Book Reviews

514 BOOKS Red Flag Over Hong Kong by Bruce Bueno de Mesquita, David Newman, and Alvin Rabushka Chatham House. 1996 • 208 pages. $25.00 cloth; $17.95 paperback Reviewed by George C. Leef F or decades, Hong Kong has been a favorite subject among those of us who teach econom ics. To demonstrate the importance of private property, economic liberty, and minimal, nonco ercive government, Hong Kong was simply ideal. Here we have a small, rocky, resource-poor bit of land where the above conditions prevailed. Next door is the resource-rich colossus of the misnamed People's Republic of China (PRC) where you find statism, corrupt autocratic rule, and pervasive hostility to personal liberty. (As the authors note, prior to the assault on pro-freedom demonstrators in Tiananmen Square in 1989,the rallyingcryof the Communist Party was "Oppose Liberalism.") The wealth and progress enjoyed by the people of Hong Kong stands in dramatic contrast to the backwardness and poverty that characterizes life in the PRC.

Alas, this wonderful experiment in the impor tance of freedom is jeopardized by the impending transfer of control over Hong Kong from the British to the communist rulers in Beijing. On July 1, 1997, British governance ends and the least authoritarian government on the planet (according to Heritage Foundation's 1997 Index of Economic Freedom) will be replaced by.... By what? The PRC has promised to allowHong Kong to continue its free-market economic system and liberal soci ety; it has promised free elections and a high degree of autonomy for Hong Kong. But will it abide by these promises? That is the crucial question that the authors explore in Red Flag Over Hong Kong. They con clude that the takeover by Beijing is a grave threat to the free and prosperous little enclave: "Hong Kong is in for a rocky road in the years ahead. Future treatment of Hong Kong will be caught up in the political competition for control of China.

Victims of that competition will include the free press, academic freedom, open and fair elections, and some portion of market freedom. Hong Kong willnot be as tightly controlled as the rest of China, but neither will it be the free and vivacious place it has been for the past half a century. The political and economic landscape will be filled with uncer tainty, cronyism, lost freedoms, and more corrup tion than has been known in the recent past. It is a bleak picture indeed." They make a persuasive case for their pessimistic outlook. Hong Kong predicting has become a thriving mini-industry (proving again how politics can alter the allocation of resources) and Bueno de Mes quita, Rabushka (both of the Hoover Institution), and Newman (of Lingnan College) readily ac knowledge that a case for optimism can and has been made, but, after a careful examination of the political and economic realities in China, find it to be much more likely that things will deteriorate significantly.

The optimists argue that China needs a thriving Hong Kong for its own economic growth and therefore will refrain from tampering with it. The authors counter that there are many contending factions in China-which is apt to become a more fragmented country in the years ahead-and that those that are threatened by the "bourgeois liberalism" of Hong Kong are more likely to prevail. The Chinese military, for instance, will play an important role in the future development of the PRC. Many readers will be surprised to find out that the "People's Liberation Army" (PLA) is thoroughly immersed in profit-making business. Much of the transportation of goods takes place in military vehicles. The navy is thought responsible for much of the piracy that takes place in the waters off China. But, the authors say, "The gravy train enjoyed by the military can persist only as long as China is ruled by corruption instead of law. Some members of the PLA, therefore, have strong in terests in protecting the status quo." A free Hong Kong, showing the results of an economy based on contract rather than power would be regarded as a dangerous anomaly by many PLA officers.

Also, there are many Communist Party officials who retain the Maoist hatred of capitalist ideas. They ordered the massacre in Tiananmen Square and persist in arresting people who have the temerity to speak out against their regime. These tyrants may not hold on to power in the long run, but they certainly can and probably will reshape Hong Kong to please them as long as they have it. In fact, the Chinese attack on Hong Kong's freedom has already begun, well in advance of the transfer date. The authors give numerous telling examples, such as Beijing's declaration that the Hong Kong press should practice "self-discipline" and be "respectful" of the sentiments of the Chinese rulers. That's a hint not likelyto be missed. Even more evidence of Beijing's hostility to free dom in Hong Kong has surfaced since the publi cation of the book. (See, e.g., "Hitting on Hong Kong," the Wall Street Journal, January 22, 1997, p. Al 4.) The authors remind us how remarkably free Hong Kong has been. The government consumes less than 20 percent of the Gross Domestic Product (compared to over 40 percent in the United States). It imposes no minimum wage law. There are no business subsidies or pointless regulations.

There is a flat 15 percent tax on salaries, and no tax on interest, dividends, or capital gains. The cur rency is stable. Those are virtual laboratory con ditions for a demonstration of the creative power of capitalism, but, sadly, they are about to be altered for the worse, the authors contend. Hong Kong may still provide us with useful economic lessons, but the comparison will be between the old, free Hong Kong and the new, more regi mented Hong Kong under Beijing's thumb. Red Flag Over Hong Kong is a fascinating book, revealing the unsavory political struggle that will determine the fate of the six million people of Hong Kong. Congratulations to the authors on a job well done. D George C. Leef is the book review editor of The Freeman. Facts, Not Fear: A Parent's Guide to Teaching Children About the Environment by Michael Sanera and Jane Shaw Regnery Publishing. 1996 • 300 pages. $14.95 paperback Reviewed by Gregory F. Rehmke I n Facts, Not Fear:A Parent's Guide to Teaching Children About the Environment, Michael San era and Jane Shaw cover a wide spectrum of environmental issues and contrast the research of leading scientists and economists with assertions found in textbooks and environmental books for children.

This task is especially challenging because the parents who are the target audience hold their own environmental beliefs. Since reporting on environBOOKS 515 mental issues is often tilted, it is difficultto provide a balanced overview without sounding tilted the other way. People-and particularly parents-are naturally wary of books that seem extreme. So as I read Facts, Not Fear, I tried to read not only for my own information about environmental issues and textbook teachings, but also with friends and relatives in mind who have children in school. Did an argument seem oversimplified? A conclu sion overstated? Was an environmentalist's posi tion presented fairly? My conclusion is that Facts, Not Fear does a good job of mainstreaming its message. It succeeds in explaining environmental issues in straightforward and uncomplicated lan guage. Sections on population, natural resources, rain forests, and wildlife all begin with quotations from school textbooks and then calmly compare gloomy textbook perspectives on these topics with the research of leading scholars. Facts, Not Fear demonstrates convincingly that school textbooks are misinforming young people about environmen tal issues.

The authors maintain an even and careful tone while pointing out the disparity between what textbooks try to teach children, and what scientific and economic research suggests should be taught. In the beginning of the book, the established experts that have reviewed each of the chapters on environmental topics are listed along with their academic affiliations. Leading economists re viewed sections on population, natural resources, and water, and a variety of scientists reviewed sections on forests, wildlife, greenhouse warming, the ozone layer, acid rain, and pesticides. Detailed notes and references for each chapter make it easy for skeptical readers to check out key sources themselves. The chapter on natural resources makes clear that much misinformation is a consequence of textbook authors not understanding economics. "You may face mineral shortages in your lifetime" writes the author of one textbook. "At the current rate of consumption, some scientists estimate that the world's known supplies of oil, tin, copper, and aluminum will be used up within your lifetime,"

saysanother. Well, yes, lots of things might happen in a student's lifetime. An asteroid might hit the earth, aliens might invade, or the moon might fall out of the sky. But future resource shortages are far more likely to be the consequence of government price controls than any future inability to locate, extract, and deliver resources to consumers. These fears of a coming resource shortage come from comparing proven world resource reserves with annual world consumption rates. This is misleading. As Sanera and Shaw explain, "proven"

516 THE FREEMAN • AUGUST 1997 reserves are the reserves of a mineral that compa nies currently know about, and thus they depend on how much effort and technology companies have so far invested in looking. This, in turn, depends on the expected price of a resource. If prices begin to rise or if new technologies allow companies to search less expensively for reserves, then more reserves are likelyto be discovered-and "proven" reserves increase. In addition, it is useful to realize that today's natural resources are yesterday's rocks and rubble. Until entrepreneurs and engineers discovered how to make use of the stuff of the world, peat, bogs, coal deposits, oil, natural gas, and all manner of ores were of little use to mankind. Oil, the authors point out, was a liability to farmers, lowering the value of their land and harming crops and pasture until the technology was developed in 1859to distill it. Entrepreneurs and inventors search to make today's sand and rubble into tomorrow's valuable natural resources. Textbook statements that we are running low on key minerals are wrong or at least misleading, and the implication that resource shortages might cripple the economic future of our children is indefensible.

Sanera and Shaw detail the fascinating U.S. Geological Survey (USGS) figures of "ultimate reserves"-the amount of recoverable resources estimated to be in the top-half mile of the Earth's crust and the total amounts of particular minerals thought to be in the entire Earth's crust. These are big numbers and show how absurd textbook pre dictions of shortages are. Consider the aluminum that many textbook authors say may run out. Instead of the 23 years that textbooks come up with by dividing known reserves by annual consump tion, the USGS estimates, by dividing ultimate recoverable resources by annual consumption, that aluminum will last for the next 68 thousand years! Future technologies willincrease even this num ber by searching deeper in the Earth's crust for minerals. How much total aluminum is there in the Earth's crust? According to the USGS, enough for 38.5 billion years! Perhaps pessimists will still complain, "But what willwe do then?" But for most people a few thousand years is enough of a cushion, and is a far cryfrom the 23-year deadline textbooks give children for aluminum (and 45 years for copper, 21 years for zinc, and so on).

In chapter after chapter, Sanera and Shaw steadily cut through textbook misstatements and misinformation. In addition to replacing fears with facts about the environment, the authors suggest at the end of each chapter exercises and activities that parents might use to engage their children in thinking about this more realistic and upbeat view of the future. Perhaps the first few chapters willbe hardest for skeptical readers. The authors begin the book with their critique of the way environmental ideas are taught in schools and layout the basics of free market environmentalism. Perspectives and con clusions are presented without having room to include the full analysispresented later in the book (readers are many times referred to later chapters). The alternative would have been to just launch into the chapters on specific environmental issues. Perhaps in recommending Facts, Not Fear to someone skeptical of market -oriented ideas it would be best to point them first to chapters on particular environmental issues.

This is a book worth buying for ourselves, and worth buying to share with friends and relatives who have children in school. I know of no better step-by-step economic and scientificcritique of the standard doom and gloom environmental world view. In countering environmental beliefs found in textbooks and taught to children, Sanera and Shaw address a disturbing consequence of the environ mental movement-the fillingof young minds with a deep and p~rvasive pessimism about their own future. [] Mr. Rehmke is director of educational programs at the Free Enterprise Institute in Houston. Up From Poverty: Reflections on the Ills of Public Assistance edited by Hans F. Sennholz Foundation for Economic Education. 1997 • 208 pages. $14.95 paperback Reviewed by Dale Matcheck T his timely collection of essays is a rich and diverse anthology united by a recurring theme, namely, that the welfare of a human being contains spiritual as well as material components. A com pelling case is made that the proper role of the state in promoting this welfare is to provide the envi ronment in which people are free to strive, to achieve, and to live with the expectation that they may enjoy the fruits of their own labor. The articles represent some of the best writing that has ap peared in The Freeman on the subject of the welfare state.

In his excellent introduction, Hans Sennholz argues that the era of experimentation with social ism and welfare statism is coming to a close, and that the passage of federal welfare reform in 1996 is a harbinger of more changes to come. What these changes are, Sennholz does not specify, but he makes it clear that it will be difficultfor recipients of public assistance to move into private-sector jobs unless the legal obstacles that destroy so many entry-level opportunities are removed. He reminds us that transfer payments are not the only "en titlements" created by the welfare state. Compul sory unionism, heavy payroll taxes and mandated benefits, minimum wages, occupational licensing, and other constraints imposed on labor markets have greatly reduced upward mobility among the poorest members of society. Furthermore, the public school monopoly has left so many young people without basic skills necessary to compete in today's labor market.

However, if we are to judge by the recent debate concerning the minimum wage, the Congress is not prepared to pass, nor is the public prepared to accept, the reforms necessary to create a truly free labor market. The new direction of public policy remains very much in doubt. Already, there are proposals to replace welfare with workfare, while some have suggested a simple privatization of the entitlement system,with private nonprofit agencies replacing the state bureaucracies. The authors represented here would clearly take issue with the idea that forcible redistribution of income can produce desirable effectson society, no matter who is administering the system or what the work requirements may be. William Graham Sum ner's classic essay "The Forgotten Man" calls into question the morality of even well-intentioned redistribution schemes, while Henry Hazlitt's essay "False Remedies for Poverty" explains clearly why the goals of such programs are so rarely realized in practice. Other articles chronicle the unfortunate consequences of these policies using historical examples from ancient Rome to modern Sweden.

The final article in the collection is must reading for every American high school student. In it, Bertel Sparks uses examples drawn from the American experience to support his contention that effort made by individuals, striving to improve their lot in life, continues to be the surest route out of the "poverty trap." The implication of this anthology is clear: free dom is a necessary component of any true measure of individual welfare. As Milton Friedman has observed, government programs that seek to ex pand the material wellbeing of citizens at the expense of their freedom are likely to end up providing less of both. Readers seeking to better BOOKS 517 understand the social, economic, and political impacts of the welfare state will find this collection of essays a valuable resource. D Dale Matcheck is assistant professor of economics at Northwood University, Midland, Michigan. Libertarianism: A Primer by David Boaz The Free Press. 1997 • 228 pages. $23.00 Reviewed by John Attarian W ith statism's failures obvious, and Americans' disgust with statist government and politi cians burgeoning, David Boaz's accessible book is a handy and timely introduction to an appealing alternative.

Opening with a brisk presentation of essential ideas, Boaz defines libertarianism as "the view that each person has the right to live his life in any way he chooses so long as he respects the equal rights of others." Government's proper role is to protect our rights to life, liberty, and the pursuit of happi ness, not initiate the use of force. Courageously, Boaz rightly contends that "the most important politicalvalue is liberty,not democracy."All political theories are essentiallyone question: "Who is going to make the decision about this particular aspect of your life, you or somebody else?" Concisely but comprehensively, Boaz presents the history of libertarianism, tracing it to a drive for religious freedom and including the contributions of St. Thomas Aquinas, the Scholastics, and the Levellers, as well as more familiar figures like John Locke and Thomas Paine. His explication of rights is likewise superb. Self-ownership and property rights are cogently spelled out, and the nonaggres sion axiom-"No one has the right to initiate aggression against the person or property of any one else"-receives due prominence. His detailed treatment of the justice of distributions arrived at through just means and his argument that property rights are human rights, and indispensable since we live and act in a material world, are especially valuable. To his credit, Boaz insists on equality of rights only, not opportunity or outcomes. There is also a fascinating, thought-provoking treatment of emergencies. Acknowledging that dire situations (e.g., natural disasters) may arise where rights might not apply, Boaz nevertheless commonsensi cally concludes that we do live in mostly normal 518 THE FREEMAN • AUGUST 1997 situations, so "Our ethics should be designed for our survival and flourishing in normal conditions."

His treatments of market processes, civilsociety, law and the Constitution, health care, and the costs and failures of America's burgeoning Leviathan are other strong points. In showing that most American "poor" are affluent by historical stan dards and that before welfare, Americans took care of their own with numerous mutual-aid societies, Boaz ablyrebuts the charge that welfare is essential because charity won't suffice. Also welcome is his explication of what liber tarianism isn't. "Libertarianism is neither libertin ism nor chaos." "Libertarians never suggested that people be 'emancipated' from the reality of the world, from the obligation to pay one's own way and to take responsibility for the consequences of one's own actions." A weakness in the book is that Boaz's case for libertyis overwhelminglyeconomicand technocratic: it makes us prosperous and promotes technological progress. "The biggest issue for most Americans in the 1990sis preseIVingeconomic growth." Oh? The biggest concern for many of us is, arguably, our disintegratingsocialfabric and risingbarbarism. The Information Age will, he confidentlypredicts, make the clumsystate "obsolete." Government's "discoor dination of the market process is making us less prosperous than we could be" and impeding progress; high-tech entrepreneurs will increasingly just bypassit. In a nutshell: Out of the way, govern ment, you're obstructing progress!

Because of this focus, Boaz skates over the tough social issues. Boaz's technocratic economism will not convince religious conservativeswho do not see consumption as their purpose in life and who hope for Heaven rather than a high-tech Brave New World. Their concerns are valid, but left unad dressed. Given the reality of evil, and the imperative of preserving a safe, wholesome living environment, prudential constraints on conduct in the public square, as opposed to one's home (whichBoaz sees, rightly, as one's castle), make sense. Laws against indecent exposure and inciting to riot, say. Perhaps Boaz will engage conservative concerns in future works. He doesn't here. But overall, he performs ably. As a concise, competent introduction to libertarianism, Boaz's primer can't be beat. Perhaps "the libertarian moment" has arrived. If libertarianism seizes its moment, it will be thanks in no small part to this book. D Dr. Attarian is a freelance writer in Ann Arbor, Michigan.

Epitaph for American Labor by Max Green AEI Press. 1996 • 207 pages. $24.95 Reviewed by David Kendrick F rom a former New York representative of the American Federation of Teachers (AFT) comes Epitaph for American Labor, which, accord ing to its author, Max Green, "testifies to a reversal of my own thinking.... Whatever was true of yesterday's [union] movement, today's movement practices a variety of reactionary leftism that opposes America's values and interests." With Big Labor conspicuously flexing its political muscles these days, a book that deflates its pretensions is most welcome. It was not always like this, Green writes, as he recalls the pragmatic nature of organized labor's leadership pre-New Deal: "Through its first cen tury, the American trade union movement was distinguished by its rejection of socialism." This moderation was due primarily to the leadership of Samuel Gompers, founder of the American Fed eration of Labor (AFL), who, perceiving the state as the "executive arm of the dominant economic class ... saw nothing to be gained by bringing government into the equation between business and labor."

Indeed, Green points out, the union move ment's "top priority during the Gompers era was the passage of legislation to keep government out of labor-management disputes," culminating with the 1932 Norris-LaGuardia Act exempting union officials from antitrust lawsuits. (Unfortunately, organized labor had succumbed to the temptation to resort to politics by this time-Norris LaGuardia also outlawed antitrust lawsuits, "yel low dog" contracts under which employees agreed as a condition of employment not to join a union.) As late as 1938, union officials in the Gompers tradition opposed a minimum wage, according to Green, "out of fear that if government could impose a minimum wage, it could also impose a maximum wage." Contrast that early opposition of union leaders to the incessant, multimillion-dollar campaign in which the AFL-CIO hierarchy suc ceeded in bludgeoning enough Republican con gressmen to raise the minimum wage last year.

While this turn in the union hierarchy's attitude toward state intervention has been well documented, Green breaks new ground in our understanding of BigLabor's role in the Cold War, taking issue with the often-expressed idea that the unions were important in the victory over commu nism. As the Cold War wasbeginning in the late 1940s, David Dubinsky, president of the International Ladies Garment Workers Union, proclaimed that "whether democracy was to revive in the countries overrun by Hitler and Mussolini lay in the trade unions." By this rationale, the principal weapons against the expansion of Soviet hegemony layin the herding of workers into union ranks, and such so-called "democratization" schemes as the expro priation of privately owned land for redistribution by the state, or "land reform." In Vietnam, for example, the redistribution of land, intended to "win hearts and minds," but imposed on the South Vietnamese people by the United States at the AFL-CIO's insistence, led to "resentment, felt at several levels of Vietnamese government and society, of interference by for eigners." In the end, Green concludes, these social efforts to undermine the internal insurgency of the Viet Cong were just "a sideshow diverting atten tion from the harsh but essential task of meeting the military challenge from the North."

During the 1980s, the Reagan Administration sought to rebuild U.S. defenses while reducing the budget deficit. But the AFL-CIO's executive coun cil insisted, first, on smaller increases than what Reagan thought was necessary, then later in the decade, that "if vital [domestic] programs are to be cut or frozen, defense spending must also be frozen." And in 1983, six of the AFL-CIO's ten larg~st unions supported the nuclear freeze. While unionists and their more avid supporters BOOKS 519 have made much of the AFL-CIO's support for the Solidarity trade union as a factor in bringing down the Iron Curtain, Green points out that the peri odic and futile labor protests which had continued in Poland since 1956 would probably have "con tinued indefinitely had it not been for ... a transformed Catholic Church." In the wake of Pope John Paul's 1979 visit to Poland, Solidarity leader Lech Walesa recounted that "millions of unorganized and unaffiliated Poles had suddenly seen themselves as a commu nity under the leadership of the church-an expe rience that a year afterward had led to the creation of Solidarity." According to Green, this outpouring of emotion, coupled with a new alliance between the Church and dissident intellectuals "formed the basis for the birth of Solidarity as a liberation movement, as distinguished from an ordinary trade union." Thus, Solidarity's role in liberating Poland had far more to do with the unification of all Polish society than it did with traditional trade unionism.

Union officialshave coerced and even terrorized millions of workers they claim to represent, but their big-government, socialisticagenda is contrary to their interests. There are no more excuses to disregard the natural right of employees to decide for themselves if a union deserves their financial support. D DavidKendrickis programdirectorfor the National Institute for Labor Relations Research, a charitable organizationprovidingresearchand analysison the social and economic inequities ofcompulsory union ism. At What Price Will The Gold Standard Return? UGoid isn't just anothercommodity.Gold is money. Some day an internationalmonetary crisis may rudelyawaken us to this reality./I -Mark Skousen, author of Economics of a Pure Gold Standard 1797Half Eagle 5.00 Gold Piece Uncirculated Price History 1957 - $700 1967 - $3,800 1977 - $9,500 1987- $30,000 1997 - $137,500 • Rare Coins • Expert Advice • Best Prices Tom Pilitowski 1-800-524-6321 1-954-979-2640 Special: Certified MS-63 St. Gaudens Double Eagles, $525 each, plus shipping.

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Our No-Risk Guarantee: Return the book in original condition within 30 days of purchase for a 100% refund of the purchase price. TWAD-CI THEFREEMAN IDEAS ON LIBERTY FEATURES 525 529 532 538 543 547 555 558 563 564 Center 541 553 576 522 579 The Perversity of Doing Good at Others' Expense by Dwight R. Lee The destructive effect of government transfers. Competition and Cooperation by David Boaz Essential elements of the simple system of natural liberty. Discovery and Economic Freedom by Daniel B. Klein The role of the unexpected in economic advancement. Yes,Virginia, There Is a Free Lunch by William H Peterson But you can't eat your cake and have it, too. Guardians of the Constitution or Watching Out for Their Own? by Daniel J. Pilla Are a federal judge's constitutional rights more sacred than those of an average citizen? Federal Government Growth Before the New Deal by Randall G. Holcombe The surprising origins of government expansion.