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The Freedom Philosophy
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About the Publisher
The Foundation for
Economic Education, founded in 1946 by Leonard E. Read, exists to serve
individuals concerned about freedom. Recognizing that the real reasons
for freedom are grasped only through an understanding of the free
market, private property, limited government way of life, The Foundation
is a first-source institution providing literature and activities
presenting this point of view.
The Freeman,
a monthly study journal of ideas on liberty, has been published by The
Foundation since 1956. Its articles and essays offer timeless ideas on
the positive case for human liberty and criticisms of the failures of
collectivism. The Freeman is available to anyone upon
request.
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Published March 1988
ISBN-0-910614-75-x
Copyright by
The Foundation for Economic Education, Inc.
Permission granted to reprint without special request except
"Free Enterprise: The Key to Prosperity," "The Source of
Rights," and "Isaiah's Job."
Printed in
U.S.A.
2nd Printing January 1990
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Table of Contents
I. Freedom: An Overview
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The Essence of Americanism by Leonard E. Read
II.
In the Market Place
2. The Case for Economic Freedom by Benjamin A. Rogge
3.
Free Enterprise: The Key to Prosperity by Clarence B.
Carson
4. The
American Way
in Economics by Edmund A. Opitz
III.
Political Aspects
5. Frederic Bastiat on
Liberty
(selected excerpts)
6. The Source of Rights by Frank Chodorov
7. Think Twice Before You Disparage Capitalism by Perry E. Gresham
IV. Moral Foundation
8. The Moral Foundation of Freedom by Ralph Husted
9. Morals and
Liberty
by F. A. Harper
V. Personal Practice
10. Looking Out for Yourself by Leonard E. Read
11. Different Yardsticks by Hans F. Sennholz
12. Not Yours to Give by Davy Crockett
13. Isaiah's Job by Albert Jay Nock
VI. In Retrospect and Prospect
14. I,
Pencil by Leonard E. Read
Summing Up
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Part One
Freedom: An Overview
The purpose of The
Foundation for Economic Education (FEE) is to explore and explain the
freedom philosophy. That's why Leonard Read started FEE in 1946 and why
the effort persists with growing vigor as the decades pass.
The freedom philosophy has
been outlined as "the free market, private property, limited government
way of life." But more than that bare outline is needed for the
enlightened personal practice of freedom. So here is an attempt to bring
together in handy, readable form some of the best thoughts of serious
students of liberty. Many others, of course, over the centuries, have
contributed to the ever-growing library on the topic. The essays here
are selected as an introduction and guide for anyone who would pursue
the study.
The
opening essay is slightly condensed from a lecture Leonard Read adapted
and delivered to hundreds of audiences dating back to 1961. It affords
an overview of the philosophy which will be examined in more detail in
later chapters.
Top of Page
1
The Essence of
Americanism by Leonard E. Read
Delivered as a speech in 1961
Someone once said: It
isn't that Christianity has been tried and found wanting; it has been
tried and found difficult- and abandoned. Perhaps the same thing might
be said about freedom. The American people are becoming more and more
afraid of, and are running away from, their own revolution. I think that
statement takes a bit of documentation.
I would like to go hack, a
little over three centuries in our history, to the year 1620, which was
the occasion of the landing of our Pilgrim Fathers at Plymouth Rock.
That little colony began its career in a condition of pure and
unadulterated communism. For it made no difference how much or how
little any member of that colony produced; all the produce went into a
common ware- house under authority, and the proceeds of the warehouse
were doled out in accordance with the authority's idea of need. In
short, the Pilgrims began the practice of a principle held up by Karl
Marx two centuries later as the ideal of the Communist Party: From each
according to ability, to each according to need-and by force!
There was a good reason
why these communalistic or communistic practices were discontinued. It
was because the members of the Pilgrim colony were starving and dying.
As a rule, that type of experience causes people to stop and think about
it!
Anyway, they did stop and
think about it. During the third winter Governor Bradford got together
with the remaining members of the colony and said to them, in effect:
"This coming spring we are going to try a new idea. We are going to drop
the practice of 'from each according to ability, to each according to
need.' We are going to try the idea of 'to each according to merit."'
And when Governor Bradford said that, he enunciated the private property
principle as clearly and succinctly as any economist ever had. That
principle is nothing more nor less than each individual having a right
to the fruits of his own labor. Next spring came, and it was observed
that not only was father in the field but mother and the children were
there, also. Governor Bradford records that "Any general wanted or
famine hath not been amongst them since to this day."
It was by reason of the
practice of this private property principle that there began in this
country an era of growth and development which sooner or later had to
lead to revolutionary political ideas. And it did lead to what I refer
to as the real American revolution.
I do not think of the real
American revolution as the armed conflict we had with King George III.
That was a reasonably minor fracas as such fracases go! The real
American revolution was a novel concept or idea which broke with the
whole political history of the world.
Up until 1776 men had been
contesting with each other, killing each other by the millions, over the
age-old question of which of the numerous forms of authoritarianism-that
is, man-made authority-should preside as sovereign over man. And then,
in 1776, in the fraction of one sentence written into the Declaration of
Independence was stated the real American Revolution, the new idea,
andit was this: "that all men are created equal; that they are endowed
by their Creator with certain unalienable Rights; that among these are
Life, Liberty and the pursuit of Happiness." That was it. This is the
essence of Americanism. This is the rock upon which the whole "American
miracle" was founded.
This revolutionary concept
was at once a spiritual, a political, and an economic concept. It was
spiritual in that the writers of the Declaration recognized and publicly
proclaimed that the Creator was the endower of man's rights, and thus
the Creator is sovereign.
It was political in
implicitly denying that the state is the endower of man's rights, thus
declaring that the state is not sovereign.
It was economic in the
sense that if an individual has a right to his life, it follows that he
has a right to sustain his life-the sustenance of life being nothing
more nor less than the fruits of one's own labor.
It is one thing to
state such a revolutionary concept as this; it's quite another thing to
implement it-to put it into practice. To accomplish this, our Founding
Fathers added two political instruments-the Constitution and the Bill of
Rights. These two instruments were essentially a set of prohibitions;
prohibitions not against the people but against the thing the people,
from their
Old World
experience, had learned to fear, namely, over-extended government.
Benefits of Limited Government
The Constitution and the
Bill of Rights more severely limited government than government had ever
before been limited in the history of the world. And there were benefits
that flowed from this severe limitation of the state.
Number one, there wasn't a
single person who turned to the government for security, welfare, or
prosperity because government was so limited that it had nothing on hand
to dispense, nor did it then have the power to take from some that it
might give to others. To what or to whom do people turn if they cannot
turn to government for security, welfare, or prosperity? They turn where
they should turn-to themselves.
As a result of this
discipline founded on the concept that the Creator, not the state, is
the endower of man's rights, we developed in this country on an
unprecedented scale a quality of character that Emerson referred to as
"self-reliance." All over the world the American people gained the
reputation of being self- reliant.
There was another benefit
that flowed from this severe limitation of government. When government
is limited to the inhibition of the destructive actions of men-that is,
when it is limited to inhibiting fraud and depredation, violence and
misrepresentation, when it is limited to invoking a common justice-then
there is no organized force standing against the productive or creative
actions of citizens. As a consequence of this limitation on government,
there occurred a freeing, a releasing, of creative human energy, on an
unprecedented scale.
This was the combination
mainly responsible for the "American miracle," founded on the belief
that the Creator, not the state, is the endower of man's rights.
This manifested itself
among the people as individual freedom of choice. People had freedom of
choice as to how they employed themselves. They had freedom of choice as
to what they did with the fruits of their own labor.
But something happened
to this remarkable idea of ours, this revolutionary concept. It seems
that the people we placed in government office as our agents made a
discovery. Having acquisitive instincts for affluence and power over
others-as indeed some of us do-they discovered that the force which
inheres in government, which the people had delegated to them in order
to inhibit the destructive actions of man, this monopoly of force could
be used to invade the productive and creative areas in society-one of
which is the business sector. And they also found that if they incurred
any deficits by their interventions, the same government force could be
used to collect the wherewithal to pay the hills.
I would like to suggest
to you that the extent to which government in America has departed from
the original design of inhibiting the destructive actions of man and
invoking a common justice; the extent to which government has invaded
the productive and creative areas; the extent to which the government in
this country has assumed the responsibility for the security, welfare,
and prosperity of our people is a measure of the extent to which
socialism and communism have developed here in this land of ours.
The Lengthening Shadow
Can
we measure this development? Not precisely, but we can get a fair idea
of it by referring to something I said a moment ago about one of our
early characteristics as a nation-individual freedom of choice as to the
use of the fruits of one's own labor. If you will measure the loss in
freedom of choice in this matter, you will get an idea of what is going
on.
There was a time, about
120 years ago, when the average citizen had somewhere between 95 and 98
per cent freedom of choice with each of his income dollars. That was
because the tax take of the government-federal, state, and local-was
between 2 and 5 per cent of the earned income of the people. But, as the
emphasis shifted from this earlier design, as government began to move
in to invade the productive and creative areas and to assume the
responsibility for the security, welfare, and prosperity of the people,
the percentage of the take of the people's earned income increased. The
percentage of the take kept going up and up and up until today it's not
2 to 5 per cent. It is now [1961] over 35 per cent.
Whenever the take of the
people's earned income by government reaches a certain level-20 or 25
per cent-it is no longer politically expedient to pay for the costs of
government by direct tax levies. Governments then resort to inflation as
a means of financing their ventures. This is happening to us now! By
"inflation" I mean increasing the volume of money by the national
government's fiscal policy. Governments resort to inflation with popular
support because the people apparently are naive enough to believe that
they can have their cake and eat it, too. Many people do not realize
that they cannot continue to enjoy so-called "benefits" from government
without having to pay for them. They do not appreciate the fact that
inflation is probably the most unjust and most cruel tax of all.
Inflation is the fiscal
concomitant of socialism or the welfare state or state
interventionism-call it what you will. Inflation is a political weapon.
There are no other means of financing the welfare state except by
inflation.
So, if you don't like
inflation, there is only one thing you can do: assist in returning our
government to its original principles.
One of my hobbies is
cooking and, therefore, I am familiar with the gadgets around the
kitchen. One of the things with which
1 am
familiar is a sponge. A sponge in some respects resembles a good
economy. A sponge will sop up an awful lot of mess; but when the sponge
is saturated, the sponge itself is a mess, and the only way you can make
it useful again is to wring the mess out of it. I hope my analogy is
clear.
Inflation in the
United States
has
ever so many more catastrophic potentials than has ever been the case in
any other country in history. We here are the most advanced division-of-
labor society that has ever existed. That is, we are more specialized
than any other people has ever been; we are further removed from
self-subsistence. Indeed, we are so specialized today that every one of
us- everybody in this room, in the nation, even the farmer-is absolutely
dependent upon a free, uninhibited exchange of our numerous specialties.
That is a self-evident fact.
Destroying
the Circulatory System
In any highly specialized
economy you do not effect specialized exchanges by barter. You never
observe a man going into a gasoline station saying, "Here is a goose;
give me a gallon of gas." That's not the way to do it in a specialized
economy. You use an economic circulatory system, which is money, the
medium of exchange.
This economic circulatory
system, in some respects, can be likened to the circulatory system of
the body, which is the blood stream. The circulatory system of the body
picks up oxygen in the lungs and ingested food in the mid-section and
distributes these special- ties to the 30 trillion cells of the body. At
those points it picks up carbon dioxide and waste matter and carries
them off. I could put a hypodermic needle into one of your veins and
thin your blood stream to the point where it would no longer make these
ex- changes, and when I reached that point, we could refer to you quite
accurately in the past tense.
By the same token, you can
thin your economic circulatory system, your medium of exchange, to the
point where it will no longer circulate the products and services of
economic specialization.
Those of you who are
interested in doing something about this, have a right to ask yourselves
a perfectly logical question: Has there ever been an instance,
historically, when a country has been on this toboggan and succeeded in
reversing itself? There have been some minor instances. I will not
attempt to enumerate them. The only significant one took place in
England
after
the Napoleonic Wars.
How
England
Did It
England
's debt, in
relation to her resources, was larger than ours is now; her taxation was
confiscatory; restrictions on the ex- changes of goods and services were
numerous, and there were strong controls on production and prices. Had
it not been for the smugglers, many people would have starved!
Something happened in
that situation, and we ought to take cognizance of it. What happened
there might be emulated here even though our problem is on a much larger
scale. There were in
England
such men
as John Bright and Richard Cobden, men who understood the principle of
freedom of exchange. Over in
France
, there
was a politician by the name of Chevalier, and an economist named
Frederic Bastiat.
Incidentally, if any of
you have not read the little book by Bastiat entitled The Law, I
commend it as the finest thing that I have ever read on the principles
one ought to keep in mind when trying to judge for oneself what the
scope of government should be.
Bastiat was feeding his
brilliant ideas to Cobden and Bright, and these men were preaching the
merits of freedom of exchange. Members of Parliament listened and, as a
consequence, there began the greatest reform movement in British
history.
Parliament repealed
the Corn Laws, which here would be like repealing subsidies to farmers.
They repealed the Poor Laws, which here would be like repealing Social
Security. And fortunately for them they had a monarch-her name was
Victoria
-who relaxed the
authority that the English people themselves believed to he implicit in
her office. She gave them freedom in the sense that a prisoner on parole
has freedom, a permissive kind of freedom but with lots of latitude.
Englishmen, as a result, roamed all over the world achieving
unparalleled prosperity and building an enlightened empire.
This development continued
until just before World War I. Then the same old political disease set
in again. What precisely is this disease that causes inflation and all
these other troubles? It has many popular names, some of which I have
mentioned, such as socialism, communism, state interventionism, and
welfare statism. It has other names such as fascism and Nazism. It has
some local names like New Deal, Fair Deal, New Republicanism, New
Frontier, and the like.
A
Dwindling Faith in Freedom
If
you will take a careful look at these so-called "progressive
ideologies," you will discover that each of them has a characteristic
common to all the rest. This common characteristic is a cell in the body
politic which has a cancer-like capacity for inordinate growth. This
characteristic takes the form of a belief. It is a rapidly growing
belief in the use of organized force-government-not to carry out its
original function of inhibiting the destructive actions of men and
invoking a common justice, but to control the productive and creative
activity of citizens in society. That is all it is. Check any one of
these ideologies and see if this is not its essential characteristic.
Here is an example of what
I mean: I can remember the time when, if we wanted a house or housing,
we relied on private enterprise. First, we relied on the person who
wanted a house. Second, we relied on the persons who wanted to compete
in the building. And third, we relied on those who thought they saw some
advantage to themselves in loaning the money for the tools, material,
and labor. Under that system of free enterprise, Americans built more
square feet of housing per person than any other country on the face of
the earth. Despite that remarkable accomplishment, more and more people
are coming to believe that the only way we can have adequate housing is
to use government to take the earnings from some and give these
earnings, in the form of housing, to others. In other words, we are
right back where the Pilgrim Fathers were in 1620-23 and Karl Marx was
in 1847- from each according to ability, to each according to need, and
by the use of force.
As this belief in the use
of force as a means of creative accomplishment increases, the belief in
free men-that is, men acting freely, competitively, cooperatively,
voluntarily-correspondingly diminishes. Increase compulsion and freedom
declines. Therefore, the solution to this problem, if there be one, must
take a positive form, namely, the restoration of a faith in what free
men can accomplish. The American people, by and large, have lost track
of the spiritual antecedent of the American miracle. You are given a
choice: either you accept the idea of the Creator as the endower of
man's rights, or you submit to the idea that the state is the endower of
man's rights. I double-dare any of you to offer a third alternative. We
have forgotten the real source of our rights and are suffering the
consequences.
Millions of people, aware
that something is wrong, look around for someone to blame. They dislike
socialism and communism and give lip service to their dislike. They
sputter about the New Frontier and Modern Republicanism. But, among the
millions who say they don't like these ideologies, you cannot find one
in ten thousand whom you yourself will designate as a skilled,
accomplished expositor of socialism's opposite-the free market, private
property, limited government philosophy with its moral and spiritual
antecedents. How many people do you know who are knowledgeable in this
matter? Very few, I dare say.
Developing
Leadership
No
wonder we are losing the battle! The problem then-the real problem-is
developing a leadership for this philosophy, persons from different
walks of life who understand and can explain this philosophy.
This leadership functions
at three levels. The first level requires that an individual achieve
that degree of understanding which makes it utterly impossible for him
to have any hand in supporting or giving any encouragement to any
socialistic activities. Leader- ship at this level doesn't demand any
creative writing, thinking, and talking, but it does require an
understanding of what things are really socialistic, however disguised.
People reject socialism in name, but once any socialistic activity has
been Americanized, nearly everybody thinks it's all right. So you have
to take the definition of socialism-state ownership and control of the
means of production-and check our current practices against this
definition.
As a matter of fact,
you should read the ten points of the Communist Manifesto and see how
close we have come to achieving them right here in
America
. It's
amazing.
The second level of
leadership is reached when you achieve that degree of understanding and
exposition which makes it possible to expose the fallacies of socialism
and set forth some of the principles of freedom to those who come within
your own personal orbit. Now, this takes a lot more doing.
One of the things you have
to do to achieve this second level of leadership is some studying. Most
people have to, at any rate, and one of the reasons the Foundation for
Economic Education exists is to help such people. At the Foundation we
are trying to understand the freedom philosophy better ourselves, and we
seek ways of explaining it with greater clarity. The results appear in
single page releases, in a monthly journal, in books and pamphlets, in
lectures, seminars, and the like. Our journal, The Freeman, for
instance, is available to anyone on request. We impose no other
condition.
The third level of
leadership is to achieve that excellence in understanding and exposition
which will cause other persons to seek you out as a tutor. That is the
highest you can go, but there is no limit as to how far you can go in
becoming a good tutor.
When you operate at this
highest level of leadership, you must rely only on the power of
attraction. Let me explain what I mean by this.
On April 22 we had St.
Andrew's Day at my golf club. About 150 of us were present, including
yours truly. When I arrived at the club, the other 149 did not say,
"Leonard, won't you please play with me? Won't you please show me the
proper stance, the proper grip, the proper swing?" They didn't do it.
You know why? Because by now those fellows are aware of my incompetence
as a golfer. But if you were to wave a magic wand and make of me, all of
a sudden, a Sam Snead, a Ben Hogan, an Arnold Palmer, or the like, watch
the picture change! Every member of that club would sit at my feet
hoping to learn from me how to improve his own game. This is the power
of attraction. You cannot do well at any subject without an audience
automatically forming around you. Trust me on that.
If you want to be helpful
to the cause of freedom in this country, seek to become a skilled
expositor. If you have worked at the philosophy of freedom and an
audience isn't forming, don't write and ask what the matter is. Just go
back and do more of your homework.
Actually, when you get
into this third level of leadership, you have to use methods that are
consonant with your objective. Suppose, for instance, that my objective
were your demise. 1 could use some fairly low-grade methods, couldn't I?
But now, suppose my objective to be the making of a great poet out of
you. What could I do about that? Not a thing-unless by some miracle I
first learned to distinguish good poetry from bad, and then learned to
impart this knowledge to you.
The philosophy of freedom
is at the very pinnacle of the hierarchy of values; and if you wish to
further the cause of freedom, you must use methods that are consonant
with your objective. This means relying on the power of attraction.
Let me conclude with a
final thought. This business of freedom is an ore that lies much deeper
than most of us realize. Too many of us are prospecting wastefully on
the surface. Freedom isn't something to be bought cheaply. A great
effort is required to dig up this ore that will save
America
. And
where are we to find the miners? I think we will find these miners of
the freedom-ore among those who love this country.
I think we will probably find them in this room. And if you were to ask
me who, in my opinion, has the greatest responsibility as a miner, I
would suggest that it is the attractive individual occupying the seat
you are sitting in.
Top of Page
Part Two
In the Market Place
One of the most important
aspects of the freedom philosophy concerns its application in the market
place. The matching of scarce resources against the infinite variety of
human wants, the voluntary exchange of goods and services, the private
ownership and control of property-all these and more are part of the
economic aspect of freedom. The role of the market economy is here
examined by Benjamin Rogge, a professor of economics; Clarence Carson, a
specialist in American history; and Edmund Opitz, theologian and staff
member of FEE.
The
Case for Economic Freedom
by
Benjamin A. Rogge
The late Dr. Benjamin
A. Rogge was Dean and Professor of Economics a t
Wabash
College
in Indiana and
long a Trustee of FEE. This lecture, printed in The Freeman in 1963, was
delivered at several FEE seminars and on other occasions. It sets forth
the Rogge ideal of the "unmixed" free economy.
My economic philosophy is
here offered with full knowledge that it is not generally accepted as
the right one. On the contrary, my brand of economics has now become
Brand X, the one that is never selected as the whitest by the
housewife, the one that is said to be slow acting, the one that contains
no miracle ingredient. It loses nine times out of ten in the popularity
polls run on Election Day, and, in most elections, it doesn't even
present a candidate.
I shall identify my brand
of economics as that of economic freedom, and I shall define economic
freedom as that set of economic arrangements that would exist in a
society in which the government's only function would be to prevent one
man from using force or fraud against another-including within this, of
course, the task of national defense. So that there can be no
misunderstanding here, let me say that this is pure, uncompromising
laissez-faire economics. It is not the mixed economy; it is the unmixed
economy.
I readily admit that I do
not expect to see such an economy in my lifetime or in anyone's lifetime
in the infinity of years ahead of us. I present it rather as the ideal
we should strive for and should be disappointed in never fully
attaining.
Where do we find the
most powerful and persuasive case for economic freedom? I don't know;
probably it hasn't been pre- pared as yet. Certainly it is unlikely that
the case I present is the definitive one. However, it is the one that is
persuasive with me, that leads me to my own deep commitment to the free
market. I present it as grist for your own mill and not as the divinely
inspired last word on the subject.
The Moral Case
You will note as I develop
my case that I attach relatively little importance to the demonstrated
efficiency of the free-market system in promoting economic growth, in
raising levels of living. In fact, my central thesis is that the most
important part of the case for economic freedom is not its vaunted
efficiency as a system for organizing resources, not its dramatic
success in promoting economic growth, but rather its consistency with
certain fundamental moral principles of life itself.
I say, "the most important
part of the case" for two reasons. First, the significance I attach to
those moral principles would lead me to prefer the free enterprise
system even if it were demonstrably less efficient than alternative
systems, even if it were to produce a slower rate of economic growth
than systems of central direction and control. Second, the great mass of
the people of any country is never really going to understand the purely
economic workings of any economic system, be it free enterprise or
socialism. Hence, most people are going to judge an economic system by
its consistency with their moral principles rather than by its purely
scientific operating characteristics. If economic freedom survives in
the years ahead, it will be only because a majority of the people accept
its basic morality. The success of the system in bringing ever higher
levels of living will be no more persuasive in the future than it has
been in the past. Let me illustrate.
The doctrine of man
held in general in nineteenth-century
America
argued
that each man was ultimately responsible for what happened to him, for
his own salvation, both in the here and now and in the hereafter. Thus,
whether a man prospered or failed in economic life was each man's
individual responsibility: each man had a right to the rewards for
success and, in the same sense, deserved the punishment that came with
failure. It followed as well that it is explicitly immoral to use the
power of government to take from one man to give to another, to legalize
Robin Hood. This doctrine of man found its economic counterpart in the
system of free enterprise and, hence, the system of free enterprise was
accepted and respected by many who had no real understanding of its
subtleties as a technique for organizing resource use. As this doctrine
of man was replaced by one which made of man a helpless victim of his
subconscious and his environment- responsible for neither his successes
nor his failures-the free enterprise system came to be rejected by many
who still had no real understanding of its actual operating
characteristics.
Basic Values Considered
Inasmuch as my own value
systems and my own assumptions about human beings are so important to
the case, I want to sketch them for you.
To begin with, the central
value in my choice system is individual freedom. By freedom I mean
exactly and only freedom from coercion by others. I do not mean the four
freedoms of President Roosevelt, which are not freedoms at all, but only
rhetorical devices to persuade people to give up some of their true
freedom. In the Rogge system, each man must be free to do what is his
duty as he defines it, so long as he does not use force against another.
Next, I believe each man
to be ultimately responsible for what happens to him. True, he is
influenced by his heredity, his environment, his subconscious, and by
pure chance. But I insist that precisely what makes man is his ability
to rise above these influences, to change and determine his own destiny.
If this be true, then it follows that each of us is terribly and
inevitably and forever responsible for everything he does. The answer to
the question, "Who's to blame?" is always, "Mea culpa, I am."
I believe as well that man
is imperfect, now and forever. He is imperfect in his knowledge of the
ultimate purpose of his life, imperfect in his choice of means to serve
those purposes he does select, imperfect in the integrity with which he
deals with himself and those around him, imperfect in his capacity to
love his fellow man. If man is imperfect, then all of his constructs
must be imperfect, and the choice is always among degrees and kinds of
imperfection. The New Jerusalem is never going to be realized here on
earth, and the man who insists that it is, is always lost unto freedom.
Moreover, man's
imperfections are intensified as he acquires the power to coerce others;
"power tends to corrupt and absolute power corrupts absolutely." This
completes the listing of my assumptions, and it should be clear that the
list does not constitute a total philosophy of life. Most importantly,
it does not define what I believe the free man's duty to be, or more
specifically, what I believe my own duty to be and the source of the
charge to me. However important these questions, I do not consider them
relevant to the choice of an economic system. Here, then, are two
sections of the case for economic freedom as I would construct it. The
first section presents economic freedom as an ultimate end in itself and
the second presents it as a means to the preservation of the no economic
elements in total freedom.
Individual
Freedom of Choice
The
first section of the case is made in the stating of it, if one accepts
the fundamental premise.
Major premise: Each man
should be free to take whatever action he wishes, so long as he does n o
t use force or fraud against another.
Minor premise: All
economic behavior is "action" as identified above. Conclusion: Each man
should be free to take whatever action he wishes in his economic
behavior, so long as he does not use force or fraud against another.
In other words, economic
freedom is a part of total freedom; if freedom is an end in itself, as
our society has traditionally asserted it to be, then economic freedom
is an end in itself, to be valued for itself alone and not just for its
instrumental value in serving other goals.
If this thesis is
accepted, then there must always exist a tremendous presumption against
each and every proposal for governmental limitation of economic freedom.
What is wrong with a state system of compulsory social security? It
denies to the individual his freedom,
his right to choose
what he will do with his own money resources. What is wrong with a
governmentally enforced minimum wage? It denies to the employer and the
employee their individual freedoms, their individual rights to enter
into voluntary relationships not involving force or fraud. What is wrong
with a tariff or an import quota? It denies to the individual consumer
his right to buy what he wishes, wherever he wishes.
It is breathtaking to
think what this simple approach would do to the apparatus of state
control at all levels of government. Strike from the books all
legislation that denies economic freedom to any individual, and
three-fourths of all the activities now undertaken by government would
be eliminated.
I am no dreamer of empty
dreams, and I do not expect that the day will ever come when this
principle of economic freedom as a part of total freedom will be fully
accepted and applied. Yet I am convinced that unless this principle is
given some standing, unless those who examine proposals for new
regulation of the individual by government look on this loss of freedom
as a "cost" of the proposed legislation, the chances of free enterprise
surviving are small indeed. The would-be controller can always find
reasons why it might seem expedient to control the individual; unless
slowed down by some general feeling that it is immoral to do so, he will
usually have his way.
No
economic Freedoms
So much for the
first section of the case. Now for the second. The major premise here is
the same, that is, the premise of the rightness of freedom. Here,
though, the concern is with the no economic elements in total
freedom-with freedom of speech, of religion, of the press, of personal
behavior. My thesis is that these freedoms are not likely to be long
preserved in a society that has denied economic freedom to its
individual members.
Before developing this
thesis, I wish to comment briefly on the importance of these no economic
freedoms. I do so because we who are known as conservatives have often
given too little attention to these freedoms or have even played a
significant role in reducing them. The modern liberal is usually
inconsistent in that he defends man's no economic freedoms, but is often
quite in- different to his economic freedom. The modern conservative is
often inconsistent in that he defends man's economic freedom but is
indifferent to his no economic freedoms. Why are there so few
conservatives in the struggles over censorship, over denials of equality
before the law for people of all races, over blue laws, and so on? Why
do we let the modern liberals dominate an organization such as the
American Civil Liberties Union? The general purposes of this
organization are completely consistent with, even necessary to, the
truly free society.
Particularly in times
of stress such as these, we must fight against the general pressure to
curb the rights of individual human beings, even those whose ideas and
actions we detest. Now is the time to remember the example of men such
as David Ricardo, the
London
banker and
economist of the classical free-market school in the first part of the
last century. Born a Jew, married to a Quaker, he devoted some part of
his energy and his fortune to eliminating the legal discrimination
against Catholics in the Eng- land of his day.
It is precisely because I
believe these no economic freedoms to be so important that I believe
economic freedom to be so important. The argument here could be drawn
from the wisdom of the Bible and the statement that "where a man's
treasure is, there will his heart be also." Give me control over a man's
economic actions, and hence over his means of survival, and except for a
few occasional heroes, I'11 promise to deliver to you men who think and
write and behave as I want them to.
The case is not
difficult to make for the fully controlled economy, the true socialistic
state. Milton Friedman, professor of economics at the
University
of
Chicago
, in his book, Capitalism and
Freedom, takes the case of a socialist society that has a sincere desire
to preserve the freedom of the press. The first problem would he that
there would be no private capital, no private fortunes that could be
used to subsidize an antisocialist, procapitalist press. Hence, the
socialist state would have to do it. However, the men and women
undertaking the task would have to be released from the socialist labor
pool and would have to he assured that they would never he discriminated
against in employment opportunities in the socialist apparatus if they
were to wish to change occupations later. Then these procapitalist
members of the socialist society would have to go to other functionaries
of the state to secure the buildings, the presses, the paper, the
skilled and unskilled workmen, and all the other components of a working
newspaper. Then they would face the problem of finding distribution
outlets, either creating their own (a frightening task) or using the
same ones used by the official socialist propaganda organs. Finally,
where would they find readers? How many men and women would risk showing
up at their state-controlled jobs carrying copies of the
Daily
Capitalist?
There are so many unlikely
steps in this process that the assumption that true freedom of the press
could be maintained in a socialist society is so unrealistic as to be
ludicrous.
Partly
Socialized
Of course, we are not
facing as yet a fully socialized America, but only one in which there is
significant government intervention in a still predominantly private
enterprise economy. Do these interventions pose any threat to the no
economic freedoms? I believe they do.
First of all, the total of
coercive devices now available to any administration of either party at
the national level is so great that true freedom to work actively
against the current administration (whatever it might be) is seriously
reduced. For example, farmers have become captives of the government in
such a way that they are forced into political alignments that seriously
reduce their ability to protest actions they do not approve.
Second, the form of these
interventions is such as to threaten seriously one of the real
cornerstones of all freedoms-equality before the law. For example,
farmers and trade union members are now encouraged and assisted in doing
precisely that for which businessmen are sent to jail (i.e., acting
collusively to manipulate prices). The blindfolded Goddess of Justice
has been encouraged to peek, and she now says, with the jurists of the
ancient regime, "First tell me who you are and then I'll tell you what
your rights are." A society in which such gross inequalities before the
law are encouraged in economic life is not likely to be one which
preserves the principle of equality before the law generally.
We could go on to many
specific illustrations. For example, the government uses its legislated
monopoly to carry the mails as a means for imposing a censorship on what
people send to each other in a completely voluntary relationship. A man
and a woman who exchange obscene letters may not be making productive
use of their time, but their correspondence is certainly no business of
the government. Or to take an example from another country, Winston
Churchill, as a critic of the Chamberlain government, was not permitted
one minute of radio time on the government owned and monopolized
broadcasting system in the period from 1936 to the outbreak of the war
he was predicting in 1939.
Each
Step Leads to Another
Every
act of intervention in the economic life of its citizens gives to a
government additional power to shape and control the attitudes, the
writings, the behavior of those citizens. Every such act is another
break in the dike protecting the integrity of the individual as a free
man or woman. The free market protects the integrity of the individual
by providing him with a host of decentralized alternatives rather than
with one centralized opportunity. As Friedman has reminded us, even the
known communist can readily find employment in capitalist
America
.
The free market is
politics-blind, religion-blind, and yes, race-blind. Do you ask about
the politics or the religion of the farmer who grew the potatoes you buy
at the store? Do you ask about the color of the hands that helped
produce the steel you use in your office building?
South Africa
provides an interesting example of
this. The South Africans, of course, provide a shocking picture of
racial bigotry, shocking even to a country that has its own tragic race
problems. South African law clearly separates the whites from the
nonwhites. Orientals have traditionally been classed as nonwhites, but
South African trade with
Japan
has
become so important in the postwar period that the government of
South Africa
has
declared the Japanese visitors to
South Africa
to be
officially and legally "white." The free market is one of the really
great forces making for tolerance and understanding among human beings.
The con- trolled market gives man rein to express all those blind
prejudices and intolerant beliefs to which he is forever subject.
To look at this another
way: The free market is often said to be impersonal, and indeed it is.
Rather than a vice, this is one of its great virtues. Because the
relations are substantially impersonal, they are not usually marked by
bitter personal conflict. It is precisely because the labor union
attempts to take the employment relationship out of the market place
that bitter personal conflict so often marks union-management
relationships. The intensely personal relationship is one that is
civilized only by love, as between man and wife, and within the family.
But man's capacity for love is severely limited by his imperfect nature.
Far better, then, to economize on love, to reserve our dependence on it
to those relationships where even our imperfect natures are capable of
sustained action based on love. Far better, then, to build our economic
system on largely impersonal relationships and on man's self-interest-a
motive power with which he is generously sup- plied. One need only study
the history of such utopian experiments as our Indiana's Harmony and New
Harmony to realize that a social structure which ignores man's essential
nature results in the dissension, conflict, disintegration, and
dissolution of Robert Owen's New Harmony or the absolutism of Father
Rapp's Harmony.
Solving
the Problem of Economic Allocation
The
"vulgar calculus of the market place," as its critics have described it,
is still the most humane way man has yet found for solving those
questions of economic allocation and division which are ubiquitous in
human society. By what must seem fortunate coincidence, it is also the
system most likely to produce the affluent society, to move mankind
above an existence in which life is mean, nasty, brutish, and short.
But, of course, this is not just coincidence. Under economic
freedom, only man's destructive instincts are curbed by law. All of his
creative instincts are released and freed to work those wonders of which
free men are capable. In the controlled society only the creativity of
the few at the top can be utilized, and much of this creativity must be
expended in maintaining control and in fending off rivals. In the free
society, the creativity of every man can be expressed-and surely by now
we know that we cannot predict who will prove to be the most creative.
You may be puzzled, then,
that I do not rest my case for economic freedom on its productive
achievements; on its buildings, its houses, its automobiles, its
bathtubs, its wonder drugs, its television sets, its sirloin steaks and
green salads with Roquefort dressings. I neither feel within myself nor
do I hear in the testimony of others any evidence that man's search for
purpose, his longing for fulfillment, is in any significant way relieved
by these accomplishments. I do not scorn these accomplishments nor do I
worship them. Nor do I find in the lives of those who do worship them
any evidence that they find ultimate peace and justification in their
idols.
I rest my case rather on
the consistency of the free market with man's essential nature, on the
basic morality of its system of rewards and punishments, on the
protection it gives to the integrity of the individual.
The free market cannot
produce the perfect world, hut it can create an environment in which
each imperfect man may conduct his lifelong search for purpose in his
own way, in which each day he may order his life according to his own
imperfect vision of his destiny, suffering both the agonies of his
errors and the sweet pleasure of his successes. This freedom is what it
means to be a man; this is the God-head, if you wish.
I give you, then, the free market, the expression of man's economic
freedom and the guarantor of all his other freedoms.
.Top
of Page
3
Free Enterprise: The
Key to Prosperity
by
Clarence B. Carson
Dr. Carson is an
experienced observer and analyst of political and economic affairs. He
is a specialist in American history with his Ph.D. degree from
Vanderbilt
University
. He is the author
of several books, including a five-volume text, A Basic History of the
United States
. The
copyright to this article is held by Clarence B. Carson.
Free enterprise is
widely acclaimed in the
United States
.
Politicians, generally, declare in favor of it; editorialists frequently
laud it; Chambers of Commerce have writing contests about it; even
automobile stickers praise its virtues. Yet much of our enterprise is
restrained, restricted, hampered, regulated, controlled, or prohibited.
As an old saw has it, "What you do speaks so loud I can't hear what you
are saying." By our practice, we say that we believe in free
enterprise-except . . .
Except for public utilities. Except
for the railroads. Except for mail delivery. Except for medical
services. Except for housing, financing, and real estate transactions.
Except for large corporations. Except for education. Except for interest
rates. Except for farmers. Except for small business. Except for
industrial workers. In short, a case could be made that Americans
believe in free enterprise except in whatever activities they happen to
be considering.
It may he helpful, then,
to consider free enterprise in terms of itself, minus all the partisan
exceptions. The approach here will be to pose five questions: What is
free enterprise? What are the objections to free enterprise? How may the
objections be answered? What are the practical advantages of free
enterprise? Is free enterprise necessary to freedom? The answers to
these should provide some perspective on free enterprise.
What Is Free Enterprise?
Free enterprise is a way
of going about meeting our needs and wants by providing for ourselves or
by freely entering into trans- actions with others. The opposite of free
enterprise is hampered, restricted, controlled, or prohibited
enterprise. The enterprise itself must be conducted in an orderly
fashion within the framework of rules, but if the rules inhibit entry or
hamper activity they become restrictions on enterprise. It is clear
enough, for example, that traffic at an intersection must be regulated
in its flow but that reasonable rules promote rather than inhibit the
effective use of the street. On the other hand, if a city made a rule
that taxicabs were to be limited to those presently in operation it
would be equally clear that enterprise was being hampered. In a similar
fashion, if a city adopted a rule forbidding any taxi to use the streets
within its boundaries, that type of enterprise would be prohibited.
Thus, government may be an adjunct or an obstacle to enterprise.
Free
enterprise does not exist in a vacuum; it must be institutionally
supported and protected. One of these institutions is government.
Government is necessary to prohibit and punish the private violation of
the rights of those who peacefully use their energies and resources in a
productive way. Government is necessary also to punish fraud and
deception, to settle disputes which may arise, and to regulate the use
of public facilities such as highways. Another basic institution for
free enterprise is private property. For enterprise to be free, those
who engage in it must be free; that entails having property in
themselves and what they produce. Enterprisers must have title to their
goods in order either to consume them or to trade with others. Real
property in land and buildings is essential to have a place to produce
and to market goods and services. Private property not only supplies
opportunities for the individual to provide for himself but it also
places inherent limits on his activity. He can only rightfully sell and
convey to another what is his in the first place. Private property also
sets bounds to enterprise by restricting the owner to the use of what is
his own or to that which the rightful owner authorizes others to use.
A third ingredient of free
enterprise is free access to the market. A market is any arena within
which buyers and sellers meet to effect their transactions. Under free
enterprise neither buyer nor seller is prevented from making
transactions by government decree o r private threats o r use of force.
The motor of free
enterprise, indeed, of all enterprise, is individual initiative.
Individuals provide the energy for the making of goods and providing of
services. They conceive, invent, design, engineer, produce, and market
goods through their endeavor. The great spur to produce is the increase
of one's goods or the profit he may make by selling them. Here again,
the importance of private property and free access to the market may be
seen. If men cannot keep as property what they produce, if they cannot
market it, their incentive to produce is lessened or removed.
The great regulator of
free enterprise is competition. Competition among sellers keeps prices
down and tends to assure that the customer will be served. Competition
among buyers provides a market in which those goods that are wanted can
be sold at a profit. Prices are the result of this competition. Although
any owner may offer his wares at a price acceptable to him, he can only
sell when he has found a buyer willing to pay his price.
What Are the Objections t o Free Enterprise?
There is no doing
without human enterprise, for without it we would all be impoverished
and our survival in doubt. The main question we have in regard to it is
whether it shall be free or hampered. Reformist and revolutionary
intellectuals have launched a massive assault over the past century
against the market, private property, the profit motive, and other
facets of free enterprise. The thrust of their efforts has been to
discover fatal flaws in the system, which they usually describe as
capitalist, and to propose that government either supervise or take over
the operation of the economy. They can be classified in one of two broad
categories: meliorism or socialism. Meliorism is the view that what is
wrong with free enterprise can be corrected by government intervention.
It holds that government can control, restrict, limit, regulate, tax,
and redistribute so as to better the lot of the people and avoid the
worst difficulties which they believe are inherent in free enterprise.
Meliorists are hardly
enthusiastic about private property and individual enterprise, but they
do not usually attack them head on.
Socialists do directly
attack property, private enterprise, the profit system, and what they
call capitalism. They propose to abolish them with governmental (or
collective or public) owner- ship of the means of production of goods.
Socialism divides roughly into two camps: democratic socialism and
communism. Democratic socialists are distinguished by a gradual approach
to socialism because they are tied to popular elections and must move as
the electorate will. Communists are revolutionaries who move toward
socialism swiftly and by drastic measures once they come to power. They
are characterized by one-party rule, and by totalitarian control over
the lives of the people.
While socialists and
meliorists have a barrage of objections to free enterprise, the
following points are central to their argument.
One of their arguments
which has broad appeal is that free enterprise produces cutthroat
competition, often described as dog eat dog, or rugged individualism.
The charge is that some people compete so vigorously that they drive
competitors out of business or buy them out. While this is made to sound
as if it were a special variety of competition, it is really a plea for
government intervention to limit and restrain competition.
Competition as War
A related objection to
free enterprise is that competition amounts to industrial warfare, that
it pits men against one another in the quest for material possessions.
Those who advance this notion say that free enterprise depends upon and
calls forth the baser human motives, that it is materialistic, that it
makes selfishness into a virtue, and that it fosters competition rather
than leading men to cooperate with one another. This conception of
competition as war has served over the years as the major propellant of
government intervention by way of antitrust legislation, fair trade
laws, and other regulatory measures.
An objection heard
frequently is that the consumer is taken advantage of and deceived by
advertising and a great variety of marginally different products and
services. According to John Kenneth Galbraith in The Affluent Society,
all kinds of frills are produced which people do not really need but are
induced to buy by advertising. Ralph Nader has made a career out of
protecting customers from themselves. The thrust of the consumer
protection movement has been to try to replace the ancient rule of
letting the buyer beware with government prescriptions about how goods
may be sold. Although those who raise objections to free enterprise are
often ambiguous about the merits of free enterprise, one of their
objections is that under this system there is imperfect competition.
This is the charge that businesses do not compete with one another with
sufficient vigor. Instead, they say, companies engaged in the same
business conspire with one another to raise prices. Or, as a result of
competition, one company drives all others out and proceeds to charge
what the traffic will bear.
In the middle of the
nineteenth century, Karl Marx claimed that in industrial capitalist
countries there was a trend toward monopoly where a single company would
dominate a whole industry. Indeed, he held that large companies would
grow larger until they had a whole industry under their sway. This
argument crops up again and again in many different guises. The term
"oligopoly" was devised to describe the situation when several giants
control an industry. The thrust of these arguments in the
United States
has
been to press for breaking up large concentrations of industry.
Some objectors to free
enterprise hold that one of its least desirable traits is that it
results in unequal distribution of goods and services. The most commonly
repeated phrase is that the rich get richer and the poor get poorer.
Many lack the bare necessities, while others have more than anyone could
consume or use. Those who make these charges against free enterprise may
not believe that goods should be exactly equally distributed, but they
do argue that everyone should have enough, at the least, to meet their
basic needs.
Probably, the most
devastating charge against the free enterprise system is that it is
responsible for the business cycle. Business activity does apparently go
in cycles, with periods of prosperity alternating with recessions and
depressions. The most common claim of reformists is that businessmen
claim too large a share of the proceeds from their products, that there
is a resulting decline in consumer demand, leading to recession or
depression. The way to prevent this, they say, is for government to soak
up the excess in taxes and distribute the wealth more or less directly
to those who will spend it for consumer goods.
How May Objections to Free Enterprise be Answered?
Many
of the objections to free enterprise arise either from misinformation
about economics or the hope that somehow the requirements of economy can
be evaded-itself a misconception regarding economics. One of the best
ways to answer them, then, is to call up some of the basic principles of
economics.
Economics has to do
with scarcity. The character of economics is indicated by the
conventional uses of words related to it. For example, one dictionary
defines "economical" as "avoiding waste or extravagance; thrifty." It
"implies prudent planning in the disposition of resources so as to avoid
unnecessary waste.
. . ."
"Economy" refers to "thrifty management;
frugality in the expenditure or consumption of money, materials, etc."
Economics can be defined as the study of the most effective means for
persons to maintain and increase the supply of goods and services at
their disposal. Goods and services are understood to be scarce, and
economics has to do with the frugal management of time, energy,
resources, and materials so as to bring about the greatest increase in
the supply of goods and services most desired.
There is every reason to
believe that man is naturally inclined to use as little energy and
materials to produce as many goods as he can from them. In short, he is
predisposed to be economical. If this were not the case, it is easy to
believe that he would long since have perished from the face of the
earth. But this economic penchant gives rise to a problem rather than
resolving all problems. There are two ways for an individual to augment
the supply of goods and services at his disposal. (1)We can provide them
for himself. (2) He can acquire them from others. Again, there are two
ways for an individual to acquire them from others. (1) He can acquire
them by exchange (in which we may well include free gifts). Or (2) he
can take them from someone who possesses them.
It is this latter option
that raises bob in determining what is economic. Strictly speaking,
robbery could he quite economical for an individual. By stealing, an
individual can greatly increase the supply of goods and services
available to him with only a very little expenditure of energy and
materials. A bank robber may, for example, spend half an hour using a
twenty-dollar gun and enrich himself, say, to the extent of $20,000.
That might indeed be
economical for an individual, but it is not so for society at large.
Economics has to do with the increase of the supply of goods in general,
not just the individual's gain. The bank robber augments his personal
supply at the expense of those from whom he has stolen. Moreover, he may
reduce the general supply further by the threat he poses to trade and
the loss of incentive men have to produce when they are uncertain that
they will be able to keep the rewards of their efforts. For these
reasons, theft should not be considered economical.
Even
so, the example of the bank robber is not frivolous. All redistribution
schemes are proposals to use force to take from those who have and give
to those who have not. If governments do such things, it is still theft,
albeit legal theft. And its effect on the general supply would
reasonably be the same as any other kind of theft.
The Problem of Scarcity
The
economic question, then, is under what system is the supply of goods
most apt to be replenished and increased? Is it one in which there is
free access to the market, in which men receive the fruits of their
labor for their own use or disposal, in which individual initiative is
fully brought into play, and in which sellers and buyers are in
competition? Or is it one in which access is controlled, in which
property is controlled by government or held in common, in which
individual initiative is discouraged, and in which competition is
restrained? If we understand that the basic problem is scarcity, these
are the questions about enterprise that need to be answered. The problem
is really one of production, and with that in mind the objections to
free enterprise discussed earlier can now be answered.
The attack on
competition, because of the rigors involved in it and because there are
losers, is really an attack on effective production. Suchattacksgain
widespread support quite often because of the desire to avoid the
requirements of competition. Anyone can see the advantage of competition
when it is among others. After all, competition brings down prices,
increases the variety and quality of goods, and increases demand as well
as supply. But competition is not nearly so attractive when we have to
engage in it, especially once we have made our mark in production. It is
not only necessary to get there by competition but also to stay there by
changing and improving products, offering superior service, and the
like. The argument against cutthroat competition is really not an
argument against free enterprise but an argument against having to
compete by those who have jobs, have arrived at a position, and want to
retain it without further competition. When government restricts entry
to any field, it is the "have-nots" who are most apt to be kept out. The
main opportunity for men to improve their condition is by way of free
access to the marker. Free enterprise offers ready entry to all comers
and provides what assurance there can be for continued replenishing of
goods.
Cooperation
and Competition
Competition
is not a kind of warfare. To the extent that it pits men against one
another it does so by stimulating them to excel. When each man is doing
his best all may benefit: those who participate by producing and
excelling, the rest of society by what is produced. There are no
necessary victims in competition. Of course, not everyone can excel or
even compete at the same level. But any man is a winner who discovers
that way and Level at which he can effectively produce and serve. Most
people cannot run the four-minute mile. That does not mean that we put
weights on the faster racers in order to enable the slower runners to
keep up. People do well to compete at their own levels of ability.
Competition does not
prevent or even downgrade cooperation, either. Under free enterprise
people must and do cooperate in many ways to provide us with the
amenities of life. Industrial production today requires cooperation of a
very high degree. The assembly line is the epitome of organized
cooperation. The making and selling of automobiles, for example,
requires the cooperation of all sorts of entrepreneurs, financiers,
service providers, manufacturers, assembly line workers, transportation
workers, designers, engineers, and mechanics.
On a less grandiose scale,
we usually take for granted that any one of a hundred items will be
available when we want it. I may decide, for example, that I need a new
box of pencils. I go to the nearest store which carries sundries and
discover that the store not only has pencils but a considerable variety
of them as well. How did this happen? Did the store know that I was
about out of pencils and that they should stock some in case I should
come by? Not at all, yet a lot of foresight had gone into providing them
for my convenience. Not only had companies brought together in factories
those who could make pencils but also the need had been predicted, the
capital set aside for producing them, supplies ordered, raw material
prepared, and the pencils produced and placed by wholesalers with my
local store. True, businesses in direct competition with one another may
not do a great deal of cooperating with one another, but that may be
largely because of the antitrust laws.
The extensive nature
of competition is not generally well understood, and certainly not by
most who write about imperfect competition. Most critics talk of
competition as if it involved only direct competition among the
suppliers of a particular kind of product. That kind of competition is
only the tip of the iceberg of competition. For example, if General
Motors were the only maker of automobiles in the
United States
, there
would still be competition. The Chevrolet division would still he
competing with Pontiac, Pontiac with Buick, Buick with Oldsmobile, these
with Cadillac, and all of them with foreign imports.
Varieties
of Competition
But competition is much
broader and more varied than the above example would suggest. New cars
are in competition with used ones. Automobiles, as a means of
transportation, are in competition with busses, airlines, trains,
motorcycles, trucks, bicycles, horses, and walking. Further, human wants
are extensive, and the means for satisfying them are numerous and
diverse. Instead of buying a car, or a second one, a given consumer may
choose to add a room on his house, buy a boat, equip his family room
with an amusement center, put his money in savings, or what not-all
because he judged the car he might have bought too expensive. That kind
of choice crops up in whatever direction we look.
The number of foods which
will sustain life, either singly or in combination with others, can
hardly be counted. There are many fibers, natural and artificial, from
which to make clothes, all sorts of building materials, a considerable
number of fuels, to give a few examples. If the price of any one of
these is raised significantly, or the quality declines, alternative
means are likely to be found to gratify the want. If oranges become more
expensive, apples may be substituted. Competition may not be as broad as
the range of commodities on the market, but we come nearer to the truth
when we view it that way than when we attempt to confine it to the
makers of a single commodity.
Access
to the Market
Imperfect competition,
rightly understood, is a condition which exists when access to the
market is hampered by legal restrictions or the use or threat of force.
Otherwise, the extent of competition may be presumed to be adequate in
the market, else new companies could be expected to enter the field.
Whether competition is adequate or not cannot be determined by counting
the number of companies engaged in making a commodity, by comparing the
shares of the market which companies have, by calculating their costs
and comparing them with retail prices, or any other such empirical
device. The effectiveness of competition can only be measured to the
extent that consumer satisfaction with the goods offered him in the
market can be measured. When there is free access to the market, anyone
who believes that there is some unmet want is free to enter the market
and supply it. It happens all the time.
The critics are right when
they say that under free enterprise goods are not equally distributed
among the populace. Where there is private property, not everyone has
the same amount of property. If such equality could exist, it would
depend upon distributing everything equally and then stopping all
transactions or change at that point. It would have to mean, also, the
stopping of all births and deaths, for as soon as an imbalance between
births and deaths occurred, a new inequality would either exist or an
entire redistribution have to take place. But before such a new
distribution could be completed the situation would no doubt have
changed again and the effort to establish equality failed.
This is by way of
saying that equality in the distribution of goods cannot be. In no
extensive society has there ever been equality of possessions;
everywhere and always there has been disparity. The present writer does
not know of a single family, which is surely the smallest social unit,
in which each has exactly the same amount of possessions as every other,
nor can he readily visualize how it could happen. Give two small
children each a toy. One will have his torn up within the hour, while
the other may keep his in good repair for months or years. It is so for
adults as well; some manage well, work hard, take care of what they have
received, others hardly at all. The basic question for an economy and
society is not one of the disparity of wealth but of the justice of the
arrangement under which it is acquired and maintained.
Market Success
What is a just
distribution of goods and services? Given the differences in talent,
tenacity, prudence, and willingness to work, it is surely not justice to
distribute goods on the basis of equality, or even need. Under the free
enterprise system men are understood to have got what they deserved when
they get as property what they have produced and get in exchange for it
what the highest bidder in the market is willing to pay. Does that mean
that the case of the have-nots is hopeless under free enterprise? Not at
all, for free enterprise offers them the best opportunity there is for
improving their condition. When there are no obstacles in the way of
entering any endeavor, men can and do change from have-nots to haves.
There are many historical examples of men who have started with nothing
and even attained great wealth. There are many more examples of those
who have started with little and attained a competence.
There
is much evidence to show that it is government activity not free
enterprise, which is responsible for the so-called business cycle. The
cyclical change from prosperity to depression-recession to prosperity
can be correlated with increases and decreases in the supply of money.
Dramatic increases in the money supply result in expansive business
activity and tend to create a boom atmosphere. When the supply of money
is decreased or stabilized, activity slows, and recessions follow. If
there is a severe deflation, such as the one that followed the stock
market crash in 1929, a deep depression can be the result. In precise
terms, the cycles result from credit expansions and contractions. The
villain of the piece is government manipulation of the money supply by
way of the Federal Reserve system. The cure lies not in government
intervention to hamper enterprise, but in a sound money that cannot be
manipulated.
What Are the Practical
Advantages of Free Enterprise?
It is not necessary to
rely on theory alone to determine the superiority of free enterprise
over other methods in providing for people's needs. There is historical
evidence that when enterprise is freed from the restrictive hand of
government and when property is rigorously protected, production
increases along with general economic well-being. It needs to he
understood, however, that much of economic history is a record of
government interventions and restraints and that there are always some.
Consequently, restriction is usually a matter of degree, not of
absolutes. Nonetheless, there have been periods in the life of nations
when enterprise has been freed from many of the restraints, and these
provide favorable evidence for free enterprise.
England
in the nineteenth century is a
striking example of what can happen when enterprise is freed. In the
early 1700s there were still numerous restrictions and special
privileges hampering enterprise in that land. Beginning in 1689,
however, the British made almost continuous progress in the direction of
freer enterprise. By the 1820s, enterprise was substantially free in
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