not really. To a great extent, as Michael Jacobs explains in his current book, they are merely responding in a rational way to the network of incentives and controls created not by the market, but by government.

"America's economy," writes Mr. Ja cobs, "was founded on the belief that mar kets work. Yet the United States now op erates the most heavily regulated financial system on earth." Consider the banking industry. One rea son why Japanese managers think in terms of decades and not in quarters is that in Germany and Japan banks sit on the boards of major corporations. Banks not only pro vide the capital necessary for steady growth, they hold managers strictly ac countable for the long-term success and profitability of the enterprise. In the United States, banks are prohibited by New Deal era legislation from owning stock in non financial companies. Banks are conservative institutions that favor long-term growth. Excluding them from an ownership role in corporations means that both banks and corporations are poorer as a result. But government regula tion, of course,does not end there.

The principal owners of corporate Amer ica are the pension funds and other institu40 THE FREEMAN • JANUARY 1993 tional investors that hold over half the stock of the hundred largest U.S. firms. Like banks, these owners tend to be conservative by nature and one might suppose that they would be the perfect long-term sharehold ers. The trouble is that government discour ages the owners of America's corporations from acting like owners. SEC and state regulations make it hard for shareholders to take concerted action to discipline or re place poor managers. Proxy battles are difficult and costly, and forty states now have anti-takeover laws. Furthermore, current interpretations of the antitrust and tax laws are so broad that if an institutional investor attempts to exer cise ownership-even by so much as nom inating a candidate for the board of direc tors-that investor is liable to be accused by the FTC of subverting competition, or by the IRS of "entering the business" of the corporation and thereby subjecting itself to tax penalties. (In the latter case, a pension fund or foundation would lose its tax exempt status, which makes these investors even more wary.) Thus, since the nominal owners may not exercise real ownership authority, the only means by which they can express their dissatisfaction with the way the company is being run is by selling their stock. And the fear that they will do just that, and expose the company to the threat of a takeover, is what drives managers to sacrifice the company's long-term interests for the sake of making a good showing in the next quarter.

The takeover threat is heightened by the fact that government taxes corporate profits twice and treats corporate debt as a tax deduction. This makes debt financing attrac tive. Indeed, as Mr. Jacobs points out, one of the features that drew investors .to so called "junk" bonds was that they pur ported to combine the return characteristics of an equity security with the tax advantages of a debt. The politicians may have deplored the wave of corporate takeovers and lever aged buyouts that swept Wall Street during the last decade, but they were as much to blame as anyone else. Predictably, the big government crowd says that the answer to our economic ills is even more intervention. Mr. Jacobs has a better idea. To cure business short-termism, he recommends that our capitalist system be injected with a healthy dose of-well capitalism. Among other reforms, he pro poses that banks be allowed to own stock in non-financial businesses, that we streamline financial services regulations, and that we give shareholders greater freedom to elect and replace directors. The sooner our cap italists are allowed to act like capitalists, he argues, the sooner our managers will be likely to think ten years ahead.

Hal Gordon is a freelance writer in Bethesda, Maryland.