The Issue Of Our Time


Mr. Palmer is Judge of the Superior Court of the State of California, in and for the County of Los Angeles. This is a condensed version of the longer essay which appeared in the American Bar Association Journal, November and December, 1954.

A world-wide war of ideas is being fought today between two types of capitalism: control by government versus control by individual owners. The freedom of men’s minds, as well as future material progress, rests on the outcome.

Some time, far, far away in the unsearchable distances of time, a being that moved upon the earth awoke one morning to be the first terrestrial capitalist. He had not consumed, destroyed, discarded, or abandoned all the gains of his yesterday’s activities. He had attained, if only instinctively, a sense of the future; and he held possession of something which, he felt, would be of value to him, utilitarian or pleasurable. He had discovered the thing that he held, or had captured it, struggled for it, or himself had fashioned it entirely or in part; and he had a feeling that the thing belonged to him, that it was his, now a part of his total self. It may have been a nest, a hole in the ground, a cave; it may have been food, feathers, bones, or a hide; it may have been a stone, a stick, or a club. Whatever it was, it was a start against future time; to this extent his past efforts had been consolidated; he had something with which to start the new day, something for which he would not have to grub in this new interval of awareness. And, hence, he could direct his attention to other activities; or he might choose a compensating leisure.

From that day to this, the essential and simple nature of capitalism has not changed. It is still waking in the morning and finding that you have something with which to start the new day; something that belongs to you and into which your past labors have been consolidated; something that you did not expend, consume, waste, or gamble away; something that makes it not necessary for you to spend this day moiling for raiment to wear, or for food, or for shelter for the storm or the coming night. Your clothing is ready for you; your breakfast is in the refrigerator and on the shelves; your car is in the garage; the streets have been paved; an of-rice with its desk, files, books, and equipment or a plant or shop with its machinery and tools awaits you; your children are taken to school by bus, streetcar, bicycle, or private car; a building with desks, books, blackboards, and all necessary equipment is housing them comfortably in the pursuit of education. The day moves by, your of-rice is closed, your tools laid down, and thanks to a thousand items of capital in stores and at home, your wife, although busy at P.T.A., club, or church through the afternoon, spreads a wholesome and appetizing dinner before you. Your lounging chair, your pipe, push-button electricity, thermostatically-con-trolled furnace, newspaper, radio, television, phonograph, books, cards combine to offer an evening of recreation or enlightenment as you choose. And then to bed: an inner spring or foam-rubber mattress, clean sheets, a soft pillow, warm coverings, and, if needed, an electric blanket!

All this is capitalism, and all this is all there is to capitalism in its essential nature.

To any adult person of average mental stature these facts must be clear:

1. Capitalism is the natural and necessary incident of the evolution of mind; it is the vehicle of and almost a synonym for progress; it is as necessary to a civilization of any level or quality as oxygen is to human life.

2. The ideal economic goal of any aspiring society is a state of general advancement wherein the greatest possible number of persons are individual capitalists; and the capital that each can call his own is such as to sustain a reasonable pride in personal achievement and to provide gratification, comfort, confidence, and a basis for security.

3. No progress toward that goal can be made by socialism. Its doctrinal essence calls for destroying the individual capitalist, except only in a restricted and always-controlled degree, and for destroying his opportunities. Not confessedly, but by logic and experience, it leads to the atrophy of those faculties of independent initiative, self-confidence, self-reliance, imagination, and daring, of the drive of ambition for personal achievement, of the competitive spirit and of the will for voluntary self-directed discipline—all factors in the making of individual capitalists.

4. Manifestly the goal cannot be achieved by government. Wise government, of course, is vital in curbing the libertine and providing the protections necessary for individual development and attainment. Obviously also, government, in varied ways, either can encourage and promote personal economic accomplishments or can discourage, retard, and obstruct them.

5. The ideal economic goal can be achieved only by individuals themselves and hence can be drawn closer only by those factors that improve the quality of individuals.

A world-wide, fateful war is being fought today between two types of capitalism. At stake in that conflict are not only the earth’s capital assets but also the freedom of men’s minds. One of the protagonists, which loosely is called communism, in its aggressive campaign to entice and subjugate the human mind, has an expedient in its own fanatical self-deceptions and in its unrestrained approval of beguilement by designed fraud.

The first self-deception and fraud of communism resides in the premise that it has something which is not capitalism to substitute for capitalism. Clearly there is no substitute for capitalism except to climb into the time machine, push the button for reverse, and travel back through millions of years to a time when no animal on earth had a non-transient nest, shelter, “home” of any sort, tool, weapon, or cached food. What communism does is to install, with the support of armed might, the worst kind of capitalism, i.e., monopolistic and gangster, as distinguished from the best kind, the kind which is competitive and open. Capitalism is open when no law or custom bars anyone of any level of society from joining the ranks of the capitalists.

In the comparatively open capitalism of the United States, each person’s opportunity is measured by his own personality, ability, aptitudes, health, ambition, industry, integrity, imagination, and daring; and, in all frankness, let us add the “breaks” of the game. They certainly often and perhaps usually go to those who make them, and they have no significance except as they go to those who are qualified to take advantage of them.

We are told now and then that a “concentration of wealth” exists among a small percentage of families in the United States. We have in our country, too, as they have in all countries, a concentration of intelligence, culture, talent, knowledge, and leadership. In any regime providing free opportunity, a small percentage will rise to the top. This fact does no social injury if the way is kept open for all persons to strive toward the top and for each to go as far as he can. Indeed, it is the law of progress that a few individuals first must go to the top, to demonstrate the possibilities and opportunities, to show the way, and to help others to follow.

Competitive and open capitalism leads to a diffusion of capital which is both impossible and inconceivable under the monopolistic capitalism of the socialist.

In 1952, of all family units in the United States, 82.3 per cent owned life insurance, 52.8 per cent owned savings accounts, 90.7 per cent owned one or more of nine favorite forms of solid investment, not counting the owners of real estate. Millions of our people own real estate. Six and a half million people owned the shares of stock in 5,000 corporations. Among these family-unit shareholders, 200,000 received annual incomes of less than $2,000.* But in 1952, we had not merely 5,000 business and industrial units in the United States; the average number of operating businesses through that year exceeded 4,000,000, representing, no doubt, many times that number of owners.

* ”Who Owns Business?” in Fortune 46: 87. September, 1952.

Shortly we shall see who owns the capital assets under a communist regime.

The second self-deception and fraud of communism derives from its foundational premise that the people as a whole, or the proletariat, can and shall own the capital and economic processes of a country.

The words “own,” “belong,” and “ownership” are only words. They do, of course, denote a concept to most of us, and that concept is quite well defined in the California Civil Code, section 654:

“The ownership of a thing is the right of one or more persons to possess and use it to the exclusion of others.”

It is clear that public ownership, even in its best sense, is a different concept; for no one would contend that public ownership is the right of all of us actually to possess and use a property. Neither would any thoughtful person contend that the mere fact of property standing of record in a government’s name makes all of us in reality the owners of it by any concept of ownership that we understand. The few officials who at any given time have control of public property come closest to its ownership in a practical sense which conforms to our concepts of possession and management. Plainly the people as a whole cannot have the control and management of any item of property; nor can they have possession of it, in the sense that individuals singly or jointly can possess property.

In practice the professed communizer is compelled by elemental facts beyond his control either to negate entirely his theory of common ownership or to compromise it. Regardless of beginning sincerity, the tendency, which may be irresistible, always is toward the former course.

Let us compare the kind of ownership actually effected by a communistic regime and that exemplified by a typical American corporation. Under communism, a nation’s capital assets are in the absolute control of a handful of individuals over whom the people have no control. This same small group control the lawmaking, courts, and all means and avenues of public communication, information, and education. They also control the ubiquitous secret police. Having no competition, and no watchdogs over them, and having and exercising power to stifle brutally any criticism or nonconforming expression, they can be grossly inefficient, as compared with good private management, without the public knowing the facts or the cause, or being able to do anything about the matter. Their prime object at all times is to maintain their own position and their own power. At this they are cunning, cruel and relentless. These few actually own the nation’s capital assets, and they do with those assets as they please. They are capitalists of fabulous magnitude. They, of course, do not please to dangerously defy or ignore the goodwill of the people. In spite of all their power, they, too, hunger for plaudits, and they harbor continual fear. As Elbert Hubbard once said, “there is no freedom on earth or in any star for those who deny freedom to others.” But without any independent vehicle of information and without any factor of control, the people must accept without audible or visible complaint what they receive from the tyrant-capitalists of communism.

A certain typical American corporation has about 200,000 stockholders, no one of whom owns as much as one per cent of the stock. At least once a year, every stockholder has a right to vote for the directors; and he does not even have to be present at a meeting to cast his vote. He may vote by proxy. The voting is voluntary and the counting is honest. Special meetings may be called on notice. The stockholder can sell his interest in the corporation or otherwise deal with it at any time he wishes. It is identifiable, precise, and immediately valuable to him. He has a right to inspect the books of the corporation at any reasonable time. Any question he may put to the management about the business will be honestly answered and with reasonable promptness. To him the directors are legally responsible in the most enlightened moral sense, and they carry that responsibility seriously. They pay him regularly his pro rata share of distributable net income. Their books and financial records are watched over by certain of the ablest certified public accountants, whose professional ideals and obligations require their conscientious efforts in the keeping of honest records and the making of accurate reports. The corporation has competition. It does not control the government although it pays taxes to support all governmental activities. Of necessity, the business is genuinely dedicated to the public welfare because its profits and its continued existence depend on such dedication. The management-personnel and the directors have been chosen not because they belong to a clique, a gang, a party, or a conspiracy, but because of proved ability and character.

Two hundred thousand regular American citizens really own the assets of this corporation, and each actually owns and can deal with his own share; and, what is more, anyone else, no matter who he is, if he has or can save a little money to invest, can become a part owner, too.

In the typical, successful American corporation, democracy has at-rained its finest and most convincing expression. Compared with it, the communist concept and practice of ownership are such a dissolute sham that even the past in human history would be ashamed to acknowledge a prototype.

In the communist ideology, the ownership by the proletariat of all the economic processes is a theoretical necessity. It is postulated that only by such ownership can the workers receive the total return from their labor; that they then do not have to share any of the return with stockholders and other proprietors who are a nonproductive class riding on the backs of the proletarian workers.

Howsoever plausible this doctrine may seem to the gullible, any dialectical validity indicated by it fails completely of substantiation in the actual operation of the socialist regime. In the acceptance and advocacy of the foregoing theories resides the third self-deception and fraud of socialism. Before confronting the reasons for the certain failure of the theories, let it be noted by contrast that the real ownership of their own business by workers is an old idea and actuality under open and competitive capitalism such as exists, however ira-perfectly, in the United States. Here the hope and effort of free-dom-loving, clear-sighted citizens ever has been that we might be free of laws, customs, or insurmountable difficulties which would bar workers of ability, imagination, and good character from establishing, owning, and conducting their own business.

According to the Statistical Abstract of the United States, there were in this country in 1950 over 9,500,000 self-employed workers. By their own free choice, these persons owned the businesses in which they worked, and they received all the profits.

The socialist tenet that the workers can receive all that they produce under socialism and, hence, will receive more than workers under competitive capitalism, promptly runs into an impasse when socialists take over. Workers under socialism—monopolistic capitalism—have to be paid a wage to live, just as workers are paid a wage under the competitive capitalism of our country. A difference does exist: The wage is much greater in the latter case. If the worker is to have a share of profits above his wage, profits must be made. But profits are taboo under socialism. They are the supreme evil that socialists propose to end. If any profits were made in one business or industry, to be divided among its workers, those profits would have to be paid by other workers; and thus the sole purpose of socialism would be defeated. So the worker under socialism receives the wage arbitrarily fixed by the rulers, and no more.

Good reasons exist why the few fabulous capitalists who own all the economic processes under communism do not pay higher wages than they do: (1) One reason is that even they must have capital assets-buildings, machinery, tools, etc.—and these must be paid for, maintained, and replaced in one way or another except insofar as they are stolen. Communists do seem to have an initial advantage in their doctrine of theft. Force is an essential part of their creed, not merely to gain control of government, but to effect the theft of the people’s property. This method saves capital investment as they see it. The advantage, however, if it is such, is short-lived. Depreciation and obsolescence respect neither theories nor tyrants. Of greater significance is the fact that the unmoral atmosphere and principle of theft, with the concomitant faith in dishonesty, cunning, compulsion, and terror are definite deterrents to efficiency, economy, and zeal in operation and production. And no permanent scheme ever has been devised whereby more can be divided among workers than they have produced.

(2) No Utopian theory alters the fact that the cost of labor is one of the major costs of any operation in the economic field. Whether or not the despot-capitalists of communism have a profit-motive, they do have the motive of saving their own necks and their power; they live under the continual fear inherent in the psyche of the tyrant; and, forever fearing the ill will of their subjects, they have an incentive to hold down production costs, and hence labor costs, in each particular industry, lest for its products or services workers in other fields must pay disproportionately. Their ideology provides no escape from the difficult, practical problem of balancing what is paid to labor at one point and what is paid to it at another. Neither do their theories alter the fact that the economic effort in which active persons are engaged under any regime is the effort for each to trade his own labor for as much of the labor of other persons as he can obtain.

(3) The worker of the communist oligarchy cannot eat military equipment or find in it shelter or raiment for his everyday needs. No power exists to curb the will of his overlords to divert into the makings of war a substantial part of the worker’s effort and production. The licentious exercise of that will is a certain incident of the despot’s fear. Neither do the workers of the communist state have any means of restraining their masters from diverting into the sumptuous provision and living of those masters and their courtiers as much of the workers’ labor as the despots choose to appropriate.

Now let us take a look at the anathema of socialism, the stockholder under open and competitive capitalism. His investment, derived usually from his own industry, thrift, and savings, is hazarded. Indeed, the stockholder carries all the risk of the business adventure. None of that risk burdens the employee, unless he also is a stockholder, in which case his risk is as a stockholder, not as an employee. None of the risk is carried by government although, as we shall see, government receives a large part of the profits. This venturing stockholder is not promised the return of his capital or even any sum for its use, except conditionally, the condition being a profitable operation. He takes his risk, knowing that millions of stockholders have lost. No dividend that ever will be paid him will be charged as an expense of doing business. Labor must be paid, taxes must be paid, all other costs must be paid before the stockholder reaches the river of some return. One of the most flagrant of all the fallacies of socialism is that stockholders constitute a class separate and apart from the rest of society. Let us grant that some of them are not engaged in what the communist would call a productive activity.* It does not follow, however, that such stockholders are useless members of society or that their dividends, if any, do not benefit society. Quite the contrary is likely to be true. Many stockholders are regular daily workers. They use their stock investments to build up an educational fund for children, a reserve for illness or other misfortune, a source of security in old age, or a capital asset for any opportunity or need that may come their way. Many stockholders or their beneficiaries are schools, colleges, foundations, and institutions for various kinds of constructive and benevolent activity. Many of them are habitual investors in launching new enterprises or extending old ones, to provide employment and to serve society with new products or conveniences. Many of them are elderly people whose dividends from their past labor and thrift are their sole support in the sunset years, and who proudly receive no support from government. Many are widows, maintained by dividends from the prudent investments of husbands now deceased. Many of them are business institutions using the dividends to pay regular monthly retirement allowances or disability benefits to former employees. No dreamer of Utopian dreams ever devised a more certain, healthier, socially-beneficial method of caring for the widow and the elderly, of maintaining private educational and other cultural institutions, and of financing charitable activities, than dividends.

* Neither are millions of persons in any communist hierarchy.

The existence of stockholders has an incalculable effect upon the efficiency and economy of business management. Directors, officers, executives know all that has been written here and more about stockholders. They are aware of all that depends upon their management. Unlike the few supreme overlords of totalitarian capitalism, officers of American corporations are servants of a fair, intelligent, and reasonable master, the stockholder. To that employer, the managers, with rare exception, account for their stewardship in accord with the finest traditions of honor and of trust responsibility.

We need to note another fact to appreciate the amazing contribution of the stockholder to our economic well-being. Before me are data concerning three typical American corporations. The data reached my files in a random way and without any selection. The reports could be thrown away, and any of numerous substitutes could be used to tell a similar story. In the goods and services alone which they economically provide society, these three corporations are institutions of inestimable social value. But look! In a recent, unexceptional calendar year, one of the corporations paid taxes in a sum equivalent to $5.50 a share of its common stock; but it paid to its stockholders dividends of only $2.00 a share. Another paid to the federal government alone taxes equivalent to $6.77 a share of common stock, a sum two-and-a-half times greater than the dividend paid! The third company’s local, state, and federal taxes amounted to two-and-a-half times the dividends paid on common stock.

So this is our American stockholder, the man or woman who takes all the risks of business, prepared in spirit and fortitude to suffer its losses, providing all the buildings, machinery, and tools for the workers, paying them the best wages in the world, and delivering over to government, which has carried no risk and no responsibility, for the use of all the people, two-and-a-half times as much a share as the stockholder himself receives. And he, too, pays additional taxes on what he receives!

A fourth self-deception and fraud of the socialist comes from the hypothesis that a handful of planners in control of a nation’s economic processes can plan and handle those processes to better advantage for the people than the people can if free to use their own resources and resourcefulness, their own inventiveness and genius, and to direct their own energies to the supplying of their own and others’ needs and wants.

Experience has given reasonable minds consistent, persistent, and altogether adequate proof of the delusive quality of this Utopian dream. In American history we had an early lesson in the falsity of the hypothesis. One significant reason why the English colonies made greater economic progress than the French was that the former had more independence of initiative and action in economic affairs and fewer directives and restraints from the planners at home.

But if trial and experience had not proved convincingly the falsity of the hypothesis, its error would be clearly indicated by known natural facts. Nature does not concentrate her resources into the possession of any few entities. Billions of stars and millions of galaxies are in her heavens; on earth, the variety of her creation, in relation to any person’s knowledge, is infinite; among human beings, aptitudes and capacities are so widely distributed that no one can foretell where talent, extraordinary ability, or genius will crop out. In this fact lies the second most cogent, practical justification for freedom. The first lies simply in the spirit of the individual man, which no other person has authority to dominate, and in the inalienable rights that derive from that fact. Men must be free if society is to receive what nature intends that it shall have and what she is prepared to give. No handful of dictatorial planners can even conceive more than the tiniest fraction of the varied contributions that people, if free, could and would make to cultural and economic advancement and to varied utilitarian values in their society. This would be true even if the dictator-planners were persons of extraordinary wisdom, intellectual fertility, character, and understanding. But they never so qualify. The world has seen a few good absolute monarchs, but none of them, in his wisdom, ever undertook what the absolutists of communism presume to do. Only little men profess to know enough to run everyone’s business.

It is that little man, at times definitely psychopathic, who, having been given or having acquired in some way a ruling authority, becomes the arbitrary planner for a nation’s economic activities. It is that little man, sometimes a madman, who, in his fear, surrounds himself with a labyrinthine army of secret police, closes all the channels of free’ information, discussion and education, and confiscates much of the energies of his subjects to bulwark himself and his co-conspirators with Cyclopean armament not needed for any honest or constructive purpose. It is that little man always behind the promulgation of an ideology that makes the individual only a pawn and a helot of a mythical god called “the state,” a premise derived from either a profound ignorance or a licentious lust for power.

By contrast, competitive and open capitalism recognizes and utilizes the truth that no “state” or “society” or “government” ever invented a tool or a machine, wrote a poem or book, composed a song or a symphony, played a violin or a piano, painted a picture or carved a work of sculpture, preached a sermon or delivered a speech, drafted a law or drew a contract, devised a set of financial records or balanced an account, attended the sick or cured the diseased. In a regime of competitive and open capitalism we know that all such achievements and services and a thousand more of kindred significance are done and performed by individual persons, each a self-aware, self-disciplined spirit that can best serve society through the guidance of his own inspiration, ideals, intuition, intelligence, self-knowledge, judgment, will, and ambition. Cooperation and teamwork, yes. But a man does his best teamwork when he acts voluntarily and with his own understanding and approval of the project and methods of the team. In short, open and competitive capitalism is keyed to nature and to facts, and as Goethe said, “there is no trifling with nature . . . . It de-ties incompetency, but reveals its secrets to the competent, the truthful, and the pure.”

A fifth fraud of communism is its promise to produce a classless society. It is extremely doubtful that anyone at the core of a communist movement or government believes in this promise or intends that it be fulfilled. But it makes a seductive delusion for the hate, envy, jealousy, and vandalism that are the dominant emotions of the communist following.

No reason, of course, can be given why we should have a classless society. We would find it difficult to imagine anything more insipid or discouraging or more deteriorating to the human species. We might as well advocate a classless school wherein all of us would remain in the kindergarten. Or, from cognate folly, we might propose classless trees, vegetation and animals, or assembly-line humans with no change in models.

Nature herself, abhorring monotony and sameness, is the great classifier. Although she has created by a process of evolution, two amazing facts about her creation are its infinite variety and its numerous sharp definitions. She has made human beings as different as they can be and still have enough in common to be identifiable as members of the species.

A classless society is an impossibility. But in a wise, cultured, and kindly civilization, every class into which people naturally group themselves by their common interests and skills, their kindred education, comparable means, intelligence, culture, or success will have two doors, one for entrance and one for exit, neither of which will be controlled by heredity or autocracy. Thus the existence of every class tells us all that we, too, might belong to it if we wish and try, if we fittingly equip ourselves, or if the “breaks” come our way as they may. And thus it is that under the relatively competitive and open capitalism of the United States no caste exists, and no class exists except the natural, fluid groupings of people; and none exists with a closed door, despite any attempts to that end.

Compare this with the rigid, despotically controlled class system of Russia.* Her people are divided broadly into four classes, and no one moves from one to the other except by the will of the masters. At the bottom are the abject slaves. Next above them is a class composed of the greater part of the population and who fittingly might be called the ordinary or the beguiled slaves. Not all of them are beguiled, to be sure; but the intention of the rulers is that they shall be. Give the rulers a few more generations in which to pursue their program of mal-education, and their intention could be realized. Members of this class are allowed bits of freedom in areas involving no risk to the ruling caste and no loss of thought control. The next higher class may be called appropriately the preferred slaves. They are selected persons whose knowledge, talents, skills, or unquestioning loyalties are deemed necessary or of special value to the oligarchy. This class includes scientists, engineers, entertainers, artists of various kinds, athletes in state training to display the Russian prowess, teachers, minor government agents, and others of exceptional usefulness. Within this class itself exists a rigid hierarchy, and referring to it as one class is justified only by relativity and comparison. Members of this caste are allowed a good deal of freedom, paid much better than the beguiled slaves, and given other privileges. An indoctrinated member of the class might believe that he was not a slave, but he would be abruptly disillusioned if he expressed a nonconforming idea. The top, most favored, and most highly paid class in the sharp-ly-defined communist hierarchy is composed, of course, of the rulers, their courtiers, and entourage.

* Of interest: Korowicz, Marek S. “I Escaped To Speak for the Enslaved” in Life 36:102-8+. March 1, 1954; 36: 128-30+. March 8, 1954.

It is true that when taking over a country and appropriating to themselves all the property of all the people, the communist conspirators liquidate the previously existing bourgeoise, always anathematized in communist ideology and propaganda. The captors do destroy the previously existing “classes.” But forthwith the old classes are replaced by new ones, more arbitrary, more autocratic, more ignorant, selfish, exclusive, and cruel than the classes replaced.

A sixth fraud of communism is its promise to establish a dictatorship of the proletariat. This promise is alluring bait for simpletons; it never is fulfilled, nor could it be; but it helps the conspirators, in gaining control of a country’s capital assets, to use mob psychology and the elemental ignorance, hysteria, and cruelty of the mob.

No rationale ever has been or will be formulated for a dictatorship of the proletariat. It would be equally absurd to advocate a dictatorship of seamen over the navy, of privates over the army, of freshmen over the university, or of janitors and elevator operators over the department store. The term itself, “dictatorship of the proletariat,” is a self-contradiction. When there is more than one dictator, either the dictators must agree or one or more dictators disappear. In his book, What Happens to Communists?, Michael Padev points out that since 1917, the following Russian Soviet high officials have been shot as spies or traitors:

“Nine of 11 Cabinet ministers holding office in 1936.

“Five out of seven presidents of the last Central Executive Committee.

“Forty-three of the 53 secretaries of the Communist Party Central Organization.

“Fifteen of 27 top Communists who drafted the 1936 constitution.

“Seventy out of the 80 members of the Soviet War Council.

“Three of every five marshals of the Soviet Army.

“All members of Lenin’s first post-revolution Politburo, his inner cabinet of 1917—except Joseph Stalin.”

Under communist ideology all citizens of a country, after the necessary liquidation of nonconformists has been accomplished, belong to the proletariat. If they were to be dictators over themselves, how would they learn what dictates they might agree on except by a full, free, and secret ballot? And if they disagreed, how would they reconcile their disagreements except by the principle of majority rule? If they really pursued these methods, they would have a democracy, not a dictatorship. But such methods, of course, are not pursued.

Communists and those who would prepare the way for them in this country have been badgering the word “profits” for decades until today, if the word bears a connotation of evil to naive minds, including some among the clergy, college students, and faculty, we ought to be sympathetic and to venture not criticism but earnest enlightenment. In their efforts to inoculate this sinister connotation, communist conspirators have practiced a seventh fraud upon the human mind.

If you invest all your savings and borrowed capital, too, in a business venture, work 16 hours a day to launch your project and carry it over the rugged pioneering hill, shoulder with your family all the burden and nervous strain of your risk and its uncertainty, finally reach a year when your income is greater than your expense, grow so you can provide employment for others and pay them good wages, you will have become, in communist ideology, an exploiter of your fellow men, your employees; and they will be “wage slaves.” This will be so because your business will have made profits—your compensation for your risk, worry, ability, imagination, labor, creation of jobs for others, and all your service to society.

People whose compensation is called “profits” are people, too. Throughout history, in commerce and morality, it generally has been recognized that if X makes his funds available to Y so that Y can use them as if they were his own, X is entitled to a fair compensation for the use of his property and to its return at an agreed time. The validity of this universal principle is never questioned except upon total negation of the concept of private property.

Insofar as a share of profits is paid to a person not active in a business, it is only the traditional compensation for the use of his funds. Profits gained by the active owner of a business are his compensation for both the use of his funds and his services. The only essential difference between those profits and the wages of his employees is that the latter involve no risk of capital and are much more certain. If the profits prove to be the greater, that fact is an incident of the greater hazards and responsibility and all that they have involved.

In the United States thousands of persons receive “wages” which are envied by thousands of business owners who receive only their profits when any are made. If one man’s profits seem too high, so do another man’s wages. These are relative matters, and under competitive and open capitalism—if it is really kept competitive and open at all levels—a tendency toward reasonable balance and relationship always is at work.

To economists, the term “profits” has a restricted meaning which I intend to respect. But we should recognize the identity of nature in the profits of a business and the margin of accumulation, reflected in possessions, which any person gains from his wages, salary, commissions, royalties, or other compensation over the cost of the consumable goods and services purchased by him. The significance in each case is merely that the receipts have been greater than the running necessary expenses.

Broadly speaking, civilizations have built the tangible structures of their cultures in either of two ways: (1) out of the compulsions of government and despots, and the slavery of peoples; or (2) out of the profits of the self-directed activity of persons, taxed or voluntarily given. We of America would be tragically unappreciative and dangerously purblind were we not to recognize that all the tangible assets of our civilization, all its institutions of education, culture, entertainment and inspiration have been created from the profits and kindred margins of accumulation of many persons acting in freedom.

In 1953 the meat packing industry of our country gained a net income of seven-tenths of one cent on each dollar of sales. On each five dollars in sales, it kept for itself three and one-half cents! In the same year, the chain food stores, providing a marvel of service, gained a net income of one and one-tenth cents on each dollar of sales. Not the faintest probability exists that these vital services ever can be performed so well or so cheaply in a society whose economic processes have been taken over by a political-police monopoly.

In this matter of profits, we have the pivotal difference between competitive and open capitalism, on the one hand, and monopolistic capitalism, whether called socialism or communism, on the other. The purpose and method of open and competitive capitalism are to use profits, whether classified as such or as wages, salary, annuities, royalties, rents, dividends, retirement payments or otherwise, to make the greatest possible number of people independent of the state and independent of the charity of others. With human nature as it is, the results will fall short of perfection; but they, nevertheless, will be comparatively successful and remarkable. Having achieved them, competitive and open capitalism then provides the profits, or even capital assets, if necessary, to care for those who have not reached such independence, or who, once having gained it, have lost it.

The purpose and method of communism are to deprive everyone of profits and thus make everyone wholly dependent upon the state b or, rather, on the few who rule and who call themselves the state.

Because profits are the lifeblood of any system of free economy, those who would prepare the way in this country for a communistic monopoly never miss a chance to asperse or belittle the genius behind all our profits, the American business builder and executive, or to destroy or reduce his profits. You will find them lending their support to every proposal and project—sometimes as the originating schemers—that either harasses, or promises opportunity for the harassment of, or depreciates that businessman.

The Machiavellian minds behind this preparing of the way appreciate more fully than many legislators and political executives the significance of the following facts: In a free economy, people obtain gainful employment through three channels: (1) self-employment, (2) private institutions owned by others, and (3) government. Obviously, the greater the employment in channels 1 and 2, the lighter the burden on government. It would seem to be apparent to most adult minds that a wise government would do everything within its power to encourage employment in channels 1 and 2, and would adopt no measure or policy without first putting it to the test: What will the effect of this be on employment opportunities in private enterprise? Only profits make such employment possible.

Cycles of higher and lower activity and their accompanying psychological cycles are not only inevitable in any sound economy but, within limits, are beneficial. It is during periods of reduced activity that the best thinking, house cleaning, planning, and self-disciplining are done in the economic structure. Such periods are pruning times; roots are strengthened and driven into new soil; and, following every recession and depression, the economic organism of a free society burgeons with renewed vigor and variety. But you will observe that the first and only thing some persons and groups want us to think about when a business cycle enters the downward trend is not how to encourage, support, and strengthen channels 1 and 2, but how to throw the government into large-scale employing business.

The government is not a producer of wealth and has no money to pay workers, except only what it collects from the producers. Government is merely the transfer agent; it may create the jobs, but to pay the wages it takes the money from the privately owned economic structure. In so doing, especially if intemperate, it can start a vicious cycle. If the self-employed and the private employer of channels 1 and 2 already are harassed, the taking of their funds to pay for government jobs, the creation of government competition with capital drawn from them, and the imposition of other burdens can reduce both their capacity and their spirit to provide employment. (This possibility is not fanciful. I am only one person; but I have known several instances of business closing down or refusing to expand because of the discouraging policies or practices of, or the atmosphere created or the interferences or obstructions allowed by, government.) As such effects multiply and deteriorate the economy, those who know no method of solving any problem except more law, more government, and more taxes, would throw the government further into the business of directly providing employment. In this way, as communists know, totalitarianism can and to some extent already has come to America, not by choice of the people, but by our innocence, the self-seeking of candidates for, and holders of, public office, and by our being victims of the craftiness, hypocrisy, and deception of the communist conspirators.

It should be made known to every American citizen who wants to be free that the sine qua non of his freedom is profits.

Communists have a pretty slogan which, no doubt, is enticing to many idealistic persons: “From each according to his ability, and to each according to his need.” By this slogan, they practice an eighth fraud upon the credulous.

It should be clear that only God could fulfill such a promise; for aside from the necessary mechanics of the project, only He could search the minds and spirits of men, know the capacities of their minds and bodies, and thus be able to determine their abilities and needs. Henry David Thoreau proved that man really needs very little in the way of material goods and services. Perhaps that fact is what the communists have in mind. Their results would so indicate. However, Thoreau and all the philosophers and ascetics who have proved the same point have had intangible, spiritual resources which communism not only does not provide but denies. Its materialism and atheism are throwbacks, placing it thousands of years in the rear of the forefront of evolution. Its doctrine that man is a mere creature of his material environment and is molded in the image thereof has been proved false innumerable times. Mere physical environment, from that of poverty to that of luxury, has a sorry record in the matter of establishing dominance over the human spirit. It is when we consider the intangible factors in that environment—religious faith, prayer, intelligence, love, understanding, trust, patience, the art of teaching, integrity, character, and ambition—or the absence of such factors, that environment challenges heredity for supremacy in influencing and molding the human mind and character. And when those spiritual factors in environment are combined with the same factors in heredity, the results can be prodigious.

Manifestly the very tenets of communism prevent it from knowing or providing what each individual needs. But even if we confine the meaning of the slogan to physical goods and tangible services, we are confronted by the necessary implication and the fact that the few turgid capitalists who rule the communist state set the measure of everyone’s needs. By the ideology of these overlords, the individual has no needs not subordinate to those of their golden calf, the state.

On the other side of the equation, the side that reads “from each according to his ability,” the communist tenets and methods again make performance impossible. Society never can receive from each according to his ability when minds and thoughts and bodies are controlled by the force and oppression of dictatorship. As previously pointed out, the individual can find his ability and develop it only in freedom, in the self-choice of interests, opportunities, truthful information and learning, and in the motivations and enthusiasms born of freedom.

Napoleon, in reflection, wrote: “Do you know what amazes me more than anything else? The impotence of force to organize anything. There are only two powers in the world—the spirit and the sword. In the long run the sword will always be conquered by the spirit.”

Real human beings, men and women not cowed by masters, want more from life than their physical needs. A social, political, and economic scheme that promises no more does not promise much. Above all, they want the gratifications that come from independent, self-directed achievement and from the service of others through that achievement. No gratification comes from being compelled by tyrants to serve. The aspiring musician does not practice eight or more hours a day for years just for his physical needs. Neither for such a bare recompense does the medical student pursue the long grind of preparation for a great and necessary service to society. Open and competitive capitalism, rather than any other scheme of political economy, has provided the most widespread opportunities for, and has created the least interference with, the gaining of the finest satisfactions in human life. Under its freedom and its generous support of religious institutions, even if one wishes to be an ascetic or to seek Nirvana, he may do so.

All enlightened persons, all reasonable persons, wish for the welfare of all peoples. They wish also that human society will be impregnated with the spirit of kindness. They do much to promote those ends. But they know that the weak, if they are to be helped, must be helped by the strong and that to destroy or prevent strength in individuals is to promote weakness generally. They know that no human society can be stronger, more resourceful, intelligent, courageous, or better informed than the individuals who compose it.

A ninth fraud in the red conspirators’ design, probably not a self-deception except to a duped contingent, is a propaganda piece that has been assimilated by a number of teachers, professors, clergymen, and young people right here in the U. S. A. It consists of the two cliches that “capitalism has failed” and “capitalism is doomed.” We ought to recognize the promotion of these ideas as a master stroke of propaganda-psychology. They are at the heart of every communist message in schoolbook, on campus, to labor union, or elsewhere.

Insofar as these slogans are an unconscious projection of what the red conspirator deeply knows about his own brand of capitalism—in the manner that a dishonest person unconsciously projects his dishonesty upon others—they, no doubt, speak truthfully. The monopolistic capitalism of socialism is a demon-strafed failure and may reasonably be regarded as doomed whenever installed. It might be more appropriate to say that under it the normal development of the human mind and spirit is doomed.

If you will try to learn from anyone who appears to have imbibed the ambiguous watchword that capitalism has failed, or who parrots the cliche, just what he means by it, you will have great difficulty. Your attention may be directed to poverty, hunger, disease, illiteracy, mistreatment of employees by employers, mistreatment of tenants by landlords, and other undesirable conditions existing in countries where the private ownership of property has existed. You probably will not be told of the mistreatment of employers by employees or of landlords by tenants. But many other factors also are concomitants of such unfortunate conditions, and nothing is proved as to cause and effect simply by the fact of coexistence. The stark truth that confronts us in all history and everywhere is that people have failed—not all people, not the species as such, but many—failed to measure up to ideals we now entertain, failed under every system, every kind of government, every kind of regime. Also, let it be noted appreciatingly that numerous persons have succeeded wondrously. Three facts that Utopians seem never able to grasp are.” (1) that people, not gods, will have to work the social, economic, political, and physical machinery the Utopians intend to construct; (2) that reasonably good sense requires that societies, regimes, and governments be judged comparatively before we choose one from the others, and not by an absolute, idealistic criterion, against which all will be found wanting; and (3) the folly of destroying the sound, demonstrated values of a regime, merely because people, being people, cannot and will not gain or receive equal benefits under it or under any scheme that the human mind can imagine.

What the red agitator really says when he tells us that capitalism has failed is this: “The private ownership of property has failed; therefore, help a few of us to seize, own, and control all property; we will liquidate the people who have owned it in the past, regardless of the industry and qualities of character by which they came into such ownership; we will manage the property—and manage you better than they did. Not only let us have the property, but surrender to us your freedom, and your reward will be that we will take care of you from the cradle to the grave.” The deal needs only to be stated frankly to reveal its own absurdity and to draw the repugnance of every sane person of moderate or greater intelligence, imbued with a normal sense of justice.

There have been persons, a few of them distinguished, who, in sincere and Christian-like concern for humanity, have been socialists of one degree or another. But the current movement for monopoly which is called communism is an offspring not of love and enlightenment, but of hate, envy, lust, vandalism, and ignorance. Its specious dialectics and its motives require the atheism that accompanies it. By its atheism it makes man the supreme being of this corner of the universe, and it fortifies the position of any particular man as sovereign who can so establish himself by cunning and might. Thus it releases men from responsibility to a higher intelligence and from any reason for obedience to natural or moral law. And thus it authorizes dishonesty, theft, cruelty, murder, and aggressive war to serve its ends. After a human mind has been contorted into the malformed framework of these falsehoods, its whole view of life is distorted. A mind cannot be pressed into such a misshapen mold and see facts, feel intangible factors, or think, as normal persons do.

As has been indicated already in this treatise, except for such spiritual understanding as man has gained and the warmth and enlightenment that have radiated from men of spiritual understanding, nothing connected with our mysterious journey on this planet has done so much to help so many people succeed and to express themselves helpfully to society and gratifyingly to themselves, as the private ownership of property and open and competitive capitalism. In productive capacity and in originality, variety, and economy of production, no social, economic, or political regime in all history can stand comparison with the achievements of our own people in our striving for the open and competitive kind of capitalism.

As for the future, everything depends on the wisdom and character of our people. If we are to give a growing population what it wants in material goods and care, then we must expose and avoid the deceptions, incompetency, and waste induced from human nature by a state-care-for-all regime; it may become necessary to abandon our primitive monetary system, now a millstone about our neck, and in spite of which the tremendous drive of our open and competitive capitalism has achieved its unparalleled successes.

Finally I am convinced that unless we zealously dedicate ourselves to the business of saving our regime of competitive and open capitalism, it will disappear from our beloved land in favor of monopolistic state capitalism, with all its paralyzing effects upon the human mind and spirit.

That dedication must transcend all petty politics, party lines, party interests, and all the cheap, ridiculous sophistries hurled in party conflict. I believe that we owe this to ourselves and to our country. Without claiming perfection in our system of capitalism, we know, appreciate, and have received its many values. We know that under it we have not been the controlled hirelings of despots, but free men with immeasurable opportunities. We know that life, vitality, and self-respect are to be found within the ideological and tangible structures of such capitalism; that most of our employment derives from the myriad interests, projects, and problems born of the imagination, daring, and activities of such a regime; that our compensation has been paid from the efforts of millions of capitalists, small and great; and that numerous persons among us have risen from poverty to distinguished positions of executive responsibility in the commercial world. We know that the control or freedom of men’s minds rests on the outcome of the struggle between two kinds of capitalism: the worst kind, total monopoly in the hands of gangsters who call their system “communism”; and the best kind, open and competitive capitalism which is our goal in the United States of America.


September 1955

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July/August 2014

The United States' corporate tax burden is the highest in the world, but innovators will always find a way to duck away from Uncle Sam's reach. Doug Bandow explains how those with the means are renouncing their citizenship in increasing numbers, while J. Dayne Girard describes the innovative use of freeports to shield wealth from the myriad taxes and duties imposed on it as it moves around the world. Of course the politicians brand all of these people unpatriotic, hoping you won't think too hard about the difference between the usual crony-capitalist suspects and the global creative elite that have done so much to improve our lives. In a special tech section, Joseph Diedrich, Thomas Bogle, and Matthew McCaffrey look at various ways these innovators add value to our lives--even in ways they probably never expected.
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