Book Reviews

A REVIEWER'S NOTEBOOK Free Markets, FreeMen by John Chamberlain G eorge Roche, the head of Hillsdale College, was an early protege of Leon ard Read, the creator of The Foundation for Economic Education. Where did Read pick up this theories? They came from what Roche calls the "historical ash-heap" of Frederic Bastiat, who lived in the French countryside and in Paris in the first half of the nineteenth century. Doing a book for Read's Architects of Freedom series in 1973,Roche chose to call it Frederic Bastiat: A Man Alone. The actual fact, however, was that Bastiat had many similarly minded friends. They happened, for the most part, to be free traders in The Virtue of Liberty by Tibor R. Machan The Foundation for Economic Education. 1994 • 176 pages. $19.95 cloth; $14.95 paperback Reviewed by J. E. Chesher S ince the summer of 1990,Tibor Machan, Professor of Philosophy at Auburn Uni versity, .has been lecturing throughout Eu rope as a Fellow for the Institute of Humane Studies. These lectures included audiences in Sweden, Poland, Czechoslovakia, Esto nia, France, and his native land, Hungary.

In his own words, "the main objective in FredericBastiat England, such as Cobden and Bright, who brought the free trade idea to France. The original title was rejected for a new edition with the title, Free Markets, Free Men (Hillsdale CollegePress and The Foun dation for Economic Education, 1993, $14.95 paperback), and a good thing, too. That says it all. In his introduction, Roche justifies the book's purposes as a reprint: the need to reinform today's public of one of "the most intrepid explorers" of free market philoso phy. Bastiatwas tryingto tellpeoplethat they couldn't get something for nothing. That, obviously,has to be said againand again. 0 these lectures has always been to explain in plain terms . . . the ideas underlying classical liberalism." This, in a nutshell, describes Machan's latest book, The Virtue ofLiberty, which grew out of those lectures. Machan has long recognized that, while a good many intellectuals champion liberty as a political value, they do not always do so for the same reasons, or with the same understanding of the source, scope, and limits of liberty. Thus, several versions of what is. often called "classical liberalism"

have developed. Machan critically explores these various political viewpoints. The book opens with a survey of major liberal/libertarian ideas found in Western thought, beginning with Xenophon from ancient Greece, moving through the Chris576 tian and Medieval era and into the modern period, with liberal ideas from Hobbes, Spinoza, Locke, Smith, Mill, and Spencer. From this century, Machan cites, among others, Mises, Hayek, the turncoat Nozick, Friedman, and, of course, Rand. Machan gives a thumbnail sketch and critique of each thinker's philosophy of liberty. Machan then explores the question' 'Why do we have rights?" Here he evaluates arguments from a number of thinkers, with special attention to the views of Thomas Hobbes and John Locke. Though both champion natural rights, and both justify government as answering to certain needs of individuals not realizable in the state of nature, for Hobbes there can be no uniquely "human" rights: any living thing has a "right" to whatever it thinks conducive to survival. It follows that Hobbesian rights lack a moral dimension, and hence lack moral force. In contrast, says Machan, Locke sees human beings as beginningfrom a position of equality, on the basis of which our rights are derived: we ought to be treated in certain ways because of our hu man nature; thus, we have natural rights.

Now, these rights, Machan says of Locke, are morC:l1 rights to which we are entitled, violation of which justifies our retaliating against the transgressors. Though Machan favors Locke's natural rights theory be cause it recognizes the moral dimension and also because, more explicitly than does Hobbes, Locke holds that the purpose of the state is to protect those rights, Machan argues that Locke's view is problematic. For one thing, Locke assumes, without proof, that human beings are by nature moral and political equals. And, given Locke's empiricist epistemology, a proof is not likely, since empiricism is skeptical about the possibility of ever knowing exter nal reality, much less discovering the nature of things, including human nature. The sub sequent dominance of empiricism in intel lectual life, Machan observes, eroded sup port for natural rights and led to a general neglect of political philosophy, from which we continue to suffer.

Machan goes on to discuss the resurgence 577 of interest in political philosophy beginning with John Rawls and Robert Nozick. With Rawls, however, Machan does not find a "robust doctrine of rights" and Rawls can offer no more solid ground for political philosophy than intuition. And, though Nozick was, until his defection, a champion of individual rights, Nozick also fails to offer a proof of individual rights, resting, as does Rawls, on intuition. This chapter closes with the observation that the "concept of rights has by now lost its function as a clear guide to political justice in a free society. In the late twentieth century what are called hu man rights are not linked to an individualist idea of human nature . . . but to human beings conceived of as members of groups. So we have women's rights, rights of Mri can-Americans, students, gays, workers, artists, and so forth." Next, Machan discusses the concept of liberty, both from a metaphysical (free will) and political perspective. Here he distin guishes moral values from values in general, discusses the challenge of determinism, and shows how determinists, who deny free will, may (and often do) nonetheless support political freedom. A particularly fruitful dis cussion concerns the "liberty-morality"

connection, where Machan discusses the possibility of defending political liberty on moral rather than on instrumental grounds. In a separate chapter, arguments for and against private property are examined, with succinct and insightful observations about the views of Marx, Locke, Keynes, Mill, and others. Then, after clarifying the con cepts of liberty and rights, and providing a framework and foundation for broader con cerns, Machan discusses the relationship between morality, liberty, and the market economy. Here he observes that various moral theories are friendly to classical lib eralism and free markets, but for different reasons. Since a wide disparity of view points tends toward skepticism, Machan offers, as a solution, a defense of the natural rights approach for morally grounding a market economy. He argues that socialism, fascism, Communism, and other systems have been rightly faulted for being econom578 THE FREEMAN • OCTOBER 1994 ically inefficient, but their most grievous fault is in promoting moral degradation, primarily by undermining freedom of choice. He describes the general features of moral theories, arguing that the natural rights perspective is not only the most theoretically persuasive, but that it is uniquely consistent with a market economy.

In other words, a market economy is mor ally grounded. From here,' Machan extends his scope globally, to discuss the environmental im plications of the political perspective he has been championing. He argues for a form of environmental anthropocentrism as a con sistent application of classical liberalism. This discussion involves an explication and defense of the view that human beings, as individuals of a certain specifiable kind, "are of the highest value in the known universe. " .While other known beings have varying kinds and degrees of value, only with human beings do moral values come into existence. The implications of this for environmentalism are significant, including ajustification for anthropocentrism, as well as protection of the environment. Returning to more strictly political mat ters, Machan discusses the use of force by the state', distinguishing between force and coercion. He observes that governments are coercive in making people give up liberty for goals that they have neither chosen nor have a say in, or by making people work for projects that they oppose, or fight in wars that they do not support. Now, some have argued for the necessity of at least some state coercion in order for society to realize certain morally acceptable goals. Machan argues that this is a serious misconception in that morality is, at heart, a matter of volition and choice. "The basic moral support for the coercive state then is the failure to remember that morality is a system of prin ciples serving a basic human purpose, namely, to enable human individuals to be good as human individuals. To even ap proach being a successful moral theory, this feature must be included within a moral system. "

Machan closes with a response to the common complaint that individualism and liberalism lead to crass hedonism, moral subjectivism, or some other morally unac ceptable view. He observes how, no sooner does one form of collectivism fail than another rises from its ashes, as has the new movement of Communitarianism which preaches the dangers of individualism and its failure to promote the common good. Machan argues that there are two distinct versions of individualism, the most influen tial in Western liberal political thought going back to Thomas Hobbes. This version, Machan argues, is open to the charge that individualism lacks a moral base, and the shortcomings of this view tend to weaken liberalism by exposing it to precisely the objections that are in such wide currency. In contrast, Machan promotes what he calls "Classical Individualism," which provides an objective moral basis for individualism and has solid roots in the philosophy of Aristotle. Classical Individualism with stands the criticisms leveled against the radical individualism of Hobbes, and pro vides the necessary moral foundation for political liberty and free markets.

The Virtue of Liberty is bold of purpose and is as rich in content as it is brief in length. Few books say as much with twice the words, and fewer still deal with as important a theme. The vision and the principles championed in this work stand in vivid contrast to the prevailing climate of thought in nearly all of our social and political institutions. The irony is that those very institutions, indeed, democracy itself, which sprang from the idea that liberty makes for human excellence, has so lost course that freedom now has little purchase in the marketplace of ideas. This book is for the politician who may wonder whether there can be nobility in his work; for the economist who seeks a deeper understand ing of human behavior than is given in non-normative models; for the student who hopes to find a ground on which to build a view of human life; for the average citizen who senses that something has been lost in our pursuit of happiness. It is something of a "handbook" for those who seek to understand the relationship between liberty, mo rality, and social life. That a defense of liberty is necessary at all shows us the present danger of our condition. This little book is a welcome addition to the literature of freedom, and yet another reminder that the price of liberty is vigilance. D Mr. Chesher is Professor ofPhilosophy at Santa Barbara City College.

The Downing Street Years by Margaret Thatcher Harper Collins Publishers. 1993 • 914 pages. $30.00 The View From No. 11: Memoirs of a Tory Radical by Nigel Lawson Bantam Press, London. 1993 • 1,119 pages. $40.00 Reviewed by Raymond J. Keating A quite startling revolution occurred in Great Britain during the years 1979 to 1990. Under the guidance of Prime Minister Margaret Thatcher, with Nigel Lawson as her Chancellor of the Exchequer from 1983 to 1989, Britain steered a course away from democratic socialism toward democratic capitalism. Or, as Lawson observed, a shift to "Thatcherism" defined as "a mixture of free markets, financial discipline, firm con trol over public expenditure, tax cuts, na tionalism, 'Victorian values' (of the Samuel Smiles self-help variety), privatization and a dash of populism." Though more hard-nosed, free-market critics might assert that Thatcherism did not go far enough, or went astray from its fundamental principles at times-and it was most assuredly guilty on both counts movement away from such a firmly en sconced government" dependency culture"

toward an "enterprise culture" should not be underrated. This political and economic journey has been captured by its two prin cipal and supremely self-confident naviga tors. BOOKS 579 Nigel Lawson's The View From No. 11 is a workmanlike, interesting mix of recent economic and political history, an explora tion of various economic theories, and anal yses of fiscal and monetary issues. In The Downing Street Years, Margaret Thatcher offers a sweeping account of economic and political developments from the local level in Great Britain to the international venue. By the very natures of their positions in government, one would expect greater em phasis by Lawson on economic and fiscal issues, and a more comprehensive tome covering not only economic and budget issues, but foreign affairs, terrorism, social and cultural policies, defense issues, etc. by Thatcher. While this is the case, fortu nately for the reader Lawson does not shy away from venturing beyond the Treasury's purview, while Lady Thatcher focuses a major portion of her tome on economics.

Both Thatcher and Lawson possess rela tively good instincts on economic principles and policies-especially when compared to most of their twentieth-century predeces sors in Great Britain. Both, however, falter occasionallyas willbe the habit of politicians. Thatcher summarizes her government's general approach on the economy: "Firm control of the money supply was necessary to bring down inflation. Cuts in public ex penditure and borrowing were ne,ededto lift the burden on the wealth-creating private sector. Lower income tax, combined with a shift from taxation on earning to taxation on spending, would increase incentives." On the matter of industrial policy-which has had a long and dismal run in the British Isles-Thatcher simply concludes that' 'the fact is that in a market economy government does not-and cannot-know where jobs will come from: if it did know, all those interventionist policies for 'picking winners' and 'backing success' would not have picked losers and compounded failure."

Thatcher sums up her economic policies as follows: "All these areas-trade union power, training, housing and business reg ulation-were ones in which in varying degrees we made progress in strengthening the 'supply side' of the economy. But the 580 THE FREEMAN • OCTOBER 1994 most important and far-reaching changes were in tax reform and privatization. Tax cuts increased incentives for the shop floor as well as the board room. Privatization shifted the balance away from the less efficient state to more efficient private busi ness. They were the pillars on which the rest of our economic policy rested. " Indeed, the most spectacular gains of Thatcherism were in these two areas. Lawson offers detailed accounts of vari ous British privatization efforts. He notes: "By the 1992 general election, about two thirds of the formerly State-owned indus tries in the UK had been transferred to the private sector. Some forty-six major busi nesses, employing some 900,000 people, had been privatized." As Lady Thatcher confirms, "Britain under my premiership was the first country to reverse the onward march of socialism. By the time I left office, the state-owned sector of industry had been reduced by some 60 percent."

Today, it remains easy for armchair econ omists to declare that more should have been done by Thatcher in the privatization area. However, they fail to appreciate the political difficulties involved. Lawson states: "In advance of every significant privatization, public opinion was invariably hostile to the idea, and there was no way it could be won round except by the Govern ment going ahead and doing it." As any great leader does, Thatcher moved ahead on privatization based on her principles and was proven correct. This type of action remains scarce among poll-reading politi cians. On the matter of taxes, the Thatcher Lawson record, though not unblemished, must be commended for its fundamental achievements. Capital gains taxes were in dexed for inflation. And as Lawson notes: "Between 1979 and 1989 [Exchequer pre decessor] Geoffrey Howe and I between us reduced the top rate of tax on earned income from 83 to 40 percent, and the top rate on savings income from an even more ludicrous figure of 98 percent to 40 percent."

Areas where these two politicians' other wise sound economic views faltered-such as succumbing to the "overheating" myth of economic growth and inflation, often irrelevant concerns regarding trade deficits, and convoluted excuses to raise some tax es-tend to stand out against the backdrop of generally positive achievements. Also, a fundamental disagreement between Lawson and Thatcher over international monetary theory damaged the Thatcher government, the British economy, and led to Lawson's resignation. Both books fully explore this rift, as one might expect, from their own passionate perspectives. In many ways, this disagreement is a microcosm of some fun damental monetary differences among market-oriented economists-fixed versus floating exchange rates. Lady Thatcher made the case for free-floating exchange rates, while Lawson pushed for maintaining targeted exchange rates. Unfortunately, neither Thatcher nor Lawson considered gold as a viable monetary standard. Law son's fixed exchange rates particularly suf fered from the absence of an anchor such as gold.

As.for the economic future of Great Brit ain, Lawson correctly calls for more Thatcherism: "More privatization, more tax reform, and a firm grip on public spend ing." As for whether or not Thatcher's successor , John Major, believes the same is, to say the least, an open question. Both The Downing Street Years and The View From No. 11 provide valuable insights into Britisheconomicsand politicsof the past 15 years. Thatcher's book is more readable, though Lawson's adds detail to many eco nomic issues. At a combined total count of over 2,000pages,readingboth books is a hefty undertaking. Obviously, each readily stands on its own. But for those wishing to gain a better understanding of the Thatcher revolu tion, the benefits of reading both even out.. weigh the size of these tomes. D Mr. Keating is Director ofNew York Citizensfor a Sound Economy.

Facing Up: How to Rescue the Economy from Crushing Debt and Restore the American Dream by Peter G. Peterson Simon & Schuster. 1993 • 411 pages. $22.00 Reviewed by John Attarian T hough our national debt keeps soaring, efforts to face it honestly are rare. Peter Peterson's Facing Up is one of the few. Founder of the deficit-fightingConcord Co alition, Peterson confronts the problem and offers a plan for budget balance by the year 2000. Spurning glib "explanations" of our def icit problem-the defense buildup; poverty programs; failure to cut taxes further Peterson shows that the real culprit is out of-control "entitlement" programs provid ing generous Social Security, Medicare, and other benefits to almost everyone. Entitle ments accounted for about $800 billion in fiscal 1993, or 53.5 percent of the budget. Moreover, the bulk of projected future spending is for entitlements. "The budget arithmetic is inescapable: We just can't get the spending cuts we need from anywhere but entitlements."

To support this argument, Peterson gives a splendidly thorough account of the enti tlement state's metastasis and our transfor mation from a responsible, thrifty society to a "choiceless society" fecklessly evading hard tradeoffs. He coolly explodes such pernicious myths as: Most entitlement spending is for the poor (in fact, most benefits the middle class); Social Security and Medicare only give beneficiaries their contributions back (most receive far more than they paid); and Social Security's huge surplus will pay the benefits promised to Baby Boomers (the "surplus" consists of government debt for which future taxpayers will be liable). Facing Up is a wide-ranging and badly needed education in economic and budget ary realities. The "Visual Guide" of charts depicting our stagnating living standards, BOOKS 581 deficient investment, plunge into debt, and entitlement explosion more vividly illumi nates our predicament. Financing our huge entitlement-driven deficits is absorbing more and more of our savings, draining the pool of money available for investment to raise output and productivity and maintain living standards. Thus, while entitlement commitments soar-total unfunded benefit liabilities as of 1991 were $14.4trillion-our ability to pay them is falling. Ultimately, our evasion of reality threatens our way of life.

As our denial is bipartisan, so is Peter son's wrath. He trounces Ronald Reagan for "the pseudosacrificial chopping away at the means-tested and investment corners of the federal budget; the silent approval of the vast increase in 'middle-class' entitlements; and, above all, the unwillingness to take the ominous deficit issue directly to the public. " Bill Clinton, too, "squander[ed] a great opportunity" with inadequate deficit reduc tion proposals; after alarmist rhetoric "all he was able to give us to cure our economy's ills were a few teaspoons of syrupy medicine." Demanding that we face up, Peterson courageously drives home the unlovely truth that "we are all on welfare of one kind or another . . . all of us have decided that we are entitled to much more than our society can afford to pay for." "Most Amer icans-emphatically including the middle class-will have to give something up, at least temporarily, to get back our American Dream." (his italics) Hence he rightly rejects budgetary book cooking and is dubious about a balanced budget amendment. He prescribes in creased high-income, liquor, cigarette, and gasoline taxes, plus a five-percent consump tion tax, in return for further defense cuts, more public-sector investment, and a ten percent real cut in domestic discretionary spending. Peterson would also increase the taxability of most entitlements, trim others, and most important, apply a highly progres sive means test to cut entitlements for above-median-income beneficiaries. These proposals have the merit of honestly admin istering necessary, unpleasant medicine, but unfortunately have many problems.

582 THE FREEMAN • OCTOBER 1994 Taxes have already been raised repeat edly, to little avail-because spending cuts promised in return never came. With such a fiscallyperfidious Congress, this is not a safe bargain to strike. The means test does what must be done: perform the lion's share of the entitlement carvery on the middle class. But given his own account of the problem, it's not enough. We should eliminate entitlements to all above the poverty line except federal retirees and veterans with service-related injuries, and gradually replace them with private alternatives below it. This would produce bigger surpluses faster. Peterson's proposals to raise the Social Security retirement age and benefit taxabil ity are sensible, but inadequate. Even if per capita benefits are trimmed, the retiring Baby Boomer generation would still swamp Social Security by sheer numbers. Given our aging population, Social Security is doomed.

Similarly, Peterson's proposal to cut farm supports is a step in the right direction, but we'd do better to abolish them. Unfortunately, Peterson advocates ex panding the entitlement state with universal basic health care coverage. In a glaring contradiction, he deplores the entitlement mentality, yet concurs with Henry Aaron's assertion that universal access to health care is "a standard perquisite of citizenship in modern developed nations." Since when? The affluence test, higher taxes, and ex panded low-income benefits risk creating perverse incentives for middle-class people to hide their wealth to protect their entitle ments. This is not farfetched; grown middle class children are already reallocating their parents' wealth to artificially impoverish them so they can qualify for Medicaid. But most important, while a balanced budget or small surplus by 2000is a laudable goal, it is not enough. Even if we reach it, we would still have a national debt exceeding $5 trillion, and its interest cost would be staggering. Rather ,we must slash the debt by running surpluses the size of our recent deficits.

That, however, would entail facing up to things which not even the sturdy Peterson admits: that entitlements are not merely out of hand but inherently untenable; that na tional bankruptcy is inevitable when the government is charged with protecting us from life; and that for sound finance to be restored, the entitlement state must be not reformed but demolished. But though there is much to dissent from, Peterson has served America nobly. Edu cating the country is crucial to solving the problem, and Facing Up is a huge stride to the budgetary blackboard. D Dr. Attarian is afreelance writer in Ann Arbor, Michigan. AmericanDemocracy:Aspectsof Practical Liberalism by Gottfried Dietze Johns Hopkins University Press. 303 pages. $39.95 Reviewed by William H. Peterson "The Anglo-American relies upon personal interest to accomplish his ends, and gives free scope to the unguided exer tions and common sense of the citizens; the Russian centers all the authority of society in a single arm: the principal instrument of the former is freedom; of the latter servi tude. Their starting point is different, and their courses are not the same; yet each of them seems to be marked out by the will of Heaven to sway the destinies of half the globe."

So wrote Alexis de Tocqueville in 1835 in Democracy in America. and German-born political scientist Gottfried Dietze of Johns Hopkins University hails the prescience of the young French visitor here who spotted two "unnoticed" powers and two ways of governance long before the rise and fall of the Soviet Union and the passage of such broad interventions in America as the New Freedom, New Deal, New Frontier, and now President Clinton's "New Generation." Yes, Eurocommunism and the Soviet Union are gone, but a kind of Russification of Japan and the West seems to push on. The issue is still Tocqueville's freedom vs. servitude. Dr. Dietze also hails The Foundation for Economic Education for defending freedom and free enterprise, and notes that Ronald Reagan has read· The Freeman, and quotes approvingly from President Reagan's first inaugural address the lines: "You and I, as individuals, can, by borrowing, live beyond our means, but for only a limited period of time. Why, then, should we think that col lectively, as a nation, we're not bound by the same limitation?"

Dietze builds his latest work around the momentous Tocqueville work to see how democratic institutions have fared in the century and a half since its publication. He is not especially hopeful but concedes America's future is too murky to be sure. (A note to the American reader: Professor Dietze uses the word "liberalism" here in its European, nineteenth-century sense as a variant on liberty.) He holds that constitutional limitations on government are being dissipated-through, among other things, U.S. Supreme Court decisions. This dissipation may be at the heart of America's troubles today, and can be inferred from Professor Dietze's book of more than twenty years ago, America's Political Dilemma: From Limited to Unlim ited Democracy. As he notes, "Rights through Riots" seems to have been replaced by "Riots through Rights." Professor Dietze writes: "It often appeared to me that people were on the way from free government to gov ernment-free, to the freedom from any kind of rule, to anarchy."

How remarkable-the incongruity of anBOOKS 583 archy and interventionism, when govern ment taxes and intrusions into peaceful private activity have rarely been greater, when the u.S. government may be ready to yet assume one-seventh of the Gross Do mestic Product (GDP) in the name of uni versal health care. So questions arise from a reading of the provocative Dietze work: Is spreading gov ernment or the Russification of society the answer to America's ills-to the rise of violent crime in America, for example? Is it seen in the rage for "victimology," in the idea that' 'I'm a victim, you're a victim, " in a corresponding flightfrom self-responsibil ity, from personal morality, in a new order that has become increasingly disorder? What's going on? Dietze quotes Yeats: Things fall apart; the center cannot hold; Mere anarchy is loosed upon the world. Freedom is insufficient, says the author, citing the works of Thomas Hobbes, John Locke, Jean Jacques Rousseau, and Ed mund Burke. He condemns what he calls "pure liberalism, or the unrestricted quest for ever more freedom," on the part of individual citizens and elected officials. He wonders if the course of American democ racy does not contain the seeds of its own decline.

Gottfried Dietze has a point: Tocque ville's liberty and equality are not enough. A return to moral and ethical imperatives is also in order, says this contemporary thinker in this thoughtful work. D Dr. Peterson, a contributing editor of The Free man, is an adjunct scholar at the Heritage Foundation. He is completing a book on political economy.

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