the freeman 1966 · hen scratches for food, and by in stinct and conditioned reflexes a lion stalks...

Clarence B. Carson 8

Ralph W. Husted 23

Vermont Royster 33

Edmund A. Opitz 36

K. Fritz Schumacher 42

Martin Anderson 46

MARCH 1966

Why Humans Must Be Free

The Flight from Reality:

18. The Origins of Reform Methods .

The Moral Foundation of Freedom .

To the Gallows .

Lord Gifford's Legacy

Today's Robber Barons.

The Fiasco of Urban Renewal .

Books:

Mercantilism Invites Corrup.tion .

Other Books

V. Orval Watts

John Chamberlain

3

60

63

COMPOUNDED DAILY, your savingsearn 4.97% when held one year at current rate of 4.85 %, paid semi-annually.

COAST FEDERAL SAVINGS & LOAN ASSOCIATIONDepartment FM, 9th & Hill Sts., Los Angeles, California 90014

STREET _

NAME(S) _(please print)

o Please send me a FREE copy ofPresident Crail's IIAdam Smith vs.Karl Marx" speech.

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D Individual D Joint

in the name(s) of CITY STATE _6-121

Y' "Man fulfills his Creator's purpose

only as he develops the power to know

and choose good and reject evil." .. p. 3

Y' Dr. Carson, in this chapter, traces

the development of the methods of re

form employed in the Flight fromReality. ... . ......... p. 8

Y' A businessman explains· why suc

cessful private enterprise requires spir

itual and political, as well as economic,

freedom. .. ...... p. 23

Y' Governments that persist in deficit

financing of profligate spending are

bound to blame their victims for the

consequent rise of prices. . ..p. 33

Y' The Reverend E. A. Opitz scholarly

reviews Lord Gifford's legacy - The

Gifford Lectures. .. .. .. p. 36

Y' An old friend of the "iron horse"

explains how tax authorities have dis

criminated against the railroads.

.... p. 42

Y' Professor Martin Anderson docu

ments chapter and verse in the long

record of failure in governmental ef

forts at Urban Renewal. .... p. 46

Y' in Clal'\k MoHenhoff's Despoilers ofDemocracy, John Chamberlain findsample documentation for his distrustof overgrown bureaucracy p. 60

Y' Life Without Prejudice, by the lateRichard Weaver, is reviewer Thornton's

book-of-the-month . p. 63

Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

MARCH 1966

LEONARD E. READ

PAUL L. POIROT

Vol. 16, No.3

President, Foundation forEconomic Education

llJar/aging Editor

THE FREEMAN is published nlonthly by theFoundation for Economic Education, Inc., a nonpolitical, nonprofit educational champion of privateproperty, the free market, the profit and loss systenl,and limited goYernment, founded in 1946, with officesat Irvington-on-Hudson, New York. Any interestedperson may receive its publications for the asking'.The costs of Foundation projects and services, including THE FREEMAN, are nlet through voluntary donations. Total expenses average $12.00 a yearper person on the mailing list. Donations are invitedin any amount - $5.00 to $10,000 - as the means ofnlaintaining and extending the Foundation's work.

Copyright, 1966, The Foundation for Economic Education, Inc. Printed In

In U.S.A.

Additional copies, postpaid, to one address: Single copy, 50 cents;3 for $1.00; 25 or more, 20 cents each.

Permission is hereby granted to anyone to reprint any article in wholeor in part, providing customary credit is given, except "Why HumansMust Be Free," liThe Flight from Reality," liTo the Gallows," and liTheFiasco of Urban Renewal."

Any current article will be supplied in reprint form If there are enoughinquiries to justify the cost of the printing.

WHY HUMANSMUST BE

v. ORVAL WATTS

HUMANS DEVELOP their humanqualities, they prosper and progress, as individuals exercise theirpowers of choice and recognize responsibility for their own acts.

This is why government cannotpromote human progress except asit establishes freedom, which isthe political condition for voluntaryaction.

For humans are not only purposive and inner-directed, as allliving creatures are. They are alsoself-controlling. They choose theirpurposes and their methods forpursuing their purposes. Theygain human quality only as theyexercise this power of choice andlearn to use it skillfully - that is,~visely.

Dr. Watts is Chairman of the Division ofSocial Studies at· Northwood Institute, aprivate college dedicated to the philosophyand practice of free enterprise. This articleis from lecture material for his course: Survey of American Life and Business.

Other creatures pursue purposeslargely dictated by built-in reflexes and instincts. By instinct abird seeks out certain kinds offood, builds its nest, preens itsfeathers, flies north in the springand south in the fall. By instinct ahen scratches for food, and by instinct and conditioned reflexes alion stalks its prey.

But man acts according to ideaswhich he himself fashions and selects in much the same way thathe makes his clothing and selectshis food.

True, he has certain reflexes anda few vague instincts. These takecare of some of his more basicneeds, such as his need for air andwater - if he permits them to doso. But he may, if he chooses, recondition his own reflexes and actcompletely contrary to his instincts. Thus, expert swimmers

4 THE FREEMAN March

and divers learn new breathinghabits, and Hindu yogis learn tocontrol even their heart beats.

Man gets his controlling ideasby using the evidence brought hiInby his senses. But he himself determines what senses he will use,how, when, and where he usesthem, and what ideas he forms concerning the sensations they bringhim. He may close his eyes andrefuse to see what is before him,or he may reject what he sees asuseless or unreal.

And as he sifts and reworks thedata supplied him by his senses,he forms patterns of ideas, values,and purposes which govern his actions.

Man Is Responsible

Because of this power of selfcontrol, man is not only accountable for his acts, he is responsiblefor them. Like every other creature, he is accountable in that hemust suffer penalties for error ashe enjoys the rewards for beingwise and efficient. But he is alsoresponsible for his acts, in a waythat others are not, in the sense ofbeing "answerable as the primarycause, motive, or agent." (Webster's Unabridged Dictionary) Foreach individual human being canact or refuse to act as he wills, andwhether he acts wisely or foolishly depends on ideas which only he,individually, can control.

It is true that a man may try toevade his responsibility by claiming that others compel him to actas he does. But as long as a personretains his human faculties, he remains self-controlling. When abank teller obeys· the command ofan armed bandit and surrendersthe bank's funds, we may excusehim on the ground that his employers and the bank's depositorsdo not expect him to risk his lifeby refusing. But he is nevertheless responsible for his act in thathe chooses to make the surrender.We recognize this fact when wecondemn a similar surrender by aguard who has pledged himself toresist such coercion.

Would we hold blameless thefather who killed his child at thecommand of an armed thug? Thenneither can we hold irresponsibleany person who yields to intimidation, even though we agree thatdiscretion is often better thanvalor.

Not the Same Purpose

We should realize, however, thatwhen a person yields to a threat ofviolence, his self-determined purpose is to avoid the violence ratherthan. to accomplish the purpose ofhis assailant. If he wanted to dowhat his would-be masters command him to do, no violence orthreat of injury would be necessary. When violence or intimida-

1966 WHY HUMANS MUST BE FREE 5

tion is necessary to make men act,it is because the victims of it havepurposes contrary to the purposesof the aggressors.

No external force can changeeither these purposes or the ideasfrom which they spring. They canbe changed only by the will of theDlJpgOn who jg to !let. If the victimof violence chooses to act as hisassailant directs, he does so, notbecause he has adopted his assailant's purpose, but in order to accomplish the quite different purpose of avoiding the threatenedinjury.

Force. Can't Control Purpose

I t is this inescapable conflict ofpurposes that makes slavery, the"planned society," and the "welfare state" destructive of humanvalues and character. The purposeof the slave masters may be to getcertain work done. The purpose ofthe government officials may be toimprove the understanding andcharacter of their subjects. But increasingly, as time passes, the subjects of the coercion seek to escape from the threat of violence.

Fear of a master's lash or of acommunist firing squad, for example, may cause men for a timeto go through certain dictated motions, but these motions do notmake efficient farmers. Instead,the private purposes of those whosuffer from the coercion cause in-

creasing inefficiency in pursuingthe masters' purposes becausethese private purposes of the victims have to do with escape, resistance, or retaliation. These private purposes are the ones whichenlist the victims' will and ingenuity. They are the only ones whichthe victims can pursue with energy or skill.

The final result depends on thevictims' ideas about how they maybest escape the threatened violence. They may decide on openflight or resistance, or they maychoose secret sabotage and slowdowns. If they decide that allflight or resistance is hopeless,they are likely to feel increasingfatigue and depression ("lazi:ness") when at work, with thegradual atrophy of will and initiative, along with increasing desiresfor the wasteful dissipation, or"vice," that characterize peoplelong subject to enslavement andtyranny. To his report of a strikeof trolley-car workers in Lodz, Poland, a few years ago, the Warsawcorrespondent of Newsweek addedthese comments:

The complaints of Lodz are echoedeverywhere except among the peasants who have benefited from Gomulka's de-collectivization policy. Inthe cities, low living standards, desperate consumer-goods shortages,and hopelessness over the future allcombine to throttle initiative. Walk-

6 THE FREEMAN March

outs and work stoppages are on theincrease. Thievery and drunkennessare rampant. Absenteeism runs ashigh as 30 per cent. Apathy characterizes the Polish worker. As aleading intellectual put it: "Grayness has entered our spirit."

forced Goodness Turns into Evil

Other victims of communist"planning" show similar evidencesof demoralization. Says MihajloMihajlov, Yugoslav lecturer atZagreb University, writing of hisrecent experiences as an exchangestudent in Moscow:

In each district there is a vytrezvitelj, a dispensary for sobering updrunks. . .. A liter of vodka costs asmuch as six long-playing records,and I cannot understand where allthe drunks come from, yet at nightyou often meet drunks. . . .

In the outlying sections of town,it is dangerous to go into the streetsat night despite numerous patrols ofdruzhinniki, the special people's militia. ( The New Leader, March 29,1965, p. 4.)

If a man is to become an efficient farmer, he must want tofarm, and he must recognize hisresponsibility for doing the thingsnecessary to produce the crops.The slave can never become an efficient farmer if his real purposeis to avoid the lash rather than toraise crops, for it is to his privatepurpose that his thoughts and ingenuity turn even when he is unaware of the fact.

Similarly, when a person orgroup tries to compel others to becharitable, industrious, or thrifty,the victims of the coercion losetheir sense of personal responsibility for acquiring these virtues. Deprived of opportunity to use anddevelop their human qualities ofself-direction, they revert towardthe animal level. At this lower level, they become more like domesticatedcattle, lacking ingenuity, enterprise, and reasoning ability. Or,they may become as intractable asthe tiger, the zebra, or the polarbear.

Says Mihajlov in the articles onSoviet Russia mentioned above:"Never was and never will anything be created in a man by force.Fortunately, as Berdyaev [Russian philosopher whose works areon the communist "black sheet"]says: 'Truth makes man free, butman must freely accept the Truth,he cannot be forced to accept it.Forced goodness is no longer good;it turns into eviL'" (The N wwLeader, June 7, 1965, p. 6.)

The Limits of Government's Power

Now, government is an agencyfor compulsion. Men organize itand use it only to apply force andthreat of force against their fellows. As a means for applyingforce, it can imprison or executewrongdoers, recover stolen property, punish fraud, and repel in-

1966 WHY HUMANS MUST BE FREE 7

vaders. In short, it can do to orfor humans whatever force andviolence can do: hurt them, restrain them, destroy them, takefrom them things they prize, ormake them fear it will do one ormore of these things to them.

As it uses its force to combatthieving, gangsterism, rioting, andarmed invasion, government canfree producers from interference.The more effectively it thus prevents such interference, thegreater is the output of goods, andthe greater are the revenues government can· get for its own uses.

It is this service to producersthat explains whatever productionand progress we observe in the relatively more socialistic countries,~uch as Soviet Russia and Yugoslavia. The price (in terms of meddling and spoliation) which therulers charge producers for theirservices in these more or less enslaved nations is exorbitant butnot quite prohibitive.

Beyond this protective serviceto producers, government coercionnot only has no usefulness, but itactually works to limit and reducegovernment's power. For, as itbullies producers in its effort todirect their labor and to get moreproduction from them, it restrictstheir output and so reduces theflow of goods from which the government gets its own coerciveweapons and manpower.

Such government bullying ofproducers has this effect becauseno external force can form a man'sideas or determine his purposes.No force or threat of violence, legal or illegal, can inspire the desire to do good or the will to doevil. It cannot make men compassionate, thrifty, foresighted, or industrious. It cannot awaken theirsense of responsibility.

In short, force, violence, and intimidation cannot make bad mengood or good men better. For noman is merely clay to be moldedby his fellows, whether they begovernment officials, teachers, employers, or his neighbors. Nor ishe a machine for going throughcertain prescribed motions at thecommand of any master or government.

Instead, man fulfills his Creator's purpose only as he developsthe power to know and choose goodand rej ect evil. The compulsions ofthe welfare state can no more develop this power in its subjectsthan riding men about in wagonscan make them into long-distancerunners or star football players.Every human being's progress depends on the amount of effort thathe himself exerts in pursuit ofgood purposes. Among the essential conditions for this effort arethe opportunities, the risks, andeven the obstacles, of freedom. ~

18.

The Originsof ReformMethods

CLARENCE B. CARSON

THERE IS NOT, to my knowledge,any thorough historical study ofthe origins of reform methods.References to this subject are aptto be casual; for example, thatMarx did not tell precisely how acountry went about achievingcommunism. This absence of careful study is the more amazing inview of the tremendous amountof scholarly activity in this century, accelerated by the increasing numbers of students undertaking and completing doctoralwork. Revolutionaries, reformers,and their assorted "isms" havecome in for a great deal of study,of course. But the focus of suchstudies has usually been uponideas and ideologies, their origin,development, and spread. It is as

Dr. Carson is Professor of American Historyat Grove City College, Pennsylvania. Amonghis earlier writings in THE FREEMAN werehis series on The Fateful Turn and TheAmerican Tradition, both of which are nowavailable as books.

8

if ideas, aims, and purposes wereall-important but how they wereput into effect was of little or noaccount. It is likely that historiansare reflecting their materials whenthey give this emphasis, for reformers have been concernedmainly with their central ideas,or obsessions, and with the greatresults that would occur once theywere put into effect, not deigningto concern themselves overmuchwith the vulgar business of making them operational.

Yet method is extremely important; for social reformers, itshould be all-important, for theirideas are instruments for changing the existing state of things.If this could be done, it wouldhave to be done by the methodsadopted for the purpose, and bymethods adapted to the purpose.The results achieved will be thosethat follow from the methods used.

1966 THE ORIGINS OF REFORM METHODS 9

The consequences of actions aredetermined by the methods ratherthan by the intent, purpose, desire, will, wish, hope, or faith ofthose who act. Dreams, hopes, visions, ideas, purposes, and desiresmay move a man to act; but, however noble his purpose, howevermuch enthusiasm he brings to thematter, however much thought hemay have given to the idea thatsomething ought to be done, hisactions will still be only as effective as the methods he adopts forachieving his end.

The Theory in Practice

It may well be that many reformers and revolutionists havebelieved their aims would beachieved by such things as the inevitable working out of the inherent processes of history, by thevictory of some ideology in thecontest of ideas, by men of goodwill when they have in their handsthe instruments of government,by the withering away of government, by a politically conscious eliteacting for the "people" or the"proletariat," by a return to nature, or by the enfranchisement ofwhole adult populations. But whenrevolutionists and reformers haveactually come to power, they havecome face to face with the problem of m.ethod which they hadhitherto evaded. That is, how isthe sought-after social reconstruc-

tion to be brought about? How isan ideology to be turned into actuality? How does one go about, forexample, realizing the "principle,""from each according to his ability, to each according to hisneed"? How can the ability of aman be determined? It cannot bewith any exactitude, but if itcould, it would only pose a newproblem. How can a man be induced to perform according to hisability? If he does not, what is tobe done? In general, either therewards or punishments will haveto be increased. But, according tothe Marxian formulation, the rewards are not to be apportionedin terms of performance. Thatmeans that the punishment willhave to be increased, an excellentdevice for tyranny but not onecalculated to get from each according to his ability. The latter partof the famous formulation posesjust as great practical difficultiesas the first. What are the needs ofa person? Who is to determinethem? If they could be determined, how would they be met?By what instrumentalities wouldthe goods be gathered and handedout to the needy? What assurancewould there be that this wouldbe done "justly"?

Nearer home, note these pronouncements by Theodore Roosevelt in his acceptance speech following his nomination by the

10 THE FREEMAN

Progressive party in 1912. "Ouraim is to promote prosperity, andthen see to its proper division ....We wish to control big business soas to secure among other thingsgood wages for the wageworkersand reasonable prices for the consumers." What are "good wages"for workingmen? What are "reasonable prices" for consumergoods? Even if these questionscould be answered, other than inthe marketplace, how could government go about securing theseends? Who would decide what are"reasonable" prices? How wouldhe go about administering them?By what instrumentalities wouldsuch controls be effected? Whatinstitutions are appropriate tosuch regulation?

Scant Attention to Methods

In the nineteenth century, reformers and revolutionaries usually talked in the broadest generalities. They favored the expropriation of the expropriators, a singletax upon the unearned incrementor social surplus, government ownership of the means of production,or government ownership of publicutilities. How would property betaken over? Who would manageit? Who would determine whatshould be produced? Who woulddetermine what prices should bepaid for goods? How would thesethings be determined? Americans

did not usually talk the languageof revolution, not if they expect.edto be elected to office; but they,too, often talked vaguely abouthow their ends were to be achievedand glowingly about the ends.

This lack of attention to methods has often become apparentwhen socialists have come to political power. In Soviet Russia, following the Bolshevik seizure ofpower, chaos reigned, particularlyfrom 1917 to 1921. The communists were rather adept at the destruction of the existing order, atmurder, at regicide, at expropriation; but they knew almost. nothing about building and producing.Force is, after all, much bettersuited to destruction than to construction. Moreover, ideologuesoften have only the foggiest of notions about how the world's workgets done. But the important pointhere is that the socialists in Russia had not devised methods, ifsuch could be devised, for accomplishing their aims. Almost thirtyyears later, when the Labor partyfinally came to power with a fullcommitment to the "nationalization" of major industries in England, they still had only the vaguest of ideas as to how this couldbe accomplished.

That is not to say that methodsof reform have not been adopted.Even communist revolutions havebecome somewhat stylized. Fa-


bians, or gradualists, have adoptedmethods, too, and these havetended to be universalized. In theUnited States, where the socialisttendency has been gradual, methods have been adopted for eachreformist move, and the move hasbeen made by and with the methodadopted. This reflects the legalistic approach to socialism.. In otherwords, insofar as reform has beenundertaken within the existingframework, and insofar as the existing framework requires government by law, reforms have beengiven a semblance of lawfulness.This has meant, to some· considerable extent, that the methods ofreform have been adopted prior toor concurrent with the introduction of the reforms themselves.This was necessary to give the reforms the appearance of legality.

Reversion to the Past

The central question is: Wheredid these methods come from?American reformers have usuallyclaimed that their reforms werenew, unique, and innovative, thatthey were adopted to deal withnew and unique conditions. Theold, the traditional, the customary, was held to be out of date, nolonger appropriate to these modern times. The new reform methods were progressive, as opposedto the outmoded methods to be replaced. There has been much talk

of bold, new social planning. LesterFrank Ward and John Deweywrote confidently about "social invention." The pragmatic approach,according to the lore of the contemporary orthodoxy, is one ofcontinual innovation, testing, andadjustment as to methods.

Such claims are interesting, butthe only reality to which they referis the mythology of reform fromwhich the rhetoric emanates. Themethods of the reformers are notnew creations; they are usuallyvariations upon methods that havea considerable antiquity. The methods of reform have been obtainedby the process of abstraction ofolder or contempora.ry methods,the abstraction of them from thecontext in which they existed, andthe application of them to differentpurposes. Many of them have longhistories and have been subjectedto a variety of uses. Let us examinesome of the sources of reformmethods, and in so doing look atsome of the methods themselves.

Reform in America, and elsewhere, has proceeded by dealingwith the population as if it weredivided into classes. To put itanother way, reforms have usuallybeen aimed at, or provided for, people in certain groups; and thesegroups are often thought of ascomposing classes. For example, ithas been common to refer to thebusiness class, the working class,

12 THE FREEMAN March

the professional class, the whitecollar class, and so on. In practice,reformers have extended this ideaconsiderably; there are manyother classes or sub-classes: farmers, women, the aged, teen-agers,Negroes, minority groups, andveterans. Americans have alwaysspoken of classes; the word was apart of the English languagewhich they inherited. It is a wordwhich had rather precise meaningin the Middle Ages in Europe, andhad rather definite descriptivemeaning in many European countries down to the twentieth century. It referred to divisions within society which were establishedat law or were protected by law,to a system in which one was borninto a particular class and mightbe expected to remain in that classfor the whole of his life. A classsystem, in short, is a system inwhich certain groups are empowered and/or disabled by legalprescription, and the condition hasusually been hereditary, though itneed not be.

Dividing Americans into Classes

Now, in this sense, America hashardly had classes at all. Afterthe adoption of the Constitution,the only definite class was thatmade up of Negro slaves. Afterthe abolition of slavery, there wereno classes in America, though Negroes suffered some disabilities by

law, and women may have, also,in some places. Americans still referred to upper, middle, and lowerclasses; but these were vagueclassifications which one might apply according to his predilections.Into the breach came sociologistswith their baneful penchant for"thingifying" abstractions. To bemore specific, there came KarlMarx and assorted hosts of socialists and reformers. Marx concocted a theory of universal history in terms of class struggle.His idea of class was probablydrawn from earlier history, buthe applied the abstraction of it tothe industrialization going onaround him. The bourgeoisie andproletariat were for him classesas rigid as any that had ever existed. This conception, or, rather,misconception, of class was spreadby socialists in the latter part ofthe nineteenth century. ManyAmerican intellectuals came tohold this conception also.

According to the rhetoric of reformers, "labor" was sinking intoa permanent state of dependence,"farmers" being reduced to theperpetual state of sharecropping,Negroes bound over to a new servility, and small businessmensqueezed out. "Big business" wasoften the villain of the piece. Thepoint here is that the populationwas divided into classes. This division provided reformers with


one of their methods, the methodof using government to disablecertain "classes" and to empowerothers. Anyone familiar with thereforms of the last fifty years orso should recognize the methodas it has been employed: regulateand control "business," particularly big business, subsidize farmers, and use the power of government to support labor unionization, for example.

Government-like Institutions

Other general methods of reform were abstracted from thesystem of government in theUnited States. One of the mostprominent of these abstractions isthat of the "democratic process,"that is, of voting, majority rule,and representation, and its broadapplication to all sorts of undertakings. For example, the methods drawn from government havebeen generally applied to unionorganization and activity. Thereare votes as to whether the workers in a craft or plant shall berepresented by a union, votes onwhether to strike, whether to accept the terms of contracts. Thedecision of the majority is usuallybinding upon all. Representativesof the workers negotiate withcompanies; and these, too, arechosen by the vote of the workers.These are clearly methods abstracted from the American gov-

ernmental framework. This particular method has become a methodof reform because the UnitedStates government has long sincethrown its weight behind theseprocesses, and undertakes to guarantee that they will be faithfullyapplied. Thus, methods which havean important and legitimate rolein government are applied to asupposedly nongovernmental matter.

Federalism, too, has been instrumented to reform purposes. In theAmerican system of government,as conceived, local governmentsperformed most governmentalfunctions, local initiative was essential to political action, and local customs and traditions determined the character of action taken. Some reforms have been undertaken at the local level, but overthe years the tendency has beento have them initiated, financed,and administered by the centralgovernment. Local governmentshave been used increasingly as administrative units and as a framework within which to impose andcontrol governmental programs bythe central government. An example of this would be the welfareprogram, that· is, the program ofold-age assistance, aid to dependent children, and aid to the disabled. Moneys are provided byboth the United States government and the state government in-

14 THE FREEMAN Ma,rch

volved. The program is administered at the county level; but itis administered according to prescriptions laid down by the central government, in the first place,and, within that, according tostate law and procedure. Thus, thecounty is reduced, in this andmany other instances, to an administrative unit. The federal system of government becomes an instrument for reformers by reversing the direction of the flow ofauthority; it becomes one of themethods for reform.

The Perversion of Voluntarism

Many of the methods of governmental reform have been abstracted from practices, procedures, and services of voluntary organizations. For example, cases ofneed and hardship were generallylooked after and provided for inthe nineteenth century by voluntary charitable organizations. Inrural areas and small communities, permanent organizationsmight not exist; each case wouldbe handled by relatives, neighbors,and churches as it arose. But incities, more nearly permanentcharitable organizations wereformed and maintained. Manyservices provided by such organizations were eventually taken overand provided by governments. Itwould make an interesting and informative study to examine into

the question of how many services now provided by governments were originated and initially provided by private industry,individuals, and voluntary groups.My guess is that it would includealmost all of them. Many roadsand bridges were built and operated by private companies in theUnited States in the first half ofthe nineteenth century, thoughthey were often chartered monopolies, in keeping with the mercantile mode of operation. Education was generally provided during the same period by voluntarymeans. Voluntary associationswithin professions, such as thelegal and medical, have maintainedstandards and "policed" themselves. Industries had inspectorsbefore government provided them.Insurance was a private function long before government gotinto the business. There were private savings banks before theUnited States government set upPostal Savings in 1910. Hospitalswere built and maintained by physicians, churches, and voluntaryorganizations. Volunteer fire departments even preceded city firedepartments. Housing for the poorwas provided by private enterprise long before "public housing"measures were undertaken. Eventhe tenement, which is surelythe model for government-financedhousing in large cities, was ini-


tially built by private initiative. Itwas, after all, the apartment housein times when capital, technology,and entrepreneurship had notmade the labor of many workerssufficiently remunerative to affordbetter. The chances are good that"Duncan Hines ate here" beforestate inspectors did generally, andhis is still considered the more important recommendation. In perspective, it looks as if the vaunted"social invention" of reformershas been restricted largely to inventing arguments why government should perform services thatwere already being performed.

Business-like Bureaucracy

Not only have many of the services now performed by governments been taken over from theindividuals and voluntary groupswho originated and maintainedthem, but administrative organization and procedure was takenover, too. Boards of trustees,boards of directors, boards of deacons, committees, and boards ofeducation - the control bodies ofprivate organizations - often havebeen perpetuated by governments.When a state takes over a privatecollege, for example, it usuallycontinues the same mode of administrative control, having apresident 'or chancellor and whatever its board of control happensto be called. It will, of course, be

brought under the sway of thegovernment, in one way or another. The various "authorities"by which governments engage inbusiness activities, as, for example, the Tennessee Valley Authority, will have some figure ashead who will likely be calledchairman, patterned after thechairman of the board of directorsof a private corporation, and aboard or commission which itselfappears to have been abstractedfrom corporation organization.

Some methods of doing thingshave had a long and checkeredcareer. Take, for example, the recording of births, marriages, anddeaths. A few hundred years agosuch records were ke'pt bychurches. In nineteenth centuryAmerica, following the change inthe political position of churches,many families kept such recordsin the family Bible. Counties tookover the function, and began torequire that reports be made tothem of these affairs, authorizations be got from them in somecases, and certificates began to beissued commonly. The Federal census, authorized as a populationcount for the purposes of apportionment of electors and representative among the states, began tocollect and contain more and moreinformation about the citizenry,.Now, the information which governments collect through these and


other devices is being made intoan instrument for the advancement of reform by way of governmental planning based upon theprojection of figures drawn fromthe information.

Feudal Practices Revived

A goodly number of the methods of reform are adapted fromother eras. An example of this isthe use of the power of eminentdomain to acquire property forreform uses. The power of eminentdomain is the power to take private property for public use bygovernment. Such a power wasassumed to be appropriate to government at the time of the adoptionof state constitutions and theUnited States Constitution, for provision was made for its exercise.The theoretical justification thenwas that it derived from the sovereignty of a government. The ideaof sovereignty was carefully formulated in the sixteenth century,was drawn from the powers of themonarch, and served to buttressthe thrust of kings to absolutepower in the seventeenth and eighteenth centuries. But the powers ofthe monarch over the land of therealm go back to the Middle Agesand the feudal system, when thepatents or rights to land belongedto and stemmed from the king. Itis somewhat a matter of choice asto whether one traces the power

of eminent domain to feudalismor to divine right monarchy. Theuse of the term "eminent domain"appears to be peculiarly American,but the power is not. For most ofAmerican history, the power wasused only to a. limited degree, andsome limitations upon it were embedded in constitutions. However,in recent years it has tended to beused as an open sesame for governmental appropriation of landfor reform purposes. This is particularly glaring in the case of urban renewal projects, but its useis not restricted to this arena.

Other practices can be tracedback to the Middle Ages, at least.The "just price" is a Medievalconception and practice which hasbeen used in price controls. Maximum wages were set by the English government as early as thefourteenth century, in connectionwith the Black Death. The settingaside of lands as forests and parkshas its model in the Medieval"commons" and the king's forests.

Mercantilism Refurns

The most fecund historicalsource for commercial regulationand control is mercantilism, whichreached its earlier apogee in theseventeenth and eighteenth centuries. The protective tariff wasthe classic mercantile device forregulating and inhibiting trade


among the peoples of various nations. Monarchs also issued patents and charters which gave toindividuals and companies monopolies of trade. Regulations uponthe export of precious metals wereadopted. Monarchs inflated thecurrency, as governments havedone from time immemorial, largely by reducing the metal contentof coins supposed to have a certain and fixed value. Practices topromote the "economic self-sufficiency" of nations were used within the mercantile framework. Subsidies and bounties were paid forthe production and manufactureof certain goods. Sumptuary lawswere passed to discourage or prohibit the consumption of certaingoods.

Virtually all of these mercantilepractices have been revived withinthe last century. Modern reformers have made some alterations inthem, however. They are more aptto set minimum wages than maximum wages. They call their "justprice" a "fair price." Mercantilistgovernments usually subsidizedthe growing of scarce items, whilemodern reformers tend to subsidize the production of goods insurplus. However, the recently authorized reduction of the silvercontent in American coins differsnot at all from the ancient practice.

Other reform methods have

been borrowed from the Europeof more recent times. Many American intellectuals have been, ofcourse, enamored of things European. For some of them, it hasbeen enough recommendation of apractice to declare only that it iswhat is done in Europe. If European countries have governmentfinanced radio and television stations, it is taken to be a properway to do things. If Europeancountries subsidize the arts andmaintain theaters and concerthalls, it is presumed to be an enlightened undertaking. Be that asit may, reformers have learnedsome of their methods from theEuropeans. England undertook toimpose an income tax in the firsthalf of the nineteenth century.Imperial Germany set up welfareprograms in the latter part of thenineteenth century, and Englandgot into the welfare business justbefore World War 1. Reforms attempted in England are quiteoften copied by American reformers, without making royalty payments either.

War a Prolific Incubatorof Reform Methods

But perhaps the most prolificwomb of methods has been war;it has been a veritable incubatorof reform methods. Reformershave long been fascinated by the"accomplishments" of a country


at war. They have noted the fullemployment, the rise in wages,the immense production, the risein farm prices, and, altogether, theaura of prosperity. There arethose who suppose that war doesindeed bring prosperity. A considerable myth was propagated byCharles A. Beard and others thatthe great industrial surge in thelatter part of the nineteenth century was a product to a large extent of the Civil War. No one hasever explained how the great wasteand destruction of war could produce prosperity, or why construction is the product of destruction.Such history is on a par with ahistory that would claim that because roosters crow before the suncomes up that their crowingcauses the sun to rise. Still, thesemyths have attracted a large following. Reformers have abstracted methods used in wartime fromtheir context and applied them inpeacetime.. One history, in dealing with the origins of the NewDeal, contains these remarks:"The power which the federal government could exert over the economy had been amply demonstratedby the War Industries Board andother wartime agencies in 1917and 1918. Roosevelt and a numberof his advisors, including GeorgeN. Peek, H ugh Johnson, and Bernard Baruch, seem to have beengreatly influenced by their experi-

ences in economic planning duringWorld War 1."1

Wartime Inflation

This does not begin, however,to tell the impact of war upon reform. Perhaps the most momentous abstraction from war hasbeen the inflationary device. Nowinflation - that is, the increase ofof the amount of currency in circulation - has not been restrictedto war. But in the United Statesthe government inflated most extensively during wars until wellinto the twentieth century, if notto the present. This has been truebecause those in power have notseen fit - have not thought it politic - to finance the wars by theordinary route of taxation. Theyhave, instead, employed surreptitious tax measures such as inflation. The first time that this measure attracted the attention of reformers to any extent was afterthe Civil War. The governmenthad issued a large number ofgreenbacks during the war. Itlater began to retire them fromcirculation, which was a responsible fiscal undertaking. Nonetheless, it drew the fire of reformers.A political party called the Greenback party was even organized.

1 Gilbert C. Fite and Jim E. Reese, AnEconomic HiBtory of the United States(Boston: Houghton Mifflin, 1959), p. 590.


This particular movement died outbut not the desire to inflate. Thesilverite movement of the latterpart of the century was an extension of the inflation· movement.During World War I the government had a much more potentmechanism for inflation - the Federal Reserve Banks. The extensiveuse of this system to facilitategovernment financing duringWorld War I was continued afterward, and this system became animportant auxiliary of the Treasury and for manipulating the currency supply.

Large-Scale Government Planning

During World War I, the firstconcerted attempt in Americanhistory was made to co-ordinate,regulate, and direct the economyby the government to a definiteend. Economic planning was carried out on a large scale. The WarIndustries Board, under the guidance of Bernard Baruch, was eventually given powers to establishpriorities for all types of materials for war use, and to convertold facilities for manufacturingfrom their former use and to causenew facilities to be brought intobeing. Baruch had a life-and-deathpower over manufacturing andcould, through the threat of thedenial of materials, bring a business into line. An Advisory FoodCommittee, with Herbert Hoover

as Food Commissioner, was setup. It was soon given great powers over certain kinds of agricultural activities. Food processorshad to be licensed by the government. The act granting these powers prohibited the use of foodstuffsfor making alcoholic beverages;thus began the "great experiment"in national prohibition. The priceof wheat was set by the government, and a corporation was setup to achieve this end. A WarTrade Board was authorized andgiven power to regulate exportsand imports. An Emergency FleetCorporation was organized withpower to buy, lease, build, and operate ships. The model for thiswas the private corporation, butthe government was going intobusiness. The first governmentdam on the Tennessee River wasbuilt during and after World War1. A War Labor Board was set upto mediate labor disputes, the firsttime the government became officially involved in these matters.The government could manipulatewages by the wages it paid in government-owned war plants. "Wilson used this power to make aninformal but firm bargain withlabor. He undertook to establishthe principle of union recognitionin government plants and to securewage increases as rapidly as pricesrose. In return, he extracted a nostrike pledge from organized la-


hor in basic industry for the duration of the war."2

This experience was abstractedand much of it applied to reformist ends. The crisis motif has beentaken from its war context andapplied to depression conditions,for instance. Reformers have cometo talk about wars on poverty, ondeath, and so forth. But the methods used during World War Ihave been specifically applied topeacetime uses also. The concentration of powers in the hands ofthe President, done during war,has now become a common modeof operation by government. Thecreation of all sorts of boards andcommissions has become standardoperating procedure. The War Industries Board served as a model,of sorts, for the National Recovery Administration. The costs ofthe agricultural programs in theearly New Deal were to be paidby a tax on food processers, a tactic obviously drawn from the method of control during World WarI. The National Labor RelationsBoard was modeled after the WarLabor Board. A dam built becauseof the exigencies of war becamethe first of a large number to bebuilt upon the Tennessee River bythe government. The list is not

2 George H. Mayer and Walter O. Forster, The United States and the Twentieth Century (Boston: Houghton Mifflin,1958), p. 244.

complete, but it should be suggestive.

Means and Ends

On the face of it, all of this maynot appear to matter much. Afterall, does it make any differencewhether reformers are original,in some kind of "creative" sense,or not? Is it not appropriate to usethe methods with which one isfamiliar, or which may be learnedfrom history, for the accomplishment of new ends? Is this not howeveryone operates, more or less?Perhaps so, but it must be kept inmind that it is the reformers whohave insisted upon the uniquenessof the times and upon the new andexperimental character of whatthey were doing. If it were notnew and different, it would not be"progressive." Moreover, if themethods had been tried before,there would be historical evidenceas to their efficacy.

As to the validity of the process of abstraction employed inthis way, it should be kept in mindthat this depends upon the identity of the nature of the things tohe dealt with. It may be appropriate to adapt a method used inone undertaking to use in another,if the undertakings are similar inkind. For example, if a corporation is an effective business organization for manufacturingbolts, it is reasonable to suppose


that it will be equally efficient inorganizing for the manufactureof nuts. The assembly line methodfor manufacturing buggies may beabstracted from this undertakingand applied to the manufacture ofautomobiles. But the assembly linecannot be utilized to produce custom-made automobiles. They maybe called custom-made, but theywill be uniform because productsof an assembly line must be, or,rather, they must be if the method is to be effectively used.

The Method Affects the Result

Weare back now to the originalpoint of departure in this article.The methods employed determinethe results produced. Aim and purpose have bearing upon the matteronly if they have determined themethods to be used. To be morespecific, feudal methods producenea-feudalism when they are applied. Mercantile methods producemercantilism. The reason for thisc~n be readily understood. Whengovernment deals with groupswithin a population as if they werea c~ass, it creates a new class system. In short, if it grants privileges or immunities to some element of the population, empowersor disables it, it has brought intobeing a class. When wartime measures are applied to civil purposes,the measures· retain their warlikecharacter. War mobilization meth-

ods are suited, if to anything, to theaugmentation of governmentalpower for the destruction of anenemy. When these methods areused for civil purposes, if theycould be, their character is unaltered. Their use still results inthe augmentation of governmentalpower, and such power remains, inthe main, destructive. There is noreal enemy - of flesh and blood,with weapons and war plans - thatcan be designated by the name,"poverty," against which to usethis power. There are only peopleand goods, and such power as isexercised will be exercised againstthese, not against some abstraction. This should have been clearwhen the New Deal's war on poverty was conducted; it was conducted initially by plowing upcrops and shooting animals. But,then, war is war, and its methodsare the methods of destruction.However subtlymethods abstractedfrom war may be applied to thedomestic situation, they continueto be wars on person and property:whether they be wars on savingsby inflation, wars upon possessionsby taxation and confiscation, warsupon human relationships by theprescription of behavior, or warsupon production by way of croplimitations.

Methods abstracted from otherkinds of activities are equally inappropriate to reform by the use of


governmental power, though theymay not always be so devastatingin their consequences when applied. The use of force or thethreat of force by labor unions isnonetheless a use of compulsionan assumption of pseudo-governmental powers - regardless ofwhether the principle of majorityrule has been applied or not. Whengovernments provide welfare forthe needy, it ceases to be charity,even though the same organizationfor the provision of the service beadapted from private and charitable societies. The adoption of theforms of business organization bygovernmental bodies does not result in maintaining responsibilityalong the lines that it was established in private companies. A government board is just not responsible for what it does in the waythat the board of directors of aprivate corporation is. When thepower of eminent domain is joined

to presidential power, or to that ofsomebody under the President, ittakes on its old ,character of absolutism, embedded in the methodall along.

We are not to suppose that reformers are aware of the grotesqueincongruities that exist betweentheir professed aims and the methods they use. It is unlikely thatmany of them are aware of theorigins of the methods they employ. They have a rhetoric whichhides them from such recognition.They talk in terms of bold, new experiments, of breakthroughs andinnovation, of pragmatic testing;but theirs are the age-old methodsof feudalism,of absolutism, ofmercantilism, of war, and of voluntary methods joined to politicalpower. The flight from reality isin the mind; in the real world theresults of actions follow from themethods used. +

T he next article in this series will concerntiThe Flight from Economics."

RALPH W. HUSTED

My JOB occasionally takes me toPhiladelphia. I never miss an opportunity, when I am there, to lookat that small room where the architects of this nation in a relatively short time drafted, debated,and finally adopted the Constitution; where the vision of a greatrepublic was given to a handful ofmen who, when opportunity came,were prepared by education, courage, and faith to discharge one ofthe greatest responsibilities everundertaken by men.

I do not believe it was an accident that those men were broughttogether at the same time and atthe same place in history. I thinkit was no accident that among thatsmall group were some of the

Mr. Husted is Vice-President and Secretaryof the Indianapolis Power & Light Company.This article is from his 1965 Veterans Dayaddress before the IPALCO Young Men'sForum.

greatest thinkers of their day,either in Europe or in America.

To one who sees about him aworld of infinite plan and design,things do not just happen. Therewere times, we are told, when theConstitutional Convention approached disruption. I believe thefact that it was finally successfulwas not an accident. I believe thecourage and wisdom de,monstratedon that occasion were not accidental. And I believe it was no accidentthat Madison was able to draft in ashort time a document containingthe wisdom of ages, and at whichmen have marveled ever since. Theman who sees history as a greatlaboratory in which it has beenproved time and again that causehas its inevitable effect, accordingto the design of a power greaterthan any of us can envision, cannot believe that the birth, educa-

23


tion, and experience of Washington, Adams, Hamilton, Jefferson,and Madison were mere accidentsof history and that the founding ofAmerica was merely a fortunatecoincidence of men and circumstances.

Our Founding Fathers believedthat we Iive in an ordered universe. They believed themselves tobe a part of the universal order ofthings. Stated another way - theybelieved in God. They believed thatevery man must find his own placein a world where a place has beenmade for him. They sought independence for their nation but, moreimportantly, they sought freedomfor individuals; freedom for menas individuals to think and act forthemselves. They established a republic dedicated to one purposeabove all others - the preservationof individual liberty, the protection of a society where men wouldbe free to pursue their purposes inlife as they see them. They did notthink man's purpose in life is to bedetermined by government or thatgovernment has any business deciding what purposes our society shallserve.

Spiritual, Economic, Political

When we speak of individual liberty, just what do we mean? In final analysis, I think it has three essential elements-namely: freedomof worship, economic freedom, and

political freedom. I will not saymuch about religious freedom except to make a point which is verysignificant, especially in the lightof the recent school prayer cases.Freedom of worship meant to ourforefathers exactly what the wordsimply, Le., freedom to worship asone pleases. But remember, it alsomeant to them the right not toworship at all. We know, of course,that very few of them were disposed to make that choice. Formost of them, worshiping God wasan essential part of their lives. Itis true that they believed in andadvocated the separation of churchand state, but they certainly didnot believe in separation of thepeople from God.

In 1835 the French lawyer,Alexis de Tocqueville, wrote aboutwhat he had seen in America:

... in America religion is the roadto knowledge, and the observance ofthe divine laws leads man to civilfreedom....

I have said enough to put thecharacter of Anglo-American civilization in its true light. It is the result (and this should be constantlykept in mind) of two distinct elements, which in other places havebeen in frequent disagreement, butwhich the Americans have succeededin incorporating to some extent onewith the other and combining admirably. I allude to the spirit of religion and the spirit of liberty.

1966 THE MORAL FOUNDATION OF FREEDOM 25

There is one more point I wantto make in connection with religious freedom, and it leads to thecentral idea of what I have to sayhere this evening. Religious freedom means nothing without economic and political freedom. Lifeis not divided into ne'at little compartments one of which can be considered without regard to allothers. Life can't be divided, norcan freedom. It is impossible tohave religious freedom withoutpolitical and economic freedom. Itis equally impossible to. have economic or political freedom withoutreligious freedom. Now let us consider economic freedom in thatlight.

Importance of Economic freedom

Economic freedom means, literally, freedom to seek the means ofsatisfying one's material needs;but I doubt that any man ever considered his own well-being in termsof material needs alone. Consideration of man's material needs necessarily involves thinking at the sametime about his spiritual needs, because his well-being depends uponsatisfaction of both, and both consciously or unconsciously influencehis efforts to satisfy his wants.Hence the interdependence of economic and religious freedom.

The significance of economicfreedom lies in the very nature ofcreation. We are made one at a

time, and no two of us alike. Thedifferences between us are great,and by far the greatest differencesare spiritual. The bare necessitiesof life are few but the. number ofmaterial things necessary to giveexpression to the spirit of mankind is endless. The millions offorms in which property is molded by the hand of man and the millions of uses to which it is put arebut extensions of the millions ofhuman personalities who gatherproperty and adapt it to theirneeds. Whether it be a pencil or asteel mill, property is but a reflection of the infinite spirit of man.It reflects the desire of the humanspirit for self-expression.

If you agree with this, I thinkyou will also agree that property,to serve its purpose best, must beprivate property. By the very nature of creation, no two of us canhave the same desires, the sameskills, or the same mental endowments. No two of us can expressourselves in the- same way. Property cannot possibly serve the samepurpose for one owner as it servesfor others. What we call ownershipis the right to the use, possession,control, and disposition of property; and it is these incidents of ownership which make property usefulin satisfying the needs of individuals.

Clearly, therefore, ownershipmust be private if a particular item


of property is to satisfy the needsof a particular man as he and noone else sees them. If you still havedoubt as to the necessity for private ownership of property, consider for a moment that all of usare property owners; a man's labor is his property, and unless heis free to control and dispose of hislabor as he wishes, he is a slave.

Men have co-ordinated their efforts in countless ways to satisfytheir material wants, but always,and regardless of how interdependent their lives may become, theirefforts are directed to satisfactionof the wants of individuals. Menhave created business organizations both large and small, bothsimple and complex, but such organizations have no life, no philosophy, and no ability to create orproduce separate and apart fromthe individuals comprising them.An organization or corporationmay become so large, that a personbegins to feel that his individualityhas become completely swallowedup in it, but the fact remains thathe is the one endowed with life andnot the organization. Only individuals can: grow and progress, andonly individuals can generate economic progress. Only an individualcan want. Only an individual canknow what he wants; and unlesshe is free to make the choices thatwill satisfy his wants, he is notreally free.

It is inconceivable that in a society where choices are made forus by government we could everenjoy complete satisfaction of ourmaterial and spiritual needs. It isequally inconceivable that anygroup of economic or social planners could make choices for us ina way that would satisfy us, because one man can never understand another well enough to doso.

The division of labor in a freesociety is a vast voluntary cooperative system. In America it hasenabled men to enjoy a standardof living that taxes the imagination of people living in other partsof the world where such freedomis denied them. Complex as oursystem may be, it is, nevertheless,built upon something that all ofus understand - the promise ofone man to another. It is built onthe right to contract, to contractfreely without the intervention ofgovernment. It is built on freedomof individual choice. A plannedsociety may enforce specializationof work, but compulsion has neverperformed the miracles of production that have become commonplace among men who are able tocontract as they wish.

Meaning 01 Political Freedom

So much for economic freedom.What about political freedom? Political freedom in the minds of


many people is something whichthey define vaguely by the word"democracy," and which they associate with freedom of speech andthe right to vote.To think of political freedom only as democracy isdangerous indeed because a democracy can become a tyrannical mob.To think of political freedom onlyas freedom of speech and the rightto vote is to fall into a socialisttrap, because even the socialistsprofess to believe in both. Theright to vote may be essential tofreedom, but we should rememberthat time and again people havegiven away their freedom by majority vote.

Then what do we mean by political freedom? I think it is this.Every right which we insist uponas free men carries with it the dutynot to interfere forcibly with theenjoyment of the same right byothers. Man's desire for self-expression is natural and good andthe right to self-expression is essential, but unless it is accompaniedwith a proper sense of responsibility it may manifest itselfin the use of force. Weare responsible beings but we all know thatin the present state of civilization,and as it probably will be for agesto come, no one is or will be perfect. Noone has or will have aperfect sense of right and wrong.We must, therefore, have law torestrain the use of force.

But let us also keep this inmind. The law is not self-executing. The law itself must employforce or the threat 'of force torestrain those who would act irresponsibly. It may seem trite torepeat here that that governmentgoverns best which governs least,but it needs to be said now asmuch as when first spoken. Political freedom means. freedom fromgovernment restraint orcompulsion beyond what is needed to curbirresponsible men. When government goes further than that, itbecomes the oppressor of freedom.When we turn over to governmentthe job of planning, managing, orcontrolling any undertaking, regardless of how humanitarian itmay appear to be, we must weighthe cost in loss of freedom becauseloss of freedom inevitably accompanies the delegation of suchpower.

The Role of Government

Now, some of you may ask,"What about the many serviceswhich the government renders forthe people? Does not the government do for us many things whichwe could not do for ourselves?"Does it? Perhaps we have beendeluding ourselves. Dr. F. A. Harper has said,

The government could do for uswhat we cannot do for ourselves onlyif it sits on the right hand of Crea-


tion itself. Otherwise, unless it bepossessed of the powers of God, itcannot possibly do anything that people can't do for themselves, for thesimple reason that people compriseall that is government. Governmentis manned by the very same personswhose deficiencies are presumed todisappear when combined into a legalstructure with bureaucratic, politicaltrappings - a process which makesan ordinary person, if anything, lessable than before to accomplish things.The bureaucratic whole is, for thisreason, really less than the sum ofits freely cooperating individualparts.

Edmund Burke once said,

To make a government requiresno great prudence. Settle the seat ofpower; teach obedience; and thework is done. To give freedom isstill more easy. It is not necessaryto guide; it only requires to let gothe rein. But to form a free government, that is, to temper togetherthese opposite elements of libertyand restraint in one consistent work,requires much thought, deep reflection, a sagacious, powerful, and combining mind.

It was no accident that Washington and his contemporaries established something the world hadnever before seen, a nation dedicated to freedom of the individual.Theirs were the minds which understood that the only real libertyis individual liberty. Theirs werethe powerful and combining minds

which understood the moral foundation of freedom - man's personal relationship with his Creator - and they made that the foundation for the greatest nation onearth.

The Danger We face

Today we are faced with themost serious attack on our freedom which has ever confronted us.I say the most serious because itis an attack on the very moralfoundation which I have just described. It is little comfort toknow that the attack may havebeen inspired initially by peoplebeyond our borders. The disturbing fact is that the burden of theattack is now being carried bypersons in all walks of life whoprofess to be and think they aregood Americans. I think it hasnot been a case of knowingly abandoning our faith, but rather wehave been led without thinking toaccept many beliefs which in factdeny that men have a personalrelationship with God. Individualliberty has been sacrificed andgovernment has come to be lookedupon, primarily, as an instrumentfor social and economic planning.

We have allowed to infect ourpolitical philosophy the belief thatmen are no longer able to takecare of themselves. We have established an enormous bureaucracy to plan for them. We still


profess the need for religiousfreedom, but we have repudiatedthe conviction of our forefathersthat unless we also have economicand political freedom, religiousfreedom is meaningless.

We have, for example, adopteda graduated income tax for theavowed purpose of supporting essential government functions, butwe have changed our concept ofwhat is essential and we are nowusing the tax in shocking measurefor the redistribution of wealthand as a means of controlling thelives of people. We have subsidiesfor housing, subsidies for farmers,subsidies for power, subsidies forshipping, and subsidies for theaged. We take one man's propertyto give to another and think it isright simply because it is accomplished by majority vote. We haveadopted the Marxist principle of"from each according to ability,to each according to need."

We have outright governmentownership of hundreds of enterprises. We have government interference with the right to contractin practically every area of economic activity. In many areas suchinterference is so great that thefree market, freedom of economicchoice, is gone. We have allowedourselves to think that a littlesocialism will not hurt uS,but theacorn has now grown into a giantof the forest.

The Mixed-Up Economy

Many of our politicians, politicalscientists, economists, school textbook writers, and even some of ourfinancial and industrial leaders seegreat hope for the future in whatthey call a mixed system of private enterprise and public enterprise. They speak of the "publicsector" of our economy as contrasted with the "private sector"and of the necessity for a partnership between the two. They praisewhat is now fashionably calledthe partnership of government andbusiness. They speak of the marvelous adaptability of our systemof free enterprise because, as theysay, it has been able to join handswith government to meet whatgovernment planners consider theneeds of society. What kind ofpartnership is it where one partner is supported entirely by theother? What kind of partnershipis it where one has become sucha burden to the other that there isevidence today of the load becoming too great? How long can itlast?

We have accepted fiscal immorality as a national policy. Thisis not something that has beenforced upon us. The fact is thatwe insist upon it. Every downturnin business is the occasion forfurther demands that the government increase spending, even deficit spending; that the Federal Re-


serve System reduce interest ratesand buy government bonds so asto increase the supply of bankcredit; all of which, of course, results in an increase in the supplyof spendable dollars but contributes nothing to the real wealth ofthe people. People are really notbetter off, because dollars are notwealth, nor are dollars a true measure of wealth when they are subject to arbitrary devaluation by arbitrarily increasing the supply ofthem.

If one concedes that privateproperty is indispensable to theachievement of man's happiness,then it must also be conceded thatany artificial manipulation of themedium of exchange by which thevalue of property is measured ismorally wrong, and that is exactlywhat our Federal government doeswhen it tinkers with interest ratesto expand or restrict credit, orreduces gold reserve requirements,or puts pressure on the FederalReserve System to buy or sellgovernment bonds to increase ordecrease bank credit, or engagesin deficit spending.

What is immoral about thesepractices? Let me mention onlyone thing that is obvious to all ofyou. It is simply the fact thateveryone holding or depending directly or indirectly on fixed income obligations and contracts isdeprived of a part of his property

without receiving anything in exchange for it. Money that is subject to tinkering by governmentbecomes the instrument by whichpeople are robbed of their property.

By Majority Vote

in the Name of Democracy

We have done it all by majorityvote and in the name of democracy. Now I do not want to bemisunderstood. The word democracy still has meaning to me andI believe in it, but I would askyou to remember always that democracy is not an end' in itself.Despite the preaching of our present-day textbook writers and government social planners, democracy is not the goal of America.Democracy can be and has beenmany times an instrument for theabuse of individuals. Our goal is,and must continue to be, individual freedom.

Of course we believe that everyone should have a decent house,that a farmer should enjoy a highstandard of living, and that theaged should not want, but howare these things to be accomplished- by resorting to more economicand social planning by government and to a program of massive government spending? Shallwe ignore the fact that when wespeak of government planning wepresuppose the existence in gov-

1966 THE MORAL 11'OUNDATION OF FREEDOM 31

ernment of someone with superhuman wisdom to do the planning?Shall we ignore the fact that whengovernment does the planning, thecoercive powers of governmentwill be used to carry the plans intoeffect at an enormous sacrifice ofindividual freedom? Apparentlysome of our present-day leaders,both in government and out, believe we should. Shall we acceptthe notion that merely becausegovernment planning for the people is done under the label of democracy, and is claimed to represent the interests of a majorityof the people, it is right?

Toda.y many of our people, bothin government and out, believe the"welfare of the majority" is thecriterion by which we should measure the extent of government interference in and control of economic affairs. We find people, bothin government and out, urging anexpanded program of governmentplanning and spending in order,as they say, to improve society andstrengthen freedom. How can thestrengthening of centralized government dedicated to a programof social and economic planningassure individual liberty to anyone? The· free man is the manwho can make choices for himselfand not have them made by government.

We find today,· among peopleranging from textbookwriters to

respected businessmen, wholehearted endorsement of the Universal Declaration of HumanRights, drafted by the U. N. Commission on Human Rights, whichdeclares that men are entitled, asa matter of right, to favorableworking conditions, just pay, social security, adequate housing,and an adequate standard of living.

Of course, these things are desirable, but let me remind youthat in the America conceived byour Founding Fathers, man's inalienable rights -life, liberty, andthe right to own property - arenot granted by the state. They areGod-given. A decent house, adequate pay, and social security arenot God-given. God gives men thecapacity to acquire these thingsfor themselves, but no more. Godgives men the capacity and freedom to work and create. He givesthem nothing they can create forthemselves. We renounce the greatreligious heritage handed down tous by our Founding Fathers whenwe speak of the material thingswhich men are intended to workfor as though they too are something we have a God-given rightto demand.

Christian Responsibility

We are a nation with Christiantraditions, and I know some of youare saying, "What about our re-

32 THE FREEMAN

sponsibility as Christians to ourfellow men?" Well, let me discussthat for a moment. I suspect thatwhat really prompts us to thinkonly the government can handlesome of our present-day problemsis that we do not really trust thesense of responsibility of our fellow citizens. We are afraid thatif care of those in need were leftto the people to handle voluntarily,they would let the job go undone.Perhaps they would in some cases.Some people might suffer if theirwelfare were dependent solely onthe charity of their fellow men.But is the welfare state the answer?

Now some of you will say thatcare of those in need is a muchbigger problem than it used to be."We are living in a different age,"you say, "and care of the needyis so big now that only the government can handle it." That is amyth. I lived through the depression of the 1930's. I saw people gohungry and without enough clothing. But I never saw or read ofanyone starving or freezing todeath. On the contrary, in theearly days of the depression, Isaw the greatest voluntary response of people to the needs oftheir fellow men that this nationhad ever seen. Without being askedby anyone, people who had lessthafl enough to satisfy their ownneeds shared what little they had

with those who were in worse condition.

And then something happened.Someone decided that the govern-.ment could do a better job of feeding and caring for the unemployed,and a vast government handoutprogram was launched. What happened? The spirit of charity thatbrought people to the aid of theirfellow men was destroyed. Thegovernment tried to assume themantle of Christian charity, thenoblest characteristic of mankind,and the people themselves thoughtit would work; but it didn't. Ohyes, the poor were fed. The unemployed were given work ofsorts; but the people of this country were changed. They had lostsomething. They had surrenderedto government their moral responsibility - the thing that made themmen and women - and from that\ve have not recovered to this day.

If we believe as our FoundingFathers did, then we must let manbe free to develop his sense ofresponsibility in his own way, andwe must have faith that he will.Christian charity is an individualact. It cannot be anything else. Itsprings from within men. It can'tpossibly be imposed on men by law;and how utterly ridiculous it isof us to think that it could be!Christian charity can't be expressedby any two people in the same way,


because no two of us think andfeel alike; and it is exactly forthat reason that our responsibilityas Christians can't be delegated.Christian charity is not a responsibility which we can delegate togovernment; and when we attemptto do so, we only weaken ourselvesand rob our society of the spiritualvigor which advances civilization.

Christian charity springs from respect of one individual for thedignity of another, from recognition by one of the divine spiritin another. When we come to understand that all men are endowed with the divine spirit, Ithink then, and only then, will weunderstand why men were meantto be free. ~

TO THEGA 'l.VERMONT ROYSTER

ws

NEXT ITEM on the agenda: Pricecontrols.;

You don't have to have an inside pipeline to White House secrets or Jeanne Dixon's mystic giftof precognition to be tempted tothat prophecy. All you need is abit of perception and a good memory.

As a matter of fact, being privyto Administration councils mightbe a hindrance to foresight.· Quitepossibly the phrase has never beenmentioned, and almost surely, ifit has, the idea of resorting tothe paraphernalia of coercive eco-

nomic controls has been rejectedas politically undesirable and economically unnecessary.

President Johnson, having livedthrough two periods when thegovernment tried to decide thewages of every plumber and theprice of every handkerchief, ishardly eager to rush back intothat maelstrom. His economic advisers, whatever else they may belacking, are full of confidence intheir ability to manage the economy with such a deft touch that inflation can be kept upon a perfectand joyous balance.

34 THE JI'REEMAN March

So an inquiry as to intent wouldbring a sincere denial of plans forgovernment fiats to fix prices,wages, interest rates, importquotas, foreign exchange rules,tourist allowances, or any otherpart of the panoply of economiccontrols.

All the same, mark it down.Barring the unlikely event of acomplete reversal in the Administration's economic policy, weshall likely soon see one or moreof these put forward. And beforevve're through, we may see themall.

The portents aren't obscure. Foryears now, under several Administrations, the Government has beensteadily counterfeiting money. Ineffect - although modern techniques are much more sophisticated - it has been simply runningthe printing presses to "create"dollars out of pieces of paper. Theprocess is in no wise differentfrom the ancient one of alloyingtalents or clipping coins.

There is nothing obscure, either,about the historic results of thatcounterfeiting. Examples aboundfrom the distant days of Diocletian to the modern times ofBrazil.

With each depreciation of thecurrency, the prices of goods andlabor rise; that is, the sovereign'ssolemnly issued money is worthless today than it was· yesterday.

At first the change is slow and tothe apparent prosperity of all.Then it proceeds more rapidly asthe authorities find they mustprint more money to redress theimbalance from the higher pricescaused by the earlier inflation.

Finally, there is so much disturbance that these same authorities feel they must try to quashthe consequences of what theyhave done. In Diocletian's day theycut off the hands of "profiteers"who asked a dozen denarii for aloaf of bread. In eighteenth century France they hung thebutcher.

But of course all this happenedin ancient times or in distantclimes. Things are different now,we are assured.

Noone denies that we are enjoying the first stage of the traditional inflationary process. Onthe contrary, everyone in authority boasts of it. To inflation, andto their perspicacity in managingit, they attribute all our prosperity.

Their perspicacity was also tokeep it in hand so that we wouldnot have to pay any of the historic penalties for our happy revels. For a time they could pointwith pride, and quite accurately,that 10 years or so of inflationhad brought only imperceptible increases in the cost-of-living index.

1966 TO THE GALLOWS 35

Some prices, in fact, declined.Even now such things as household appliances and many fooditems cost less than a year ago.

However, not everything hasbeen coming up roses. In the pastfive years that "slow" increase inthe cost of living has raised theindex from 103.3 to 110.4, a totalrise that's quite perceptible. In thelast year alone there have beensome spectacular increases inmany areas, notably in clothes,meat, education, and medical care.

And in key areas elsewhere thepressures are mounting, the mostpublicized being steel, aluminum,and interest rates. The last item,incidentally, is especially significant because it is the price of borrowing today's dollars to be paidback 'with tomorrow's dollars andso closely reflects the effects ofcurrency. depreciation.

So now what are we told? Why,the whole trouble is caused bythose wicked steel makers, aluminum makers, and bankers. Allthat's necessary to put everythingright as rain is for them to voluntarily agree to restrain themselves. If they won't, by Lyndon,they'll just get bashed over thehead.

We have already, then, the firstefforts at price control. The factthat it is selective, and doesn't yettouch the butcher and candlestickmaker, or that the coercion is not

by fiat but by threat, doesn't alterthe fact that the government isundertaking to control prices. Thegovernment is also, by the samedevice, trying to control othereconomic activity, such as decisions on foreign investment.

In short, we are right on schedule. The country has passedthrough the primary stage of inflation, in which the cheapeningof the money has only happy effects, and into the second stagewhere those effects appear lesshappy and even begin to threatenother economic desires and objectives. The response of the authorities is also right out of the book.

It's true enough that the process could stop at this point. Allthe government needs to do isstop clipping the coins. But quiteapart from the normal difficultiesof kicking the habit, we have nowan added factor. The peril of imprudent men is always the unexpected, and in this case it's a war- a long and costly war. Thisyear's deficit will be billions bigger than anticipated, and afterthat in unknown figures.

How long it will take to reachthe tertiary stage is anybody'sguess. But don't be surprisedwhen the agenda includes a debateon hanging the butcher. ~

This article is reprinted by permission fromthe December 3, 1965 issue of The WallStreet Journal, of which Mr. Royster iseditor,

rbIfforb'sgocy

EDMUND A. OPITZ

THE MOST DISTINGUISHED lectureship in the English-speaking worldis sponsored in turn by the fourScottish universities - Edinburgh,Glasgow, Aberdeen, and St. Andrews - according to the termslaid down in the will of AdamGifford. Lord Gifford drew up hiswill in 1885, died in 1887 at theage of 67, and the first series ofGifford Lectures was delivered in1888. At regular intervals eversince a fat and solid volume hasdropped from the presses. Takentogether, this more-than-five-footshelf of books - still growingrepresents a monumental achievement of the mind in our time.

By splitting his endowmentfour ways, Lord Gifford introduced an element of competitioninto the intellectual scene. Four

The Reverend Mr. Opitz of the Foundationstaff is active as a lecturer and seminar leader.

36

separate committees, each havingaccess to the finest scientific andphilosophical brains in the world,vie with each other to bring themost prestigious lecturer to thelocal campus. And the scholarnominated for this post is put onhis mettle. The appointment itselfis a high tribute to his attainments, far outranking any honorary degree, and the realizationthat he is to address an audienceloaded with distinguished scholarsis just the stimulus needed tobring out a man's best efforts.William James never wrote anything more fascinating than TheVarieties of Religious Experience,The Gifford Lectures for 19011902. Arthur Stanley Eddington,astronomer at the University ofCambridge, has made some lasting contributions to certain abstruse questions in astronomy and

1966 LORD GIFFORD'S LEGACY 37

physics, but his reputation in theworld of literate men endureswith The Nature of the Phy.sicalWorld, The Gifford Lectures for1927. Philosophers, scientists, theologians, and men of letters havetrekked to Scotland, for the pastthree-quarters of a century, andour intellectual heritage is vastlyenriched as a consequence.

Adam Gifford was a jurist andjudge. He was born in 1820, sonof a man who had risen fromhumble beginnings to becometreasurer and master of The Merchant Company. His mother wasan independent thinker who instructed her children at home until they were sent off to learnLatin and Greek - at the age ofeight! Adam later attended Edinburgh Institute and in 1849 wascalled to the bar. Seventeen yearslater he was Sheriff of Orkneyand Zetland, and in 1870 wasmade a judge. He took his seat inthe Court of Sessions, the supreme civil tribunal, as Lord Gifford.

The Giffords were a pious family. Adam's father was an elderin the United Secession Churchand a zealous Sunday school teacher. This oddly named denomination had been formed the year ofAdam's birth by the fusion oftwo dissident bodies which hadseceded from the establishedchurch in the eighteenth century.

It was based on the principIe ofvoluntary association, and it bredmen given to independent thoughtand action, unwilling to takethings for granted; men likeLord Gifford.

The Gifford Lectures

The private life of Lord Gifford is no concern of history, butthe terms of his will are in thepublic domain. The Gifford L.ectures are in the realm of naturaltheology, the discipline whichseeks to trace the nature, meaning, and direction of the cosmicpurpose by pondering the relevantevidence, and by reasoning hardand long. "I wish the lecturersto treat their subject as a strictlynatural science, the greatest ofall possible sciences, indeed, in onesense, the only science, that of Infinite Being, without reference toor reliance upon any supposed special exceptional or so-called miraculous revelation. . . ." Thesewords have a distinctly old-fashioned ring, for natural theology isout of favor, for the moment,among the popular philosophersand theologians of our day.

Much hinges, of course, on theconnotations of the word Hnatura!." Human nature, strictly speaking, is not "natural"; it is a cultivated or learned thingsuperimposed on a biological substratum.The piety "natural" to Lord Gif-


ford was that of the Scotch Covenanter strain, not that of someaborigine, and this faith is evident in the opening words of thewill: "Having been for many yearsdeeply and firmly convinced thatthe true knowledge of God andthe felt knowledge of the re-lations of man and of the universeto Him... is the means of man'shighest well-being...." But so confident was Gifford of the abilityof the unimpeded human reasonto attain vital truths that he laiddown no qualifications for the lecturers except unimpeachable competence and integrity:

The lecturers appointed shall besubjected to no test of any kind, andshall not be required to take anyoath, or to emit or subscribe anydeclaration of belief, or to make anypromise of any kind'; they may beof any denomination whatever, orof no denomination at all (and manyearnest and high-minded men preferto belong to no ecclesiastical denomination); they may be of any religion or way of thinking, or as issometimes said, they may be of noreligion, or they may be so-calledsceptics or agnostics or freethinkers,provided only that the "patrons" willuse diligence to secure that they beable reverent men, true thinkers,sincere lovers of and earnest inquirers after truth....

Four of the Gifford Lecturershave been Americans. WilliamJames of Harvard University has

been mentioned above. His book,he tells us, "would never have beenwritten had I not been honoredwith an appointment as GiffordLecturer." The lectures immediately prior to James were delivered by his Harvard colleague,Josiah Royce, resulting in a hugetome entitled The W orold and theIndividual. Harvard has not wonthe nod again, and we note thatthe recent paperback edition ofRoyce is introduced by ProfessorJohn E. Smith of Yale University!

A quarter of a century was topass before another American wasinvited to lecture, and this time itwas John Dewey. His ten lectures,half the customary series, resultedin the book, Quest f or Certainty.I had a semester seminar on thisvolume, which disqualifies me fromcommenting impartially! ReinholdNiebuhr lectured at Edinburgh inthe spring and fall of the fatefulyear, 1939. To those of you whoknow only the Niebuhr whocharges wildly about the politicalarena, and who is forever makingdubious pronouncements on economics, be advised that there is another Niebuhr or, more precisely,another and more important facetof the same man. The lectures werepublished in two volumes as TheNature and Destiny of Man, andthey are brilliant. They are hardreading, occasionally disputatious,but bracing.


Scot/andl s ContributionScotland has never lacked phi

losophers. Adam Smith, it will berecalled, taught moral philosophyat the University of Glasgow. Hislike number at Edinburgh until1941 was the late A. E. Taylorwhose Gifford Lectures publishedin 1930, The Faith of a Moralist,remains my favorite of kind. Thisnearly 900-page treatise by thegreat Platonist is a modern philosophical classic, but it has noneof the jargon philosophers employwhen they talk to each other. LordGifford stipulated that "the lectures shall be public and popular..." and most of the speakershave tried to comply. But "naturaltheology," the- stipulated subjectmatter, is intrinsically difficult,and "popular" in this contextmeans only that the writer hastaken pains to be lucid; none ofthese books is easy reading. Taylor,incidentally, is one of the fewmoralists who is aware that theterm "value" in ethics does nothave the same connotation as theword "value" in economics. Whenthe economist speaks of "values,"he is not referring to moral norms,but to the degree of consumerpreference for this' item over thatwhich issues in the pricing of economic goods.

w. MacNeile Dixon taught English literature at the Universityof Glasgow for more than forty

years, retiring in 1935. He wascalled abruptly out of retirementupon the death of philosopherEmile Meyerson, the 1935 choice,and delivered two courses of lectures. T he Human Situa,tion is afar-ranging and beautifully written book. Most of the other Gifford Lectures are books to wrestlewith; this is a book to live withand live by. It has a poetic qualityfound only rarely in conjunctionwith deep thought.

The Human Situation, appropriately enough, is bounded on theone side by theology and on theother by physiology. The lectureseries immediately prior to ,Dixonwas delivered by the eminent English churchman who later becameArchbishop of Canterbury, William Temple. Nature, Man andGod floored me at first exposure ina seminar course, and I still findit hard going; but it is a greatbook. Following Dixon came SirCharles Sherrington, the eminentmedical man and physiologist, withMan on His Nature. "Individuality would seem to be through complexity an aim of life," says Sherrington, thus continuing a stresswhich runs like a thread throughthe Gifford Lectures - an emphasis on the individual person andhis latent possibilities.

Sherrington worked after themanner of the historian and especially the scientist, reasoning

40 THE FREEMAN

inductively from a" body of data.The other approach is deductivereasoning which seeks to draw outthe full implications from a seemingly simple axiom or observation.This is the approach of the Cambridge philosopher, W. P. SorIey,who began his series of lecturesin 1914; Moral Values and theIdea of God is one of the finestexamples of sustained logic in thelanguage. Most philosophers, Sorley notes, frame a theory of thecosmos, and then from their metaphysics derive an ethic. But it isa fact that men at every culturallevel do make moral decisions andcannot avoid doing so; therefore,any theory of the cosmos whichfails to include the fact that menmake choices according to theirunderstanding of right and wrongis to this extent based on incomplete data. Sorley starts with theaxiom that human experience includes valuations and judgmentsbased on moral factors, and 510pages later he has extracted allthe meat and juice from this idea.

An English churchman, theBishop of Woolwich, recently madequite a stir on both sides of theAtlantic with a thin thing calledHonest to God. The old metaphorsaren't what they used to be, theBishop appears to be saying, andnever were! It is our bad habit,he points out, to think and speakof God as being "out there." Spa-

tial metaphors are misleading,true, but then the Bishop - influenced by Freud and depth psychology - declares that God is "inhere." This appears to continue aspatial metaphor, or at least a directional one. Man is a symbolusing animal, not only in his religion but in his science. A symbol is a thing standing for something else, and if we mistake itfor the thing it signifies, the confusion is compounded. The notedHellenist, Edwyn Bevan, exploredthese matters with characteristicthoroughness in his Lectures, published as Symbolis'm and Belief.When this book was repTinted inthis country in 1957, the eventpassed unnoticed.

liThe Honor Is Very Pleasant"

It would be interesting to go behind the scenes with the GiffordLectures and watch these men react to their task, but such autobiographical data is not available,except where personal journalsand papers have been made public,as in the case of the late Deanlnge. William Ralph lnge was aclassical scholar as well as a theologian, and his articles in the\veekly press put his name beforea wide public. His Gifford Lectures on Plotinus, the great paganphilosopher of the third centuryof our era, is still the standardwork on the man. The offer came


to lnge on March 13, 1917, andthe full journal entry reads, "Aletter from Lord Haldane. TheUniversity of St. Andrews has decided by a unanimous vote of theGifford Committee to offer me theGifford Lectureship. I shall haveto break up my book on Plotinusinto lectures, but this I can doeasily. The honor is very pleasant."The invincible calm of these Englishmen! we say. But go back inthe Dean's journal. A 1908 entryreads, "My wish now is to writea modernised defense of Plotinus'philosophy of religion, which Ithink would make a good book forthe Gifford Lectures, if I am everinvited to give them." That hopewas nourished for nine years before being consummated.

One would also like to knowvvhat goes on at a meeting of theGifford Committee. Why, for instance, should a lectureship centering on natural theology be offered to a man who denies thevery idea of natural theologyeven if he is the world's most famous theologian? Karl Barthopened his lectures with thesewords : "It can only be to the goodof 'natural theology' to be ableonce again to measure itself as thetruth - if it is the truth! - by that[Barthianism] from which itspoint of view is the greatest oferrors. Opportunity is to be givento do this here." The wraith of old

Gifford must have squirmed atthis, trying to learn what naturaltheology is from a long and involved discussion of what it is not!Why was the unsympathetic Barthgiven the nod when men of thestature of Henri Bergson, F .C.S.Schiller, Alfred North Whitehead,and C.D. Broad went untapped?Two other names come to mind:Bertrand Russell and Friedrichvon Huegel. The former mighthave been written off as a headline hunter; and as for the latter,well, no Roman Catholic deliveredthe Gifford Lectures until 1947,when the eminent historian, Christopher Dawson, produced the important work published as Religionand Culture. Dawson's second setof lectures appeared as Religionand the Rise of Western Culture.The high repute of Dawson's workneeds no touching up from me.

The Unfinished Task

Mention of von Huegel raisesanother question. His major workis a huge two-volume study ofThe Mystical Element of Religion.Mysticism receives more than passing attention at the hands ofmany of the lecturers, but not oneof the series is devoted entirelyto this subject, as perhaps themost important facet and feederof natural theology. Von Huegelwould have been up to such a task;likewise Rufus Jones, the Ameri-


can Quaker; likewise Evelyn Underhill. Mention of this last namereminds us that no woman hasyet delivered the Gifford Lectures.Now, philosophy is not woman'sforte, but Evelyn Underhill is toprank in her specialty, and womenlike Susan Stebbing and DorothyEmmet are sounder than certainpopular male philosophers whoshall remain nameless.

It would be pleasant to concludeby saying that the things Adam

MODERN robber baron state taxassessors are more ruthlessly predatory than their medieval counterparts who looted commerce on theRiver Rhine. Ancient commercewas not restricted to one unimproved waterway or primitiveoverland route. It was free to select the route least subject to

Though long retired, Mr. Schumacher continues "workin' on the railroad" through hisone-man "Free-Lance Society for Preventionof Cruelty to the Iron Horse."

Gifford exemplified in his life andtried to perpetuate in his willthings like personal piety, individual self-reliance and hard work,the validity of reason and thepower of philosophy - werestronger now than in 1887. Alas,they are weaker. But they are notlost! The old landmarks are stillthere for those- who would searchthem out, and old Lord Gifford'slegacy is the fountainhead of anenduring series of them. ~

K. FRITZ SCHUMACHER

depredation by local "tax collectors."

In this respect, modern interstate commerce by railroad is lessfortunate. It is chained to its privately owned and improved rightof-way, inhibited by governmentregulation in all matters, includingre-routing. State property tax assessors take advantage of out-ofstate owned corporations with nolocal vote. They assess railroad

1966 TODAy'S ROBBER BARONS 43

property at a higher percentageof market value than similar locally owned property. Thus, theyappropriate the inherent economyof railroad transportation for taxpurposes. Local taxpayers, so relieved of part of their burden,naturally do not object.

The indulgent North Americantaxpayer has been thoroughlybrainwashed to believe the fableof railroad obsolescence. This fable offers a convenient smokescreen behind which politicianscannibalize railroads for the benefit of subsidized nonrail transport,spawned in political pork barrels.The ability of self-reliant railroads to withstand political abuseis their weakness. They offer noopportunity for waterway - stylepork barrel rolling.

Discriminatory taxation leviedagainst railroad property beganinnocently enough in the earlydays of the industry. Railroadsthen had little or no competitionand taxes were moderate. A taxon railroad transportation couldbe evaded only by resort to horsedrawn vehicles. Railroads, then asnow, leaned over backward to demonstrate good citizenship in stateswhich, then as now, searched frantically for sources of additionaltax revenue.

Many state constitutions specify uniform property tax rates,but do not prohibit nonuniform

assessment values. Resourceful assessors take full advantage of thisloophole. They assess railroadproperty at a higher percentage ofmarket value than other comparable commercial property. Everyproperty owner is painfully awareof skyrocketing property taxes dueto reckless political spendocracy.Taxes on punitively evaluatedrailroad property, raised in proportion, have reached ruinouslyconfiscatory levels. Self-preservation dictates firm resistance tofurther political attempts to killthe goose that lays the goldenrailroad tax egg.

In 1961 the railroad propertyoverassessment ranged from 1lf3times that on other private property in Virginia to 6lf4 times inArizona. The table below showsthe relative overassessment ofrailroad property in 24 states,listed in descending order of magnitude, and computed from figurespublished in Railway Age for December 9, 1963. The overtax indollars appears in the same article. Instances are on record inwhich railroad property, placed onthe market, sold for less than theyearly tax take.

This, according to Railway Age,happened in Hudson County, NewJersey: Pennsylvania Railroad unloaded property of assessed valueof $621,000 for a selling price of$19,471 and thereby shed a yearly


1961 COMPARABLE PRIVATE COMMERCIALAND RAILROAD PROPERTY TAX

Rail OvertaxState Commercial Railroad (Estimated)

Arizona $100 $627 $6,348,366Wyoming 100 490 2,592,636Montana 100 473 5,764,795New Mexico 100 446 1,787,999Idaho 100 382 3,293,139

New Jersey 100 343 11,874,423Tennessee 100 299 4,597,737Kansas 100 290 8,472,279Oklahoma 100 259 3,927,851California 100 258 14,150,498

Mississippi 100 250 1,974,756Iowa 100 245 4,464,561South Dakota 100 236 797,271IlIinois l 100 217 20,725,603Kentucky2 100 217 3,127,387

North Dakota 100 210 2,884,610Alabama 100 198 1,557,587Louisiana 100 196 2,039,064Missouri 100 194 4,571,649Utah 100 193 1,919,882

North Carolina 100 154 791,270Nevada 100 151 808,960West Virginia 100 148 2,487,902Virginia 100 137 2,019,192

Total 1961 Railroad Overtax: $112,979,417

1 In 1963 Illinois enacted a law (SB 946, approved August 26, 1963) requiring assessments of railroads at the same percentage of full value aslocal property is assessed. However, a number of Illinois lines contestedthe 1963 assessments, claiming that arbitrarily increased values offsetequalization.

2 In recent years, the State of Kentucky has made a substantial effort tobring railroad property assessments into line with the assessment of localproperty and hopes to accomplish this objective in 1966.

1966 TODAy'S ROBBER BARONS 45

tax load of $52,226. Another roadsold land assessed at $857,000 withannual taxes of $66,000 for only$40,000. Examples of flagrantoverassessment of railroad property, given in Railway Age, arenot limited to the 24 states tabulated. New York Central's discontinued West Albany car repairshops were sold for $500,000. Assessed value for railroad taxeswas $1,500,000. The new owner,not in railroad business, enjoyeda miraculous depreciation to amere $300,000!

The "Doyle Report" on transportation policy to the UnitedStates Senate gives the experienceof the Pullman Company at Richmond, California, in 1960. Property, sold by the company andcarried on the tax rolls at $342,830,was reassessed for the new privateowner at $190,000.

Tax proceeds in most states areused indiscriminately for highways, airports, waterways, and

other indirect subsidies to railroad competitors. Thus, bureaucrats are in a position to re-allocate railroad traffic to subsidized,proper t y - t a x -ex em pt, non 1'" a i Itransport. The results of arbitrary,political traffic redistribution areall too evident. A new public highway is immediately congested bylong-haul truck traffic. A tax-paying parallel railway line loses traffie, to operate far below capacity.

It is high time that administrators of Mid-Victorian railroadtaxing and regulating policies understand that railroads were builtin good faith to provide vitaltransportation service. State taxlooting practices severely hamperrailroad ability to serve customersand invite long overdue congressional action to stop depredationson interstate commerce. Robberbaron tax collectors for 24 statesare looting travelers and shippersresiding in all 50 states. +

Lincoln, Today

PAUL FISHER, of Redondo Beach, California, suggests, that if

Lincoln were commenting today, his statement might have been:

"We cannot use the law to favor some of the people some of the

time without endangering the freedom of all of our people, for all

time."

the

Fiascoof

UrbanRenewal

MARTIN ANDERSON

46

BUSINESS LEADERS have heardmany times .in recent years thatour housing and our cities are decaying, that private enterprisecannot save them, that the government must step in and "help"private enterprise with urban renewal, and that they - as responsible citizens and businessmenshould collaborate with the government in this effort.! In myjudgment, none of these statements is true.

The purpose of this article is toevaluate the federal urban renewalprogram - its goals, its methods,its accomplishments - and tocompare them with those of thefree marketplace. A comparisonof the results that these twoforces - the federal urban renewal program and private enterprise- have produced since 1949 bringsout some fundamental issues andquestions that have been obscuredin a fog of good intentions andplatitudes. The basic question isthis: Should the federal urban renewal program be continued andexpanded, or should it be stopped?I shall argue that it should bestopped.

1 See, for example, Leland Hazard,"Are We Committing Urban Suicide?"Thinking Ahead, Harvard Business Review, July-August 1964, p. 152.

Dr. Martin Anderson is Associate Professor ofEconomics and Finance, Graduate School ofBusiness, Columbia University, and author ofThe Federal Bulldozer. This article is reprintedby permission from the January-February 1965issue of the Harvard Business Review.

1966 THE FIASCO OF URBAN RENEWAL 47

Goals of Renewal

In response to continual exhortation and pressure to do something to "save" the cities and improve housing, Congress enactedthe federal urban renewal program in 1949, proceeding on theconviction that a program of thistype would help to-

· .. eliminate substandard and otherinadequate housing through clearance of slums and blighted areas;

· .. stimulate sufficient housing production and community developmentto remedy the housing shortage;

· .. realize the goal of a decent homeand a suitable living environmentfor every American family.

I doubt that anyone can arguewith these goals. Better· homes,improved neighborhoods, and theelimination of slums - all aredesirable. The difficulty is notwith the goals, but with the meansof accomplishing them and withthe consequences that result.

What the Program Is

And How It Works

In essence the federal urban renewal program attempts to rebuild rundown areas of cities byfeeding large amounts of publicmoney and government power intothe normal operations of the private marketplace. It does not complement the private market; itshort-circuits it.

This is how the program works.First, a section of a city is designated as an urban renewal area,and plans are drawn up and approved by the local renewal agency, the local governing body, andthe federal authorities in Washington.A public hearing is thenheld at which local renewal officialsdocument their case for urbanrenewal. At this time other persons interested in the project havethe opportunity to speak for oragainst it.

Once the planning is complete,execution starts. Though some execution activities may be carriedon simultaneously, there are sixbasic steps:

(1) Land acquisition. The landand the buildings are usually acquired by negotiation with the owners, but if this fails, the renewalauthorities will use the power ofeminent domain to force the recalcitrant owners to sell; in cases likethis, the purchase price is determined by independent appraisers.

(2) Displacement and relocation.Individuals, families, and businesseslocated in the area are forced tomove and find homes or establishbusinesses elsewhere. The law provides for some compensation and requires renewal authorities to relocate them satisfactorily, although inpractice this does not always happen.

(3) Site clearance. The wreckingcranes and the bulldozers demolish


any buildings not considered usefulby the renewal authorities.

(4) Site improvements and supporting facilities. The cleared landis usually improved by the construction of streets, sewers, water mains,lighting systems, schools, libraries,and parks.

(5) Disposition of impt'oved land.The cleared and improved land canbe sold, leased, donated, or retainedby the renewal agency. Usually theland is sold to private persons eitherby competitive bidding or by negotiation between renewal officials andthe private buyer.

(6) New construction. The newconstruction may be residential, industrial, commercial, or public; sofar it has been predominantly private residential. The private developer is usually obliged to build according to a general plan approvedby the renewal authorities.

This, then, is urban renewaldamned by some, praised by many,and understood by very few. Atfirst glance, urban renewal wouldseem to be a most desirable program, both plausible and appealing. The picture is often paintedlike this: before - dirty, dark,ugly slums; after - clean, bright,beautiful buildings. The contrastis clear, the appeal seductive, butthis picture shows only the hopesand wishes of urban renewal. Therealities of its costs and consequences are drastically different.

Everybody PaysUrban renewal is, of course, ex

pensive. The gross project cost ofurban renewal includes all expenses incurred by a local renewalauthority - planning costs, land,buildings, overhead, interest, relocation, site improvements, andsupporting facilities.

Assume that all this costs $9million for a good-sized project.Where does the money come from '!

Some of it comes from privatedevelopers who buy the clearedand improved land. On the average, private developers have beenbuying urban renewal land forabout 30 per cent of the grosscost of the project - say, $3 million for our $9 million project.This leaves the city with a netcost of $6 million. The federalgovernment will pay two-thirdsof this net cost, or, in this case,$4 million.

Thus, for our $9 million project, we get $3 million from theprivate developer who becomesthe new owner, $4 million fromtaxpayers all over the UnitedStates, and $2 million from taxpayers living in the communitywith the urban renewal project.Additional features, called noncash grants-in-aid, can reduce thenet cost to the city still further.

Because the federal government subsidizes two-thirds of thenet cost to the city, some people


feel that urban renewal is a bonanza that cannot be passed up.This might be true if .only onecity were engaged in urban renewal; but there are over 1,500projects in about 750 citiesthroughout the country. Throughfederal taxes, the residents of anyone of these cities are helping topay for all the other projects. Asmore and more cities attempt to"get their share" and the over-allcost of the program rises, the costto all necessarily increases.

Better Housing?

One of the most serious consequences of the federal urban renewal program is the effect that ithas had on the supply of housing,especially low-rent housing. Thisis ironic because one of the goalsof the program is to improve living conditions. Why has this goalnot been realized?

The typical urban renewal project destroys a great many homes.Between 1950 and 1960, the program was responsible for the destruction of approximately 126,000housing units. Of these homes,101,000 had been classified as substandard by the local renewal authorities, while 25,000 were ingood condition. The good ones\vere destroyed because they werejudged to be incompatible withthe proposed plan for the area.

I have estimated that in this

same decade approximately 28,000new housing units were completedwithin urban renewal areas.2

About 25,000 of these were privately owned homes; 3,000 or sowere public housing units. Score:126,000 down, about 28,000 up.This means that almost four timesas many homes were destroyed aswere built.

The total effect on housing conditions was even worse. All the126,000 homes that were destroyedwere located in older sections ofcities, and almost all were lowrent units. It is doubtful whetherthe average rent paid exceeded$50 or $60 a month. On the otherhand, the rents of the new privately owned homes were veryhigh. For example, those homesbuilt in 1962 in urban renewalareas had rents averaging $195 amonth. (A small percentage rentedfor over $360 a month!) Hence itwas virtually impossible for anyperson displaced from an urbanrenewal area to move back in; hecould afford it only if he movedinto public housing. And only3,000 units of public housing werebuilt - an insignificant number incomparison to the number of unitsdestroyed.

Thus the net effect of the federal urban renewal program in

~ The Federal Bulldozer (Cambridge:The Massachusetts Institute of Technology Press, 1964), pp. 65-67.


the field of housing for the periodI have studied can be summed upin this way:

• More homes were destroyed thanwere built.

• Those destroyed were predominantly low-rent homes.

• Those built were predominantlyhigh-rent homes.

• Housing conditions were madeworse for those whose housing conditions were least good.

• Housing conditions were improved for those whose housing conditions were best.

Improved Living Conditions?

Private studies indicate thatthe people displaced by urban renewal usually move into housingof approximately the same qualityas the housing they were forcedout of - but they often pay morefor it. Their predicament is compounded, not alleviated, by urbanrenewal. Government studies, onthe other hand, indicate that about80 per cent of the displaced peoplemove into standard housing. Obviously, both the private studiesand the government studies cannot be correct.

I suspect the reason for the discrepancy between them is that local government officials decidewhether or not a dwelling unit inan urban renewal area is standardor substandard, and their estimates are therefore subject to

bias. An official interested inspeeding up the process of anurban renewal project may betempted to apply high housingstandards to justify the taking ofthe property, and then, when itcomes to relocating the people displaced, he may be tempted to usequite low housing standards tojustify the quick relocation ofthese people.

The notion that over 80 percent of the displaced people moveinto good housing is difficult toreconcile with other relevant facts.The people living in these areasare relatively poor. A great manyof them come from minoritygroups; approximately two-thirdsof all those forced to move areNegroes and Puerto Ricans. Goodquality, conveniently located housing costs so much more than poorhousing that it is difficult to conceive of hundreds of thousands oflow-income people, many of themsubject to racial discrimination,suddenly moving from low-qualityhousing into higher-quality housing at rents they can afford.

And then one might ask the following question. If it is true thatall this good-quality, convenientlylocated, low-rent housing is available, why then is it necessary toforce these people out of theirhomes with a bulldozer? Would itnot be far simpler, more just, andmuch cheaper just to tell them


about the better homes availableelsewhere?

One Million Evictions

The numher of people affectedby the program was small duringits first few years of operation.But I have estimated that as ofDecemher 31, 1962, approximately1,665,000 persons were living orhad lived in urban renewal areas.This is about the same number ofpeople that live in Detroit, Michigan - the fifth largest city in theUnited States. Some of these people have already heen forced out;the rest will be on their way eventually.

The number of people actuallyevicted so far is very large. ByMarch 31, 1963, about 609,000 persons had been forced to move, andthe number has, of course, continued to go up. I estimate that atleast 1,000,000 people will beevicted by the end of 1965. Andthis is by no means the end; infact, it is probably just a smallstart. In 1962, William Slayton,the Commissioner of the UrbanRenewal Administration, statedthat approximately 1,00(},000 families would be displaced duringthe next decade. This means thatsomewhere around 4,000,000 persons will be actually displaced by1972 - or about one person out ofevery 50 Iiving in the .UnitedStates.

Good for Business?Although most urban renewal

areas are predominantly residential, they often contain a numberof businesses. These businessesrange from one-man offices to industrial concerns with several hundred employees. According to a1960 report financed by the SmallBusiness Administration:

It is estimated that there are over100,000 business firms in all 650project areas.... The approximately100,000 firms scheduled for dislocation from project areas on December31, 1959, represent a beginning only.. . . New projects have been startedat an increasing rate. Although noprecise forecasts have been made,it is expected that the volume ofbusiness dislocations from renewalareas over the 1960-1970 decade willbe at least twice the 100,000 alreadyunderway or planned.3

What happens to a businesswhen it is forced to move? Doesit stay in business? Where does itmove to?

According to the study quotedabove, many firms never relocateat all. This study covered 14 citieswith 21 urban renewal projectscontaining a total of 2,946 dis-

3 William N. Kinnard, Jr. and ZenonS. Malinowski, The Impact of Dislocationfrom Urban Renewal Areas on SmallBusiness, prepared by the University ofConnecticut under a grant from the SmallBusiness Administration, July 1960, pp.2-3.


placed firms. The finding: 756 ofthem either went out of businessor disappeared. Similar findingshave been made by others:

• A study conducted by BrownUniversity in the city of Providence,Rhode Island, found that 40 per centof the businesses displaced went outof business.4

• A study prepared by the Libraryof Congress concluded that urbanrenewal projects "are destroyingsmall businesses and jobs and contributing to the unemployment problem."5

What about rents for firmsforced to relocate? In the studyprepared for the Small BusinessAdministration, a sample was taken of four cities that contained1,142 displaced firms. Only 41, or3.1 per cent, actually moved backinto the urban renewal area. Theresearchers observed:

... Approximately 75 per cent ofthose who do relocate find quarterswithin one mile of their former location; and nearly 40 per cent withinone-quarter mile. They generallyoccupy about the same floor areathey did before (which is less thanthey claimed to want or need), at asquare foot rental at least doublewhat they were paying (which ismuch more than they claimed to be

4 Chamber of Commerce of the UnitedStates, Washington Report, December20, 1963.

5 Ibid.

able to afford or to be willing topay) .6

The Tax Myth

One of the most valued arguments presented by those whofavor expansion of the urban renewal program is that it willstrengthen and increase the taxbase and thus increase tax revenues to the city. Unfortunately,this has not happened, and thechances of urban renewal producing a significant tax revenue increase in the future are small.

The latest data I have on ne,,,construction actually started inurban renewal areas goes throughMarch 31, 1961. It shows that theurban renewal programs actuallydecreased the tax revenues flowinginto the cities' tax coffers. By theend of 1960, approximately $735million of real estate had beendestroyed in urban renewal project areas. About $824 million ofreal estate construction had beenstarted, $577 million of which wasprivately owned and thus taxable.If we optimistically assume that70 per cent of this total amountprivately started was ever finished, the net result is about $400million worth of taxable property- $335 million less than we hadbefore urban renewal!

Is this a temporary situation,

6 W. N. Kinnard, Jr. and Z. S. Malinowski, Ope cit., p. 75.


or is an adverse tax effect a fundamental quality of urban renewal? Several factors militate againstnet tax increases:

(1) Interim tax losses from realestate destroyed are often overlooked.Once buildings are down, no taxesare paid on them. Nor are any taxespaid until new buildings have beenput up. The new buildings will probably be worth much more than theold ones. But the length of time between the destruction of the oldbuildings and the construction of thenew ones can easily be five years ormore. During this time the city islosing tax revenue.

(2) Tax revenue increases thatwould have occurred in the absenceof urban renewal must be considered.In most cases, a certain amount ofnew construction and rehabilitationwould probably have been accomplished with private funds, therebyincreasing the tax base with no costto the city.

(3) Much of the new constructionin the urban renewal area wouldhave been built elsewhere in the cityanyway. Some experts in the fieldestimate that from 50 per cent to 75per cent of this construction wouldhave been accomplished by privateenterprise.7

( 4) Many of the new tenants inan urban renewal area will comefrom"other parts of the city. Whathappens to the value of the buildingsthey vacate?

7 See The Federal Bulldozer, pp. 180,181.

(5) Some cities have had to givespecial tax abatements to induceprivate developers to come in. This,of course, will further reduce anynet gain in tax revenues that mightmaterialize.

To be sure, some of the factorsoperating ma.y tend to increasethe tax revenues. If an urban renewal project is successful, it ispossible that the value of the surrounding buildings may increase.But before this is translated intoincreased taxes, the assessment onthe buildings must be raised.

The whole issue of tax revenuechanges is still a cloudy one andwill probably remain so. It shouldbe kept in mind that the netchange will be the result of manycomplex factors. It is not enoughjust to compare the value of theold real estate with the proposedvalue of the new real estate. Timing of payments, effect on the restof the city, what would have happened without urban renewalthese must all be considered, alongwith the fact that the process ofurban renewal itself costs the citya considerable amount of money.

Constitutional?

Under the Constitution of theUnited States, it is understoodthat a man is free to use his property as he desires as long as hedoes not interfere with the rightsof others. Traditionally, public


use is the only reason for whichthe government may seize privateproperty. The Supreme Courtchanged this in 1954, and today,under the federal urban renewalprogram, it is possible for the government to seize the property ofone man, destroy it, and then sellthe cleared land to some other manat a negotiated price.

The Constitution clearly statesthat the power of eminent domainmay be used only to seize privateproperty for public use. Approximately 70 per cent of the new construction in urban renewal areasis privately owned. By no distortion of the thinking process canthis be construed to be a publicuse ; it is clearly a private use.

The Supreme Court essentiallyjustified this procedure on thegrounds that it was in the publicinterest. They neatly sidesteppedthe problem of clearly defining thepublic interest. The use of thepublic interest to justify a government program often means thatone group of people will gain atthe expense of some other group.Those who do not mind sacrificingthe rights of a few persons in thenarne of the public interest eventually may end up sacrificing therights of the public in the name ofthe public interest.

The equation of public interestwith public use is a dangerousprinciple to accept. It means that

the government theoretically couldseize anyone's property for anyreason that an official claimed wasin the public interest if he couldjustify it to the satisfaction of thecourt. Every citizen has the responsibility of questioning thedecisions of the Supreme Court.The Court is not infallible in itsinterpretation of the law; and itsdecisions can be reversed.

Power of free Enterprise

According to certain experts,things are getting worse in urbanhousing. In a report of the President's Commission on NationalGoals in 1960, Catherine BauerWurster stated:

There is a great deal of seriouslysubstandard housing in Americancomnlunities, and spreading "grayareas" in various stages of actual orpotential decay, plus commercial andindustrial blight. It is quite evidentthat economic progress alone doesnot cure these evils, and that localgovernments cannot do the necessaryjob alone.... 8

Others have made similar statements. If they are correct, it seemsthat we are in for serious trouble.Fortunately, the actual developments of recent years contradictthese pessimistic opinions.

8 "Framework for an Urban Society,"Goals for Americans - The Report of thePresident's Commission on National Goals(Englewood Cliffs, New Jersey: PrenticeHall, Inc., 1960), p. 229.


Impressive progress has beenmade toward achieving the objectives set forth by Congress in1949. Over-all housing conditionshave improved dramatically, incities and outside of cities, for thepoor and for the rich, and for thenonwhites as well as the whites.This progress has been furtheredby businessmen operating in thefree marketplace. To summarizesome of the more important aspects of the record:

• Both the relative and absolutechanges in housing quality between1940 and 1960 were striking. In 1940,51 per cent of all housing in theUnited States was considered standard or sound; in 1950 the proportion had moved up to 63 per cent;and in 1960, fully 81 per cent wasclassified as standard. If this trendcontinues, it is likely that the Censusof 1970 will reveal that 90. per centto 95 per cent of all ·our housing isstandard.

• From 1950 to .1960 alone thetotal number of standard homes increased from 29.1 million to 47.4million, a 63 per cent increase injust ten years. This increase of over18 million standard homes was theresult of both new construction andrehabilitation. Over 12 million newunits were built, and the number ofsubstandard units declined from 17million to under 11 million. Virtuallyall of this was accomplished by private construction, rehabilitation, anddemolition efforts; massive amounts

of private funds were invested inhousing. These investments were inno way connected with the federalurban renewal program.

• From 1945 to 1960, private mortgage debt outstanding increased byalmost $170 billion. Although approximately 40 per cent of this totalwas insured by the federal government through the Federal HousingAdministration and the Veterans Administration, this does not mean thatthe government was responsible forthe increase in housing quality. Theunderlying demand for housing andthe growing income of those who desired better housing were clearly thepredominating factors. The effect ofgovernment insurance programs wasprobably to produce a slight increasein the amount of housing starts; butit should be kept in mind that ifthese government insurance programs had not existed, private insurance companies, such as the Mortgage Guaranty Insurance Corporation, would have surely developed ata n1uch faster rate than they did.

• The amount of really bad housing - that classified as dilapidatedby the Bureau of the Census - declined from 9.8 per cent in 1950 to5.2 per cent· in 1960. The 1960 overall vacancy rate was slightly over9 per cent. The number of dilapidated homes was actually smallerthan the number of vacant homes.Vacancy rates were much higherfor poor housing than for good housing. In 1960, 6.8 per cent of thestandard housing was vacant, where-


as the vacancy rate was 20 per centfor dilapidated housing. Then, asnow, the fact seemed to be that therewere a certain number of people whoeither could not or would not spendenough money to rent or to buy theavailable standard housing.

Housing for Minorities

It is sometimes charged that thefree working of capitalism cannotproduce gains for some groups ofpeople, particularly the nonwhitepopulation. Many are convincedthat the only answer must lie inthe direction of greater government intervention and higher public subsidies.

In fact, the nonwhite populationof the United States has enjoyeda very substantial increase in thequality of its housing. From 1950to 1960 there was an over-all netincrease of 1,813,000 standardunits and a decrease of 537,000substandard units. Between 1950and 1960, the per cent of standardhousing occupied by nonwhitesdoubled - going from 28 per centto 56 per cent. Most of the badhousing is now located in theSouth, where only 38 per cent isstandard. In the Northeast, 77per cent is standard; in the NorthCentral, 73 per cent; in the West,79 per cent. In comparisons likethis it should be remembered thatthe rents paid by whites are about29 per cent higher than those paid

by nonwhites, and that the valuesof the homes owned by whites areover 82 per cent 'higher.

The housing conditions of nonwhites have improved substantially, and although the quality oftheir housing does hot yet equalthat of the whites, it is rapidly approaching it, particularly in areasoutside the South. Compared tothe federal urban renewal program, the private marketplace ismaking swift, substantial progress.

Marching Metropolises

The same type of improvementin housing quality that has takenplace throughout the country hastaken place in our cities. In 1960,fully 88.6 per cent of the housinglocated in central cities of over100,000 population was classifiedas standard. In these same 128central cities, the dilapidated housing had declined to slightly over3 per cent of the total. In our 13largest cities, taken as a group,90.1 per cent of all housing wasstandard in 1960; only 2.6 percent was dilapidated.

Housing quality in cities hasbeen continually improving, andnow, as in the past, housing incities is substantially better thanin the country taken as a whole.Today the bulk of the relativelysmall amount of bad housing thatstill exists lies outside of our


cities, particularly in the ruralareas. Only 18 per cent of thesubstandard housing lies withincities having populations of morethan 100,000. There appears to bea definite correlation between thedegree of urbanization and theamount of good housing.

Since the war, construction activity has been booming all overthe United States and its cities.From 1950 to 1960, approximately$52.6 billion of new building construction went up in cities withpopulations over 100,000. Only alittle over 1 per cent of this wasurban renewal construction. If ourcities are "declining," as is oftenclaimed, how does one account forthe steady increase in building activity?

What about the worrisome claimthat the middle-income group isdisappearing from the city? Thecity of the future is prophesied bysome as the city of the very richand the very poor. The facts indicate that this has not happenedand probably will not happen. Ifwe define "middle-income" as$4,000 to $10,000 a year, we findthat almost 57 per cent of all people living in large cities fall within this range. In fact, the incomedistribution in large cities isroughly the same as that for thecountry as a whole. Today's cityis not the city of the very richand the very poor; it is predom-

inantly the city of the middle-income group.

By any objective measure, theindications are clear that our cities- in over-all terms - are continu

ally improving and that today theyare better than they ever werebefore.

Validity of Data. The foregoingfacts were taken from the data onhousing quality collected every tenyears by the Bureau of the Census. These Census data were theresult of observations made by150,000 enumerators, all of whomwere given careful instructions onhow to classify housing.

The three categories used in1960 were "sound," "deteriorating," and "dilapidated." Categoriesor definitions of categories varyslightly from decade to decade,but adjustments were made tomake the data comparable in time,and the effect of the slightlychanged definitions was negligible.Generally speaking, "sound" housing has no defects or has slightdefects that would normally becorrected during regular maintenance (lack of paint, for example)."Deteriorating" housing needsmore repair than that required bynormal maintenance (a shakyporch or broken plaster, for example) . "Dilapidated" housingdoes not provide safe and adequateshelter.


Although the Bureau of theCensus data can be criticized, theyare by far the best available today- most accurate, broadest inscope, and most consistent overtime. I emphasize this because aconsiderable number of self-styledexperts consider their lone opinions superior to those of 150,000trained enumerators. They wouldjustify their conclusion that thecity or housing is deterioratingsolely on the basis of their visualimpressions. This is not a validway to measure changes in housing quality. The amateur's experience is very limited, his standardscannot be identified, and there isno way of knowing whether hisstandards change from year toyear.

The next time you hear that thecity is deteriorating, ask: "In whatway? By whose standard?"

Conclusion

Since 1949 two different methods have been used to grapple withthe "problems" of housing andcities. One of these is basicallythe system of free enterprise,guided by the complex interplayof the marketplace. The otherforce is the federal urban renewalprogram, guided by over-all plansprepared by city planning expertsand backed up with the taxpayers'money and the police power of thegovernment.

The facts tell us that privateenterprise has made enormousgains, while the federal programhas not. Contrast, for example,the fantastic increase of 18 million homes in areas outside urbanrenewal projects with the net decrease of homes within urban renewal projects. Consider also thedecrease in low-rent flousing andthe increase in high-rent housingin the urban renewal areas; urbanrenewal actually subsidizes highincome groups and hurts low-income groups. Add to this the destruction of businesses and theforcible displacement of peoplefrom their homes. The programendangers the right of privateproperty - commercial and residential- in its equating of publicinterest with public use.

The over-all results of the government's program, when compared to the results of privateforces, are negligible. Its over-allcosts, when compared with its results, are high. On balance, thefederal urban renewal programhas accomplished little of benefitin the past, and it appears doubtful that it will do better in thefuture.

However, there are times whenparticipating in a federal urbanrenewal project - as a contractor,a banker, or a businessman - maybe attractive if only short-rungains or profits are considered.


Participation may make it possiblefor a businessman to get that 10cation he wants from an ownerwho has been unwilling to sell; itmay renovate an adjacent area andthus increase the value of hisproperty; it may eliminate buildings that are visually offensive tohim; and he may even make somemoney out of it.

But in supporting the programfor these or other reasons, thebusinessman should be aware thathe is supporting a government program that, in the long run, is detrimental to his own interests. Ituses the concept of eminent domain in such a way that privateproperty - business as well asresidential - can be taken and resold by the government to otherprivate persons for their own usesimply because it is supposed tobe in the public interest. It implies acceptance of the idea thatprivate enterprise cannot work effectively in the field of housingand that government must intervene, when, in fact, this is nottrue. It subsidizes some businessesand construction interests that arein direct competition with those ofother private businessmen. Duringexecution it lowers the tax baseof the city - in some cases perhapspermanently-and thus increasesthe tax burden for the rest of thecity.

And, finally, the businessmanmay be hurt directly when the local renewal authorities decide thatthe area in which he is locatedis blighted! The irony of Washington's urban renewal program isthat without the enthusiastic collaboration of many businessmenit would come to a grinding halt.

In my judgment, the programshould be repealed now. This couldbe accomplished simply by notauthorizing any new projects. Allprojects currently under contractcould be carried through to completion if the individual cities desired to do so.

As the Greek philosopher Aristotle stated more than 2,200 yearsago: "Even when laws have been\vritten down, they ought not al\vays to remain unaltered."

What would be the results ofsuch clear-cut, positive action?Would slums proliferate? Wouldhousing get worse? Would citiesdie? Clearly, no. The record ofwhat has been achieved outside ofthe federal urban renewal program by private forces is concreteevidence of what can be done byan essentially free-enterprise economic system. If this is what canbe accomplished by free enterprise, the rational course of actionis to encourage it to function, notto attack it or to sabotage it. ~

A REVIEWER'S NOTEBO'OK JOHN CHAMBERLAIN

WE LIVE in a mercantilist age.Great industries, depending ongovernment for sales and contracts, feel compelled to thinktwice before taking a case to thepublic. As in the days of KingGeorge III, there is the "court"to consider. There is a "partnership" between industry and government' but since one "partner"has the power to inspect the taxreports of the other, or to denyhim a contract, it is not preciselya partnership among equals. The"court" comes first.

There is not much point in complaining about this state ofaffairs. The defense necessities ofthe nuclear age make the UnitedStates government a huge buyerof hardware. The aircraft manufacturers, the missile makers, theproviders of steel, aluminum, andcopper, would be not only remissto their stockholders but tremendously unpatriotic men if theywere to refuse their services to Sec-

60

retary McNamara. When the military budget is upwards of fiftybillion dollars a year, the free enterprise system will find itself implicated with mercantilist doctrinewhether it wishes it or not. Somebody is going to get those contracts, and the business concernthat doesn't have its courtiers onhand to present a case to the sovereign may find itself in hot waterin trying to explain .a saggingsales chart to the board of directors.

Under the circumstances, it isprobably miraculous that we don'thave a lot more corruption thanwe already have of the type whichClark R. Mollenhoff describes inhis Despoilers of Democracy(Doubleday, $5.95). With businessmen going to work for government, there are always psychological ties to the old company, orthe old bank, or the old home town.Even though all physical symbolsbetokening a "conflict of interest"

1966 MERCANTILISM INVITES CORRUPTION 61

may be stored away for the moment in trust, or even disposed offor good, men cannot escape thepull of their pasts. "Integrity"must become a matter of degreebecause of subconscious factors.So, if Texas gets a contract andCalifornia does not, it may notmean very much provided most ofthe other - and more objectivefactors are equal.

The soil, however, will alwaysbe ready for the growth of "raw"corruption. Mr. Mollenhoff's bookis concerned with "raw" cases andnot with the general developmentof the modern mercantilist system.A third of his book is devoted tothe scandals developing from theBobby Baker case. A fourth of thepages detail the quarrels thathave beset the Department of Defense over such things as the TFXcontract (it went to GeneralDynamics, a Texas company, instead of to Boeing, of the Stateof Washington). Then there arechapters on the Billie Sol Estesbusiness, and the stockpile scandals, and the Otepka case (whichinvolved "security" inside theState Department), and someskulduggeries and injustices inthe administration of foreign aid.

Mr. Mollenhoff is a first-rate reporter who belongs to the diminishing tribe of those who are capable of combining indignationwith an ability to marshal facts in

a calm and orderly manner. Backin the nineteen twenties, whenPaul Anderson was reporting forthe Natiorn, we used to have a lotof Mollenhoffs around. But in ourideological age they are growingscarce. Today exposures usuallyfollow party lines. So it is refreshing to get a book which doesn'tpull its punches to let a Democrator a Republican, a liberal or a conservative, get the better of abargain.

Growth of GovernmentLeads to Corruption

For my taste as a libertarian,however, Despoilers of Democracywould have been a better book ifMr. Mollenhoff had stopped toconsider where the growth ofmercantilist capitalism is boundto lead us. Won't it be to a sort ofgeneralized state of diffused corruption that takes in just abouteverybody? The advance of government - Le., the "court" - intothe business domain must turn usall into courtiers of sorts. Wherewe used to live by competition, wewill find ourselves cultivating thecourtier's assets of flattery, subservience, and willingness to conform.

I wish Mr. Mollenhoff had schematized his book along lines thatwould have separated corruptionin the defense sector of the economy, which must in the nature of


things deal with government, andcorruption in things like agriculture, which don't have to be implicated with government at all.When Secretary McNamara insiststhere were compelling reasons fortaking a General Dynamics planeinstead of a Boeing plane, it isdifficult for me, a civilian who ismystified by aerodynamics, toknow whether he has a case ornot. The only thing that is certainis that the United States, as oneof the two superpowers in theworld, is' going to need a goodmilitary defense. But when a BillySol Estes manipulates cotton allotments and mortgages on nonexistent liquid fertilizer storagetanks to pile up a few million dollars, I know that none of thiscould have happened if the government had not been implicatedin the futile attempt to "control"agriculture in the first place.

Any government is bound tomake some mistakes, and havesome corruption, when it must goto private industry to get airplanes and rifles and army blankets and armor plate. But the attempt to control the price level orthe distribution of incomes inagriculture is an unnecessary bitof corruption in itself. It makesthe government a prime evader ofthe antitrust laws. I can forgivean Administration for letting politics seep into the award of defense

contracts. But when an Administration finds itself embarrassed bya Billy Sol Estes, I have no sympathy for it.

Stockpile Manipulation

When there is money beingpassed around, the ravens - orshould one say the vultures? - willgather. It could be nobody's faultin the White House or in the officeof the Majority Leader of theSenate when a Bobby Baker hasan interest in a food-vending company that is trying to sell its services to defense plants. This sortof thing will happen under mercantilism anywhere, and when themercantilism proceeds from defense necessities we have to counton Bobby Bakers turtling up. Butwhere is the justification for government to go into stockpiling ofraw materials beyond a certainpoint?

We have just been witness towhat can be done with stockpiles.But Mr. Mollenhoff's pages on thestockpile scandals make one feela lot less sorry than we should befor certain big metals companiesover their mistreatment in the recent government-manipulatedprice crackdowns. There is nomoral or legal justification forFederal use of stockpiles to effectprice control. But some of themetals companies helped dig theirown graves here by encouraging

1966 MERCANTILISM INVITES CORRUPTION 63

the government in mercantilistpractices when it came to buildingup the stockpiles not only for defense but to support the market.At one point President Kennedyand Senator Stuart Symingtonwere astonished to discover that"the value of the aluminum in thestockpile exceeds the amounts wewould need for three years in theevent of war by $347 million."Kennedy also said the "excess supply of nickel is $103 million." Theimplication is that some of thebig metals companies were willingto connive at price control on theway down. Well, the whole business boomeranged on them whenPresident Johnson decided to workthe process in reverse. We've allheard about poetic justice, and weknow that sauce for the goose isalways sauce for the gander. Ifwe had not permitted mercantilism to dominate the business ofstockpiling in the first place,Lyndon Johnson wouldn't havehad a handy boomerang to hurl atthe businessmen. He would havehad to go to Congress to get pricecontrol, which is the proper placeto apply for it if we are to have agovernment of laws and not ofmen.

Mr. Mollenhoff's book is designed to improve our civic tone.But it could have a most important by-product in improving oureconomic thinking. +

~ LIFE WITHOUT PREJUDICEby Richard Weaver (Chicago:Henry Regnery Company, 1965),167 pp., $4.50.

Reviewed by Robert M. Thornton

I VENTURE to predict that RichardWeaver's influence over the yearswill be all out of proportion tothe number of books he wrote.The one under review is only hisfifth - the second to be publishedsince his death in 1963 - and ismade up of eight essays whichappeared in various publicationsbetween 1956 and the year hedied. While not a great .stylist,Weaver was a careful writer whodid a lot of hard thinking beforehe put his ideas down on paper;consequently, he is a great pleasure to read. Keen insights andprovocative ideas abound, andthere are no superfluous words inthis intellectual feast - all goodlean meat!

My favorite of the collection isthe title essay, "Life WithoutPrejudice." Prejudice is, of course,a "bad" word today although lifeas we know it could not go on ifmany times each day all of usdid not prejudge. Most persons,for instance, are prejudicedagainst murder; that is, if questioned on the subject, they wouldinstantly declare themselves opposed to such an act without pausing to reason out a judgment. "A

64 THE FREEMAN

prejudice may be an unreasonedjudgment . . . but an unreasonedjudgment is not necessarily anillogical judgment. . . . [Thereare] three types of belief forwhich we cannot furnish immediate logical proof, but which maynevertheless be quite in line withtruth." There are "judgmentswhose verification has simplydropped out of memory . . . opinions we adopt from others - ourbetters in some field of learningor experience [and those] whichhave a subconscious origin" - the"intuitions, innuendoes, and shadowy suggestions which combineto form our opinion...."

"A man who frankly confessesto his prejudices is usually morehuman and more humane. He adj usts amicably to the idea of hislimitations. A limitation once admitted is a kind of monition notto try acting like something superhuman. The person who admitshis prejudices, which is to say,his unreasoned judgments, has aperspective on himself."

Mark Twain, Weaver notes, gave"a therapeutic insight into thephenomenon of prejudice" whenhe wrote, "I know that I am prejudiced in this matter, but I wouldbe ashamed of myself if I werenot."

The theme running through allof these essays, indeed, through

all of Weaver's work, is that humanity is not a theoretical abstraction or "a number of atomsor monads knocking together,"but a spiritual community. It is afunction of education, he writesin the essay, "Education and theIndividual," to nourish this community "in which to feel deeplyis to feel widely, or to make oneself accessible to more of one'sfellow members. In consequence,it cannot be too forcefully arguedthat the education which regardsonly development with referenceto externals is not education fora higher plane of living, for theindividual and for the society ofwhich he is a part, but for alower-for an artificially depressedlevel of living which, were it tobe realized, would put an end tohuman development."

Ours is a cocky generation thatdenies its debt to the past andits obligations to the future. Weaver reminds us that human society is more than a conglomeration of bodies but is a mysticalbond uniting the living, not onlywith one another, but with thedead and with the generations tocome. He reminds us also of themystery of creation and the expression of awe that should beours before the individual as a"unique creation, something fearfully and wonderfully made." ~

Also available instandard clothbound volume, $2.50

in a new, attractive,low-priced paperback:

$ .95

2.00

6.00

45.00

Single copy

3 copies

10 copies

100 copies

~~~e first e:~ion of MAINSPRING (279 pp., in

dexed) was published in 1947. Since Mr. Weaver'spassing, this great book has been the property ofFEE. Previous to this new paperback edition, 350,000 copies have been printed.

One large company's circulating library for employees required 150 volumes to meet the demand.

Based on FEE's experience, MAl NSPRING topsall books as a starter for any aspiring student ofliberty. Easy reading - indeed, exciting - the beginner becomes so interested in freedom that hecan hardly help pursuing the subject further.

FEE's recommendation: Keep a good supply ofthe paperbacks on hand to present to any individualwho shows a spark of interest in freedom.

THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK, 10533

GAIN All YOU CAN

• Gain all you can, by common sense, by using in your busi

ness all the understanding which God has given you. It is

amazing to observe how few do this; how men run on in the

same dull track with their forefathers. But whatever they do

who know not God, this is no rule for you. It is a shame for a

Christian not to improve upon them, in whatever he takes in

hand. You should be continually learning from the experience

of others, or from your own experience, reading, and reflec

tion, to do everything you have to do better to-day than you

did yesterday. And see that you practise whatever you learn;

that you make the best of all that is in your hand.

J aH N WE S LEY, from Sermon 50, "On the Use of Money"

the freeman 1966 · hen scratches for food, and by in stinct and conditioned reflexes a lion stalks...

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