On Memorial Day, once a year, we pledge ourselves to remember the hundreds of thousands of victims of American foreign policy. But Americans are not much interested in history. We prefer to forget both the victims and the perpetrators. So, on Memorial Day, Americans generally ignore our war dead and wait to hear news reports about our Indianapolis 500 dead. We forget about memorials, just as on July 4, we pay little attention to the Declaration of Independence; on Thanksgiving Day, we ignore the Pilgrims; on Labor Day, we don’t go to work; on Easter Sunday, we search for Easter eggs; on Christmas, we open presents; on Presidents day, we ignore two presidents at the same time; and on Good Friday, we ignore the crucifixion. Finally, on Martin Luther King [Jr.] Day, most Americans pay as little attention as possible to the memory of Rev. King. (I would be a lot more enthusiastic about Rosa Parks Day, i.e., I would have voted against it, but not with the same enthusiasm that I would have voted against Martin Luther King Day.)
I hate holidays — all of them, without regard to race, creed, color, or national origin. When it comes to holidays, I am not only Scrooge, I am Alastair Sim’s version of Scrooge.
A holiday is technically a holy day, i.e., a day set apart for some religious purpose. But the common feature of all American holidays is that they are days set apart for doing nothing productive. They are basically consumption days. They are excuses to consume, especially time, our only irreplaceable resource.
I make it a point to work all day on every holiday except Christmas. I only work half a day on Christmas. I sell out. The peer pressure is too great.
LOST PRODUCTIVITY
For almost a century, there has been an academic debate over whether Protestant nations gained an economic advantage over Catholic nations. The man who argued that this was the case was Max Weber (Mawx Vayber), whose book, The Protestant Ethic and the Spirit of Capitalism (1905) remains a classic. He argued that Protestantism was more favorable to capitalism than Catholicism was. If the 16th century School of Salamanca had been dominant, this would not have been true, but those remarkable scholastic defenders of free enterprise were not in control of holidays. Some Catholic countries had 150 holidays a year, including Sundays, in Luther’s day. The Protestants abolished most of them.
Protestant rulers generally opposed holidays. The Puritans were the archetype. In 1659, the General Court (legislature) of Massachusetts passed the following law:
“For preventing disorders, arising in several places within this jurisdiction by reason of some still observing such festivals as were superstitiously kept in other communities, to the great dishonor of God and offense of others: it is therefore ordered by this court and the authority thereof that whosoever shall be found observing any such day as Christmas or the like, either by forbearing of labor, feasting, or any other way, upon any such account as aforesaid, every such person so offending shall pay for every such offence five shilling as a fine to the county.”
http://masstraveljournal.com/features/1101chrisban.html
Protestants worked on Saturdays. They took seriously these words: “Six days shalt thou labour, and do all thy work” (Exodus 20:9). The Puritans wouldn’t allow recreations on Sundays. Most Continental Protestants did, including John Calvin himself. So did Anglicans. Protestants might allow a few special prayer days in a national crisis, but that was about the limit of their tolerance for leisure.
Two rules of economic success are these: (1) work a little bit harder than your competitors every day; (2) then allow the compounding process to give you an enormous advantage over decades. It’s John Schaub’s rule: making it big on little deals.
Almost three decades ago, I wrote a manual for college students on how to do well in college. One of my recommended strategies was (and is) to do homework while everyone else is at the Big Game. If you work while everyone else is playing, you gain a permanent advantage.
Working on Saturdays is basic to lifelong success. You may choose to work around the house, but if you’re productive, it’s better to work at your occupation at (say) $50/hour, and hire someone to work on household jobs at $20/hour.
Most Americans are salaried. They see no reason to work more than 40 hours a week. They also see no reason to improve their skills, start a weekend home business, learn a new trade, earn a college degree, or in some other way become more productive on their own time. This offers a tremendous advantage to those few people who are willing to use Saturdays and time after work, including drive time, to improve their skills.
People think, “if I could earn 20% per annum on my money, I could get rich.” But they can earn 80% on their time. Instead of working a 40 hour week, they can work 72: 12 hours a day, six days a week, year after year. They could also limit vacations to two one-week-long sessions.
In The Millionaire Next Door, we learn the secrets of success of 80% of America’s millionaires, the ones who made their own fortunes. Here are the secrets:
Start your own business. Invest your profits in your business.Work 72 hours a week.Spend less than you earn.Don’t get divorced.
I would add this: tithe ten percent of your pre-tax income.
This was how I did it. This is how most of the rich people I know did it.
There are other worthwhile goals besides making money. You must invest large amounts of time to achieve these goals. You can achieve some of them with money, but if you don’t have money, you must invest time. Also, even if you have money, it is unlikely that you will achieve maximum success in these other areas of life without a major investment of time. It takes skill to give away money wisely. Skill comes through time applied to learning.
Television isn’t free. It’s expensive. It eats up your time. The same is true of novels. A few TV shows are informative. I watch “Sunday Morning.” A few novels are informative. I have read Gore Vidal’s history of the United States. But time is scarce. We must allocate it wisely. Jesus said, “I must work the works of him that sent me, while it is day: the night cometh, when no man can work” (John 9:4). That is good advice.
There is a legitimate use of carefully planned relaxation. It makes you work better. It also makes work seem worthwhile. As with all things in life except addictive substances or addictive activities, as you get more of something, the value of each successive unit falls in relation to the previous unit’s value. Put another way, everything is subject to the law of diminishing returns. This includes work. But when entertainment becomes addictive, it’s time to go back to work. In this society, entertainment for most people has become addictive. The quantity has increased, and the quality has declined.
THE SOVIET UNION
I spoke with a woman recently who has spent her life in the Soviet Union. As an Armenian Christian, she was out of step in Muslim Uzbekistan. As an Armenian, she was also out of step with the Communist workers’ ethic, which proclaimed: “They pretend to pay us, and we pretend to work.” The Armenians are Christianity’s Jews. Their work ethic is similar, their commitment to education is similar, and their ability to make money is similar. As my Jewish roommate told me in 1962, “We used to live in Fresno, but when the Armenians moved in, the Jews moved out.” My wife’s Armenian father grew up in Kingsburg, not far from Fresno.
The lady told me of the horror faced by pensioners in the 1990’s, after the collapse of the Soviet Union. Their money fell to zero value, and the Communist welfare system also collapsed. They were worse off than before Communism failed.
I told her that Soviet Communism was like a gigantic prison in which none of the inmates learned a productive skill. Then, without warning, the guards opened the gates and sent everyone away. For the old, the retired, and the congenitally bureaucratic, the collapse of Communism was a painful experience. But for the young, there is now hope.
Her grandfather had the ability to make a fortune under Communism. Two times, his fortune was confiscated by the authorities. Her son has the same ability. If he can get permanent legal status in the United States, he will be successful. He will generate net income. Society will benefit. Under Communism, he would never have been able to become this productive. Freedom makes the difference.
THE LEGACY OF JOHN MCDONOGH
This leads me to the story of John McDonogh. He was one of the great forgotten men in American history. He was not well known outside of Louisiana, and he was generally hated there. He died in 1850, the richest man in the state. Today in Louisiana, there are many public schools named after him. There is a reason for this.
John McDonogh was a penny-pinching Scot. Like most Calvinist Scots, he was a strict sabbatarian. Nobody worked on his plantation on Sundays, but they worked like madmen on the other six days.
Why? From everything we know about the slave economy, slaves were slackers. They stole, they cheated, they faked illnesses. They were goldbricks. They were officially regarded as natural slaves.
What John McDonogh proved, as perhaps no one in American history has proved more clearly, is that men respond to incentives. In 1825, he conceived of a plan that would enable his slaves to buy their way to freedom. He hoped that they would go to Liberia, but only one did.
As a strict sabbatarian, he would give them Saturday afternoons off for their own work if they promised not to work on Sundays. Other planters also gave their slaves Saturday afternoon off. But McDonogh made this offer: if they would work for him on Saturday afternoon, and two extra hours each day, he would pay them extra. He paid them 50 cents a day in winter and 62.5 cents in summer.
He established a set release price for males of $600 and $450 for females. This was somewhat less than the average market price for healthy field hands. Once they had paid off one-sixth of this agreed-upon price, they would get one free day of their own. They could then use their earnings on this free day to speed up repayment. When they “owned” Saturday, the time they spend working for him on Saturday enabled them to buy Friday. When they had bought Friday, they started buying Thursday. When they bought Monday, they were granted their freedom. It took fifteen years for a slave to buy his way out of slavery.
Slaves ran his entire operation: rent collection from his white tenants, the agricultural operations, his urban real estate. A jury of six slaves handled all disciplinary matters, which he reviewed. He would overturn their punishments when they were too harsh. The slaves’ jury tended to be overly rigorous in their judgments against fellow slaves.
He was a man of his word. He reported to them every six months concerning their progress. He later told his white contemporaries that slaves were in the best position to know a master’s character, and the plan could work only if they trusted him to fulfill his promise.
He argued that merely by giving them their freedom, the owner could never get them to plan ahead. The owner might go back on his promise. But by selling a slave his freedom, this future-orientation would affect the slave’s character positively. “Hope would be kept alive in his bosom; he would have a goal in view, continually urging him on to faithfulness, fidelity, trust, industry, economy, and every virtue of good work.” [Cited by Carl N. Degler, The Other South (New York: Harper & Row, 1974), pp. 43-44. Degler relies on two main sources: Lane Carter Kendell, “John McDonogh — Slave-Owner,” Louisiana Historical Quarterly, XVI (1932), and William Talbot Childs, John Mcdonough: His Life and Work (Baltimore, Maryland: Johns Hopkins University Press, 1939).]
He understood that by allowing a slave to buy his way to freedom, the very effort would prepare him for independence. Meanwhile, the efforts of these independence-seeking slaves made him a rich man.
At his funeral, there were many weeping former slaves, but very few whites. He had broken covenant with his white contemporaries.
His principle was this: a man should be allowed to buy his way out of bondage. The South did not agree. So, after Lee’s surrender, the prostrate South had to dig its way out of the hole without slaves. This is why the region went to sharecropping: a land owner’s right to receive a percentage of the crop. Sharecropping maximized productivity in a society in which the land was the major capital asset. Sharecropping provided incentives for ex-slaves to work hard, and it allowed land owners to maximize the return on their capital, including seed and tools.
The freed slaves had a major advantage: the United States’ economy in 1865 was based on capitalism. There was payment for services rendered. There was mobility of capital, including the legal right to walk away. This was what gained ex-slaves a higher return on their labor. (The other major factor in their liberation and their ability to gain wealth was their new-found right to marry, which had been denied to them for two centuries.)
In the Soviet Union, an entire society was in bondage for 74 years. There was no provision for buying your way out. So, when the economy collapsed, and then the political order followed the economy, it left tens of millions of people without income or hope. There was no capitalist framework for men to maximize their productivity. The free market there is still haphazard. The women I spoke with says that she owns her home but not the land it sits on. The State still owns the land.
DENG XAIO PING
Unlike Brezhnev and his successors, Deng recognized the need to free up the economy if China was to experience economic growth. He began his reforms in 1979. He initially freed up agriculture. Peasants could now own their land and sell their output into free markets. Overnight, agricultural output increased. This liberation spread to other areas of the economy. China began an unprecedented boom that is still rolling along at 7% per annum.
Deng presided over a prison. He did not announce the end of the prison system. His successors still call their system Communism. But the Chinese prison system is steadily resembling freedom. This freedom does not apply to political expression, which matters most to Western political liberals, but it does apply to ever-growing segments of the economy, which is an affront to Western political liberals.
Meanwhile, house churches are operating quietly and illegally to undermine the old Communist ideology. There were virtually no visible Protestant churches in 1975. Today, there are between 60 million and 80 million Protestants, and 8 million Catholics. This, in a society that is officially atheistic.
The older Confucianism is reviving. This is an ethical system that is closer to Dale Carnegie’s How to Win Friends and Influence People than Mao’s Little Red Book. The Chinese family is steadily replacing the Communist Party in terms of most people’s allegiance.
This time, China is selling into an international free market. There are no regional trade zones established by Western political powers. Teddy Roosevelt’s open door policy — which meant open to the United States — is actually beginning to be applied. China now has almost five decades of successful examples to imitate: Japan, South Korea, Singapore, Taiwan, and Hong Kong. The success of capitalism is clear to everyone with a TV set. The satellite TV networks are bringing daily evidence of the wealth of the West to an entire society.
Deng was far more of a capitalist reformer than either Reagan or Thatcher. He began with a seriously centralized economic system and, while carefully avoiding the rhetoric of free market capitalism, he freed up the most significant sector of the Chinese economy.
In recent weeks, George W. Bush and Congress have reaffirmed mercantilism for the American agricultural sector, as if Adam Smith had not refuted mercantilist economics in 1776. More than ever, America is denying what Deng affirmed: the necessity of free markets in agriculture. I prefer actions to rhetoric. As Attorney General John Mitchell put it before he went to jail, “Watch what we do, not what we say.”
CONCLUSION
The secrets of economic success are now known around the world: private ownership, legally enforceable contracts, thrift, low taxation, the free flow of capital, and the avoidance of war. Men still trust in government-controlled monetary systems, so we have not yet applied the principle of liberty of contract to the central economic institution: money. Men still trust governments to pay off their pension promises, just as Russians did in 1991. That illusion will be gone soon enough, along with the existing monetary system. But, on the whole, people now know what makes societies rich: the free market. There are a few Chavezes left in politics, but not many. While actions rarely match rhetoric in politics, the rhetoric is no longer socialistic. This bodes well for the future.
I prefer to live in a world where men have the liberty to pursue their dreams. Like McDonogh’s slaves, the more liberty they have to follow their dreams, the harder they will work to keep me, a sovereign consumer, comfortable and better equipped to do my work.
The more capital that people have, the better they can fulfill their dreams. So, I prefer Moses to Congress. “Six days shalt thou labour, and do all thy work” (Exodus 20:9).
If I had the votes, there would be fewer national holidays. The strongest case for national holidays that I can think of is that Congress isn’t in session on holidays. I would vote to replace every holiday with John McDonogh Day, which would allow all Federal employees to take a day off, but would let the rest of us go to work.
I hope you had a safe and productive Memorial Day. Next time there is a holiday, mow the lawn. Wash some windows. Organize your hard drive. Download Google’s toolbar. But do something. Anything. Say to yourself, “I am not Congress. I am productive.” Then act accordingly. Every little bit helps.
The harder you work, the richer I get. That’s capitalism.
May 31, 2002
Gary North is the author of Mises on Money. To subscribe to his free investment letter (e-mail), click here.
