64
the Freeman VOL. 22, NO.3- MARCH 1972 Utopia: Dream into Nightmare Alexander Winston 131 A historical review o'f utopian ventures, culminating In the twentieth-century welfare statism; prospects for a revival of freedom. . Digging Ditches A job worth doin'g is worth doing well. Robert W. Demers 140 On Appeasing Envy Henry Hazlitt 142 The very measures taken to appease envy often tend to aggravate it. The Founding of the American Republic: 8. British Acts Become Intolerable Clarence B. Carson 147 Parliamentary pressures after 1766 lead eventually to open warfare. Who Is the Marginal Producer? W. A.Paton 160 The first to withdraw unless conditions improve is not necessarily foretold by the. firm's balance sheet. American Competitivism: Cause or Result? Ron Heiner 164 How can. we revive a competitive spirit if we reject· the condition of freedom that spawned it? Fixed Exchange Rates and Monetary Crises Gary North 168 Price control, whether of goods and services or of money, interferes with the peaceful processes of trade. Book Reviews:186 IICruising Speed: A Documentary" by William F. Buckley, Jr. "Libertarianism: a Political Philosophy for Tomorrow" by John Hospers liThe Regulated Consumer" by Mary Bennett Peterson Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

The Freeman 1972 · Andreae's Christianopolis (1619), Campanella's City of the Sun (1623); Bacon's New Atlantis (1627), to cite a few; then a growing flood rising from the French

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  • the

    FreemanVOL. 22, NO.3- MARCH 1972

    Utopia: Dream into Nightmare Alexander Winston 131A historical review o'f utopian ventures, culminating In the twentieth-centurywelfare statism; prospects for a revival of freedom. .

    Digging DitchesA job worth doin'g is worth doing well.

    Robert W. Demers 140

    On Appeasing Envy Henry Hazlitt 142The very measures taken to appease envy often tend to aggravate it.

    The Founding of the American Republic:8. British Acts Become Intolerable Clarence B. Carson 147

    Parliamentary pressures after 1766 lead eventually to open warfare.

    Who Is the Marginal Producer? W. A.Paton 160The first to withdraw unless conditions improve is not necessarily foretold bythe. firm's balance sheet.

    American Competitivism: Cause or Result? Ron Heiner 164How can. we revive a competitive spirit if we reject· the condition of freedomthat spawned it?

    Fixed Exchange Rates and Monetary Crises Gary North 168Price control, whether of goods and services or of money, interferes with thepeaceful processes of trade.

    BookReviews:186IICruising Speed: A Documentary" by William F. Buckley, Jr."Libertarianism: a Political Philosophy for Tomorrow" by John HospersliThe Regulated Consumer" by Mary Bennett Peterson

    Anyone wishing to communicate with authors may send

    first-class mail in care of THE FREEMAN for forwarding.

  • tile

    FreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTY

    IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230

    LEONARD E. READ

    PAUL L. POIROT

    President, Foundation forEconomic Education

    Managing Editor

    THE F R E E MAN is published monthly by theFoundation for Economic Education, Inc., a non-political, nonprofit, educational champion of privateproperty, the free market, the profit and loss system,and limited government.

    Any interested person may receive its publicationsfor the asking. The costs of Foundation projects andservices, including THE FREEMAN, are met throughvoluntary donations. Total expenses average $12.00 ayear per person on the mailing list. Donations are in-vited in any amount-$5.00 to $10,OOO-as the meansof maintaining and extending the Foundation's work.

    Copyright, 1972, The Foundation for Economic Education, Inc. Printed in

    U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents;

    3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

    Articles from this journal are abstracted and indexed in Historical

    Abstracts and/or America: History and Life. THE FREEMAN also Is

    available on microfilm, Xerox University Microfilms, Ann Arbor, Mich-

    igan 48106. Permission granted to reprint any article from this Issue,

    with appropriate credit, except liOn Appeasing Envy."

  • UTOPIAdrBaminton

    ALEXANDER WINSTON

    PLATO FATHERED the first blue-print of a planned society, and hisdescendants still clasp us in asticky embrace while they rifleour freedoms. His Republicmapped out a spartan state runby benevolent philosophers, de-fended by a secondary caste ofwarriors, and supplied with thenecessities of life by a mass offarmer-artisans whose only polit-ical role was to obey. He did awaywith two obstacles to the orderedstate : private property and thefamily. In the Republic each citi-zen performs that task for whichhe is fitted; the lowly toiler'signorance is his bliss; and allparts of the body politic functiontogether in well-oiled harmony.

    Thomas More's Utopia (Greekfor "no-place") in 1516 gave the

    A former lecturer in philosophy at Tufts Col-lege, Dr. Winston has written extensively in thefield of history. His most recent book is No ManKnows My Grave: Privateers and Pirates,1665-1715.

    name to this whole type of litera-ture. A spate of others followed:Andreae's Christianopolis (1619),Campanella's City of the Sun(1623); Bacon's New Atlantis(1627), to cite a few; then agrowing flood rising from theFrench Revolution and spreadingamidst the industrial turmoil ofthe nineteenth century (EdwardBellamy's Looking Backward,1888, being the most popular);and on to our own day in suchprojections of the future as H.G.Wells' Modern Utopia (1905) andB.F. Skinner's Walden Two (1948).

    They number by the score, andtheir variety in detail is as great.The majority rely on rule by anaristocracy of merit, a few try topreserve a modicum of democracy;most are communistic, but one atleast (Hertzka's Freelands, 1890)recognizes self-interest as basicand aims to save capitalism byrestraint on overproduction. They

    131

  • 132 THE FREEMAN March

    may be secular or religious, agri-cultural or industrial, favorableto education or distrustful of it,resolutely egalitarian or franklyhierarchical.

    Common Assumptions

    However, certain elements ofthese multiform visions emergewith such frequency that they de-serve our attention. The utopianpictures a static society in whichcareful planning solves every ma-jor problem of human life.. Faithis placed in a collectivity that ownsor controls all property. Competi-tion for markets or jobs vanishes.Family ties diminish, and therearing of children by the stateis taken for granted. Everythingis· rationally ordered by thosemost capable of doing so: Plato'sguardians, More's king and hisadvisers, Bacon's Solomon'sHouse scientists, Bellamy's indus-trial council, Wells' austere samu-rai, Saint-Simon's Council ofNewton, Campanella's quartet ofsuperior men, Skinner's panel ofpsychologists.

    In utopia everyone works, thewomen on equal terms with themen. Hours are short - four tosix daily-and retirement as earlyas age fifty, but the wants of thepeople have a stoic simplicity, andall enjoy a decent living. There islittle to quarrel over, the atmos-phere is uniformly brotherly,

    crime is almost unknown anddisease rare - a perfect whole ofperfect parts, all supremely con-tent. "U-topia," the no-place, isplainly "eu-topia" the happy place.

    But how to get there? Utopianshad no answer to that, and avoid-ed the question. They sprang theirflawless states full-armed fromthe ink-pot, always somewhereelse - a distant island, an obscurewilderness, another planet - or· ata dim future time. The transitionfrom a callous, exploitive society,its people already deformed byprevalent evil, to one of affectionand universal sharing, struck theutopians dumb. Their residue' ofhope rested in a double view ofhuman nature. They mixed thesetwo elements at will, for each onefavored a regeneration of man'ssorry existence. In one they sawman fundamentally good (but per-verted by a debasing environ-ment) ; in the other they saw manquite plastic, molded. to the' lastdetail by his surroundings. Eitherway, the right society would veryquickly set men right.

    A combination of circumstancesafter 1800 convinced social ideal-ists that the time was ripe forbringing heaven to earth. TheFrench Revolution had produceda new crop of theorists, the longhours and short pay of .the earlyfactory system .promised to grinddown the poor, and overseas the

  • 1972 UTOPIA: DREAM INTO NIGHTMARE 133

    American republic offered a havenfor all who wanted to try some-thing better than mankind hadever known. "Our fathers havenot seen it," said Saint-Simon;u our children will arrive thereone day, and it is for us to clearthe way for them."

    American Experiments

    The result was more than 130attempts to establish utopian so-cieties in the United States duringthe nineteenth· century. A fermentof change filled the air, even instaid New England. "Weare ana little wild here with numerousprojects, of social reform," Emer-son wrote to Carlyle. "Not a read-ing man but has a draft of a newcommunity in his waistcoatpocket." Many of the settlementswere European in origin as wellas theory; some seeking . escapefrom -religious persecution, othersimbued with recent secular plansfor utopia; but all drawn by thecheap land of the American fron-tier and the easy tolerance of theyoung republic that had thrownoff the shackles of old Europe andconsidered itself the vehicle of thenew age. At last the utopians hadbefore them something very likethe fabulous island of the olddreamers. In America they couldfound minuscule states, as self-sufficient as possible, based oncommon ownership of property,

    filled with the brotherly spirit,and isolated from contaminationby the outside world. "Our ulte-rior aim," said young CharlesDana of Brook Farm, "is nothingless than heaven on earth."

    As might be expected, some ofthese starry-eyed experimentswere simply preposterous. AtFruitlands that "tedius archan-gel" Bronson Alcott would notharness work-horses to the plow(unnatural), nor allow sugar(reaped by slaves), nor wearwoolen cloth (robbed from sheep),nor spread manure on the fields(filthy stuff) ,nor burn whale-oillamps (from slaughtered whales).Shakers led by an illiterate fac-tory girI hailed as "Ann theWord" were strictly celibate, andregulated the lives of the faithfuldown to such details as what shoeto put on first in dressing, andwhich trouser-leg to step into. Anirresistible little fellow in Michi-gan got himself proclaimed JamesI of Zion by 2,000 adherents andfive wives; "King Benjamin" ofthe House of David announcedthat he was the younger brotherof Jesus Christ; the· final verdictin the early days of the Amanasettlement rested with an oracularWerkzeug whose utterances camestraight from God ; the ruler of aFlorida colony taught that we alllive inside the earth, our feet onits inner surface. The Lake Erie

  • 134 THE FREEMAN March

    Brotherhood of the New Life gavemajor attention to the sisterhood,in the belief that:

    "Soul-life and sex-life are at one,In the Divine their pulses run."

    Robert Owen and Charles Fourier

    Founders of other perfectionistsettlements were more sincere anda bit less silly. Robert Owen, asuccessful English textile manu-facturer, believed community ofproperty essential to the goodlife, and was sure that the indi-vidual is totally shaped by hisenvironment. In 1825 he boughtup the extensive holdings of areligious community that wasmoving from Harmony, Indiana.The 900 who flocked in at hisopen invitation seemed to Owen'sson a "heterogeneous collection ofradicals, enthusiastic devotees toprinciple, honest latitudinariansand lazy theorists, with a sprin-kling of unprincipled sharpersthrown in." Owen's communalsystem gave full vent to theirshabby ways. They couldn't runanything properly-flour mill, sawmill, tannery or smithy-and theironly solution to problems of pro-duction was to write another con-stitution or make another speech.The industrious soon tired· of sup-porting the idle. From the Na-shoba, Tennessee Owenite settle-ment, leader Frances Wright in-formed Owen that "cooperation

    has nigh killed us all," and de-parted. Within two years everyOwenite venture, fourteen in all,disintegrated.

    Disciples of the unsmilingFrenchman Charles Fourier setup no less than twenty-sevenAmerican experiments. Fourierbased his utopian ideal less onman's malleability than on hisfundamental goodness. The twelvepassions, which he carefully listedand classified, would act in perfectharmony with each other and withsociety as a whole if given achance. Let people gather into"phalanxes" of some 2,000 mem-bers, housed communally in onehuge "phalanstery" lying in aspread of 1,600 acres owned incommon. Let each choose the workhe wished to do. Pay the highestwage for disagreeable butneces-sary labor, less for the' more: at-tractive, and least for work thatwas downright pleasurable. Bringall goods produced to a singlewarehouse, where they could bepurchased with work-tickets. InFourier's ample vision all man-kind would finally be gathered intothree million phalanxes, coordi-nated by an Omniarch in Con-stantinople.

    Fourier-inspired communesquickly died of dissension, inepti-tude, and sheer tomfoolery. Anattempt to use some Fourier prin-ciples dealt the final blow to the

  • 1972 UTOPIA: DREAM INTO NIGHTMARE 135

    most charming and humane of allthe utopi~n experiments, BrookFarm. The Farm was owned inshares; it intended to support it-self by voluntary labor at an equalwage for all (ten cents an hour),and have plenty of time leftoverfor culture. Some choice soulssought refuge there: The Rev.George Ripley, founder; NathanielHawthorne, who soon discoveredthat forking manure ten hours aday was not conducive to litera-ture; George Curtis, later to editHarper's; and Isaac Hecker, ahumble German who became apriest and instituted the PaulistFathers. Good families sent their·boys down to be prepared for Har-vard at the Farm school.

    Into this idyllic but financiallyprecarious community of likeminds swept a voluble enthusiastfor Fourier, Albert Brisbane. Heconvinced them that their happyanarchy wouldn't work. Theymust organize. Tasks were spe-cialized on Fourier principles; aSacred Legion took on the dirtierjobs; unequal wages replacedequal pay; work became compul-sory; uneducated artisans camein with their ignorant and sharp-tongued wives; and before longthe genial spirit that had heldBrook Farm together evaporated.Six years after its beginning in1841 the Farm was sold to WestRoxbury (Mass.) for an alms-

    house, thus passing, in the wordsof one observer, from "the highestideal" to "the lowest actual."

    Two That Remain

    Two utopian communes havethe distinction of remaining,though much altered, to the pres-ent day. In 1848 John HumphreyNoyes settled fifty-one Perfection-ists along Oneida Creek nearUtica, New York, an area sofilled with fiery religious fanaticsthat wits called it "the burned-over district." A slab-chinned fel-low with a scraggly beard andbleating voice, Noyes was never-theless personally impressive, anda canny manager of people.· Hequipped that too many agricul-tural communes had "runaground," and set out to makeOneida industrial. The growingmembership (an average of 250)canned farm produce for the mar-ket, made traveling bags and aspecial type of steel trap, spunsilk, silver-plated dinnerware, andprospered.

    Noyes' word was law. He restedit on divine inspiration, and ex-erted pressure so gently that noone thought him despotic. The in-dividual at Oneida had no lifeapart from the community - prop-erty in common, personal acts un-der common· scrutiny, sexual shar-ing on the theory that monogamywas un-Christian "claiming." The

  • 136 THE FREEMAN March

    women said that they belonged toGod first and Noyes next, an orderof precedence that they in factreversed. A system of selectivebreeding called "stirpiculture"admitted only the most fit toparenthood. Children lived apart,rarely seen by their parents.

    For thirty years Oneida ad-hered to the original plan. By1880 Noyes had aged; the reli-giousspirit that he had evokedflickered; the young revolted atthe idea of sharing spouses andsurrendering their children. Thecommune converted to a joint-stock company in an effort toavoid collapse, but its old habitswere too ingrained. In 1890 P.B.Noyes, one of the founder's "stir-piculture" sons (he sired ten)saved the community by trans-forming it into a typical well-runAmerican business. He concen-trated on silverware, cut costs,emphasized teamwork, hustled,advertised, and competed. TodayOneida differs in no essentialfrom any other enlightened man-ufacturing firm.

    Where Oneida, chose industry,the Amana community of Iowa re-mained rural, and even more per-vasively religious. Eight hundredGermans of the "True Inspira-tion" sect established it in 1854on 26,000 choice acres, seven vil-lages spread in a circle aroundthe central one. Every member

    surrendered all his capital to thecommon fund (if he left, he gotit back with interest) and in re-turn was guaranteed his necessi-ties for life. Under the rule ofchurch elders the maxim, "obey,without reasoning, God, andthrough God your superiors," keptmembers in line. Amana suppliedits own needs - weavers, cobblers,tailors, watchmakers, pharmacies,printshop - and exported onlyhigh-grade woolen cloth. As muchas possible the members ignoredthe world around them, even hir-ing outsiders to serve in the hotellest their own girls be corrupted.

    By 1900 Amana's piety hadwaned. Without the invigoratingspur of competition the economylagged badly. In 1932 it became' ajoint-stock company intent onprofit. A business managerbrought in from the outsidetrimmed the labor force of itshired hands, closed shops that hadrun at a loss for years, eliminatedfifty-two inefficient dining halls,sold businesses into private handsand houses to their occupants. Stillquaint and quiet today, Amana isa producing and marketing co-operative, without a vestige of itsformer communism.

    American experiments thatwent under in two years, as manydid, had too large a proportion ofmisfits whose record outside wasone of .steady failure. Intimacy

  • 1972 UTOPIA: DREAM INTO NIGHTMARE 137

    bred discord, as people living ·tooclose together bumped each otherat every turn. The absence ofcompetition resulted in lethargy.None of these eccentrics had anybusiness sense; the purchase of a300-acre tract in Pennsylvania,for example, was made in mid-winter snows by an artist, a doc-tor and· a cooper, and turned outto be rock-and-sand that had to beabandoned in a year. The Ruskincolony in Tennessee (1894) wasruined by an agent who took suchpleasure in making a sale that hesold regularly at a loss. Occasion-ally plain chicanery was too muchfor the innocent: the Rev. AdinBallou lost his "miniature Chris-tian republic" at Hopedale- whenone of his Christians bought upenough shares to force everyoneelse out. Worse, the· utopians mis-read human nature. "If men wereangels," remark the FederalistPapers, "no government would benecessary." The utopians discov-ered to their sorrow that men arenot angels now, nor can be soshaped.

    Displaced by the Welfare State

    While these sad little failuresgathered dust, Americans awoketo the fact that in the welfarestate of the western democracies,and more explicitly in communistRussia, utopia had already arrivedon a massive scale. The re-sults in

    this country stirred up a generalunease. Every. step that added tothe individual's security detractedfrom his liberty; every movetoward the better life exacted itstoll. The United States govern-ment assumed vast new powers totax, spend - and regulate the af-fairs of its citizens. Mass produc-tion and the communicationsmedia created a bland uniformity,with the flesh-and-blood bread-winner converted into a SocialSecurity number. Welfare pro-grams that averted gross povertyalso robbed the -individual of hisinitiative. Women's equality didmuch to skyrocket divorce. Thesame technological advance thatincreased abundance polluted thelandscape. Nuclear energy wasmore bomb than blessing. Parentsdid all they could to make a heavenon earth, and their children kickedthem in the stomach for the effort.

    The West edged piecemealtoward the planned· society; Rus-sia made it in a leap. Marx hadrevived the utopian dream andpromised its fulfillment: abun-dance of consumer goods, uni-versal happiness, absolute equal-ity, peace at home and abroad,government that would .hardlyneed to .govern - a perfect wholeof perfect parts. Liberals who hadbeen beguiled by this splendidvision shuddered at the actuality.In Russia the·government clamped

  • 138 THE FREEMAN March

    an iron grip on the people andshowed no inclination to let go.Everything was in short supplyexcept armaments. The mildestcritic of the regime was brandeda traitor, and shipped off to Si-beria. Art and science became toolsof the Party; news media spewednothing but the official line; andthe calculated lie became a. habit.The planned society, dreamed ofthrough the a.ges, turned out tobe the police state.

    Americans who had believed ina steady march to the promisedland now quailed at the prospect.Once they had yearned for utopia.;now they asked themselves, "Whatcan we do to prevent it?"

    Anti-utopian novels clanged likewarning bells in the night. EugeneZamiatin's We (1920) was amongthe first, and dozens followed (ifwe include science fiction) , no-tably Aldous Huxley's Brave NewWorld (1932), Vladimir Na-bokov's Bend Sinister (1947) andGeorge Orwell's 198J" in 1949.They draw a frightening pictureof the planned society: its ruth-less manipulation by the rulers ofthe ruled, its grey-faced homoge-neity, its stifling of creativechange, its reduction of man to aproducing and consuming animal,its hideous distortion of truth.Once the masters of this. night-mare society are in the saddle,few can escape or even want to.

    Human nature, in these anti-utopias, is infinitely malleable;men can be taught to kiss theirchains.

    Are we all doomed to this?There is reason to doubt it. Theanti-utopian sounds a neededalarm, but he badly overplays hishand. He regards the individualas an empty sack into which anyrubbish can be poured. Even thelonely rebels of anti-utopian nov-els are spineless, stupid, or both.D-503 of We can build a cosmicmachine, but is otherwise a bum-bling idiot; Bernard in Brave NewWorld is a sniveling coward;Smith in 198J" is a perverter oftruth by vocation and a. love':sickninny on the side; the renownedphilosopher Kruger inBend Sin-ister has a backbone of rope. Inanti-utopia western man hasthrown away every vestige of hishard-won rights, to gain a bovineplacidity. All the world is contentto chew its cud.

    Common Sense .May Prevail

    Such a view undoes history.Western man has shown himselffar too stubborn, restless andplain cussed for any such fate.Once the common man has hada full taste of speaking his mind,no one can shut him up for long.Once he is used to the ballot, andthe exhilarating experience ofthrowing the rascals out, he can

  • 1972 UTOPIA: DREAM INTO NIGHTMARE 139

    be deprived of it only under themost extraordinary conditions.Once real power is firmly estab-lished at the base of the politicalpyramid (as it never was in Rus-sia or China), tyranny from thetop becomes an outside chance.

    This may be faith, but it is afaith worth having. A man's es-sence is his hazardous freedom.It is built-in, inexpungeable. For

    it he has fought wars, rioted, hid-den in catacombs, gone to thestake, killed kings, languished inprison, and he does not forget.Freedom disrupts old orders, andsometimes gives the impressionthat everything nailed down iscoming loose, but as long asAmericans demand it as theirright, the horrors of the policestate will stay beyond our borders.

    ~

    IDEAS ON

    LIBERTY

    Umpire

    IN GENERAL, nothing happens except a change in the weather,unless somebody makes it happen. Under a free economic system,the man who makes things happen is called an enterpriser. Withhis own savings ·or savings. borrowed from others, he goes intofarming, manufacturing, mining, or banking, and begins pro-ducing goods or moving them around. That much is basic.

    Thomas Nixon Carver, the economist, said the reason manycountries are backward is that there was nobody who cared toinvest in them. Either the government itself was predatory, orthieves and robbers roamed unmolested. In such countries therich keep their wealth in the form of unproductive goods - goldand jewels - which they can hide and easily transport whenthings get too tough.

    If a nation wants production and prosperity,the persons toencourage are the enterprisers. Not only· should they be encour-aged to build and produce, but they should be assured that theirproperty and a decent part of their gains are protected againstconfiscation. If they lose part or all of their savings in the com-petitive game, they must take the loss and shut up. Government'smain job is to see that the rules are fair and are enforced.

    FROM The William Feather Magazine, November, 1971

  • DIGGINGROBERT W. DEMERS

    I FIRST MET Joe when I was aboutten. My dad was foreman on asewer job in our town and theywere digging a long ditch for thepipe ·on the street where we lived.I was watching the men dig - nomachines in those days. Aboutmid-morning a horse-drawn vege-table wagon pulled up where sev-eral of the men were on the banktaking a "break." I noticed Joebecause he bought a large cab-

    . bage, cut it in half with his jackknife, and proceeded to munch onit, raw. I was watching him, wide-eyed, when he smiled, cut off aslice of the cabbage, and offered itto me. I bit into it,hesitantly, andsoon found that I liked it' verymuch. That was the first goodthing I learned from Joe, the firstof many things I would learn fromhim over a period of several years.

    Joe was a short, squat man,barrel chested, short legs, and along, powerful torso. He was al-ready past 40 when I first methim, with a thick thatch of grey-ing hair and a catching little ac-cent in his voice. His father came

    Mr, Demers is a vocational . counselor inVeneta, Oregon,

    140

    DITCHESto this country from Italy, but Joewas born in New York City andhad migrated to the mountainswith his wife and family. That'swhen he began working for mygranddad, digging ditches.

    Whenever I could, through theyears, I would "visit" with Joewherever he was working. He hadmany interesting stories to tell ayoung boy, and a great pride inhis work.

    He taught me the proper way touse a round-nosed shovel, a square-nosed shovel, a long-handled anda short-handled shovel. It was im;.portant tq keep the sides of theditch perpendicular, to keep thebanks clean, to throw the dirt ina certain place and a certain dis-tance from the edge of the ditch.The ditches varied in width, andthe angles of the sides varied de-pending upon the condition of thesoil. No facet of Joe's digging wastoo insignificant to command hisfull interest and attention. Heloved to talk about his job and toshow others how to do the job"properly."

    I recall my sadness on hearingthat Joe no longer dug ditches for

  • 1972 DIGGING DITCHES 141

    the city. One of his daughters, inmy class at school, told me herfather had gone into .business forhimself, digging ditches. Beforelong, he was the most sought afterditch digger in town. Mechanicalcontrivances were now available,but there were still a hundred andone places where a ditch could onlybe dug by hand; there you'd findJ oe.Most of the plumbers in townwere "waiting in line" for Joe'sskills, even holding off on certainjobs until he could dig their ditch,or their hole, or whatever diggingthey needed.

    Through the lean Depressionyears, Joe was one of the very,very few who found full employ-ment. Somewhere Joe kept "dig-ging." His pay sometimes· was asack of beans, a chicken, or adozen eggs, but his children, allseven of them, remained well,strong, and in school.

    Few, indeed were the· people intown who didn't know Joe, whodidn't know and who didn't telleverybody that he was "the bestditch digger ever," and that healso built the "best stone wallsand fences," and grew the "mostbeautiful roses."

    Years later, on a fall day whenthe cabbages were ripe, I soughtout Joe, where he was digging aditch. along a side hill. I was onleave for a few weeks and hadlearned that Joe's son, one of my

    classmates, had died on the beachesat Normandy. As I walked up thehill, Joe greeted me with the samebig smile. His hair was snowywhite now, his back a little morehunched, his stance a bit moresquat, but his arms were stillsinewy, muscular and powerful, ashe cupped one·hand over the endof the hickory handle of his be-loved shovel and extended theother warmly and affectionately inmy direction.

    We talked long in the warmthof the autumn sun. I learned thata job worth doing is a job thatought to be extremely well done. Ilearned something of the distanceI must travel toward such a. worthygoal. Joe was sure that most ofthe trouble in the world stemmedfrom the refusal of people to exer-cise to their fullest potential thetalents with which they wereblessed. I wish that everyonemight hear the tone, the richness,the wisdom in Joe's voice as hesaid: "A man ought to find out,as soon as possible, what it is thathe can do, then learn and study,and do it as best he can all of hislife. If a man really did this he'dhave no time to drift to the rightor the left, or to stumble up ordown because he'd' be too busy do-ing well what he knew best, bestfor himself and for all th.ose abouthim; and he'd be happy and rich,both here and beyond."

  • ONAPPEASING

    ANY ATTEMPT to equalize wealthor income by forced redistributionmust only tend to destroy wealthand income. Historically the bestthe would-be equalizers have eversucceeded in doing is to equalizedownward. This has even beencaustically described as their in-tention. "Your levellers," saidSamuel Johnson in the mid-eighteenth century,. "wish to leveldown as far as themselves; butthey cannot bear levelling up tothemselves." And in our own daywe find even an eminent liberallike the late Mr. Justice Holmeswriting: "I have no respect forthe passion for equality, whichseems to me merely idealizingenvy."!

    Henry Hazlitt is well known to FREEMANreaders as author, columnist, editor, lecturer,and practitioner of freedom. This article willappear as a chapter in a forthcoming book,The Conquest of Poverty, to be published byArlington House.

    142

    HENRY HAZLITT

    At least a handful of writershave begun to recognize explicitlythe all-pervasive role played byenvy or the fear of envy in lifeand in contemporary politicalthought. In 1966, Helmut Schoeck,professor of sociology at the Uni-versity of Mainz, devoted. a pene-trating book to the subject.2

    There can be little doubt thatmany egalitarians are motivated atleast partly by envy, while stillothers are motivated, not so muchby any envy of their own, as bythe fear of it in others, and thewish to appease or satisfy it.

    But the latter effort is bound to

    1 The Correspondence of Mr. JusticeHolmes and Harold J. Laski Cede M. DeWolfe Howe, 2 vol. Cambridge, Mass.,1953). From Holmes to Laski, May 12,1927, p. 942.

    2 Helmut Schoeck, Envy (Englishtranslation, Harcourt, Brace & World,1969) .

  • 1972 ON APPEASING ENVY 143

    be futile. Almost no one is com-pletely satisfied with his status inrelation to his fellows. In the envi-ous the thirst for social advance-ment is insatiable. As soon asthey have risen one rung in thesocial or economic ladder, theireyes are fixed upon the next. Theyenvy those who are higher up, nomatter by how little. In fact, theyare more likely to envy their im-mediate friends or neighbors, whoare just a little bit better off, thancelebrities or millionaires who areincomparably better off. The posi-tion of the latter seems unattain-able, but of the neighbor who has.i ust a minimal advantage they aretempted to think: "I might almostbe in his place."

    The Urge to Deprive Others

    Moreover, the envious are· morelikely· to be mollified by seeingothers dep~ived of some advantagethan by gaining it for themselves.It is not what they lack that chief-ly troubles them, but what othershave. The envious are not satis-fied with equality; they secretlyyearn for superiority and revenge.In the French revolution of 1848,a woman coal-heaver is reportedto have remarked to a richlydressed lady: "Yes, madam, every-thing's going to be equal now; Ishall go in silks and you'll carrycoal."

    Envy is implacable. Concessions

    merely whet its appetite for moreconcessions. As Schoeck writes:"Man's envy is at its most intensewhere all are almost equal; hiscalls for redistribution are loud-est when there is virtually nothingto redistribute."3

    (We should, of course, alwaysdistinguish· that merely negativeenvy which begrudges others theiradvantage from the positive ambi-tion that leads men to active emu-lation, competition, and creativeeffort of their own.)

    But the accusation of envy, oreven of the fear of others' envy,as the dominant motive for anyredistribution proposal, is a seri-ous one to make and a difficult ifnot impossible one to prove. More-over, the motives for making aproposal, even if ascertainable,are irrelevant to its inherentmerits.

    We can, nonetheless, apply cer-tain objective tests. Sometimesthe motive of appeasing other peo-ple's envy is openly avowed. Social-ists will often talk as if some formof superbly equalized destitutionwere preferable to "maldistrib-uted" plenty. A national incomethat is rapidly growing in abso-lute terms for practically every-one will be deplored because it ismaking the rich richer. An impliedand sometimes avowed principleof the British Labor Party leaders

    3 Ibid., p. 303.

  • 144 THE FREEMAN March

    after World War II was that "No-body should have what everybodycan't have."

    Equality, Yes; Abundance, No!

    But the main objective test of asocial proposal is not merelywhether .it emphasizes equalitymore than abundance, but whetherit goes further and attempts topromote equality at the expense ofabundance. Is the proposed meas-ure intended primarily to help thepoor, or to penalize the rich? Andwould it in fact punish the rich atthe cost of also hurting everyoneelse?

    This is the actual effect, as wesaw earlier,4 of steeply progressiveincome taxes and confiscatory in-heritance taxes. These a.re notonly counter-productive fiscally(bringing in less revenue from thehigher brackets than lower rateswould have brought), but· theydiscourage or confiscate the capi-tal accumulation and investmentthat would have increased nationalproductivity and real wages. Mostof the confiscated funds are thendissipated by the government incurrent consumption expenditures.The long-run effect of such tax-rates, of course, is to leave theworking poor worse off than theywould otherwise have been.

    There are economists who will

    4 "Should We Divide the Wealth 1" inTHE FREEMAN, February, 1972, p. 100.

    admit all this, but will answer thatit is nonetheless politically neces-sary to impose such near-confisca-tory taxes, or to enact similarredistributive measures, in orderto placate the dissatisfied and theenvious - in order, even, to pre-vent actual revolution.

    Appeasement Provokes Envy

    This argument is the reverse ofthe truth. The effect of trying toappease envy is to provoke moreof it.

    The most popular theory of theFrench Revolution is that it cameabout because the economic con-dition of the masses was becomingworse and worse, while the kingand the aristocracy remained com-pletely blind to it. But Tocqueville,one of the most penetrating socialobservers and historians of his orany time, put forward an exactlyopposite explanation. Let me stateit first as summarized by an emin-ent French commentator in 1899:

    Here is the theory invented byTocqueville.... The lighter a yoke,the more it seems insupportable;what exasperates is not the crushingburden but the impediment; whatinspires. to revolt is not oppressionbut humiliation. The French of 1789were incensed against the nobles be-cause they were almost the equals ofthe nobles; it is the slight differencethat can be appreciated, and whatcan be appreciated that counts. The

  • 1972 ON APPEASING ENVY 145

    eighteenth-century middle class wasrich, in. a position to fill almost anyemployment, almost as powerful asthe nobility. It was exasperated bythis "almost" and stimulated by theproximity of its goal; impatience isalways provoked by the final strides.5

    I have quoted this passage be-cause I do not find the theorystated in quite this condensedform by Tocqueville himself. Yetthis. is essentially the theme of hisL'Ancien Regime et la Revolution,and he presented impressive fac-tual documentation to support it.

    As the prosperity which I havejust described began to extend inFrance, the community neverthelessbecame more unsettled and uneasy;public discontent grew fierce; hatredagainst all established institutionsincreased. The nation was visibly ad-vancing toward a revolution. . . .

    It might be said that the Frenchfound their position the more in-tolerable precisely where it had be-come better. Surprising as this factis, history is full of such contradic-tions.

    It is not always by going from badto worse that a country falls intorevolution. It happens most frequent-ly that a people, which had sup-ported the most crushing laws with-out complaint, and apparently as ifthey were unfelt, throws them offwith violence as· soon as the burden

    5 Emile Faguet, Politicians and M oral-ists of the Nineteenth Century (Boston:Little, Brown; 1928), p. 93.

    begins to be diminished. The state ofthings destroyed by a revolution isalmost always somewhat better thanthat which immediately preceded it;and experience has shown that themost dangerous moment for a badgovernment is usually that when itenters upon the work of reform.Nothing short of great political gen-ius can save a sovereign who under-takes to relieve his subjects after along period of oppression. The evilswhich were endured with patienceso long as they were inevitable seemintolerable as soon as a hope can beentertained of escaping from them.The abuses which are removed seemto lay bare those which remain, andto render the sense of them moreacute; the evil has decreased, it istrue, but the perception of the evilis more keen. . . .

    No one any longer contended in1780 that France was in a state ofdecline; there seemed, on the con-trary, to be just then no bounds toher progress. Then it was that thetheory of the continual and indefiniteperfectibility. of man took its origin.Twenty years before nothing was tobe hoped of the future: then nothingwas to be feared. The imagination,grasping at this near, and unheardof felicity, caused men to overlookthe advantages they already pos-sessed, and hurried them forward tosomething new.6

    6 Alexis de Tocqueville, On the Stateof Society in France before the Revolu-tion of 1789. (London : John Murray,1856) pp. 321-324. Also' available as TheOld Regime and. the French Revolutionin a Doubleday paperback.

  • 146 THE FREEMAN March

    Aggravated by Sympathy

    The expressions of sympathythat came from the privilegedclass itself only aggravated thesituation:

    The very men who had most tofear from the fury of the people de-claimed loudly in their presence onthe cruel injustice under which thepeople had always suffered. Theypointed out to each other the mon-strous vices of those institutionswhich had weighed most heavilyupon the lower orders: they em-ployed all their powers of rhetoricin depicting the miseries of the com-mon people and their ill-paid labor;and thus they infuriated while theyendeavored to relieve them.7

    Tocqueville went on to quote atlength from the mutual recrimi-

    7 Ibid., pp. 329-330.

    nations of the king, the nobles,and the parliament in blamingeach other for the wrongs of thepeople. To read them now is to get

    .the uncanny feeling that they areplagiarizing the rhetoric of thelimousine liberals of our own day.

    All this does not mean that weshould refrain from taking anymeasure truly calculated to relievehardship and reduce poverty.What it does mean is that weshould never take governmentalmeasures merely for the purposeof trying to assuage the enviousor appease the agitators, or to buyoff a revolution. Such measures,betraying weakness and a guiltyconscience, only lead to more far-reaching and even ruinous de-mands. A government that payssocial blackmail will precipitate thevery consequences that it fears. ~

    IDEAS ON

    LIBERTY

    The "Law of Sympathy"BUT AID and sympathy must operate in the field of private andpersonal relationships under the regulation of reason and con-science. If men trust to the State to supply "reason and con-science," they so deaden themselves that the "law of sympathy"ceases to operate anywhere. Men who shrug off their personalobligations become hard and unfeeling, and it is small wonderthen that they are entirely willing to go along with hard andunfeeling politics. It is when he decides to "let the State do it" thatthe humanitarian ends up by condoning the use of the guillotinefor the "betterment" of man.

    FROM JOHN CHAMBERLAIN'S REVIEW OF SUMNER'SWhat Social Classes Owe to Each Other,

    September 1955 issue of Ideas on Liberty.

  • CLARENCE B. CARSON

    THE

    FOUNDING

    OF

    THE

    AMERICAN

    REPUBLIC

    8

    British ActsBecome Intolerable

    THE REPEAL of the Stamp Act inearly 1766 did not put an end toresistance in America. It didlower the level of the contest be-tween Britain and America fromits crisis proportions by removingthe most conspicuous irritant. Butrepeal of the Stamp Act only whet-ted the appetite of some Ameri-cans for much more thoroughgo-ing removal -of British imposi-tions. As early as April the NewYork Sons of Liberty were de-manding that "Americans shouldalso insist on the removal of allrestrictions on trade, the abolitionof post offices and admiraltycourts, and they should do so 'whilethe colonies are unanimous.' "1

    After all, most of the parliamen-tary acts against which the colo-nists objected were still on thebooks, and executive action re-mained unaltered. Troops werestill stationed in America, and na-val ships of war were stationedalong the coast. The Sugar Actwas still in effect. New York mer-chants sent a petition to Parlia-ment in 1766 complaining bitterlyabout the effects of trade restric-tions upon their commerce. Re-

    1 Merrill Jensen, The Founding of aNation (New York: Oxford UniversityPress, 1968), p. 186.

    Dr. Carson lives. in Florida. He is a notedlecturer and author, his latest book entitledThrottlinA the Railroads.

    147

  • 148 THE FREEMAN March

    straints upon imports and exportsof sugar were particularly galling,and their· trade was hurt badly bylimitations on how wood productscould be sold.2 The Quartering Actstill placed requirements on thecolonies involved which some ofthem refused to comply with. TheCurrency Act restricted the issu-ance of paper money both uponcolonies which had responsibly re..;tired theirs in the past as well asthose which had not. And therewas the Declaratory Act with itsstrident claims about the unlimitedpowers of Parliament.

    The'Strategy of Resistance

    The colonists employed a va-riety of tactics in their resistanceto British impositions during thedecade or so after 1763: some le-gal, some extra-legal, and othersillegal. These tactics ranged fromresolutions of legislatures, to peti-tions to the government in Eng-land, to unauthorized conventionsand congresses, to boycotts, todemonstrations, all the way torioting and the intimidation of of-ficials by mobs. The use of some ofthese latter tactics in recent yearshas been justified on the groundsthat they were employed by ourvenerated forebears - an excusewhose merits would be dependentupon analogous conditions. It maybe of some use to examine the con-

    2 Ibid., pp. 207-08.

    ditions of the resort to violenceby some Americans of that earliertime, both for the light it will shedon their situation as well as whatit may tell us about the appropri-ateness of this justification forcontemporary violence. By such anexamination, too, the issues be-tween the colonists and the Britishcan be sorted out.

    What tactics are appropriate issurely dependent on the options

    .available. To understand what op-tions were available to the colo-nists, one needs to review the po-litical situation.

    The colonists did not fully con-trol their governments. Far fromit, in most cases. Usually, the gov-ernor was appointed from England(the charter colonies of Connecti-cut and Rhode Island were excep-tions) , and he quite often receivedinstructions from officials there.No more did the colonists ordi-narily choose the members of thegovernor's council. The assemblywas popularly elected, but its ac-tions could be severely circum-scribed. It met on call from the gov-ernor, could have its acts vetoedby him, and was subject to beingdismissed or dissolved by the ex-ecutive. There were even efforts tocontrol assemblies from England.For· example, the New York legis-lature was suspended for its fail-ure to provide supplies for thetroops under the Quartering Act.

  • 1972 BRITISH ACTS BECOME INTOLERABLE 149

    Therefore, legislatures were great-ly hampered when it came to pre-venting impositions on the colon-ies. No direct action was open tothem ordinarily because. of thepower of governor and council tonegate such action.

    Nor was there any establishedm.eans for intercolonial action;none had ever been set up, and theBritish were not about to allowany to be legally established dur-ing the decade under considera-tion. At best, only extra-legalmeans were available for concertedaction across the lines of colonies.The means for legal action by thecolonists were limited then, not, asis the case usually, the means forsome minority to express itself,but for the colonies as a people.This distinction is quite germaneboth for the justifications of revo-lution which would be offered inthe 1770's and for such justifica-tion as there could be for illegalaction prior to the revolt.

    A Balance of Powers

    Now the elected legislatures hadgained considerable power duringthe colonial period, as was shownin an earlier chapter. That powerderived mainly from their author-ity to originate taxes and appro-priations. Governors even depend-ed upon the elected legislaturefor their salaries in most colonies,and all actions requiring moneys

    awaited legislative action. Gov-ernors and other crown officialswere dependent upon or subject tothe local populace in other ways aswell. The force that had ordinarilybeen at their disposal before theperiod· under discussion had to beexercised by militia and other lo-cal persons. Crown officials had toact through courts whose judgesmight be appointed by governorsbut whose most basic decisionswere made by juries; and theycould, themselves, be brought be-fore the courts for mistreatingcolonists.

    In short, a precarious balance ofpowers had grown up over theyears in most colonies. Coloniallegislatures were counter-balancedby governors and councils, and thegovernor's power was limited bythe necessity of his relying uponelected legislatures. Action depend-ed upon a considerable measureof co-operation among the branch-es of government. If they wouldnot act together, many kinds ofaction could not be taken.

    Massive resentment was arousedin the 1760's, then, when Parlia-ment moved to alter these arrange-ments: by taxing colonists, bymaking appropriations, by· sendingstanding armies, by setting up ad-miralty courts without juries, andso on. The thrust of parliamentaryaction was to eviscerate the inde-pendence of elected legislatures.

  • 150 THE FREEMAN March

    The Quartering Act points this up,for the act required that coloniesappropriate supplies for troopswithin the colony. If a legislaturehad to act in this fashion, it washardly independent of Parliament.If Parliament could tax the colo-nists, it could appropriate moneysto free officials within the coloniesfrom dependence on the legisla-tures. The fear of this was nophantom, for Parliament wasmov-ing in this direction on governor'ssalaries. Of course, taxation byParliament raised another basicissue. The Connecticut legislatureput the matter in this fashion in1765:

    That, in the opinion of this House,an act for raising money by dutiesor taxes differs from other acts oflegislation, in that it is always con-sidered as a free gift of the peoplemade by their legal and electedrep,resentatives; and that we cannotconceive that the people of GreatBritain, or their representatives,have right to dispose of our prop-erty.3

    In fact, Parliament was movingto unbalance the powers withincolonies and make the colonies sub-ject to itself. The colonists raisedthe question from the outsetwhether Parliament had the au-

    3 Quoted in Edmund S. Morgan, "Co-lonial Ideas of Parliamentary Power,:The Reinterpretation of the AmericanRevolution, Jack P. Greene, ed. (NewYork: Harper and Row, 1968), p.166.

    thority to do this. This question,in turn, led to an even more basicone: What was the extent of par-liamentary authority over Amer-ica? This was a question for whichno definitive answers had everbeen given. As Richard Bland ofVirginia said in 1766: "It is invain to search into the civil con-stitution of England for directionsin fixing the proper connection be-tween the colonies and the mother-kingdom.... The planting coloniesfrom Britain is but of recent date,and nothing relative to such plan-tation can be collected from theancient laws of the kingdom...."He argued that "As then we canreceive no light from the laws ofthe kingdom, or from ancient his-tory to direct us in our enquiry,we must have recourse to the lawof nature, and those rights of man-kind which flow from it."4 Otherssought to base the argument, how-ever, on charter rights.

    Colonial spokesmen generallymaintained that Parliament couldproperly regulate relations amongthe parts of the empire and withother nations. They accepted thesovereignty of the British govern-ment over them and did not ques-tion - during the early years-that Parliament played a role inchanges in the actions of the sov-

    4 Jack P. Greene, ed., Colonies to Na-tion (New York: McGraw-Hill, 1967),pp. 88-89.

  • 1972 BRITISH ACTS BECOME INTOLERABLE 151

    ereign. Beyond these general func-tions, Parliament should not go.The position of Parliament re-garding its powers over the colo-nies was set forth in the Declara-tory Act: it could legislate for thecolonies in all matters whatsoever.

    Who was right? The answer tothat question depends on what isright. The majority in both housesof Parliament never proposed toconsider the question. They did notdoubt that they had the authorityto take what actions they would(Where were the limits uponthem?), and they did not appearto .doubt that when called uponthey would have the necessarypower to enforce their acts. It wasnot a matter of what was right (aminority in Parliament disagreedabout this), it was only a matterof what was expedient.

    The colonial opposition, fromthe beginning, did tackle the ques-tion from the angle of what wasright. They believed that Parlia-ment, by right, was limited inwhat it could do. They believedthat the original charters, theBritish constitution, and, in thefinal analysis, the laws of nature,set bounds to the authority ofParliament. The colonists shouldbe adjudged to have been right,then. Since Parliament chose toact on the grounds of expediency,it is only fair that they should bejudged, in part, on those grounds.

    It turned out not to have been anexpedient course, for by it theAmerican empire, except forCanada, was lost. Since Parlia-ment did not choose to stand onright, the colonist's position as toright can be accepted without dif-ficulty, because it was not con-tested.5

    In any case, Parliament and thecolonies were on a collision courseeach time they acted fro~ theiropposite premises. Parliamentmight, and did, find it expedient toback down on particular issues,though not on the general princi-ple. The colonists, on the otherhand, since they did not supposethemselves to be acting from ex-pediency, did not back down. OnceParliament no longer found it ex-pedient to back down, the die wascast.

    The Townshend Acts

    Parliament plunged ahead withnew legislation aimed at the colo-nies in 1767. The leader in formu-lating this legislation was CharlesTownshend, and it became known

    5 This does not mean that colonistswere right in everything they did in op-position to British action, nor thatothers at some later time would be justi-fied in imitating their every action, evenif they found themselves in analogousconditions. The rightness of a cause doesdoes not absolve people from moral andjust behavior. That a cause is just isreason for working for its triumph, notfor the engaging in wrongful acts.

  • 152 THE FREEMAN March

    as the Townshend Acts. For awhile after the repeal of theStamp Act, things began to lookbetter for the colonies. WilliamPitt formed a cabinet, and he hadbeen quite outspoken on the sideof the colonies during the debatesover the Stamp Act. In fact, Pittwas far and away the most popu-lar Englishman in America at thistime, though truth to tell he hadlittle competition. But Pitt wasmade the Earl of Chatham, movedinto the House of Lords, and wasdebilitated by illness. The legisla-tive leadership passed to CharlesTownshend, chancellor of the ex-chequer, in 1767.

    Taxes and Intervention

    The act which has drawn themost attention was the one levy-ing import duties on glass, lead,painter's colors, paper, and tea.During the debates over the stamptax the distinction between inter-nal and external was talked aboutconsiderably. Some got the impres-sion that Americans accepted ex-ternal taxes, but not internal ones.Operating from this premise,Townshend argued that Ameri-cans should accept these new du-ties, since they were levied on im-ports and would be consideredexternal taxes. The act indicatedthat it was for the purpose ofraising a revenue, that such mon-eys as were raised would go first

    to defray costs of governing inAmerica, that what was left wouldgo to the British treasury, andthat the. duties must be paid insilver. It also authorized the useof writs of assistance to be usedin searching for goods on whichduties had not been. paid andspecifically empowered "his Maj-esty's customs to enter and go intoany house, warehouse, shop, cellar,or other place, in the Briti-sh colo-nies or plantations in America, tosearch for and seize prohibited oruncustomed goods" with writswhich courts in America were di-rected to issue.

    Another act, passed at the sametime, was the American Board ofCustoms Act. This established aboard of customs for America, tobe composed of five commissioners,and to be located at Boston. Alittle later in the year, an act waspassed suspending the New Yorklegislature for not providing troopsupplies. In a similar vein, an actin September of 1767 curtailedthe power of colonial elected legis-latures. Finally, an act passed inJuly of 1768 extended and spelledout the jurisdictions of vice-ad-miralty courts in the colonies andincreased the number of courts inAmerica from one to four.

    Resistance to the Townshendduties, as to the other British ac-tions, was preceded or accom-panied by theoretical formulations,

  • 1972 BRITISH ACTS BECOME INTOLERABLE 153

    formulations which held that Brit-ish action was in violation of im-memorial rights. These theoreticalformulations frequently appearedfirst as' a series of anonymous let-ters in newspapers and then aspamphlets, though the order mightbe reversed. America had quite anumber of men ready to enter thelists with such writings at criti-cal junctures. James Otis, SamuelAdams, Daniel Dulany, and Rich-ard Bland provided some of theearly grist for the mills of opposi-tion.

    John'Dickinson's "Letters"

    The man who came forward todo duty against the TownshendActs was John Dickinson, a Mary-lander born, who was sometimesfrom Pennsylvania but most regu-larly from Delaware. He belongsin that select circle of men en-titled to. be called Founding Fath-ers. From 1767 to 1775 he was thetheoretician of colonia.l resistance.Though he opposed declaring in-dependence, he headed the commit-tee which produced the Articles ofConfederation. He served in thearmy for a time during the Warfor Independence and was a dele-gate to the constitutional. conven-tion from Delaware, though leader-ship in such matters was now inother hands.

    Dickinson's position on theTownshend duties was published

    as a series of letters published'weekly in the PennsylvaniaChronicle and Universal Adver-tiser beginning November 30,1767. These collected letters werecalled Letters from a Farmer inPennsylvania. New England news-papers began publishing them inDecember, and before it was overall colonial neswpapers except fourpublished them. They were pub-lished as a pamphlet in 1768, wentthrough seven American editions,one in Dublin, two in London, and3. French translation.6 A historiansums up their impact in this way:"Immediately, everyone took Dick-inson's argument into account:Americans in assemblies, townmeetings, and mass meetingsadopted resolutions of thanks;British ministers wrung theirhands; all the British press com-mented, and a portion of it ap-plauded; Irish malcontents readavidly; even the dilettantes ofParis salons discussed the Penn-sylvania farmer."7

    For one thing, the tone of theLetters was right.. Dickinson notonly claimed a formal loyalty to theking and the empire but actuallycast. his argument in terms of thewell being of the empire. Thoughthe natural law philosophy. under-

    6 See Jensen, op. cit., pp.241-42.1 Forrest McDonald, intro., Empire

    and Nation (Englewood Cliffs: Prentice-Hall, 1962), p. xiii.

  • 154 THE FREEMAN March

    lay much of what he wrote, he didnot· emphasize natural laws andnatural rights so as to distinguishthem in a divisive manner fromthe rights of Britons under theConstitution, as some writers hadrushed to do prematurely. His ap-peal was to tradition, precedent,prudence, self-interest, the desireof liberty, and continuity with thepast. And though he bade Ameri-cans to resist the Townshend du-ties, he proposed that they do soin an orderly fashion. First, theyshould send petitions; if these didnot get results, turn to somethinglike a boycott of goods; only whenall peaceful means had failed,should other approaches be con-sidered. But he pled with Ameri-cans not to give in to a spirit. ofriotousness. "The cause of libertyis a cause of too much dignity tobe sullied by turbulence and tu-mult. It ought to be maintained ina manner suitable to her nature.Those who engage in it, shouldbreathe a sedate, yet ferventspirit, animating them to actionsof prudence, justice, modesty,bravery, humanity and magna-nimity."8

    The Argument Against Taxes

    The great appeal of his workstemmed, of course, from the factthat he shredded the argument forthe Townshend duties, showed it

    8 Ibid., p. 17.

    to be grounded in sophistry - nobetter than the case for the StampAct, only more subtle - and foundthe duties violative of the rightsof British subjects and potentiallyconfiscatory. As for these dutiesbeing acceptable because theywere external taxes, he thoughtthe case hardly worth considering.The objection to taxation by Par-liament did not hinge upon thedistinction between internal andexternal; it was to taxation assuch. Americans accepted, hepointed out, as they had accepted,duties that were for the purposeof regulating trade, but not thoselevied for the raising of revenue.·The latter were clearly taxes, andthey involved the taking of prop-erty without the consent of theowners. True, incidental revenuesmight arise from the regulationof trade, but they were a conse-quence, not the cause of it. Nosuch case could be made for theTownshend duties; they were laidon items which must be obtainedfrom England. Certainly, it wasnot the aim of the British to in-hibit trade in them nor to re-strain it. In fact, it was simplya tax, for the colonists were notpermitted to obtain the goods else-where, and might, if the Britishchose, be prohibited from manu-facturing them. There was ampleprecedent for this.

    Property was no longer· secure,

  • 1972 BRITISH ACTS BECOME INTOLERABLE 155

    Dickinson said, if the principle ofparlia.mentary taxation of the col-onies be· once accepted. "If theparliament have a right to lay aduty of Four Shillings and Eight-pence on a hundred weight ofglass, or a. ream of paper, theyhave a right to lay a duty of anyother sum on either.... If theyhave any right to tax us - then,whether our own money shall con-tinue in our own pockets or not,depends no longer on us, but onthem. 'There is nothing which' we'can call our own; or, to use thewords of Mr. Locke - WHAT PROP-ERTY HAVE' WE 'IN THAT, WHICH

    ANOTHER MAY, BY RIGHT, TAKE,

    WHEN HE PLEASES, TO HIMSELF?'''9

    Massachusetts' Circular Letter

    Colonial elected legislatures be-gan to act in 1768. Massachusettstook the lead in February bydrawing up a Circular Letterwhich it sent around to the othercolonies. This letter was subse-quently endorsed by New Hamp-shire, Virginia, Maryland, Connec-ticut, Rhode Island, Georgia, andSouth Carolina, sometimes by as-semblies~ and, if they were notsitting, by the Speaker.10 TheBritish reply came from the Earlof Hillsborough in April; it was

    9 Ibid., pp. 43-44.10 See Lawrence H. Gipson, The Com-

    ing of the American Revolution (NewYork: Harper Torchbooks, 1962), pp.185-87.

    sent as a. circular letter to thegovernors of all the colonies. Hehad already written to GovernorBernard of Massachusetts that atthe next session of the House ofRepresentatives he "must 're-quire' " them "to rescind theCircular Letter and declare" their"'disapprobation of and dissent tothat rash and hasty proceed-ing.'''l1 To the other governors,he declared that his expectationwas that their assemblies wouldnot participate in this new effortto arouse resentment to Britishrule. "But if notwithstandingthese expectations and your mostearnest endeavors, there shouldappear in the Assembly of yourProvince a disposition to receiveor give any Countenance 'to thisSeditious Paper [the Massachu-setts Circular Letter], it will beyour duty to prevent any proceed-ing upon it, by an immediateProrogation or Dissolution...."12In June, Hillsborough orderedtroops to Boston.

    Non-Importation Agreement

    It was obvious from these andother instances - the harassmentof shippers by customs agents,the increasing of military forcesin the colonies, the rejection ofpetitions - that petitions and res-olutions alone would not produce

    11 Jensen, Ope cit., p~ 253.12 Greene, Colonies to Nation, p. 143. ,

  • 156 THE FREEMAN March

    a change in British policy. Thecolonists, then, moved toward at-tempting to hit Britain where itwould hurt - in trade. Boston tookthe lead in adopting a non-im-portation agreement in August of1768. What they proposed to do,among other things, was to ceasealmost all imports from Britain.The movement to do this spreadthrough the colonies, though itwas rough going. Understandably,importers and shippers were notoverly enthusiastic about this,especially those for whom this wasa major source of income. More-over, it needed to be a concertedeffort throughout the colonies. Ifit were not, ports which· remainedopen could put the efforts of theothers to nought. Colonists didsucceed in closing down the majorport cities in America to mostBritish imports in the course of1769. The best weapon againstports which did not co-operate wasto cut off commercial relationswith them. ~ This usually broughtthem into line.

    Though non-importation wasfar from absolute, it did succeed.Imports from Great Britain intothe colonies fell from £2,157,218in 1768 to £ 1,336,122 in 1769.13

    Some ports did much better thanthis average. For example, Phil-

    13 Richard B. Morris, ed., Encyclopediaof American History (New York: Har-per, 1953), p. 78.

    adelphia's imports from Britaindropped from £432,000 in 1768to £ 200,000 in 1769 to £ 135,000in 1770.14 More importantly, sincethe object of non-importation wasnot simply to reduce imports fromBritain, the British began to backdown once again in the face ofdetermined colonial opposition. In1769, Parliament moderated itsposition on the Quartering Act toallow colonies to supply troops ontheir own initiative.

    Reduced Tensions under Lord North

    More success for the colonieswas to follow with the coming ofa new ministry. Lord North be-came, in effect, Prime Minister inearly 1770, a position which hewas to hold until 1782. Duringthese years he served George IIIas best he could, doing his willduring a time when a man oflesser loyalty and fortitude wouldhave sought a less demanding job.Re served his king first by actingto reduce tensions in America. InApril, the Townshend duties wererepealed, except for the tax ontea. Some concessions were alsomade in the application of theCurrency Act.

    I t was not long before the non-importation agreements began tobe abandoned. There was consider-able sentiment for continuingthem - after all, the tax on tea

    14 Jensen, op. cit., p. 357.

  • 1972 BRITISH ACTS .BECOME INTOLERABLE 157

    had not been repealed, nor hadother sources of tension been re-moved - but many of the mer-chants had had ~nough of suchself-denial. By various maneuvers,they opened up the ports to Brit-ish goods once again. This coursewas the more attractive generallybecause the hasty efforts at in-creasing domestie manufacturesto replace British imports hadproduced few tangibl~ results.

    Calm Before Storm

    The colonies were comparativelycalm during 1771. Although therehad been clashes between Britishtroops and colonists at New Yorkand Boston (the latter leading tothe "Boston Massacre") in 1770,these did not expand into anygeneral conflict. Such as remainedof the British threat to the colo-nies was difficult to dramatize;there can hardly be said to be atrend toward oppression if the op-pressive measures are being re-duced. At any rate, no major fig-ure ventured forth to attempt anydramatization. Even though teacontinued to be taxed, the amountof tea imported into the coloniesfrom England increased from thelow point for the past severalyears of 110,000 pounds in 1770to 362,000 pounds in 1771.15

    15 See Donald B. Cole, Handbook ofAmerican History (New York: Harcourt,Brace and World, 1968), p. 51.

    It was, however, the calm beforethe storm, the clouds for whichbegan to gather in 1772. The firstof these was the burning of therevenue ship, the Gaspee, byRhode Islanders in June. TheGaspee had been harassing ship-ping coming into Rhode Islandfor some time; the captain wasparticularly obnoxious in histreatment of those on shipsstopped for searches. The Gaspeeran aground, and while she was inthat disabled condition, a partyboarded her, drove the crew offand burned the ship. An investi-gating committee turned up nouseful information but its appoint-ment from England stirred resent-ment. A little later in the year,the British Exchequer took overthe payment of the salaries of thegovernor and judges in Massachu-setts. Here the move that had beenlong feared: to remove crown of-ficials from reliance on the electedlegislature. In November, Bostonformed a committee of correspon-dence which sent statements toother towns in Massachusetts andto all colonial assemblies. Earlythe next year, the House of Bur-gesses in Virginia established acommittee of correspondence, andmost· other colonies followed suit.

    Tea Act 01 May, 1773

    What stirred the colonists toopen resistance once again, how-

  • 158 THE FREEMAN March

    ever, was the Tea Act in May of1773. The purported intent of thisact was to rescue the East IndiaCompany. That company was indire straits, on the verge of bank-ruptcy, and sorely in need of amarket for its tea. Though im-ports had picked up in the Amer-ican market, it is generally be-lieved that most of the tea con-sumed in America came from theDutch; by buying such tea thethe colonists unlawfully evadedthe tax on it. The Tea Act wasdevised to make tea from the EastIndia Company almost irresisti-ble. It enabled that company tosell tea directly in America, re-lieving it of the necessity of sell-ing it first at auction to merchantsin England. "By eliminating themiddleman . . . the company wasable to sell tea in the coloniescheaper than in England," eventhough it was still taxed in the col-onies. "More significantly, its teanow undersold that of the Dutchsmugglers."16

    A Monopoly, plus Taxes

    The British were about to suc-ceed in doing what John Dickin-son indicated to be the danger.They were going to establish amonopoly for a taxed item, some-thing which could not be compet-

    16 John C. Miller, Origins of the Amer-ican Revolution (Boston: Little, Brownand Co., 1943), p. 339.

    itively produced in America, butwas very popular. It is likely thathad Parliament contented itselfwith establishing a monopoly itmight have got away with it. Butthe fact that tea was taxed entan-gled the monopoly question withtaxation-without-representation.The objections which had beenraised before had now a freshexemplar; but now Americanswere to be seduced into compli-ance by a lower price.

    It did not happen. True, theEast India. Company caused chestsof tea to be loaded on many shipsfor America, and these put intoport at Boston, Philadelphia, NewYork, and Charleston. The colon-ists were ready for them; theywould not buy or consume thetea, nor would they allow it to belanded if they could help it. Themost dramatic opposition occurredat Boston, where Bostoniansdressed as Indians boarded theships and heaved the chests intothe water. Patriots prevented teafrom being landed in Philadelphia.It was landed and transferred tothe customs house at Charleston;there it stayed until war came.

    The Intolerable Ads

    This time Parliament did notback down when confronted bycolonial resistance. The majoritydetermined, instead, on a policy ofcoercion, a policy backed by four

  • 1972 BRITISH ACTS BECOME INTOLERABLE 159

    acts passed between March 31stand June 2nd of 1774. They areknown formally as the CoerciveActs. The force was to be con-centrated on Boston and Massa-chusetts. The Boston Port Actclosed the port of Boston to com-mercial shipping until such timeas the East India Company hadbeen compensated for the tea. TheMassachusetts Government Actprovided that the governor's coun-cil would be appointed by the king,not elected as had been the case,that the governor and king wouldappoint judges, that juries would

    be chosen by the sheriff, and thattown meetings could not be heldwithout the consent of the gover-nor, except for annual electionmeetings. The Administration ofJustice Act was of general effectand provided for the trying ofcertain officials from the coloniesin England, if the governorthought it necessary. The Quar-tering Act applied generally to thecolonies, also; it authorized thequartering of troops in occupied·dwellings.

    The colonists dubbed them theIntolerable Acts. (I

    Next: The Prelude to Independence.

    A Policeman's Lot

    IDEAS ON

    LIBERTY

    A GOVERNMENT'S proper function in a free society· is to act asa policeman, not as a regulator over people's actions Ot" choices.

    The more regulations or restrictions, the more corruption.Why? Because we have reached a time when honest business-men must get the right to produce or engage in a business frommen who do not produce. A dozen permits are needed by busi-nessmen before they can engage in activity which is their right.More often than not, they must grease the palm of every para-site issuing these permits or suffer deliberate and disastrousdelays. In addition the city has the "right" to take away thesepermits, in the event some asinine regulation is not complied with.

    JACK MORANO, A MEMBER OF THE TACTICAL PATROL FORCE OF NEW YORK CITY,FROM A LETTER TO The Wall Street Journal, December 28, 1960.

  • Who is theMARC! LR ODUCER?

    w. A. PATON

    CONCEPTIONS of the marginal en-tity ranging from the fuzzy tothe downright indefensible arefrequently encountered in currentdiscussions of business manage-ment and finance and pe:t;haps thisjustifies some comments aimed atclarification and sharper defini-tion.

    Marginal firm Defined

    In making use of the term"marginal" in this connectionthere is a need, to begin with, tohave clearly in view the qualityor characteristics we are lookingfor when .attempting to define themarginal enterprise. In thissearch our concern, presumably,is with the price-making process,and we are focusing attention on

    Dr. W. A. Paton is Professor Emeritus of Ac-counting and of Economics at the Universityof Michigan. This article is adapted from onesection of a paper prepared for the "Mises 90thBirthday Collection," copyright by The Insti-tute for Human~ Studies.

    160

    the business firm that occupiesthe crucial position in this proc-ess, for a special field or marketarea, at a particular point orperiod in time.

    The· definition I consider ap-propriate may be stated as fol-lows: The marg·inal producer is theone who is just barely induced toremain in operation by the exist-ing state of affairs and who is sosituated with respect to volume ofoutput that his dropping out willexert sufficient pressure on thearray of price-itnftuencing forces,through the supply side of themarket, as to bring about a rec-ognizable change in product price.

    This was the description of themarginal man or firm, as I recallit, stressed by my revered mentor,Fred Manville Taylor, when I wasin his graduate courses sixtyyears ago. A slightly differentversion that is acceptable is: The

  • 1972 WHO IS THE MARGINAL PRODUCER? 161

    marginal producer is the·. one whowill be the first to withdraw un-less conditions improve.

    The Break-Even Approach

    The most common conception ofthe marginal producer nowadays,so it seems, is that of the entitythat is precisely at the break-even, zero-earnings stage. Thetextbooks in the courses in man-agement and other subjects in theschools of business administrationare full of charts which identifythe break-even position as of crit-ical importance. I am one of thosewho are getting very tired of thispreoccupation with break-even"analysis." In my judgment noconvincing case has ever beenmade for the view that the zero-earning level is a decisively sig-nificant spot in connection withbusiness decision-making. Andwhen the "analysis" includes thedesignation, of the firm at thebreak-even point as "marginal"those who know anything abouteither economic theory or actualbusiness operation can feel theirhackles rising.

    The notion that the marginalposition is occupied by the break-even producer finds no solid sup-port in business experience.· Evenfirms operating at .a loss oftenhang on for years. This is par-ticularly true in the case of thesmall or medium-sized firms with

    ownership and control residing ina family or small local group, butthe condition is not unknownamong relatively large enter-prises. As long as revenues covercurrent expenditures, includingattractive salaries for executives,immediate management has astrong urge to continue opera-tions, even if the outlook is un-promising to the point of beingdownright gloomy. This accountsfor the phenomenon of corpora-tions that are worth more deadthan alive. Examples. are not rareof substantial concerns whoseshares have been quoted formonths or even years at less thannet liquidation value (that is, atless than could be realized if theentity disposed of all assets forwhat they would bring, paid allliabilities, and distributed the bal-ance to shareholders).

    In some. of these cases the an-nouncement, finally, that the di-rectors had decided on a, programof liquidation has caused a sharpadvance in the price of the stock.I recall one example, a miningcompany, with shares listed on amajor exchange, where the marketprice of .the stock - which hadbeen hovering under $2 per sharefor some time - promptly movedup to $16 when the plan to go outof business was formally decidedupon at a board meeting. The lowprice preceding the announcement

  • 162 THE FREEMAN March

    was of course based on the as-sumption - by those trading inthe company's shares - that themanagement would continue tofritter away the liquid resourcesin unprofitable operation and ex-ploration. (By these observationsI am not intending to deny thatthere have been many cases wheretenacity in the face of a poorshowirig over a considerable timehas finally paid off.)

    It may be safely concluded thatin a given situation neither thefirm at the zero-earning point northe concern suffering persistentlosses is necessarily the vulner-able, marginal entity, the enter-prise just barely hanging on, andthat will be the first to drop outif conditions become less favor-able. And it may also be concludedthat even the most badly situatedfirm, the one at the very bottomof the stairway of earning power(or that shows the greatest levelof loss) need not be in the mar-ginal position in the sense definedabove. (Of course, the term mightbe used to designate the worst-offenterprise - and some seem toemploy it for this purpose.)

    Profit Maker May Be Marginal

    Indeed the marginal producer,soundly defined, may be an enter-prise that has an established ea.rn-ing power. Assume, for example,a producer operating in a high-

    risk field for some time has beenachieving an earning rate· of 4 percent on the stockholder capitalemployed (computed in terms ofthe current value of resourcesless liabilities). Assume, further,that a 10 per cent annual returnis regarded as the necessary lurefor risk capital in this field, asevidenced by the data of the in-vestment market. With these con-ditions the management may welldecide to curtail production - orstop operations altogether as soonas practicable - and thus step intothe marginal-entity role. Remem-ber, it's the producer just on theverge of dropping out, and whosedecision will have an effect onproduct price, who may be re-garded as marginal.

    In practice, it must be con-ceded, the identification of themarginal producer in a given in-dustry and time period may bedifficult if not impossible. Thisis especially true when we thinkof such producers as poised onthe brink of withdrawal, but notyet having taken decisive action.The difficulty in the way of spe-cific identification, however, is nowarrant for adoption of sloppy orunsound concepts and definitions.A good guess would be that sel-dom does reaching the preciseposition of a zero level of earn-ings signal or trigger a cease-production decision.

  • 1972 WHO IS THE MARGINAL PRODUCER? 163

    The Cost of Capital-FurnishingIn conclusion I wish to return

    to the fashionable break-evencharts and discussions for a mo-ment to register an objectionsomewhat outside the question ofthe definition of the marginalfirm. From the standpoint of goodmarket-economy theory the basicdifficulty with an this rubbish liesin an improper conception of whatit means to "break even." If cap'i-tal-furnishing is a primary, essen-tial factor in the productive proc-ess - and that this is the case hasbeen brilliantly demonstrated byeconomists over and over again-it shouldn't be ignored in the com:-

    putation of total cost in the broadsense of price-influencing cost.And if, in a given situation, thiscost is omitted from the reckon-ing, and revenues just match therecognized costs, the producer isnot truly breaking even. Instead,he is operating at a loss (even ifthis is not the way the account-ants look at it). Here is a crucialpoint in the case for the free-market economy as opposed to so-cialism, and certainly those whostrongly prefer control by themarket to authoritarian directives(including "freezes") shouldn'tuse concepts and terms that playinto the enemy's hands. t)

    IDEAS ON

    LIBERTY

    How to Attract Capital

    THERE IS NO REAL SHORTAGE of capital in the world, and I do notknow of any major project which has been held up solely becauseof the lack of money. Capital is plentiful wherever it is "wantedand well treated." The real bottleneck in the development of theworld is the shortage of human capital: people with the skill,training, and education intelligently to employ the world'sresources.

    The facts are that when political freedom and free enterprisespread, markets increase, and that the expansion of markets isonly prevented through political motivation. The interest ofAmerican business in the expansion of a free enterprise systemaround the world as part of a free political system is based notonly upon moral considerations, but on the hard fact that thereis no market for consumer goods among slaves.

    WALTER B. WRISTON

  • RON HEINER

    FROM TIME IMMEMORIAL, thinkersand philosophers have attributedto that which has been called the"character" or "spirit" of the peo-ple all of those noteworthy accom.;,;plishments achieved by variouscivilizations. Rome was the prod-uct of a great spirit of disciplineand a genius of organizationalability; the European Renaissancewas the product of a rebirth ofenergy and creativity; and theAmerican rise to world eminencewas due to the unheralded ruggedcompetitive spirit of its people.The preeminence of this view isseen by its implicit reflection inmost ethnic jokes (Le., the impli-cation· being in certain jokes thatthe Polish are stupid, the Italiansare lazy, the Germans are mili-taristic' and so on) .

    Mr. Heiner is a third-year undergraduate ineconomics at the University of Washington.

    164

    Concomitant with this view isthe belief that if order and civili-zation are on the decline, if "timesare bad," what is needed is a re-commitment, a rededication, a re-newed spirit of sacrifice on thepart of the citizens and then allwill be well again.

    In the last two centuries, how-ever, a select group of thinkershas fundamentally challenged thecorrectness of these views con-cerning civilization and social life.Beginning most recognizably withthe writings of Adam Smith, TheWealth of Nations, there emergedan essentially new discipline laterto be called economics, and with itsprang a different view of humancivilization which was to revolu-tionize subsequent thought. Twoparagraphs from the openingpages of Ludwig von Mises' Hu-man Action serve as a striking

  • 1972 AMERICAN COMPETITIVISM: CAUSE OR RESULT? 165

    introduction to this view and itssignificance:

    "Other philosophers . . . lookedat human things from the view-point of government. They wereintent on establishing rules ofpolitical action, a technique, as itwere, of· government and state-manship. Speculative minds drewambitious plans for a thoroughreform and reconstruction of so-ciety. The more modest were satis-fied with a collection and systema-tization of the data of historicalexperience. But all were fully con-vinced that there was in the courseof social events no such regularityand invariance of phenomena ashad already been found in the op-eration of human reasoning andin the sequence of natural phe-nomena. They did not search forthe· laws of social cooperation be-cause they thought that man couldorganize society as he pleased. Ifsocial conditions did not fulfill thewishes of the reformers, if theirutopias proved unrealizable, thefault was seen in the moral failureof man. Social problems were con-sidered ethical problems. Whatwas needed in order to constructthe ideal society, they thought,were good princes and virtuouscitizens. With righteous ·men anyutopia might be realized.

    "The discovery of the inescapa-ble interdependence of marketphenomena overthrew this opinion.

    Bewildered, .people had to face anew view of society. They learnedwith· stupefaction that there is an-other aspect from which humanaction might .be viewed than thatof good and bad, of fair and un-fair, of just and unjust. In thecourse of social events there pre-vails a regularity of phenomenato which man must adjust his ac-tions if he wishes to succeed. It isfutile to approach social factswith the attitude of a censor whoapproves or disapproves from thepoint of view of quite arbitrarystandards and subjective judg-ments of value. One must studythe laws of human action and so-cial cooperation as the physiciststudies the laws of nature. Humanaction and social cooperation seenas the object of a science of givenrelations, no longer as a norma-tive discipline of things that oughtto be - this was a revolution oftremendous consequences forknowledge and philosophy as wellas for social action."l

    In other words,· the belief in thesole primacy of ethics in socialmatters was fundamentally chal-lenged: society. could not be or-ganized according to any set ofethical norms; and further, thereprevailed certain inescapable ef-fects of. various social structureswhich could not be nullified re-

    1 Ludwig von Mises, Human Action(3rd ed., Chicago. Regnery, 1966), p. 2.

  • 166 THE FREEMAN March

    gardless of the sincerity and dili-gence of those individuals attempt-ing to reform the social system interms of various desired ethicalqualities (such as equality in allaspects of social life). Indeed, theview now developed that many ofthese qualities (viz., character,spirit, dedication, and so forth ofthe people) could more correctlybe regarded as effects or resultsof certain patterns of social col-laboration, rather than the causeof the specific social structure andthe achievements of the peopletherein.

    Ethics Plus Organization

    Thus, one of the significantrevelations derived through thedevelopment of economics is thatthe necessary conditions for theprogression and "flowering" of acivilization include not only a sys-tem of workable ethical values butalso the appropriate system of BO-cial organization, and that neitheris sufficient without the other.Moreover, if there prevails a setof ethical norms, the practice ofwhich precludes the developmentof an appropriate system of socialorganization (for example, beliefswhich consider merchants andlenders of money who demand in-terest as people engaged in activi-ties of low moral character), therecan be no general advancement forthat civilization; or, if the appIi-

    cation of a set of political andeconomic doctrines also precludesthe establishment and continuanceof an appropriate system of socialorganization, then appeals and ef-forts to revitalize the dedicationand moral spirits of the populacecannot succeed in bringing aboutadvancement (or preventing down-fall) for that civilization.

    It could be argued, therefore,that the oft-cited American "com-petitive spirit" and "rugged in-dividualism" are consequences ofthat system of social collaborationcharacterized by the unhamperedmarket economy, and that thiscompetitive drive could not havedeveloped without this system ofsocial collaboration.

    Very much related to the abovediscussion is a remarkable andsignificant series of events in re-cent months most dramaticallyrepresented by the current "wage-price freeze." In one of the state-ments made by President Nixonshortly after the initiation of the"freeze," it was emphasized that,in the long run, what is needed torevitalize America (in addition towage-price controls) is a rededica-tion by Americans to that spirit ofcompetitivism which made Amer-ica great.

    In light of the preceding devel-opment, however, this plea for arecommitment of the American"rugged individualist spirit" is

  • 1972 AMERICAN COMPETITIVISM : CAUSE OR RESULT? 167

    seen to be completely illusory.In fact, what has been done is

    to implement the most drasticform of restriction (general scaleprice controls) on that· system ofsocial organization (viz., the un-hampered market economy) whichis the cause or necessary co-con-dition which permitted the emer-gence of the very spirit of com-petitive individualism which thePresident deems as necessary forAmerica's continued greatness.

    This means that the Presidenthas embarked on a policy which,if continued and enlarged, willeliminate what is left of this com-petitive spirit and render its re-emergence impossible.

    Compounding Error

    All of this testifies to the wordsof Ludwig von Mises in the clos-ing pages of Human Action2 :"the study of economics is almostoutlawed today. The public discus-sion of economic problems ignoresalmost entirely all. that has beensaid by economists in the last two-hundred years. Prices, wage rates,interest rates, and profits are dealtwith as if their determinationwere not subject to any law. Gov-ernments try to decree and to en-force maximum commodity prices

    2 Ibid., pp. 879-880.

    and minimum wage rates. States-men exhort businessmen to cutdown profits, to lower prices, andto raise wage rates as if thesematters were dependent on thelaudable intentions of individuals."

    In order to attain any end, ap-propriate means must be used inorder to effect the true causes ofthat which is sought. The ironic.aspect of the solely ethical inter-pretation of economic affairs isthat it fundamentally miscon-ceives the operation of the socialsystem in such a manner as to sup-press and obscure the real work-ings and true causes of the prob-lems it seeks to remedy. In so do-ing, the measures which are thusimplemented themselves becomecauses of systematic distortionsin the economic system; whichare then interpreted as proof ofthe necessity for even more drasticextensions of those original poli-cies - thus compounding and mul-tiplying the distortions in a self-justifying cycle.

    All of these. consideratio