The New Industrial Policy; T. DiLorenzo

Anyone who thinks government funds will be allocated to firms according to merit has not lived or served in Washington very long. T hese remarks by former Senator Wil liam Proxmire, Democrat of Wisconsin, presented during 1983 Senate debates over industrial policy, explain why current pro posals for an interventionist' 'industrial pol icy" have little chance of improving eco nomic efficiency. It is an iron law of politics that governmental schemes to support or subsidize certain industries will be guided primarily by political motivations-by pork barrel politics-not by economic efficiency or "competitiveness" considerations. Indeed, in many instances the very exis tence of government intervention-sub sidies for failing businesses, for example is inefficient and a hindrance to economic growth. One of the virtues of a free-market economy is that it rewards businesses that are efficient in serving their customers and penalizes others that aren't. Govern ment intervention to prop up failing busi nesses only slows down the necessary mar ket reallocation of resources that must take Dr. DiLorenzo is Professor of Economics in the Sellinger School ofBusiness and Management at Loyola College in Baltimore.

-Senator William Proxmire, 1983 place in order to maintain a healthy econ omy. One implicit assumption behind all pro posals to "target" governmental assistance to "strategic" industries is that those doing the targeting will somehow be able to isolate themselves from political reality. But a pol itician who ignores politics is like a cat that barks; there is no such animal. As Nobel Laureate economist James Buchanan has explained: Politicians are politicians because they want to be. They are no more robots than other men. Yet the politician who would do nothing other than reflect the prefer ences of his constituents would, in fact, be robotlike in his behavior. Few, if any, politicians are so restricted. They seek office because they seek "profit" in the form of "political income" which will normally be obtained only if their behav ior is not fully in accord with the desires of electoral majorities. Those. . . who are attracted to politics as a profession are likely to be precisely those who have considerable interest in promoting their 292 own version of good government, along with those who see the opportunities for direct and indirect bribes, and those who evaluate political officeas a means toward other ends. 1 Interventionist industrial policies are nothing new. There have always been "col laborative" efforts between business, gov ernment, unions, and other groups, and the results have always been overwhelmingly guided by politics, not economics. More often than not, such collaboration turns into a conspiracy to raise prices, cut off compe tition, or loot the treasury. As Adam Smith remarked over two centuries ago in The Wealth of Nations: "People of the same trade seldom meet together, even for mer riment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."

Allegedly Successful Industrial Policies One of the most prominent and outspoken proponents of an interventionist industrial policy is MIT's Lester Thurow. At a time when socialism and centralized economic planning have been thoroughly discredited, Thurow-and quite a few other intellectu als, industrialists, and policy makers-is still arguing for greater governmental "plan ning" of the economy. Just what these wouldbe planners have in mind is clearly indicated by the examples offered by Thurow of allegedly successful industrial policies of the past. These policies, says Thurow, should be viewed as models for all of American industry. In a report for the Center for National Policy entitled "The Case for Industrial Policies," Thurow hails government subsi dies to the nineteenth-century transcon tinental railroads as a stellar example of a "successful" industrial policy which serves as a model for the rest of American indus try.2 While it is true that certain large corpo rations (and their employees and stockhold ers) did benefit-at least for a time-from 293 land grants and other subsidies to some of the builders and operators of the transcon tinental railroads, the overall effect of this particular industrial policy was to create a grossly inefficient industry in which all but one firm-the only one not to accept gov ernment subsidies-went bankrupt at some point.

Historical revisionists such as Thurow have long argued that without government subsidies the transcontinental railroads would not have been built-just as it is argued today that certain industries deserve subsidies because they allegedly may pro vide "the jobs and technology of the fu ture. " But there is a problem with this historical revisionism. As economic histo rianBurton W. Folsom, Jr., has pointed out: "While some of this rush for subsidies was stillgoingon [inthe late nineteenth century], James J. Hill was buildinga transcontinental from S1. Paul to Seattle with no federal aid whatsoever. Hill's road was the best built, the least corrupt, the most popular, and the only transcontinental never to go bank rupt. ,,3 The entrepreneurial Hill boasted that "our own line . . . was built without any government aid, even in the right of way, through hundreds of miles of public lands, being paid for in cash. "4 Hill understood all too well that with government subsidy comes government control, which is always detrimental to an efficiently run business.

His competitors all ignored this lesson and found themselves drowning in bureaucracy, red tape, and regulation. Congress' decision to grant per-mile sub sidies to the builders of transcontinental railroads had economically ruinous effects. Since they were being paid by the mile, the railroads sometimes built winding, circui tous roads to collect for more mileage. The Northern Pacific and Central Pacific rail roads were notorious for building with cheap materials and stressing speed over workmanship. The "rush for subsidies" led to other perversities, such as building miles of track on top of several feet of ice in the Northern Rockies. When the spring thaw melted the 294 THE FREEMAN • AUGUST 1993 ice, the tracks collapsed. The railroads sim ply rebuilt them and collected even more subsidy payments, courtesy of the U.S. taxpayers. Because of such inefficiencies the building of the transcontinental railroads cost three times more than originally esti mated.

The building of the transcontinental rail roads by the Northern Pacific and Central Pacific may have been inefficient, but their schmoozing of politicians and their subsidy seeking was not. For example: [Union Pacific Vice President] Thomas Durant wined and dined 150 "prominent citizens" (including Senators, an ambas sador, and government bureaucrats) along a completed section of the railroad. He hired an orchestra, a caterer, six cooks, a magician, and a photographer. For those with ecumenical palates, he served Chinese duck and Roman goose; the more adventurous were offered roast ox and antelope. All could have expensive wine and, for dessert, strawberries, peaches, and cherries. After dinner some of the men hunted buffalo from their coaches. Durant hoped all would go back to Washington inclined to repay the UP for its hospitality. 5 As is true of any type of interventionist industrial policy, when the financial success of a business depends critically on procuring government subsidies, it is bound to pay more attention to bribing the subsidy grant ors than producing and marketing a com petitive product. Industrial competitiveness inevitably suffers while governmental power expands.

Another feature of all industrial policies is that the power to subsidize is also the power to destroy. Government regulation always accompanies subsidies. This is why Hills dale and Grove City Colleges, virtually alone among educational institutions, have refused to accept any form of governmental aid. The administrators and trustees of these institutions know that their independence and integrity would be compromised if they were to accept subsidies. Some of the subsidized railroads eventually came to realize this as well. Union Pacific's president, Charles Francis Adams, complained that because of regulation" [w]e cannot lease; we cannot guarantee, and we cannot make new loans on business princi pIes, for we cannot mortgage or pledge; we cannot build extensions, we cannot contract loans as other people contract them. All these things are [prohibited] to us. . . .' ,6 As Folsom concluded, subsidies to the transcontinental railroads "bred inefficien cy; the inefficiencycreated consumer wrath; the consumer wrath led to government reg ulation; and the regulation closed the UP's options and helped lead to bankruptcy.,,7 This is a lesson that today's industrial policy advocates have chosen to ignore.

The Great Northern James J. Hill's Great Northern transcon tinental railroad was a stark contrast to the other heavily regulated, bureaucratized, and grossly inefficient roads. Hill and his business partners purchased a nearly bank rupt (subsidized) railroad, the St. Paul and Pacific, in 1878. Unburdened by the political dictates of an industrial policy, Hill built his railroad according to economic, not political criteria. "What we want ... is the best possible line, shortest distance, lowest grades and least curvature that we can build. We do not care enough about Rocky Moun tain scenery to spend a large sum of money developing it.,,8 Hill personally supervised the building of his railroad, never skimping on quality ma terials. He assisted the farmers in the vicin ity of his line by funding experimental plant ing programs and offering rewards for "the fattest cattle" and the most productive wheat fields. He did this because of his recognition that "we are in the same boat with you, and we have got to prosper with you or we have got to be poor with you.' ,9 Hill's personal tenacity enabled him to out compete his heavily subsidized rivals who, burdened by regulation, allwent bankrupt in 1893.

In sum, historical revisionists such as Thurow, who point to the governmentsubsidized transcontinental railroads as a "successful" industrial policy, are either poorly informed about them or are being very selective in their descriptions. While it is true that the government's industrial pol icy did contribute to the building of trans continental railroads, it also deterred other entrepreneurs, like Hill, from building them with private funds and doing so much more efficiently. The gross inefficiencies of the governmentsubsidized railroads swamped any social benefits from the subsidies. Fur thermore, the granting of subsidies encour aged others-not just in the railroad busi ness-to seek similar handouts, which fostered a culture of political greed and corruption. The USDA Model of Industrial Policy A second "model" of a supposedly "suc cessful" industrial policy, according to Thurow, is American agricultural policy.

Here Thurow seems to commit the post hoc, ergo propter hoc (after this, therefore be cause of this) fallacy: American agriculture is efficient enough to feed America and much of the rest of the world. An interven tionist agricultural policy exists. Therefore, the policy must cause the success of Amer ican agriculture. Another example of this fallacy would be: A rooster crows, and the sun rises every morning. Therefore, the rooster's crowing must cause the sun to rise. A more accurate interpretation would be that American agriculture has succeed ed-to the extent that it has-despite the government's agricultural policy, not be cause of it. America's agricultural policy, rooted in the farm programs of the New Deal that were ruled unconstitutional in the 1930s, is a clear example of the failures of central planning. James Bovard noted the similarities between U.S. agricultural indus trial policies and the now-defunct, centrally planned economies of the former Commu nist countries: There are striking similarities between how America manages its agriculture and THE NEW INDUSTRIAL POLICY 295 how Eastern European governments manage their industries. In Hungary and in Mississippi, prosperity often depends more on political connections than on economic achievement. In Czechoslova kia and in Illinois, the government pays not according to whether a product is sold, but whether it is produced. In East ern Europe there are stocks of unused, often worthless manufactured goods; in the United States we have our rotting mountains of surplus cheese, butter, and corn. to Although all industrial policies amount to little more than corporate w~lfare dressed up as a legitimate economic policy, there is much evidence that Thurow's vaunted ag ricultural policies do not even benefit farm ers in the long run. According to Clifton B.

Luttrell, who spent 35 years as an agricul tural economist at the Federal Reserve Bank of St. Louis: The power of the federal government has been used for more than half a century to transfer wealth from taxpayers and con sumers to a small group of landowners and agricultural suppliers via the farm program. In many cases, these amount to reverse transfers: subsidies by the less affluent for the more affluent. . . . Our current agricultural programs . . . contain an internal growth mechanism. The various instruments of U.S. farm policy-acreage controls, non-recourse commodity loans, export subsidies, dairy cattle buyouts, tariffs, import quotas, price supports, government land rental programs, direct payments to producers, and others-all have the effect of increas ing the returns to farmers. In so doing, however, they increase the incentive to produce. Over the long run, then, they are self-defeating, because they encourage the use of new and excessive resources in the industry.

In the presence of these new resources, returns are once again diluted, and sub sidies must be ratcheted up again just to return to the earlier income standard. Repeated several times, this cycle can 296 THE FREEMAN • AUGUST 1993 consume enormous amounts of govern ment aid without significantly improving farm welfare. 11 American agricultural policy is a carnival of corruption and inefficiency. In order to win votes and campaign contributions from a small but politically influential group-the farm lobby-government pays wealthy cor porate farmers millions of dollars annually not to produce food; enforces cartel agree ments with the explicit purpose of making food more expensive for American consum ers-an especially cruel policy toward the poor; gets farmers hooked on federally sub sidized debt that most farmers can never repay; subsidizes the use of chemical pes ticides and other substances that are a major source of water pollution; and constitutes a perpetual drain on the taxpayers' pocket books.

H. L. Mencken understood the true man ifestations of agricultural policy when he had this to say about subsidy-seeking farm ers: Let the farmer, so far as I am concerned, be damned forever more! To hell with him and bad luck to him! He is . . . simply a tedious fraud and ignoramus, a cheap rogue and hypocrite, the eternal Jack of the human pack.... No more grasping, selfish and dishonest mammal, indeed, is known to students of the Anthropoidea. When the goingis good for him he robs the rest of us up to the extreme limit of our endurance; when the going is bad he comes bawling for help out of the public tiU}2 Mencken went on to ask a series of ques tions that could well be asked of any indus try proposing an "industrial policy" for itself. Has anyone ever heard of a farmer making any'sacrifice of his own interests, how ever slight, to the common good? Has anyone ever heard of a farmer practicing or advocating any political idea that was not absolutely self-seeking-that was not, in fact, deliberately designed to loot the rest of us to his gain?13 To paraphrase, one might well ask: How often do industrialists and unionists go to Washington to lobby for anything but spe cial-interest subsidies-at the expense of the taxpayers or of their competitors? How often does "collaboration" between gov ernment and business not end up in a con spiracy either to give the business collabo rators a government-mandated competitive advantage over their rivals or to loot the treasury? If Thurow and other industrial policy advocates know of an example, they have yet to offer it.

Drunk With Power A third example of a "model" of indus trial policy "success," according to Thurow, is the federal government's Bon neville Power Administration (BPA). Like the Reconstruction Finance Corporation, the transcontinental railroads, and farm programs, there are clearly defined benefi ciaries of the Bonneville Power Administra tion. But the issue is not whether any bene ficiaries can be found. Rather, it is whether power generation in the Northwest-Bon neville's main priority-would be better served by alternative institutional arrange ments, such as unsubsidized, private power provision. Also, what is the social return to the taxpayers' "investment" in subsidized power in the Pacific Northwest? Bonneville and other public power "au thorities" represent parochial, porkbarrel politics at its worst. There is no good reason why taxpayers in Massachusetts, Florida, and Kansas should be taxed so that resi dents of Oregon and Washington State can enjoy subsidized electricity that is priced at less than half the national average.

In theory, the federal government's initial investment in BPA-and in other federally subsidized power producers-was to be re paid. But despite its claims of profitability, BPA has repaid only eight percent of its initial funding from the federal government; between 1970 and 1984 BPA made only one payment of $126 million while borrow ing an extra $5.3 billion from the federal treasury. 14 Far from being a model of success, the Bonneville Power Administration is primar ily responsible for the largest default in the history of municipal finance-the Washing ton Public Power Supply System (WPPSS), or "Whoops" for short. It was Bonneville that initially persuaded 23 government owned electric utilities to form WPPSS in the late 1950s. WPPSS was a government agency formed to carry out Bonneville's grandiose plans for nuclear power genera tion during the 1960s and '70s. It sold billions of dollars in non-voter-approved revenue bonds to finance the venture. In theory, revenues earned by the projects financed by such bonds are to payoff the principal and interest to the bondholders.

But WPPSS, as an off-budget government agency shielded from public scrutiny and direct voter control, was notoriously ineffi cient as it built its nuclear power plants with its eye on political patronage, not economic efficiency. In 1982-just prior to WPPSS' bankrupt cy-Fortune reported that "A Nuclear Fi asco Shakes the Bond Market. ,,15 This "fi asco" culminated in WPPSS default on $2.25 billion in debt in 1983. The lawsuits against the public utilities, which were coaxed by Bonneville into forming WPPSS, were not settled until late 1992, a decade later. The source of the WPPSS fiasco was industrial policy, or political management of industry. When Bonneville announced its plans, local politicians were quite enthusi astic, for many of them were offered seats on the WPPSS board of directors. Such seats were ideal places from which to award lucrative construction contracts to political supporters.

Construction companies and unions were equally enthusiastic, but investment bank ers were perhaps the most enthusiastic sup porters of all. In the autumn of 1981,Merrill Lynch underwrote $750 million in WPPSS bonds and earned a $22.5 million commis sion-the largest in the firm's history. 16 With all this political support, WPPSS undertook to build five nuclear power plants simultaneously. Eager to spread the patronTHE NEW INDUSTRIAL POLICY 297 age contracts as widely as possible, the WPPSS board utilized as many as 65 general contractors per job site. Commonwealth Edison, a low-cost private producer of nu clear power plants, generally used about three general contractors. Bureaucratic in eptitude led to long delays and inflated construction costs. Each construction site was littered with as many as 50 cranes. Similar construction projects by private companies typically used about 10 cranes.

A report by the Washington State Senate Energy and Utilities Committee in 1982 concluded that costs had escalated 1,200 percent above initial estimates as con struction was delayed by five years or longer. 17 Bonneville was stuck with a large part of the tab for these cost overruns and had to pass the costs on to all of its customers, who suffered an 88 percent rate hike in 1980 and an additional 50 percent increase in 1981.18 Angered by these rate increases, the voters of the Northwest pressed for voter approval of future bond issues for WPPSS. Bonne ville's response was to argue against the voters in court that such an exercise of democracy supposedly "violates both fed eral and state constitutions" and' 'interferes with Congressional policy regarding estab lishment of a reliable, stable power system in the Pacific Northwest. ,,19 WPPSS is now defunct, having defaulted on over $2 billion in outstanding debt. Four of the five partially completed nuclear power plants were dismantled. All of this was widely publicized for years during the early 1980s, which makes it all the more incredible that someone supposedly as as tute as Thurow would use the Bonneville Power Administration-the source of the WPPSS fiasco-as an ideal model of indus trial policy for America.

A High-Tech Pork Barrel The latest cause of America's central planners is to bureaucratize the high tech nology industries with a governmental "plan." But the federal government's record in the area of high technology indus298 THE FREEMAN • AUGUST 1993 trial policies is abysmal. The Wall Street Journal recently characterized the policy of government· subsidies for high technology industries as "a 40-year history of commer cial-technology projects turning into pork barrel embarrassments .... ,,20 In a 1991 Brookings Institution study, The Technology Pork Barrel, Linda R. Cohen and Roger C. Noll concluded that of the major federally subsidized commercial R&D programs they studied, all but one NASA's development of commercial satel lites-were "almost unqualified failures. ,,21 It is debatable, moreover, whether even NASA's satellites are successes when one considers the opportunity cost-the value of alternative uses of those resources.

Because of WPPSS-like cost overruns, driven by the political patronage and bu reaucratic bungling that is inherent in all government programs , the supersonic trans port and Clinch .River Breeder Reactor "were killed before they had produced any benefits." The Clinch River Breeder Reac tor's cost overruns were so extensive and diverted so many dollars from the govern ment's R&D budget that it "probably re tarded overall technological progress. " The space shuttle "costs too much and flies too infrequently," Cohen and Noll concluded, and the Synthetic Fuels Corporation spent billions on "pilot and demonstration facili ties that failed.' ,22 The story of. the illfated Clinch River Breeder Reactor typifies government's in dustrial policies involving high technology. Cohen and Noll describe the project as "the quintessential example of a technological turkey by the time it was mercifully put to rest in 1983." Power demand was grossly exaggerated for political reasons, while costs were underestimated dramatically (where have we heard that before?). Like WPPSS and other industrial policy pork barrel projects, the political benefits of pa tronage contracts' 'proved decisive in keep ing the program going [long] after it was· a clear mistake," costing· the taxpayers mil lions.23 According to Cohen and Noll' s statistical analysis of the determinants of Congressional votes for maintaining the Clinch River Breeder Reactor project, Congressmen tended to vote for the project if they were members of the Public Works Committee, Joint Committee on Atomic Energy, or the Subcommittee of Fossil and Nuclear Energy Research, all of which were able to grant construction contracts (Le., dish out the pork). Also found to be a statistically sig nificant determinant of votes in favor of continuing the project was the preponder ance of "contracts for Clinch River-related work to the legislator's district.' ,24 .

Based on their study of the history of the government's high technology industrial policies, Cohen and Noll concluded that the failure of virtually all such policies is inher ent. "The principal conclusion [of the book] is that American political institutions intro duce predictable, systematic biases into R&D programs so that, on balance, govern ment projects will be susceptible to perfor mance underruns and cost overruns. ,,25 Proposals for a high-tech industrial policy all seem to ignore the fact that the private sector has already developed an amazingly efficient organization of information that is widely accessible through such products as computerized versions of the Encyclopedia Britannica and the Oxford English Diction ary, Prodigy, Compuserve, and a growing number of similar products and services that are sure to become increasingly inexpen sive, as is always the case in such a com petitive marketplace. The federal bureau cracy's intervention into this dynamic, efficient, and growing industry would be the kiss of death. Congressional micro-manage ment could only retard America's informa tion technology industries. The best the government can do in this regard is to eliminate government-created barriers to competition, such as allowing telephone companies to enter the fiber optics cable markets. Thus far, politically influential ca ble television companies have persuaded their friends in Congress to keep the phone companies out of information services mar kets. This policy illustrates why less, not more, government intervention would be the best industrial policy.

Industrial Policy Means Protectionism Some proponents of industrial policy claim to be in favor of free trade and against protectionism. This is an extremely naive viewpoint, however, because industrial pol icy inevitably leads to protectionism of one kind or another. When President Bush traveled to Japan with auto industry executives in 1991, the executives didn't go there to lobby for free trade; they wanted the President to pressure the Japanese to reduce imports into the United States. Although he may not have realized it, George Bush did the American public a great service when he vomited (in view of television cameras) in the lap of the Japanese Prime Minister, abruptly ending an "unsuccessful" trip to Japan. If the trip had been a "success," as defined by the participants in the trip, Americans would now be paying more for automobiles and other products produced by the protection ists who accompanied the President and who conducted themselves like unwelcome guests who had crashed a wedding, embar rassing their industry and their country.

Before Bill Clinton was even sworn in as President, the same auto executives issued a memorandum requesting that the new administration sharply restrict the importa tion of minivans from abroad, despite the fact that the "Big Three" U.S. automakers account for about 90 percent of minivan sales. The result of lower import quotas, of course, would be higher prices to consumers. The entire history of so-called collabora tion between government and business is a history of protectionist pleading. For de cades the Interstate Commerce Commission operated as a government-sponsored cartel for the benefit of the trucking and railroad industriesand their unions.Theseregulated industries were able to charge monopoly prices, enforced by the federal government, in return for political supportin cash and in kind-from the industries and their unions. The Civil Aeronautics Board operated a similar cartel arrangement for the airline industry. Research has also shown that the THE NEW INDUSTRIAL POLICY 299 Federal Deposit Insurance Corporation re stricted entry into the banking industry for decades, thereby propping up bank profits at the expense of consumers. Federal deposit insurance is the result of a "collaborative"

effort by bankers and the government to socialize the risk, but not the rewards, of operating the banking system. The taxpayers are the suckers when it comes to bank bail outs, but they never share in any of the profits. Collaboration between government and business in the agriculture industry has created a giant agricultural cartel, whereby the U.S. Department of Agriculture pays farmers not to grow food as a way of restricting the supply and increasing the price of food-exactly what a private cartel would want to do. In most cities, the local governments grant a single cable television company a monopoly franchise. Monopoly prices are charged, and the government shares in the "loot" by taxing a portion of the monopoly profits. Millions of dollars are typically spent by cable companies to bribe-implic itly and explicitly, legally and illegally-city politicians into granting their company the monopoly franchise. The list of examples of how industrial policy constitutes a conspir acy by business and government against the public is almost endless.

Conclusions Former Senator William Proxmire is right: An inherent feature of all interven tionist industrial policies is that government money will go "where the political power is," regardless of economic considerations. Most industrial policy advocates seem to recognize this political fact of life, but then ignore it when making their policy propos als. Perhaps they believe that, once in power, their superior intellects will enable them to convince the career politicians to carry out the grandiose plans of the indus trial policy advocates. If this is what the industrial policy advocates believe, then they are hopelessly naive. The very image of a group of "planners" standing around a "situation room" in the 300 THE FREEMAN • AUGUST 1993 White House with an "industrial map" of the United States, trying to determine where to intervene, is simply ludicrous. Choosing when and where to intervene would be guided by politics, not economics. Because of the nature of politics, such intervention inevitably funnels subsidies to incumbent firms which makes .it more difficult for newer, more entrepreneurial businesses to become established. Then, because govern mental controls always accompany subsi dies, the controls render the subsidy receiving firms less competitive. This usually leads to requests for even more corporate welfare, and the cycle repeats itself. As history has shown, an interven tionist industrial policy-properly labeled as neo-mercantilism-is a recipe for eco nomic stagnation and decline. D 1. James M. Buchanan, "Why Does Government Grow?"

in Thomas Borcherding, ed., Budgets and Bureaucrats: The Sources of Government Growth (Durham, N.C.: Duke Uni versity Press, 1977), p. 13. 2. Lester Thurow, The Case for Industrial Policies (Wash ington, D.C.: Center for National Policy, January 1984). 3. Burton W. Folsom, Jr., The Myth ofthe Robber Barons (Herndon, Va.: Young America's Foundation, 1991). 4. Folsom, p. 18. 5. Robert G. Athean, Union Pacific Country (Chicago: Rand McNally, 1971), p. 153, cited in Folsom, p. 20. 6. Folsom, p. 21. 7. Folsom, p. 22. 8. Folsom, p. 27. 9. Folsom, p. 27. 10. James Bovard, The Farm Fiasco (San Francisco: ICS Press, 1989), inside front cover. 11. Clifton B. Luttrell, The High Cost of Farm Welfare (Washington, D.C.: Cato Institute, 1989), p. 129. 12. H. L. Mencken, Prejudices: A Selection (New York: Vintage Books, 1955), p. 160. 13. Mencken, p. 161. 14. Doug Bandow, The Politics ofPlunder: Misgovernment in Washington (New Brunswick, N.J.: Transaction Books, 1990), p. 188.

15. Peter Bernstein, "A Nuclear Fiasco Shakes the Bond Market," Fortune, February 22, 1982, pp. 100-115. 16. Bernstein, p. 110. 17. James T. Bennett and Thomas J. DiLorenzo, Under ground Government: The Off-Budget Public Sector (Washing ton, D.C.: Cato Institute, 1982), p. 118. 18. L. Wayne, "Utility Setbacks on the Coast," New York Times, November 3, 1981, p. 21. 19. Bennett and DiLorenzo, Underground Government, p.120. 20. Cited in Bob Davis, "Clinton'sTeamStillVowstoHelp Commercialize New Technologies But Worries More About Pork," Wall Street Journal, December 15, 1992, p. A-20. 21. Linda R. Cohen and Roger C. Noll, The Technology Pork Barrel (Washington, D.C.: Brookings Institution, 1991), p.365. 22. Cohen and Noll. 23. Cohen and Noll, p. 255. 24. Cohen and Noll, p. 256. 25. Cohen and Noll, p. 243. Blue Eagles and Deja Vu I f the proponents of central planning came right out and said they wanted to create an economic police state, their cause would never get off the ground. So, they resort to "doublespeak," as Mario Pei so aptly called it, the usual camouflagefor the ultimate use offorce against the individual. Ludwig von Mises summed it up when he wrote: "All this talk: the state should do this or that ultimately means: the police should force consumers to behave otherwise than they would behave spontaneously. In such proposals as: let us raise farm prices, let us raise wage rates, let us lower profits ... the us ultimately refers to the police. Yet, the authors of these projects protest that they are planning for freedom and industrial democracy."

Perhaps the oldest lesson of history is that an assault on one aspect of freedom is an attack on the whole, as the framers of the Constitution were well aware. To think that the bell that tolls for economic freedom does not toll for academic freedom or for freedom of the press is a delusion, and a dangerous one.... All current proposals for a managed economy rest on an under estimation of the intelligence of the American people. They assume that you and I are just not smart enough to decide how to spend the money we earn. -WALTER WRISTON, The Freeman, September 1975 IDEAS ON LIBERTY THEFREEMAN IDEASON LIBERTY NATIONAL SERVICE: UTOPIAS REVISITED by Doug Bandow I n his State of the Union speech President Clinton proposed more than just higher taxes and more spending. He also promised to make his vision of national service a reality. It seems the President wants the state to guide the young into "appropriate" pursuits.