Current Deviations from Ideal Government

Within the framework of these lectures - which have to do only with the sociological aspect of freedom - deviations from the ideal can be described as coercive force impeding creative action, as man employing force to impose his will on others or, to use the vernacular, as man getting onto the back of his fellow [ 55 man. Now, it is true that such coercive force can and often does occur in the form of private banditry. But it is coercive force of this and related types - violence, fraud, misrepresentation, preda tory practices - that governments, ideally, are supposed to mini mize. According to the·point of view here presented, governments are properly limited to this negative function. Our concern in these lectures is not with banditry and plunder as it is practiced privately.! Instead, our concern is with the way people employ government - society's organized police force - to practice ban ditry and plunder for them. Bastiat stated quite succinctly the deviation from the ideal we propose to examine: The law perverted! And the police powers of the State perverted along with it! The law, I say, not only turned from its proper pur pose but made to follow an entirely contrary purpose! The law becomes· the weapon of every kind of greed! Instead of checking crime, the law itself guilty of the evils it is supposed to punish!2 At the outset, let me state categorically that the perversion Bastiat deplored is becoming more and more pronounced in nearly every country. What has already happened to the Argentine one of God's garden spots - is happening elsewhere. Political in tervention in each country bears diHerent labels and the speed of its penetration varies greatly, but it introduces the same type of disintegration regardless of name.

Can Interventionism Be Reversed? One question we ought to ask ourselves: Can the people of a nation, once they have committed themselves to an interven tionist course, be rid of the intervention? In short, is reversal a political possibility? History oHers very few encouraging examples. Most history reads like The Decline and Fall of the Roman Em pire. lActually, most of the deviltry in the world is carried on by the well-intentioned. There simply aren't enough criminals or wholly malevolent persons among us to account for all the mischief. 2Bastiat, Frederic. The Law. Irvington-on-Hudson, N.Y.: Foundation for Eco nomic Education, Inc. 1950. p. 117. 56] The only significant reversal I have found occurred in England following the Napoleonic Wars. England, at the time, had a small population and her economy was relatively simple as compared with the advanced division-of-Iabor economies of our day and age. Yet, England's debt was greater, in relation to her resources, than most countries now bear; her taxation was confiscatory; and the restrictions on the exchange of goods and services were so great that had it not been for the smugglers many of the people might have starved. Altogether, England's case appeared hopeless.

Something happened. What was it? In the answer to the above question, we have the all-important guide for ourselves - in the Argentine, in the United States, or wherever. What happened was primarily the result of work done by men such as you libertarian thinkers in Centro and those iden tified with FEE. Two of the distinguished leaders in the English movement were Richard Cobden and John Bright. These men understood and could explain the virtues of freedom and free exchange. They went about England writing and speaking. Mem bers of Parliament listened, and there began the greatest reform movement in British history - the repeal of restrictive law. They repealed the Corn Laws, the Poor Laws, and the like. Fortunately for Western civilization, England's monarch at the time, Victoria, appeared to have no passion for ruling Englishmen - in the over riding sense of rule. She relaxed the power that was inherent in her office. Englishmen roamed all over the world and developed production, trade, and prosperity, a development that went on until a little before the beginning of World War I when the same interventionist policies, that had nearly destroyed her earlier, set in again to wreak their havoc on the world.

Many Names-One Idea Let us examine this interventionist policy in more detail. As I stated previously, it has many names. State interventionism, so cialism, and communism have already been mentioned. Other popular labels are Fabianism, nazism, fascism, the Welfare State, [ 57 the planned economy and, in my country, the Fair Deal, the New Deal, the New Republicanism, and so on. Reflection will reveal that each of these so-called progressive ideologies has a character istic in common with all the rest. This common characteristic is the essence of the disease that is plaguing us all: a rapidly growing belief in the employment of organized police force - government - to forcibly direct and control the creative and productive activi ties of the citizens. This is contrary to what libertarians believe to be the proper function of government. Libertarians believe that organized police force should be used to inhibit any destructive activities that interfere with the peacefully creative and produc tive efforts of its own citizenry.

Government housing simply illustrates the workings of inter ventionism. I can remember when and if we wanted a house or housing, we relied on private enterprise. First, we relied on the person who wanted a house; second, on the builder who wanted to compete for its construction; third, on the banker who thought he saw some advantage to himself in loaning the money for the tools, the n1aterial, and the labor. Following this design in the United States, we built more square feet of housing per person than ever existed in any country on earth and at any time in all history. Yet, in spite of this remarkable record, more and more of my country men believe today that the only way to have adequate housing is to let government take the fruits of the labor of the many and give these fruits, in the form of housing, to the few whom government deems needy. In short, government housing is the practice of the Marxian ideal- «from each according to his ability, to each ac cording to his need," engineered by the force of the State.

In the Argentine, as in the United States, this interventionist policy is not limited to housing. All segments of our economies are subject to this force. Interventionism reflects itself in the economic bloodstream - the medium of exchange - as I shall demonstrate. Having no familiarity with the statistics of Argentina, I shall use United States data to demonstrate how interventionist policies destroy the medium of exchange as did England's coin clipping 58 ] in the seventeenth century. These policies are destructive wher ever practiced, in your country or mine. There is no difference in principle between clipping a peso and clipping a dollar. freedom of Choice Ideally, we seek freedom of choice as to how we employ our selves and as to what we do with the fruits of our labor. Devia tions from the libertarian ideal, therefore, are marked by the de gree to which freedom of choice is denied. ·No one, not even the most devout socialist, can logically deny that state interventionism subtracts from individual freedom of choice. Any consistent so cialist or state interventionist must concede this point. Their ac tions indicate that freedom of choice is an inappropriate ambition for the ordinary individual but, instead, is a privilege re~erved for those who have gained power and established themselves as the political elite. This is the essential point of contention between authoritarians and libertarians.

A way, then, to measure the gro,vth of communism or social ism or Per6nism, or whatever the intervention is called, is to measure the loss of the individual's freedom of choice as to what he does with the fruits of his own labor, that is with his income dollar or income peso. In the United States, a little nlore than a century ago, the aver age citizen had a 95-98 per cent freedom of choice as to what he did with his income dollar. In other words, the forcible absorption or "take" of earned income by government was between 2 and 5 per cent. But as government progressively intervened, controlled, and operated business enterprises - with the resulting deficits and as government more and more assumed the responsibility for the welfare of citizens, the percentage of the "take" of all earned income increased until today it is about 32 per cent. Many people insist that this is not too bad because, they argue, that on the average we still enjoy a 68 per cent freedom of choice with our income dollar.

Permit me to interpolate for a moment about this "on the aver[ 59 age" argument. Using a 40-hour week - going to work at 8:00 a.m., an hour off for luncheon, continuing until 5:00 p.m., Mon day through Friday - the average American has to spend all day Monday and until 2:00 p.m. on Tuesday working for government before he can start working for himself. But an American who has been extremely successful must work all day Monday, all day Tuesday, all day Wednesday, all day Thursday, and until noon on Friday working for government before he can start working for himself. The term "on the average" is more or less meaningless because no person is "average." There is little solace in the fact that, on the average, we in the United States today have a 68 per cent freedom of choice with our income dollar. Those who believe that a 32 per cent govern ment "take" of earned income portends no evil consequences have failed to study their history carefully. Research into the fiscal be havior of nations, covering the past few centuries, reveals that whenever the "take" of earned income by government gets to a certain level-somewhere below the level in the United States today - that large segments of the population will support in creases in the volume of money (inflation) as the means of easing the direct payment of taxes. Many in the population - workers, industrialists, financiers, and all who receive subsidies and special privileges - conceive that they have a vested interest in inflation as a means of financing their special type of plunder or banditry, often referred to by them as "social gains."

IICoin Clipping ll Obviously, increases in money supply result in decreases in its unit value. Decreases in money value result in higher dollar prices of goods and services precisely as if counterfeiters were at work. One rarely hears of an instance where interventionism takes more than 25 per cent of the earned income of the people without be ing financed by increases in the money supply - the thing which I define as inflation. It is "coin clipping" in modern version. Polit ically and inevitably, inflation has to be the ultimate fiscal policy of interventionism. 60] It is almost impossible to weigh the damage of inflation. Statistics can little more than hint at the destruction. For instance, examine the French experience. France began the policy of in terventionism, during our times, in 1914. More and more the State took control and o\vnership of the productive enterprises. More and more the State assumed responsibility. for the welfare of the citizens. If the claims made ahoveare correct, the French franc should· have lost some of its purchasing value during these past 44 years. How much? More than 991h per cent!

I recall, when a soldier in World War I, buying a dinner in Paris. The price was five francs, equivalent to a 1918 dollar. I didn't get to Paris again until 1947. I took a friend to luncheon, admittedly to a much finer place than the one visited 29 years earlier. The price for the two of us was 3,400 francs. In Paris again two years later with my wife - same place, same luncheon - the price was 4,100 francs. Last fall while passing through Paris, I found that the price for two at that restaurant was about 6,000 francs. Envision a young Frenchman in 1914. At 21 years of age, he might well have given some thought to 1958 when he would reach retirement. Assume that he bought himself at that time a paid-up annuity, one that would return him 1,000 francs per month be ginning January 1958. Back in 1914 that amount would have per mitted him to live very well, indeed. But, my doctor friends assure me that no human could survive on only one meal in thirty days which is about all the monthly retirement \vould buy today.

Test the validity of this reasoning, historically. Only 29 years ago the take of earned income by government in Russia was 29 per cent; in Germany at that time it was 22 per cent; in France and in England at that time it was 21 per cent - all below the present take of earned income in the United States. Observe what has happened during these 29 years to the economies of Russia, Germany, France, and England; and it then becomes clear what intervention leaves in its wake. [ 61 Currency Shrinkage One way to obtain a fair idea of the effects of interventionism is to take note of the rate of decrease in the purchasing power of a country's money. The dollar, for instance, has lost 15 per cent of its purchasing value in the last nine years. Some other examples of currency shrinkage for the same period: ECUADOR 13% NORWAy 33% BELGIUM 15% SPAIN 34% VENEZUELA 19% EL SALVADOR 40% GUATEMALA 23% MEXICO 45% CANADA 25% COLOMBIA 46% ITALy 25% URUGUAY 48% HONDURAS 26% FRANCE 52% COSTA RICA 27% PERU 55% SWEDEN 29% BRAZIL 70% In Argentina the currency shrinkage for the last nine years is, according to my latest figures, about 73 per cent. That other South American countries - Chile, 93 per cent; Paraguay, 96 per cent; Bolivia, 99 per cent - are experiencing even a greater shrinkage is small cause for satisfaction. Interventionism is on the rampage all over the world!

Bear in mind that interventionism to any great extent is politi cally difficult to finance except by increases in money volume taxation by inRation; that increases in money volume must result in decreases in money value; that decreases in money value must be reflected in higher prices for goods and services. In short, there is no cure for constantly higher and higher prices and for currency shrinkage except the removal of interventionism. Let's evaluate the significance of currency shrinkage. The fact that all persons who live on fixed incomes - widows, retired peo ple, and the like - are robbed of their financial competence for the alleged benefit of special privilege groups ought to be reason enough to be done with state interventionism once and for all. The practice of using the State for this sort of thing has no more moral sanction than has an act of personal theft. Economic well-being - call it wealth or income - fills a moral 62 ] purpose. To illustrate, contemplate the Chinese coolie. He has to labor in the rice paddies from early morning until late at night merely to eke out an anin1al existence. ·What chance have these coolies to emerge along intellectual and spiritual lines, to develop those creative poten~ialities peculiar to their own persons? Little chance at all! Small wonder that many regard such people as sub human. Over the centuries their buds of genius have suffered atrophy and their potential flowering has been stifled. These peo ple are the victims of an economic slavery, of a poverty servitude.

Regardless of the cause - psychological or sociological-they re main in the same low state of suppressed individuality generation after generation. Now, contemplate a person who is the beneficiary of division of labor, in a society where capital accumulates easily, where in centives are numerous, where the fruits of one's own labor are protected from violence, fraud, predation, where competition de termines who will cooperate with whom, where everyone is equal before the law, where willing exchange is uninhibited, where the Golden Rule is the general order of the day - in other words, where men are truly free. While no such society exists, there are, at least, approaches to it. In these near approaches people are free to engage in the creative activity of their choice, free to develop along the lines harmonious with their own nature, free to help others help themselves. For example, other people raise my food, make my dishes, provide me with heat and light, build my home, indeed they supply me with literally thousands of other goods and services in exchange for the single specialization of my choice. Wealth freed my ancestors and me from the servitude of abject poverty.

The Moral Purpose of Wealth Wealth, considered in the matrix of freedom, is a freeing agent. It is not an end in itself, but is rather a means to higher purposes, and should be so regarded. When wealth is taken as the end or object of life instead of as a means to the fulfillment of life; wealth becomes a devastating master and not a helpful servant. Wealth, [ 63 in my view, is not for the purpose of retiring from life; it is but an agent for getting ever deeper into that aspect of life peculiar to one~s own distinctive calling. Wealth is not for freeing one from serious work; it is, on the contrary, the single means for releasing one from less productive labor in order that one may work more seriously and efficiently at one's productive, creative occupational category, whatever that may be. Having in mind the moral purpose of wealth, let us see how the interventionism of the State destroys moral purpose. Obvi ously, wealth is increased· as specialization develops and free, un inhibited exchange prevails. Envision, then, such a wealth-pro ducing society of interdependent individuals. Each depends on the successful specialization of others and upon the free exchange of the products thereof. However, in a highly specialized society, exchange is not in the form of barter. No one has ever offered me livestock on the hoof for one of my lectures! Exchange in a spe cialized society depends on a circulatory system, a medium of ex change, to carry the results of specializations from one to another.

This economic circulatory system may be compared, in some respects, to the circulatory system· of the body, the bloodstream. This carries oxygen and ingested food to the billions of the body~s cells and takes off waste matter. However, if I were to inject water into your veins and gradually thin your bloodstream, there would come a point when it would no longer perform its circulatory functions. Likewise, the economic circulatory system - the me dium of exchange - can be thinned and diluted by inflation until it will no longer serve to carry the specializations of each of us to others. History furnishes many examples of the destruction of the eco nomic circulatory system.3 I am reminded of the two German boys who, during 1918, received an.inheritance of 500,000 marks each from their late father. One was a frugal lad. He didn't spend a single mark. The other spent the whole inheritance on champagne 8Fiat Money Inflation in France by Andrew Dickson White should be read by all persons who have a concern for the future of their country. A copy may be obtained from the Foundation for Economic Education, Irvington-on-Hudson, N.Y.

64 ] parties. Such was the inflation in Germany that within three years 30,000,000 marks wouldn't buy a loaf of bread. The frugal lad had nothing. The spendthrift was able to exchange his empty cham pagne bottles for a dinner. The economy had returned to barter! Please bear in mind that each of the hyperinflations, such as occurred in Germany following World War I, in France during the 1790's, and in other countries, was invariably preceded by the more gradual types which nearly every nation is now experi encing. Practically all countries are deviating from the ideal and have adopted the principles which lead, unless reversed, to hyper inflation. I repeat, there is no possibility of reversal except as we lessen state interventionism. To use another analogy, the medium of exchange is the trans mission line, the kinetic circuit. Sever such a line or reduce its carrying capacity and the whole dynamic wealth mechanism is destroyed. Every item of interventionism is a step toward this disaster.

Admittedly, the establishment of an honest, efficient medium of exchange is most difficult. But, regardless of any weaknesses it may have, there can be nothing but more trouble if government intervenes in business or assumes the responsibility for the welfare of citizens. There is no end to our social troubles except as we put government in its proper place. [ 65 ~auJeJ 01 Aut':JoritarianiJm ~ At the outset, let me acknowledge that I do not know all the causes of authoritarianism. This is by way of saying that I do not know all of the reasons for governmental interventionism or why so many people are intent upon forcibly imposing their wills on others or why they attempt to cast others in their own little im ages. Further, I am acquainted with no thoughtful person who claims to know all the forces which make us behave as meanly toward each other as we do. Yet, without some estiInate of these causes it would be a waste of time, effort, and money to attempt a replacement of interven tionism with freedom. Without a basic diagnosis of authoritari anism there would be no more chance of success in this venture than in trying to find the proverbial needle in the haystack, blind folded. We cannot repair flaws without knowing where they are nor can we expect to correct error if we do not know that we err - and we will be aided in our corrective efforts if we know why we err. Therefore, any program aiming at free and willing exchange, at the practice of private property principles, and at limiting government to its proper scope, will require not only an awareness of existing deterrents to freedom, but also a reasonably sound hypothesis as to why they exist.