Freeman

ARTICLE

How Many Servants Can You Afford?

OCTOBER 01, 1976 by BERTEL SPARKS

Bertel M. Sparks is Professor of Law at Duke University School of Law, Durham, North Carolina.

The title for this paper began as, "How Many Servants Do You Want?" As that question was put to a few people chosen at random, a rather uniform pattern of responses began to appear. Almost everyone who was asked replied that he would like to have all the servants he could get, all he could afford, or other words substantially to that effect. No effort was made to assure’ the selection of a scientifically accurate sample, nor is there any claim that the answers received are characteristic of the population as a whole.

But regardless of how those points are resolved, it does appear a bit useless to consider the number of servants one might like to have without giving thought to the costs and conditions upon which the servants might be obtained. It was with that in mind that the title was changed to, "How Many Servants Can You Afford?" By putting the question in that form, it is intended to call for some consideration to the alternatives to having servants as well as an evaluation of the reasons justifying the choice concerning the number of servants a particular person might find desirable or appropriate for his situation.

For the purpose of this discussion, a servant might be a slave who is being held in bondage against his will, an employee who is working under a freely negotiated contract with his employer, a business partner sharing reciprocal rights and obligations with another, a supplier who is furnishing merchandise at a price the customer is willing to pay, or a party to any one of numerous other economic relations that human beings might enter into.

Serving Each Other

It should be noted that in each of these relationships the party being served is also providing some kind of service to the servant. The General Motors Corporation is serving the customer when it sells him an automobile; the customer is serving General Motors when he pays the price. Business partners are serving each other when they join together to pursue a joint venture. An employee is serving the employer by the service he performs; the employer is serving the employee when he pays the wages. Even the slave who is being compelled to work against his will is being served by the master when the master provides the slave with food, clothing, and shelter. Thus it is that every master is also a servant and every servant is also a master. It is a reciprocal relationship in which nobody is getting anything for nothing, and nobody is giving up anything without getting something in return.

But ever since Adam and Eve partook of the forbidden fruit in the Garden of Eden, the human animal has had a tendency to search for ways of obtaining something for nothing. It is an effort to get all the services possible while giving as little as possible. It is the impulse to say, "Yes, I want all the servants I can get—provided they don’t cost anything." And while some particular human beings might successfully deny that they have any such impulse, the fact remains that it is present in the vast majority of us.

And that impulse, that desire to get something for nothing, becomes an effective tool in the hands of the political interventionist. It enables one who is an interventionist or statist candidate to win votes by promising to supply the things the voter wants. He promises tariff laws that will relieve the businessman from the burden of foreign competition, higher wages to the laborer, financial security for the elderly, lower rent for tenants, urban renewal funds for the cities, higher subsidies for the farmers, food stamps and rent subsidies for the lower income groups, and guaranteed education and ideal medical care for everybody. The voter’s attention is so much centered upon the apparent attractiveness of the things being promised that he tends to forget that the office seeker making the promises doesn’t have any of these things to give. Neither will he have any of them after he gets into office. The only way the office holder can obtain any of the items promised is to seize the earnings of one special interest group and distribute those earnings to another such group.

Promises and Payments

But the things promised, at least some of them, do show up in the hands of the promisees; and the promisees continue to give their votes to the candidate making the biggest promises. One candidate promises to get sufficient Federal funds for urban transportation to maintain the artificially low-priced subway ride in New York City. Another promises sufficient funds to guarantee Kansas wheat farmers more income for less wheat than the open market is willing to give. Both candidates win. They meet in the cloak room on Capitol Hill, confess their sins to each other, and each one pledges to help the other deliver on his promise.

As the farmer collects the higher price for his wheat and the New Yorker enjoys his subsidized subway ride, each of them takes pride in the fine representative he has in Washington. As the farmer and the subway rider see it, each representative has just demonstrated that free servants are available, and that the honest citizen can get something for nothing—if he will vote for the right candidate. The New Yorker fails to see that his own taxes have been increased in order to pay the Kansas farmer to cut down on his wheat production so the farmer can get a higher price for what he sells; so the New Yorker will have to pay a higher price for his bread. In like manner, the farmer doesn’t seem to realize that his taxes have been increased in order to subsidize the urban transportation system, so the city dweller can enjoy a higher standard of living while lowering his own level of production; so the farmer will have the dubious privilege of paying higher prices for the tools and machinery he has to buy. The farmer and the subway rider are expropriating each other’s productive capacity and paying a handsome royalty to an unruly bureaucracy for the privilege of doing it. In the market place that would be called plundering; in the political arena it is known as social progress.

The wheat farmers and the subway riders are not the only special interest groups in our society. There are numerous others and they are all competing for attention. The skillful politician is the one who succeeds in identifying the special interest group or groups that can be used to put together a winning margin in his constituency. And for this purpose, the group need not be a majority or anything even close to a majority.

Throughout most of the political history of the United States we have had two major political parties, the voters being in approximately equal division between them. A shift of only a few percentage points is usually enough to win an election. If any one candidate can avoid upsetting that balance and at the same time find some special interest group to whom he can make enough promises to win an almost unanimous support from that group, he can usually be assured of election even though the special interest group is comparatively small. Once that politician is in office, he is in a position to use the powers of government to plunder other citizens for the special advantage of his particular group. The immediate temptation of the competing politician is to seek the votes of some other special interest groups by promising his brand of special privileges to them.

Competing for Favors

As the competition for votes increases, each candidate finds it necessary to broaden his base. He must make more promises to more people. As these promises are fulfilled, more and more people find it advantageous to lower their own level of production so they can qualify for larger appropriations from the public till. Direct payments to farmers for producing less is an example of this. So are rent subsidies and food stamps for the lower income groups and government loans or grants to failing businesses. The loan or grant to a failing business falls within this category because in its essence it is a financial reward for being an unproductive enterprise. At the other end of the scale some of the less-skilled members of society learn that it is more profitable to them to cease production altogether and rely upon the relief rolls for everything.

As this contest between candidates is accelerated and each candidate makes more and more promises to more and more people, society tends to become fragmented into competing groups. In such an atmosphere there is a tendency to neglect the basic rights, especially the right to equal protection, which the American Constitution guarantees to every human being simply because he or she is a human being. Emphasis is shifted away from the rights of individuals and toward the supposed rights of competing groups where each group is representing a particular special interest of some kind. The individual tends to be ignored or else he becomes swallowed up in the melee of oratory about the rights of farmers, the rights of business, the rights of women, the rights of teachers, the rights of minority races, the rights of the elderly, the rights of the young, and so on without end.

Justifying Failure

As each of the competing groups tries to justify its claim to financial assistance from the government, it bases that claim on its own failure to meet minimum production standards. The failure might have been the result of poor management by the failing party or it might have been the result of a natural disaster or other unforeseen event beyond the control of the individual or individuals concerned. But regardless of the reason, the economic expectations of some special interest group have not been met, and the government is called upon to supply the shortage. That is to say, the government is called upon to supply some "free" services. Unfortunately, the government has nothing to give to any special group except what it expropriates through taxation or otherwise from some other group.

The contest becomes a contest between producers and non-producers with the government aligned on the side of the non-producers. This result has nothing to do with whether government officials are honest or dishonest, wise or stupid. They are mere agents administering a system which the citizens, acting in their capacity as voters, have demanded. It is a system that includes in its own mechanism the seeds of its own destruction. The marginal producer, whether he is a laborer or a manager, cannot avoid seeing the advantages of allowing himself to fall below the survival line, cease his contributions to those who are still farther below, and qualify for a claim upon his government, and through his government upon his more successful competitors, for his own support. And each individual or business enterprise that takes that step will automatically draw the producer who is only slightly higher on the economic scale just a little closer to that same survival line. Eventually all are pulled below it and are faced with the necessity of beginning over again without any prosperous neighbors upon whom they can call for help and without any backlog of capital they can use as a starting point.

How many servants can you afford? Not many, if the servants are government agents offering their services "free." Their cost is too high. Being a system based upon rewards to nonproducers and penalties for producers, the system’s ultimate end is the destruction of both rival groups and itself as well. Servants who are voted into their jobs upon their promises to give something for nothing are too expensive in a world of scarce resources. That which "free" servants give to one must be seized from another. And since the method of seizure is such that it tends to discourage production, there are fewer and fewer goods available to be seized.

The Exchange Economy

But if human existence is to be maintained in any form other than in its most primitive state, there must be servants. There must be some form of sharing of benefits and burdens. If each individual must retreat to a state of nature and procure his own food, shelter, and other provisions with his own hands, he will be lucky to find time to rear his young, to say nothing of accumulating any of what are now referred to as the amenities of civilization. This is true regardless of the skills or abilities the individual citizen might possess. His economic development cannot advance very far unless there is some sharing of responsibilities, some division of labor.

Our hypothetical citizen of that primitive society might be an especially skilled shoemaker. He might even be the best shoemaker of his generation. But if he has to raise his own vegetables, catch his own game, make all his own clothing, and do all the other things that are going to be done toward his own preservation, he will have very little time left for shoemaking.

If he happens to have a neighbor whose talents lie in the direction of the hunt and the catching of game, the two of them might work out an arrangement whereby one is to procure and supply the skins while the other makes the shoes. As each neighbor pursues the particular trade for which his skills and inclinations are best adapted, each one of them will be able to have better shoes with less effort. They might even divide the meat that accumulates as a by-product of their shoe business and improve their eating habits. The division of labor will have begun and each of the two participants will have discovered that he is better off than he was before. Each one is a servant of the other and each one is being served by the other. It is a willing exchange that is serving to enhance the material well-being of both parties to the transaction. Just when and how that development occurred is lost to antiquity. But that it or some similar development did occur at some time appears to be a virtual certainty. And as soon as that step was taken, the idea that a trade which results in a gain to one party is necessarily a loss to the other was exploded and a new industrial era was born. Both the shoemaker and the hunter benefited from their trading with each other. Each one gave up a commodity of which he was in long supply, and each one received an item of which he was in short supply. The balance of trade was maintained.

But before such an exchange economy could operate very satisfactorily, a few other conditions had to be met. The shoemaker needed some assurance that his store of skins could be protected while they were waiting to be manufactured into shoes, and that his store of shoes could be protected after they had been made and while they were waiting for trade. He also needed some assurance that his contracts would be honored and that he would be able to walk around outside his shop without being murdered or exposed to other kinds of physical violence.

To meet this need, governments were established whose function it was to prevent murder, stealing, and other forms of violence, as well as to restrain deceit, perjury, the breaking of contracts, and similar forms of antisocial behavior. To enable the government to carry out these functions, it was given the exclusive right to use force upon other human beings. The government became a kind of organized self-defense through which the citizens managed to shield themselves from the necessity of providing their own individual self-defense.

A Considered Risk

In delegating the exclusive right to use force to the government, humanity took a dangerous step. It was dangerous because it clothed government with the power to use its newly acquired force to impose tyranny, or even slavery, upon its citizens. And when such a power is present in any people anywhere, there is also present a risk that the power might be exercised. While the risk involved in delegating that kind of power to any government is always high, the value of having a government clothed with such a power is also high so long as the government can be confined to its proper function of keeping the peace, protecting private property, and enforcing contracts that have been voluntarily entered into. Humanity chose to assume the risk.

With the protection afforded by an apparently responsible government, the shoemaker and the hunter were ready to continue their convenient trading arrangement with confidence in spite of the high-risk burden they were carrying. It can well be imagined that such an ingenious pair of fellows as these soon located a third neighbor who preferred the growing of fruits and vegetables to either catching game or making shoes. A three-way arrangement was worked out to the mutual advantage of all three participants. As each member of the trio pursued his own chosen occupation, the three of them were able to enjoy better shoes and more meat and vegetables with less effort than was possible as long as each one was left to the elementary pursuit of all his own needs. There was more time to think, to plan, and to make better tools which resulted in still further improvements in the standard of living for all participants.

The Economy Develops

As soon as the advantages of this limited division of labor were felt, other entrepreneurs began to follow the example set by the three hypothetical industrial pioneers. Other specialties were developed. Each newcomer who entered the field soon learned that there was only one way by which he could gain anything from the arrangement. That way was to produce something that somebody else wanted and offer that item in exchange for something sought by the offerer. No one was offering goods or services "free." It was a voluntary, exchange economy that presented a drastic contrast to the hostile economy of our present era in which each business or occupational group is calling upon government to apply force to compel other producers to share their wealth with the disgruntled party without regard to whether the disgruntled party has anything to offer in exchange.

As the trading community expanded, the three original entrepreneurs were probably amazed at their own success. As the shoemaker’s skills became more refined, he found himself making more shoes than could possibly be worn by himself, his family, and his immediate associates. His production was improving in both quantity and quality. By using the excess shoes in trade, he was able to procure his groceries, his trousers, his home, and even his medical care. Other artisans had entered the toolmaking business and were offering to supply the shoemaker with a new and improved line of tools in exchange for some of his shoes. More advanced specialization was on its way. The shoemaker soon found that it was more profitable for him to completely abandon all work except shoemaking. Other things he needed were being offered to him in exchange for his efficiently produced, high quality shoes.

Each artisan, farmer, laborer, manager, or whatever soon learned that when he devoted his attentions to the particular trade that was most adaptable to his particular interests and abilities, he could maintain a higher standard of efficiency than was otherwise possible. With each one concentrating on the thing he did best, the aggregate productivity was elevated. With each member of the community free to trade his surplus commodities for other commodities of which he was in short supply, each one was in a position to elevate his personal standard of living for the mutual benefit of all. To say that each one was acting as a servant of someone else and each one was being served by someone else would be a gross understatement. The truth is that each one was being served by numerous others, not all of whom could ever be identified; and each one was serving an equally large and equally undefinable group who were out there somewhere and who were unknown to the party or parties rendering the service.

Spreading Competition

Have another look at the shoemaker. It is obvious that he is being served by the suppliers of raw materials, food, clothing, and other commodities that are being traded directly for shoes. But is that all? What about the would-be suppliers who would like to trade their goods for shoes but haven’t succeeded in doing so? Their problem seems to be that there is a limit to the amount of food the shoemaker can eat or the number of pairs of trousers he can wear. A competing supplier tries to offer a better quality of goods for the quantity of shoes he wants or else he offers a larger quantity of goods of the same quality the shoemaker is accustomed to receiving.

Whether the new competitor will succeed in his efforts can never be known until after he has tried. But even if he never makes a sale, he is likely to become one of those hidden or unknown servants of the shoemaker. His presence in the market place with his attempt to make a sale is likely to put sufficient pressure on the old suppliers to cause them to improve their own offerings. The shoemaker is likely to get better food and better trousers even though he continues to trade with the same suppliers. The competitor who failed as a trader will have succeeded in bringing about that indirect result. Unwittingly, he became the shoemaker’s servant in a way he had not anticipated.

As the trading community expanded and competition became a more significant factor to be reckoned with, other forces were at work all along the line. Other toolmakers were competing for an opportunity to get their shoes by furnishing the shoemaker with more and better tools for his trade. Since the shoemaker was free to obtain his tools wherever he wished, he tended to do business with the artisan who could give him the best service at the lowest possible cost. The result was that he soon had a vast array of servants competing with each other to determine who could provide the best tools at the lowest cost to the shoemaker.

As better tools at lower cost became available, the shoemaker’s cost of production declined. He was faced with the choice of either lowering the price of his shoes or else leaving the door open for a competitor who might acquire the more efficient tools and place a competing line of shoes on the market at a price designed to undersell the original producer. Whichever route was taken, the resulting advantage was to the people who wore shoes. Now whose servants were all those competing toolmakers, some of whom actually supplied tools to the shoemaker and some of whom didn’t? They were at least the servants of all people who wore shoes.

The fact is that the services of the toolmakers extended well beyond the wearers of shoes. As the cost of shoes declined, the wearers of shoes were left with more resources to devote toward improvements in the production of food, clothing, housing, education, recreation, or whatever else they happened to desire. The toolmakers were servants of all these people.

But what happened to the toolmakers who failed to sell anything to the shoemakers? There was no set pattern. Some of them discovered that they were unsuited for the toolmaking trade. They entered other occupations. Most of them probably made only minor adjustments in their designs and made tools for the clothesmakers, the farmers, the hunters, the tanners of hides, or anyone else who might have been in need of tools or machinery. Their competition with other toolmakers taught them the art of adaptability.

Result: The Free Market

What emerged was a system of cooperation through competition. It was the free market. It was a system in which there was no possibility of gain for anyone without his offering some good or service that others wanted. It was a system where a gain was guaranteed for everyone who did make such an offering. Free trade means the absence of coercion. And in the absence of coercion, no one is likely to consciously give up the goods or services under his control unless he intends to make a gift or else he gives up the good or service he has in order to get something he wants more. There can be no exchange unless each party to the transaction receives something which he subjectively values more than he values the things he gives. Each party is necessarily the servant of the other. And as long as individual choices are left unhindered in the market place, trade necessarily remains in balance. Shortages are avoided. No computer has yet been invented that is capable of keeping an economy in such perfect harmony as is accomplished automatically in an unhindered market. Thus far all our discussion of the developing market system has been approached in terms of a barter exchange. Emphasis has been upon the exchange of goods a trader has but wants less for the things he does not have but wants more. No doubt that is the way it all began. But industrial progress cannot advance very far on the economic scale until there is a medium of exchange. Some of the transactions already described would probably not have taken place had there not been a medium of exchange to assist the transaction.

A farmer who was specializing in potatoes might have found that the shoemaker was already supplied with potatoes and therefore not interested in giving up a pair of shoes for any quantity of that commodity. The farmer might have traded his potatoes for some other commodity, maybe corn, tobacco, whiskey, a precious metal, or some other item, that was comparatively imperishable and had a fairly uniform value throughout the community. He then traded that commodity, or a portion of it, to the shoemaker for a pair of shoes. The shoemaker might or might not have been interested in consuming the corn, tobacco, or whatever the medium was, but he had confidence that it would be acceptable in trade for merchandise he did want. He had discovered a commodity that was convenient as a medium for facilitating an indirect exchange and also convenient as a store of value for future use.

The story of just how a medium of exchange was developed and how it operates is a fascinating one, but it is sufficient for present purposes to say that it did come and that an industrial economy was developed. After several generations and many transitional steps, the lonely shoemaker became the Amalgamated International Shoe Company and the toolmaker became the Consolidated Machine and Foundry Corporation. Both companies were surrounded by other industrial giants of comparable magnitude. Each enterprise was out seeking the greatest gain possible for itself. In such a world as that, how many servants can you afford? How many are already available? Look and see!

Johnny’s Servants

Have a look at a man named Johnny who is an individual in a remote section of the United States in the 20th century. He does not own any stock in any corporation, has only a grade school education, and is employed as an unskilled laborer in a small textile plant which, with its 65 employees, is the only industrial enterprise within 50 miles of where Johnny lives. How many servants can Johnny afford?

It has already been observed that in the government-regulated economy where government is in the business of seizing from the producers to reward nonproducers, servants are pretty expensive and pretty self-destructive. This is especially true of a fellow like Johnny who still has enough pride to continue to work, even at what are probably comparatively low wages. He prefers even that to accepting government aid. By continuing to work, he is paying taxes to support some of his nonworking neighbors who have already given up the struggle.

What would be Johnny’s chances in a free market? How many servants could an insignificant fellow like him afford in that setting? How many servants is the market providing him already? First of all, the textile company is serving him by furnishing him a job. Needless to say, Johnny is also serving the textile company by furnishing his labor. That’s the way it is in the free market; everyone who is receiving service is also giving service.

It is in the economic interest of the textile company to get as much work as possible from Johnny while paying him as little as possible. But even in that isolated community there are limits to how low the wages can be reduced. The lower limits are not controlled by the textile company either. About 125 miles away there is an automobile assembly plant that is in need of workers and is paying about twice the wage scale being offered by the textile company. Johnny likes his home and doesn’t want to move to the larger city, but he can go there if he chooses to do so. The automobile company is serving Johnny by keeping his wages as high as they are even if Johnny never sees the inside of the assembly plant. Johnny can continue to live with dignity in his home town. Johnny gets his shoes from the local retail store which gets them from the Amalgamated International Shoe Company. As an individual, Johnny is not very important to Amalgamated. He is only one customer. But if Amalgamated raises its prices or fails to give satisfactory service, there are at least a half-dozen other shoe companies watching for an opportunity to sell shoes to Johnny. The only way any one of them can make a sale to Johnny is by offering him a better shoe at a lower price than Amalgamated is offering. And if any one of them is able to make Johnny a better offer, Johnny will grab it; and so will a lot of other Johnnies who are out there somewhere. When that happens, Amalgamated will be in a difficulty it would prefer not to face.

Although Johnny as an individual customer might not be important to Amalgamated, Johnny plus all the other Johnnies, most of whom are unknown to each other, constitute the real market Amalgamated will have to satisfy if it remains in business. The result is that Johnny has the services of all the competing shoe companies who are competing with each other for better ways to make shoes for Johnny at a lower price. In their efforts to get business for themselves, they are helping to keep prices down and quality up at Amalgamated.

What has been said about Johnny’s job and his shoes is true of his groceries, his automobile, his clothing, and all other goods and services for which he has any desire. The whole world is striving to give him more of the things he wants at lower prices than he is now paying. They are not striving toward that end because of any moral goodness they might have nor because of any special love they have for Johnny. They are striving to please him because that is their only route to their own economic survival.

Coercion or Freedom?

How many servants can you afford? If all depends upon whether you live in a coercive, regulated economy or in a place where the free market is permitted. In the coercive economy where production is penalized and nonproduction is rewarded, your servants are quite expensive and in diminishing supply. By their very nature, all of them will eventually disappear because the group receiving the rewards will necessarily outlast the producing group from whom the rewards are being seized.

On the other hand, the free market is characterized by an absence of coercion in the economic field. Without coercion there is no way for anyone to enhance his own material well-being except by offering for sale a good or service at a price someone else is willing to pay. Since the only way to improve one’s own well-being is by offering better service, the only competition possible is a competition for excellence. Since it is competition for excellence in service to each other, it is a competition that is synonymous with cooperation.

When the individual takes an honest view of his personal wellbeing, he is likely to find that in so far as the free market prevails, the whole world is competing for the privilege of serving him better. At that point the question is not, "How many servants can he afford?" The question is, "How many servants can he afford to be without?" How long can he afford to allow the coercive power of his government to continue to set roadblocks in the way of the servants otherwise available to him? 

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October 1976

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