Freeman

ARTICLE

Around the World . . .

JUNE 01, 1979 by PERRY E. GRESHAM

Dr. Gresham Is President Emeritus and Distinguished Professor, Bethany College, Bethany, West Virginia.

Yogi Berra is reputed to have made the sage remark: "You can observe an awful la just by lookin’!" A few days in a country can yield only an impression, but when the visit is preceded by study, and the observations are supplemented by interviews and visits with informed persons, the impressions may have more validity.

For eighty days I have been sailing around the world on the Queen Elizabeth 2. We have spent some time in several interesting nations such as Brazil, Uruguay, South Africa, India, Sri Lanka, Singapore, Hong Kong, China and Japan. My studies in philosophy and economics have prompted me to ask many questions and look in on many projects. The world-wide fellowship of academic people has been a great help to me. With a few exceptions I have been able to avoid talking with any of the officials who have a point of view and a position to defend. I have, with the help of a good interpreter, talked with people involved in the several cultural and economic activities that make up a national character and image. These impressions I have gained are of such interest to me that I feel impelled to share them with anybody who finds them interesting or instructive—even irritating!

It seems to me that any country in which the government is hostile to business and industry, for political reasons, damages the quality of life for the people in general. Marx is long dead and frequently shown to be wrong in his observations, yet politicians and bureaucrats cling to his dogmas of the rapacity, culpability, and greedy self-interest of people engaged in the production and distribution of goods and services for profit. Responsible persons seem never to learn the wisdom of Samuel Gompers who said, "The company that does not make a profit is the enemy of the working man"! A government that socializes its economy kills the goose that lays golden eggs for the poor and needy. Still it goes on around the world.

Uruguay is a prime example. Here is an attractive country about the size of Washington state which has just gone through the socialist wringer. It all started with a welfare program that promised everything to everybody. It was indeed reported to be a worker’s paradise wherein everybody could retire at forty on a fat state pension. Private enterprise was squeezed out in favor of the system which Bastiat described as an arrangement wherein everybody attempts to live at the expense of everybody else. The State went broke. A military strong man moved in. Everything is rationed and equality is widely proclaimed, but privilege is apparent and poverty continues. The privileged few are the politicos, the bureaucrats and the leaders of the ruling junta. People live on, as they must anywhere in the world. People survive the loss of freedom and the excesses of governments. But without liberty they are locked in. Without free business and industry they cannot gain freedom or mobility for themselves. How prosperous these people could be if capital could be formed, industry and trading encouraged and the people free to make something of themselves rather than to exist as the wards of the state!

Singapore shows what can happen to a tiny country that encourages trade and production. That celebrated entrepreneur, Sir Stamford Raffles, started the little island out as a business center when political people were attempting to divide up the earth. The influence of the founder is remembered by successful enterprise as well as of the old hotel which bears his name and which inspired Somerset Maugham to write so many exciting stories centered in Singapore and the Raffles. Poverty-stricken people from all sides come into Singapore for the same reason that southerners poured into Detroit to work for Henry Ford. The politicians, ambitious as they are, see the need to preserve the high standard of living which successful business affords. There are some curious contradictions wherein the government joins hands with industry to build housing for the workers, but when people do not work they do not go on dole.

Welfare payments are restricted to working people with the result that there is no unemployment, with the very small exception of unemployable welfare cases. The function of government to protect its citizens from injury by anyone using force or fraud seems to be rigorously performed. There is little or no crime; there are no beggars; there are no coddled criminals. The death penalty is enforced by hanging.

Business comes in from all over the world to bring prosperity to a little overcrowded island which has negligible natural resources. Business comes because it feels secure from the raids of the politicians who have in less fortunate countries stolen the capital which has been invested there. Overregulation and confiscatory taxation are not on the Singapore menu. Trade unions are not given special privileges under the law. Business prospers, people work, the government intervenes, but not to the destruction of business by which the place lives. Civil rights are defended still by appeal to the Privy Council in London.

Hong Kong is an even better example. Here is probably the nearest thing to a free market to be found anywhere in the modern world. The government of Hong Kong is an attempt at the least possible, given the peculiar problems of overcrowding and geographical limits. Investment bankers for the whole world center here. Capital is placed for the oil-rich Middle East and markets are found for productive countries like West Germany and the USA. The limited government is aimed toward providing conditions that lead to prosperity and peace. No wonder business looks this way in a world in which dedicated bureaucrats and politicians are working—as much as they work at anything—trying to tax and regulate business out of existence. When they succeed the result is socialist business which is best illustrated by the postal service in the USA.

Plato, who had little interest in democracy, saw the political process as running from too much clamor and conflict in a leaderless democracy, moving to a socialist state, to be followed by a dictator. Sri Lanka is just emerging from the last stages of the overregulated and over-socialized government. This small island about half the size of Alabama has 15,000,000 people. Tea and rice are the predominant products since natural rubber demand has diminished. Some gems of rare quality are found on the island. Politicians promised everything and attempted to deliver, with the result that taxation and inflation could not keep the overspent budget close to balance. When bankruptcy comes in a socialist state, nobody admits it, but the stability disintegrates and a strong alternative moves in, making the controls even more stifling. Some of my sophisticated friends see a glimmer of hope in the fact that the beleagured government may at last see the wisdom of trade and perhaps even foreign investment. Some imagination and a look around at some nearby countries might very well start the "Hong Kong effect."

The market, which Adam Smith called the invisible hand, operates anywhere. It is not some optional form of political economy. It is more like the law of gravity which works even when distorted and impeded. Communist China is just now rediscovering the operation of the market. When farmers were granted the right to the product of a small plot of ground, the land thought worthless suddenly became fertile and the crops were amazing. Incentive makes for resourcefulness and effort. Farmers not only grow foodstuff for themselves but also grow enough to take to the streets and sell for cash. Now the central government is trying to open the doors to trade. How could they avoid noticing the prosperity of Taiwan in contrast to the poverty of Red China? Tourism is going to be big business in The People’s Republic. I sat at dinner with the Minister of Tourism for all of China. This man has a vision of a tidal wave of tourists all bringing hard money into his country. The greatest need of that vast nation is for capital. A person with a broom or a shovel has only a small investment back of him. When he can have a powerful street sweeper or giant steam shovel his capital back-up will be great and his productivity will be multiplied. Chinese traders have been famous for centuries, and they are ready to trade again if they can get the stifling ideologists off their backs. People who write about China tend to assume that any improvement rests with the government. Get the government impediments out of the way and you will see the miracle of Hong Kong begin to operate.

Japan is a study in the effect of open trading and the encouragement of business and industry. Fifty years ago Japanese products were thought to be shabby if not phony. Today their technology is unsurpassed in the world. At the close of World War II Japan was freed from the expense of a vast military establishment. This was a help. The people were eager to work. This was a greater help. Even today the Japanese work week is six days. Electronic devices of quality are manufactured at a fraction of the cost of those produced in other countries. These things are not the result of sweat-shop labor, for the Japanese workers are very well paid by any standards. Now, however, the government effect of intervention is beginning to operate. Regulation and taxation together with inflationary government spending may very well soon reduce productivity along with product quality and Japan will be caught in the web of bureaucracy not unlike that of the USA.

These impressions and opinions need the correction of more careful observation and study, but they are enough to deepen the opinions I have long held about the nature of human well-being when government intervention takes its toll. Politicians and bureaucrats are not evil people. They are out for themselves as a self-respecting person must be—regardless of the system. Interest groups push for benefits and politicians promise to pass a law to spread the cost. Bureaucrats need to defend their positions and increase their power and the enforcement machinery multiplies with excessive personnel. Governments grow; the politicians promise more and more, the bureaucrats multiply and the bewitching socialist chimera enchants the people. The government overspends, the economy falters, business and industry fail and the people are in distress. The predicament is only worsened by the dictatorship which must follow.

Now and again, however, there comes a glimmer of hope. China begins to open up and trade; Sri Lanka takes a new look at Hong Kong; Britain tries to get hold of the inflationary spiral; America takes a look at taxes and government spending. Plato smiles at the succession of government blunders, Karl Marx wonders what went wrong with his classless society, and Adam Smith nods knowingly as he sees reality overtake ideology. Yogi was right. "You can observe an awful lot just by lookin’!"

 

***

The Conditions for Progress

IN a nation without a thriving business community, private wealth is generally stored in vaults, or used in conspicuous consumption, or invested in real estate, or placed with business communities abroad. But where a country’s private business is not subject to Procrustean measures of control, this private wealth is less likely to be shipped abroad, buried, or otherwise diverted into circuits of low economic potential.

HAROLD M. FLEMING 

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June 1979

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