(If)the stronger faction can readily unite and oppress the weaker, anarchy ... reign(s) as in a state of nature, ... and as ... even the stronger individuals are prompted, by the uncertainty of their situation, to submit to a government which may protect the weak as well as themselves, so ....will the more powerful factions or parties be gradually induced, by a like motive, to wish for a government which will protect all parties, the weaker as well as the more powerful... Federalist 51

Thursday, October 18, 2007

the translation of values

THE TRANSLATION OF VALUES

Are good intentions enough? What is the road to hell paved with, anyway? Then why is generating “political will” of one sort or another the only way countless factions approach large, public or small, private problems? Is there really some necessary, automatic connection between intentions and results? Or do intentions have to be translated through economic and political processes on the larger scales, through at least common understanding on the smaller scales?

Below is a chapter by chapter synopsis of a book yours truly wrote in the early 1980s which has yet to find a place on any publisher’s list. The synopsis dates from 1986. This version is modified only slightly from the typewritten 1986 original, largely to make fuller references to sources and correct occasional awkward wording. It is about a twelve to one condensation, so do not expect full-fledged arguments.

Originally titled Crucified on a Cross of Paper, it is now The Translation of Values. The idea is to take it beyond the realm of materialistic economics. In a bad novel the characters are bent and twisted to the needs of the plot; in a good novel the characters have lives of their own and reshape the plot to meet their own needs and demands. Hunter-gatherer bands erupt in unison and reduce miscreants to tears, a primordial arche-type that underlies so much “modern” behavior, from soap opera to solving society’s problems with “political will” of one sort or another. “Political will” is taken as the answer to society’s problems (and lesser expressions to smaller problems), as if mere intention is sufficient, without translation by action into proper consequence, as if modern society is supposed to erupt in unison. Einstein is widely quoted that the bomb changed everything but the way we think. Indeed.

THE TRANSLATION OF VALUES 
Chapter by Chapter Synopsis

I.  Marching Orders to the World?
II. How You Can Profit From People of the Lake
III. There Is Such a Thing as a Cheaper Lunch?
IV. The Polis Joke
V. Crucified on a Cross of Paper: 1984 as a Parody of Keynesian Economics
VI. The New Industrial State Between the Lines: Small Is Beautiful
VII. Boycott “Lettuce”
VIII. The End of the Great Jackass Fallacy?

The sixth chapter is the most topical and needs extensive updating. The railroads, airlines, and utilities mentioned below are pre-deregulation. Globalization, global warming, peak oil, and the Internet will have to be dealt with. Apartheid South Africa has since collapsed, but the argument that a genuine gold standard would not have strengthened apartheid overall still has important insights. One major updating would be the neo-Georgist “tax bads, not goods” movement.

The eighth chapter will be considerably more fleshed out by two decades of accumulated material, with an emphasis on distinguishing between public and private spheres of life. William Cronon, Nature’s Metropolis, revived the concept of “second nature,” the man created world, as opposed to “first nature,” the God created world. Suitable commentary on this point will be added to the eighth chapter, including the observations that 1) supposedly modern man deals with “second nature” the way his pre-scientific ancestors dealt with “first nature,” and 2) that this book is intended to do for “second nature” what Rachel Carson, Silent Spring, did for “first nature.”

The first chapter has already been updated. The first five are already punched into the computer and will be little changed.

The appendix has been updated as “Original Intent vs. Nuclear Aftermath,” and published in Whole Elephant Tri-Quarterly.

The general economic thrust of this book has been condensed and intertwined with the monotheistic or Abrahamic ethic in the article, “Saudi Arabia: Victim of Artificially Low Interest Rates,” in Whole Elephant Quarterly.

Following the synopsis are several of the more pointed quotations from the book, perhaps its major strength.

I. Marching Orders to the World?

In a bad novel the characters are bent and twisted to the needs of the plot; in a good novel they have lives of their own and reshape the plot to their own needs. Most politically opinionated people, it seems, want to reshape the plot to their own needs but wind up bending and twisting others to the needs of a plot. Conservatives and liberals, businessmen, unionists, and radicals, and many others, all proclaim liberty for themselves while denying it to others. Some want society to do a patriotic, traditional thing; others, a compassionate, egalitarian thing, but almost all want some sort of government power to do it with.

Can we all live as characters in a good novel? But what about economic coercion? The terrible power of capital? Big fish swallowing little fish? The rich getting richer and the poor getting poorer? The economy collapsing?

Let us understand “economic coercion” and “the terrible power of capital” a bit differently. 19th century America was one of history’s nearest approaches to a free market, yet the greatest fortunes were made through government favors, per Gustavus Myers, History of the Great American Fortunes. At the turn of the century these fortunes were threatened by the rapidly expanding and decentralizing economy, per Gabriel Kolko, The Triumph of Conservatism, but were protected by Progressive Era legislation, passed not by outraged populists, but by the great financial powers.

We might better discuss “the terrible power to withhold capital.” Without capital we can only live off the land. The more effectively it can be withheld, the greater the “economic coercion.” “Scab” capital must be suppressed. Morgan partner Thomas Lamont in 1915 looked forward to American financing displacing that of England, France, and Germany “depending on the duration of the war.” Given the stealing, stifling, and squandering of capital via political means, the questions must be restated. To what extent is political manipulation responsible for the evils usually blamed on capital and the market process?

But must even the free market be imposed politically? Is even sweet liberty just another government favor, subject to every passing political controversy? No, private initiative can supplant many government functions and even confront the crucial government powers of taxation and to issue currency, via tax resistance and private hard currencies. Can such measures defeat “the terrible power to withhold capital”? If so, will we be able to reshape the plot to our own needs or will we merely be bent and twisted to a new plot?

Let us try to imagine capital doing its own thing, free from political stealing, stifling, and squandering, an economy as separate from the state as religion. Historical insights are invaluable, but only logic can carry us into an unprecedented situation. Fortunately there is a constant in human behavior from which we can draw implications. that it is purposeful, and let us seek an underlying order in human relationships. We can further distinguish freely entered relationships from those based on force or fraud, defining the first as the economic process, the second as the political process. Hypothetical social orders can be distinguished according to the relative weight of the two processes. As the political influence increases, does the “economic coercion” increase?

We do have our problems, however, in recognizing our most basic assumptions and in not passing judgement on human purposes not in full harmony with our own, problems that seem to be deeply rooted in human nature.

II. How You Can Profit From People of the Lake

For perhaps the first time in popular form Harry Browne offered a theory on the origin of money, from an isolated individual producing only for himself, to two individuals trading directly with each other, to three individuals trading directly among themselves, to 100 people settling upon a crude medium of exchange, each step occurring because people see it as a better way to get what they want. Carl Menger advanced this theory in founding the Austrian School of Economics in 1871; Ludwig von Mises confirmed it in 1912 by reasoning that the exchange value of money could only be guaged by previous experience, therefore that the money commodity had to be valued for something else before it could be valued for exchange. Perhaps this theory can be slightly restated and corroborated by archeological evidence.

No human being can live without the products of society; even Robinson Crusoe needed objects from the shipwreck, per Frederic Bastiat, Economic Harmonies. The higher primates, from baboons to hunting-gathering tribes, generally live in bands of about twenty-five, according to Leakey and Lewin, People of the Lake. Even for such highly social animals as the chimpanzee, eating is almost entirely an individual affair. Human life arose, they speculate, with a food sharing economy. Perhaps a woven carrier bag allowed one half of the band to bring plant foods back to camp, freeing the other for the lucrative but risky pursuit of meat. Mises agreed such sharing distinguishes human from animal life and also substitutes cooperation for competition.

The complexity of food sharing society enormously stimulated the development of both intelligence and emotions, far more than the outside environment. From three million years ago to a quarter million years ago stone tools advanced little in technical efficiency, but greatly in form and variety. This occurred for nonutilitarian reasons, reflecting the language and thought required by an increasingly ordered social structure. Nonutilitarian objects 300,000 and 50,000 years old have been found. The earliest known “art” objects are two inch statuettes 30,000 years old, with carefully carved features, but worn by constant handling. Perhaps these were the first objects to be regularly traded.

About this same time, it seems, man became a cultured being with a will of his own, not the mere product of natural selection. Bargaining with a medium of exchange might have stimulated the use of speech and the forward orientation needed for agriculture. The rationality it required, however, came with the emotions developed by the food sharing economy. Altruistic emotions must impel members of the food sharing economy to aid each other. Aggressive emotions must curb cheating and departures from group mores. Gatherer/hunter bands erupt in unison against a cheater. The individual is abjectly dependent upon the group and the group can distribute wealth by group fiat.

Crowd psychology today seems to spring from such primal roots. It is only in the past 300 years that self-interest has been recognized as socially beneficial. The aggressive emotions have never been able to cope with the phenomena of the money economy or with individual initiative. Actions in the money economy have consequences and the individual is not abjectly dependent on a limited group. Unity in the far flung money economy cannot be inspired by positive goals, but only by the lowest common denominator, a common enemy. Jews and other commercial peoples provide handy scapegoats. The money economy requires a different approach, addressing others’ self-love, as Adam Smith put it. Cheaters must be dealt with on the money economy’s own terms, not by primal emotionalizing. Missapplied emotionalism afflicts not only reactionaries and revolutionaries, but also some free market advocates. We must synchonize out heads and hearts and question ingrained emotional responses.

III. There Is Such a Thing as a Cheaper Lunch?

Capital accumulation, usually considered as bolstering the status quo, has a profound capacity to disturb it, per Marx, The Communist Manifesto, Orwell, 1984, and Kolko, The Triumph of Conservatism. Venting aggressive emotions upon it, nevertheless, we see without it we have to live like a monkey troop and without paying for it labor will indeed have to be the sole source of value. If workers are to get the full value of the product, they will have to wait for the full value to be paid, a long wait for those in the early stages of production. To participate in long production processes, workers needing frequent pay depend on others’ reserves. Workers needing daily pay are impossible to organize and are often condemned as strikebreakers. Venting aggressive emotions upon capital accumulation we do likewise to its profound lack as well.

Mere censure of capital accumulation is at least as futile as mere censure of crime. Both must rather be explained. All economic thought, indeed, must be based on explanations, on cause and effect, not mere censure and exhortations, even if produced by the most laudable intentions. Deal with human behavior as it is, not as it ought to be; valid explanations have their effect whether anyone understands them or not, per Boehm-Bawerk.

If we can get beyond jaded, cynical and despairing attitudes, we might see economic theory as a solid foundation and capital accumulation as a disturbance to the status quo. Capital accumulation, the fruits of previous production set aside for future production, is not merely capital goods, but a reserve set aside for future efforts. In a money economy it is the ability to buy out of savings for resale at a profit. Even workers incur work related expenses which they later recover in paychecks. Thus even they “confiscate surplus value.”
 
Purchase and resale involves two transactions and three parties. The transactions, if freely made, are the best the parties have available. If one or more freely acting parties perceived something better available, that would be selected instead. The objects of purchase and resale are directed toward higher and higher values. A baker buys grain and sells it as bread. A potter sells pottery to bakers, but needs a greater reserve, since pottery takes longer to produce. Pottery wheels sold t o potters take longer yet. Thus bread creates a market for capital goods and a complex structure of production which can only be sustained by previous accumulation.

The money economy does not exist, however, merely for bread. People accept money only to get what they want, that being an entirely personal and subjective matter. Everyone has his priorities, per Boehm-Bawerk’s famous example. Our breadmakers are too busy to make clothes or build homes, so they pay others instead. They are not trying to reimburse each other or settle any philosophical debate about producing for use or profit, merely trying to get what they want. By directing objects of purchase and resale toward higher and higher valuations, they can all successfully “confiscate surplus value.”

Greater and greater surpluses allow more and more confiscation of surplus value. As purchase prices go up, resale prices go down, and returns diminish, greener fields are sought. As some attract less confiscation of surplus value and others more, proportions are established and reestablished among different endeavors.

The most important proportion is between consumer and capital goods, governed by the relative surpluses available. Scanty surpluses demand quick payback; abundant surpluses allow longer but eventually more productive processes. Thus interest rates, governed by time-preference, Boehm-Bawerk’s major discovery. Insufficient investment chokes off future production; overambitious investment depletes the economy’s reserves and leaves major projects uncompleted.

Thus also a vastly more complicated interaction which can only be conducted with reference to a medium of exchange. Without money and market prices, Divine Omniscience would be needed to proportion the various endeavors and decide among competing endeavors, according to Mises, Socialism, and lovely quote from Bastiat.

Benefits to the impoverished? Those living on the margins are most affected by marginal gains. English peasants, displaced by the Enclosure movememts, had no refuge, except the early factories. Horrendous conditions for the workers notwithstanding and despite bitter opposition from the entrenched aristocracy, the factories succeeded in substantially raising material living standards for the masses and in largely displacing the aristocracy. Even the wealthiest aristocracy is but little competition for the ever increasing efficiency of mass production.

As capital becomes less and less scarce, however, its commanding position in the economy is eroded and its owners have to deal on more reasonable terms, per Adam Smith. A strange class conflict is created, not between haves and have-nots, but between established haves and up-and-coming haves. The fading aristocracy does not take kindly to commoners becoming fabulously wealthy through mass production, nor even to the masses enjoying a previously unknown diginty through increased standards of living, and prepares its devious response.

IV. The Polis Joke

No free market economist has ever questioned manna from heaven, a genuinely free lunch. Free lunch otherwise makes some other lunch more expensive, however, beginning with raiding parties in the wake of the agricultural reveolution and already an entrenched system at the dawn of recorded history, per I Samuel. The free lunch of the agricultural/feudal economy had its own primal gratifications, not characteristic of trade. Free lunch was largely swept away by the Industrial Revolution, per Macaulay, but returned in unprecedented style, per F.C. Howe.

The poor and weak want free lunch too. Cargo cults of the South Pacific comically imitate western rituals, even buying politicians, sometimes with astonishing success. Modern man too feels himself at the mercy of forces he does not understand. He identifies with the state, which he feels to be a part of nature, and seeks to put the mighty machine in motion, per Ortega y Gasset. He is comical when he gets the bill for free lunch.

The cheaper lunch leaves both parties stronger, but free lunch leaves one stronger and one weaker. The stronger may restrain itself to plunder the weaker another day, and even share free lunch with the weaker, to cement the relationship. Parasitic relationships are governed by a fundamental law, i.e., don’t parasite too much and kill the host, per Miriam Rothschild, microbiologist and member of the famous banking family.

Expropriation in kind has little place in modern society, except for eminent domain. Even the Bolsheviks found the limits of direct confiscation under War Communism, per Soviet document. Expropriation of money became more important as the money economy evolved, restrained by little but the law of parasitism. Restriction of competition had somewhat more leeway, however, by substituting less substituting less efficient production for the more efficient. Adam Smith did little except protest this, which he considered a game for the rich and powerful. He also showed how taxes cripple capital accumulation, in which we can see anti-competitive effects. David Ricardo also makes this point.

Growth disorders in living things are caused by disturbances in metabolism, in economic society by disturbances in capital accumulation. The 19th century English aristocracy explicitly feared the masses becoming well-off and independent. Benefiting handsomely from tariffs on food, it well understood imposing costs on rivals. This it did to its rapidly ascending rival, the industrial middle class, with exposes of factory conditions and child labor. Through article and a Parliamentary investigation it shaped opinion to this day. The Communist Manifesto denounced their effort as self-serving; other observers noted the worst abuses had long since been corrected. Such concern for agricultural children was politically impossible, admitted a Tory leader. Prominent free trade advocates favored protections for children. In the wake of Irish famine, Tory social conscience finally abolished food tariffs, but factory owners still had to resist prejudicial measures.

Factory legislation pushed small capitalists under, said Marx, thus concentrating capital and destroying the last resort of the redundant population. In the late 19th century Ruskin set the stage for more extensive legislation, imbuing Oxford students with the need to spread the English tradition. The initiative came from the upper class and reflected its concerns. Younger generations deserted family firms for politics or the landed gentry and businesses became more concerned with security than expansion. The Boer War cut savings available for industry and caused wages to stagnate. The campaign for tariffs foundered, but Mill’s principles of taxation, that the prudent should not be taxed to relieve the prodigal, that capital should not be taxed for current expenditures, were abandoned. Hobson argued to tax unearned income. Huge war debts perturbed orthodox financial opinion. The Liberal campaign stressed economy but increased spending in office. Churchill paid lip service to capital accumulation but campaigned to thrust a “big slice of Bismarckism,” i.e., extensive welfare legislation. Denouncing tariff protection and its devious support by the rich, he nevertheless put over a new protection for the rich and powerful.

Free lunch in post-Civil War America was unadorned freebooting, based on war profits and government favors, recounted by Myers, History of the Great American Fortunes. Toward the turn of the century it became more genteel, with the Interstate Commerce Commission to protect the overbuilt railroad industry from cutthroat competition; Progressive Era legislation was enacted, not because of outraged populists, but by leading financial and industrial interests seeking to curb the rapidly expanding and decentralizing economy, per Kolko, Railroads and Regulation and The Triumph of Conservatism. In a startling reversal, Sen. Nelson Aldrich had the income tax passed, an action quite consistent, however, with his long-standing protectionism. Republicans never were “laissez-faire.”

South Africa deliberately used minimum wages to induce employer discrimination against blacks in the early twentieth century.

Orwell wrote the masses could not become “too” comfortable, lest they sweep away the ruling classes. Bismarckism, however, adopted by the British ruling classes about the turn of the previous century, sought to keep the masses comfortable enough not to follow revolutionary demagogues. It had ample precedent in Roman bread and circuses. Bismarckism also sought to buy the masses’ loyalty in war, its welfare state measures succeeding in Germany, England, France, and Italy. Fabian Sidney Webb called for an “imperial race”; he and Beatrice even formed a brain trust of imperialists and militarists.

Macaulay wrote that the exertions of the people will overcome bad government. Bismarckism, however, forestalled not only political but economic revolutions, by blunting the people’s will to think and take care of themselves. de Tocqueville described “an immense and tutelary power” that takes care of all a people’s concerns and reduces them to timid animals in the care of a sheperd.

Ruskin’s famous “a little worse and a little cheaper” comment is aimed squarely at marginal economic activity, just what the poor need to accumulate capital and improve their lot. That initial accumulation is the most difficult, said Adam Smith, also that royal expenditures sap industrious habits among the population, as do anti-competitive measures among businessmen. Bastiat dwells on plodding bureaucracies.

“Free lunch” is based on unwilling relationships, those of status, not of contract. Apparently it takes quite some status to break even, however. Bastiat said for all Frenchmen to enjoy the priveleges of the rich, they must exploit eventually three hundred million Chinese.

Ruskin and his followers formed semi-secret societies, eventually becoming the Council on Foreign Relations and the Trilateral Commission, through which the high and mighty pretty much run things. This is quite consistent with Ruskin’s inaugural speech that inspired Rhodes.

The cheaper lunch replenishes accumulation, while ‘free lunch” drains it, stifles spontaneous activity, and perpetuates power based on scarcity. It is not redistribution that will rearrange wealth and change the status quo, but rather its abolition.

V. Crucified on a Cross of Paper: 1984 as a Parody of Keynesian Economics

Orwell predicted the Vietnam War, the war not fought to win anything, although he was not altogether specific on the location. It might be seen as the inevitable result of Keynesian economic policies. Orwell’s thesis is that there has been a constant conflict among the High, the Middle, and the Low. It was clear to ninteenth century thinkers that the machine age could eliminate poverty and drudgery, but that leisure and comfort generally enjoyed would undermine hierarchical society. Economics is Orwell’s neglected message.

Keynes’ economics might be better understood as anti-economics, per his disparagement of savings. He actually said wars, eathquakes, and pyramid-building serve to increase wealth. Samuelson’s text instills proto-Keynesian ideas, also explaining fractional reserve banking, not defining his terms too well, however.

Samuelson tells of an ancient goldsmith who stored others’ gold, but found he could loan most of it without fear of withdrawal. He assures his depositors that their money is safe and is contributing to greater and greater prosperity. Samuelson says such a bank will want to keep as little as possible in reserve, but that fractional reserve is a “fair weather” system without government back-up. Banks might be unable to pay depositors, but government bonds offer a safe, easily liquidated investment. A central bank is needed to coordinate credit expansion and prevent runaway inflation. Samuelson could have added legal tender laws and suspension of payment to his list of interventions.

Marx said the growth of capitalism will be its undoing, that it will stagger from crisis to crisis until the final crisis. Samuelson says laissez-faire is without a “good thermostat,” that it needs “proper macroeconomic (Keynesian) policies” to insure full employment, not so little investment as to cause unemployment, not so much as to cause inflation. He does not make clear, however, whether “laissez-faire” includes fractional reserve or not. Mises and Rothbard consider fractional reserve an extremely poor “thermostat.” Samuelson himself says “stimulus to investment” is “somewhat in the lap of the gods.”

Fractional reserve certainly does change “the distribution of dollar votes,” the same distribution democracy sometimes has to change, in Samuelson’s view. It shifts production and tampers with investment priorities. Interest rates set by savings relative to possible return on investment, i.e., time preference, are not the thermostat, but replaced by the cycle of credit expansion. As explained by a 19th century banker, credit expansion causes rising prices, in turn causing demand for more credit expansion. Any adverse turn might trigger a run on the banks, however, forcing even the strongest banks to assist the weakest. The cycle begins anew when the banks think they can expand credit again.

Expansion shifts production from consumer to capital goods, raising prices of both. The currency falls in value. If expansion stops, the old proportion reasserts itself and the new capital goods industries must cut back. If it continues, the artificially lowered interest rates stimulate those industries most removed in time from final sale, moving the economy toward Hayek’s fabulous machine, whose production exhausts capital reserves.

Liquidations were short-lived in the 18th century, due to lesser expansions and no government intervention to stop them. “Laissez-faire” Hoover, however, reversed this policy and the resulting stagnation set the stage for Keynes’ remedy.

World War I left industry, agriculture and finance overextended. Banks and governments find common interest in war debts, per Samuelson and Mises. Big business eagerly embraced war cartelization, as did liberal intellectuals. As Secretary of Commerce Hoover failed to stem the post-war agricultural depression, but succeeded in sponsoring much cartelization and subsidization of of American industry, also early labor laws.

Fashionable economic thought in the 1920s dictated price stability, meaning prices should not fall, not that they should not rise. Wages and prices in the consumer industries increased little in the 1920s; they increased substantially, however, in the capital goods industries. Money in circulation expanded over 60%. The stock market boom, causing high level concern, could be curbed only by curbing credit expansion itself in 1929.

Hoover scorned the “liquidationists” and immediately extracted agreements from businesses not to cut wages. Attempts to prop agricultural prices failed. The Smoot-Hawley Tariff was passed, as was a record tax increase in 1932. The Reconstruction Finance Corporation was created and largely bailed out bank debts. Hoover boasted in 1932 of his unprecedented meaaures. He balked, however, at the Swope Plan (NRA) to cartellize industry, losing big business support to FDR. His efforts to prevent adjustment only prolonged the agony; without them the Great Depression would be little more remembered than that of 1921.

The New Deal ushered in American Bismarckism, i.e., Institutionalism as developed by Americans who had studied in Germany. It was aimed not merely at political discontent, but the NRA and other measures were aimed at “unfair competition.” The minimum wage and the Wagner Act were aimed at low wage competition, largely in the south. John L. Lewis cartellized the coal industry, after the Guffey-Vinson Act was struck down.

British industry, finance and labor all tried to live in the pre-war past, plunging the country into depression between the two wars. Massive unemployment and the dole probably inspired Orwell’s reference to masses kept half alive with state aid. Having sought to suppress German competition, Britain emerged from the war deeply in debt to the U.S. and dependent upon American financial policies. Restoration of the pound to $4.66 crippled British industry in world trade and was anything but a true gold standard. Shaky loans were made to Germany. Bank of England governor Montagu Norman persuaded friends at the Federal Reserve to prop up the pound with an American expansion. Bank runs came in 1931.

Britain plunged into protectionism and quotas. Keynes and the fascist Mosely each proposed public works and economic nationalism.

What is mutually advantageous in the boom is a far cry from that in the bust. Keynes wrote in an escapist style, offering not a painful recognition of reality but an indefinite boom. Sufficient commercial borrowing being quite impossible, he proposed government borrowing to restore sufficient “aggregate demand,” from banks, of course. In 1949 a blue ribbon committee said banks had become more oriented to government securities than private lending. The Federal Reserve itself said banks need a loan market for credit expansion to take place and that World War II absorbed excess reserves.

Credit expansion stimulates investments most removed in time from consumer sale, according to Austrian business cycle theory. The “logical” extension is investments completely removed from consumer sale, i.e., waste. War is not only psychologically acceptable, but spiralling arms races generate their own markets. They solve the classic “capitalist” desperation for markets and even create an exception to the law of marginal utility.

Germany’s runaway inflation of the 1920s and depression of the 1930s prepared it well to be an enemy. An industrialist said extensive factories financed by inflation had to be demolished. Foreign loans in the late 1920s built factories for heavy capital goods for markets that did not exist. Heavy industry in Germany and Italy, oriented to raw materials, heavy machinery, and armaments, had high-handed and aggressive attitudes, whereas light industry, oriented to finished products and export markets, was “class collaborationist.” Heavy industries installed fascist gangs to dole out armaments and public works contracts, financed by credit expansion. Currency controls and isolation from foreign markets crippled light industry. German banks turned from private loans to government securities. Economic isolation served the cause of peace, said Keynes. American big business was also heavily involved in German war industry.

European heavy industry cut wages ruthlessly while American policy propped them up. Extensive American consumer credit may be the difference, which also propped up the auto, steel, and appliance industries. Consumer credit, borrowed from major banks, is the auto industry’s working capital and generates business cycle. War production is “consumer of last resort,” perhaps accounting for German AEG’s ambivalent policies.

Keynes said his theory is better suited to totalitarianism and urged adoption of Dr. Schacht’s measures. J.K. Galbraith said WWII brought the Keynesian remedy “with a rush,” that Hitler was “the outstanding protagonist of Keynesian ideas,” and that Keynesian support for the economy involves heavy spending for arms.

The Soviet Union was the only available enemy after WWII, its devastation notwithstanding. The Soviets were terrified by Churchill’s and Truman’s saber rattling and by prominent Americans proposing an atomic blitz. A 1961 report urged massive American arms spending, to force the Soviets to do the same and bleed their economy. Antony Sutton documents extensive western industrial and military aid to the Soviets, such as jet engines for MiGs and precision grinders for missle guidance systems. References to Orwell, “We’ve always been fighting Eastasia,” and to the three superstates propping each other up like three sheaves of corn.

Macarthur spoke against phony war scares. Victory is a pre-Orwellian concpet; a war that is won ends. Constant war preparation and “limited war” are necessary. Another U.S. war may repeat D.F. Fleming’s account of WWI in Russia. This is not a voluntary social order, but based on massive force and fraud. Bastiat and Aristotle both anticipated Orwell. “George Orwell: British optimist. Author of 1968.“

VI. The New Industrial State Between the Lines: Small Is Beautiful

In J. K. Galbraith’s collection of half-truths, The New Industrial State, is to be found a more vivid and concrete picture of the market economy than painted b;y many free market economists. Big business, the “mature corporation,” with its “high technology,” requires heavy capital outlays so far in advance of production that demand may well evaporate. Thus “regulation of aggregate demand” via government spending to underwrite the risks of “high technology,” without which disaster would ensue for the industrial system. The economies of scale are so outweighed by the diseconomies of excessive scale that big business would quickly collapse without massive state aid, in other words. Without state aid, a market economy of simple products and simple equipment would prevail, using unspecialized labor frozen out of the planned economy. Galbraith’s taxation and spending indeed suppress shoestring activity and stifle competition for big business. He even flaunts the rigidity of the industrial system, rigidity being the historic enemy of the poor. The truly free market, however, is a model of sensitive adaptation.

Galbraith does not use “regulation of aggregate demand” in the standard Keynesian sense, in reference to the expansion or contraction of credit. This powerful and subtle practice, however, has vast repercussions on technology and business concentration, subsidizing longer production processes at the expense of the shorter. It does not create the vast wealth needed by the longer processes, but merely shifts it, equivalent to stuffing the ballot box in an election. It overbuilds industries most removed in time from consumer sale, i.e., mining, raw materials, and heavy machinery, aggravating other problems.

Galbraith’s bureaucratic “technostructure” runs things for its own benefit, only making enough profit to forestall stockholder takeovers. Its interests would dovetail with a minority controlling interest seeking to load corporations with debt, especially in public utilities. Railroad financiers have often sacrificed stockholder interests with unwise acquisitions, including diesel locomotives and poorly utilized freight cars. The airlines cartellized by the Civil Aeronautics Board and dominated by east coast financiers, bought many unneeded airliners. Galbraith attributes GM’s size not to economics of scale but to the needs of planning, a point true of the most capital intensive industry, electric power. As structured by Insull, the industry charged very low rates to industrial users, who could afford powerplants of their own, but much higher rates to home users, who could not. His state regulated monopoly prevented municipal power, i.e., combinations of home users large enough for economies of scale. “Fair return” on investment encourages investment quite beyond economic needs and excessive debt for utilities, nuclear power in particular. It even encourages money losing investments, as long as investments can be included in the rate base, according to “now classic” hypothesis in scholarly journals.

The twentieth century capital wresting economy, characterized by Pope Pius XI, has supplanted the ninteenth century captial accumulating economy. Welfare for big business is not inevitable, however, no more than the population explosion of rats if one allows garbage to pile up, a heap colorfully described by F.C. Howe. It also means cutting off welfare for the poor too and a veritable train of reaction seems to be getting the high green. To figure out what will really happen, however, we must avoid imposing values on others and use logic where historical precedent does not suffice, per Jerome Smith comment.

“Reducing society to the cash nexus” only means recognizing the inevitability of the money economy and seeing to it that market prices do indeed reflect social costs, unwarped by inflation, taxation, and regulation. The yearning for a more personal economy may be guaged not only from the pages of The Mother Earth News, but also from the magazine’s solid commercial success, the paradox being that the undistorted “cash nexus” offers more opportunity for partial escape. Some quid pro quo is necessary in all human relationships, impossible without money in far-flung relationships, in personal relationships dependent upon “family feelings,” per Gandhi disciple. Railroads are classic example of vertically integrated business out of touch with costs, while Japanese subcontracting system shows utility of market mechanism within industries. The undistorted cash nexus will of course be the occasional bearer of bad news, that one form of economic activity has been supplanted by another. Unlike the distorted nexus, however, it will also ensure that there is an overall gain in productivity.

Let us begin our union-busting at the top, with the capital “union” that restricts buyers in the labor market. It will go faster, however, if we bust the unions that restrict sellers and burden “scab” buyers, per Pius XI on excessive wage demands. Unions themselves have ample capital to become buyers, of course, to behave as they think responsible buyers should. Farmers do not simply make minimum price demands; no, they expect the government to buy surplus production at support prices. Unions try to treat surplus workers the same way with demands to “stimulate the economy,” i.e., credit expansion. The net effect, however, is to raise prices and cut wages, and, of course, feather the bankers’ nest. Until the picket line can exclude people from crime or skid row, let us not make moral lepers of “scabs.” Free market would abolish workmen’s comp and restore liability.

The undredged channels of the free market will leave “mature corporations” on the sandbars. Production will be decentralized, with a very thin line between employer and employee. If the large employer is a wolf, however, the small one is a werewolf, a vapor gone in the night, as the International Ladies Garment Workers Union found out. Sweatshops were the principal means by which Jewish refugees raised themselves from squalor around the turn of the century. The ILWGU has never been able to control the runaway employer or home workers, seeking tariffs in the 1970s against imported goods. Poor people’s unions simply cannot maintain effective picket lines and are only hurt by the effective picket lines of affluent workers. Instead of financing real estate, the ILWGU might bankroll more humane employment alternatives for the poor.

Do children really need child labor, on top of family turmoil, drugs, and sex, chaotic schools and TV, etc.? Yes, if it is a matter of survival, as in Naples, Italy. Don’t take it away if it is the best thing available. The family farm was a bastion of child labor and industrial “family farms” will be much more viable under a free market. Children will be much better educated with genuine work experience, per Capital.

Extreme forced association, all capital held by a central administration, or all jobs controlled by one big union, would be extremely discriminatory, The picket line, being a device to exclude, lends itself readily to discrimination. Employers seek to include, however, when their pockets dictate, per Marcus Garvey. Noncompetitive institutions tend to be much more discriminatory than competitive, per Thomas Sowell. With free accumulation of capital, discrimination on any basis except performance will be costly. Complaints of employer discrimination imply dependence upon employer. Jews and Chinese have long evaded discrimination with their own businesses, as women once did and are beginning to do again. One is much more independent with many employers than with one, per Adam Smith.

No standard diatribe against welfare recipients here, citing woman who went on welfare after husband deserted her with two children and the IRS confiscated monthly paychecks. Debilitating effects can be seen on more affluent, per standard reaction to closing military bases. Eliminating welfare state will also curb threats of police state, per striking resemblances between Social Security and South African passbook laws.

Support for South Africa will not be military, due to cutbacks forced by curtailment of credit and taxation. The price of gold will go up, of course, but blacks should get the major share of increased prosperity. Per Mises theory, no particular amount of gold is needed for exchange, so gold currency does not imply dependence on South Africa.

SA investment concerns should be aimed at government borrowing and military industry. SA basic industry is way overbuilt, per Mises theory. Consumer goods industries for black markets and increasing blacks’ commercial and technical skills should definitely be encouraged. Krugerand boycotts are merely gratuitious insults; attitudes toward SA need rethinking.

Architects of the treadmill economy confuse stopping the treadmill with stopping the economy. Stopping the treadmill will help the weakest the most. Prices should decline with increasing productivity, as in 19th century. Debts will be repayable if profit margins hold up; they should increase. No “depression from which we will never recover,” unless, of course, consumer demand is so satiated that no further production is necessary. Boom-and-bust cycle will be eliminated with credit expansion and by keying economy strictly to ultimate consumer demand. Economy should be as vigorous as Japanese small business, pending complete satiation.

Technical and financial progress have gotten bum raps because of counterfeits. Norfolk and Western steam locomotives were example of real thing, as was Lima Super-Power. Social progress must come first, and in spite of Schumacher’s homage to Keynes, mass psychology in “Small is Beautiful” movement, and penchant for government financing. “Other peoples money” still breeds grandiose projects, per Macaulay. Expropriation of the means of production, as if they had not been expropriated already, is still widely seen as the answer, Schumacher’s homage to self-reliance notwithstanding. It is, rather, the problem.

VII. Boycott “Lettuce”!

Half of solving a problem is defining it. Once an end is selected we can apply rational analysis to selection of appropriate means. In economics, however, there is no small confusion as to what is a means and what is an end. Free market advocates, always criticizing others for selecting inappropriate means, must be especially careful themselves.

Stockpiling “hard assets” and guns in not particularly rational, if it only touches off a slaughter or leads to eating dehydrated food in an armed camp.

Economists like to see their programs enacted into official policy. Free market advocates can expect great things if libertarian candidates are elected. Proposition 13 and the legalization of gold were solid achievements, as would be repeal of legal tender laws. Two problems arise, however, the first being the ever present difficulty of gaining a political consensus. Bias must be countered and distinctions made from not-so-free market approaches, such as Milton Friedman’s, which accepted central banking and the income tax, and that of big business, which generally prefers profits to liberty.

Second, principled positions have a rough go of it in politics anyway; politics tends to be arbitrary and whimsical. Paine warned of repeated petitioning; nothing makes kings more obstinate. To achieve freedom only through the political process would make it just another political favor.

The government never furthered any enterprise except by getting out of the way, said Thoreau. It is not the government that protects free speech today, but those who vigorously assert the right. “Even voting for the right is doing nothing for it,” said Thoreau. Immediate power may be vested in a ruling class, but the ultimate power, never. The power of the ruling class is simply that of gaining the cooperation of the multitudes. There is nothing superhuman or demonic about it. The ruling class is that segment of society which gets what it wants through the first use of force and fraud. Given the prevalance of private firearms, the U.S. establishment rules by fraud. In that case, ending its dominion is largely a matter of getting our heads screwed on straight.

Religious ethics may soften the hearts of the oppressors and is certainly more inspiring than economics, wrote Bastiat; the task of political economy is to enlighten their dupes. “Cast your whole vote,” said Thoueau, and let us withdraw our cooperation. The medium of exchange results from an intricate network of cooperation. Dissatisfaction with the present medium of exchange has already lead to an upsurge in barter, as clumsy as it can be per MASH episode. Barter exchanges issue crude currency.

Concrete action based upon principle needs no critical acclaim. Why merely store gold and silver coin, when they can be used in normal business transactions, as some people have begun to do anyway? There is even a fledgling industry offering hard currency alternatives. We need not be mere “voters” in the market process; we can become “election judges” as well. The American public has already rejected $2 bills and Susan B. Anthony coins. It can do the same to paper money in general, a process that will feed on itself as paper money depreciates ever more rapidly. We need not piteously petition government officials and beg to be heard. Rather, their problem is that we might not hear them. The French Revolution offers the classic example of the public rejecting depreciated paper money, draconic and brutal government measures to the contrary.

The grey eminences urge sacrifices to “beat inflation.” As Gen. Patton said, however, “Let those bastards die for their country.” Self-interest will compel holdings of sound currency. Unbacked Phillipine occupation currency example of currency vanishing virtually overnight. To reject depreciated currnecy for sound currency is to withdraw allegiance from a massive transfer of wealth that finances boondoggles at the expense of daily necessities, to resist the “cruelest tax,” as David Rockefeller quoted Lyndon Johnson. It is to substitute a new pattern of cooperation for the old; it is to gain implicit agreement for what may take forever to gain explicit agreement. Political economy teaches workers to keep what belongs to them, said Bastiat.

Thoreau found the world a different place when he came out of jail. So does one who tries to circulate one of the new hard currencies now on the market. Some people understand it right away, but most greet it with blank incomprehension. One libertarian, who accepted payment and even mentioned it in a newsletter, refused a second payment because she had to go to several banks to cash the first. A “hard money” book club refused a second payment after the first had gone through without incident and after it refused to credit my account. O, well, what if King George refused to accept the Declaration of Independence? A union of state professional employees in New York proposed payment indexed to gold. The dollar became a floating currency when the Swiss refused to inflate their franc enought to buy excess dollars. Ideas become powerful only when they appear in the flesh, said Erich Fromm.

Thoreau’s concern for debtors might be better turned to creditors today, because of legal tender laws. Legal tender laws can wipe out the currency or allow wars to be financed. according to landmark court decisions. They were effectively resisted in California during the Civil War, via public embarrassment of those who paid in greenbacks. They are quite unconstitutional, judging by the framers’ debates, and Supreme Court decisions upholding them are in gross error. Three scholars of diverse backgrounds agree on this point. Codified law only ratifies what happens in the streets, however; the courts’ credibility will have to be put on the line before significant change takes place.

People have not always felt the same urge to explain things that rhey feel now. In the 1750s, for instance, the Massachusetts legislature tried to impose a tax on the consumption of alcohol. People were supposed to report how much they were drinking and assess themselves a tax. The vehement objection was that if people had to account for their innocent activities, all the abuses of the Inquisition would follow. Federalist 12 shows the framers did not intend taxes to be wholesale invasions of privacy. The American taxpayer is too intent on justifying himself to IRS to think about basic protections of law. Everyone should at least learn to keep his mouth shut with IRS; the more intrepid can choose left-wing civil disobedience or right-wing constitutional challenges.

The “reasonableness” of state interventions should be challenged in court, as should their underlying “state interest,” but, more than anything else, the credibility of the federal judiciary, for financial bias via bank stocks, coercion by IRS, and general high-handedness.

The first use of force and fraud can be pretty much eliminated from economic life (if public and private spheres are properly distinguished), whether by resistance or through the political process. Some residual use will probably always be necessary, however, to maintain civil order, such as compulsory production of evidence in criminal matters, minimal taxation to support police and courts, eminent domain and public accomodation laws to insure everyone’s right of travel, and suppression of private armies. Formulas are not universal; the courts have not even found an inclusive definition for fraud.

VIII. The End of the Great Jackass Fallacy?

“Carrot and stick” is the dominant philosophy of American business. Prof. Harry Levinson asks executives what goes in-between and retorts their philosophy implies employees are jackasses. The problem is not a lack of communication but an excess of communication in one direction.

Life all too often seems to be a manner of winning arguments and manipulating our fellow man. Human conflicts seem to be largely collisions of jackass fallacies. Enticed by the vision of jackasses getting off their haunche sand repelled by any vision that might be seen through their eyes, we impose jackass fallacies on ourselves.

Barely have we learned to talk before the Great Jackass Fallacy takes hold. Few adults realize the futility of yelling at children or realize they have minds and feelings of their own. Lockstep education is the great citadel of the Great Jackass Fallacy, based on the assumption that children do want to learn and parents cannot be trusted to have them learn. School choice plans seem to be the equivalent of letting harem wives choose their sultan. Treatment of rape victims and school children have striking parallels. Schools take on a larger-than-life quality and make direction seem necessary to get anything done. Assuming the full burden of maintaining relationship, schools provide perfect training for prisons, the military, cults, and divorce court. We become unable to live without direction, like freed convicts yearning for the security of prison.

The obvious answer to the world’s problems is some “vast impersonal machine” to properly police it or properly feed it, to be harnessed to bayonet patriotism or bayonet brotherhood. The “cool” teacher to one is a nasty old schoolmarm to the other, but both have in common a vision of a “cool” teacher getting the jackasses off their haunches. Then we will see something like the Budweiser Clydesdales. Bastiat painted a vivid picture of such visions of grandeur, which he blamed on classical education and its excessive reverence for antiquity. The dreamers invent “a new heart” to go with their social order, he said.

The Fabian Society is the world’s most successful jackass driver; the John Birch Society, for all its analysis of the Fabians, one of the least effective.

Bayonet patriotism has an easier row to hoe than bayonet brotherhood, catering to prejeudice more than overcoming it. Still there are limits in forcing people to fight. Bayonet brotherhood runs out of scapegoats a bit more easily. Howevermuch they spurn “gradualism,” still even its most militant proponents recognize that things take time, even with the full uninhibited might of the state at their disposal. Bayonet brotherhood is strongest when coupled with bayonet patriotism, for example, the Soviets during WWII. The “new heart” is just slavish dependence on the military, per Hamilton, Federalist 8.

There is no point in arguing with jackass drivers; it only confirms their jackass fallacies. The state will never respect the individual as a higher and independent power until the individual asserts himself as such. Then let the unhorsed jackass drivers take it any way they want. Eventually they will have to address others’ self-love. Without all their “rights” to others’ sweat and blood, they will feel like immmigrants of a century ago just washed up on our shores. It will be one terrific adjustment, but, like the immigrants of then and now, they will have the thrill of building something for themselves.

Turned aside from the path of vice, people feel the attractin of virtue all the more, said Bastiat. Practicing virtue out of prosaic self-interest, they may rise to the more poetic sphere of practicing virtue for its own reward. However impossible it is for a jackass driver to see things through the eyes of a (!) jackass, that is exactly what we have to do to address others’ self-love. “Looking out for No. 1” under free exchange, when people can indeed take their business elsewhere, requires the practice of reciprocal altruism. With the basic gratifications assured, we should see Bismarckism in reverse, per Gandhi disciple, and the satisfactions of reshaping the plot superseding material gain.

Sensitivity toward children would nip jackass fallacy in the bud, although it would not necessarily follow from sensitivity toward adults. Montessori’s principles might be extended toward adults, however, Moral systems must be both beautiful and severe, per Cardinal Newman. People must live with consequences of own actions; otherwise we get the empty-headedness of state-established religion and education. That people are not to be bent and twisted, manipulated and controlled, however, will have to be made concretely.

Appendix- “Whither the Militia?” Supreme Court decisions notwithstanding, there is no compulsory military service under the army clause, only under militia clauses. Militia clauses as framers intended would resolve current controversies of draft and gun control.

I. Marching Orders to the World?

"Another factor, depending on the duration of the war, is the extent to which we shall buy back American securities still held by foreign investors... If we shall continue to buy back such securities on a large scale- and the chances are that if the war continues long enough we shall do that- then we should no longer be in the position of remitting abroad vast sums in the way of interest... We should be paying the interest upon our debts to our own people, not to foreigners. Such a development would be of the utmost importance for this country financially.
"A third factor, and that, too, is dependent upon the duration of the war, is as to whether we shall become lenders to the foreign nations upon a really large scale. I have pointed out that since the war began we have loaned direct to foreign governments something over two hundred million dollars. Yet this is a comparatively small sum. Shall we become lenders upon a really stupendous scale to those foreign governments? Shall we become lenders for the development of private or semipublic enterprises in South America and other parts of the world, which up to date have been commercially financed by England, France, and Germany? If the war continues long enough to encourage us to take such a position, and if we have the resources to deal with it, then inevitably we shall become a creditor instead of a debtor nation, and such a development, sooner or later, would certainly tend to bring about the dollar, instead of the pound sterling, as the international basis of exchange." (7)
7. Annals of the Academy of Political Science, Volume 60, July 1915, pp106-112, quoted in Ferdinand Lundberg, America's 60 Families, The Vanguard Press, NewYork, 1937, pp139-140, quoting Morgan partner Thomas Lamont

"On the day the Provisional Government (of Russia) was overthrown the shops were open, the trams ran and the cinemas were crowded. One of the most significant events in the history of mankind took place almost unnoticed. This astonished John Reed (the Harvard graduate who supported the Bolsheviks- author of Ten Days That Shook the World). 'All the complex routine of common life- humdrum even in wartime- proceeded as usual. Nothing is so astounding as the vitality of the social organism- how it persists in feeding itself, clothing itself, amusing itself, in the face of the worst calamities,'" (10)
10. Douglas Brown, Doomsday 1917: The Destruction of Russia's Ruling Class, G. P. Putnam's Sons, New York, 1975, p141

II. How You Can Profit From People of the Lake

"One of the most popular of philosophers, in a novel that has had the good fortune to charm generation after generation of children, shows us how a man can rise above the hardships of absolute solitude by his energy, his initiative, and his intelligence. Desiring above all to show all the resources possessed by this noble creature, our author imagines him accidently cut off, so to speak, from civilization. It was, therefore, Daniel Defoe's original plan to cast Robinson Crusoe ashore on the Isle of Despair alone, naked, deprived of all that can be added to one man's strength by united effort specialized skills, exchange and society.
"Nevertheless, and despite the fact that the obstacles are purely fictitious, Defore would have deprived his novel of every trace of verisimilitude if, overfaithful to the thought he wished to develop, he had not made necessary social concessions by allowing his hero to save from the shipwreck a few indispensable objects, such as provisions, gunpowder, a rifle, an ax, a knife, rope, boards, iron, etc.- decisive proof that society is man's natural mileau, since even a novelist cannot make him live outside it." (4)
4. Frederic Bastiat, Economic Harmonies, 1851, FEE, 1968, p64

"...The means of sustenance are scarce for every species of living beings. Hence biological competition prevails among the members of all species, an irreconcilable conflict of vital 'interests.' Only a part of those who come into existence can survive. Some perish because others of their own species have snatched away from them the means of sustenance. An implacable struggle for existence goes on among the members of the same species precisely because they are of the same species and compete with other members of it for the same scarce opportunities of survival and reproduction. Man alone by dint of his reason substitutes social cooperation for biological competition. What makes social cooperation possible is, of course, a natural phenomenon, the higher productivity of labor accomplished under the principle of the division of labor and specialization of tasks..."
"...What makes every specimen of an animal species a deadly foe of every other specimen is the mere fact of their life and death rivalry in their endeavors to snatch a sufficient amount of food... Only man has the power to escape to some extent from the rule of this law by intentional cooperation. So long as there is social cooperation and population has not increased beyond optimum size, biological competition is suspended...." (6)
6. Ludwig von Mises, Theory and History, 1957, Arlington House, 1969, pp38-40

"...Nobody ever saw one animal by its gestures and natural cries signify to another, this is mine, that yours; I am willing to give this for that. When an animal wants to obtain something either of a man or another animal, it has no means of persuasion but to gain the favour of those whose service it requires. A puppy fawns upon its dam, and a spaniel endeavors by a thousand attractions to engage the attention of its master... Man sometimes uses the same arts with his brethren... He has not time, however, to do this upon every occasion. In civilized society he stands at all times in need of the co-operation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do what he requires of them... It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from regard to their own self-interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities but of their advantages... Even a beggar does not depend upon (benevolence) entirely... it neither does nor can provide him with (the necessaries of life) as he has occasion for them. With the money one man gives him he purchases food..." (15)
15. Adam Smith, The Wealth of Nations, 1776, Book I, Chapter II (Modern Library, Random House, 1937, pp13-14)

"The sign of a high intelligence is the ability to dissociate ideas which are traditionally bound together and to separate truths from the emotions they become wrapped up in over the years. Our tragic incapacity to make this dissociation is responsible for almost all the wars and social catastrophes of mankind." (19)
19. Sydney J. Harris, Strictly Personal, Henry Regnery and Co., Chicago, 1953, p219

III. There Is Such a Thing as a Cheaper Lunch?

"... And for centuries, long before science set up the doctrine of marginal utility, the common man was accustomed to seek things and abandon things, not in accordance with the highest utility that they are by nature capable of delivering, but with the increase or decrease in concrete utility that depends on each given good. In other words, he practiced the doctrine of marginal utility before economic theory discovered it." (4)
4. Eugne von Bohm-Bawerk, Capital and Interest, Libertarian Press, South Hollanf, Ill., 1959, Volume II (The Positive Theory of Capital), p204

"In every purchase and sale... two men with diametrically opposed interests confront each other. The confrontation is decidedly antagonistic, for each knows the intentions of the other- knows they are opposed to his own. Therefore, the first consequence is the application of an immoral means to attain an immoral end..." (5)
5. Friedrich Engels, Outlines of a Critique of Political Economy, Appendix to Marx, The Economic and Philosophic Manuscripts of 1844, quoted in The Freeman, April 1975, p221

"On coming to Paris for a visit, I said to myself: Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis. It staggers the imagination to try to comprehend the vast multiplicity of objects that must pass through its gates tomorrow, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by so frightful a prospect. On the other hand, eighty departments have worked today, without co-operative planning or mutual arrangements, to keep Paris supplied. How does each succeedng day manage to bring to this gigantic market just what is necessary- neither too much nor too little? What, then, is the resourceful and secret power that governs the amazing regularity of such complicated movement, a regularity in which everyone has such implicit faith, although his prosperity and his very life depend upon it? That power is an ABSOLUTE PRINCIPLE, the principle of free exchange. We put our faith in that inner light which Providence has placed in the hearts of all men, and to which has been entrusted the preservation and unlimited improvement of our species, a light we term SELF-INTEREST, which is so illuminating, so constant, and so penetrating, when it is left free of every hindrance. Where would you be, inhabitants of Paris, if some cabinet minister decided to substitute for that power contrivances of his own invention, however superior we might suppose them to be; if he proposed to subject this prodigious mechanism to his supreme direction, to take control of all of it into his own hands, to determine by whom, where, how, nd under what circumstances everything should be produced, transported, exchanged, and consumed? Although there may be much suffering within your walls, although misery, despair, and perhaps starvation, cause more tears to flow than your warm-heared charity can wipe away, it is probable, I dare say it is certain, that the arbitrary intervention of the government would infinitely multiply this suffering and spread among all of you the ills that now affect only a small number of your fellow citizens." (11)
11. Bastiat, Economic Sophisms, FEE, pp97-98; Leonard Read, Anything That's Peaceful, FEE, pp

"The proletariat created... by the forcible expropriation of the people from the soil, this 'free' proletariat could not possibly be absorbed by the nascent manufacturers as fast as it was thrown upon the world. on the other hand, these men, suddenly dragged from their wanted mode of life, could not as suddenly adapt themselves to the discipline of their new condition. They were turned en masse into beggars, robbers, vagabonds, partly from inclination, in most part from the stress of circumstances. Hence... a bloody legislation against vagabondage. The fathers of the present working class were chastised for the enforced transformation...." (13) 13. Karl Marx, Capital, Chapter XXVIII

"How could poor, uneducated buyers compete against the entrenched wealth of the English landed aristocracy? How could their meager purchases compete against the wealthy man's competition for the services of producers? How could some dust covered miner hope to bid scarce economic resources away from the man of wealth? Simply because there were so many of them? Simply because there were so many of them! As capitalist techniques of production steadily increased the output of the laboring classes, the poor became slightly but steadily less poor. A few pennies here, a few yards of cloth there, multiplied a million times over: No aristocracy on earth was rich enough to withstand this relentless economic pressure of slightly less poor men, when so many of those men were being created by the labor markets of England. As individuals they were poor, especially before 1840, but they were not so poor as they had been in 1789, and here was THE new fact of life for producers using the older methods of production. Men who could not afford fine wool suits could now afford a cheap cotton one, and very rapidly it became obvious to English entrepreneurs that it would pay dividends to start producing hundreds of thousands of cotton garments than a few thousand high priced wool or silk ones. 'The outstanding fact about the Industrial Revolution,' wrote Mises, 'is that it opened an age of mass production for the needs of the masses. The wage earners are no longer people toiling merely for other people's well being. They themselves are the main consumers of the products the factories turn out... There is in the market economy no other means of acquiring and preserving wealth than by supplying the masses in the best and cheapest way with all the goods they ask for." (15)
15. Gary North, "Price Competition and Expanding Alternatives," The Freeman, FEE, August 1974, p469, citing Mises, Human Action

"As the quantity of stock to be lent at interest increases, the interest, the price which must be paid for the use of that stock, necessarily diminishes, not only from those general causes which make the market price of things commonly diminish as their quantity increases, but from other causes which are peculiar to this particular case. As capitals increase in any country, the profits which can be made by employing them necessarily diminish. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital. There arises in consequence a competition between different capitals, the owner of one endeavoring to get possession of that employment which is occupied by another. But on most occasions he can hope to justle that other out of this employment by no other means but by dealing on more reasonable terms. He must not only sell what he deals in somewhat cheaper, but in order to get it to sell, he must sometimes too buy it dearer. The demand for productive labor, by the great increase in funds which are destined for maintaining it, grows every day greater and greater. Labourers easily find employment, but the owners of capitals find it difficult to get labourers to employ. Their competition raises the wages of labor, and sinks the profits of stock. But when the profits which can be made by the use of a capital are in this manner diminished, as it were, the price which can be paid for the use of it, that is, the rate of interest, must necessarily be diminished with them." (16)
16. Adam Smith, The Wealth of Nations, Book II, Chap. IV

"Because capitalism, with its free mobility of labor, its right of voluntary contract, its emphasis on personal responsibility, and its supporting ethic of thrift and planning, opens new opportunities for men once locked in a far narrower universe economiclly, it is resented. A society that places considerable emphasis on considerations of personal and family status- name, rank, family heritage- does not react favorably to the NOVEAU RICHE "consumers" who, through a special skill of being able to produce for a mass market through cost-cutting and future predicting, have become fabulously wealthy. They may be rich, but the only way they can gain status in the old world's in the old world's terms is to marry the daughters of high status, falling income nobles, and aristocrats, or give employment to younger sons in a primogeniture (eldest son inherits all) system."
"... The price-cutting entrepreneur who makes a product available for a wider market is the great threat. The man who trims costs, or finds a cheaper substitute that is preferable to buyers at a lower price, is seen as a cunning thief. Yet in the middle of the last century, he was making products available to men who could otherwise have never dreamed of buying something as fine as the item being offered. A cotton garment that could be laundered simply gave a man an opportunity to attend church or a wedding or a funeral with a dignity he had never before known. And that, perhaps, was his great sin in the eyes of the old feudal aristocracy- the sin of pride on the part of social inferiors who were steadily becoming less inferior economically. The status world of the middle ages was being shattered by the world of free market contracts." (17) 17. North, op. cit, 469, 471

IV. The Polis Joke

"Then Samuel told all the words of the Lord to the people that had desired a king of him. And said: This will be the right of the king, that shall reign over you: he will take your sons, and put them in his chariots. And he will appoint of them to be his tribunes, and centurions, and to plough his fields, and to reap his corn, and to make his arms and chariots. Your daughters also he will take to make him ointments and to be his cooks, and bakers. And he will take your fields, and your vineyards, and your best oliveyards, and give them to his servants. Moreover, he will take the tenth of your corn, and of the revenues of your vineyards, to give his eunuchs and servants. Your servants also and handmaids, and your goodliest young men, and your asses he will take away, and put them to his work. Your flocks also he will tithe, and you shall be his servants. And you shall cry out in that day from the face of the king, whom you have chosen to yourselves: and the Lord will not hear you in that day, because you desired unto yourselves a king." (I Samuel/Kings 8:10-18, also quoted in Thomas Paine, Common Sense, to debunk monarchical government.)

"The nobleman has courage spends without counting, despises petty detail. There is a great air of freedom and unselfishness about the nobleman. He will throw his life away for a cause, not calculate the returns. That is the noble IDEA. In reality he lives by the serfdom of others, and he broadens his acres by killing, and taking other people's land- 'the good old rule, the simple plan. That they should take who have the power, and they should keep who can.'
"The bourgeoisie opposed such noble free-handedness and supported a king who would replace the 'the good old rule' by one less damaging to trade and manufacture- and to the peasants' crops. But the regretable truth is that there is no glamour about trade. Trade requires regularity, security, efficiency, and exact QUID PRO QUO, and an exasperating attention to detail... There is nothing spontaneous, generous, or large-minded about it. Man's native love of drama rebels against a scheme of life so plodding and resents the reward of qualities so niggling.
"What a convenient word is bourgeois! How expressive and well shaped for the mouth to utter scorn. And how flexible in its application- it is another wonderful French invention!" (2) 2. Dr. Jacques Barzun, quoted in Edmund Opitz, "Humane Values and the Free Economy," The Freeman, June 1978, p324

"In every experimental science there is a tendency toward perfection. In every human being there is a wish to ameliorate his own condition. These two great principles have often sufficed, even when counteracted by great public calamities and by bad institutions, to carry civilization rapidly forward. No ordinary misfortune, no ordinary misgovernment, will do so much to make a nation wretched as as the constant effort of every man to better himself will do to make a nation prosperous. It has often been found that profuse expenditures, heavy taxation, absurd commercial restrictions, corrupt tribunals, disaatrous wars, seditions, persecutions, conflagrations, inundations, have not been able to destroy capital so fast as the exertions of private citizens have been able to create it. It can easily be proved that, in our own land, the national wealth has, during at least six centuries, been almost uninterruptedly been increasing... This progress, having continued during many ages, became at length, about the middle of the eighteenth century, portentously rapid, and has proceeded, during the ninteenth century, with accelerated velocity." (3) 3. Thomas Babington Macaulay, History of England, Chapter III, quoted in Henry Hazlitt, The Conquest of Poverty, Arlington House, New Rochelle, N.Y., 1973, pp159-160.

"These are the rules of big business. They have superseded the teachings of our parents and are reducible to a simple maxim: Get a monopoly; let Society work for you; and remember that the best of all business is politics, for a legislative grant, franchise, subsidy or tax exemption is worth more than a Kimberly or Comstock lode, since it does not require any labor, either physical or mental, for its exploitation." (4) 4. Frederic C. Howe, Confessions of a Monopolist, Public Publishing Co., Chicago, 1906, p157, quoted in Antony Sutton, Wall Street and the Bolshevik Revolution, Arlington House, New Rochelle, N.Y., 1974, p16. Howe's support of Bolsheiks, pp115-116, 154. Sutton's well documented thesis is that Wall Street bankers (mostly non-Jewish) funneled money to both the Bolsheviks and Admrial Kolchak's group under cover of a Red Cross mission, apparently to establish an authoritarian regime which would curtail independent economic development of Russia and competition with U.S. interests in world markets. Note consistency with Lamont statement (Chap. I, n7).

"A young man attended public school, rode the free school bus and participated in the subsidized lunch program. He entered the army, and upon his discharge retained his National Service Insurance. He then attended the State University on the GI Bill.
"Upon graduation he married a Public Health nurse and bought a farm with an FHA loan, and then obtained an RFC loan to go into business. A baby was born at the county hospital.
"Later he put part of his land in the soil bank, and the payments helped pay for his farm and ranch. His father and mother lived on the ranch on Social Security; REA lines supplied him with electricity. The government helped him clear his land. The county agent showed him how to terrace it, then the government built him a fishpond and stocked it with fish.
"Books from the public library were delivered to his door. He banked his money and a government agency insured it. His children attended public schools, rode the free school busses, played in the public parks, and swam in the public pools.
"He was a leader in obtaining the new federal building, and went to Washington with a group to ask the government to build a great dam. He petitioned the government to give the local air base to the county.
"Then one day, after hearing that Carter's $500 million budget for 1979 added up to $2,000 for every man, woman and child, he wrote his Congressman:
"'I wish to protest these excessive governmental expenditures and attendant high taxes. I believe in rugged individualism. I think people should stand on their own two feet without expecting hand-outs. I am opposed to all socialistic trends and I demand a return to the principles of the Constitution and of states' rights." (8)
8. Howard Ruff, How to Prosper During the Coming Bad Years, Target Publishers, Alamo, Cal., 1978, pp27-28; original attributed to former Senator Stephen Young (D-Ohio)

"The problems that beset parasites differ from those confronting non-parasitic animals. The rat flea, once it is on the host, has at its disposal a virtually limitless supply of food. Provided that the flea can avoid the extremely efficient extermination tactics of the host- an end to which the flea's whole external anatomy has become highly modified- its difficulties as an individual are over. The non-parasitic animal must strive endlessly for its daily food and has highly developed sense organs to assist it. The flea's breakfast is permanently at its feet, but on the other hand, the future of the species is always in jeoprady. Sometimes the interest of the individual parasite may even run counter to the interests of subsequent generations. For example, if too many fleas live on one rat, they may weaken their host and eventually kill it. Parasites must be modest in their demands and unobtrusive in their ways; they must attract a minimum of attention and yet somehow ensure that their offspring are always in a position to find a similar opportunity and continue their long and now essential intimacy with their host...
"Perhaps nowhere in the animal kingdom are the dangers and cost of success more clearly illustrated. Blessed are the meek- that is, the not too successful- for they shall inherit the earth. One of the more unpalatable truths about natural selection is that it imposes a certain mediocrity...." (9)
9. Miriam Rothschild, "Fleas," Scientific American, December 1965

"To expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain, is as absurd as to expect that an Oceana or Utopia should ever be established in it. Not only the prejudices of the public, but what is much more unconquerable, the private interests of many individuals, irresistably oppose it. Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of rivals in the home market; were the former to animate their soldiers, in the same manner as the latter enflame their workmen, to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us. This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has the authority to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists," (13)
13. Adam Smith, The Wealth of Nations, Modern Library, Random House, N.Y. 1937, Book IV, Chapter II, pp437-438

"... We have no acts of parliament against combining to lower the price of work, but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necesity is not so immediate." (14) 14. Ibid., Book I, Chapter VIII, p66

"People of the same trade seldom meet together, even for merriment and diversion but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is indeed impossible to prevent such meetings, by any law which could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less make them necessary."
"An incorporation not only renders them necessary, but makes the act of the majority binding upon the whole. In a free trade an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation can enact a bye-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever," (15) 15. Book I, Chapter X, Part 2, pp128, 129

"... taxes upon the necessaries of life have nearly the same effect upon the circumstances of the people as a poor soil and a bad climate. Provisions are thereby rendered dearer in the same manner as if xxx required extraordinary labor and expense to raise them...
"Such taxes, when they have grown up to a certain height, are a curse equal to the barrenness of the earth and the inclemency of the heavens; and yet it is in the richest and most industrious countries that they have been most generally imposed. No other countries could support such a disorder. As the strongest bodies only can live and enjoy good health, under an unwholesome regimen; so the nations only, that in every sort of industry have the greatest natural and acquired advantages, can subsist and prosper under such taxes... " (19) 19. Book IV, Chapter II, p435

"'A people,' he tells us, 'may be too rich, but a government cannot be so.'
"'A state,' says he, 'cannot have more wealth at its command than may be employed for the general good, a liberal expenditure in national works being one of the surest means for promoting national prosperity; and the benefit being still more obvious, of an expenditure directed to the purposes of national improvement. But a people may be too rich.'" (22)
22. Robert Southey, Colloquies on Society, quoted by Thomas Babington Macaulay, Edinburgh Review, January 1839, p544

"Owing to their historical position, it became the vocation of the aristocracies of France and England to write pamphlets against modern bourgeois society. In the French revolution of July 1830, and in the English reform agitation, these aristocracies again succumbed to the hateful upstart. Thenceforth, a serious political struggle was altogether out of the question. A literary battle alone remained possible. But even in the domain of literature the old cries of the restoration period had beome impossible.
"In order to arouse sympathy, the aristocracy was obliged to lose sight, apparently, of its own interests, and to formulate its indictment against the bourgeoisie in the in the interest of the exploited working class alone. Thus the aristocracy took its revenge by singing lampoons against its new master, and whispering in his ears sinister prophecies of coming catastrophes.
"In this way arose Feudal Socialism: Half lamentation, half lampoon; half echo of the past, half menace of the future; at the time, by its bitter, witty, and incisive criticism, striking the bourgeoisie to the very heart's core, but always ludicrous in its effect through total incapacity to comprehend the march of modern history.
"The aristocracy, in order to rally the people to them, waved the proletarian alms-bag in front for a banner. But the people, as often as it joined them, saw on their hindquarters the old feudal coats of arms, and deserted with loud and irreverent laughter." (23)
23. Karl Marx and Friedrich Engels, The Communist Manifesto, part III, section 1(a)

"Why are we mill-owners to be selected as subjects of interference? Why is a Scotsman to be sent to see how I work my people, while the farmer, and the carpenter, and the builder, and the tailor, is left to the ordinary responsibilities of law and public opinion? Are we worse educated than they are?Are our people less intelligent, more ready to submit to oppression, or more easy to manage? It was proposed the other day to force us to spend millions in boxing off our machinery. We have three carters. In the same space time two of them have been killed. I have no doubt that in agricultural employments accidents are a hundred times more frequent in proportion to the numbers employed, than those which occur in factories. But we are unpopular, we are envied, we are supposed to be rich, we are Radicals, and Whigs and Tories combine to gain popularity by calumniating us and robbing us. I have advised my partners, if the machinery Bill passes, to set the example of turning the key on the doors of our mills, and to throw on the legislators the responsibility of feeding the million they will not allow us to employ with a profit." (28)
28. Albert Venn Dicey, Lectures on the Relationship between Law and Public Opinion in England During the Nineteenth Century, Macmillan & Co., London, 1914, 1953, p236

"... yet at the same time, owing to the necessity (the Factory Acts) impose for greater outlay of capital, they hasten the decline of the small masters, and the concentration of capital."
"If the general extension of factory legislation to all trades for the purpose of protecting the working class both in mind and body has become inevitable, on the other hand, as we have already pointed out, that extension hastens on the general conversion of numerous isolated small industries into a few combined industries carried on upon a large scale; it therefore accelerates the concentration of capital and the exclusive predominance of the factory system. It destroys both the ancient and tradtional forms, behind which the dominion of capital is still in part concealed, and replaces them by the direct and open sway of capital... By the destruction of petty and domestic industries it destroys the last resort of the 'redundant population,' and with it the sole remaining safety valve of the whole social mechanism..." (30) 30. Karl Marx, Capital, Modern Library, Random House, New York, Chap. XV, Sec8(e), p , Chap. XV, Sec. p, pp

"A new industrial order was hammered out of the Civil War, composed largely of war profiteers and others who grew rich on government contracts and the requirements of national emergency, and who during the war and its aftermath were able to influence the economic reconstruction. Charles Beard called it the 'Second American Revolution,' winning for industry the assurance of 'an immense national market surrounded by a tariff wall bidding defiance to the competition fo Europe.' Business tycoons also won banking and investment priveleges, land grants, railroad subsidies, and repeal of the moderate wartime income tax. The most important of the ninteenth-century American capitalists acquired their first great fortunes during the war. J.P. Morgan, Philip Armour, Clement Studebaker, John Wanamaker, Cornelius Vanderbilt, and the du Ponts had all been government contractors. Andrew Carnegie got rich speculating in bridge and rail construction while assistant to the Assistant Secretary of War in charge of military transport." (37)
37. Richard Kaufman, The War Profiteers, Bobbs-Merrill, Indianapolis, p9

"During the past few years the unexpected spectacle of certain so-called 'old-line conservative' Republican leaders in Congress suddenly reversing their attitude of a lifetime and seemingly espousing, though with ill-tempered reluctance, the proposed income-tax amendment to the Constitution has been the occasion of universal surprise and wonder." (42) 42. Howard Hinton, Cordell Hull: A Biography, Doubleday, Doan & Company, Inc., Garden City, N.Y., 1942, p124

"No railway legislation that was not either helpful to or harmless against 'the interests'; no legislation on the subject of corporations that would interfere with 'the interests' which use the corporate form to simplify and systematize their stealing; no legislation on the tariff question unless it secured to 'the interests' full and free license to loot; no investigations of wholesale robbery or of any of the evils resulting from it- there you have in a few words the whole story of the Senate's treason under Aldrich's leadership, and of why property is concentrating in the hands of the few and the little children of the masses are being sent to toil in the darkness of the mines, in the dreariness and unhelathfulness of factories instead of being sent to school; and why the great middle class- the old fashioned Americans, the people with the incomes of from $2,000 to $15,000 a year- is being swiftly crushed into dependence and the repulsive miseries of 'genteel poverty.' The heavy and ever heavier taxes of 'the interests' are swelling rents, swelling the prices of food, clothing, fuel, all the necessities, and all the necesary comforts. And the Senate both forbids the lifting of those taxes and levies fresh taxes for its master." (45)
45. David Graham Phillips, "The Treason of the Senate," Cosmopolitan, April 1906

"... everyone forgot that the Republicans had never been the laissez-faire party: On the contrary, it was the Democrats who had always championed free markets and minimal government, while Republicans had crusaded for a protective tariff that would shield domestic industry from efficient competition, for huge land grants and other subsidies to railroads, and for inflation and cheap credit to stimulate purchasing power and apparent prosperity. It was the Republicans who championed paternalistic Big Government and the partnership of business and government while the Democrats sought free trade and free competition, denounced the tariff as the 'mother of trusts,' and argued for the gold standard and the separation of government and banking as the only way to guard against inflation and the destruction of people's savings. At least that was the policy of the Democrats before Bryan and Wilson at the start of the twentieth century, when the party shifted to a position not very far from its ancient Republican rivals." (48)
48. Murray N. Rothbard, "Reliving the Crash of '29," Inquiry, November 12, 1979, p15

"The method tyrants use of stultifying their subjects cannot be more clearly observed than in what Cyrus did with the Lydians... (B)eing unwilling to either sack such a fine city or to maintain an army there to police it, he thought of an unusual expedient for reducing it. He established in it brothels, taverns, and public games, and issued the proclamation that the inhabitants were to enjoy them. He found this type of garrison so effective that he never again had to draw the sword against the Lydians. These wretched people enjoyed themselves inventing all sorts of games, so that Latins have derived the word from them, and what we call PASTIMES they call LUDI, as if they meant to say LYDI... Roman tyrants invented a further refinement. They often provided the city wards with feasts to cajole the rabble, always more readily tempted by the pleasure of eating than anything else. The most intelligent and understanding amongst them would not have quit his soup bowl to recover the liberty of the Republic of Plato. Tyrants would distribute largesse, a bushel of wheat, a gallon of wine, and a sesterce: and then everyone would cry, "Long live the King!" The fools did not realize that they were merely recovering a portion of their own property, and that their ruler could not have given them what they were receiving without first having taken it from them. A man might one day be presented with a sesterce and gorge himself at the public feast, lauding Tiberius and Nero for handsome liberality, who on the morrow would be forced to abandon his property to their avarice, his children to their lust, his very blood to the cruelty of these magnificent emperors, without offering any more resistance than a stone or tree stump... Yet when (Nero) died- when this incendiary, this executioner, this savage beast, died as vilely as he had lived- the noble Roman people, mindful of his games and festivals, were saddened to the point of wearing mourning for him. Thus wrote Cornelius Tacitus, a competent and serious author, and one of the most reliable." (51) 51. Etienne de la Boetie, The Politics of Obedience: The Discoure of Voluntary Servitude, Free Life Editions, N.Y., 1975, pp69-71

"Above this race of men stands an immense and tutelary power, which takes upon itself alone to secure their gratification and to watch over their fate. That power is absolute, minute, regular, provident, and mild. It would be like the authority of a parent if, like that authority, its object was to prepare men for manhood; but it seeks, on the contrary, to keep them in perpetual childhood: it is well content that the people should rejoice, provided they think of nothing but rejoicing. For their happiness such a goverment willingly labors, but it chooses to be the sole agent and the only arbiter of that happiness; it provides for their security, forsees and supplies their necessities, facilitates their pleasures, manages their principal concerns, directs their industry, regulates the descent of property, and subdivides their inheritances: what remains but to spare them all the care of thinking and all the trouble of living?
"Thus it every day renders the exercise of the free agency of man less useful and less frequent; it circumscribes the will within a narrower range and gradually robs a man of all the uses of himself. The principle of equality has prepared men for these things; it has predisposed men to endure them and often to look on them as benefits.
"After having thus successfully taken each member of the community in its powerful grasp and fashioned him at will, the supreme power then extends its own arm over the whole comunity. It covers the surface of society with a network of small, complicated rules, minute and uniform, through which the most original minds and the most energetic characters cannot penetrate to rise above the crowd. The will of man is not shattered, but softened, bent, and guided; men are seldom forced by it to act, but they are constantly restrained from acting. Such a power does not destroy, but it prevents existence; it does not tyrannize, but it compresses, enervates, extinguishes, and stupefies a people, till each nation is reduced to nothing better than a flock of timid and industrious animals, of which the government is the sheperd." (55)
55. Alexis de Tocqueville, Democracy in America, Vintage Books, New York, Volume II, Fourth Book, Chapter VI, pp336-337

"... A great stock, though with small profits, generally increases faster than a small stock with great profits. Money, says the proverb, makes money. When you have a little, it is generally easy to get more. The great difficulty is to get that little..." (56) 56. Adam Smith, op.cit., Book I, Chapter IX, p93

"The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. We are more industrious than our forefathers; because in the present times the funds destined for the maintainance of industry, are much greater in proportion to those which are likely to be employed in the maintainance of idleness, than they were two or three centuries ago. Our ancestors were idle for want of sufficient encouragement of industry. It is better, says the proverb, to play for nothing, than to work for nothing. In mercantile and manufacturing towns, where the inferior ranks of the people are chiefly maintained by the employment of capital, they are in general industrious, sober, and thriving; as in many English, and in most Dutch towns. In those towns which are principally supported by the constant or occasional residence of a court, and in which the inferior ranks of people are chiefly maintained by the spending of revenue, they are in general idle, dissolute, and poor; as at Rome, Versailles, Compeigne, and Fontainbleau... In a city where a great revenue is spent, to employ with advantage a capital for any other purpose than for supplying the consumption of that city, is probably more difficult than in one in which the inferior ranks of people have no other maintainance but what they derive from such a capital. The idleness of the greater part of the people who are maintained by the expense of revenue, corrupts, it is probable, the industry of those who ought to be maintained by the employment of a capital, and renders it less advantageous to employ a capital there than in other places. There was little trade or industry before the the union. When the Scotch parliament was no longer to be assembled in it, when it seemed to be a necessary residence of the principal nobility and gentry of Scotland, it became a city of some trade and industry. It still continues, however, to be the necessary residence of the principal courts of justice in Scotland, of the boards of custom and excise, &c. A considerable revenue therefore still continues to be spent in it. In trade and industry it is much inferior to Glasgow, of which the inhabitants are chiefly maintained by the employment of capital. The inhabitants of a large village, it has sometimes been observed, after having made considerable progress in manufactures, have beome idle and poor, in consequence of a great lord's having taken up his residence in their neighbourhood." (57)
57. Adam Smith, op.cit., Book II, Chapter II, p319

"There is a destiny now possible to us, the highest ever set before a nation to be accepted or refused. We are still undegenerate in race; a race mingled of the best northern blood. We are not yet dissolute in temper, but still have the firmness to govern and the grace to obey... This is what England must do or perish: she must found colonies as far and as fast as she is able... seizing every piece of fruitful waste ground she can set her foot on..." (61)
61. John Flint, Cecil Rhodes, Little, Brown, and Company, Boston, 1974, pp27-28

"... whenever a revolution breaks out in a country where there are different ranks and classes and social strata, and where the upper-most class has arrogated to itself certain privileges, it is the class next lower in the social scale that gains the ascendancy; naturally it calls the others to its aid by appealing to notions of fairness and justice. After the revolution, the second class comes to power. Usually it is not long in granting itself priviliges. The same is true of the third and fourth class. All this is odious, but it is always possible, as long as there is a lower class that can pay the costs of the priviliges involved.
"But as a result of the February Revolution, the whole nation, the whole people, including the lowest strata of the population, reached the point, or could reach it, through election, through universal suffrage, where it governed itself. And then, in a spirit of imitation which i deplore, but which seems natural enough, the people thought they could cure their sufferings by granting themseles privileges too; for I regard the RIGHT TO INTEREST-FREE CREDIT and the RIGHT TO EMPLOYMENT and many other demands as really privileges. (unrest0
"And in fact, gentlemen, these privileges can be granted to it, if there is beneth it, or withing sight, another, even more numerous class, three hundred million Chinese, for example, who can bear the costs of it. (laughter of agreement) Now, such a class does not exist; that is why each of the privileges will have to be paid for by our own people, out of their own pockets, not only without any possible profit to them, but by means od a complicated apparatus of which they will have to bear all the cost." (62)
62. Bastiat, Selected Essays on Political Economy, FEE, pp314-315

V. Crucified on a Cross of paper: 1984 as a Parody of Keynesian Economics

"It is a badly written book, poorly organized; any layman who, beguiled by the author's previous reputation, bought the book was cheated out of his 5 shillings. It is not well suited for classroom use. It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgments. It abounds in mares' nests and confusions... In short, it is a work of genius."
"It bears repeating that the General Theory is an obscure book so that would-be anti-Keynesians must assume their position largely on credit." (3) 3. Henry William Spiegel, ed., The Development of Economic Thought, Wiley, New York, 1052, pp767, 768, quoted in Hazlitt, The Failure of the 'New Economics,' 1959, Arlington House, New Rochelle, N.Y., 1973, pp3-4

"'wasteful' loan expenditure may nevertheless enrich the community on balance. Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better." (12)
12. Keynes, op.cit., pp128-129; Hazlitt, op.cit., pp148, 152

"Where the stimulus to investment is concerned, the system is somewhat in the lap of the gods. We may be lucky or unlucky; and one of the few things you can say about luck is, 'It's going to change.' Fortunately, things need not be left to luck. We shall see that perfectly sensible public and private policies can be followed that have greatly enhanced the stability and productive growth of the mixed economy." (32) 32. Samuelson, Economics, McGraw-Hill, N.Y., 8th ed., 1970, p196; 10th ed., 1976, p208

"We have found that the quantity of a mixed currency is not governed by the laws of value. Do we, then, find that it is controlled by accident? It would better be so, for there would be more chances of its coming out right. But, on the contrary, we find laws positively mischievous substituted for the wholesome operation of supply and demand.
"... The more that is issued of a mixed currency, the more will be wanted. The supply does not satisfy the demand' it excites it. Like an unnatural stimulus taken into the human system, it creates an increasing desire for more; and the more it is gratified, the more insatiable are its cravings.
"There are two reasons for this: one, that, as the currency is expanded, prices are raised correspondingly, and more currency is demanded to effect the same exchange; the other, that the speculation inevitably following a rise in prices leads to an enormous extension and repetition of indebtedness, which requires, for its discharge, a greatly increased amount of circulating medium. Thus, by the action and interaction of these causes, the demand for the issue of this kind of currency is certain to be greatest when it is already redundant. All this, of course, is quickened and helped by the fact that the manufacturers of this currency are ready and eager to crowd upon the public all it will take.
"... We have already seen the forces that raise the currency higher and higher. We have not seen that it is done for the public good, or in obedience to a call of trade. We might suppose that there would be an unending progress in this direction, till any degree of expansion be reached, inasmuch as the law of value does not govern a product into which the element of labor does not enter, It is not, therefore, the expense of multiplying it, nor is its increase limited by any consideration of utility. The cause that finally limits expansion, and finally produces a contraction, is the liability of the notes to be presented for payment in money. The occasion for this cause to operate may be almost anything, -a political convulsion, an adverse balance of trade, a failure of some large trading or banking company."
"It is hardly necessary to trace the course of contractions, they are so familiar to the American mind. The banks know their own position better than anyone else. They understand precisely what they must do. They act instantaneously. They curtail their loans. They know that trouble is at hand, and they propose to meet it in the best way for themselves. They know that their notes may now prove their ruin, and they propose to get them out of the way as fast as possible.
"There are two classes of banks:
1st. Those who transact all their business in an honorable manner, and, so far as the nature of the currency they issue will admit, on a secure basis.
2d. Those who get out, and keep out, all they can, and carry their circulation, deposits, and loans as high as possible, without regard to the specie in their vaults. This class is numerous, especially those of small capital.
"In case of a demand for specie, the latter class are obliged to call for assistance from the former, who, willing or unwilling, are equally obliged to give it. The 'feeble banks' must be sustained, or the whole system will be suspected. If these be allowed to dishonor their notes, a run will be made at once on all the rest; and, having as we see only one dollar in five to pay with, they must, of course, soon stop paying altogether.
"It is commonly said that the banks only increase their issues as demanded by the wants of trade; that they extend their credits, because the public require them as business facilities.
"But it is not true. The movement always comences with the banks. When, by a monetary revulsion, their circulation and deposits have been reduced so low that they feel safe in commencing another expansion, the panic being over, the banks begin to offer extraordinary inducements to their customers to borrow money. They will discount all good paper offered, even if it has a long time to run. It is not uncommon, at such times, to solicit the privilege of making loans. (This is within the personal knowledge of the [quoted] author as a bank director.) As soon as this state of things takes place all businessmen begin speculative operations; for prices have begun to rise. Speculation will will give a still greater rise in prices, and cause a still greater demand for currency. The expansive force is now in full operation, and is sure to increase in power till by revulsion the equilibrium is restored." (35) 35. Amasa Walker, The Science of Wealth, J.B. Lippincott & Co., Philadelphia, 1874, pp170-174

"... There is need to realize that inflation does not add anything to a nation's power of resistance, either to its material resources or to its spiritual and moral strength. Whether there is inflation or not, the material equipment required by the armed forces must be provided out of the available means of restricting consumption for non-vital purposes... these things can be done if the majority of citizens are firmly resolved to offer resistance to the best of their abilities and are prepared to make sacrifices...
"But the situation those advocating emergency inflation have in mind is of a quite different character. Its characteristic feature is an irreonciliable antagonism between the opinions of the government and those of the majority of the people... The government, in this regard supported by only a minority of the people, believes that there exists an emergency that necessitates a considerable increase in the public expenditures and a corresponding austerity in private households. But the majority of the people disagree. They do not believe that conditions are so bad as the government depicts them or they think that the preservation of the values endangered is not worth the sacrifices they would have to make... Perhaps the government is right. However, we deal not with the substance of the conflict but with the methods chosen by the rulers for its solution. They reject the democratic way of persuading the majority. They arrogate to themselves the power and moral right to circumvent the will of the people. They are eager to win its cooperation by deceiving the public about the costs involved... their conduct is in effect not that of not that of elected office holders but of guardians of the people. The elected executive no longer considers himself the people's mandatory; he turns into a Fuhrer.
"The emergency that brings about inflation is this: The people... are not prepared to defray the costs incurred by their rulers' policies. They support these policies only to the extent that they believe their conduct does not burden themselves...
"... Recourse to inflation may provide the government with the funds which it could neither collect by taxation nor borrow from the savings of the public, because the people and its parliamentary representatives objected. Spending the newly created fiat money, the government can buy the equipment the armed forces need. But a nation reluctant to make the material sacrifices necessary for victory will never display the requisite mental energy. What warrants success in a fight for freedom and civilization is not merely material equipment but first of all the spirit that animates those handling the weapons. This heroic spirit cannot be bought by inflation." (39) 39. Mises, The Theory of Money and Credit, pp425-428

"Business willed its own domination, forged its bonds, and policed its own subjection," "The World War was a wonderful school... It showed us how so many things may be bettered that we are at a loss where to begin with permanent utilization of what we knew," and, "Businessmen wholly consecrated to government service ... now faced businessmen... sympathetic with the purpose of government." (41)
41. Grosvenor B. Clarkson, Industrial America in the World War, Houghton, Mifflin Co., Boston, 1923, pp154, 230, 312; quoted in Ronald Radosh and Murray Rothbard, eds., A New History of Leviathan, 1972, E.P. Dutton & Co., Inc., N.Y., Rothbard, "War Collectivism in World War I," pp74, 75-76, 77

"... we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action... No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times... For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered... They were maintained until the cost of living had decreased and the profits had vanished. They are now the highest real wages in the world...
"Creating new jobs and giving to the whole system a new breath of life: nothing has ever been devised in our history which has done more for ... 'the comon run of men and women.' ... Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom... We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction." (49)
49. Rothbard, America's Great Depression,, p169

"As I understand it, it is for purpose of wiping out competition between us miners first, viewing it from our side of the question; next for the purpose of wiping out competition as between operators in these four states. When we have succeeded in that and we have perfected an organization on both sides of the question, then as I understand the real purpose of the movement, it is that we will jointly declare war upon every man outside this competitive field." (62)
In the 1920s Lewis bluntly summarized his labor strategy:
"Shut down 4,000 coal mines, force 200,000 miners into other industries, and the coal problem will take care of itself. The public will then be assured of an adequate supply of low-priced fuel."
"We decided it is better to have half a million men working in the industry at good wages... than it is to have a million working in the industry in poverty." (63)
63. quoted in Joseph E. Finley, The Corrupt Kingdom, Simon and Schuster, New York, 1972, p61

"... for expansion of bank credit to take place at all there must be a demand for it by credit-worthy borrowers- those whose financial standing is such as to entail a liklihood that the loan will be repaid at maturity- and/or an available supply of low-risk investment securities such as would be appropriate for banks to purchase. Normally these conditions prevail, but there are times when demand for bank credit is slack, eligible loans or securities are in short supply, and the interest rates on bank investments has fallen with the result that banks have increased their preference for cash. Such conditions tend to slow down bank credit expansion...
"... banks, as business organizations, endeavor to use all their available funds in profitable ways and keep as reserves only the minimum required by law. During the greater part of the life of the Federal Reserve System, member banks have put practically all their funds to use and have had practically no excess reserves. Such conditions tend to slow down bank credit expansion...
"After the early 1930s there was a large movement of gold into the country. This gold greatly increased the reserves of member banks. At the same time there was only a limited demand for loans acceptable to banks at current interest rates prevailing in the market. Consequently, the banks had an excessive volume of excess reserves. During and after World War II the greater part of these excess reserves were absorbed into required reserves as credit expanded, demand for currency increased, and increases were made in reserve requirements, as permitted by law. In recent years excess reserves have once again constituted a relatively small proportion than in the 1920s." (76)
76. Board of Governors of the Federal Reserve System, The Federal Reserve System: Purpose and Functions, Washington, D.C., 1963 (50th anniversary), pp77, 80-81

"It has been too hastily taken for granted that an increase in the supply of any commodity whatever must, of necessity, result in the diminution of its value. Increase of supply cuts down values in so far as it satiates demand, but in so far only. By Mr. Jevons and the Austrian school of economists this important qualification seems to have been, to some extent, overlooked. They accordingly set forth the proposition as an absolute universal one, that, for every successive increment of supply there is of neessity a successive diminution in the 'utility,' that is to say, in the 'wantedness' of the thing being supplied, till presently this 'utility' altogether vanishes.
"This conclusion, it seems to me, has been arrived at owing to an over concentration of attention on the most simple cases, and a neglect of the more complicated ones. If we regard the supply as being furnished to one individual standing alone, and as consisting of food or clothing, then no doubt the more he gets the less he will want. But let us take a slightly more complicated case. Suppose the supply to be furnished to a group of warlike tribes, such as the earlier traders found in possession of New Zealand eighty years ago, and the article to be supplied to be gunpowder. It is evident that, for a considerable period at any rate, the increase of supply is likely, instead of being attended with a diminution of demand, to be attended with a demand that is increasingly urgent. The very fact that one tribe has secured a supply of gunpowder makes it a matter of vital necessity for others to secure a supply likewise. The more that each obtains, the more must all the others have. If, again, we extend our view to the world generally, and conceive the article supplied to be some arm of precision or armour of defense, or the material of which one or both are made, it is difficult to place any limit to the period during which increase of supply may not be necessarily attended by a proportionate or more than proportionate increase in demand." (79)
79. W.W. Carlile, The Evolution of Modern Money, 1901, Augustus M. Kelley, N.Y., 1969, pp252-253

"We have some very extensive factories which are nothing but RUBBISH. Therefore it is not sufficient, if we wish to restore our business, to close these establishments, in the hope of reopening them later. Even factories not working cost money; e.g., the Rheinische Metallenwarenfabrik spends half a million marks per annum on a locomotive factory which is closed. Therefore our slogan must be: DEMOLITION! WE MUST CONSIDER AS FINALLY LOST THE CAPITAL UNWISELY INVESTED IN THOSE FACTORIES. Certainly this is a unique occurance in the history of Germany; it is a recognition of very grave mistakes committed during the inflation." (82)
82. Constantino Bresciani-Turroni, The Economics of Inflation, 1934, Augustus M. Kelley, 197., passim 329, 390

"... At the present moment more than a hundred American corporations have subsidiaries here or cooperative understandings. The DuPonts have three Allies in Germany that are aiding in the armament business. Their chief ally is the I.G. Farben Company, a part of the Government which gives 200,000 marks a year to one propaganda organization operating on American public opinion. Standard Oil Company (New York sub-company) sent $2,000,000 here in December 1933 and has made $500,000 a year helping Germans make Ersatz gas for war purposes; but Standard Oil cannot take any of its earnings out of the country except in goods. They do little of this, report their earnings, but do not explain the facts. The International Harvester Company president told me their business here rose 33% a year (arms manufacture, I believe), but they could take nothing out. Even our airplanes people have secret arrangement with Krupps. General Motor Company and Ford do enormous businesses (sic) here through their subsidiaries and take no profits out. I mention these facts because they complicate things and add to war dangers." (86)
86. Antony Sutton, Wall Street and the Rise of Hitler, '76 Press, Seal Beach, Cal., 1976

"The Nazis were not given to books. Their reaction was to circumstances, and this served them better than the sound economists served Britain and the United States. From 1933, Hitler borrowed and spent- and he did it liberally as Keynes would have advised. It seemed the obvious thing to do, given the unemployment. At first, the spending was mostly for civilian works- railroads, canals, public buildings, the Autobahnen. Exchange controls then kept frightened Germans from sending their money abroad and those with ising incomes from spending too much of it on imports.
"The results were all a Keynesian could have wished. By late 1935, unemployment was at an end in Germany. By 1936, high income was pulling up prices or making it possible to raise them. Likewise wages were beginning to rise. So a ceiling was put on both prices and wages, and this too worked. Germany, by the late thirties, had full employment at stable prices. It was, in the industrial world, an absolutely unique achievement.
"The German example was instructive but not persuasive. British and American conservatives looked at the Nazi financial heresies- the borrowing and spending- and uniformly predicted a breakdown. Only Schacht, the banker, they said, was keeping things patched together. (They did not know that Schacht, so far as he was aware of what was happening, was opposed,) And American liberals and British socialists looked at the repression, the destruction of the unions, the Brownshirts, the Blackshirts, the concentration camps, the screaming oratory, and ignored the economics. Nothing good, not even full employment, could come from Hitler..."
"The war then brought the Keynesian remedy with a rush. Expenditures doubled and redoubled. So did the deficit....
"There is another way of looking at this history. Hitler, having ended unemployment in Germany, had gone on to end it for his enemies. He was the outstanding protagonist of the Keynesian ideas.
"The war revealed two of the enduring features of the Keynesian Revolution. One was the difference between spending for welfare and spending for war. During the Depression very modest outlays for the unemployed seemed socially debilitating, economically unsound. Now expenditures many times greater for weapons and soldiers were perfectly safe. It's a difference that still persists."
"... Keynesian support for the economy has come to involve heavy spending for arms..." (97) 97. John Kenneth Galbraith, The Age of Uncertainty, Houghton Mifflin Company, Boston, 1977, pp213-214, 221, 226

"The causes of hostility among nations are innumerable. There are some which have a general and almost constant operation upon the collective bodies of society. Of this description are the love of power or the desire of pre-eminence and dominion- the jealousy of power, or the desire of equality and safety. There are others which have a more circumscribed though an equally operative influence within their spheres. Such are the rivalships and competitions between commercial nations. And there are others, not less numerous than either of the former, which take their origins entirely in private passions; in the attachments, enmities, interests, hopes, and fears of leading individuals in the communities of which they are members. Men of this class, whether the favorites of a king or of a people, have in too many instances abused the confidence they possessed; and assuming the pretext of some public motive, have not scrupled to sacrifice the national tranquility to personal advantage or personal gratification.
"The celebrated Pericles, in compliance with the resentments of a prostitute, at the expense of much of the blood and treasure of his countrymen, attacked, vanquished, and destroyed the city of the Samnians. The same man, stimulated by private pique against the Megarensians, another nation of Greece, or to avoid a prosecution with which he was threatened as an accomplice in a supposed theft of the statuary of Phidias, or to get rid of the accusations prepared to be brought against him for dissipating the funds of the state in the purchase of popularity, or trom a combination of all these causes, was the primitive author of that famous and fatal war, distinguished in the Grecian annals by the name of the Peloponnesian war; which, after various vicissitudes, intermissions, and renewals, terminated in the ruin of the Athenian Commonwealth." Alexander Hamilton, Federalist 6

"George Orwell: British optimist. Author of 1968." Great Society Dictionary.

"It is quite common, however, to attribute to capital a kind of deadly efficiency that would plant selfishness, hardness, and Machiavellian duplicity in the hearts of those who possess it. But is this not confused thinking? There are countries where labor is mainly fruitless. The little that is earned must go quickly for taxes. In order to take from you the fruit of your labor, what is called the state loads you with fetters of all kinds. It interferes in all your activities; it meddles in all your dealings; it tyrannizes over your understanding and your faith; it deflects people from their natural pursuits and places them all in precarious and unnatural positions; it paralyzes the activities and the energies of the individual by taking upon itself the direction of all things; it places responsibility for what is done upon those who are not responsible, so that little by little the distinction between what is just and what is unjust becomes blurred; it embroils the nation, through its diplomacy, in all the petty quarrels of the world, and then it brings in the army and the navy; as much as it can, it perverts the intelligence of the masses on economic questions, for it needs to make them believe that its extravagances, its unjust aggressions, its conquests, its colonies, represent a source of wealth for them. In these countries it is difficult for capital to be accumulated in natural ways. Their aim, above all, is by force and guile to wrest capital from those who have created it. The way to wealth there is through war, bureaucracy, gambling, government contracts, speculation, fraudulent transactions, risky enterprises, public sales, etc. The qualities needed to snatch capital violently from the hands of the men who create it are exactly the opposite of the qualities that are necessary for its formation. It is not surprising, therefore, that in those countries CAPITAL connotes ruthless SELFISHNESS; and this connotation becomes ineradicable if the moral judgements of the nation are derived from the history of antiquity and the Middle Ages." (105)
105. Bastiat, Economic Harmonies, pp197-196

VI. The New Industrial State Between the Lines: Small Is Beautiful

“Once an abuse exists, everything is arranged on the assumption that it will last indefinitely; and as more and more people come to depend on it for their livelihood, and still others depend upon them, a superstructure is erected that soon comprises a formidable edifice.
“The moment you try to tear it down, everybody protests; and the point to which I wish to call particular attention here is that those who protest always appear at first glance to be in the right, because it is easier to show the disorder that must accompany reform than the order that should follow it.” Frederic Bastiat


“The regulation of aggregate demand, it will be evident, is an organic requirement of the industrial system. In its absence ,there would be unpredictable and almost certainly large fluctuations in demand and therewith in sales and production. Planning would be gravely impaired; capital and technology would have to be used much more carefully and much less effectively than now. ... There is an impression ... that the business firms that comprise the industrial system have been hostile to (regulation of aggregate demand). This on closer examination turns out to have been far from the case.”
(2) John Kenneth Galbraith, The New Industrial State, Houghton-Mifflin, Boston 1967, Signet paperback edition, p233

“... Size is the general servant of technology, not the special servant of profits. The small firm cannot be restored by breaking the power of the large ones. It would require, rather, the rejection of the technology which since earliest consciousness we are taught to applaud. It would require that we have simple products made with simple equipment from readily available raw materials by unspecialized labor. Then the period of production would be short; the market would reliably provide the labor, equipment, and materials required for production; there would be neither possibility nor need for managing the market for the finished product. If the market thus reigned, there would be and could be no planning. No elaborate organizxation would be required. The small firm would then, at last, do very well. All that is necessary is to undo nearly everything that, at whatever violence to meaning, has been called progress in the last half century. There must be no thought of supersonic travel, or exploring the moon, and there will not be many automobiles”
(3) Ibid, p44

“In the first place, it is obvious that not only is wealth concentrated in our times but an immense power and despotic economic dictatorship is consolidated in the hands of a few, who often are not are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure.

“This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the floso to speak, of the life blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will.

“This concentration of power and might, the characteristic mark, as it were, of contemporary economic life, is the fruit of the unlimited struggle among competitors has of its own nature produced, and which lets only the strongest survive; and this is often the same as saying, those who fight the most violently, those who give the least heed to their consciences.

“This accumulation of might and of power generates in turn three kinds of conflict. First, there is the struggle for economic supremacy itself; then there is the bitter fight to gain supremacy over the State in order to use in economic struggles its resources and authority; finally there is conflict between States themselves, not only because countries employ their power and shape their policies to promote every economic advantage of their citizens, but also because they seek to decide political controversies that arise among nations through the use of economic supremacy and strength.

“The ultimate consequences of the individualist spirit in economic life are those which you yourselves, Venerable Brethren and Beloved Children, see and deplore: Free competition has destroyed itself; economic dictatorship has supplanted the free market; unbridled ambition for power has likewise succeeded greed for gain; all economic life has become tragically hard, inexorable, and cruel. To these are to be added the grave evils that have resulted from an intermingling and shameful confusion of the functions and duties of public authority with those of the economic sphere- such as, one of the worst, the virtual degradation of the majesty of the State, which, although it ought to sit on the high like a queen and supreme arbitress, free from all partiality and intent upon the one common good and justice, is become a slave, surrendered and delivered to the passions and greed of men....” (50)
50. Pope Pius XI, Quadragesimo Anno, ¶¶105-109

“This is the story of something for nothing- of making the other fellow pay. This making the other fellow pay, of getting something for nothing, explains the lust for franchises, mining rights, tariff priveleges, railway control, tax evasions. All these things. All these things mean monopoly, and all monopoly is bottomed on legislation.

“And monopoly laws are born in corruption. The commercialism of the press, or education, even of sweet charity, is part of the price we pay for the special priveleges created by law. The desire of something for nothing, of making the other fellow pay, of monopoly in some form or other, is the cause of corruption. Monopoly and corruption are cause and effect. Together, they work in Congress, in our Commonwealths, in our municipalities. It is always so. It has always been so. Privelege gives birth to curruption, just as the poisonous sewer breeds disease. Equal chance, a fair field and no favors, the ‘square deal,’ are never corrupt. They do not appear in legislative halls, nor in Council Chambers. For these things mean labor for labor, value for value, something for something. This is why the little businessman, the retail and wholesale dealer, the jobber, and the manufacturer are not the business men whose business corrupts poilitcs>“ (51)
51. Frederick C. Howe, Confessions of a Monopolist, Public Publishing Co., Chicago, 1906 ppV-VI, quoted in Antony Sutton, Wall Street and FDR, Arlington House, 1975, pp73-74

“It scarcely ever happens, that any private man, or body of men, will invest property in a canal, a tunnel, or a bridge, but from an expectation that the outlay will be profitable to them. No work of this sort can be profitable to private speculators, unless the public be willing to pay for the use of it. The public will not pay of thieir own accord for what yields no profit or convenience to them. There is thus a direct and obvious connexion between the motive which induces individuals to undertake such a work, and the utility of the work.

“Can we find any such connexion in the case of a public work executed by a government? If it is useful, are the individuals who rule the country richer? If it is useless, are they poorer? A public man may be solicitious for his credit, but is not he likely to gain more credit by a useless display of ostentatious architecture in a great town, than by the best road or canal in some remote province? The fame of public works is a much less certain test of their utility, than the amount of toll collected at them. In a corrupt age, there will be direct embezzlement. In the purest age there will be an abundance of jobbing. Never were the statesmen of any country more sensitive to public opinion, and more spotless in pecuniary transactions, than those who have of late governed England. Yet we have only to look at the buildings recently erected in London for proof of our rule. In a bad age, the fate of the public is to be robbed. In a good age, it is much milder- merely to have the dearest and the worst of everything.” (110)
110. Thomas Babington Macaulay, Edinburgh Review, January 1830, p545

VII. Boycott “Lettuce”
VIII. The End of the Great Jackass Fallacy?

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