OCTOBER 01, 1959 by E.W. DYKES
Mr. Dykes is an architect from
Optimism is a wonderful attitude but only to the point where it begins to blind us to realities for which real solutions need be found. As an example of what may be over-optimism we are told again and again that "the sixties" will usher in the most fabulous wave of prosperity we have ever enjoyed—so relax, and enjoy it. In one form or another this theme is being drummed by writers and other assorted observers.
Recently, following the usual banquet fare, I heard an unusually talented speaker not only make the prophecy but support it with a number of detailed reasons which deserve our attention. But if I understood him, three of his five principal reasons would actually work against prosperity, while the other two would have little meaning unless accompanied by the prime adjunct to prosperity—the creation of the tools of production! Let’s take a look at the reasoning which dominates the optimistic view of prosperity unlimited.
REASON #1: "There is an unprecedented increase in our birth rate and population."
If this reason were valid, the people of
The increase in population, if present levels of living are to be maintained, means that capital investment must be sufficient not only to replace obsolete tools but also to provide all the tools needed by all the persons added to the population. Five million new job holders, for instance, would require tools costing between 50 and 75 billion dollars at today’s prices—plus billions more to cover obsolescence—all this just to stay even. To increase living standards would require still further investment in tools. An arbitrary increase in tools, say $1,000 more per job holder, would call for an additional 75 billion dollar investment. Since all this could come only from savings, the enormity of the task is obvious.
REASON #2: "Both political parties now are committed to the principle of ‘Full Employment.’"
Again let’s look at
Actually, political parties, as such, have no control over "full production." Politicians always speak of "full employment"—not "full production." It is possible for the political party in power to "make" work to employ persons, and the taxing power even yields capital for such a purpose. However, it is capital which, in the hands of its rightful owners, might have created truly productive and lasting jobs for the unemployed. To test this idea of "full employment," why not cancel all freight runs of the Pennsylvania Railroad and give jobs to the unemployed to carry the freight on their backs from
Political parties, because of their mischief in the past, now have a job to do for full production: remove the roadblocks to investment which take the form of confiscatory taxation—take away the barriers to incentive—do away with the laws which give one group of citizens unfair advantages in "bargaining" with other citizens. And then let them stay out of the business world entirely. That would be a real service.
REASON #3: "We are in a period of controlled but continuous inflation."
Inflation, "controlled" or otherwise, is a deterrent to savers and therefore to investment in the capital tools which increase production. Few threats to prosperity are greater than that insidious robber which is inflation. When persons are aware that their savings are losing value, they become spenders rather than savers. Strangely, it is often our chief executive or high government officials who warn us about inflation—yet only the Congress can do anything about it. And very simply, too. Just balance the budget—that’s all.’ For all practical purposes, inflation would end.
REASON #4: "Automation will increase the country’s productive capacity so much that employees will have shorter hours and higher pay."
This is true—if—if the immense sums of money necessary to produce such equipment are made available. Neither political party has a record with respect to tax policies which encourage such savings and investment. If the money is not forthcoming, then automation, for the most part, will be a dream. Politicians, labor leaders, and citizens generally need to recognize this fact; most businessmen already know it.
REASON #5: "…. Because of the tremendous capacity, energy, and ingenuity of the American people."
Americans, just because they are Americans, are not endowed with superman qualities. Freedom of the individual to invest, to invent, to keep most of the fruits of his own labor is the factor which has made Americans appear to be so energetic and ingenious. Recent political activity has done little but chop away at the basic American freedoms. It follows, of course, that only damage can result from such political activities instigated, as always, "for the common good."
In summary, then, may it be suggested that the large quantity of invested capital per unit of population primarily accounts for our high level of living. With bare hands we could do no more, perhaps less, than savages can do. If there are more of us, it takes that much more capital. Automation, truly the wave of the future, requires fantastic investments. Few of the spokesmen in either political party show any signs of understanding this basic economic fundamental, much less doing anything about it. They often refer to our "free enterprise system," which is anything but free. What is needed, truly, is a return to the free market, a cessation of deficit financing, abolition of the progressive tax, and a whole new outlook oriented toward opportunity as the best path to security.
¹Balancing the federal budget, of course, would require some cooperation from the constituents of congressmen. For a further discussion of this point, see "Naive Nervousness" by Leonard Read in the August 1959 FREEMAN, page 32.