Book Reviews

BOOKS Titan: The Life of John D. Rockefeller, Sr. by Ron Chernow Random House • 1998 • 774 pages. $30.00 Reviewed by D.T. Armentano F or me, this is the image that sticks: John D. Rockefeller, president of Standard Oil, age 57, in bicycle suit and goggles, racing around the University of Chicago campus in 1897, harried administrators in tow, with stu dents on the sidewalk chanting: "Rah, Rah, Rah, Rockefeller, he's the feller." Priceless. He was indeed "the feller," as this scintil lating retelling of his life and times by Ron Chernow aptly demonstrates. Chernow must surely be one of the few historians who can really write. That a 774-page book about a businessman born in 1839 can be a wonderful page-turner in the late 1990s says a lot about Chernow's literary talents-and about the object of his attention, John D. Rockefeller. Chernow's early hunch was that the Rocke feller legend was "exhausted" and that he should skip the project. We can rejoice that he did not. For here, finally, is an intelligent and insightful account of the most important industrialist of his time, of his personal and family life, his religious beliefs, his massive philanthropy, and the company he created.

This important revisionist account of the man and the myth is about as good as we are like ly to get. Who was John D. Rockefeller? Chernow shows that he was, above all else, a man who held fast to certain core values throughout his life. His early Baptist religious training shaped his lifelong attitudes toward the importance of hard work and charitable giv ing. Rockefeller threw himself into both with out reservation. "Get money and give money" was his double-entry bookkeeping for recon ciling capitalism and Christianity. His church work and other charitable causes were never an apology for his commercial success. Read55 ers of this magazine can be grateful that he sank many millions into creating the Univer sity of Chicago. Despite great wealth, Rockefeller was always economical, some would say miserly, in his own affairs. He reviewed every house hold bill and often "patrolled the hallways turning off gaslights." The titan and his fami ly owned several residences, but there were no racehorses, no decadent parties, no yachts, no extravagant traveling or gaudy personal trin kets. When Cettie, his beloved wife of 50 years, died in 1915, her most costly items of clothing were a seal coat and muff valued at $135. Rockefeller gave away hundreds of mil lions of dollars to his children and to selected causes (including medical research and black schooling). When he died, his own personal estate (which had been devastated by the 1929 crash) stood at a "mere" $26 million.

Chernow labors mightily to set Standard's commercial accomplishments reasonably straight. He identifies correctly the factors that account for the early growth of the firm (entre preneurship, economies of scale, technologi cal innovation) and its ability to maintain mar ket leadership. He also identifies correctly the changing market conditions at the tum of the century that eroded Standard's market share prior to the antitrust suits. Indeed, Chernow even admits that the subsequent legal actions may have been "superfluous." But there are problems with some of his economic and legal analysis. Lacking a cor rect (Austrian) theory of monopoly, Chernow is unnecessarily bothered by Standard's "predatory" pricing and by the "rebates" it was able to wring consistently from the rail roads. Also, he constantly refers to Standard as a "monopoly" even though there were always rivals in domestic refining (147 in 1911), and even though most markets were legally open to entry.

The greatest disappointment in Titan is Chernow's virtual non-treatment of the classic antitrust decisions that broke· up Standard. While the book builds to this climax, the Cir cuit Court (1909) and Supreme Court (1911) decisions are tossed off in less than two pages! Readers are not told that the Circuit Court never made any legal judgment on 56 THE FREEMAN/IDEASON LIBERTY • JANUARY 1999 Standard's business practices or economic performance. Instead, it decided the case on the more narrow issue of whether Standard Oil of New Jersey was a "trust" or "combina tion" in restraint of trade. Under the legal precedents, it was. Guilty; divestiture ordered. And while the Supreme Court announced that dominant firms should be judged by a "rule of reason," it never applied that rule to the evi dence in the case. These are not dry academic points. They are crucially important to any overall evalua tion of the firm in the marketplace and to an understanding of any appropriate "monopoly"

policy. Unfortunately, Chernow misses it all very badly. Still this is a blockbuster book that every student (and professor) of business his tory would do well to study carefully. D D.T. Armentano, professor emeritus of economics at the University ofHartford, is the author of Antitrust and Monopoly: Anatomy of a Policy Failure. The Great Betrayal: How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy by Patrick Buchanan Little Brown & Company. 1998 • 320 pages • $22.95 Reviewed by James Bovard P atrick Buchanan has given America one of the most eloquent theological tracts of recent decades. Unfortunately, when Buchanan, a two-time presidential candidate, takes his theological views into economic areas, the result is a recipe for poverty, con flict, and subjugation. The subtitle of Buchanan's book is "How American Sovereignty and Social Justice Are Being Sacrificed to the Gods of the Global Economy." Buchanan seems obsessed with demons-denouncing economist Frederic Bastiat as "heretical," denouncing elites for betraying America, denouncing foreigners at every opportunity. He seems far more inter ested in the proliferation of enemies than with the simple mechanics of economic exchange.

In a chapter entitled "Anatomy of a Mur der," Buchanan uses the American auto indus try as the consummate example of the evils of American trade policy. He declares: "The U.S. auto industry can justifiably claim to have been a victim of abuse, neglect, and abandon ment by the government of the United States." The one lesson from this chapter is that no industry can be held responsible for its own incompetence and abuse of loyal customers. He begins by declaring that Volkswagen Beetles were the first foreign auto to get sig nificant market share in the United States and then stresses Hitler's role in creating the Volkswagen corporation and the fact that the company (like many German corporations) relied on slave labor from concentration camps during World War II. Readers are left with the impression that all Volkswagens are forever tainted by this Original Sin and that anyone who bought a Beetle or any foreign car was morally inferior to people who bought American-made cars.

One issue Buchanan did not find space for is quality and reliability. Consumer Reports in the early-to-mid-1980s repeatedly flogged the Big Three American automakers for the high rate of defects in their new cars-at a time when Japanese companies had far better qual ity control. Buchanan, like other protection ists, ignores how foreign competition improves the quality of domestic products. Among other notions of unfair trade, Buchanan claims that foreigners unfairly ben efit because they are not forced to comply with the same regulations and pay the same taxes that American companies face. He has shifted from his. earlier beliefs that govern ment must slash the burden of regulations and taxes on American citizens and American businesses-and is now on a holy crusade to "level the playing field" by imposing more taxes and burdens on foreign businesses. The fact that many European companies face heavier tax and regulatory burdens than do U.S. companies somehow never gets men tioned. Even were that not so, why should for eign companies be considered cheaters if their nations' tax systems are not as idiotic as is the U.S. Internal Revenue Code?

Buchanan's program is nothing new. Amer ican protectionists have always found some moral pretext to damn imports. In the 1820s, protectionists proclaimed that trade between England and America could not be fair because England was advanced and America was comparatively backward. In the 1870s, protectionists announced that trade between America and Latin America could not be fair because America was comparatively rich while Latin American countries were poor. In the 1880s, protectionists warned that trade could not be fair if the interest rate among the trading nations differed by more than 2 percent. In practice, fair trade means protectionism. Yet every trade barrier undermines the pro ductivity of capital and labor throughout the economy. A 1979 Treasury Department study estimated that trade barriers routinely cost American consumers eight to ten times as much as they benefit American producers. A 1984 Federal Trade Commission study esti mated that tariffs cost the American economy $81 for every $1 of adjustment costs saved.

According to the Institute for International Economics, trade barriers are costing Ameri can consumers $70 billion a year-equal to over $1,000per family. The myth of fair trade is that politicians and bureaucrats are fairer than markets and that prosperity is best achieved by arbitrary politi cal manipulation, rather than by each individ ual pursuing his own interest. But government cannot make trade more fair by making it less free. Should Pat Buchanan have dictatorial power over what other Americans are permit ted to buy from 96 percent of the world's pop ulation? This is the question by which his doc trine must be judged. James Bovard is the author of The Fair Trade Fraud. BOOKS 57 Politics By Principle, Not Interest: Towards Nondiscriminatory Democracy by James M. Buchanan and RogerD. Congleton Cambridge University Press • 1998 • 191 pages • $49.95 Reviewed by William H. Peterson S aid Plato: "Morality determines politics."

Which raises a question 2,500 years later for Nobel laureate James Buchanan and fel low economist Roger Congleton: Does poli tics determine morality? Their answer in an era of no-holds-barred welfare state politics is, in the main, yes. They argue that the very logic of majoritarianism inevitably leads to unequal treatment and dis crimination by the state. Coalitions push the interests of their members at the expense of others. Politics and "takings" become virtual ly synonymous. Unprincipled politics? The charge is not new. Ambrose Bierce defined politics as "the conduct of public affairs for private advan tage." Oscar Wilde saw democracy as the "bludgeoning of the people by the people for the people." Yet America seems to cling to politics over character. The high approval rat ings of scandal-ridden President Clinton come to mind. A kind of political amorality marks our times. Politics becomes a secondhand reli gion, an odd mixture of opportunism, apathy, cynicism, relativism, and deception. It sinks into a contest over spoils, plundering many to benefit a few, all via political spin and tax coercion.

Buchanan's insights into this unholy process helped him win the 1986 Nobel Prize in eco nomics, long after he and colleague Gordon Tullock forged the Public Choice school with their 1962 book, The Calculus of Consent. Their theory holds that self-interest guides voters and officials in their public as well as private choices, and that government naturally caters to powerful "rent-seeking" groups. "Rent" in public choice jargon means a special grant: in a sense, a sale of a govern ment favor enabling the beneficiary to prosper 58 THE FREEMAN/IDEAS ON LIBERTY • JANUARY 1999 more than it otherwise could. Note, for exam ple, that the domestic price of wholesale sugar is about twice the world price. It remains at that high level because the federal govern ment protects some three-quarters of the mar ket for high-cost domestic growers, with the remaining quarter allotted by quotas to low cost foreign producers. The domestic grow ers' gain comes at the expense of sugar con sumers-virtually everyone getting clipped for but a few pennies a day.

Why does politics generate programs of such dubious morality? Public choice theo rists explain that the rent-seekers are well informed about and fight hard for programs that give them large gains. The costs, on the other hand, are widely diffused among a great number of consumers who know little or nothing about the government's policy and have little incentive to oppose it. The political deck is stacked in favor of those who prefer to wheedle their profits out of government "rent" rather than honest trade. Buchanan and Congleton point up the eco nomic facts of life. No free lunch everthe state can give only what it first takes. Most voters are too busy with life's exigencies to cope with the daily maze of politics, or as the public choicers put it, voters are "rationally ignorant." However, they will pursue their perceived self-interest,join pressure groups in an attempt to get their cut of the state's booty, and generally vote for the candidate or party that promises them the most.

The cure? The authors prescribe relimiting the state: Get it back to equal treatment of all. Restore to constitutional vitality the Ninth Amendment: "The enumeration in the Consti tution of certain rights shall not be construed to deny or disparage others retained by the peo ple." In short, Buchanan and Congleton want to stop the state constitutionally from treating different persons and groups differently. That would knock rent-seeking for a loop. It would reform election campaigns by getting at the root of the problem-power. It would add up to freer trade, saner environmental controls, greater freedom for American entre preneurs. It would also lead to faster econom ic growth, less discrimination, less state waste, and lower taxes. But, Catch-22: Can guts for such basic change be found in today's jaded electorate? How many Americans want to do in Santa Claus by setting up a real barrier to the free spending, vote-buying state? The need to put the constitutional brakes on runaway govern ment is clear. How do we get there from here?

That question awaits an answer. As Voltaire wrote some 250 years ago: "The art of government is to take from some to give to others." It is this dark art that James Buchanan and Roger Congleton seek to undo. D William Peterson, a Heritage Foundation adjunct scholar, is Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University in North Carolina. Written on the Heart: The Case for Natural Law by 1. Budziszewski InterVarsity Press • 1997 • 252 pages • $15.99 Reviewed by Robert Batemarco T he canard that freemarket economists are so narrowly focused on economic concerns that they miss the big picture seems as indestructible as it is indefensible. It was Ludwig von Mises, after all, who said that one cannot be a good economist if he is only an economist. Indeed, there are things higher than economics that do have a bearing on how an economic system should be properly ordered. Written on the Heart spells out what those higher things are and why they justify economic freedom.

This book, however, was not written pri marily to shed light on the best way to fashion an economy. It is, rather, a primer on natural law philosophy. It discusses the main tenets of three seminal thinkers in this tradition: Aris totle, Aquinas, and Locke. After comparing the views of the three, the author then exam ines the utilitarian position of John Stuart Mill, which helped move moral philosophy away from natural law thinking. Just what does natural law philosophy have to say about the proper role of government?

Aristotle's teaching that government exists to make men virtuous looks like an invitation to an overbearing state. However, the author, a philosophy professor at the University of Texas, shows that Aquinas qualified this somewhat, contending that the state should not seek to extirpate all vices but "only the more grievous vices, from which it is possible for the majority to abstain, and chiefly those that are to the hurt of others." This formula tion still leaves much to be desired. To most people, for instance, the drinking of alcoholic beverages would scarcely qualify as a "griev ous vice," but unfortunately the author, show ing more courage than wisdom, denies that Prohibition was an instance in which banning a vice did more harm than good. This will hardly help to promote natural law thinking. Just how far short of the standards set by natural law thinking current legislative prac tice falls is clearly demonstrated by Aquinas's definition of law as "an ordinance of practical reason, for the common good, made by those who have care of the community, and promul gated or made known." With so many legisla tive enactments serving special interests rather than the common good, and so few such measures fully understood even by the legislators who vote on them, the amount of twentieth-century American legislation that meets all these criteria would probably fit in a volume not much larger than one issue of The Freeman.

Budziszewski's discussion of Locke revolves around the seventeenth-century philosopher's criteria for justice in the appro priation of goods from their original state of nature and his notion of inalienable rights. It follows from these Lockean concepts that since the natural right to keep justly acquired property is inalienable, redistributive taxation is theft, regardless of how large a majority favors it. That argument will shock many, but it is one that needs to be made. Budziszewski's critique of the utilitarian challenge to natural law is very pointed. He finds utilitarianism devoid of any notion of right and wrong that is not tantamount to expediency. Moreover, he maintains that the foundation of utilitarian ethics is feeling rather than reason. Thus the widespread BOOKS 59 acceptance of utilitarianism has imbued the twentieth century with ethical relativism and the exalting of emotions over reason. The price, counted in lives and liberties lost in wars, concentration camps, and bureaucratic tyranny, has been high indeed.

The book is avowedly Christian. It is laced with numerous references to scripture and to Christian writers such as C.S. Lewis. Whether or not the reader shares Budziszewski's belief in God, he would be hard pressed to deny that natural law thinking is a mighty obstacle to the belief that earthly rulers are entitled to wield godlike powers. The acceptance of nat ural law, he writes, implies that "Earthly rulers are on a leash. They cannot make deeds wrong simply by prohibiting them, nor can they make them right simply by calling them constitutional rights." Beautifully said. Unless that point is taken to heart, however, the 21st century may tum out as bad as the twentieth. D Robert Batemarco is director of analytics at a mar keting research firm in New York City and teaches economics at Marymount College in Tarrytown, New York. The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the World by Daniel Yergin and Joseph Stanislaw Simon and Schuster. 1998 • 352 pages • $26.00 Reviewed by David L. Littmann T he danger in telling a good story is often the sacrifice of key facts, thereby distort ing the reader's understanding of reality. In The Commanding Heights, authors Daniel Yergin and Joseph Stanislaw describe the epic twentieth-century conflict between socialists and market advocates. This is an extremely worthy story, but the telling, although quite informative, has some serious gaps and weak analysis. We might say that it comes up one sandwich short of a picnic.

The book's title is lifted from a saying of Lenin's, that socialists must aim at seizing the "commanding heights" of a nation's economy 60 THE FREEMAN/IDEASON LIBERTY • JANUARY 1999 if they are to succeed in their plans. Yergin and Stanislaw embark on an ambitious jour ney to describe the eight-decade-Iong, world wide struggle among economists and politi cians with conflicting visions about govern ment's role in the economic and social life of their citizens. One admirable accomplishment of the book is its tracing of the forces and individuals most centrally involved in the rise and fall of socialist policies around the globe. The authors have painstakingly developed the key names and ideas associated with the drama. Their history of each nation's sorry experi ence with socialism is excellent. The anec dotes and damaging quotations from now discredited proponents of socialism alone make the read worthwhile.

The greatest strength of The Commanding Heights is its comprehensive portrayal of socialism's ascendency-the road to serfdom, as EA. Hayek put it. Yergin and Stanislaw reveal an amazingly consistent pattern of political connivance and the distressing ease with which professional politicians and their coterie of "economic advisers" systematically capitalize on fear and gullibility among the masses to replace freedom and property rights with central planning and bureaucracy. The authors illustrate how eagerly totalitarians have-and in the future, will-pounce on every economic crisis as an opportunity to grasp more power. But there are significant weaknesses in the book stemming from the authors' deficient background in economics. This deficiency leads them to repeat familiar misconceptions about the free market, such as blaming it for the Great Depression. Readers are bombarded by "market failures" as the reasons for the subsequent rise of the central planners, but if the authors had looked more closely, they would have found that government interven tion was responsible for all the economic shocks of the century.

Among the precursors of the crises exploit ed by the socialists are stifling taxes, trade restrictions, intervention in agricultural mar kets, counterproductive regulations, and per verse monetary and credit policies. The authors, however, accept the conventional, but unprofessional wisdom propounded by the propaganda organs of socialism that whenev er something goes wrong, it's a market failure for which the visionaries have a remedy. Con sequently, the average reader is apt to blithely accept "market failure" rather than govern ment meddling as the beginning of the gov ernment's rise to the commanding heights. The errors do not end there. Yergin and Stanislaw fail to distinguish between money and credit, and they totally miss the origins of the $200 billion savings and loan disaster. Those and other mistakes undermine the book. Their understanding of inflation, for exam ple, is weak. Inflation is always and every where a monetary phenomenon. Printing money faster than the growth of real output leads to an increase in the overall average price level. Yergin and Stanislaw, however, write as if increases in particular prices-oil, in this case-were the cause of inflation.

Worse yet, they fail to examine the terrible policy blunders committed in Washington in an effort to "solve" the so-called energy cri sis. Looking down from the commanding heights, our central planners gave us price controls, rationing schemes and, thanks to the Federal Reserve, torrents of new money and true inflation. Many important lessons can be learned from a study of the "energy crisis" of the 1970s, but the reader will have to learn them elsewhere. The plentiful sins of omission and commis sion could have been avoided if the authors had talked less with the likes of Felix Rohatyn and had consulted more with, say, Walter Williams. Alas, they didn't. Read this book for its generally good history, but beware of its poor economic analysis. D David L. Littmann is senior vice president and chief economist of Comerica Bank, Detroit, Michigan.

Beyond All Reason: The Radical Assault on Truth in American Law by Daniel A. Farber and Suzanna Sherry Oxford University Press • 1997 • 195 pages • $25.00 Reviewed by Lauren S. Bain I n Beyond All Reason, Daniel Farber and Suzanna Sherry identify a serious threat to our legal system-the assault on the idea that the law should seek and then respond to the truth. Unfortunately, they pull their punches and fail to deliver a knockout blow to this lurking menace. Much has been written about the farrago of bizarre ideas that goes under the name of "multiculturalism." Among the stranger notions advanced by the multiculturalists is that reality is a social construct. There is no objective truth; instead, each person or group constructs his own reality. Women, for exam ple, supposedly have their own "way of know ing," and those who dispute this idea must be a part of the "dominant power structure" and therefore beneath response. Decades ago, Ludwig von Mises destroyed the claims of what he referred to as "polylogism," but bad ideas have a way of coming back, dressed up in some fancy new language. That is exactly the case here.

Law professors Farber and Sherry see the multiculturalist assault on truth as undermin ing the very foundations of our system of law. They write, "Critiques of truth, merit and legal reasoning are all tightly intertwined. It is difficult to defend merit if the concept of truth is open-ended. . . . [1]t is difficult to defend truth if the merit of an analysis or argument is wholly subjective. And without either merit or truth, how could judicial reasoning hope to stand?" Well said. They have identified one of the most pernicious tendencies of multicultur alism-its hostility to reason. Consider, for example, the "indeterminacy thesis" advanced by the "critical legal stud ies" movement. Professor Mark Tushnet, a proponent of this thesis, explains, "Critique is all there is.... A competent adjudicator can square a decision in favor of either side in any BOOKS 61 given lawsuit with the existing body of legal rules." But the consequences of adopting indeterminacy are devastating. As Farber and Sherry write, "If the indeterminacy thesis is correct, then it is unclear how legal arguments ever have any persuasive effect, because all arguments are equally sound." Why bother with argumentation at all; we might as well flip a coin.

The authors go to considerable lengths to deconstruct two crucial tenets of multicultur alist theory: first, that reality is socially con structed, and second, that all constructs of reality merit equal deference in the market place of ideas, including the legal system. They are particularly effective in obliterating the "alternative ways of knowing" supposition that the multiculturalists use as a battering ram against the idea embedded in the legal system that the truth excludes all incompati ble ideas. This is the backbone of the book and it is strong. Unfortunately, our avowedly "centrist" authors weaken their effort by trying to paci fy the multiculturalists. "We don't mean that all the work of these scholars is worthless," they write. They then proceed to validate their multiculturalist colleagues' "other work" by resort to the non-judgmental multiculturalist trait of presuming merit where no evidence of merit exists. The reader looks in vain for any sound argument from the authors in favor of multiculturalist theorizing, in law or else where.

At one point, Farber and Sherry go so far as to attempt an intellectual rescue of the people whose ideas they have shown to be a menace in the law, saying that the multiculturalists are only guilty of employing wild and sometimes inane slogans as a means of getting across their ideas. But if the ideas behind the slogans are bad ones, what does it matter how they promote them? At another turn, the authors, attempting to chart a "middle" course, take a completely gratuitous swipe at the freemarket camp: "Radical multiculturalists favor ideas relating to the social construction of reality, just as conservative scholars have latched onto other ideas about free markets." These law profes sors probably know almost nothing about the 62 THE FREEMAN/IDEAS ON LIBERTY • JANUARY 1999 vast extent of freemarket scholarship (that they insist on labeling it "conservative" is a tip off), but are happy to dismiss it in the same breath as they dismiss the idea that reality is merely a "social construct."

Their unwillingness to come down hard on the multiculturalists (who are leftist allies, if rather embarrassing ones) and their pandering attacks on freedom advocates undermine what might have been a truly useful book. Like the proverbial road to hell, Beyond All Reason is paved with good intentions. Farber and Sherry smoke out and then wound some of the multiculturalist dragons, but it will have to fall to more courageous writers to slay them. D Lauren Rain (lbain@emeraldnet.net) is an attorney and writer living on Vashon Island in Puget Sound. She is the author ojGlamorgan's Tales: A Cat's Gar den of Verse (Companion Star, 1998).