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ARTICLE

Perspective: On the Inside

AUGUST 01, 1988 by JOSEPH S. FULDA

The transmission and use of so-called inside information has been made to seem invidious by the recent hit movie Wall Street. Passing “inside” information is, in itself, a mere exercise of free speech and a benign one at that, since the information is true and the spread of the truth is no evil. In the movie, though, the information was gained by filial betrayal and by cloak-and-dagger operations that would embarrass the CIA.

Likewise, the use of true information to guide one’s actions is paradigmatic human rationality. So- called market manipulation—buying low and selling high—is no more than any businessman does, and the better his knowledge of when something is undervalued, the greater will be his profit. Moreover, it is impossible to draw a clear line demarcating “inside” information from other information. In the movie, though, the information is used for both revenge and betrayal—to hurt people.

Movies like Wall Street, as entertaining as they may be, do little to enhance public understanding about the realities of the business world. Instead, they create undeserved animus and lead to erroneous generalizations. How unfortunate.

Joseph S. Fulda

Hofstra University

Overcoming Racism

I have found that if you can make yourself indispensable to people, if you can produce a product that is better than any other product, if you can give people something that they cannot get anywhere else, they will forget about race and they will forget about everything of that nature. I don’t run into a lot of prejudice with anyone if I’m making money for them; I don’t have any problem with my printer; I don’t have any problem with anybody if they need me. And so what we need to do, we need to make ourselves indispensable. We need to be so good at what we do that people need us, and if they need us they will support us.

—John H. Johnson,

Chairman The Johnson Publishing Company

publisher of Ebony and Jet

Steel Blues, Part I

In 1984, the Reagan administration persuaded major steel exporters to restrict their shipments to the U.S. market. The goal was to reduce the share of steel imports from 26 per cent to 22 per cent of total domestic sales and, in the process, to create jobs in the beleaguered U.S. steel industry.

Did the plan work? That depends on how you look at it. According to a study by Washington University economist Arthur Denzau (“How Import Restraints Reduce Employment,” published by the Center for the Study of American Business), by 1986, the “voluntary” trade restrictions had added an estimated 16,900 jobs to the U.S. steel industry.

But the restrictions also raised steel prices, making it more difficult for U.S. auto makers and other American producers who use steel to compete in world markets. Because of the trade restrictions, Denzau found, the U.S. metal fabrication industry lost 26,000 jobs, nonelectrical machinery lost 11,800 jobs, electrical machinery suffered 4,600 job losses, and transportation equipment lost 7,600 jobs.

The net employment effect of the trade restrictions: the loss of more than 35,000 American jobs.

—BJS

Steel Blues, Part II

Caterpillar Inc. of Peoria, Ill., is having trouble getting the steel it needs to build tractors for a $2.2 billion export business that employs 14,000 people. The company has asked U.S. mills for more steel, but the mills cannot deliver it. Nor can Caterpillar get steel from overseas, because U.S. quotas imposed in 1984 limit imports. The shortages are now constricting Caterpillar’s exports . . . .

Steel import quotas are forcing Davis Walker Corp., the largest steel wire maker on the West Coast, to pay a 10 percent to 15 percent premium over world prices on its steel . . . .

Scotchman Industries Inc., a machine tool maker in Philip, S.D., has seen steel prices from domestic mills rise 17 percent to 25 percent in the past year . . . .

Quota-induced price increases are filtering through to housing prices, says John P. Hayes, chairman of National Gypsum Co. of Dallas, because steel is a large component in construction. “If we have a demand for, say, 1.5 to 1.6 million houses a year, and we can only sell 1.3 to 1.4 million because of high prices, why that means all of those jobs for people to build to that demand level won’t be there,” he says.

Insight, March 14, 1988

The Unseen Governors

Several years ago I began asking students in my college class to tell me who keeps order in Grove City, Pennsylvania, a town of 10,000, when college is in session. They invariably responded, “the local police,” or “the Pennsylvania State Police,” or “the campus security officers,” and then, sometimes, “the Dean of Men.” The students were convinced that societal peace and order were produced almost entirely by what might be called the visible governors-most often officials of the State. But then I pointed out that in our town, if just 500 citizens decided to do wrong, our dozen local policemen, a handful of security guards and the officers of the closest state police barracks ten miles away would be hard pressed to bring the five per cent of the population under control. “How,” I ask them, “could order ever be maintained if all 10,000 people set out to disobey the law?” The orderly existence we enjoy in towns like Grove City is not the product of the threat of statist force. The orderly and free society we have is due primarily to the presence of unseen governors—not primarily to billy clubs or the rotating red light of squad cars. To emphasize, order in communities results from the inhibiting (dare I use that now disreputable word) restraints of morals, religious convictions, conscientious scruples, and the regularizing and meliorating bonds of custom, tradition, usage, and observance.

—John A. Sparks

Grove City College

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August 1988

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