Famous last
words. In a sense, the Reagan handlers were right: there were
no more tears, no more complaints, because the principles themselves
were quickly forgotten, swept into the dustbin of history. Deficits
and the public debt have piled up mountainously since then, and
few people care, least of all conservative Republicans. Every
few years, the legal limit is raised automatically. By the end
of the Reagan reign the federal debt was $2.6 trillion; now it
is $3.5 trillion and rising rapidly. And this is the rosy side
of the picture, because if you add in “off-budget” loan
guarantees and contingencies, the grand total federal debt is
$20 trillion.

Before the
Reagan era, conservatives were clear about how they felt about
deficits and the public debt: a balanced budget was good, and
deficits and the public debt were bad, piled up by free-spending
Keynesians and socialists, who absurdly proclaimed that there
was nothing wrong or onerous about the public debt. In the famous
words of the left-Keynesian apostle of “functional finance,”
Professor Abba Lernr, there is nothing wrong with the public debt
because “we owe it to ourselves.” In those days, at
least, conservatives were astute enough to realize that it made
an enormous amount of difference whether – slicing through
the obfuscatory collective nouns – one is a member of the
“we” (the burdened taxpayer) or of the “ourselves”
(those living off the proceeds of taxation).

Since
Reagan, however, intellectual-political life has gone topsy-turvy.
Conservatives and allegedly “free-market” economists
have turned handsprings trying to find new reasons why “deficits
don’t matter,” why we should all relax and enjoy the process.
Perhaps the most absurd argument of Reaganomists was that we should
not worry about growing public debt because it is being matched
on the federal balance sheet by an expansion of public “assets.”
Here was a new twist on free-market macroeconomics: things are
going well because the value of government assets is rising! In
that case, why not have the government nationalize all assets
outright? Reaganomists, indeed, came up with every conceivable
argument for the public debt except the phrase of Abba Lerner,
and I am convinced that they did not recycle that phrase because
it would be difficult to sustain with a straight face at a time
when foreign ownership of the national debt is skyrocketing. Even
apart from foreign ownership, it is far more difficult to sustain
the Lerner thesis than before; in the late 1930s, when Lerner
enunciated his thesis, total federal interest payments on the
public debt were $1 billion; now they have zoomed to $200 billion,
the third-largest item in the federal budget, after the military
and Social Security: the “we” are looking ever shabbier
compared to the “ourselves.”

To think
sensibly about the public debt, we first have to go back to first
principles and consider debt in general. Put simply, a credit
transaction occurs when C, the creditor, transfers a sum of money
(say $1,000) to D, the debtor, in exchange for a promise that
D will repay C in a year’s time the principal plus interest. If
the agreed interest rate on the transaction is 10 percent, then
the debtor obligates himself to pay in a year’s time $1,100 to
the creditor. This repayment completes the transaction, which
in contrast to a regular sale, takes place over time.

So far, it
is clear that there is nothing “wrong” with private
debt. As with any private trade or exchange on the market, both
parties to the exchange benefit, and no one loses. But suppose
that the debtor is foolish, gets himself in over his head, and
then finds that he can’t repay the sum he had agreed on? This,
of course is a risk incurred by debt, and the debtor had better
keep his debts down to what he can surely repay. But this is not
a problem of debt alone. Any consumer may spend foolishly; a man
may blow his entire paycheck on an expensive trinket and then
find that he can’t feed his family. So consumer foolishness is
hardly a problem confined to debt alone. But there is one crucial
difference: if a man gets in over his head and he can’t pay, the
creditor suffers too, because the debtor has failed to return
the creditor’s property. In a profound sense, the debtor who fails
to repay the $1,100 owed to the creditor has stolen property that
belongs to the creditor; we have here not simply a civil debt,
but a tort, an aggression against another’s property.

In earlier
centuries, the insolvent debtor’s offense was considered grave,
and unless the creditor was willing to “forgive” the
debt out of charity, the debtor continued to owe the money plus
accumulating interest, plus penalty for continuing nonpayment.
Often, debtors were clapped into jail until they could pay –
a bit draconian perhaps, but at least in the proper spirit of
enforcing property rights and defending the sanctity of contracts.
The major practical problem was the difficulty for debtors in
prison to earn the money to repay the loan; perhaps it would have
been better to allow the debtor to be free, provided that his
continuing income went to paying the creditor his just due.

As early
as the 17th century, however, governments began sobbing about
the plight of the unfortunate debtors, ignoring the fact that
the insolvent debtors had gotten themselves into their own fix,
and they began to subvert their own proclaimed function of enforcing
contracts. Bankruptcy laws were passed which, increasingly, let
the debtors off the hook and prevented the creditors from obtaining
their own property. Theft was increasingly condoned, improvidence
was subsidized, and thrift was hobbled. In fact, with the modern
device of Chapter 11, instituted by the Bankruptcy Reform Act
of 1978, inefficient and improvident managers and stockholders
are not only let off the hook, but they often remain in positions
of power, debt-free and still running their firms, and plaguing
consumers and creditors with their inefficiencies. Modern utilitarian
neoclassical economists see nothing wrong with any of this; the
market, after all, “adjusts” to these changes in the
law. It is true that the market can adjust to almost anything,
but so what? Hobbling creditors means that interest rates rise
permanently, to the sober and honest as well as the improvident;
but why should the former be taxed to subsidize the latter? But
there are deeper problems with this utilitarian attitude. It is
the same amoral claim, from the same economists, that there is
nothing wrong with rising crime against residents or storekeepers
of the inner cities. The market, they assert, will adjust and
discount for such high crime rates, and therefore rents and housing
values will be lower in the inner-city areas. So everything will
be taken care of. But what sort of consolation is that? And what
sort of justification for aggression and crime?

In a just
society, then, only voluntary forgiveness by creditors would let
debtors off the hook; otherwise, bankruptcy laws are an unjust
invasion of the property rights of creditors.

One myth
about “debtors’” relief is that debtors are habitually
poor and creditors rich, so that intervening to save debtors is
merely a requirement of egalitarian “fairness.” But
this assumption was never true: in business, the wealthier the
businessman the more likely he is to be a large debtor. It is
the Donald Trumps and Robert Maxwells of this world whose debts
spectacularly exceed their assets. Intervention on behalf of debtors
has generally been lobbied for by large businesses with large
debts. In modern corporations, the effect of ever-tightening bankruptcy
laws has been to hobble the creditor-bondholders for the benefit
of the stockholders and the existing managers, who are usually
installed by, and allied with, a few dominant large stockholders.
The very fact that a corporation is insolvent demonstrates that
its managers have been inefficient, and they should be removed
promptly from the scene. Bankruptcy laws that keep prolonging
the rule of existing managers, then, not only invade the property
rights of the creditors; they also injure the consumers and the
entire economic system by preventing the market from purging the
inefficient and improvident managers and stockholders and from
shifting the ownership of industrial assets to the more efficient
creditors. Not only that; in a recent law review article, Bradley
and Rosenzweig have shown that the stockholders, too, as well
as the creditors, have lost a significant amount of assets due
to the installation of Chapter 11 in 1978. As they write, “if
bondholders and stockholders are both losers under Chapter 11,
then who are the winners?” The winners, remarkably but unsurprisingly,
turn out to be the existing, inefficient corporate managers, as
well as the assorted lawyers, accountants, and financial advisers
who earn huge fees from bankruptcy reorganizations.

In a free-market
economy that respects property rights, the volume of private debt
is self-policed by the necessity to repay the creditor, since
no Papa Government is letting you off the hook. In addition, the
interest rate a debtor must pay depends not only on the general
rate of time preference but on the degree of risk he as a debtor
poses to the creditor. A good credit risk will be a “prime
borrower,” who will pay relatively low interest; on the other
hand, an improvident person or a transient who has been bankrupt
before, will have to pay a much higher interest rate, commensurate
with the degree of risk on the loan.

Most people,
unfortunately, apply the same analysis to public debt as they
do to private. If sanctity of contracts should rule in the world
of private debt, shouldn’t they be equally as sacrosanct in public
debt? Shouldn’t public debt be governed by the same principles
as private? The answer is no, even though such an answer may shock
the sensibilities of most people. The reason is that the two forms
of debt-transaction are totally different. If I borrow money from
a mortgage bank, I have made a contract to transfer my money to
a creditor at a future date; in a deep sense, he is the true owner
of the money at that point, and if I don’t pay I am robbing him
of his just property. But when government borrows money, it does
not pledge its own money; its own resources are not liable. Government
commits not its own life, fortune, and sacred honor to repay the
debt, but ours. This is a horse, and a transaction, of a very
different color.

For
unlike the rest of us, government sells no productive good or
service and therefore earns nothing. It can only get money by
looting our resources through taxes, or through the hidden tax
of legalized counterfeiting known as “inflation.” There
are some exceptions, of course, such as when the government sells
stamps to collectors or carries our mail with gross inefficiency,
but the overwhelming bulk of government revenues is acquired through
taxation or its monetary equivalent. Actually, in the days of
monarchy, and especially in the medieval period before the rise
of the modern state, kings got the bulk of their income from their
private estates – such as forests and agricultural lands.
Their debt, in other words, was more private than public, and
as a result, their debt amounted to next to nothing compared to
the public debt that began with a flourish in the late 17th century.

The public
debt transaction, then, is very different from private debt. Instead
of a low-time-preference creditor exchanging money for an IOU
from a high-time-preference debtor, the government now receives
money from creditors, both parties realizing that the money will
be paid back not out of the pockets or the hides of the politicians
and bureaucrats, but out of the looted wallets and purses of the
hapless taxpayers, the subjects of the state. The government gets
the money by tax-coercion; and the public creditors, far from
being innocents, know full well that their proceeds will come
out of that selfsame coercion. In short, public creditors are
willing to hand over money to the government now in order to receive
a share of tax loot in the future. This is the opposite of a free
market, or a genuinely voluntary transaction. Both parties are
immorally contracting to participate in the violation of the property
rights of citizens in the future. Both parties, therefore, are
making agreements about other people’s property, and both deserve
the back of our hand. The public credit transaction is not a genuine
contract that need be considered sacrosanct, any more than robbers
parceling out their shares of loot in advance should be treated
as some sort of sanctified contract.

Any melding
of public debt into a private transaction must rest on the common
but absurd notion that taxation is really “voluntary,”
and that whenever the government does anything, “we”
are willingly doing it. This convenient myth was wittily and trenchantly
disposed of by the great economist Joseph Schumpeter: “The
theory which construes taxes on the analogy of club dues or of
the purchases of, say, a doctor only proves how far removed this
part of the social sciences is from scientific habits of mind.”
Morality and economic utility generally go hand in hand. Contrary
to Alexander Hamilton, who spoke for a small but powerful clique
of New York and Philadelphia public creditors, the national debt
is not a “national blessing.” The annual government
deficit, plus the annual interest payment that keeps rising as
the total debt accumulates, increasingly channels scarce and precious
private savings into wasteful government boondoggles, which “crowd
out” productive investments. Establishment economists, including
Reaganomists, cleverly fudge the issue by arbitrarily labeling
virtually all government spending as “investments,”
making it sound as if everything is fine and dandy because savings
are being productively “invested.” In reality, however,
government spending only qualifies as “investment” in
an Orwellian sense; government actually spends on behalf of the
“consumer goods” and desires of bureaucrats, politicians,
and their dependent client groups. Government spending, therefore,
rather than being “investment,” is consumer spending
of a peculiarly wasteful and unproductive sort, since it is indulged
not by producers but by a parasitic class that is living off,
and increasingly weakening, the productive private sector. Thus,
we see that statistics are not in the least “scientific”
or “value-free”; how data are classified – whether,
for example, government spending is “consumption” or
“investment” – depends upon the political philosophy
and insights of the classifier.

Deficits
and a mounting debt, therefore, are a growing and intolerable
burden on the society and economy, both because they raise the
tax burden and increasingly drain resources from the productive
to the parasitic, counterproductive, “public” sector.
Moreover, whenever deficits are financed by expanding bank credit
– in other words, by creating new money – matters become
still worse, since credit inflation creates permanent and rising
price inflation as well as waves of boom-bust “business cycles.”

It is for
all these reasons that the Jeffersonians and Jacksonians (who,
contrary to the myths of historians, were extraordinarily knowledgeable
in economic and monetary theory) hated and reviled the public
debt. Indeed, the national debt was paid off twice in American
history, the first time by Thomas Jefferson and the second, and
undoubtedly the last time, by Andrew Jackson.

Unfortunately,
paying off a national debt that will soon reach $4 trillion would
quickly bankrupt the entire country. Think about the consequences
of imposing new taxes of $4 trillion in the United States next
year! Another way, and almost as devastating, a way to pay off
the public debt would be to print $4 trillion of new money –
either in paper dollars or by creating new bank credit. This method
would be extraordinarily inflationary, and prices would quickly
skyrocket, ruining all groups whose earnings did not increase
to the same extent, and destroying the value of the dollar. But
in essence this is what happens in countries that hyper-inflate,
as Germany did in 1923, and in countless countries since, particularly
the Third World. If a country inflates the currency to pay off
its debt, prices will rise so that the dollars or marks or pesos
the creditor receives are worth a lot less than the dollars or
pesos they originally lent out. When an American purchased a 10,000
mark German bond in 1914, it was worth several thousand dollars;
those 10,000 marks by late 1923 would not have been worth more
than a stick of bubble gum. Inflation, then, is an underhanded
and terribly destructive way of indirectly repudiating the “public
debt”; destructive because it ruins the currency unit, which
individuals and businesses depend upon for calculating all their
economic decisions.

I propose,
then, a seemingly drastic but actually far less destructive way
of paying off the public debt at a single blow: outright debt
repudiation. Consider this question: why should the poor, battered
citizens of Russia or Poland or the other ex-Communist countries
be bound by the debts contracted by their former Communist masters?
In the Communist situation, the injustice is clear: that citizens
struggling for freedom and for a free-market economy should be
taxed to pay for debts contracted by the monstrous former ruling
class. But this injustice only differs by degree from “normal”
public debt. For, conversely, why should the Communist government
of the Soviet Union have been bound by debts contracted by the
Czarist government they hated and overthrew? And why should we,
struggling American citizens of today, be bound by debts created
by a past ruling elite who contracted these debts at our expense?
One of the cogent arguments against paying blacks “reparations”
for past slavery is that we, the living, were not slaveholders.
Similarly, we the living did not contract for either the past
or the present debts incurred by the politicians and bureaucrats
in Washington.

Although
largely forgotten by historians and by the public, repudiation
of public debt is a solid part of the American tradition. The
first wave of repudiation of state debt came during the 1840s,
after the panics of 1837 and 1839. Those panics were the consequence
of a massive inflationary boom fueled by the Whig-run Second Bank
of the United States. Riding the wave of inflationary credit,
numerous state governments, largely those run by the Whigs, floated
an enormous amount of debt, most of which went into wasteful public
works (euphemistically called “internal improvements”),
and into the creation of inflationary banks. Outstanding public
debt by state governments rose from $26 million to $170 million
during the decade of the 1830s. Most of these securities were
financed by British and Dutch investors.

During the
deflationary 1840s succeeding the panics, state governments faced
repayment of their debt in dollars that were now more valuable
than the ones they had borrowed. Many states, now largely in Democratic
hands, met the crisis by repudiating these debts, either totally
or partially by scaling down the amount in “readjustments.”
Specifically, of the 28 American states in the 1840s, 9 were in
the glorious position of having no public debt, and 1 (Missouri’s)
was negligible; of the 18 remaining, 9 paid the interest on their
public debt without interruption, while another 9 (Maryland, Pennsylvania,
Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi,
and Florida) repudiated part or all of their liabilities. Of these
states, four defaulted for several years in their interest payments,
whereas the other five (Michigan, Mississippi, Arkansas, Louisiana,
and Florida) totally and permanently repudiated their entire outstanding
public debt. As in every debt repudiation, the result was to lift
a great burden from the backs of the taxpayers in the defaulting
and repudiating states.

Apart from
the moral, or sanctity-of-contract argument against repudiation
that we have already discussed, the standard economic argument
is that such repudiation is disastrous, because who, in his right
mind, would lend again to a repudiating government? But the effective
counterargument has rarely been considered: why should more private
capital be poured down government rat holes? It is precisely the
drying up of future public credit that constitutes one of the
main arguments for repudiation, for it means beneficially drying
up a major channel for the wasteful destruction of the savings
of the public. What we want is abundant savings and investment
in private enterprises, and a lean, austere, low-budget, minimal
government. The people and the economy can only wax fat and prosperous
when their government is starved and puny.

The next
great wave of state debt repudiation came in the South after the
blight of Northern occupation and Reconstruction had been lifted
from them. Eight Southern states (Alabama, Arkansas, Florida,
Louisiana, North Carolina, South Carolina, Tennessee, and Virginia)
proceeded, during the late 1870s and early 1880s under Democratic
regimes, to repudiate the debt foisted upon their taxpayers by
the corrupt and wasteful carpetbag Radical Republican governments
under Reconstruction.

So what can
be done now? The current federal debt is $3.5 trillion. Approximately
$1.4 trillion, or 40 percent, is owned by one or another agency
of the federal government. It is ridiculous for a citizen to be
taxed by one arm of the federal government (the IRS) to pay interest
and principal on debt owned by another agency of the federal government.
It would save the taxpayer a great deal of money, and spare savings
from further waste, to simply cancel that debt outright. The alleged
debt is simply an accounting fiction that provides a mask over
reality and furnishes a convenient means for mulcting the taxpayer.
Thus, most people think that the Social Security Administration
takes their premiums and accumulates it, perhaps by sound investment,
and then “pays back” the “insured” citizen
when he turns 65. Nothing could be further from the truth. There
is no insurance and there is no “fund,” as there indeed
must be in any system of private insurance. The federal government
simply takes the Social Security “premiums” (taxes)
of the young person, spends them in the general expenditures of
the Treasury, and then, when the person turns 65, taxes someone
else to pay the “insurance benefit.” Social Security,
perhaps the most revered institution in the American polity, is
also the greatest single racket. It’s simply a giant Ponzi scheme
controlled by the federal government. But this reality is masked
by the Social Security Administration’s purchase of government
bonds, the Treasury then spending these funds on whatever it wishes.
But the fact that the SSA has government bonds in its portfolio,
and collects interest and payment from the American taxpayer,
allows it to masquerade as a legitimate insurance business.

Canceling
federal agency-held bonds, then, reduces the federal debt by 40
percent. I would advocate going on to repudiate the entire debt
outright, and let the chips fall where they may. The glorious
result would be an immediate drop of $200 billion in federal expenditures,
with at least the fighting chance of an equivalent cut in taxes.

But if this
scheme is considered too draconian, why not treat the federal
government as any private bankrupt is treated (forgetting about
Chapter 11)? The government is an organization, so why not liquidate
the assets of that organization and pay the creditors (the government
bondholders) a pro-rata share of those assets? This solution would
cost the taxpayer nothing, and, once again, relieve him of $200
billion in annual interest payments. The United States government
should be forced to disgorge its assets, sell them at auction,
and then pay off the creditors accordingly. What government assets?
There are a great deal of assets, from TVA to the national lands
to various structures such as the Post Office. The massive CIA
headquarters at Langley, Virginia, should raise a pretty penny
for enough condominium housing for the entire work force inside
the Beltway. Perhaps we could eject the United Nations from the
United States, reclaim the land and buildings, and sell them for
luxury housing for the East Side gliterati. Another serendipity
out of this process would be a massive privatization of the socialized
land of the western United States and of the rest of America as
well. This combination of repudiation and privatization would
go a long way to reducing the tax burden, establishing fiscal
soundness, and desocializing the United States.

In order
to go this route, however, we first have to rid ourselves of the
fallacious mindset that conflates public and private, and that
treats government debt as if it were a productive contract between
two legitimate property owners.

Day 16
of Robert
Wenzel’s 30-day reading list that will lead you to become
a knowledgeable libertarian, this article first ran in the June
1992 issue of Chronicles
(pp. 49–52).

For sixty years, American foreign policy has been set on a course of global intervention, ostensibly on behalf of “making the world safe for democracy”, and of securing and expanding the “free world.” Now, sixty years later, the world – and the United States – manifestly far less free than when we began to launch our global Crusades; and dictatorships abound everywhere. Surely, at the very least, we must have been doing something wrong. Indeed, that wrong is the very policy of global intervention itself.

Three burgeoning dictatorships have been much in the news recently, and they provide instructive lessons for libertarians and for Americans generally. The most dramatic, of course, is the brutal takeover of India by Mrs. Indira Gandhi, jailing thousands of political opponents and imposing a drastic censorship on the press. Ever since World War II, theNew York Times and the rest of the Establishment press have trumpeted the glories and virtues of India as the “world’s largest democracy”; massive amounts of foreign aid have been pumped into India by the U.S. on the strength of this rosy view of the Indian subcontinent. At the very least, the Establishment press, standing there with egg on its face, will have to mute its paeans to Indian “democracy” in the future. Predictably, American press reaction has been far more in sorrow than in anger, and replete with pitiful hopes that Mrs. Gandhi will revert to democracy soon.

But Indian “democracy”, let alone Indian liberty, has been a sham and a mockery from the beginning. Even in political form, India has suffered from its inception under the one-party rule of the Congress party, with other opposing political groupings shunted to the periphery to preserve democratic camouflage. More important, the Indian polity is one of the most thoroughly rotten in the world: a collectivist mass of statist activities, controls, subsidies, taxes, and monopolies, all superimposed upon a frozen caste system that governs in the rural villages in which most Indians continue to live. Considering this unholy mess, the savaging of the opposition by Mrs. Gandhi comes, not as a sudden and inexplicable act, as Americans tend to see it, but as merely the last link in a chain of statist despotism fastened upon that blighted land. When we discard the myths propagated by the American Establishment, we see that, rather than a source of wonder, Mrs. Gandhi’s takeover becomes all too explicable.

Portugal is another country in the news – as a land slipping rapidly into a military-Communist dictatorship, or rather, into a military despotism employing Communist ideology and the Communist Party as its only political ally. Once again, the American press has reacted to the dramatic events without asking the crucial question: How come? For here was Portugal, governed for fifty years by the fascist military dictatorship of Salazar (and, then, his successors.) So seemingly efficient was Salazar in suppressing dissent that the Birch Society, in its annual “scoreboard” of nations, regularly adjudged Portugal as somewhere around zero percent “Communist”. Much American aid had been poured into the Salazarean regime. And yet, scarcely more than a year after the bloodless Spinola “revolution of the roses”, here in Portugal, of all places, going Communist!

But it is precisely here that an important lesson lies. Far from being a “bulwark” against each other, we should realize that fascist and communist dictatorships are not only similar but easily transformed one into the other. Right-wing and left-wing military dictatorships are readily convertible; for each of them build up the collectivist institutions of statist rule, of big government domination of the economy and of society, of militarist and police repression of their subjects. And so, Salazarean fascist corporatism, with its network of monopolies, restrictions, and controls, its military rule, its apparatus of police terror, can be easily transformed into Communist military rule. The institutions of statism are there; and all that is needed is a reshuffling of the power elites and ruling groups at the top. In this way, the centrist collectivism of the Weimar Republic smoothly paved the way for Hitler’s National Socialism; and the Nazi occupation of Europe, in turn, paved the way for the near takeover by Communist-led Resistance forces after World War II. The important lesson is that it doesn’t really matter who controls the statist and collectivist institutions of Big Government; the important point is the existence of these institutions themselves.

Another crucial, and corollary, point is the non-existence, in these countries, of any classical liberal (let alone libertarian) tradition of ideology or of activist political movements. Classical liberal thought and opinion has been non-existent in India; and the same is true for Portugal. Whatever such movement might have arisen was stamped out in advance by a half-century of Salazarean repression. Portugal, too, is an anomaly within Western Europe. A Backward and still semi-feudal land, Portugal has never really joined the Industrial Revolution, nor has it has any tradition of classical liberal thought or activism. Joined to this was a special Portuguese problem: already dominant in a backward land, the Portuguese military had been swollen and overblown in order to fight an endless and losing colonial war to keep its possessions in Africa. The Portuguese army suffered from an aggravated and triple source of resentment: the losing counter-guerrilla war in Africa; the spectre of obsolescence and unemployment as Portugal liquidates its colonies in Africa and brings the troops back home; and relative loss of income and status to the emerging middle class who had begun to develop in the last decade or so with the beginnings of economic development. In France, the resentful army in Africa turned rightward after its losing war in Algeria; but the Portuguese army scarcely had that option, since it was impossible to become more rightist than Salazar. Furthermore, the imposition of a fully military-Communist regime promised a hefty increase in jobs and status for the now obsolescent and over-expanded army; in short, the Portuguese army could now turn its “imperial” power inward, upon its own economy and society. And as usual under fascist repression, only the disciplined Communist party managed to retain its underground cadres, and so could function as civilian allies. And so the Portuguese army went Left.

Whether military-Communism will succeed in ruling Portugal is still open to question. For the Portuguese Communist Party, headed by the hard-line fanatic Alvaro Cunhal, rests within the rather broad spectrum of world Communist opinion somewhere on the near-lunatic fringe. Cunhal almost makes Stalin look like Tolstoyan pacifist. And so, they might just blow it. But, at any rate, the crucial point is to see the interpenetrability of despotism, right and left, and the hopelessness of liberty in a land where no movement exists on behalf of even classical liberalism, let alone libertarianism.

In seeming contrast to Portugal’s left-wing military dictatorship, Chile’s right-wing military despotism was born, in the fall of 1973, in a revolutionary’ coup against Allende’s Marxist regime. Part of that overthrow was a genuine popular revolution – especially, the revolt of the self-employed truckers and other middle-class groups against the statism and runaway inflation suffered under Allende. But the major faction that engineered the coup – the armed forces, with the help, it now turns out, of the CIA – simply proceeded to continue all the worst features of the old regime, and to add to it a systematic use of massive torture against dissidents and political prisoners. After nearly two years in office, Chile still suffers from nationalization and controls – and from a staggering runaway inflation rate of nearly 400% per year. Unemployment ranges from 13 to over 26%, the armed forces enjoy nearly half the national budget, and foreign investments have not really materialized. Moreover, military officers are in charge of all high schools and colleges, the teaching of all “conflictive subjects” is prohibited, and a compulsory nightly curfew is still in effect.

As Professor Petras writes, even the New York bankers (especially the First National City Bank), the leading backers of the Chilean junta, have become disgusted and are unwilling to pour more good money after bad. As Petras writes, for the New York bankers, “the problem is the disintegrating state of the Chilean economy and the frightening spectacle of a 400 per cent inflation rate.” Chilean Finance Minister Jorge Cauas discovered at his meeting on May 8th with the bankers, that the latter are no longer satisfied with the new regime’s shifting of all the blame on Allende for the present crisis. For “U.S. bankers want to know how promises of cutbacks in public spending, credits and public employment can take place when the junta promises at the same time to reduce unemployment by financing massive public works programs.” (James Petras. “The Chilean Junta Besieged,” The Nation, June 28, 1975 pp. 784ff.)

The final irony is that Cauas is an avowed disciple of Milton Friedman and the Chicago School, and has been busy using Friedmanite rhetoric as a cloak for the galloping statism and inflationism of the dictatorial regime. Thus, once again (as in Friedman’s misguided endorsement of the indexing policy of the Brazilian dictatorship), Friedmanism is being used as a free-market cloak for state despotism. Such is the tragedy that must result when “free-market” economists attempt to influence the State from above, and to become efficiency experts for despotism. (See Frank Maurovich, in the San Francisco Sunday Examiner & Chronicle July 13, 1975).

Again, the major lesson of the Chilean tragedy should be clear. Once again, a right-wing dictatorship has simply taken over the pernicious institutions created by a previous left-wing dictatorship. Right and left are brothers under the skin. Once again, massive U.S. foreign aid (supplemented this time by CIA) has only succeeded in strengthening the yoke of despotism upon a foreign land. And, finally, once again we see the absurdity of expecting victories for liberty in a land where no libertarians or classical liberals exist.

The lessons of India, Portugal, and Chile, in short, are the same lessons as those offered by the debacle of American policy in Southeast Asia. The United States must cease its interventions and meddling in foreign lands; interventionism is not only immoral and aggressive; it doesn’t work. We must regain liberty at home, end all interventions in other countries, and return to the historic, forgotten “foreign policy” of serving as an example and a beacon-light of liberty to the rest of the suffering and strifetorn world.

A. The Just Tax and the Just Price

For centuries before the science of economics was developed, men searched for criteria of the “just price.” Of all the innumerable, almost infinite possibilities among the myriads of prices daily determined, what pattern should be considered as “just”? Gradually it came to be realized that there is no quantitative criterion of justice that can be objectively determined.

Suppose that the price of eggs is 50¢ per dozen, what is the “just price”? It is clear, even to those (like the present writer) who believe in the possibility of a rational ethics, that no possible ethical philosophy or science can yield a quantitative measure or criterion of justice. If Professor X says that the “just” price of eggs is 45¢, and Professor Y says it is 85¢, no philosophical principle can decide between them. Even the most fervent anti-utilitarian will have to concede this point. The various contentions all become purely arbitrary whim.

Economics, by tracing the ordered pattern of the voluntary exchange process, has made it clear that the only possible objective criterion for the just price is the market price. For the market price is, at every moment, determined by the voluntary, mutually agreed-upon actions of all the participants in the market. It is the objective resultant of every individual’s subjective valuations and voluntary actions, and is therefore the only existent objective criterion for “quantitative justice” in pricing.

Practically nobody now searches explicitly for the “just price,” and it is generally recognized that any ethical criticisms must be leveled qualitatively against the values of consumers, not against the quantitative price-structure that the market establishes on the basis of these values. The market price is the just price, given the pattern of consumer preferences. Furthermore, this just price is the concrete, actual market price, not equilibrium price, which can never be established in the real world, nor the “competitive price,” which is an imaginary figment.

If the search for the just price has virtually ended in the pages of economic works, why does the quest for a “just tax” continue with unabated vigor? Why do economists, severely scientific in their volumes, suddenly become ad hoc ethicists when the question of taxation is raised? In no other area of his subject does the economist become more grandiosely ethical.

There is no objection at all to discussion of ethical concepts when they are needed, provided that the economist realizes always (a) that economics can establish no ethical principles by itself – that it can only furnish existential laws to the ethicist or citizen as data; and (b) that any importation of ethics must be grounded on a consistent, coherent set of ethical principles, and not simply be slipped in ad hoc in the spirit of “well, everyone must agree to this….” Bland assumptions of universal agreement are one of the most irritating bad habits of the economist-turned-ethicist.

This book does not attempt to establish ethical principles. It does, however, refute ethical principles to the extent that they are insinuated, ad hoc and unanalyzed, into economic treatises. An example is the common quest for “canons of justice” in taxation. The prime objection to these “canons” is that the writers have first to establish the justice of taxation itself. If this cannot be proven, and so far it has not been, then it is clearly idle to look for the “just tax.”

If taxation itself is unjust, then it is clear that no allocation of its burdens, however ingenious, can be declared just. This book sets forth no doctrines on the justice or injustice of taxation. But we do exhort economists either to forget about the problem of the “just tax” or, at least, to develop a comprehensive ethical system before they tackle this problem again.

Why do not economists abandon the search for the “just tax” as they abandoned the quest for the “just price”? One reason is that doing so may have unwelcome implications for them. The “just price” was abandoned in favor of the market price. Can the “just tax” be abandoned in favor of the market tax? Clearly not, for on the market there is no taxation, and therefore no tax can be established that will duplicate market patterns. As will be seen further below, there is no such thing as a “neutral tax” – a tax that will leave the market free and undisturbed – just as there is no such thing as neutral money. Economists and others may try to approximate neutrality, in the hopes of disturbing the market as little as possible, but they can never fully succeed.

B. Costs of Collection, Convenience, and Certainty

Even the simplest maxims must not be taken for granted. Two centuries ago, Adam Smith laid down four canons of justice in taxation that economists have parroted ever since.[1] One of them deals with the distribution of the burden of taxation, and this will be treated in detail below. Perhaps the most “obvious” was Smith’s injunction that costs of collection be kept to a “minimum” and that taxes be levied with this principle in mind.

An obvious and harmless maxim? Certainly not; this “canon of justice” is not obvious at all. For the bureaucrat employed in tax collection will tend to favor a tax with high administrative costs, thereby necessitating more extensive bureaucratic employment. Why should we call the bureaucrat obviously wrong? The answer is that he is not, and that to call him “wrong” it is necessary to engage in an ethical analysis that no economist has bothered to undertake.

A further point: if the tax is unjust on other grounds, it may be more just to have high administrative costs, for then there will be less chance that the tax will be fully collected. If it is easy to collect the tax, then the tax may do more damage to the economic system and cause more distortion of the market economy.

The same point might be made about another of Smith’s canons: that a tax should be levied so that payment is convenient. Here again, this maxim seems obvious, and there is certainly much truth in it. But someone may urge that a tax should be made inconvenient to induce people to rebel and force a lowering of the level of taxation. Indeed, this used to be one of the prime arguments of “conservatives” for an income tax as opposed to an indirect tax. The validity of this argument is beside the point; the point is that it is not self-evidently wrong, and therefore this canon is no more simple and obvious than the others.

Smith’s final canon of just taxation is that the tax be certain and not arbitrary, so that the taxpayer knows what he will pay. Here again, further analysis demonstrates that this is by no means obvious. Some may argue that uncertainty benefits the taxpayer, for it makes the requirement more flexible and permits bribery of the tax collector. This benefits the taxpayer to the extent that the price of the bribe is less than the tax that he would otherwise have to pay. Furthermore, there is no way of establishing long-range certainty, for the tax rates may be changed by the government at any time. In the long run, certainty of taxation is an impossible goal.

A similar argument may be levelled against the view that taxes “should” be difficult to evade. If a tax is onerous and unjust, evasion might be highly beneficial to the economy, and moral to boot.

Thus, none of these supposedly self-evident canons of taxation is a canon at all. From some ethical points of view they are correct, from others they are incorrect. Economics cannot decide between them.

C. Distribution of the Tax Burden

Up to this point, we have been discussing taxation as it is levied on any given individual or firm. Now we must turn to another aspect: the distribution of the burden of taxes among the people in the economy. Most of the search for “justice” in taxation has involved the problem of the “just distribution” of this burden.

Various proposed canons of justice will be discussed in this section, followed by analysis of the economic effects of tax distribution.

(1) Uniformity of Treatment

a. Equality Before the Law: Tax Exemption

Uniformity of treatment has been upheld as an ideal by almost all writers. This ideal is supposed to be implicit in the concept of “equality before the law,” which is best expressed in the phrase, “Like to be treated alike.” To most economists this ideal has seemed self-evident, and the only problems considered have been the practical ones of defining exactly when one person is “like” someone else (problems that, we shall see below, are insuperable).

All these economists adopt the goal of uniformity regardless of what principle of “likeness” they may hold. Thus, the man who believes that everyone should be taxed in accordance with his “ability to pay” also believes that everyone with the same ability should be taxed equally; he who believes that each should be taxed proportionately to his income also holds that everyone with the same income should pay the same tax; etc. In this way, the ideal of uniformity pervades the literature on taxation.

Yet this canon is by no means obvious, for it seems clear that the justice of equality of treatment depends first of all on the justice of the treatment itself. Suppose, for example, that Jones, with his retinue, proposes to enslave a group of people. Are we to maintain that “justice” requires that each be enslaved equally? And suppose that someone has the good fortune to escape. Are we to condemn him for evading the equality of justice meted out to his fellows? It is obvious that equality of treatment is no canon of justice whatever. If a measure is unjust, then it is just that it have as little general effect as possible. Equality of unjust treatment can never be upheld as an ideal of justice. Therefore, he who maintains that a tax be imposed equally on all must first establish the justice of the tax itself.

Many writers denounce tax exemptions and levy their fire at the tax-exempt, particularly those instrumental in obtaining the exemptions for themselves. These writers include those advocates of the free market who treat a tax exemption as a special privilege and attack it as equivalent to a subsidy and therefore inconsistent with the free market. Yet an exemption from taxation or any other burden is not equivalent to a subsidy. There is a key difference. In the latter case a man is receiving a special grant of privilege wrested from his fellow men; in the former he is escaping a burden imposed on other men. Whereas the one is done at the expense of his fellow men, the other is not. For in the former case, the grantee is participating in the acquisition of loot; in the latter, he escapes payment of tribute to the looters. To blame him for escaping is equivalent to blaming the slave for fleeing his master.

It is clear that if a certain burden is unjust, blame should be levied, not on the man who escapes the burden, but on the man or men who impose it in the first place. If a tax is in fact unjust, and some are exempt from it, the hue and cry should not be to extend the tax to everyone, but on the contrary to extend the exemption to everyone. The exemption itself cannot be considered unjust unless the tax or other burden is first established as just.

Thus, uniformity of treatment per se cannot be established as a canon of justice. A tax must first be proven just; if it is unjust, then uniformity is simply imposition of general injustice, and exemption is to be welcomed. Since the very fact of taxation is an interference with the free market, it is particularly incongruous and incorrect for advocates of a free market to advocate uniformity of taxation.

One of the major sources of confusion for economists and others who are in favor of the free market is that the free society has often been defined as a condition of “equality before the law,” or as “special privilege for none.” As a result, many have transferred these concepts to an attack on tax exemptions as a “special privilege” and a violation of the principle of “equality before the law.” As for the latter concept, it is, again, hardly a criterion of justice, for this depends on the justice of the law or “treatment” itself. It is this alleged justice, rather than equality, which is the primary feature of the free market. In fact, the free society is far better described by some such phrase as “equality of rights to defend person and property” or “equality of liberty” rather than by the vague, misleading expression “equality before the law.”[2]

In the literature on taxation there is much angry discussion about “loopholes,” the inference being that any income or area exempt from taxation must be brought quickly under its sway. Any failure to “plug loopholes” is treated as immoral. But, as Mises incisively asked:

What is a loophole? If the law does not punish a definite action or does not tax a definite thing, this is not a loophole. It is simply the law…. The income tax exemptions in our income tax are not loopholes…. Thanks to these loopholes this country is still a free country.[3]

b. The Impossibility of Uniformity

Aside from these considerations, the ideal of uniformity is impossible to achieve. Let us confine our further discussion of uniformity to income taxation, for two reasons:

1. because the vast bulk of our taxation is income taxation; and
2. because, as we have seen, most other taxes boil down to income taxes anyway.

A tax on consumption ends largely as a tax on income at a lower rate.

There are two basic reasons why uniformity of income taxation is an impossible goal. The first stems from the very nature of the State. We have seen, when discussing Calhoun’s analysis, that the State mustseparate society into two classes, or castes: the taxpaying caste and the tax-consuming caste. The tax consumers consist of the full-time bureaucracy and politicians in power, as well as the groups which receive net subsidies, i.e., which receive more from the government than they pay to the government. These include the receivers of government contracts and of government expenditures on goods and services produced in the private sector. It is not always easy to detect the net subsidized in practice, but this caste can always be conceptually identified.

Thus, when the government levies a tax on private incomes, the money is shifted from private people to the government, and the government’s money, whether expended for government consumption of goods and services, for salaries to bureaucrats, or as subsidies to privileged groups, returns to be spent in the economic system. It is clear that the tax-expenditure level must distort the expenditure pattern of the market and shift productive resources away from the pattern desired by the producers and toward that desired by the privileged. This distortion takes place in proportion to the amount of taxation.

If, for example, the government taxes funds that would have been spent on automobiles and itself spends them on arms, the arms industry and, in the long run, the specific factors in the arms industry become net tax consumers, while a special loss is inflicted on the automobile industry and ultimately on the factors specific to that industry. It is because of these complex relationships that, as we have mentioned, the identification in practice of the net subsidized may be difficult.

One thing we know without difficulty, however. Bureaucrats are net tax consumers. As we pointed out above, bureaucrats cannot pay taxes. Hence, it is inherently impossible for bureaucrats to pay income taxes uniformly with everyone else. And therefore the ideal of uniform income taxation for all is an impossible goal. We repeat that the bureaucrat who receives $8,000 a year income and then hands $1,500 back to the government is engaging in a mere bookkeeping transaction of no economic importance (aside from the waste of paper and records involved). For he does not and cannot pay taxes; he simply receives $6,500 a year from the tax fund.

If it is impossible to tax income uniformly because of the nature of the tax process itself, the attempt to do so also confronts another insuperable difficulty, that of trying to arrive at a cogent definition of “income.” Should taxable income include the imputed money value of services received in kind, such as farm produce grown on one’s own farm? What about imputed rent from living in one’s own house? Or the imputed services of a housewife? Regardless of which course is taken in any of these cases, a good argument can be made that the incomes included as taxable are not the correct ones. And if it is decided to impute the value of goods received in kind, the estimates must always be arbitrary, since the actual sales for money were not made.

A similar difficulty is raised by the question whether incomes should be averaged over several years. Businesses that suffer losses and reap profits are penalized as against those with steady incomes – unless, of course, the government subsidizes part of the loss. This may be corrected by permitting averaging of income over several years, but here again the problem is insoluble because there are only arbitrary ways of deciding the period of time to allow for averaging. If the income tax rate is “progressive,” i.e., if the rate increases as earnings increase, then failure to permit averaging penalizes the man with an erratic income. But again, to permit averaging will destroy the ideal of uniform current tax rates; furthermore, varying the period of averaging will vary the results.

We have seen that, in order to tax income only, it is necessary to correct for changes in the purchasing power of money when taxing capital gains. But once again, any index or factor of correction is purely arbitrary, and uniformity cannot be achieved because of the impossibility of securing general agreement on a definition of income.

For all these reasons, the goal of uniformity of taxation is an impossible one. It is not simply difficult to achieve in practice; it is conceptually impossible and self-contradictory. Surely any ethical goal that isconceptually impossible of achievement is an absurd goal, and therefore any movements in the direction of the goal are absurd as well.[4] It is therefore legitimate, and even necessary, to engage in a logical (i.e., praxeological) critique of ethical goals and systems when they are relevant to economics.

Having analyzed the goal of uniformity of treatment, we turn now to the various principles that have been set forth to give content to the idea of uniformity, to answer the question: Uniform in respect to what? Should taxes be uniform as to “ability to pay,” or “sacrifice,” or “benefits received”? In other words, while most writers have rather unthinkingly granted that people in the same income bracket should pay the same tax, what principle should govern the distribution of income taxes between tax brackets? Should the man making $10,000 a year pay as much as, as much proportionately as, more than, more proportionately than, or less than, a man making $5,000 or $1,000 a year? In short, should people pay uniformly in accordance with their “ability to pay,” or sacrifice made, or some other principle?

(2) The “Ability-To-Pay” Principle

a. The Ambiguity of the Concept

This principle states that people should pay taxes in accordance with their “ability to pay.” It is generally conceded that the concept of ability to pay is a highly ambiguous one and presents no sure guide for practical application.[5]Most economists have employed the principle to support a program of proportional or progressive income taxation, but this would hardly suffice. It seems clear, for example, that a person’s accumulated wealth affects his ability to pay. A man earning $5,000 during a certain year probably has more ability to pay than a neighbor earning the same amount if he also has $50,000 in the bank while his neighbor has nothing. Yet a tax on accumulated capital would cause general impoverishment.

No clear standard can be found to gauge “ability to pay.” Both wealth and income would have to be considered, medical expenses would have to be deducted, etc. But there is no precise criterion to be invoked, and the decision is necessarily arbitrary. Thus, should all or some proportion of medical bills be deducted? What about the expenses of childrearing? Or food, clothing, and shelter as necessary to consumer “maintenance”? Professor Due attempts to find a criterion for ability in “economic well-being,” but it should be clear that this concept, being even more subjective, is still more difficult to define.[6]

Adam Smith himself used the ability concept to support proportional income taxation (taxation at a constant percentage of income), but his argument is rather ambiguous and applies to the “benefit” principle as well as to “ability to pay.”[7] Indeed, it is hard to see in precisely what sense ability to pay rises in proportion to income. Is a man earning $10,000 a year “equally able” to pay $2,000 as a man earning $1,000 to pay $200? Setting aside the basic qualifications of difference in wealth, medical expenses, etc., in what sense can “equal ability” be demonstrated? Attempting to define equal ability in such a way is a meaningless procedure.

McCulloch, in a famous passage, attacked progressiveness and defended proportionality of taxation:

The moment you abandon … the cardinal principle of exacting from all individuals the same proportion of their income or their property, you are at sea without rudder or compass, and there is no amount of injustice or folly you may not commit.[8]

Seemingly plausible, this thesis is by no means self-evident. In what way is proportional taxation any less arbitrary than any given pattern of progressive taxation, i.e., where the rate of tax increases with income? There must be some principle that can justify proportionality; if this principle does not exist, then proportionality is no less arbitrary than any other taxing pattern. Various principles have been offered and will be considered below, but the point is that proportionality per se is neither more nor less sound than any other taxation.

One school of thought attempts to find a justification for a progressive tax via an ability-to-pay principle. This is the “faculty” approach of E.R.A. Seligman. This doctrine holds that the more money a person has, the relatively easier it is for him to acquire more. His power of obtaining money is supposed to increase as he has more: “A rich man may be said to be subject … to a law of increasing returns.”[9] Therefore, since his ability increases at a faster rate than his income, a progressive income tax is justified. This theory is simply invalid.[10] Money does not “make money”; if it did, then a few people would by now own all the world’s wealth. To be earned, money must continually be justifying itself in current service to consumers. Personal income, interest, profits, and rents are earned only in accordance with their current, not their past, services. The size of accumulated fortune is immaterial, and fortunes can be and are dissipated when their owners fail to reinvest them wisely in the service of consumers.

As Blum and Kalven point out, the Seligman thesis is utter nonsense when applied to personal services such as labor energy. It could only make sense when applied to income from property, i.e., investment in land or capital goods (or slaves, in a slave economy). But the return on capital is always tending toward uniformity, and any departures from uniformity are due to especially wise and farseeing investments (profits) or especially wasteful investments (losses). The Seligman thesis would fallaciously imply that the rates of return increase in proportion to the amount invested.

Another theory holds that ability to pay is proportionate to the “producer’s surplus” of an individual, i.e., his “economic rent,” or the amount of his income above the payment necessary for him to continue production. The consequences of taxation of site rent were noted above. The “necessary payments” to labor are clearly impossible to establish; if someone is asked by the tax authorities what his “minimum” wage is, what will prevent him from saying that any amount below the present wage will cause him to retire or to shift to another job? Who can prove differently?

Furthermore, even if it could be determined, this “surplus” is hardly an indicator of ability to pay. A movie star may have practically zero surplus, for some other studio may be willing to bid almost as much as he makes now for his services, while a disabled ditch-digger may have a much greater “surplus” because no one else may be willing to hire him. Generally, in an advanced economy there is little “surplus” of this type, for the competition of the market will push alternative jobs and uses near to the factor’s discounted marginal value product in its present use. Hence, it would be impossible to tax any “surplus” over necessary payment from land or capital since none exists, and practically impossible to tax the “surplus” to labor since the existence of a sizable surplus is rare, impossible to determine, and, in any case, no criterion whatever of ability to pay.[11]

b. The Justice of the Standard

The extremely popular ability-to-pay idea was sanctified by Adam Smith in his most important canon of taxation and has been accepted blindly ever since. While much criticism has been levelled at its inherent vagueness, hardly anyone has criticized the basic principle, despite the fact that no one has really grounded it in sound argument. Smith himself gave no reasoning to support this alleged principle, and few others have done so since. Due, in his text on public finance, simply accepts it because most people believe in it, thereby ignoring the possibility of any logical analysis of ethical principles.[12]

The only substantial attempt to give some rational support to the “ability-to-pay principle” rests on a strained comparison of tax payments to voluntary gifts to charitable organizations. Thus Groves writes: “To hundreds of common enterprises (community chests, Red Cross, etc.) people are expected to contribute according to their means. Governments are one of these common enterprises fostered to serve the citizens as a group….”[13] Seldom have more fallacies been packed into two sentences. In the first place, the government is not a common enterprise akin to the community chest. No one can resign from it.No one, on penalty of imprisonment, can come to the conclusion that this “charitable enterprise” is not doing its job properly and therefore stop his “contribution”; no one can simply lose interest and drop out. If, as will be seen further below, the State cannot be described as a business, engaged in selling services on the market, certainly it is ludicrous to equate it to a charitable organization. Government is the very negation of charity, for charity is uniquely an unbought gift, a freely flowing uncoerced act by the giver. The word “expected” in Groves’ phrase is misleading. No one is forced to give to any charity in which he is not interested or which he believes is not doing its job properly.

The contrast is even clearer in a phrase of Hunter and Allen’s:

Contributions to support the church or the community chest are expected, not on the basis of benefits which individual members receive from the organization, but upon the basis of their ability to contribute.[14]

But this is praxeologically invalid. The reason that anyone contributes voluntarily to a charity is precisely the benefit that he obtains from it. Yet benefit can be considered only in a subjective sense. It can never be measured. The fact of subjective gain, or benefit, from an act is deducible from the fact that it was performed. Each person making an exchange is deduced to have benefited (at least ex ante). Similarly, a person who makes a unilateral gift is deduced to have benefited (ex ante) from making the gift. If he did not benefit, he would not have made the gift. This is another indication that praxeology does not assume the existence of an “economic man,” for the benefit from an action may come either from a good or a service directly received in exchange, or simply from the knowledge that someone else will benefit from a gift. Gifts to charitable institutions, therefore, are made precisely on the basis of benefit to the giver, not on the basis of his “ability to pay.”

Furthermore, if we compare taxation with the market, we find no basis for adopting the “ability-to-pay” principle. On the contrary, the market price (generally considered the just price) is almost always uniform or tending toward uniformity. Market prices tend to obey the rule of one price throughout the entire market. Everyone pays an equal price for a good regardless of how much money he has or his “ability to pay.” Indeed, if the “ability-to-pay” principle pervaded the market, there would be no point in acquiring wealth, for everyone would have to pay more for a product in proportion to the money in his possession. Money incomes would be approximately equalized, and, in fact, there would be no point at all to acquiring money, since the purchasing power of a unit of money would never be definite but would drop, for any man, in proportion to the quantity of money he earns. A person with less money would simply find the purchasing power of a unit of his money rising accordingly. Therefore, unless trickery and black marketeering could evade the regulations, establishing the “ability-to-pay” principle for prices would wreck the market altogether. The wrecking of the market and the monetary economy would plunge society back to primitive living standards and, of course, eliminate a large part of the current world population, which is permitted to earn a subsistence living or higher by virtue of the existence of the modern, developed market.

It should be clear, moreover, that establishing equal incomes and wealth for all (e.g., by taxing all those over a certain standard of income and wealth, and subsidizing all those below that standard) would have the same effect, since there would be no point to anyone’s working for money. Those who enjoy performing labor will do so only “at play,” i.e., without obtaining a monetary return. Enforced equality of income and wealth, therefore, would return the economy to barbarism.

If taxes were to be patterned after market pricing, then, taxes would be levied equally (not proportionately) on everyone. As will be seen below, equal taxation differs in critical respects from market pricing but is a far closer approximation to it than is “ability-to-pay” taxation.

Finally, the “ability-to-pay” principle means precisely that the able are penalized, i.e., those most able in serving the wants of their fellow men. Penalizing ability in production and service diminishes the supply of the service – and in proportion to the extent of that ability. The result will be impoverishment, not only of the able, but of the rest of society, which benefits from their services.

The “ability-to-pay” principle, in short, cannot be simply assumed; if it is employed, it must be justified by logical argument, and this economists have yet to provide. Rather than being an evident rule of justice, the “ability-to-pay” principle resembles more the highwayman’s principle of taking where the taking is good.[15]

(3) Sacrifice Theory

Another attempted criterion of just taxation was the subject of a flourishing literature for many decades, although it is now decidedly going out of fashion. The many variants of the “sacrifice” approach are akin to a subjective version of the “ability-to-pay” principle. They all rest on three general premises:

1. that the utility of a unit of money to an individual diminishes as his stock of money increases;
2. that these utilities can be compared interpersonally and thus can be summed up, subtracted, etc.; and
3. that everyone has the same utility-of-money schedule.

The first premise is valid (but only in an ordinal sense), but the second and third are nonsensical.

The marginal utility of money does diminish, but it is impossible to compare one person’s utilities with another, let alone believe that everyone’s valuations are identical. Utilities are not quantities, but subjective orders of preference. Any principle for distributing the tax burden that rests on such assumptions must therefore be declared fallacious. Happily, this truth is now generally established in the economic literature.[16]

Utility and “sacrifice” theory has generally been used to justify progressive taxation, although sometimes proportional taxation has been upheld on this ground. Briefly, a dollar is alleged to “mean less” or be worth less in utility to a “rich man” than to a “poor man” (“rich” or “poor” in income or wealth?), and therefore payment of a dollar by a rich man imposes less of a subjective sacrifice on him than on a poor man. Hence, the rich man should be taxed at a higher rate. Many “ability-to-pay” theories are really inverted sacrifice theories, since they are couched in the form of ability to make sacrifices.

Since the nub of the sacrifice theory – interpersonal comparisons of utility – is now generally discarded, we shall not spend much time discussing the sacrifice doctrine in detail.[17] However, several aspects of this theory are of interest. The sacrifice theory divides into two main branches: (1) the equal-sacrifice principle and (2) the minimum-sacrifice principle. The former states that every man should sacrifice equally in paying taxes; the latter, that society as a whole should sacrifice the least amount. Both versions abandon completely the idea of government as a supplier of benefits and treat government and taxation as simply a burden, a sacrifice that must be borne in the best way we know how. Here we have a curious principle of justice indeed – based on adjustment to hurt. We are faced again with that pons asinorumthat defeats all attempts to establish canons of justice for taxation – the problem of the justice of taxation itself. The proponent of the sacrifice theory, in realistically abandoning unproved assumptions of benefit from taxation, must face and then founder on the question: If taxation is pure hurt, why endure it at all?

The equal-sacrifice theory asks that equal hurt be imposed on all. As a criterion of justice, this is as untenable as asking for equal slavery. One interesting aspect of the equal-sacrifice theory, however, is that it does not necessarily imply progressive income taxation! For although it implies that the rich man should be taxed more than the poor man, it does not necessarily say that the former should be taxed more than proportionately. In fact, it does not even establish that all be taxed proportionately! In short, the equal-sacrifice principle may demand that a man earning $10,000 be taxed more than a man earning $1,000, but not necessarily that he be taxed a greater percentage or even proportionately.

Depending on the shapes of the various “utility curves,” the equal-sacrifice principle may well call for regressive taxation under which a wealthier man would pay more in amount but less proportionately (e.g., the man earning $10,000 would pay $500, and the man earning $1,000 would pay $200). The more rapidly the utility of money declines, the more probably will the equal-sacrifice curve yield progressivity. A slowly declining utility-of-money schedule would call for regressive taxation. Argument about how rapidly various utility-of-money schedules decline is hopeless because, as we have seen, the entire theory is untenable. But the point is that even on its own grounds, the equal-sacrifice theory can justify neither progressive nor proportionate taxation.[18]

The minimum-sacrifice theory has often been confused with the equal-sacrifice theory. Both rest on the same set of false assumptions, but the minimum-sacrifice theory counsels very drastic progressive taxation. Suppose, for example, that there are two men in a community, Jones making $50,000, and Smith making $30,000. The principle of minimum social sacrifice, resting on the three assumptions described above, declares: $1.00 taken from Jones imposes less of a sacrifice than $1.00 taken from Smith; hence, if the government needs $1.00, it takes it from Jones. But suppose the government needs $2.00; the second dollar will impose less of a sacrifice on Jones than the first dollar taken from Smith, for Jones still has more money left than Smith and therefore sacrifices less. This continues as long as Jones has more money remaining than Smith. Should the government need $20,000 in taxes, the minimum-sacrifice principle counsels taking the entire $20,000 from Jones and zero from Smith. In other words, it advocates taking all of the highest incomes in turn until governmental needs are fulfilled.[19]

The minimum-sacrifice principle depends heavily, as does the equal-sacrifice theory, on the untenable view that everyone’s utility-of-money schedule is roughly identical. Both rest also on a further fallacy, which now must be refuted: that “sacrifice” is simply the obverse of the utility of money. For the subjective sacrifice in taxation may not be merely the opportunity cost forgone of the money paid; it may also be increased by moral outrage at the tax procedure. Thus, Jones may become so morally outraged at the above proceedings that his marginal subjective sacrifice quickly becomes very great, much “greater” than Smith’s if we grant for a moment that the two can be compared. Once we see that subjective sacrifice is not necessarily tied to the utility of money, we may extend the principle further.

Consider, for example, a philosophical anarchist who opposes all taxation fervently. Suppose that his subjective sacrifice in the payment of any tax is so great as to be almost infinite. In that case, the minimum-sacrifice principle would have to exempt the anarchist from taxation, while the equal-sacrifice principle could tax him only an infinitesimal amount. Practically, then, the sacrifice principle would have to exempt the anarchist from taxation. Furthermore, how can the government determine the subjective sacrifice of the individual? By asking him? In that case, how many people would refrain from proclaiming the enormity of their sacrifice and thus escape payment completely?

Similarly, if two individuals subjectively enjoyed their identical money incomes differently, the minimum-sacrifice principle would require that the happier man be taxed less because he makes a greater sacrifice in enjoyment from an equal tax. Who will suggest heavier taxation on the unhappy or the ascetic? And who would then refrain from loudly proclaiming the enormous enjoyment he derives from his income?

It is curious that the minimum-sacrifice principle counsels the obverse of the ability-to-pay theory, which, particularly in its “state of well-being” variant, advocates a special tax on happiness and a lower tax onunhappiness. If the latter principle prevailed, people would rush to proclaim their unhappiness and deep-seated asceticism.

It is clear that the proponents of the ability-to-pay and sacrifice theories have completely failed to establish them as criteria of just taxation. These theories also commit a further grave error. For the sacrifice theory explicitly, and the ability-to-pay theory implicitly, set up presumed criteria for action in terms of sacrifice and burden.[20] The State is assumed to be a burden on society, and the question becomes one of justly distributing this burden. But man is constantly striving to sacrifice as little as he can for the benefits he receives from his actions. Yet here is a theory that talks only in terms of sacrifice and burden, and calls for a certain distribution without demonstrating to the taxpayers that they are benefiting more than they are giving up.

Since the theorists do not so demonstrate, they can make their appeal only in terms of sacrifice – a procedure that is praxeologically invalid. Since men always try to find net benefits in a course of action, it follows that a discussion in terms of sacrifice or burden cannot establish a rational criterion for human action. To be praxeologically valid, a criterion must demonstrate net benefit. It is true, of course, that the proponents of the sacrifice theory are far more realistic than the proponents of the benefit theory (which we shall discuss below), in considering the State a net burden on society rather than a net benefit; but this hardly demonstrates the justice of the sacrifice principle of taxation. Quite the contrary.

(4) The Benefit Principle

The benefit principle differs radically from the two preceding criteria of taxation. For the sacrifice and ability-to-pay principles depart completely from the principles of action and the accepted criteria of justice on the market. On the market people act freely in those ways which they believe will confer net benefits upon them. The result of these actions is the monetary exchange system, with its inexorable tendency toward uniform pricing and the allocation of productive factors to satisfy the most urgent demands of all the consumers. Yet the criteria used in judging taxation differ completely from those which apply to all other actions on the market.

Suddenly free choice and uniform pricing are forgotten, and the discussion is all in terms of sacrifice, burden, etc. If taxation is only a burden, it is no wonder that coercion must be exercised to maintain it. The benefit principle, on the other hand, is an attempt to establish taxation on a similar basis as market pricing; that is, the tax is to be levied in accordance with the benefit received by the individual. It is an attempt to achieve the goal of a neutral tax, one that would leave the economic system approximately as it is on the free market. It is an attempt to achieve praxeological soundness by establishing a criterion of payment on the basis of benefit rather than sacrifice.

The great gulf between the benefit and other principles was originally unrecognized, because of Adam Smith’s confusion between ability to pay and benefit. In the quotation cited above, Smith inferred that everyone benefits from the State in proportion to his income and that this income establishes his ability to pay. Therefore, a tax on his ability to pay will simply be a quid pro quo in exchange for benefits conferred by the State. Some writers have contended that people benefit from government in proportion to their income; others, that they benefit in increased proportion to their income, thus justifying a progressive income tax.

Yet this entire application of the benefit theory is nonsensical. How do the rich reap a greater benefit proportionately, or even more than proportionately, from government than the poor? They could do so only if the government were responsible for these riches by a grant of special privilege, such as a subsidy, a monopoly grant, etc. Otherwise, how do the rich benefit? From “welfare” and other redistributive expenditures, which take from the rich and give to the bureaucrats and the poor? Certainly not. From police protection? But it is precisely the rich who could more afford to pay for their own protection and who therefore derive less benefit from it than the poor.

The benefit theory holds that the rich benefit more from protection because their property is more valuable; but the cost of protection may have little relation to the value of the property. Since it costs less to police a bank vault containing $100 million than to guard 100 acres of land worth $10 per acre, the poor landowner receives a far greater benefit from the State’s protection than the rich owner of personalty. Neither would it be relevant to say that A earns more money than B because A receives a greater benefit from “society” and should therefore pay more in taxes. In the first place, everyone participates in society. The fact that A earns more than B means precisely that A’s services are individually worth more to his fellows. Therefore, since A and B benefit similarly from society’s existence, the reverse argument is far more accurate: that the differential between them is due to A’s individual superiority in productivity, and not at all to “society.” Secondly, society is not at all the State, and the State’s possible claim must be independently validated.

Hence, neither proportionate nor progressive income taxation can be sustained on benefit principles. In fact, the reverse is true. If everyone were to pay in accordance with benefit received, it is clear that (a) the recipients of “welfare” benefits would bear the full costs of these benefits: the poor would have to pay for their own doles (including, of course, the extra cost of paying the bureaucracy for making the transfers); (b) the buyers of any government service would be the only payers, so that government services could be financed out of a general tax fund; and (c) for police protection, a rich man would pay less than a poor man, and less in absolute amounts. Furthermore, landowners would pay more than owners of intangible property, and the weak and infirm, who clearly benefit more from police protection than the strong, would have to pay higher taxes than the latter.

It becomes immediately clear why the benefit principle has been practically abandoned in recent years. For it is evident that if (a) welfare recipients and (b) receivers of other special privilege, such as monopoly grants, were to pay according to the benefit received, there would not be much point in either form of government expenditure. And if each were to pay an amount equal to the benefit he received rather than simply proportionately (and he would have to do so because there would be nowhere else for the State to turn for funds), then the recipient of the subsidy would not only earn nothing, but would have to pay the bureaucracy for the cost of handling and transfer. The establishment of the benefit principle would therefore result in a laissez-faire system, with government strictly limited to supplying defense service. And the taxation for this defense service would be levied more on the poor and the infirm than on the strong and the rich.

At first sight, the believer in the free market, the seeker after a neutral tax, is inclined to rejoice. It would seem that the benefit principle is the answer to his search. And this principle is indeed closer to market principles than the previous alleged canons. Yet, if we pursue the analysis more closely, it will be evident that the benefit principle is still far from market neutrality. On the market, people do not pay in accordance with individual benefit received; they pay a uniform price, one that just induces the marginal buyer to participate in the exchange. The more eager do not pay a higher price than the less eager; the chess addict and the indifferent player pay the same price for the same chess set, and the opera enthusiast and the novice pay the same price for the same ticket. The poor and the weak would be most eager for protection, but, in contrast to the benefit principle, they would not pay more on the market.

There are even graver defects in the benefit principle. For market exchanges (a) demonstrate benefit and (b) only establish the fact of benefit without measuring it. The only reason we know that A and B benefit from an exchange is that they voluntarily make the exchange. In this way, the market demonstrates benefit. But where taxes are levied, the payment is compulsory, and therefore benefit can never be demonstrated. As a matter of fact, the existence of coercion gives rise to the opposite presumption and implies that the tax is not a benefit, but a burden. If it really were a benefit, coercion would not be necessary.

Secondly, the benefit from exchange can never be measured or compared interpersonally. The “consumers’ surplus” derived from exchange is purely subjective, nonmeasurable, and noncomparable scientifically. Therefore, we never know what these benefits are, and hence there can be no way of allocating the taxes in accordance with them.

Thirdly, on the market everyone enjoys a net benefit from an exchange. A person’s benefit is not equal to his cost, but greater. Therefore, taxing away his alleged benefit would completely violate market principles.

Finally, if each person were taxed according to the benefit he receives from government, it is obvious that, since the bureaucracy receive all their income from this source, they would, like other recipients of subsidy and privilege, be obliged to return their whole salary to the government. The bureaucracy would have to serve without pay.

We have seen that the benefit principle would dispense with all subsidy expenditures of whatever type. Government services would have to be sold directly to buyers; but in that case, there would be no room for government ownership, for the characteristic of a government enterprise is that it is launched from tax funds. Police and judicial services are often declared by the proponents of the benefit principle to be inherently general and unspecialized, so that they would need to be purchased out of the common tax fund rather than by individual users. However, as we have seen, this assumption is incorrect; these services can be sold on the market like any others. Thus, even in the absence of all other deficiencies of the benefit principle, it would still establish no warrant for taxation at all, for all services could be sold on the market directly to beneficiaries.

It is evident that while the benefit principle attempts to meet the market criterion of limiting payment solely to beneficiaries, it must be adjudged a failure; it cannot serve as a criterion for a neutral tax or any other type of taxation.

(5) The Equal Tax and the Cost Principle

Equality of taxation has far more to commend it than any of the above principles, none of which can be used as a canon of taxation. “Equality of taxation” means just that – a uniform tax on every member of the society. This is also called a head tax, capitation tax, or poll tax. (The latter term, however, is best used to describe a uniform tax on voting, which is what the poll tax has become in various American states.) Each person would pay the same tax annually to the government.

The equal tax would be particularly appropriate in a democracy, with its emphasis on equality before the law, equal rights, and absence of discrimination and special privilege. It would embody the principle: “One vote, one tax.” It would appropriately apply only to the protection services of the government, for the government is committed to defending everyone equally. Therefore, it may seem just for each person to be taxed equally in return. The principle of equality would rule out, as would the benefit principle, all government actions except defense, for all other expenditures would set up a special privilege or subsidy of some kind. Finally, the equal tax would be far more nearly neutral than any of the other taxes considered, for it would attempt to establish an equal “price” for equal services rendered.

One school of thought challenges this contention and asserts that a proportional tax would be more nearly neutral than an equal tax. The proponents of this theory point out that an equal tax alters the market’s pattern of distribution of income. Thus, if A earns 1,000 gold ounces per year, B earns 200 ounces, and C earns 50 ounces, and each pays 10 ounces in taxes, then the relative proportion of net income remaining after taxes is altered, and altered in the direction of greater inequality. A proportionate tax of a fixed percentage on all three would leave the distribution of income constant and would therefore be neutral relative to the market.

This thesis misconceives the whole problem of neutrality in taxation. The object of the quest is not to leave the income distribution the same as if a tax had not been imposed. The object is to affect the income “distribution” and all other aspects of the economy in the same way as if the tax were really a free-market price. And this is a very different criterion.

No market price leaves relative income “distribution” the same as before. If the market really behaved in this way, there would be no advantage in earning money, for people would have to pay proportionately higher prices for goods in accordance with the level of their earnings. The market tends toward uniformity of pricing and hence toward equal pricing for equal service. Equal taxation, therefore, would be far more nearly neutral and would constitute a closer approach to a market system.

The equal-tax criterion, however, has many grave defects, even as an approach toward a neutral tax. In the first place, the market criterion of equal price for equal service faces the problem: What is an “equal service”? The service of police protection is of far greater magnitude in an urban crime area than it is in some sleepy backwater. That service is worth far more in the crime center, and therefore the price paid will tend to be greater in a crime-ridden area than in a peaceful area.

It is very likely that, in the purely free market, police and judicial services would be sold like insurance, with each member paying regular premiums in return for a call on the benefits of protection when needed. It is obvious that a more risky individual (such as one living in a crime area) would tend to pay a higher premium than individuals in another area. To be neutral, then, a tax would have to vary in accordance with costs and not be uniform.[21] Equal taxation would distort the allocation of social resources in defense. The tax would be below the market price in the crime areas and above the market price in the peaceful areas, and there would therefore be a shortage of police protection in the dangerous areas and a surplus of protection in the others.

Another grave flaw of the equal-tax principle is the same that we noted in the more general principle of uniformity: no bureaucrat can pay taxes. An “equal tax” on a bureaucrat or politician is an impossibility, because he is one of the tax consumers rather than taxpayers. Even when all other subsidies are eliminated, the government employee remains a permanent obstacle in the path of equal tax. As we have seen, the bureaucrat’s “tax payment” is simply a meaningless bookkeeping device.

These flaws in the equal tax cause us to turn to the last remaining tax canon: the cost principle. The cost principle would apply as we have just discussed it, with the government setting the tax in accordance with costs, like the premiums charged by an insurance company.[22] The cost principle would constitute the closest approach possible to neutrality of taxation. Yet even the cost principle has fatal flaws that finally eliminate it from consideration. In the first place, although the costs of nonspecific factors could be estimated from market knowledge, the costs of specific factors could not be determined by the State.

The impossibility of calculating specific costs stems from the fact that products of tax-supported firms have no real market price, and so specific costs are unknown. As a result, the cost principle cannot be accurately put into effect. The cost principle is further vitiated by the fact that a compulsory monopoly – such as State protection – will invariably have higher costs and sell lower-quality service than freely competitive defense firms on the market. As a result, costs will be much higher than on the market, and, again, the cost principle offers no guide to a neutral tax.

A final flaw is common to both the equality and the cost theories of taxation. In neither case is benefit demonstrated as accruing to the taxpayer. Although the taxpayer is blithely assumed to be benefiting from the service just as he does on the market, we have seen that such an assumption cannot be made – that the use of coercion presumes quite the contrary for many taxpayers. The market requires a uniform price, or the exact covering of costs, only because the purchaser voluntarily buys the product in the expectation of being benefited. The State, on the other hand, would force people to pay the tax even if they were not voluntarily willing to pay the cost of this or any other defense system. Hence, the cost principle can never provide a route to the neutral tax.

(6) Taxation “For Revenue Only”

A slogan popular among many “right-wing” economists is that taxation should be for “revenue only,” and not for broad social purposes. On its face, this slogan is simply and palpably absurd, since all taxes are levied for revenue. What else can taxation be called but the appropriation of funds from private individuals by the State for its own purposes? Some writers therefore amend the slogan to say: Taxation should be limited to revenue essential for social services.

But what are social services? To some people, every conceivable type of government expenditure appears as a “social service.” If the State takes from A and gives to B, C may applaud the act as a “social service” because he dislikes something about the former and likes something about the latter. If, on the other hand, “social service” is limited by the “unanimity rule” to apply only to those activities that serve some individuals without making others pay, then the “taxation-for-revenue-only” formula is simply an ambiguous term for the benefit or the cost principles.

(7) The Neutral Tax: A Summary

We have thus analyzed all the alleged canons of tax justice. Our conclusions are twofold:

1. that economics cannot assume any principle of just taxation, and that no one has successfully established any such principles; and
2. that the neutral tax, which seems to many a valid ideal, turns out to be conceptually impossible to achieve.

Economists must therefore abandon their futile quest for the just, or the neutral, tax.

Some may ask: Why does anyone search for a neutral tax? Why consider neutrality an ideal? The answer is that all services, all activities, can be provided in two ways only: by freedom or by coercion. The former is the way of the market; the latter, of the State. If all services were organized on the market, the result would be a purely free-market system; if all were organized by the State, the result would be socialism (see below). Therefore, all who are not full socialists must concede some area to market activity, and, once they do so, they must justify their departures from freedom on the basis of some principle or other.

In a society where most activities are organized on the market, advocates of State activity must justify departures from what they themselves concede to the market sphere. Hence, the use of neutrality is a benchmark to answer the question: Why do you want the State to step in and alter market conditions in this case? If market prices are uniform, why should tax payments be otherwise?

But if neutral taxation is, at bottom, impossible, there are two logical courses left for advocates of the neutral tax: either abandon the goal of neutrality, or abandon taxation itself.

D. Voluntary Contributions to Government

A few writers, disturbed by the compulsion necessary to the existence of taxation, have advocated that governments be financed, not by taxation, but by some form of voluntary contribution. Such voluntary contribution systems could take various forms. One was the method relied on by the old city-state of Hamburg and other communities – voluntary gifts to the government.

President William F. Warren of Boston University, in his essay, “Tax Exemption the Road to Tax Abolition,” described his experience in one of these communities:

For five years it was the good fortune of the present writer to be domiciled in one of these communities. Incredible as it may seem to believers in the necessity of a legal enforcement of taxes by pains and penalties, he was for that period … his own assessor and his own tax-gatherer. In common with the other citizens, he was invited, without sworn statement or declaration, to make such contribution to the public charges as seemed to himself just and equal. That sum, uncounted by any official, unknown to any but himself, he was asked to drop with his own hand into a strong public chest; on doing which his name was checked off the list of contributors…. Every citizen felt a noble pride in such immunity from prying assessors and rude constables. Every annual call of the authorities on that community was honored to the full.[23]

The gift method, however, presents some serious difficulties. In particular, it continues that disjunction between payment and receipt of service which constitutes one of the great defects of a taxing system. Under taxation, payment is severed from receipt of service, in striking contrast to the market where payment and service are correlative. The voluntary gift method perpetuates this disjunction. As a result, A, B, and C continue to receive the government’s defense service even if they paid nothing for it, and only D and E contributed. D’s and E’s contributions, furthermore, may be disproportionate.

It is true that this is the system of voluntary charity on the market. But charity flows from the more to the less wealthy and able; it does not constitute an efficient method for organizing the general sale of a service. Automobiles, clothes, etc., are sold on the market on a regular uniform-price basis and are not indiscriminately given to some on the basis of gifts received from others.

Under the gift system people will tend to demand far more defense service from the government than they are willing to pay for; and the voluntary contributors, getting no direct reward for their money, will tend to reduce their payment. In short, where service (such as defense) flows to people regardless of payment, there will tend to be excessive demands for service, and an insufficient supply of funds to sustain it.

When the advocates of taxation, therefore, contend that a voluntary society could never efficiently finance defense service because people would evade payment, they are correct insofar as their strictures apply to the gift method of finance. The gift method, however, hardly exhausts the financing methods of the purely free market.

A step in the direction of greater efficiency would have the defense agency charging a set price instead of accepting haphazard amounts varying from the very small to the very large, but continuing to supply defense indiscriminately. Of course, the agency would not refuse gifts for general purposes or for granting a supply of defense service to poor people. But it would charge some minimum price commensurate with the cost of its service.

One such method is a voting tax, now known as a poll tax.[24] A poll tax, or voting tax, is not really a “tax” at all; it is only a price charged for participating in the State organization.[25] Only those who voluntarily vote for State officials, i.e., who participate in the State machinery, are required to pay the tax. If all the State’s revenues were derived from poll taxes, therefore, this would not be a system of taxation at all, but rather voluntary contributions in payment for the right to participate in the State’s machinery. The voting tax would be an improvement over the gift method because it would charge a certain uniform or minimal amount.

To the proposal to finance all government revenues from poll taxes it has been objected that practically no one would vote under these conditions. This is perhaps an accurate prediction, but curiously the critics of the poll tax never pursue their analysis beyond this point. It is clear that this reveals something very important about the nature of the voting process.

Voting is a highly marginal activity because

1. the voter obtains no direct benefits from his act of voting, and
2. his aliquot power over the final decision is so small that his abstention from voting would make no appreciable difference to the final outcome.

In short, in contrast to all other choices a man may make, in political voting he has practically no power over the outcome, and the outcome would make little direct difference to him anyway. It is no wonder that well over half the eligible American voters persistently refuse to take part in the annual November balloting.

This discussion also illuminates a puzzling phenomenon in American political life – the constant exhortation by politicians of all parties for people to vote: “We don’t care how you vote, but vote!” is a standard political slogan.[26] On its face, it makes little sense, for one would think that at least one of the parties would see advantages in a small vote. But it does make a great deal of sense when we realize the enormous desire of politicians of all parties to make it appear that the people have given them a “mandate” in the election – that all the democratic shibboleths about “representing the people,” etc., are true.

The reason for the relative triviality of voting is, once again, the disjunction between voting and payment, on the one hand, and benefit on the other. The poll tax gives rise to the same problem. The voter, with or without paying a poll tax, receives no more benefit in protection than the nonvoter. Consequently, people will refuse to vote in droves under a single poll-tax scheme, and everyone will demand the use of the artificially free defense resources.

Both the gift and the voting-tax methods of voluntary financing of government, therefore, must be discarded as inefficient. A third method has been proposed, which we can best call by the paradoxical namevoluntary taxation. The plan envisioned is as follows: Every land area would, as now, be governed by one monopolistic State. The State’s officials would be chosen by democratic voting, as at present. The State would set a uniform price, or perhaps a set of cost prices, for protective services, and it would be left to each individual to make a voluntary choice whether to pay or not to pay the price. If he pays the price, he receives the benefit of governmental defense service; if he does not, he goes unprotected.[27] The leading “voluntary taxationists” have been Auberon Herbert, his associate, J. Greevz Fisher, and (sometimes) Gustave de Molinari. The same position is found earlier, to a far less developed extent, in the early editions of Herbert Spencer’s Social Statics, particularly his chapter on the “Right to Ignore the State,” and in Thoreau’s Essay on Civil Disobedience.[28]

The voluntary taxation method preserves a voluntary system, is (or appears to be) neutral vis-à-vis the market, and eliminates the payment-benefit disjunction. And yet this proposal has several important defects. Its most serious flaw is inconsistency. For the voluntary taxationists aim at establishing a system in which no one is coerced who is not himself an invader of the person or property of others. Hence their complete elimination of taxation. But, although they eliminate the compulsion to subscribe to the government defense monopoly, they yet retain that monopoly. They are therefore faced with the problem: Would they use force to compel people not to use a freely competing defense agency within the same geographic area?

The voluntary taxationists have never attempted to answer this problem; they have rather stubbornly assumed that no one would set up a competing defense agency within a State’s territorial limits. And yet, if people are free to pay or not to pay “taxes,” it is obvious that some people will not simply refuse to pay for all protection. Dissatisfied with the quality of defense they receive from the government, or with the price they must pay, they will elect to form a competing defense agency or “government” within the area and subscribe to it.

The voluntary taxation system is thus impossible of attainment because it would be in unstable equilibrium. If the government elected to outlaw all competing defense agencies, it would no longer function as the voluntary society sought by its proponents. It would not force payment of taxes, but it would say to the citizens: “You are free to accept and pay for our protection or to abstain; but you are not free to purchase defense from a competing agency.” This is not a free market; this is a compulsory monopoly, once again a grant of monopoly privilege by the State to itself. Such a monopoly would be far less efficient than a freely competitive system; hence, its costs would be higher, its service poorer. It would clearly not be neutral to the market.

On the other hand, if the government did permit free competition in defense service, there would soon no longer be a central government over the territory. Defense agencies, police and judicial, would compete with one another in the same uncoerced manner as the producers of any other service on the market. The prices would be lower, the service more efficient. And, for the first and only time, the defense system would then be neutral in relation to the market. It would be neutral because it would be a part of the market itself! Defense service would at last be made fully marketable. No longer would anyone be able to point to one particular building or set of buildings, one uniform or set of uniforms, as representing “our government.”

While “the government” would cease to exist, the same cannot be said for a constitution or a rule of law, which, in fact, would take on in the free society a far more important function than at present. For the freely competing judicial agencies would have to be guided by a body of absolute law to enable them to distinguish objectively between defense and invasion. This law, embodying elaborations upon the basic injunction to defend person and property from acts of invasion, would be codified in the basic legal code.

Failure to establish such a code of law would tend to break down the free market, for then defense against invasion could not be adequately achieved. On the other hand, those neo-Tolstoyan nonresisterswho refuse to employ violence even for defense would not themselves be forced into any relationship with the defense agencies.

Thus, if a government based on voluntary taxation permits free competition, the result will be the purely free-market system outlined in chapter 1 above. The previous government would now simply be one competing defense agency among many on the market. It would, in fact, be competing at a severe disadvantage, having been established on the principle of “democratic voting.” Looked at as a market phenomenon, “democratic voting” (one vote per person) is simply the method of the consumer “co-operative.” Empirically, it has been demonstrated time and again that co-operatives cannot compete successfully against stock-owned companies, especially when both are equal before the law. There is no reason to believe that co-operatives for defense would be any more efficient. Hence, we may expect the old co-operative government to “wither away” through loss of customers on the market, while joint-stock (i.e., corporate) defense agencies would become the prevailing market form.[29]

Notes

[1] Adam Smith, The Wealth of Nations (New York: Modern Library, 1937), pp. 777–79. See also Hunter and Allen, Principles of Public Finance, pp. 137–40.

[2] This discussion applies to Professor Hayek’s adoption of the “rule of law” as the basic political criterion. F.A. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960).

[3] Mises, in Aaron Director, ed., Defense, Controls, and Inflation (Chicago: University of Chicago Press, 1952), pp. 115–16.

[4] To say that an ethical goal is conceptually impossible is completely different from saying that its achievement is “unrealistic” because few people uphold it. The latter is by no means an argument against an ethical principle.

Conceptual impossibility means that the goal could not be achieved even if everyone aimed at it. On the problem of “realism” in ethical goals, see the brilliant article by Clarence E. Philbrook, “‘Realism’ in Policy Espousal,”American Economic Review, December, 1953, pp. 846–59.

[5] See Walter J. Blum and Harry Kalven, Jr., The Uneasy Case for Progressive Taxation (Chicago: University of Chicago Press, 1963), pp. 64–68.

[6] Due, Government Finance, pp. 121ff.

[7] Said Smith:

The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion of their respective abilities; that is, in proportion to the revenue which they respectively enjoy under protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute to their respective interests in the estate. (Wealth of Nations, p. 777)

[8] J.R. McCulloch, A Treatise on the Principle and Practical Influence of Taxation and the Funding System (London, 1845), p. 142.

[9] E.R.A. Seligman, Progressive Taxation in Theory and Practice (2nd ed.; (New York: Macmillan & Co., 1908), pp. 291–92.

[10] For an excellent critique of the Seligman theory, see Blum and Kalven, Uneasy Case for Progressive Taxation, pp. 64–66.

[11] See ibid., pp. 67–68.

[12] Due, Government Finance, p. 122.

[13] Groves, Financing Government, p. 36.

[14] Hunter and Allen, Principles of Public Finance, pp. 190–91.

[15] See Chodorov, Out of Step [also in PDF], p. 237. See also Chodorov, From Solomon’s Yoke to the Income Tax (Hinsdale, Ill.: Henry Regnery, 1947), p. 11.

[16] The acceptance of this critique dates from Robbins’ writings of the mid-1930′s. See Lionel Robbins, “Interpersonal Comparisons of Utility,” Economic Journal, December, 1938, pp. 635–41; and Robbins, An Essay on the Nature and Significance of Economic Science (2nd ed.; London: Macmillan & Co., 1935), pp. 138–41. Robbins was, at that time, a decidedly “Misesian” economist.

[17] For a critique of sacrifice theory, see Blum and Kalven, Uneasy Case for Progressive Taxation, pp. 39–63.

[18] For an attempt to establish proportional taxation on the basis of equal sacrifice, see Bradford B. Smith, Liberty and Taxes (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, n.d.), pp. 10–12.

[19] Pushed to its logical conclusion in which the State is urged to establish “maximum social satisfaction” – the obverse of minimum social sacrifice – the principle counsels absolute compulsory egalitarianism, with everyone above a certain standard taxed in order to subsidize everyone else to come up to that standard. The consequence, as we have seen, would be a return to the conditions of barbarism.

[20] The ability-to-pay principle is unclear on this point. Some proponents base their argument implicitly on sacrifice; others, on the necessity for payment for “untraceable” benefits.

[21] This does not concede that “costs” determine “prices.” The general array of final prices determines the general array of cost prices, but then the viability of firms is determined by whether the price people will pay for their products is enough to cover their costs, which are determined throughout the market. In equilibrium, costs and prices will all be equal. Since a tax is levied on general funds and therefore cannot be equivalent to market pricing, the only way to approximate market pricing is to set the tax according to costs, since costs at least reflect market pricing of the nonspecific factors.

[22] Blum and Kalven mention the cost principle but casually dismiss it as being practically identical with the benefit principle:

Sometimes the theory is stated in terms of the cost of the government services performed for each citizen rather than in terms of the benefits received from such services. This refinement may avoid the need of measuring subjective benefits, but it does little else for the theory. (Uneasy Case for Progressive Taxation, p. 36 n)

Yet their major criticism of the benefit principle is precisely that it requires the impossible measurement of subjective benefit. The cost principle, along with the benefit principle, dispenses with all government expenditures exceptlaissez-faire ones, since each recipient would be required to pay the full cost of the service. With respect to the laissez-faire service of protection, however, the cost principle is clearly far superior to the benefit principle.

[23] Dr. Warren’s article appeared in the Boston University Year Book for 1876. The board of the Council of the University endorsed the essay in these words:

In place of the further extent of taxation advocated by many, the essay proposes a far more imposing reform, the general abolition of all compulsory taxes. It is hoped that the comparative novelty of the proposition may not deter practical men from a thoughtful study of the paper. (See the Boston University Year Book III (1876), pp. 17–38)

Both quotations may be found in Sidney H. Morse, “Chips from My Studio,” The Radical Review, May, 1877, pp. 190–92. See also Adam Smith, Wealth of Nations, pp. 801–03; Francis A. Walker, Political Economy (New York: Henry Holt, 1911), pp. 475–76. Smith, in one of his most sensible canons, declared:

In a small republic, where the people have entire confidence in their magistrates and are convinced of the necessity of the tax for the support of the state, and believe that it will be faithfully applied to that purpose, such conscientious and voluntary payment may sometimes be expected. (Smith, Wealth of Nations, p. 802)

[24] The current poll tax began simply as a head tax, but in practice it is enforced only as a requirement for voting. It has therefore become a voting tax.

[25] See below on fees charged for government service.

[26] Voting, like taxation, is another activity generally phrased in terms of “duty” rather than benefit. The call to “duty” is as praxeologically unsound as the call to sacrifice and generally amounts to the same thing. For both exhortations tacitly admit that the actor will derive little or no benefit from his action. Further, the invocation of duty or sacrifice implies that someone else is going to receive the sacrifice or the payment of the “obligation” – and often that someone is the exhorter himself.

[27] We are assuming that the government will confine its use of force to defense, i.e., will pursue a strictly laissez-faire policy. Theoretically, it is possible that a government may get all its revenue from voluntary contribution, and yet pursue a highly coercive, interventionist policy in other areas of the market. The possibility is so remote in practice, however, that we may disregard it here. It is highly unlikely that a government coercive in other ways would not take immediate steps to see that its revenues are assured by coercion. Its own revenue is always the State’s prime concern. (Note the very heavy penalties for income-tax evasion and counterfeiting of government paper money.)

[28] Spencer, Social Statics; Herbert and Levy, Taxation and Anarchism; and Molinari, Society of Tomorrow. At other times, however, Molinari adopted the pure free-market position. Thus, see what may be the first developed outline of the purely libertarian system in Gustave de Molinari, “De la production de la sécurité,” Journal des Economistes, February, 1849, pp. 277–90, and Molinari, “Onzième soirée” in Les soirées de la rue Saint Lazare (Paris, 1849).

[29] These corporations would not, of course, need any charter from a government but would “charter” themselves in accordance with the ways in which their owners decided to pool their capital. They could announce their limited liability in advance, and then all their creditors would be put amply on guard.

There is a strong a priori reason for believing that corporations will be superior to cooperatives in any given situation. For if each owner receives only one vote regardless of how much money he has invested in a project (and earnings are divided in the same way), there is no incentive to invest more than the next man; in fact, every incentive is the other way. This hampering of investment militates strongly against the cooperative form.

The threat in Iran is grave, even potentially cataclysmic. But that threat is only secondarily the danger to the 62, now 49, American embassy employees imprisoned in Teheran. The main danger is a disastrous war, to be launched by a furious and petulant United States against the people of Iran. For the really scary thing about the still continuing Iranian crisis is not the Shiite zealots led by the venerable Ayatollah Khomeini; it is the barbarous emotions welling up in the breasts of the American people.

For it seems that civilization is only skin-deep, after all, in these United States; let the American eagle be tweaked a bit and savage bellows for war and destruction thunder across the land. If the Ayatollah and his colleagues are “fanatics” and “madmen”, what then are the countless American demonstrators who joyfully burn Iranian flags, chant “Nuke the Iranians” or “Camel Jockeys, Go Home” or, in the case of an anti-Iranian rally at Houston, burn an Iranian flag while grotesquely singing “America the Beautiful”? College campuses which once rocked with a fervent anti-war spirit are now calling for the expulsion and deportation of harmless Iranian students. A war fever is raging in the United States, and for once we cannot say that the Establishment is dragging a peaceful public into war; the war pressure is coming upward from the grass roots.

But neither can we say that the Carter Administration is blameless in instigating this affair. We already know that the Administration had been warned by its own experts that admitting the Shah into the U.S. would likely trigger Iranian reprisal against our embassy there; yet, not only did we admit the Shah but we did not even beef up security at the Teheran embassy. Bumbling, or a deliberate whipping up of crisis? Of course, with Carter’s record as stumblebum extraordinaire, even conspiracy-minded analysts will have to give considerable credence to the bumble hypothesis.

We do know, also, that the Administration was reluctant to admit the Shah, but that it was successfully pressured into this fateful step by none other than Henry Kissinger and his mentor David Rockefeller. Once again, Kissinger has worked his foreign policy evil; is there no way of getting rid of this man’s malign influence? What happened to the idea of the people choosing at the polls? Wasn’t Kissinger repudiated in 1976? And—conspiracy analysis again—we shouldn’t forget that we have a David Rockefeller-Trilateral Commission-dominated foreign policy Administration, and also that the Shah is personally a multi-billion dollar client at Rockefeller’s Chase Manhattan Bank.

One libertarian of our acquaintances has a charming solution to the hostage crisis: send the Iranians Kissinger and Rockefeller in return for the hostages. There is in this solution a certain unique and piquant charm.

Is the Shah really dying, or is he really ill at all? Many physicians profess themselves puzzled at unusual features of the Shah’s therapy. One wonders, too, if he couldn’t have surgery or chemotherapy in Mexico; are there no medical facilities there? Certainly, with his $12 billion or so smackers, he has the wherewithal to fly down top specialists on his behalf. Surely, too, the Shah would solve a lot of world problems by corking off pronto from natural causes.

At any rate, whether or to what extent the Shah is ill, he is certainly at this writing very much alive, and kicking, and therefore must be treated as such. His case raises many fascinating and in advanced applied libertarian theory. Thus, forgetting about his alleged illness, what would we do, or more to the point, what shouldwe do, if Hitler suddenly found himself alive and ill at New York Hospital? Should we defend his right to asylum, or send him back to Germany for trial?

Whatever we answer in the Hitler or Eichmann case, we must answer for the Shah also. The Shah, too, murdered 60,000 of his subjects, and tortured countless others at the hands of the dread SAVAK, the secret police, causing Amnesty International to call his bloody reign the worst torture regime in the world. And the Shah is a thief on a mammoth scale. The Shah’s plundering, by the way, is a paradigm example of land theft and of the proper libertarian analysis of this “feudal” act. For the Shah’s father, only fifty years ago, was a bandit who assumed the throne of Iran by conquest, and proceeded to literally steal half the land area of the country and place it into his “private” ownership, mulcting the peasant owners of “rents” to their new feudal overlord. The present Shah simply systematized and expanded his father’s speculations, and converted them from land to dollar wealth. When radical libertarians speak of justice and land reform, they are always confronted with the rebuttal that land thefts are lost in antiquity, and that titles are so fuzzy that no clear-cut justice can be done. But in the case of Iran none of that is true; the robberies were quite recent, in the memory of many now alive, and the record is all too clear.

Furthermore, the surging hatred of the United States in Iran is all too understandable. For a generation, it was the United States government that propped up the Shah on a massive scale, pouring literally billions in military and economic aid into his coffers. For years, the Shah was considered America’s geopolitical ally and satrap in the Middle East. And when, in the early 1950’s, the Iranians revolted and kicked out the hated Shah, the CIA rushed in to reinstall him in 1953—an action that Americans may have forgotten, but that Iranians have bitterly remembered. The Shah and the United States, the Shah, Kissinger and Rockefeller—all these have been closely linked, not only in the perception of Iranian “fanatics”, but also in reality.

Given all this—should we send the Shah back to Iran to be tried for his crimes? Should we have sent Hitler back? The answer in both cases must be no. For while a people may surely try their own rulers or ex-rulers for high crimes, governments should be bound by the concept of asylum. Governments should” not be able to extradite political dissidents to the tender mercies of another regime. This is because governments, being governments, being coercive monopolies of force in a given territorial area, should be held to different standards than would free-market anarchist defense institutions. So long as these territorial monopolies of force exist, they should be held strictly to the boundaries of their own territorial areas. Once let them try to extend their jurisdiction to other areas, and only perpetual wars can ensue—wars such as minarchists are always bellyaching about when contemplating anarchism. For we live right now in an “international anarchy” in the worst sense; there are gangs of coercive states which are not under any one world government (And why, by the way, don’t minarchists pursue the logic of their own beliefs and advocate world government?) Whether we are anarchists or minarchists, we must try to limit these governments at least to their territorial area, to reduce government intervention to a minimum at home and abroad. Part of such a policy is for governments to take no sides in the internal quarrels of other nations, and to allow asylum once a foreign national and political dissident reaches its shores. So, despite their patcut crimes, the U.S. government should deport neither the Shah nor a hypothetical Hitler back to the land of their sins.

But, of course, there is surely no positive injunction upon the U.S. government to devote a great deal of taxpayers’ resources to guarding the life of the Shah or any other imported monster. Did the U.S. taxpayer have to spend millions, and tie up virtually the entire police department of New York City, to guard the butcher Castro for nearly a week? Surely not. And neither does it have to knock itself out defending the Shah; surely, it is bizarre to think that the Shah, Castro, or our putative Hitler should have vastly more tax-resources spring to his defense, than for the defense of any one peaceful and put-upon citizen on the streets of New York, So let the U.S. government take all the guards away from New York Hospital. It is true that the Shah has his private guards at the hospital; but perhaps some of the revolutionary Iranian people could work their just will despite that hazard. Let the Shah take his chances, like everyone else, in the Big Apple. So the Shah is a criminal and the United States, as usual, is hip deep in blame, though we can’t countenance outright betrayal of the right of asylum. What then should the United States do in this predicament? Acknowledge its previous guilt, surely. Support the idea of an international tribunal to try the Shah—why not? Outside of that, try patient and quiet diplomacy, using as best we can respected private persons and groups, such as the constructive role already played by the Irishman Sean MacBride and conservative Congressman George Hansen (R.Idaho), who, in his private search for peaceful solutions with the Iranians, is a marvelously refreshing change from the usual bluster xenophobia, and war hysteria on the Right. And that is all; there must be no use of military force by the United States. Military measures would not only be costly and threaten wider war, they would also injure innocent civilians in Iran as well as Americans. Already, the American freeze of Iranian bank deposits and cutoff of oil imports are petulant and coercive, and they accomplish nothing except financial disarray at home and abroad. They free no hostages and are only expensive and aggressive ways for the U.S. government to save face—a concept we have attributed exclusively to inscrutable Orientals.

But what about force? Defense? Punishment? The right of every American citizen to be protected? And what of the inviolability of the “sovereignty” of the American embassy?

Once again, because we are living in a world of coercive nation-states, with each attaining a monopoly over its territorial area, and because in the modern world any war between states necessarily commits the civilians of each country to the war regardless of their wishes, it is vital for each state to confine its use of violence strictly to its own area. So, in such a world, it is the responsibility of the American government to protect the lives and properties of its subjects— but only those who inhabit the territorial area of the country. We must therefore conclude that American citizens abroad must take their chances—that it is not worth embroiling all other Americans in a war on their behalf should they stray beyond U.S. jurisdiction.

To put the plight of the unfortunate Americans in Teheran in perspective: No one forced these people to stray outside the borders of the U.S. Moreover, they knew darned well, as did the rest of us, that Iran was an explosive trouble spot, and that therefore they were taking a considerable risk in remaining there. The U.S. government was delinquent in not reminding them of this risk, and, in fact, for encouraging them to stay. They took their chances. And, after all, they were, voluntarily, U.S. government and U.S. embassy employees, and therefore they voluntarily took on the coloration of U.S. imperialist policy in Iran. In a sense, then, they all shared in the guilt of U.S. foreign policy, and their seizure by the Iranian students, while unfortunate, does not seem quite so irrational.

There is another important point here, illustrative of a double standard and a jingo blood thirst at work. Every year, indeed every day, many Americans lose their lives and property to domestic criminals within the United States. People are here shot, killed, and kidnapped all the time; no one applauds these deeds, but why are there no blood cries for all-out vengeance when the criminals are here at home? Is it only because the prestige of the U.S. government has been damaged long ago, by numerous actions of the U.S. government itself, but those actions never worried out superpatriots by one whit.

But isn’t the embassy sacred American soil, and therefore wasn’t the attack on our embassy an act of war? But surely the “sovereignty” of an enclave of one house and an acre or two is only a pleasant fiction, not a serious reality. Surely it is not a moral problem for Americans to fight, die, and kill over. The inviolability of a nation’s embassy is an important pragmatic principle of international relations, since if embassies and diplomats are habitually aggressed against, very little international dealings or peaceful negotiations would-ever take place. But this principle is important to every nation-state, not just to the U.S., and they all realize this fact. Once again, this is a matter for quiet international diplomacy, and not for acts of moral outrage and coercive saber-rattling by the United States.

But shouldn’t the kidnappers be punished? Here the pro-war theorists liken such a military thrust as equivalent to a domestic “police action.” But there are vital differences. First, as we have reiterated, on foreign soil there is no American monopoly of force, and therefore “punishment” is no longer a police action, but an act of military intervention and war. Furthermore, punishing the guilty, important though it be, is far less important for a libertarian than another principle: protecting the innocent. The innocent may not be injured or murdered in order to apprehend the guilty. Suppose, for example, that police are chasing a robber or even a murderer fleeing down a crowded street. May the police, in order to catch the fugitive, spray the street with machine-guns and mortar fire, killing many innocent people along with the criminal? Certainly not, and police never do such a thing. But, in the same way, it is morally impermissible for any government, including the American, to launch a military offensive to punish the students, the Ayatollah, or whatever. For countless innocent civilians would be injured or killed by such an action.

But isn’t it immoral to deal with kidnappers? WHY? Is it immoral for parents to pay ransom to kidnappers to buy back their children? What peculiar moral theory could possibly be at work here?

And what of the Iranian students in the U.S.? The cry for their incarceration and deportation, and the steps in that direction already taken, are a monstrous imposition of collective guilt, a concept which properly horrified Americans when the Nazis employed it against the Czech town of Lidice. Just because we don’t like what some Iranian students did at Teheran, gives us no warrant to proceed with a force against other Iranian students in this country.

To conclude: the U.S. should pursue the delicate and threatening Iranian crisis with quiet diplomacy, and eschew all acts of force or saber-rattling threats of force. Another war threatens all of us in the Iranian crisis, and it behooved libertarians to be in the forefront of today’s and tomorrow’s anti-war movement. So far, the first libertarian organ to leap into the fray is Sam Konkin’s New Libertarian Strategy, whose “Stop the Presses” December issue has an excellent revisionist analysis of the Iranian crisis. We have had many differences with Konkin’s anti-L.P. “Movement of the Libertarian Left” tendency, but Konkin deserves great commendation for being the first libertarian periodical or institution to take a strong stand on the Iranian crisis. (Available at $10.00 a year from New Libertarian Enterprises, Box 1748, Long Beach CA 90801). Libertarians must put as much pressure as we can upon the Administration to stop the war, pressure that is desperately needed to offset the war fever, and, if necessary, to build a longer-range anti-war movement. If we needed any further reminders, the Iranian crisis shows us and everyone else, once again, that libertarians are NOT” conservatives”; we are for nonintervention and antiwar.

Someone has, indubitably, shot and almost assassinated Larry Flynt, creator and publisher of Hustler and other publications. Why did he do it? The Establishment theory is that a lone nut Christian did it, and indeed they picked up an authentic Christian at the scene of the crime, only to find that he was not the assassin.

Let us examine the alternative possible theories: (1) the Lone Nut Christian. But why would the lone Christian, however nutty, try to kill Larry Flynt shortly after he had converted from pornography to Jesus? Maybe before, but after Larry saw the light? Why would a Christian kill a newly found brother? Of course, he might have his doubts, as we all may, about the sincerity of Brother Flynt’s conversion. But this way madness lies, for surely we can’t kill all suspect newcomers to a proselytizing Church. And if someone like Chuck Colson remains unscathed, why pick on poor Flynt? And so soon? (2) Flynt might have been shot by a fellow pornographer, sore at Larry’s desertion of their common cause to that of Christianity. Dubious, for after all pornographers tend to be more interested in moolah than in ideology or solidarity, and so any pornographer would probably bid good riddance to a formidable competitor. And that leaves (3), the fascinating hypothesis, somehow neglected in press speculation, that Flynt’s shooting may have nothing whatever to do with Christianity, but is rather related to the fact that only a few days previously, Larry Flynt had taken out ads all over the country, offering no less than $1,000,000 reward “for information leading to the arrest and conviction of anyone involved in the planning or execution of President Kennedy’s murder, or for information which makes it possible for the truth to come out.” Oho! The Kennedy Assassination redivivus! In fact, Flynt had become such an Assassination buff that he had recently purchased the L. A. Free Press, and made the veteran revisionist Mark Lane the major editor of a new supplement, or Special Reports, on the Kennedy murder. The first supplement had just appeared on the stands. There have been so many murders, and mysterious deaths, surrounding the assassination of Kennedy and Oswald (and of Officer Tippitt), that we would have to go with this unsung hypothesis as at least a likely explanation.

The press has hinted at a fourth explanation for those who cannot quite swallow the Lone Nut Christian theory: (4) that the Mafia gunned down Flynt for interfering with their magazine distribution monopoly. But the very raising of the point about the Mafia is dangerous for the Establishment, because there is much evidence that the Mafia was hip-deep in the Kennedy Assassination itself. So that is not likely to be a well-publicized theory.

Larry Flynt adds one more name to a growing roster of mysterious and unsatisfactorily explained political assassinations and quasi-assassinations in recent years:

John F. Kennedy; Lee Harvey Oswald; John Connally; and Officer J. D. Tippitt—all killed or wounded on or around Nov. 22, 1963 in Dallas. Robert F. Kennedy; Martin Luther King; George C. Wallace; and Malcolm X. All of these were ostensibly killed or wounded by lone nuts, with the exception of Malcolm, where the top “conspirator” claims that his fellow convicts had nothing to do with the murder. And then, on the possibly political level, there are the murders of Sam Giancana and Johnny Roselli, both supposed to be purely gangland killings of undetermined and trivial origin.

II. THE HOUSE COMMITTEE

How goes the House Select Committee on Assassinations? The answer, unsurprisingly, is: not very well. It looks as if the well-orchestrated ouster of Richard Sprague early last year has drawn the Committee’s teeth and assures yet another governmental whitewash of the KennedyOswald and King killings.

The L.A. Free Press Special Report Number One, co-edited by Assassination Revisionist Mark Lane, reports that, when Rep. Thomas Downing (D., Va.) established the Committee, another leading revisionist, Washington lawyer Bernard Fensterwald, Jr., was offered the key post of chief counsel. Fensterwald allegedly told Lane that the CIA had levelled a death threat at Fensterwald if he should take the post, and that three other attorneys had been similarly warned off. After Fensterwald then turned down the post, it went to the abrasive, dynamic Richard Sprague, the successful prosecutor of the famous Yablonski murder case at the United Mine Workers.

After Sprague showed signs of taking the job seriously, he was subjected to an unprecedented, and seemingly coordinated smear-campaign in the press, after which he was fired by the new Committee chairman, Rep. Henry Gonzalez (D., Tex.) after almost hysterical personal attacks directed by the Congressman against Sprague. Was there any “old boy” Texas influence working on Gonzalez?

Since then, the Committee has been quiet, which L. A. Free Press hopes is a sign that the Committee is doing effective work behind the scenes. But the signs are not good, if we can credit the report in the Feb. 20 issue of New Times. For, apparently, the new chief counsel, G. Robert Blakey, has been so low-key that he has returned almost half a million dollars to the Treasury as unneeded. Many staff members have complained that Blakey’s action has pulled punches in the investigation and has crippled its effectiveness.

There are more sinister aspects to Blakey’s behavior than simple penny-pinching. For as soon as he took over the post, Blakey cracked down on his staff, required them to sign agreements that they would not acknowledge their jobs at the committee without permission. Violation will bring instant dismissal and a $5,000 fine.

More troubling than the mere martinet aspects of the Blakey regime is its attitude toward the CIA, the self-same agency that allegedly threatened Fensterwald. For Blakey has refused to allow access to classified material to any staff member who cannot get CIA clearance. Not only that: any staff members who do read CIA documents must submit any notes they make to the Agency for review! Blakey’s refusal to call former CIA director and admitted perjurer Richard Helms before his committee, is of a piece with a statement he once made about U.S. intelligence agencies: “You don’t think they’d lie to me, do you? I’ve been working with those people for twenty years.” Hmmm.

There is also an ambivalence in Blakey’s attitude toward organized crime—which possibly had important links to the assassination (pace Giancana, Roselli, and, especially, Jack Ruby). After building a reputation as a crusader against racketeers, including a stint as Special Prosecutor in Bobby Kennedy’s organized crime strike force, Blakey weighed in with an anti-free press affidavit supporting La Costa Ranch in its libel suit against Penthouse Magazine in the winter of 1976. Things get curiouser and curiouser.

At any rate, we may now judge that another Warrengate is in the works, that the Committee may eventually peter out with yet another rubber-stamp of the Oswald-Ruby-lone nuts thesis. So what else is new?

These are grim times for those of us who yearn for a peaceful American foreign policy, for a foreign policy emulating the ideals of Thomas Paine, who exhorted America to interfere with the affairs of no other nations, and to serve instead as a beacon-light of liberty by her example. The lessons of the Vietnam intervention have been shuffled off with obscene haste, by masses and by intellectuals alike, by campus kids and by veterans of the antiwar movement of the 1960’s. It started with Iran, with bloody calls for war, for punishment, for “nuking ’em”, for, as so many graffiti across the land have been putting it: “nuking ’em till they glow”.

But just as we have been whipping ourselves up to nuking Muslims and to declaring war against “fanatical” Islam per se, we are ready to turn on a dime and sing the praises of no-longer fanatical Muslims who are willing to fight Russian tanks with their bare hands: the heroic freedom fighters of Afghanistan. All of a sudden President Carter has gone bananas: declaring himself shocked and stunned by the Soviet incursion into Afghanistan, mobilizing the United Nations in stunned horror, levying embargoes (my how this peanut salesman loves embargoes!), and threatening the Olympics so dear to sports fans around the globe.

It’s all very scary. There is the phony proclamation of personal betrayal—Brezhnev not coming clean on the Hot Line—all too reminiscent of the late unlamented King of Camelot before he almost got us into a nuclear holocaust over a few puny Russian missiles in Cuba. There is the same macho insistence on regarding every foreign affairs crisis as a duel with six-shooters at high noon, and trying to prove that good old Uncle Sam still has the fastest draw.

To set the record straight from the first: Yes, it is deplorable that Russia saw fit to move troops into Afghanistan. It will, we can readily predict, be a disaster for the Soviets themselves, for tens of thousands of troops will be tied down, Vietnam-fashion, in a country where they are universally hated and reviled, and where they will be able to command only the cities and the main roads, and those in the daytime. But deplorable as the Soviet action is, it is neither surprising nor shocking: it is in line with Soviet, indeed with all Russian actions since the late 19th century—an insistence on dominating countries on its borders. While unfortunate, this follows the line of Czarist imperialism; it is old-fashioned Great Power politics, and presages neither the “fall” of Southwest Asia nor an immediate armed strike upon our shores.

Indeed, the righteous horror of the U.S. and the UN at Soviet actions in Afghanistan takes on an ironic perspective when we consider the massive use of military force wielded not very long ago by the United States against Cuba, Vietnam, Cambodia, and the Dominican Republic. Indeed, the ground for Soviet invasion: the backing of one side in another country’s civil war, was precisely the groundwork for the massive and disastrous U.S. military intervention in Vietnam. In Vietnam, too, we intervened on the side of an unpopular repressive regime in a civil war against a popular revolution; and now the Soviets are doing the exact same thing. So why the selective moral indignation wielded by: Carter, the UN, the war hawk conservatives, the Social Democrats, the liberals, the media, etc? Hypocrisy has become rife in America.

There are two crucial differences between America’s and Russia’s “Vietnam” in Afghanistan. One, that Russia will be slaughtering far fewer Afghans than we did Vietnamese. And two, that Afghanistan is, after all, on Russia’s borders while we launched our intervention in Vietnam half the globe away from our shores. And Afghanistan, of course, is even further away than Vietnam. The whole thing is ludicrous and absurd. Is Afghanistan now supposed to have been part of the “free world”? Afghanistan has no resources, has no treaties with the U.S., no historic ties, there are none of the flimsy but popular excuses that we have used for over a century to throw our weight around across the earth. But here we go, intervening anyway, loudly proclaiming that Russia’s actions in Afghanistan are “unacceptable”, and for which we are ready to scrap SALT, detente, and the feeble past attempts of the Carter administration to shuck off the Cold War and to establish some sort of modus vivendi with Russia. The conservatives, the Pentagon, the Social Democrats, the neo-conservatives, the Coalition for a Democratic Majority—all the worst scoundrels in American life—have been yearning to smash detente, and to accelerate an already swollen arms budget and heat up the Cold War. And now Carter has done it—to such an extent that such conservative organs as Human Events are even finding Carter foreign policy to be better in some respects than that of its hero Reagan.

The idiocy of the sudden wailing and hand-wringing over Afghanistan may be gauged by the fact that that land-locked and barren land had been a Russian client state since the late nineteenth century, when clashes of British and Russian (Czarist) imperialism came to draw the Afghan-Indian border where it is today. (An unfortunate situation, since northwest and western Pakistan is ethnically Pushtu—the majority ethnic group in Afghanistan, while southwestern Pakistan is ethnically Baluchi: the same group that populates southern Afghanistan and southeastern Iran.) Ever since, the King of Afghanistan has always been a Russian tool, first Czarist then Soviet—to the tune of no bleats of outrage from the United States. Then, in 1973, the King was overthrown by a coup led by Prince Mohammed Daud. After a few years, Daud began to lead the Afghan government into the Western, pro-U.S. camp. More specifically, he came under the financial spell (i.e. the payroll) of the Shah of Iran, the very man much in the news of late. Feeling that they could not tolerate a pro-U.S. anti-Soviet regime on it borders, the Russians then moved to depose Daud and replace him with the Communist Nur Taraki, in April 1978. Ever since then, Afghanistan has been under the heel of one Communist ruler or another; yet nobody complained, and no American president threatened mayhem. The reason for the latest Soviet invasion is simple but ironic in our world of corn-fed slogans. For the problem with Hafizullah Amin, the prime minister before the Soviet incursion, was that he was too Commie for the Russians. As a fanatical left-Communist, Amin carried out a brutal program of nationalizing the peasantry and torturing opponents, a policy of collectivism and repression that fanned the flames of guerrilla war against him. Seeing Afghanistan about to slip under to the West once again, the Soviets felt impelled to go in to depose Amin and replace him with an Afghan Communist, Babrak Karmal, who is much more moderate a Communist and therefore a faithful follower of the Soviet line. There are undoubtedly countless conservatives and Social Democrats who still find it impossible to conceive of Soviet tools who are more moderate than other Communists, but it is high time they caught up with several decades of worldwide experience.

I deplore the Soviet invasion; I hope for victory of the Afghan masses; and I expect that eventually, as in Vietnam, the oppressed masses will triumph over the Soviet invaders and their puppet regime. The Afghans will win. But that is no reason whatever for other nations, including the United States, to leap into the fray. We must not die for Kabul!

The crocodile tears shed for the Afghans point up once again the disastrous concept of “collective security” which has provided the basis for U.S. foreign policy since Woodrow Wilson and is the very heart and soul of the United Nations. Collective security means that any border skirmish anywhere, any territorial rectification, any troubles of any pipsqueak country, necessarily provides the sparkplug for a general holocaust, for a world war “against aggression”. The world does not have one government, and so international war is not a “police action”, despite the successful attempt of the warmonger Harry Truman to place that seemingly innocuous label on his military invasion of Korea. U.S. hysteria over Afghanistan is the bitter fruit of the doctrine of collective security. If we are to avoid nuclear holocaust, if we are to prevent World War III, we must bury the doctrine of collective security once and for all, we must end the idea of the United States as God’s appointed champion of justice throughout the world. We must pursue, in the immortal words of classical liberal Sydney Smith, quoted in this issue, “apathy, selfishness, common sense, arithmetic.” But we can’t be apathetic in this pursuit, because time’s a wastin’. American officials are ominously spreading the word that the Afghan crisis is the most threatening foreign affairs situation since the Cuban missile crisis of 1962, or even since World War II. No doubt; but only because the Carter administration and the war hawks have made it so.

Libertarians must mobilize to Stop the War, and to stop it now! We must stop the embargo (Carter’s favorite foreign policy tactic), which is both criminal and counterproductive. Criminal because it aggresses against the rights of private property and free exchange. Criminal because it represses trade and thereby injures both the American public and the innocent civilian public of both Iran and Afghanistan. Counterproductive because, while hurting innocent civilians, embargoes do nothing to injure the power elites of either side. Emborgoes will only unify the people of Iran or Afghanistan behind their regimes, which they will identify as defending them and their food supply against the aggressor Carter. We must stop the war; ever since Kennedy abandoned his feeble attempt to talk sense on Iran because of the war hysteria that poured over him, there is no peace candidate on the American scene. The Libertarian party, if it has the will to do so, and to follow its own clear platform, can be the peace party in this terribly troubled time. If it raises a loud and clear call for peace and for opposition to the war hysteria, it can earn the gratitude of all Americans who cherish peace and freedom, and of future generations of Americans who will, one hopes, emerge from the bloody century-long miasma of nationalist chauvinism to see their way clear at long last for the truly American and the genuinely libertarian policy of nonintervention and peace.

In a recent and well-known article, Norman Podhoretz has attempted to conscript George Orwell into the ranks of neoconservative enthusiasts for the newly revitalized cold war with the Soviet Union.[1] If Orwell were alive today, this truly “Orwellian” distortion would afford him considerable wry amusement. It is my contention that the cold war, as pursued by the three superpowers of Nineteen Eighty-Four, was the key to their successful imposition of a totalitarian regime upon their subjects. We all know thatNineteen Eighty-Four was a brilliant and mordant attack on totalitarian trends in modern society, and it is also clear that Orwell was strongly opposed to communism and to the regime of the Soviet Union. But the crucial role of a perpetual cold war in the entrenchment of totalitarianism in Orwell’s “nightmare vision” of the world has been relatively neglected by writers and scholars.

In Nineteen Eighty-Four there are three giant superstates or blocs of nations: Oceania (run by the United States, and including the British Empire and Latin America), Eurasia (the Eurasian continent), and Eastasia (China, southeast Asia, much of the Pacific). The superpowers are always at war, in shifting coalitions and alignments against each other. The war is kept, by agreement between the superpowers, safely on the periphery of the blocs, since war in their heartlands might actually blow up the world and their own rule along with it. The perpetual but basically phony war is kept alive by unremitting campaigns of hatred and fear against the shadowy foreign Enemy. The perpetual war system is then used by the ruling elite in each country to fasten totalitarian collectivist rule upon their subjects. As Harry Elmer Barnes wrote, this system “could only work if the masses are always kept at a fever heat of fear and excitement and are effectively prevented from learning that the wars are actually phony. To bring about this indispensable deception of the people requires a tremendous development of propaganda, thought-policing, regimentation, and mental terrorism.” And finally, “when it becomes impossible to keep the people any longer at a white heat in their hatred of one enemy group of nations, the war is shifted against another bloc and new, violent hate campaigns are planned and set in motion.”[2]

From Orwell’s time to the present day, the United States has fulfilled his analysis or prophecy by engaging in campaigns of unremitting hatred and fear of the Soviets, including such widely trumpeted themes (later quietly admitted to be incorrect) as “missile gap” and “windows of vulnerability.” What Garet Garrett perceptively called “a complex of vaunting and fear” has been the hallmark of the American as well as of previous empires:[3] the curious combination of vaunting and braggadocio that insists that a nation-state’s military might is second to none in any area, combined with repeated panic about the intentions and imminent actions of the “empire of evil” that is marked as the Enemy. It is the sort of fear and vaunting that makes Americans proud of their capacity to “overkill” the Russians many times and yet agree enthusiastically to virtually any and all increases in the military budget for mightier weapons of mass destruction. Senator Ralph Flanders (Republican, Vermont) pinpointed this process of rule through fear when he stated during the Korean War:

Fear is felt and spread by the Department of Defense in the Pentagon. In part, the spreading of it is purposeful. Faced with what seem to be enormous armed forces aimed against us, we can scarcely expect the Department of Defense to do other than keep the people in a state of fear so that they will be prepared without limit to furnish men and munitions.[4]

This applies not only to the Pentagon but to its civilian theoreticians, the men whom Marcus Raskin, once one of their number, has dubbed “the mega-death intellectuals.” Thus Raskin pointed out that

their most important function is to justify and extend the existence of their employers. … In order to justify the continued large-scale production of these [thermonuclear] bombs and missiles, military and industrial leaders needed some kind of theory to rationalize their use. … This became particularly urgent during the late 1950s, when economy-minded members of the Eisenhower Administration began to wonder why so much money, thought, and resources, were being spent on weapons if their use could not be justified. And so began a series of rationalizations by the “defense intellectuals” in and out of the Universities. … Military procurement will continue to flourish, and they will continue to demonstrate why it must. In this respect they are no different from the great majority of modern specialists who accept the assumptions of the organizations which employ them because of the rewards in money and power and prestige. … They know enough not to question their employers’ right to exist.[5]

In addition to the manufacture of fear and hatred against the primary Enemy, there have been numerous Orwellian shifts between the Good Guys and the Bad Guys. Our deadly enemies in World War II, Germany and Japan, are now considered prime Good Guys, the only problem being their unfortunate reluctance to take up arms against the former Good Guys, the Soviet Union. China, having been a much lauded Good Guy under Chiang Kai-shek when fighting Bad Guy Japan, became the worst of the Bad Guys under communism, and indeed the United States fought the Korean and Vietnamese wars largely for the sake of containing the expansionism of Communist China, which was supposed to be an even worse guy than the Soviet Union. But now all that is changed, and Communist China is now the virtual ally of the United States against the principal Enemy in the Kremlin.

Along with other institutions of the permanent cold war, Orwellian New-speak has developed richly. Every government, no matter how despotic, that is willing to join the anti-Soviet crusade is called a champion of the “free world.” Torture committed by “totalitarian” regimes is evil; torture undertaken by regimes that are merely “authoritarian” is almost benign. While the Department of War has not yet been transformed into the Department of Peace, it was changed early in the cold war to the Department of Defense, and President Reagan has almost completed the transformation by the neat Orwellian touch of calling the MX missile “the Peacemaker.”

As early as the 1950s, an English publicist observed that “Orwell’s main contention that ‘cold war’ is now an essential feature of normal life is being verified more and more from day to day. No one really believes in a ‘peace settlement’ with the Soviets, and many people in positions of power regard such a prospect with positive horror.” He added that “a war footing is the only basis of full employment.”[6]

And Harry Barnes noted that “the advantages of the cold war in bolstering the economy, avoiding a depression, and maintaining political tenure after 1945 were quickly recognized by both politicians and economists.”

The most recent analysis of Orwell’s Nineteen Eighty-Four in terms of permanent cold war was inU.S. News and World Report, in its issue marking the beginning of the year 1984:

No nuclear holocaust has occurred but Orwell’s concept of perpetual local conflict is borne out. Wars have erupted every year since 1945, claiming more than 30 million lives. The Defense Department reports that there currently are 40 wars raging that involve one-fourth of all nations in the world — from El Salvador to Kampuchea to Lebanon and Afghanistan.

Like the constant war of 1984, these post-war conflicts occurred not within superpower borders but in far-off places such as Korea and Vietnam. Unlike Orwell’s fictitious superpowers, Washington and Moscow are not always able to control events and find themselves sucked into local wars such as the current conflict in the Middle East heightening the risk of a superpower confrontation and use of nuclear armaments.[7]

But most Orwell scholars have ignored the critical permanent-cold-war underpinning to the totalitarianism in the book. Thus, in a recently published collection of scholarly essays on Orwell, there is barely a mention of militarism or war. [8]

In contrast, one of the few scholars who have recognized the importance of war in Orwell’sNineteen Eighty-Four was the Marxist critic Raymond Williams. While deploring the obvious anti-Soviet nature of Orwell’s thought, Williams noted that Orwell discovered the basic feature of theexisting two- or three-superpower world, “oligarchical collectivism,” as depicted by James Burnham, in his Managerial Revolution (1940), a book that had a profound if ambivalent impact upon Orwell. As Williams put it:

Orwell’s vision of power politics is also close to convincing. The transformation of official “allies” to “enemies” has happened, almost openly, in the generation since he wrote. His idea of a world divided into three blocs — Oceania, Eurasia, and Eastasia, of which two are always at war with the other though the alliances change — is again too close for comfort. And there are times when one can believe that what “had been called England or Britain” has become simply Airship One.[9]

A generation earlier, John Atkins had written that Orwell had “discovered this conception of the political future in James Burnham’s Managerial Revolution.” Specifically, “there is a state of permanent war but it is a contest of limited aims between combatants who cannot destroy each other. The war cannot be decisive. … As none of the states comes near conquering the others, however the war deteriorates into a series of skirmishes [although]. … The protagonists store atomic bombs.”[10]

To establish what we might call this “revisionist” interpretation of Nineteen Eighty-Four we must first point out that the book was not, as in the popular interpretation, a prophecy of the future so much as a realistic portrayal of existing political trends. Thus, Jeffrey Meyers points out thatNineteen Eighty-Four was less a “nightmare vision” (Irving Howe’s famous phrase) of the future than “a very concrete and naturalistic portrayal of the present and the past,” a “realistic synthesis and rearrangement of familiar materials.” And again, Orwell’s “statements about 1984 reveal that the novel, though set in a future time, is realistic rather than fantastic, and deliberately intensifies the actuality of the present.” Specifically, according to Meyers, Nineteen Eighty-Four was not “totalitarianism after its world triumph” as in the interpretation of Howe, but rather “the very real though unfamiliar political terrorism of Nazi Germany and Stalinist Russia transposed into the landscape of London in 1941–44.”[11] And not only Burnham’s work but the reality of the 1943 Teheran Conference gave Orwell the idea of a world ruled by three totalitarian superstates.

Bernard Crick, Orwell’s major biographer, points out that the English reviewers of Nineteen Eighty-Four caught on immediately that the novel was supposed to be an intensification of present trends rather than a prophecy of the future. Crick notes that these reviewers realized that Orwell had “not written utopian or anti-utopian fantasy … but had simply extended certain discernible tendencies of 1948 forward into 1984.”[12] Indeed, the very year 1984 was simply the transposition of the existing year, 1948. Orwell’s friend Julian Symons wrote that 1984 society was meant to be the “near future,” and that all the grim inventions of the rulers “were just extensions of ‘ordinary’ war and post-war things.” We might also point out that the terrifying Room 101 in Nineteen Eighty-Fourwas the same numbered room in which Orwell had worked in London during World War II as a British war propagandist.

But let Orwell speak for himself. Orwell was distressed at many American reviews of the book, especially in Time and Life, which, in contrast to the British, saw Nineteen Eighty-Four as the author’s renunciation of his long-held devotion to democratic socialism. Even his own publisher, Frederic Warburg, interpreted the book in the same way. This response moved Orwell, terminally ill in a hospital, to issue a repudiation. He outlined a statement to Warburg, who, from detailed notes, issued a press release in Orwell’s name. First, Orwell noted that, contrary to many reviews,Nineteen Eighty-Four was not prophecy but an analysis of what could happen, based on present political trends. Orwell then added: “Specifically, the danger lies in the structure imposed on Socialist and on liberal capitalist communities by the necessity to prepare for total war with the USSR and the new weapons, of which of course the atomic bomb is the most powerful and the most publicized. But danger also lies in the acceptance of a totalitarian outlook by intellectuals of all colours.” After outlining his forecast of several world superstates, specifically the Anglo-American world (Oceania) and a Soviet-dominated Eurasia, Orwell went on:

If these two great blocs line up as mortal enemies it is obvious that the Anglo-Americans will not take the name of their opponents. … The name suggested in 1984 is of course Ingsoc, but in practice a wide range of choices is open. In the USA the phrase “American” or “hundred per cent American” is suitable and the qualifying adjective is as totalitarian as any could wish.[13]

We are about as far from the world of Norman Podhoretz as we can get. While Orwell is assuredly anti-Communist and anticollectivist his envisioned totalitarianism can and does come in many guises and forms, and the foundation for his nightmare totalitarian world is a perpetual cold war that keeps brandishing the horror of modern atomic weaponry.

Shortly after the atom bomb was dropped on Japan, George Orwell pre-figured his world ofNineteen Eighty-Four in an incisive and important analysis of the new phenomenon. In an essay entitled “You and the Atom Bomb,” he noted that when weapons are expensive (as the A-bomb is) politics tends to become despotic, with power concentrated into the hands of a few rulers. In contrast, in the day when weapons were simple and cheap (as was the musket or rifle, for instance) power tends to be decentralized. After noting that Russia was thought to be capable of producing the A-bomb within five years (that is, by 1950), Orwell writes of the “prospect,” at that time, “of two or three monstrous super-states, each possessed of a weapon by which millions of people can be wiped out in a few seconds, dividing the world between them.” It is generally supposed, he noted, that the result will be another great war, a war which this time will put an end to civilization. But isn’t it more likely, he added, “that surviving great nations make a tacit agreement never to use the bomb against one another? Suppose they only use it, or the threat of it, against people who are unable to retaliate?”

Returning to his favorite theme, in this period, of Burnham’s view of the world in The Managerial Revolution, Orwell declares that Burnham’s geographical picture of the new world has turned out to be correct. More and more obviously the surface of the earth is being parcelled off into three great empires, each self-contained and cut off from contact with the outer world, and each ruled, under one disguise or another by a self-elected oligarchy. The haggling as to where the frontiers are to be drawn is still going on, and will continue for some years.

Orwell then proceeds gloomily:

The atomic bomb may complete the process by robbing the exploited classes and peoples of all power to revolt, and at the same time putting the possessors of the bomb on a basis of equality. Unable to conquer one another they are likely to continue ruling the world between them, and it is difficult to see how the balance can be upset except by slow and unpredictable demographic changes.

In short, the atomic bomb is likely “to put an end to large-scale wars at the cost of prolonging ‘a peace that is no peace.’” The drift of the world will not be toward anarchy, as envisioned by H.G. Wells, but toward “horribly stable … slave empires.”[14]

Over a year later, Orwell returned to his pessimistic perpetual-cold-war analysis of the postwar world. Scoffing at optimistic press reports that the Americans “will agree to inspection of armaments,” Orwell notes that “on another page of the same paper are reports of events in Greece which amount to a state of war between two groups of powers who are being so chummy in New York.” There are two axioms, he added, governing international affairs. One is that “there can be no peace without a general surrender of sovereignty,” and another is that “no country capable of defending its sovereignty ever surrenders it.” The result will be no peace, a continuing arms race, but no all-out war.[15]

Orwell completes his repeated wrestling with the works of James Burnham in his review of The Struggle for the World (1947). Orwell notes that the advent of atomic weapons has led Burnham to abandon his three-identical-superpowers view of the world, and also to shuck off his tough pose of value-freedom. Instead, Burnham is virtually demanding an immediate preventive war against Russia,” which has become the collectivist enemy, a preemptive strike to be launched before Russia acquires the atomic bomb.

While Orwell is fleetingly tempted by Burnham’s apocalyptic approach, and asserts that domination of Britain by the United States is to be preferred to domination by Russia, he emerges from the discussion highly critical. After all, Orwell writes, the

Russian regime may become more liberal and less dangerous a generation hence. … Of course, this would not happen with the consent of the ruling clique, but it is thinkable that the mechanics of the situation may bring it about. The other possibility is that the great powers will be simply too frightened of the effects of atomic weapons ever to make use of them. But that would be much too dull for Burnham. Everything must happen suddenly and completely.[16]

George Orwell’s last important essay on world affairs was published in Partisan Review in the summer of 1947. He there reaffirmed his attachment to socialism but conceded that the chances were against its coming to pass. He added that there were three possibilities ahead for the world. One (which, as he had noted a few months before was the new Burnham solution) was that the United States would launch an atomic attack on Russia before Russia developed the bomb. Here Orwell was more firmly opposed to such a program than he had been before. For even if Russia were annihilated, a preemptive attack would only lead to the rise of new empires, rivalries, wars, and use of atomic weapons. At any rate, the first possibility was not likely. The second possibility, declared Orwell, was that the cold war would continue until Russia got the bomb, at which point world war and the destruction of civilization would take place. Again, Orwell did not consider this possibility very likely. The third, and most likely, possibility is the old vision of perpetual cold war between blocs of superpowers. In this world,

the fear inspired by the atomic bomb and other weapons yet to come will be so great that everyone will refrain from using them. … It would mean the division of the world among two or three vast super-states, unable to conquer one another and unable to be overthrown by any internal rebellion. In all probability their structure would be hierarchic, with a semi-divine caste at the top and outright slavery at the bottom, and the crushing out of liberty would exceed anything the world has yet seen. Within each state the necessary psychological atmosphere would be kept up by complete severance from the outer world, and by a continuous phony war against rival states. Civilization of this type might remain static for thousands of years.[17]

Orwell (perhaps, like Burnham, now fond of sudden and complete solutions) considers this last possibility the worst.

It should be clear that George Orwell was horrified at what he considered to be the dominant trend of the postwar world: totalitarianism based on perpetual but peripheral cold war between shifting alliances of several blocs of super states. His positive solutions to this problem were fitful and inconsistent; in Partisan Review he called wistfully for a Socialist United States of Western Europe as the only way out, but he clearly placed little hope in such a development. His major problem was one that affected all democratic socialists of that era: a tension between their anticommunism and their opposition to imperialist, or at least interstate, wars. And so at times Orwell was tempted by the apocalyptic preventive-atomic-war solution, as was even Bertrand Russell during the same period. In another, unpublished article, “In Defense of Comrade Zilliacus,” written at some time near the end of 1947, Orwell, bitterly opposed to what he considered the increasingly procommunist attitude of his own Labour magazine, the Tribune, came the closest to enlisting in the cold war by denouncing neutralism and asserting that his hoped-for Socialist United States of Europe should ground itself on the backing of the United States of America. But despite these aberrations, the dominant thrust of Orwell’s thinking during the postwar period, and certainly as reflected in Nineteen Eighty-Four, was horror at a trend toward perpetual cold war as the groundwork for a totalitarianism throughout the world. And his hope for eventual loosening of the Russian regime, if also fitful, still rested cheek by jowl with his more apocalyptic leanings.

This first appeared in The Libertarian Forum, Volume XVIII, NO.7-8, July-August, 1984

What in hell is happening in America? This has been an Endless Summer, an odious, repellent, horrifying orgy of Patriotic Shlock. In all my years I have never seen so many blankety-blank American flags being waved, mindlessly, over and over again.

It started on that rotten last night of the Democratic convention, when the massed delegates were all waving, instead of the usual banners for their nominees, American flags, duly issued to them by the smooth Mondale machine. The culmination was the acceptance speech of Geraldine Ferraro, in which La Ferraro droned on about her immigrant mother, immigrant daughters, and God knows what else, all to the tune of American flags being waved, and, yes, masses of delegates sobbing and hugging each other.

I put it all down to one night’s aberration, little realizing what an orgy of mass sobbing and flag-waving we were all in for. The next step, of course, was the infernal Olympics, in which patriotic shlock reached a new all-time low. Again, what in hell is going on? There was nothing at all like this in the last Olympics held in the U.S. – the winter Olympics of 1976. There was no sobbing, no flag-waving, in fact there was a healthy realism by the media focussing on the transportation foulups at Lake Placid. But here, in L.A., in the home of Hollywood shlock, all of a sudden everyone went nuts, the audience, the media, even the athletes. The pattern began with the Opening Ceremonies, a vast exercise in tedium, when the flag-waving, the sobbing, and all the rest began, and never let up. Come on: 84 pianists in blue tuxes, simultaneously faking the playing of Rhapsody in Blue! And it wasn’t only ABC (see below) that went bonkers; the press was almost as bad, San Francisco’s famous voice of the Peepul, Truman Democrat Herb Caen, writing two lengthy columns on the wonders of the Opening Ceremonies, how it “made everyone proud to be an American again,” “proud to wave flags again,” etc. Yecchh! Also characteristically weighing in to do his muddled bit was philosopher Tibor Machan in Reason magazine, taking off on a few facts, all of them wrong, about the Olympics.

ABC was disgustingly chauvinist, much more than in past Olympics. Cameras pointed shamelessly to Americans to the exclusion of virtually anyone else; commentary was American-hype to the nth degree; behind every American athlete pictured was a huge American flag waving in the nonexistent breeze. ABC got so bad that Olympic authorities began to complain.

But it wasn’t just ABC or the press. It was the American masses, the audience themselves, that succumbed to the most unsportsmanlike behavior. The mob, bellowing “USA,” “USA,” the cheers for every U.S. point, the booing when a U.S. gymnast got less than a perfect 10. Probably the low point of the entire Games was when Carl Lewis, upon winning the 100 meters – typically, about 20 meters ahead of everyone else – grabbed a huge American flag, and virtually wrapping himself in the thing, ran around the Stadium. It was the apex of a truly obscene spectacle.

And what ever happened to the old propaganda of the U.S. media that the Olympic Games are not a team, but an individual, sport, so that one shouldn’t even count the medals gained by the various countries? That old hype apparently applied only when the Soviet Union and East Germany used to walk off with most of the medals. But now that the East European bloc was safely out of the way, Oh the crowing and oh the gloating about all the medals “we” of the U.S. were racking up! Hey, fantastic, so we beat up on the British Antilles, and all the other one-horse countries that the U.S. paid to show up. As usual, the American mob was ungallant from start to finish, as in the invasion of tiny Grenada, gloating about the huge U.S. stomping on minuscule opposition!

An old friend of mine, a U.S. patriot from many years of being obliged to live in a hated foreign land, upon watching the opening ceremonies, lamented, “It made me ashamed to be an American!”

I tell you: Watching the Olympics made me nostalgic for the good old days of the New Left, and the ranting about “Amerika” or even “Amerikkka.” One more day of this horror, one more binge of patriotic sobbing and flag-waving, and I will be ready for the Jeff Hummell Deviation (i.e. opposition to all nationalism, even national liberation against imperial States.) And for the first time in decades I look with favor on old Herbert Hoover, President when the last Summer Olympics were held in the U.S. (Los Angeles in 1932), who didn’t bother officiating at the opening ceremonies because “they weren’t important.” At this point, I am almost ready to forgive Hoover his origination of the New Deal.

This article, which first appeared in Modern Age for Fall 1973, is collected in Egalitarianism as a Revolt Against Nature and Other Essays.

For well over a century, the Left has generally been conceded to have morality, justice, and “idealism” on its side; the Conservative opposition to the Left has largely been confined to the “impracticality” of its ideals. A common view, for example, is that socialism is splendid “in theory,” but that it cannot “work” in practical life. What the Conservatives failed to see is that while short-run gains can indeed be made by appealing to the impracticality of radical departures from the status quo, that by conceding the ethical and the “ideal” to the Left they were doomed to long-run defeat. For if one side is granted ethics and the “ideal” from the start, then that side will be able to effect gradual but sure changes in its own direction; and as these changes accumulate, the stigma of “impracticality” becomes less and less directly relevant. The Conservative opposition, having staked its all on the seemingly firm ground of the “practical” (that is, the status quo) is doomed to lose as the status quo moves further in the left direction. The fact that the unreconstructed Stalinists are universally considered to be the “Conservatives” in the Soviet Union is a happy logical joke upon conservatism; for in Russia the unrepentant statists are indeed the repositories of at least a superficial “practicality” and of a clinging to the existing status quo.

Never has the virus of “practicality” been more widespread than in the United States, for Americans consider themselves a “practical” people, and hence, the opposition to the Left, while originally stronger than elsewhere, has been perhaps the least firm at its foundation. It is now the advocates of the free market and the free society who have to meet the common charge of “impracticality.”

In no area has the Left been granted justice and morality as extensively and almost universally as in its espousal of massive equality. It is rare indeed in the United States to find anyone, especially any intellectual, challenging the beauty and goodness of the egalitarian ideal. So committed is everyone to this ideal that “impracticality” – that is, the weakening of economic incentives – has been virtually the only criticism against even the most bizarre egalitarian programs. The inexorable march of egalitarianism is indication enough of the impossibility of avoiding ethical commitments; the fiercely “practical” Americans, in attempting to avoid ethical doctrines, cannot help setting forth such doctrines, but they can now only do so in unconscious, ad hoc, and unsystematic fashion. Keynes’s famous insight that “practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist” – is true all the more of ethical judgments and ethical theory. 1

The unquestioned ethical status of “equality” may be seen in the common practice of economists. Economists are often caught in a value-judgment bind – eager to make political pronouncements. How can they do so while remaining “scientific” and value-free? In the area of egalitarianism, they have been able to make a flat value judgment on behalf of equality with remarkable impunity. Sometimes this judgment has been frankly personal; at other times, the economist has pretended to be the surrogate of “society” in the course of making its value judgment. The result, however, is the same. Consider, for example, the late Henry C. Simons. After properly criticizing various “scientific” arguments for progressive taxation, he came out flatly for progression as follows:

The case for drastic progression in taxation must be rested on the case against inequality – on the ethical or aesthetic judgment that the prevailing distribution of wealth and income reveals a degree (and/or kind) of inequality which is distinctly evil or unlovely. 2

Another typical tactic may be culled from a standard text on public finance. According to Professor John F. Due, “[t]he strongest argument for progression is the fact that the consensus of opinion in society today regards progression as necessary for equity. This is, in turn, based on the principle that the pattern of income distribution, before taxes, involves excessive inequality.” The latter “can be condemned on the basis of inherent unfairness in terms of the standards accepted by society.” 3

Whether the economist boldly advances his own value judgments or whether he presumes to reflect the values of “society,” his immunity from criticism has been remarkable nonetheless. While candor in proclaiming one’s values may be admirable, it is surely not enough; in the quest for truth it is scarcely sufficient to proclaim one’s value judgments as if they must be accepted as tablets from above that are not themselves subject to intellectual criticism and evaluation. Is there no requirement that these value judgments be in some sense valid, meaningful, cogent, true? To raise such considerations, of course, is to flout the modern canons of pure wertfreiheit in social science from Max Weber onward, as well as the still older philosophic tradition of the stern separation of “fact and value,” but perhaps it is high time to raise such fundamental questions. Suppose, for example, that Professor Simons’s ethical or aesthetic judgment was not on behalf of equality but of a very different social ideal. Suppose, for example, he had been in favor of the murder of all short people, of all adults under five feet, six inches in height. And suppose he had then written: “The case for the liquidation of all short people must be rested on the case against the existence of short people – on the ethical or aesthetic judgment that the prevailing number of short adults is distinctly evil or unlovely.” One wonders if the reception accorded to Professor Simons’s remarks by his fellow economists or social scientists would have been quite the same. Or, we can ponder Professor Due writing similarly on behalf of the “opinion of society today” in the Germany of the 1930s with regard to the social treatment of Jews. The point is that in all these cases the logical status of Simons’s or Due’s remarks would have been precisely the same, even though their reception by the American intellectual community would have been strikingly different.

My point so far has been twofold: (1) that it is not enough for an intellectual or social scientist to proclaim his value judgments – that these judgments must be rationally defensible and must be demonstrable to be valid, cogent, and correct: in short, that they must no longer be treated as above intellectual criticism; and (2) that the goal of equality has for too long been treated uncritically and axiomatically as the ethical ideal. Thus, economists in favor of egalitarian programs have typically counterbalanced their uncriticized “ideal” against possible disincentive effects on economic productivity; but rarely has the ideal itself been questioned. 4

Let us proceed, then, to a critique of the egalitarian ideal itself – should equality be granted its current status as an unquestioned ethical ideal? In the first place, we must challenge the very idea of a radical separation between something that is “true in theory” but “not valid in practice.” If a theory is correct, then it does work in practice; if it does not work in practice, then it is a bad theory. The common separation between theory and practice is an artificial and fallacious one. But this is true in ethics as well as anything else. If an ethical ideal is inherently “impractical,” that is, if it cannot work in practice, then it is a poor ideal and should be discarded forthwith. To put it more precisely, if an ethical goal violates the nature of man and/or the universe and, therefore, cannot work in practice, then it is a bad ideal and should be dismissed as a goal. If the goal itself violates the nature of man, then it is also a poor idea to work in the direction of that goal.

Suppose, for example, that it has come to be adopted as a universal ethical goal that all men be able to fly by flapping their arms. Let us assume that “pro-flappers” have been generally conceded the beauty and goodness of their goal, but have been criticized as “impractical.” But the result is unending social misery as society tries continually to move in the direction of arm-flying, and the preachers of arm-flapping make everyone’s lives miserable for being either lax or sinful enough not to live up to the common ideal. The proper critique here is to challenge the “ideal” goal itself; to point out that the goal itself is impossible in view of the physical nature of man and the universe; and, therefore, to free mankind from its enslavement to an inherently impossible and, hence, evil goal. But this liberation could never occur so long as the anti-armfliers continued to be solely in the realm of the “practical” and to concede ethics and “idealism” to the high priests of arm-flying. The challenge must take place at the core – at the presumed ethical superiority of a nonsensical goal. The same, I hold, is true of the egalitarian ideal, except that its social consequences are far more pernicious than an endless quest for man’s flying unaided. For the condition of equality would wreak far more damage upon mankind.

What, in fact, is “equality”? The term has been much invoked but little analyzed. A and B are “equal” if they are identical to each other with respect to a given attribute. Thus, if Smith and Jones are both exactly six feet in height, then they may be said to be “equal” in height. If two sticks are identical in length, then their lengths are “equal,” etc. There is one and only one way, then, in which any two people can really be “equal” in the fullest sense: they must be identical in all of their attributes. This means, of course, that equality of all men – the egalitarian ideal – can only be achieved if all men are precisely uniform, precisely identical with respect to all of their attributes. The egalitarian world would necessarily be a world of horror fiction – a world of faceless and identical creatures, devoid of all individuality, variety, or special creativity.

Indeed, it is precisely in horror fiction where the logical implications of an egalitarian world have been fully drawn. Professor Schoeck has resurrected for us the depiction of such a world in the British anti-Utopian novel Facial Justice, by L.P. Hartley, in which envy is institutionalized by the State’s making sure that all girls’ faces are equally pretty, with medical operations being performed on both beautiful and ugly girls to bring all of their faces up or down to the general common denominator. 5 A short story by Kurt Vonnegut provides an even more comprehensive description of a fully egalitarian society. Thus, Vonnegut begins his story, “Harrison Bergeron”:

The year was 2081, and everybody was finally equal. They weren’t only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General.

The “handicapping” worked partly as follows: Hazel had a perfectly average intelligence, which meant she couldn’t think about anything except in short bursts. And George, while his intelligence was way above normal, had a little mental handicap radio in his ear. He was required by law to wear it at all times. It was tuned to a government transmitter. Every twenty seconds or so, the transmitter would send out some sharp noise to keep people like George from taking unfair advantage of their brains. 6

The horror we all instinctively feel at these stories is the intuitive recognition that men are not uniform, that the species, mankind, is uniquely characterized by a high degree of variety, diversity, differentiation; in short, inequality. An egalitarian society can only hope to achieve its goals by totalitarian methods of coercion; and, even here, we all believe and hope the human spirit of individual man will rise up and thwart any such attempts to achieve an ant-heap world. In short, the portrayal of an egalitarian society is horror fiction because, when the implications of such a world are fully spelled out, we recognize that such a world and such attempts are profoundly antihuman; being antihuman in the deepest sense, the egalitarian goal is, therefore, evil and any attempts in the direction of such a goal must be considered evil as well.

The great fact of individual difference and variability (that is, inequality) is evident from the long record of human experience; hence, the general recognition of the antihuman nature of a world of coerced uniformity. Socially and economically, this variability manifests itself in the universal division of labor, and in the “Iron Law of Oligarchy” – the insight that, in every organization or activity, a few (generally the most able and/or the most interested) will end up as leaders, with the mass of the membership filling the ranks of the followers. In both cases, the same phenomenon is at work – outstanding success or leadership in any given activity is attained by what Jefferson called a “natural aristocracy” – those who are best attuned to that activity.

The age-old record of inequality seems to indicate that this variability and diversity is rooted in the biological nature of man. But it is precisely such a conclusion about biology and human nature that is the most galling of all possible irritants to our egalitarians. Even egalitarians would be hard put to deny the historical record, but their answer is that “culture” has been to blame; and since they obviously hold that culture is a pure act of the will, then the goal of changing the culture and inculcating society with equality seems to be attainable. In this area, the egalitarians slough off any pretense to scientific caution; they are scarcely content with acknowledging biology and culture as mutually interacting influences. Biology must be read out of court quickly and totally.

Let us ponder an example that is deliberately semi-frivolous. Suppose that we observe our culture and find a common dictum to be: “Redheads are excitable.” Here is a judgment of inequality, a conclusion that redheads as a group tend to differ from the nonredhead population. Suppose, then, that egalitarian sociologists investigate the problem, and they find that redheads do, indeed, tend to be more excitable than nonredheads by a statistically significant amount. Instead of admitting the possibility of some sort of biological difference, the egalitarian will quickly add that the “culture” is responsible for the phenomenon: the generally accepted “stereotype” that redheads are excitable had been instilled into every redheaded child from an early age, and he or she has simply been internalizing these judgments and acting in the way society was expecting him to act. Redheads, in brief, had been “brainwashed” by the predominant nonredhead culture.

While not denying the possibility of such a process occurring, this common complaint seems decidedly unlikely on rational analysis. For the egalitarian culture-bugaboo implicitly assumes that the “culture” arrives and accumulates haphazardly, with no reference to social facts. The idea that “redheads are excitable” did not originate out of the thin air or as a divine commandment; how, then, did the idea come into being and gain general currency? One favorite egalitarian device is to attribute all such group-identifying statements to obscure psychological drives. The public had a psychological need to accuse some social group of excitability, and redheads were fastened on as scapegoats. But why were redheads singled out? Why not blondes or brunettes? The horrible suspicion begins to loom that perhaps redheads were singled out because they were and are indeed more excitable and that, therefore, society’s “stereotype” is simply a general insight into the facts of reality. Certainly this explanation accounts for more of the data and the processes at work and is a much simpler explanation besides. Regarded objectively, it seems to be a far more sensible explanation than the idea of the culture as an arbitrary and ad hoc bogeyman. If so, then we might conclude that redheads are biologically more excitable and that propaganda beamed at redheads by egalitarians urging them to be less excitable is an attempt to induce redheads to violate their nature; therefore, it is this latter propaganda that may more accurately be called “brainwashing.”

This is not to say, of course, that society can never make a mistake and that its judgments of group-identity are always rooted in fact. But it seems to me that the burden of proof is far more on the egalitarians than on their supposedly “unenlightened” opponents.

Since egalitarians begin with the a priori axiom that all people, and hence all groups of peoples, are uniform and equal, it then follows for them that any and all group differences in status, prestige, or authority in society must be the result of unjust “oppression” and irrational “discrimination.” Statistical proof of the “oppression” of redheads would proceed in a manner all too familiar in American political life; it might be shown, for example, that the median redhead income is lower than nonredheaded income, and further that the proportion of redheaded business executives, university professors, or congressmen is below their quotal representation in the population. The most recent and conspicuous manifestation of this sort of quotal thinking was in the McGovern movement at the 1972 Democratic Convention. A few groups are singled out as having been “oppressed” by virtue of delegates to previous conventions falling below their quotal proportion of the population as a whole. In particular, women, youth, blacks, Chicanos (or the so-called Third World) were designated as having been oppressed; as a result, the Democratic Party, under the guidance of egalitarian-quota thinking, overrode the choices of the voters in order to compel their due quotal representation of these particular groups.

In some cases, the badge of “oppression” was an almost ludicrous construction. That youths of 18 to 25 years of age had been “underrepresented” could easily have been placed in proper perspective by areductio ad absurdum, surely some impassioned McGovernite reformer could have risen to point out the grievous “underrepresentation” of five-year olds at the convention and to urge that the five-year-old bloc receive its immediate due. It is only commonsense biological and social insight to realize that youths win their way into society through a process of apprenticeship; youths know less and have less experience than mature adults, and so it should be clear why they tend to have less status and authority than their elders. But to accept this would be to cast the egalitarian creed into some substantial doubt; further, it would fly into the face of the youth-worship that has long been a grave problem of American culture. And so young people have been duly designated as an “oppressed class,” and the coercing of their population quota is conceived as only just reparation for their previously exploited condition. 7

Women are another recently discovered “oppressed class,” and the fact that political delegates have habitually been far more than 50 percent male is now held to be an evident sign of their oppression. Delegates to political conventions come from the ranks of party activists, and since women have not been nearly as politically active as men, their numbers have understandably been low. But, faced with this argument, the widening forces of “women’s liberation” in America again revert to the talismanic argument about “brainwashing” by our “culture.” For the women’s liberationists can hardly deny the fact that every culture and civilization in history, from the simplest to the most complex, has been dominated by males. (In desperation, the liberationists have lately been countering with fantasies about the mighty Amazonian empire.) Their reply, once again, is that from time immemorial a male-dominated culture has brainwashed oppressed females to confine themselves to nurture, home, and the domestic hearth. The task of the liberationists is to effect a revolution in the female condition by sheer will, by the “raising of consciousness.” If most women continue to cleave to domestic concerns, this only reveals the “false consciousness” that must be extirpated.

Of course, one neglected reply is that if, indeed, men have succeeded in dominating every culture, then this in itself is a demonstration of male “superiority”; for if all genders are equal, how is it that male domination emerged in every case? But apart from this question, biology itself is being angrily denied and cast aside. The cry is that there are no, can be no, must be no biological differences between the sexes; all historical or current differences must be due to cultural brainwashing. In his brilliant refutation of the women’s liberationist Kate Millett, Irving Howe outlines several important biological differences between the sexes, differences important enough to have lasting social effects. They are: (1) “the distinctive female experience of maternity” including what the anthropologist Malinowski calls an “intimate and integral connection with the child . . . associated with physiological effects and strong emotions”; (2) “the hormonic components of our bodies as these vary not only between the sexes but at different ages within the sexes”; (3) “the varying possibilities for work created by varying amounts of musculature and physical controls”; and (4) “the psychological consequences of different sexual postures and possibilities,” in particular the “fundamental distinction between the active and passive sexual roles” as biologically determined in men and women respectively. 8

Howe goes on to cite the admission by Dr. Eleanor Maccoby in her study of female intelligence “that it is quite possible that there are genetic factors that differentiate the two sexes and bear upon their intellectual performance…. For example, there is good reason to believe that boys are innately more aggressive than girls – and I mean aggressive in the broader sense, not just as it implies fighting, but as it implies dominance and initiative as well – and if this quality is one which underlies the later growth of analytic thinking, then boys have an advantage which girls…will find difficult to overcome.” Dr. Maccoby adds that “if you try to divide child training among males and females, we might find out that females need to do it and males don’t.” 9

The sociologist Arnold W. Green points to the repeated emergence of what the egalitarians denounce as “stereotyped sex roles” even in communities originally dedicated to absolute equality. Thus, he cites the record of the Israeli kibbutzim:

The phenomenon is worldwide: women are concentrated in fields which require, singly or in combination, housewifely skills, patience and routine, manual dexterity, sex appeal, contact with children. The generalization holds for the Israeli kibbutz, with its established ideal of sexual equality. A “regression” to a separation of “women’s work” from “men’s work” occurred in the division of labor, to a state of affairs which parallels that elsewhere. The kibbutz is dominated by males and traditional male attitudes, on balance to the content of both sexes.10

Irving Howe unerringly perceives that at the root of the women’s liberation movement is resentment against the very existence of women as a distinctive entity:

For what seems to trouble Miss Millett isn’t merely the injustices women have suffered or the discriminations to which they continue to be subject. What troubles her most of all…is the sheer existence of women. Miss Millett dislikes the psychobiological distinctiveness of women, and she will go no further than to recognize – what choice is there, alas? – the inescapable differences of anatomy. She hates the perverse refusal of most women to recognize the magnitude of their humiliation, the shameful dependence they show in regard to (not very independent) men, the maddening pleasures they even take in cooking dinners for the “master group” and wiping the noses of their snotty brats. Raging against the notion that such roles and attitudes are biologically determined, since the very thought of the biological seems to her a way of forever reducing women to subordinate status, she nevertheless attributes to “culture” so staggering a range of customs, outrages, and evils that this culture comes to seem a force more immovable and ominous than biology itself.11

In a perceptive critique of the women’s liberation movement, Joan Didion perceives its root to be a rebellion not only against biology but also against the “very organization of nature” itself:

If the necessity for conventional reproduction of the species seemed unfair to women, then let us transcend, via technology, “the very organization of nature,” the oppression, as Shulamith Firestone saw it, “that goes back through recorded history to the animal kingdom itself.” I accept the Universe, Margaret Fuller had finally allowed: Shulamith Firestone did not.12

To which one is tempted to paraphrase Carlyle’s admonition: “Egad, madam, you’d better.”

Another widening rebellion against biological sex norms, as well as against natural diversity, has been the recently growing call for bisexuality by Left intellectuals. The avoidance of “rigid, stereotyped” heterosexuality and the adoption of indiscriminate bisexuality is supposed to expand consciousness, to eliminate “artificial” distinctions between the sexes and to make all persons simply and unisexually “human.” Once again, brainwashing by a dominant culture (in this case, heterosexual) has supposedly oppressed a homosexual minority and blocked off the uniformity and equality inherent in bisexuality. For then every individual could reach his or her fullest “humanity” in the “polymorphous perversity” so dear to the hearts of such leading New Left social philosophers as Norman O. Brown and Herbert Marcuse.

That biology stands like a rock in the face of egalitarian fantasies has been made increasingly clear in recent years. The researches of biochemist Roger J. Williams have repeatedly emphasized the great range of individual diversity throughout the entire human organism. Thus:

Individuals differ from each other even in the minutest details of anatomy and body chemistry and physics; finger and toe prints; microscopic texture of hair; hair pattern on the body, ridges and “moons” on the finger and toenails; thickness of skin, its color, its tendency to blister; distribution of nerve endings on the surface of the body; size and shape of ears, of ear canals, or semi-circular canals; length of fingers; character of brain waves (tiny electrical impulses given off by the brain); exact number of muscles in the body; heart action; strength of blood vessels; blood groups; rate of clotting of blood – and so on almost ad infinitum.

We now know a great deal about how inheritance works and how it is not only possible but certain that every human being possesses by inheritance an exceedingly complex mosaic, composed of thousands of items, which is distinctive for him alone.13

The genetic basis for inequality of intelligence has also become increasingly evident, despite the emotional abuse heaped upon such studies by fellow scientists as well as the lay public. Studies of identical twins raised in contrasting environments have been among the ways that this conclusion has been reached; and Professor Richard Herrnstein has recently estimated that 80 percent of the variability in human intelligence is genetic in origin. Herrnstein concludes that any political attempts to provide environmental equality for all citizens will only intensify the degree of socioeconomic differences caused by genetic variability.14

The egalitarian revolt against biological reality, as significant as it is, is only a subset of a deeper revolt: against the ontological structure of reality itself, against the “very organization of nature”; against the universe as such. At the heart of the egalitarian left is the pathological belief that there is no structure of reality; that all the world is a tabula rasa that can be changed at any moment in any desired direction by the mere exercise of human will – in short, that reality can be instantly transformed by the mere wish or whim of human beings. Surely this sort of infantile thinking is at the heart of Herbert Marcuse’s passionate call for the comprehensive negation of the existing structure of reality and for its transformation into what he divines to be its true potential.

Nowhere is the Left Wing attack on ontological reality more apparent than in the Utopian dreams of what the future socialist society will look like. In the socialist future of Charles Fourier, according to Ludwig von Mises:

all harmful beasts will have disappeared, and in their places will be animals which will assist man in his labors – or even do his work for him. An antibeaver will see to the fishing; an antiwhale will move sailing ships in a calm; an antihippopotamus will tow the river boats. Instead of the lion there will be an antilion, a steed of wonderful swiftness, upon whose back the rider will sit as comfortably as in a well-sprung carriage. “It will be a pleasure to live in a world with such servants.”15

Furthermore, according to Fourier, the very oceans would contain lemonade rather than salt water.16

Similarly absurd fantasies are at the root of the Marxian utopia of communism. Freed from the supposed confines of specialization and the division of labor (the heart of any production above the most primitive level and hence of any civilized society), each person in the communist utopia would fully develop all of his powers in every direction.17 As Engels wrote in his Anti-Dühring, communism would give “each individual the opportunity to develop and exercise all his faculties, physical and mental, in all directions.”18 And Lenin looked forward in 1920 to the “abolition of the division of labor among people…the education, schooling, and training of people with an all-around development and an all-around training, people able to do everything. Communism is marching and must march toward this goal, and will reach it.”19

In his trenchant critique of the communist vision, Alexander Gray charges:

That each individual should have the opportunity of developing all his faculties, physical and mental, in all directions, is a dream which will cheer the vision only of the simple-minded, oblivious of the restrictions imposed by the narrow limits of human life. For life is a series of acts of choice, and each choice is at the same time a renunciation.

Even the inhabitant of Engels’s future fairyland will have to decide sooner or later whether he wishes to be Archbishop of Canterbury or First Sea Lord, whether he should seek to excel as a violinist or as a pugilist, whether he should elect to know all about Chinese literature or about the hidden pages in the life of a mackerel.20

Of course one way to try to resolve this dilemma is to fantasize that the New Communist Man of the future will be a superman, superhuman in his abilities to transcend nature. William Godwin thought that, once private property was abolished, man would become immortal. The Marxist theoretician Karl Kautsky asserted that in the future communist society, “a new type of man will arise…a superman…an exalted man.” And Leon Trotsky prophesied that under communism:

man will become incomparably stronger, wiser, finer. His body more harmonious, his movements more rhythmical, his voice more musical…. The human average will rise to the level of an Aristotle, a Goethe, a Marx. Above these other heights new peaks will arise.21

We began by considering the common view that the egalitarians, despite a modicum of impracticality, have ethics and moral idealism on their side. We end with the conclusion that egalitarians, however intelligent as individuals, deny the very basis of human intelligence and of human reason: the identification of the ontological structure of reality, of the laws of human nature, and the universe. In so doing, the egalitarians are acting as terribly spoiled children, denying the structure of reality on behalf of the rapid materialization of their own absurd fantasies. Not only spoiled but also highly dangerous; for the power of ideas is such that the egalitarians have a fair chance of destroying the very universe that they wish to deny and transcend, and to bring that universe crashing around all of our ears. Since their methodology and their goals deny the very structure of humanity and of the universe, the egalitarians are profoundly antihuman; and, therefore, their ideology and their activities may be set down as profoundly evil as well. Egalitarians do not have ethics on their side unless one can maintain that the destruction of civilization, and even of the human race itself, may be crowned with the laurel wreath of a high and laudable morality.

References

1 John Maynard Keynes, The General Theory of Employment, Interest, and Money (New York: Harcourt, Brace, 1936), p. 383.

2 Henry C. Simons, Personal Income Taxation (1938), pp. 18-19, quoted in Walter J. Blum and Harry Kalven, Jr., The Uneasy Case for Progressive Taxation (Chicago: University of Chicago Press, 1953), p. 72.

3 John F. Due, Government Finance (Homewood, Ill.: Richard D. Irwin, 1954), pp. 128-29.

4 Thus: A third line of objection to progression, and undoubtedly the one which has received the most attention, is that it lessens the economic productivity of the society. Virtually everyone who has advocated progression in an income tax has recognized this as a counterbalancing consideration. (Blum and Kalven, The Uneasy Case for Progressive Taxation, p. 21) The “ideal” vs. the “practical” once again!

5 Helmut Schoeck, Envy (New York: Harcourt, Brace, and World, 1970), pp. 149-55.

6 Kurt Vonnegut, Jr., “Harrison Bergeron,” in Welcome to the Monkey House (New York: Dell, 1970), p. 7.

7 Egalitarians have, among their other activities, been busily at work “correcting” the English language. The use of the word “girl,” for example, is now held to grievously demean and degrade female youth and to imply their natural subservience to adults. As a result, Left egalitarians now refer to girls of virtually any age as “women,” and we may confidently look forward to reading about the activities of “a five-year-old woman.”

8 Irving Howe, “The Middle-Class Mind of Kate Millett,” Harper’s (December, 1970): 125–26.

9 Ibid., p. 126.

10 Arnold W. Green, Sociology (6th ed., New York: McGraw-Hill, 1972), p. 305. Green cites the study by A.I. Rabin, “The Sexes: Ideology and Reality in the Israeli Kibbutz,” in G.H. Seward and R.G. Williamson, eds., Sex Roles in Changing Society (New York: Random House, 1970), pp. 285–307.

11 Howe, “The Middle-Class Mind of Kate Millett,” p. 124.

12 Joan Didion, “The Women’s Movement,” New York Times Review of Books (July 30, 1972), p. 1

13 Roger J. Williams, Free and Unequal (Austin: University of Texas Press, 1953), pp. 17, 23. See also by Williams Biochemical Individuality (New York: John Wiley, 1963) and You are Extraordinary (New York: Random House, 1967).

14 Richard Herrnstein, “IQ,” Atlantic Monthly (September, 1971).

15 Ludwig von Mises, Socialism: An Economic and Sociological Analysis (New Haven, Conn.: Yale University Press, 1951), pp. 163–64.

16 Ludwig von Mises, Human Action (New Haven, Conn.: Yale University Press, 1949), p. 71. Mises cites the first and fourth volumes of Fourier’s Oeuvres Complètes.

17 For more on the communist utopia and the division of labor, see Murray N. Rothbard, Freedom, Inequality, Primitivism, and the Division of Labor (chap. 16, present volume).

18 Quoted in Alexander Gray, The Socialist Tradition (London: Longmans, Green, 1947), p. 328.

19 Italics are Lenin’s. V.I. Lenin, Left-Wing Communism: An Infantile Disorder (New York: International Publishers, 1940), p. 34.

20 Gray, The Socialist Tradition, p. 328.

21 Quoted in Mises, Socialism: An Economic and Sociological Analysis, p. 164.

The Best of Murray Rothbard

Rothbard’s review of George Orwell’s Nineteen Eight-Four (Harcourt, 1949) appeared in Analysis, September 1949, p. 4

In recent years, many writers have given us their vision of the coming collectivist future. At the turn of the century, neither Edward Bellamy nor H. G. Wells suspected that the collectivist societies of their dreams were so close at hand. As collectivism sprouted following World War I, many keen observers felt that there was a big difference between the idyllic Edens pictured by Bellamy and Wells and the actual conditions of the various “waves of the future.”

Notable among these revised forecasts of the world of the future were Aldous Huxley’s Brave New World and Ayn Rand’s Anthem. Both of their future worlds, evil as they were, had saving graces. Huxley’s future was spiritually dead, but at least the masses were happy; Ayn Rand’s dictators were timid, stupid men who permitted a renascent individualist to escape from the strangling collectivist world and begin life anew.

George Orwell’s collectivist Utopia has plugged all the loopholes. There is no hope at all for the individual or for humanity, and so the effect on the reader is devastating. Orwell’s future is run by a Party whose job is the total exercise of Power, and it goes about its job with diabolic efficiency and ingenuity. The Party represents itself as the embodiment of the principles of Ingsoc, or English Socialism. These principles turn out to be: blind, unquestioning obedience to the Party, and equally blind hatred of any person or group the Party proclaims as its enemy. These emotions are the only ones permitted to anybody; all others, such as personal and family love, are systematically stamped out.

All ideas are of course treasonable and subversive – the only persons permitted to live are those who unthinkingly parrot the Party Line. Any man with a bent for independent thought is subtly encouraged in his heresy by the Thought Police. Then, when he has come to realize the nature of the regime and hates it thoroughly, the Ministry of Love takes over and, via the most horrible forms of torture, burns out of him any spark of human dignity. Finally, the heretic goes to his slaughter convinced of the goodness of his persecutors. He dies loving the Party and its mythical leader, Big Brother. Not even martyrdom is permitted in the inferno of the future.

To accomplish its purpose of destroying the human mind and heart, the Party uses: constant propaganda, inducing all to love Big Brother and hate his enemies; the destruction of truth by continually altering historical records to conform to the ever-changing Party Line – thus history is destroyed and all truth flows from the Party; the destruction of language to make it impossible to think independent thoughts – by confusing the meaning of words and by introducing a new gibberish-language; and the destruction of logic by a process known as doublethink defined as the capacity to hold in one’s mind two contradictory beliefs at the same time.

One significant method that the Party uses to remain in power is to contrive to keep its country always at war with some other country. The other countries are also run by similar parties, though each have different names. By the process of doublethink every loyal Party member believes that his part will ultimately conquer the world, yet also recognizes that all the countries tacitly engage in a war that never becomes too “hot.” Thus, each Party has an excuse to starve and terrorize its subjects in the name of military necessity, while its ruler remains secure from any wartime disaster.

“I understand how,” said Winston Smith, the pathetic heretic of Nineteen Eight-Four,“but I don’t understand why.” Why does the Party do all this? One of its leaders explains:

“The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. We are different from all the oligarchies of the past in that we know what we are doing. All the others were cowards and hypocrites. They never had the courage to recognize their motives. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means; it is an end. The object of persecution is persecution. The object of torture is torture. The object of power is power. How does one man assert his power over another? By making him suffer. Unless he is suffering, how can you be sure that he is obeying your will and not his own? Power is in inflicting pain and humiliation. Power is in tearing human minds to pieces and putting them together again in new shapes of your own choosing. In our world, there will be no emotions except fear, rage, triumph, and self-abasement – a world of fear and treachery and torment. If you want a picture of the future, imagine a boot stamping on a human face forever.” Orwell’s collectivist world of the future is doubtless a nightmare – but is it merely a dream?

The Best of Murray Rothbard

This first appeared in The Libertarian Forum, Volume I, NO.VII, July 1, 1969

Most people, when they hear the word “revolution”, think immediately and only of direct acts of physical confrontation with the State: raising barricades in the streets, battling a cop, storming the Bastille or other government buildings. But this is only one small part of revolution. Revolution is a mighty, complex, long-run process, a complicated movement with many vital parts and functions. It is the pamphleteer writing in his study, it is the journalist, the political club, the agitator, the organizer, the campus activist, the theoretician, the philanthropist. It is all this and much more. Each person and group has its part to play in this great complex movement.

Let us take, for example, the major model for libertarians in our time: the great classical liberal, or better, “classical radical”, revolutionary movement of the seventeenth, eighteenth, and nineteenth centuries. These our ancestors created a vast, sprawling, and brilliant revolutionary movement, not only in the United States but throughout the Western world, that lasted for several centuries. This was the movement largely responsible for radically changing history, for almost destroying history as it was previously known to man. For before these centuries, the history of man, with one or two luminous exceptions, was a dark and gory record of tyranny and despotism, a record of various absolute States and monarchs crushing and exploiting their underlying populations, largely peasants, who lived a brief and brutish life at bare subsistence, devoid of hope or promise. It was a classical liberalism and radicalism that brought to the mass of people that hope and that promise, and which launched the great process of fulfillment. All that man has achieved today, in progress, in hope, in living standards, we can attribute to that revolutionary movement, to that “revolution”. This great revolution was our father; it is now our task to complete its unfinished promise.

This classical revolutionary movement was made up of many parts. It was the libertarian theorists and ideologists, the men who created and wove the strands of libertarian theory and principle: the La Boeties, the Levellers in seventeenth-century England, the eighteenth-century radicals – the philosophes, the physiocrats, the English radicals, the Patrick Henrys and Tom Paines of the American Revolution, the James Mills and Cobdens of nineteenth-century England, the Jacksonians and abolitionists and Thoreaus in America, the Bastiats and Molinaris in France. The vital scholarly work of Caroline Robbins and Bernard Bailyn, for example, has demonstrated the continuity of libertarian classical radical ideas and movements, from the seventeenth-century English revolutionaries down through the American Revolution a century and a half later.

Theories blended into activist movements, rising movements calling for individual liberty, a free-market economy, the overthrow of feudalism and mercantilist statism, an end to theocracy and war and their replacement by freedom and international peace. Once in a while, these movements erupted into violent “revolutions” that brought giant steps in the direction of liberty: the English Civil War, the American Revolution, the French Revolution. (Barrington Moore, Jr. has shown the intimate connection between these violent revolutions and the freedoms that the Western world has been able to take from the State.) The result was enormous strides for freedom and the prosperity unleashed by the consequent Industrial Revolution. The barricades, while important, were just one small part of this great process.

Socialism is neither genuinely radical nor truly revolutionary. Socialism is a reactionary reversion, a self-contradictory attempt to achieve classical radical ends liberty, progress, the withering away or abolition of the State, by using old-fashioned statist and Tory means: collectivism and State control. Socialism is a New Toryism doomed to rapid failure whenever it is tried, a failure demonstrated by the collapse of central planning in the Communist countries of Eastern Europe. Only libertarianism is truly radical. Only we can complete the unfinished revolution of our great forebears, the bringing of the world from the realm of despotism into the realm of freedom. Only we can replace the governance of men by the administration of things.

The Best of Murray Rothbard

This essay is chapter 15 of the book Egalitarianism As a Revolt Against Nature.

Why be libertarian, anyway? By this we mean, what’s the point of the whole thing? Why engage in a deep and lifelong commitment to the principle and the goal of individual liberty? For such a commitment, in our largely unfree world, means inevitably a radical disagreement with, and alienation from, the status quo, an alienation which equally inevitably imposes many sacrifices in money and prestige. When life is short and the moment of victory far in the future, why go through all this?

Incredibly, we have found among the increasing number of libertarians in this country many people who come to a libertarian commitment from one or another extremely narrow and personal point of view. Many are irresistibly attracted to liberty as an intellectual system or as an aesthetic goal, but liberty remains for them a purely intellectual parlor game, totally divorced from what they consider the “real” activities of their daily lives. Others are motivated to remain libertarians solely from their anticipation of their own personal financial profit. Realizing that a free market would provide far greater opportunities for able, independent men to reap entrepreneurial profits, they become and remain libertarians solely to find larger opportunities for business profit. While it is true that opportunities for profit will be far greater and more widespread in a free market and a free society, placing one’s primary emphasis on this motivation for being a libertarian can only be considered grotesque. For in the often tortuous, difficult and grueling path that must be trod before liberty can be achieved, the libertarian’s opportunities for personal profit will far more often be negative than abundant.

The consequence of the narrow and myopic vision of both the gamester and the would-be profit maker is that neither group has the slightest interest in the work of building a libertarian movement. And yet it is only through building such a movement that liberty may ultimately be achieved. Ideas, and especially radical ideas, do not advance in the world in and by themselves, as it were in a vacuum; they can only be advanced by people and, therefore, the development and advancement of such people – and therefore of a “movement” – becomes a prime task for the libertarian who is really serious about advancing his goals.

Turning from these men of narrow vision, we must also see that utilitarianism – the common ground of free-market economists – is unsatisfactory for developing a flourishing libertarian movement. While it is true and valuable to know that a free market would bring far greater abundance and a healthier economy to everyone, rich and poor alike, a critical problem is whether this knowledge is enough to bring many people to a lifelong dedication to liberty.

In short, how many people will man the barricades and endure the many sacrifices that a consistent devotion to liberty entails, merely so that umpteen percent more people will have better bathtubs? Will they not rather set up for an easy life and forget the umpteen percent bathtubs? Ultimately, then, utilitarian economics, while indispensable in the developed structure of libertarian thought and action, is almost as unsatisfactory a basic groundwork for the movement as those opportunists who simply seek a short-range profit.

It is our view that a flourishing libertarian movement, a lifelong dedication to liberty can only be grounded on a passion for justice. Here must be the mainspring of our drive, the armor that will sustain us in all the storms ahead, not the search for a quick buck, the playing of intellectual games or the cool calculation of general economic gains. And, to have a passion for justice, one must have a theory of what justice and injustice are – in short, a set of ethical principles of justice and injustice, which cannot be provided by utilitarian economics.

It is because we see the world reeking with injustices piled one on another to the very heavens that we are impelled to do all that we can to seek a world in which these and other injustices will be eradicated. Other traditional radical goals – such as the “abolition of poverty” – are, in contrast to this one, truly utopian, for man, simply by exerting his will, cannot abolish poverty. Poverty can only be abolished through the operation of certain economic factors – notably the investment of savings in capital – which can only operate by transforming nature over a long period of time. In short, man’s will is here severely limited by the workings of – to use an old-fashioned but still valid term – natural law. But injustices are deeds that are inflicted by one set of men on another; they are precisely the actions of men, and, hence, they and their elimination are subject to man’s instantaneous will.

Let us take an example: England’s centuries-long occupation and brutal oppression of the Irish people. Now if, in 1900, we had looked at the state of Ireland, and we had considered the poverty of the Irish people, we would have had to say: poverty could be improved by the English getting out and removing their land monopolies, but the ultimate elimination of poverty in Ireland, under the best of conditions, would take time and be subject to the workings of economic law. But the goal of ending English oppression – that could have been done by the instantaneous action of men’s will: by the English simply deciding to pull out of the country.

The fact that of course such decisions do not take place instantaneously is not the point; the point is that the very failure is an injustice that has been decided upon and imposed by the perpetrators of injustice – in this case, the English government. In the field of justice, man’s will is all; men can move mountains, if only men so decide. A passion for instantaneous justice – in short, a radical passion – is therefore not utopian, as would be a desire for the instant elimination of poverty or the instant transformation of everyone into a concert pianist. For instant justice could be achieved if enough people so willed.

A true passion for justice, then, must be radical – in short, it must at least wish to attain its goals radically and instantaneously. Leonard E. Read, founding president of the Foundation for Economic Education, expressed this radical spirit very aptly when he wrote a pamphlet I’d Push the Button.The problem was what to do about the network of price and wage controls then being imposed on the economy by the Office of Price Administration. Most economic liberals were timidly or “realistically” advocating one or another form of gradual or staggered decontrols; at that point, Mr. Read took an unequivocal and radical stand on principle: “if there were a button on this rostrum,” he began his address, “the pressing of which would release all wage and price controls instantaneously, I would put my finger on it and push!”[1]

The true test, then, of the radical spirit, is the button-pushing test: if we could push the button for instantaneous abolition of unjust invasions of liberty, would we do it? If we would not do it, we could scarcely call ourselves libertarians, and most of us would only do it if primarily guided by a passion for justice.

The genuine libertarian, then, is, in all senses of the word, an “abolitionist”; he would, if he could, abolish instantaneously all invasions of liberty, whether it be, in the original coining of the term, slavery, or whether it be the manifold other instances of State oppression. He would, in the words of another libertarian in a similar connection, “blister my thumb pushing that button!”

The libertarian must perforce be a “button pusher” and an “abolitionist.” Powered by justice, he cannot be moved by amoral utilitarian pleas that justice not come about until the criminals are “compensated.” Thus, when in the early 19th century, the great abolitionist movement arose, voices of moderation promptly appeared counseling that it would only be fair to abolish slavery if the slave masters were financially compensated for their loss. In short, after centuries of oppression and exploitation, the slave masters were supposed to be further rewarded by a handsome sum mulcted by force from the mass of innocent taxpayers! The most apt comment on this proposal was made by the English philosophical radical Benjamin Pearson, who remarked that “he had thought it was the slaves who should have been compensated”; clearly, such compensation could only justly have come from the slaveholders themselves.[2]

Antilibertarians, and antiradicals generally, characteristically make the point that such “abolitionism” is “unrealistic”; by making such a charge they are hopelessly confusing the desired goal with a strategic estimate of the probable outcome.

In framing principle, it is of the utmost importance not to mix in strategic estimates with the forging of desired goals. First, goals must be formulated, which, in this case, would be the instant abolition of slavery or whatever other statist oppression we are considering. And we must first frame these goals without considering the probability of attaining them. The libertarian goals are “realistic” in the sense that they could be achieved if enough people agreed on their desirability, and that, if achieved, they would bring about a far better world. The “realism” of the goal can only be challenged by a critique of the goal itself, not in the problem of how to attain it. Then, after we have decided on the goal, we face the entirely separate strategic question of how to attain that goal as rapidly as possible, how to build a movement to attain it, etc.

Thus, William Lloyd Garrison was not being “unrealistic” when, in the 1830s, he raised the glorious standard of immediate emancipation of the slaves. His goal was the proper one, and his strategic realism came in the fact that he did not expect his goal to be quickly reached. Or, as Garrison himself distinguished:

Urge immediate abolition as earnestly as we may, it will, alas! be gradual abolition in the end. We have never said that slavery would be overthrown by a single blow; that it ought to be, we shall always contend.[3]

Actually, in the realm of the strategic, raising the banner of pure and radical principle is generally the fastest way of arriving at radical goals. For if the pure goal is never brought to the fore, there will never be any momentum developed for driving toward it. Slavery would never have been abolished at all if the abolitionists had not raised the hue and cry thirty years earlier; and, as things came to pass, the abolition was at virtually a single blow rather than gradual or compensated.[4]

But above and beyond the requirements of strategy lie the commands of justice. In his famous editorial that launched The Liberator at the beginning of 1831, William Lloyd Garrison repented his previous adoption of the doctrine of gradual abolition:

I seize this opportunity to make a full and unequivocal recantation, and thus publicly to ask pardon of my God, of my country, and of my brethren, the poor slaves, for having uttered a sentiment so full of timidity, injustice and absurdity.

Upon being reproached for the habitual severity and heat of his language, Garrison retorted: “I have need to be all on fire, for I have mountains of ice about me to melt.” It is this spirit that must mark the man truly dedicated to the cause of liberty.[5]

Notes

[1] Leonard E. Read, I’d Push the Button (New York: Joseph D. McGuire, 1946), p. 3.

[2] William D. Grampp, The Manchester School of Economics (Stanford, Calif.: Stanford University Press, 1960), p. 59.

[3] Quoted in William H. and Jane H. Pease, eds., The Antislavery Argument (Indianapolis: Robbs-Merrill, 1965), p. xxxv.

[4] At the conclusion of a brilliant philosophical critique of the charge of “unrealism” and its confusion of the good and the currently probable, Professor Philbrook declares:

Only one type of serious defense of a policy is open to an economist or anyone else: he must maintain that the policy is good. True ‘realism’ is the same thing men have always meant by wisdom: to decide the immediate in the light of the ultimate.

Clarence Philbrook, “‘Realism’ in Policy Espousal,” American Economic Review (December, 1953): 859.

[5] For the quotes from Garrison, see Louis Ruchames, ed., The Abolitionists (New York: Capricorn Books, 1964), p. 31, and Fawn M. Brodie, “Who Defends the Abolitionist?” in Martin Duberman, ed., The Antislavery Vanguard (Princeton, N.J.: Princeton University Press, 1965), p. 67. The Duberman work is a storehouse of valuable material, including refutations of the common effort by those committed to the status quo to engage in psychological smearing of radicals in general and abolitionists in particular. See especially Martin Duberman, “The Northern Response to Slavery,” in ibid., pp. 406–13.

The Best of Murray Rothbard

This originally appeared as “The Editor Rebuts,” in the February 1973 edition of The Libertarian Forum.

First, I should like to make it clear, to Dr. Hospers and to his many admirers, that I have nothing but the greatest esteem for him, both as a friend and as the outstanding theorist and spokesman for the “limited archy” wing of the libertarian movement. I wrote the article to which he is objecting (“Hospers On Crime and the FBI,” Lib. Forum, December 1972) not out of malice – but out of sadness, sadness at the numerous violations of libertarian principle committed by the Presidential candidate of the Libertarian Party in the questionnaire. I am firmly convinced, moreover, that the numerous flaws, fallacies, and inconsistencies in Dr. Hospers’ general position stem not from personal eccentricities but from the very essence of his “conservative libertarian” position. Between Conservatism and Libertarianism there are numerous and grave inner contradictions, and the attempt to mix the two will lead inevitably to grave problems and anomalies, as we have all recently seen, for example, in Ayn Rand’s attack upon amnesty for draft evaders. But since Dr. Hospers is a man of great rationality, objectivity, and dedication, I have every confidence that he will eventually embrace the truth and jump completely over the conservative wall.

Now as to specifics. Dr. Hospers states that the questionnaire was not intended for publication; yet when a presidential candidate, in the heat of his campaign, answers a questionnaire designed for all the candidates, this is surely and legitimately News, and publication of the results can scarcely be regarded as a breach of confidence. When one runs for the Presidency, and assumes an important role as spokesman for libertarianism, then one’s utterances become especially subject to careful scrutiny. Hospers the presidential candidate of the Libertarian Party rather than Hospers the man was the subject of scrutiny in our article.

As for the “context,” of course readers can only decide the merits of my summary by obtaining the questionnaire from the Friends of the FBI. But one notable fact is that Dr. Hospers makes not a single rebuttal to any of the points in my article nor an explanation of any of his answers. Instead, virtually his entire reply is devoted to the “Russian Question,” a matter irrelevant and out of context if there ever were one. As I recall, there was not a single mention, either in the questionnaire or in Dr. Hospers’ answers of the Russian Question, nor of course in my article. Indeed, what in the world the Russian Question has to do with whether or not the FBI should prosecute the drug traffic, or wiretap, or whether the police should remind accused persons of their constitutional rights, passeth understanding. Are we going to be like the typical Conservative, who drags in the Russian Threat like King Charles’ Head to justify any and all acts of government tyranny? Once we go that route, once we begin to justify a loss of liberty now in order to “defend” that liberty later, we are not only abandoning liberty itself: we are justifying every act of statism, from the draft to oil proration laws. Indeed, every such act has been justified by conservatives in the name of the Russian Threat and of national defense.” And in these justifications, we can see how the State has for centuries used the “foreign threat” to aggrandize its power over its deluded subjects.

Before getting to the Russian Question itself, I would like to say that I fail to be impressed with the politeness of the FBI. That they are better than many local police is hardly a commendation; do we prefer Attila or Genghis Khan? In fact, on the score of education, intelligence, and suavity, the CIA has the FBI beat hollow; and yet the foul deeds of the CIA have become glaringly known. But the major point is the usual libertarian case for decentralization: that when we confront despotism by the FBI we have no place to go short of leaving the country; whereas to avoid despotism or brutality by, say, the West Waukegan police force all we have to do is to skip to East Waukegan: surely a far more comfortable choice.

But to get to the Russian Question. In the first place, whether or not Russia constitutes a critical military threat is strictly an empirical question, and therefore not a question that can be resolved in a few pages of philosophical or political controversy. For example, it is logically conceivable that Great Britain constitutes an imminent military threat to the U.S., and that Edward Heath is planning a sneak atomic attack on New York in 48 hours. Logically conceivable, but of course empirically laughable – even though we could make out a case of sorts, citing the fact that we were twice in grave military combat with Great Britain, and so on.

Since it is an empirical question, I will have to be a bit high-handed and say flatly that it is my considered view that there is not a single shred of evidence of any Russian aim or plan to launch a military attack upon the United States, either in the past, present, or future. In fact, the evidence is all the other way, even in the time of Lenin, and certainly in the time of Stalin and his successors. Since the time of Lenin and his magnificent (from a libertarian, pro-peace point of view) conclusion of the “appeasement” Treaty of Brest-Litovsk in 1918, the Soviet Union, vis-à-vis the other Great Powers, has consistently pursued a policy of what they have long termed “peaceful coexistence,” in fact often bending over backwards to pursue a peaceful foreign policy almost to the point of national suicide. I am not maintaining that the motivation for this unswerving course was any sort of moral nobility; it is the supremely practical one of preserving the Soviet State at all costs to other aims and objectives, buttressed by the Soviets’ firm Marxian conviction that, since capitalist states are doomed anyway, it is foolhardy in the extreme to court or risk war. The Soviet policy has always been the defensive one of hanging on to what they have and waiting for the supposedly inevitable Marxian revolutions in the other countries of the world. Lenin’s adherence to that policy was only confirmed by the “socialism in one country” doctrine of Stalin and his successors.

We all too often forget several crucial facts of modern European history: and one is that, from the point of view of ordinary international relations, Russia (any Russia, not just Soviet Russia) was a grievous loser from the settlements imposed by World War I (Brest-Litovisk, Versailles). Any German, Russian, or Austrian regime would have been “revisionist” after the war, i.e., would have sought the restoration of the huge chunk of territory torn from them by the victorious powers. Old Czarist Russia was shorn of Finland, Estonia, Latvia, Lithuania, Western Byelorussia (grabbed by Poland after its war of aggression against Soviet Russia in 1920-21), and Western Ukraine (lopped off by Czechoslovakia and Rumania). Any Russian government would have hankered for its lost and grabbed territories. And yet, the Soviets did very little about this hankering; certainly they made no move whatsoever to make war to get the territories back. The Hitler-Stalin pact, much reviled by the uncomprehending Western press, actually made excellent sense for both major “revisionist” post-Versailles powers, Germany and Russia. For the essence of that pact was the commonality of revisionist interests by both powers: from that pact, Germany got its lost territories back (plus an extra chunk of ethnically Polish Poland), and Russia peacefully re-acquired its old territories, with the exception of Finland. No dire Russian military threat to the West, let alone the United States, can be conjured up out of that.

The next crucial and unfortunately forgotten fact is this: that Hitler turned brutally upon his ally and savagely attacked Soviet Russia on June 22, 1941. In this attack, Hitler was joined by the fascist regimes of Rumania and Hungary (Polish Poland and Czechoslavakia had by this time disappeared, or been swallowed up by Germany.) Why Hitler did this foolhardy act, an act that lost him the war and his head, is still a puzzle to historians. But we can say that his motives were compounded out of two factors: (a) his long-held desire to seize the “breadbasket” of the Ukraine; and (b) his hysterical anti-communism which fully matches the equivalent anti-Communism of the American Conservative movement. In his hysteria, Hitler too, like our conservatives, thought he saw an imminent Russian Threat: and so he decided on what is now called a “preemptive strike.” But of course Hitler, like our American Conservatives, was deluded; for the events of the war revealed that Stalin’s unwise trust in his ally led him to neglect elementary preparedness and thereby almost lost him the war as a result. Stalin’s pacific policy was carried almost to the point of national suicide.

What of Stalin’s “expansion” into Eastern Europe? This expansion was scarcely aggression in any rational sense: it was purely the inevitable consequence of Russia’s rolling back and defeating the German aggressor and his Hungarian and Rumanian allies. It is only by a grievous “dropping of the context,” of forgetting that Russia got into the war as a result of German aggression, that we can possibly point the finger of threat of “aggression” at Russia’s military march into the aggressor countries.

As his evidence for alleged Soviet “orders to advance” into Western Europe at the end of the war, Dr. Hospers cites only a paragraph from Professor Carroll Quigley. Yet Professor Quigley is not in any sense a specialist on the history of the Cold War nor does he command any respect whatever in the historical profession. And with good reason. The only place I have ever seen Professor Quigley cited as an authority is in several Birchite tracts, tracts which, whatever their devotion to individual liberty, are scarcely noted for the profundity or the accuracy of their scholarship. If any readers are interested in the best scholarly evidence on Russia and the Cold War, let them turn to the excellent and notable researches of such distinguished historians as Gabriel Kolko, Lloyd Gardner, Walter LaFeber, and Gar Alperovitz, researches which back my interpretation to the hilt. I repeat: there is not a shred of evidence of any Soviet aim or plan, much less “orders,” to invade Western Europe at the end of World War II or at any other time. If Dr. Hospers would care to cite some real evidence for his charge, I would be delighted to hear it.

In fact, read correctly, Professor Quigley’s citation is simply one more of numerous indications that it was the United States that launched the Cold War, that it was the United States that brutally and immorally brandished its monopoly of atomic weapons in an attempt to cow Soviet Russia into getting out of the conquered territories of Eastern Europe and to open them to American influence and penetration. In fact, historians from such opposite ends of the political and ideological spectrum as Gar Alperovitz (in his great work, Atomic Diplomacy) and the late Harry Elmer Barnes, have shown that the very genocidal dropping of the A-bomb on an already vanquished Japan was done largely for the purpose of using atomic diplomacy as a counter in the American-launched Cold War.

As for the Cuban crisis of 1962, there is not a single piece of evidence of any Russian aim to drop missiles on the United States. In fact, the Soviets had plenty of their own missiles; and any idea that Cuba would launch a missile attack on the U.S. seems to me in the Great Britain-as-military threat category. In fact, the Soviet missiles in Cuba were as nothing to the missiles with which the United States had long encircled the Soviet Union. It is evident to me that the only possible purpose of Khrushchev’s emplacement of missiles in Cuba was to safeguard Cuba against an American attack: an attack the prospect of which was scarcely ludicrous, considering the 1961 CIA attack on Cuba at the Bay of Pigs. As Richard Walton points out in his excellent recent book on the Cuban crisis, the cause and motive power of the crisis was President Kennedy’s aggravated sense ofmachismo, his dangerous desire to face down the Russians in any sort of confrontation even at the risk of worldwide nuclear devastation. In fact, the Cuban settlement satisfied both parties: Kennedy looked like the macho conqueror, forcing the Russian missiles out of Cuba; while Khrushchev gained the informal but vital concession from Kennedy that the U.S. would launch no further aggression upon Cuba. Unfortunately for Khruschchev, his Soviet colleagues did not appreciate the loss of macho face, and Khruschchev was deposed for his pains.

Dr. Hospers’ only other piece of evidence is unsupported references to various Communist theoreticians, which he likens to Hitler’s “announced intentions” in Mein Kampf. In the first place, as the eminent left-liberal English historians A. J. P. Taylor and Geoffrey Barraclough have pointed out, far too much has been made of the importance of Mein Kampf in assessing Hitler’s policies. To say that someone’s actions can be fully explained by a tract, written in very different circumstances a decade or more earlier, is highly simplistic as historical method. But more relevantly, Communist “announced intentions” are very different from those of Mein Kampf. The announced intentions of all the Marxist-Leninist theoreticians, from Lenin down to the present, are notably different: they call repeatedly and consistently for a policy of peaceful coexistence by Communist countries with the “capitalist” powers. There is never any equivocation about that. However, they do warn (to varying degrees, depending on the wing of Marxism-Leninism) that capitalism inevitably begets imperialism, and that imperialism will tend to launch a war against the Communist powers. Therefore, they call for alert preparedness and oppose any unilateral disarmament by the Communist powers. And given the black record of American aggression in the Cold War and elsewhere, I must say that they have a point: not in the inevitability of capitalism begetting imperialism, but in a wariness over the possibly aggressive intentions of American imperialism. In short, there is infinitely more evidence of an American military threat to Russia than vice versa; and the “announced intentions” of Marxism-Leninism confirm rather than rebut this conclusion.

In fact, after decades of study of Marxist-Leninist writings, I have found only one theorist who has ever advocated a Soviet attack on the United States: and that is the crazed Latin-American Trotskyite, Juan Posadas. But since Senor Posadas has no standing within the world Trotskyite movement, let alone among the Communists in power, I think we can safely assure Dr. Hospers that the Posadas threat is about as critical as our hypothetical threat from the armed might of Prime Minister Edward Heath.

Curiously, Dr. Hospers seems to be most worried about a Russian attack during the period of transition to a free economy, when the U.S. State shall have been abolished. How Russia could see this development as “hostile to its interests” is difficult to see; on the contrary, the Russians would breathe a sigh of relief at being free of the threat of American aggression, a threat which they have felt deeply ever since we intervened with troops and weapons to try to crush the Bolshevik Revolution in 1918-20. The Russians, indeed, have been anxious to conclude a joint disarmament agreement with the U.S., and have ever since they accepted the American proposal to that effect on May 10, 1955: a proposal which the U.S. itself promptly repudiated and has balked at ever since. Contrary to American propaganda, incidentally, the Russian proposal was for general and complete disarmament coupled with unlimited inspection; it was the United States who, while insisting on inspection, balked at any kind of effective disarmament.

To proceed to Dr. Hospers’ final point: what of those Americans who are not persuaded by our evidence, and who persist in fearing the Russian Threat? He accuses us anarcho-capitalists who wish to dismantle the American State of “risking not only my life, but yours, by disarming.” But the point is that, in an anarchist society, those who fear a foreign threat and wish to arm themselves defensively, are free to go ahead and do so. Dr. Hospers happily concedes that private police forces would be more efficient than the police force of government monopoly; so why not private defense forces or “armies” as well? Contrary to Dr. Hospers, anarchists do not propose to force those who wish to arm defensively to disarm: instead on the contrary it is he and other advocates of archy who are now forcing us to arm against a foreign threat that many of us believe does not exist. It is no more moral to tax someone to pay for one’s own defense, whether real or imagined, than it is to draft him for the same purpose. And, besides, if the FBI is really protecting us against the sabotage of Grand Central Station, then why couldn’t the owners of that station do a far better job?

The Best of Murray Rothbard

[The Cato Journal, Fall, 1981, pp. 519–564; The Logic of Action Two (Cheltenham UK: Edward Elgar, 1997, pp. 56–108.

"A neutral mode of taxation is conceivable that would not divert the operation of the market from the lines in which it would develop in the absence of any taxation."

~ Ludwig von Mises, Human Action (1949)

Economists have long believed that government's tax and expenditure policy either is, or can readily be made to be, neutral to the market. Free-market economists have advocated such neutrality of government, and even economists favoring redistributive actions by government have believed that the service activities and the redistributive activities of government can easily be distinguished, at least in concept. The purpose of this paper is to examine the nature and implications of fiscally neutral government; the paper argues that all government activities necessarily divert incomes, resources, and assets from the market, and therefore that the quest for a neutral tax or expenditure policy is an impossible one and the concept a myth.

Structure of the Free Market: Consumers and Incomes

To evaluate the idea of a neutral government, we must first define what neutrality to the market may be. Any firm or institution is neutral to the market when it functions as part of the market. That is, both General Motors and Mom and Pop's Candy Store are part of the market, and insofar as their activities remain within the market, they are neutral to it. [1]

We may analyze market institutions according to the following categories: (a) what and how much they produce, and (b) how much and from where the institution receives monetary funds. For every institution produces goods or services and receives money.

There are two types of market institutions. One is the business firm. The firm is guided by its expectations of monetary income from customers in payment for its products. The firm receives funds from two sources: (b1) customer expenditures, and (b2) entrepreneurial investments. Entrepreneurial investments are monies invested in the firm to purchase or hire factors of production to make goods and services to be sold to customers. The investments are savings spent in anticipation of greater returns from selling products to customers. Although the conspicuous resource and production decisions in the market are made by capitalist-entrepreneurs (by the owners of the firm and its capital assets) these decisions are made in accordance with their expectations of monetary income from customers. In short, businessmen are guided by the quest for monetary profits and the wish to avoid monetary losses, and their forecasting and anticipations must turn out to be good enough to reap profits from their production decisions. The intake of investment funds into the firm, then, is subordinate to the expected profit to be made from sales to customers.

Business firms and the structure of capital assets in the economy, as Austrian school economists have shown, are not a homogeneous lump: Production is a structure of stages, a latticework that moves from the most “roundabout” processes of production – the stages of production most remote from the consumers – down to nearer processes, and finally down to the production and sale of goods and services to the ultimate consumers. [2] The ham sandwich at the local coffee shop begins with the mining of ore for tools and machines and the growing of grain to feed hogs, and continues in stage after stage down through the wholesale and retail stages, until it arrives in the maw of the final buyer, the consumer. Thus, for our purposes, we can short-circuit the structure and refer to the consumer as the basic source of the income of business firms; ultimately, it is consumer demand that provides profits or losses to business firms and either vindicates or not prior production decisions by investors.

Investments that bring money into the firm in anticipation of consumer demand, (b2), consist of two parts. The basic investment (b2a) is investment by the owner or owners of the firm in the form of personal savings, partnerships, or investment in corporate stock. Auxiliary investment (b2b) are loans to the owners of the firm by other capitalists, either in the form of short-term credit or long-term debentures. The willingness of the firm’s owners to pay a fixed-interest return to lenders is, of course, a function of their anticipated profit in selling the product to the consumers. Willingness to pay interest will always be less than or equal to the anticipated profit rate; and in the long-run general-equilibrium world of changeless certainty – a world that has never and can never come into existence – the rate of return would be equal throughout the market economy. In that world, the rate of profit in every firm would be equal to the rate of interest on loans. [3]

For market firms, therefore, there is no mystery about the determination of their production decisions and income. The former are determined by firms’ anticipation of consumer demand, and the latter by the reality of that demand. Hence, firms receive their income, in the final analysis, from serving consumers. The more efficiently and ably the firms anticipate and serve consumer demand, the greater their profits; the less ably, the less their profits and the more they suffer losses.

Finally, the owners of the factors of production – land, labor, and capital goods – receive their income in advance of production from the investor-owners of the firm. The more ably and productively a factor or factors are believed to serve consumer demand, the greater the demand for those factors by the owners, and the higher their income. Since capital goods themselves form part of the structure of production, ultimately factor incomes consist of the income from the exertion of labor energy (wages, salaries), the use of land (land rents), and the transfer of money (a present good) in exchange for anticipated future income (a future good) – that will yield interest (or long-run profit) for time preference, and entrepreneurial profits or losses. All these factor incomes then, are tied to the efficient service of anticipated consumer demand. [4]

Incomes to factors and entrepreneurs on the market, therefore, are tied inextricably to the effective satisfaction of consumer demand, a satisfaction that depends on the successful forecasting of the market conditions that will exist when and after the goods or services are produced. Income to the firm and to factors from consumers is linked inextricably to the satisfaction the consumers derive. In a deep sense, therefore, income to producers on the market reflects benefits to consumers.

The crucial point is that when consumers spend, they benefit, because the expenditures are voluntary. The consumers buy product X because they decide that, for whatever reason, it would benefit them to buy that product rather than use the money on some other product or save or add to their cash balances. They give up money for product X because they expect to prefer that product to whatever they could have done with the money elsewhere; their preference reflects a judgment of relative benefit from that, as compared to another, purchase. In my own terms, spending choices by consumers demonstrate their preference for one, as compared to another, way of using their money. [5]

And that is not all. The profit-and-loss tests of the market, the rewarding of effective producers and forecasters and the punishing of ineffective ones, ensures that the overall ability at any time of entrepreneurs to forecast and satisfy consumer demands will be high. Good forecasters will be rewarded with higher profits and incomes; poor forecasters will suffer losses and finally leave the business. So that the market tendency is toward a high level of fit between anticipation and reality, and for a minimum of erroneous investment. Producer income, therefore, reflects consumer benefit even more closely than we might at first realize. [6]

The second type of market institution – after the business firm – is the voluntary nonprofit membership organization: the bridge club, lodge, ideological organization, or charitable agency. Here, too, income and benefit are cognate. Income is no longer divided between investors and consumers. All income is obtained from members, either in the form of regular dues or systematic or occasional donations. The purpose of the organization is not to earn a monetary profit, but to pursue various purposes desired by the income-paying members. In a sense, then, the members are the “consumers,” except that they consume the services of the organization not by purchasing a product but by helping the organization pursue its goals. The member-donors are at the same time the consumers and the investors, the consumers and the makers of the production decisions. [7] The organization will employ as much of its resources as the member-consumer-donors desire to contribute to the pursuit of their goals.

Membership organizations, while clearly part of the market, are necessarily limited in their scope, for they do not follow the division of labor necessary for most market production. In virtually all other cases of production, the producers and the consumers are not one and the same: The producers of steel bars do not, Heaven forfend, use up those selfsame bars in their own consumption. They sell the bars for money and exchange the money for other goods that they would like to consume. In the case of membership organizations, however, the member-investors are the consumers of the service.

Even where the explicit goals of the organization are to help non-donors, this rule – that the consumers guiding production decisions are the donors – still applies. Suppose, for example, the organization is a charity giving alms to the poor. In a sense, the purpose is to benefit the poor, but the actual consumers here, the guides to production decisions, are the donors, not the recipients of charity. The charity serves the purposes of the donors, and these purposes are in turn to help the poor. But it is the donors who are consuming, the donors who are demonstrating their preference for sacrificing a lesser benefit (the use of their money elsewhere) for a greater (giving money to the charity to help the poor). It is the donors whose production decisions guide the actions of the charity.

In this case, presumably, the donors themselves will be guided, in their turn, by how effective the organization is in ministering to the poor. But the ways of judging this effectiveness lack the precision of monetary purchase, or profit and loss. They depend on subjective interpretation by the donors, an interpretation that is necessarily subject to a great deal of error. Donors, in the same way, are the consumers regardless of the purpose of the nonprofit organization, whether it is chess playing, medical research, or ideological agitation. In all these cases, precise profit-and-loss tests of effectiveness are lacking; in all these cases, too, donors voluntarily pursue their activity, preferring it to other uses of their resources. [8]

Nonprofit organizations also purchase and hire factors of production. To a large extent, these organizations compete with business firms for factors; to that extent, they must pay the factors at least the discounted marginal product they can earn elsewhere. To some extent, however, the factors may be specific to these organizations; to that extent their marginal product incorporates their service to the donor-consumers, that is, the extent to which they pursue the same goal as the sources of income. Thus, in both the profit-making and the nonprofit sectors, in their different forms, production decisions are guided by service to the consumers. The main difference is that in the case of business firms, the consumers are separate from the producers, and (we hope) recoup producers’ investments by buying the products of the firm; while in nonprofit organizations, the consumers are the donor-investors.

We have been describing two polar cases: the business firm, and the nonprofit organization. Probably most real-world institutions on the market fall into one of these categories. In some cases, however, an organization can partake of both modes. Let us consider two cases. First, a charitable organization, instead of, or in addition to, giving away alms, may sell some products to the poor at a low, subsidized price. In this case, while the donors provide the overall thrust and guidance, part of the feedback gained by the firm is willingness to buy goods by the recipients. In some sense, the recipients of alms provide a guide to their interest in the organization. There are now two sets of consumers: the donors, and the charity recipients, each of whom demonstrates its preference for this organization in contrast to other uses for its money. [9] But the overall purpose of the organization is not to make a profit, but rather to serve the values and goals of the donors, and so the donors must be considered the regnant consumers in this situation.

Another case is a profit-making business firm where the owner or owners decide to accept a lesser monetary profit on behalf of some other goals of the owners: for example, because a certain line of product is considered immoral by the owners or because the owner wishes to hire incompetent relatives in order to keep peace in the family. Here once again, these are two sets of consumers – the buyers of the product, and the producers or owners themselves. Because of his own values as a “consumer,” the owner decides to forego monetary profit because of his own moral principles or because he holds keeping peace in the family high on his value scale. In either case, the owner is foregoing some monetary profit in order to achieve psychic profit. Which motive will dominate depends on the facts of each particular case. Since the market is generally characterized by a division of labor between producers and consumers, however, the general tendency will be for monetary profit, or service to non-owning consumers, to dominate the decisions of business firms. [10]

It is a basic fact that all voluntary actions are undertaken because actors expect to benefit from them. When two persons make a voluntary exchange of goods or services, they do so because each expects to benefit from the exchange. When A trades commodity X for B’s commodity Y, A is demonstrating a preference – an expected net benefit – for Y over X, while B is demonstrating the opposite, a preference for X over Y. The free market is a vast latticework of two-person (or two-group) exchanges, an array of mutually beneficial exchanges up and down and across the structure of production. [11]

Robbery and the Market

Having dealt with this idyll of harmonious and mutually beneficial exchanges, let us now introduce a discordant note. A thief now appears, making his living by robbing and coercively preying on others: The robber obtains his income by presenting the victim with a choice: your money or your life (or, at least, your health) – and the victim then yields his assets. Or, to be more precise, the robber presents the victim with a choice between paying immediately or waiting until the robber injures him. [12] In this situation both parties do not benefit; instead, the robber benefits precisely at the expense of the victim. Instead of the consumer’s paying, guiding, and being benefited by the producer’s activity, the robber is benefiting from the victim’s payment. The robber benefits to the extent that the victim pays and loses. Instead of helping expand the amount and degree of production in society, the robber is parasitically draining off that production. Whereas an expanded market encourages increases in production and supply, theft discourages production and contracts the market.

It should be clear that the robber is not producing any goods and services at all. In contrast to consumers who purchase goods and services, or who contribute voluntarily to a nonprofit organization, no one is voluntarily purchasing from or contributing to our criminals at all. If they were, the criminals would not be criminal. In fact, what distinguishes a criminal group is that its income, in contrast to that of all other organizations, is extracted by the use of violence, against the wishes or consent of the victims. The criminals, then, are “producing” nothing, except their own income at the expense of others.

It has been maintained that the payments by the victims are “really” voluntary because the victim decides to transfer his funds under penalty of violence by the robber. This kind of sophistry, however, destroys the original, as well as the common-sense, meaning of the term “coercion” and renders allactions whatever “voluntary.” But if there is no such thing as coercion and all conceivable actions are voluntary, then the distinctive meaning of both terms is destroyed. In this paper, we are defining “voluntary” and “coercion” in a common-sense way: that is, “voluntary” are all actions not taken under the threat of coercion; and “coercion” is the use of violence or threat of violence to compel actions of others. Robbery at gunpoint, then, is “coercion”; the universal need to work and produce is not. In a trivial sense, the victim agrees to be victimized rather than lose his life; but surely, to call such a choice or decision “voluntary” is a corruption of ordinary language. In contrast to truly voluntary decisions, where each person is better off than he was before the prospect of exchange came into view, the robbery victim is simply struggling to cut his losses, for, in any case, he is worse off because of the entry of the robber onto the scene than he was before.

Just as the claim that the victim’s payment to the thief is “voluntary” is patently sophistical, so is it absurd to claim that the robber is “producing” some service to the victim or anyone else. The fact that the victim paid him revenue proves no demonstrated preference or value; it proves only that the victim prefers the imposition to being shot.

The robber may well spin elaborate arguments for his productivity and for his alleged benefit to the victim. He may claim that by extracting money he is providing the victim a defense from other robbers. In attempting to achieve and maintain his monopoly of loot, he may very well act against other robbers trying to muscle in on his territory. But this “service” scarcely demonstrates his productivity to the victims. Only if the victims pay the robber voluntarily can any case be made for a nexus of payment and benefit. Since payments are now coercive instead of voluntary, since the consumer has now become the victim, all arguments offered by the criminal and his apologists about why the victim should have been eager to pay the criminal voluntarily are in vain, for the stark and overriding fact is that these payments are compulsory.

The robber takes the funds extracted from the victims and spends them for his own consumption purposes. The total revenue collected by theft we may call tribute; the expenditures of the robbers, apart from the small sums spent on burglars’ tools, weapons, planning, and so on, are consumption expenses by the robbers. In this way, just as income and assets are diverted from the productive sector to the robbers, so the robbers are able to use that money (in their purchasing) to extract productive resources from the market.

We conclude, then, that the activities of thieves are most emphatically not neutral to the market. In fact, the robbers divert income and resources from the market by the use of coercive violence, and thereby skew and distort production, income, and resources from what they would have been in the absence of coercion. If, on the contrary, we adhere to the view that theft is voluntary and criminals productive, then criminal activities, too, would be neutral to the market, in which case the entire problem of neutrality would disappear by semantic legerdemain, and everything by definition would be neutral to the market because the rubric of the market would encompass all conceivable activities of man. In that case, nothing could be called “intervention” into the market. By labeling aggressive violence as “coercion” and as an interference into the market, we avoid this kind of absurd trap, and we cleave closely to the commonsense view of such concepts as “coercion,” “voluntary,” “market,” and “intervention.”

Government as Robber

We are now in a position to analyze government and its relationship to the market. Economists have generally depicted the government as a voluntary social institution providing important services to the public. The modern “public choice” theorists have perhaps gone furthest with this approach. Government is considered akin to a business firm, supplying its services to the consumer-voters, while the voters in turn pay voluntarily for these services. All in all, government is treated by conventional economists as a part of the market, and therefore, as in the case of a business firm or a membership organization, either totally or in part neutral to the market.

It is true that if taxation were voluntary and the government akin to a business firm, the government would be neutral to the market. We contend here, however, that the model of government is akin, not to the business firm, but to the criminal organization, and indeed that the State is the organization of robbery systematized and writ large. The State is the only legal institution in society that acquires its revenue by the use of coercion, by using enough violence and threat of violence on its victims to ensure their paying the desired tribute. The State benefits itself at the expense of its robbed victims. The State is, therefore, a centralized, regularized organization of theft. Its payments extracted by coercion are called “taxation” instead of tribute, but their nature is the same. The German sociologist Franz Oppenheimer saw this clearly when he wrote that

there are two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one’s own labor and the forcible appropriation of the labor of others.. .. I propose .. . to call one’s own labor and the equivalent exchange of one’s own labor for the labor of others, the “economic means” for the satisfaction of needs, while the unrequited appropriation of the labor of others will be called the “political means.” [13]

Oppenheimer then proceeded to identify the State as the “organization of the political means.” [14] Or, as the libertarian writer Albert Jay Nock, vividly put it: “The State claims and exercises the monopoly of crime…. It forbids private murder, but itself organizes murder on a colossal scale. It punishes private theft, but itself lays unscrupulous hands on anything it wants, whether the property of citizen or alien.” [15] Or, as Ludwig von Mises points out, this regularization establishes a systematic coercive hegemonic bond between the rulers of the State and the subject that contrasts vividly with the contractual bond of mutual benefit.

There are two different kinds of social cooperation: cooperation by virtue of contract and coordination, and cooperation by virtue of command and subordination or hegemony. Where and as far as cooperation is based on contract, the logical relation between the cooperating parties is symmetrical. They are all parties to interpersonal exchange contracts. John has the same relation to Tom as Tom has to John. Where and as far as cooperation is based on command and subordination, there is the man who commands and there are those who obey his order. The logical relation between these two classes of men is asymmetrical. There is a director and there are people under his care. The director alone chooses and directs; the others – the wards – are mere pawns in his actions. [16]

In this coercive, hegemonic condition, the individual must either accept the orders of the ruler or rebel. To the extent that the person submits, this choice then subjects him to the continuing hegemony of the rulers of the State. Contrasting the contractual and the hegemonic, Mises states:

In the frame of a contractual society the individual members exchange definite quantities of goods and services of a definite quality. In choosing subjection in a hegemonic body a man neither gives nor receives anything that is definite. He integrates himself into a system in which he has to render indefinite services and will receive what the director is willing to assign to him. He is at the mercy of the director. The director alone is free to choose. Whether the director is an individual or an organized group of individuals, a directorate, and whether the director is a selfish maniacal tyrant or a benevolent paternal despot is of no relevance for the structure of the whole system. [17]

Mises goes on to contrast the system of contractual coordination that is responsible for much of the achievements of Western civilization with the hegemonic system embodied in the State, “an apparatus of compulsion and coercion… by necessity a hegemonic organization.” [18]

The idea that taxation is voluntary seems to be endemic among economists and social scientists, though hardly so among the general public. [19] But if an individual refuses to pay his assigned tax, coercion will be wielded against him, and if he resists the confiscation of his property he will be shot or jailed. Failure to pay taxes subjects one to civil and criminal penalties. There should be little need to pursue the matter beyond this, were not economists determined to deny this patently obvious fact. As Joseph Schumpeter trenchantly declared: “The theory which construes taxes on the analogy of club dues or of the purchases of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.” [20]

But if taxation is coercive and a system of organized theft, then any “services” that the government may supply to its subjects are beside the point, for they do not establish the government as voluntary or as part of the market any more than a criminal band’s providing the “service” of defending its victims from competing bands establishes that its services are voluntarily paid for. These services are not voluntarily paid for by the taxpayers, and we therefore cannot say that the taxes measure or reflect any sort of benefit. In the case of voluntary purchase on the market, as we have seen, the consumer demonstrates by his purchase that he values the good or service he buys more than the price he pays; but in paying taxes he demonstrates no such thing – only the desire not to be the recipient of further violence by the State. We have no idea how much the taxpayers would value these services, if indeed they valued them at all. For example, suppose that the government levies a tax of X dollars on A, B, C, and so on, for police protection – for protection, that is, against irregular, competing looters and not against itself. The fact that A is forced to pay $1,000 is no indication that $1,000 in any sense gauges the value to A of police protection. It is possible that he values it very little, and would value it less if he could turn to competing defense agencies. Moreover, A may be a pacifist; so he may consider the State’s police protection a net harm rather than a benefit. But one thing we do know: If these payments to government were voluntary, we can be sure that they would be substantially less than present total tax revenue. Why? Because if people were willing to pay voluntarily, then there would be no need for the apparatus of coercion so intimately wrapped up in taxation.

A second important point is that, in contrast to the market, where consumers pay for received benefits (or, in nonprofit organizations, where members pay for psychic benefits), the State, like the robber, creates a total disjunction between benefit and payment. The taxpayer pays; the benefits are received, first and foremost, by the government itself, and secondarily, by those who receive the largess of government expenditures.

But if, under coercive taxation, tax payments far exceed benefits to the victim, and if benefits accrue to the government itself and to the recipients of its expenditures at the expense of taxpayers, then it should be quite clear that it is impossible for taxes ever to be neutral to the market. Taxation, whatever its size or incidence, must distort market processes, must alter the allocation and distribution of assets, incomes, and resources.

The Alleged Voluntariness of Taxation

Despite the fact that government and taxation are patently coercive, economists have devoted considerable energy, in numerous ways, to maintaining the contrary. If government and taxation were truly voluntary, then taxation would be akin to a market payment, and government could be deemed a part of, and therefore neutral to, the market.

By lumping government along with private expenditures as a gauge of the output of the economy, the conventional national income statisticians are implicitly assuming that government is neutral to the market because government provides those “services” that “society” desires it to supply. Government “output” is equated to the salaries paid to the bureaucracy. By employing the seemingly precise method of segregating some government expenses as mere “transfer payments” – the taxing of Peter to pay Paul – rather than productive purchases of goods and services, the national income statisticians are in reality making an unsupportable ideological judgment. For in what sense does the hiring of bureaucrats, or the purchasing of paper clips, add to the production of the economy and therefore become somehow voluntary, while transfer payments are frankly taxing one group to subsidize another? As we shall see further below, all taxation necessarily involves taking from one group to subsidize another; therefore all government expenditures, taken together, constitute one giant transfer payment.

Even if one does not go that far, it is a rare person who would not concede that at least 50 percent of government expenditures are sheer waste, which would mean that they should not form part of the estimated national product at all. Despite his recognition of this fact, as well as the shakiness of ranking government expenses along with market expenditures, Sir John Hicks finally sees no alternative. He puts it this way:

I can see no alternative but to assume that the public services are worth to society in general at least what they cost…. One may feel considerable qualms about such an assumption – it is obvious that the government spends far too much on this, far too little on that: but if we accept the actual choices of the individual consumer as reflecting his preferences… then I do not see that we have any choice but to accept the actual choices of the government, even if they are expressed through a Nero or a Robespierre, as representing the actual wants of society. [21]

Elsewhere, Hicks explains that in constructing national product figures, “the social accountant … must work upon some convention which is independent of his individual judgment.” [22] It is remarkable that Hicks can find security from the shoals of individual judgment in assuming that Nero or Robespierre embody “the actual wants of society.” Can he really believe that this fictive “society” and its head of State adequately represent the preferences of individual citizens?

Collective Goods

More intellectually respectable is the contention that insofar as government supplies society with “collective goods” or “public goods,” it is supplying a necessary service and is in a sense voluntary and neutral to the market. Collective goods are goods that allegedly cannot be supplied on the private market because they are indivisible and therefore cannot be allocated by having individual consumers pay for their own portions of the product. No consumer can be excluded from receiving the good. Like the sun, collective goods shine on all alike, and none can be made to pay for the service. Professor Buchanan, sympathetic to the idea of an “ideally neutral fiscal system,” defines it as one that “uniquely aims at providing the social group with some ‘optimal’ or ‘efficient’ quantity of collective goods and services.” Then, if “the fiscal system is conceived as the means through which collective goods and services are provided to members of the society without any subsidiary or supplementary social purposes,” we have, says Buchanan, an “analogy with the market economy.” The fiscal system is then “ideally neutral” to the market economy. [23]

In the first place, even if there were such things as collective goods, government supply would establish neither its voluntarism nor its neutrality. Even if there were no other way to supply these services, taxation to provide them is still compulsory. And since it is coercive, there is no standard, as there is on the market, to decide how much of these services to supply by taxation. And the more the government provides, the less people are allowed to spend on their own private consumption.

Furthermore, if there exists but one anarchist in any society, the very existence of the State coercively supplying a collective good constitutes a great psychic harm to that anarchist. The anarchist, therefore, receives not a collective service but an individual harm from the operations of the State. It follows therefore that the good or service cannot be truly collective; its “service” is separable, and distinctly negative, to the anarchists. Hence, the good can neither be truly collective (indivisible, and positive) nor can it be voluntary. [24]

No matter how “divisible” the service, furthermore, a collective good is not quite like the sun: The more resources the government expends, the greater will be its output. These resources will have to be extracted from other potential products. Take, for example, “defense” or police protection, which is often considered to be provided as a homogeneous lump to everyone. But every good or service in the world, “collective” ones included, is provided, not in lump sum, but in marginal units. Yet strangely, economists, trained to think of marginal units everywhere else, suddenly start referring to defense as a “lump” when discussing government. In reality, however, there is a vast range of “defense” services that the government (or any other defense agency) could supply to its customers. To take two polar extremes, the government could supply one unarmed policeman for an entire country, or it could sink most of the national product into providing an armed bodyguard, replete with tank and flame throwers, for every citizen. The question that must be answered by any defense agency is not whether or not to supply defense, but how much defense to supply to whom? In the same way, the question confronting a steel company is not whether or not to produce steel, but how much steel of various grades and types to supply.

But this failure to provide rational criteria for amounts and types of collective services is an inherent flaw in any provision by government. The market’s price system and profit-and-loss test tell private firms how much of what kind of steel to produce; rational criteria for satisfying consumers most efficiently are inherent in the free market. But government can have no such criteria. Since the consumers of defense do not pay for the service, since taxes do not measure the service, and since the government does not have to worry about losses that can be recouped by further taxation, there are no criteria of how much defense to provide to whom. Decisions are purely arbitrary, as well as coercive. If, on the other hand, defense were provided by private firms on the market, then these firms would, as in the rest of the market, supply efficiently the amounts and types of protection desired by particular customers. Those customers, for example, who desired and were willing to pay for round-the-clock bodyguards would do so; those who felt no need for protection – or pacifists aghast at the very idea – would pay nothing; and there might be a large spectrum of services in between.

More specifically: Only a minority of specific individuals find themselves in actual need of police or judicial protection during any given period. If A and B are attacked, the police can spring to the aid of these specific persons. It will be objected that even if only a few persons are actually attacked at any one time, no one can determine who will be attacked in the future, and so everyone will want to be sure of protection in advance, thus salvaging the notion of a “collective want.” But, again, there will be a spectrum of opinion among individuals. Some persons may feel pretty sure that they will not be attacked, and will therefore be willing to opt out of protection, to take their chance rather than pay a protection tax. Others will be confident of their own ability to repulse an attack, or would only patronize another, competing private defense agency. Others may fear an attack so little that the cost of paying protection will not be worth the benefit. On the free market, individuals would be free to choose any or none of these protection-insurance packages.

Even if it be conceded that not all people demand protection, it might still be argued that defense is a “collective good” because no one can be excluded from receiving its benefits. But surely if the inhabitants of a particular block refuse to pay for the police protection, the police may simply exclude that block from its patrols or other services. In the case of judicial protection, the conventional case for a collective good is even weaker. For surely a court, financed by voluntary payment (either by insurance premium or by fee-for-service), can refuse to hear the case of a nonpaying plaintiff. Even in the case of national defense, which seems to be a particularly strong example of a collective good, the pacifist or anarchist receives a harm rather than a good, and exclusion can be practiced in such ways as not rushing troops or planes to defend nonpaying areas, or at the very least not to defend them as rapidly and as diligently as areas that do pay.

Thus defense cannot be a collective good so long as only one pacifist or one anarchist exists in the society, for these persons will receive a harm rather than a benefit when they receive the “service” of coercive defense. And defense is not a collective good because its recipients can be excluded and separated.

Professor Kenneth Goldin is one of the very few economists to recognize that defense service is separable and not indivisible. He also points out that increased police service requires increased expense:

As communities grow, and more residents must be supplied with crime defense, most communities hire more policemen; clearly an increased cost. If more policemen are not hired, then new residents can be served only by decreasing service to others: more streets can be patrolled only if there are fewer patrols at night; more properties can be checked only if each one is checked less thoroughly, and only the more urgent calls can be responded to. Each of these service changes imposes costs on residents. Either they will suffer from more crime, or they will incur the costs of purchasing other types of crime defense. Many types of crime defense are selectively available such as locks, fences, guard dogs, guards, and also alarm companies which respond if the burglar alarm is tripped. And don’t overlook private police patrols, which check selected houses on selected streets, as thoroughly and as often as each customer requests, for a fee. [25] 

Court services are clearly separable, and private arbitrators are indeed generally more efficient than government courts. Goldin adds:

To service more persons generally requires more judges and courtrooms. If more facilities are not acquired, additional users will impose costs on others, in the form of longer days for trial and/or less judicial time spent on each case. It is costless to serve additional persons only if they have no disputes.

To some extent, he goes on, even government courts charge fees to users and therefore charge for benefits received, although the fees usually do not vary with the difficulty of the case. And “private arbitrators are also available, selectively, to those parties willing to pay a fee. So, although adjudication is a fundamental service in any society, it does not follow that adjudication is a public good.” [26]

And even in the case of national defense, Goldin points out,

there is certainly some variation in protection, especially among cities (regarding protection by missiles), and among Americans who either travel or have property abroad. While the troops may be sent out to protect some Americans or their property from some foreign seizures (such as the Mayaguez), in other cases no action is taken (tuna boats). One of the firmly embedded myths of modern public finance is that it doesn’t matter if population increases: The costs of defending the U.S. from external attack will not change. But consider two points. First, the new population must live somewhere. If they cause an increase in the U.S. land area, then either more defenses must be provided, or there will be a decrease in the level of protection to earlier residents and either way the marginal cost of protecting additional persons is positive…. Second, even if the new population resides within the existing boundaries, they will generally increase the amount of physical and human wealth which might be coveted by an enemy. That is, foreign attack is (at least partially) an economically motivated action, and is more likely to occur if there is more capital worth coveting. [27]

Not only does total cost of national defense vary with population, but the service of protection against foreign attack can be variable. First, there once existed private armies, and such armies, serving private individuals or groups, still exist today. Goldin mentions the armies of religious groups in contemporary Lebanon, as well as a Central American army owned by Robert Vesco. These armies, as Goldin states, “yield benefits primarily to their owner.” [28]

Second, even a collective State army can vary its services to individual citizens:

A military force also protects people from theft of property and kidnapping by foreigners. Exclusion from this service is relatively easy: The military force simply makes no attempt to stop theft or kidnapping of named persons. These persons would either hire their own guards, or suffer the damages of theft or kidnapping by foreigners…. Americans with substantial property abroad or at sea might well prefer to provide their own anti-theft defenses, rather than pay for a communal army which cannot be counted on to protect their property…. Contrary to public goods theory, even in this key case of defense from external attack, exclusion is not impossible and the marginal cost of serving additional persons generally is not zero. [29]

Moreover, as Buchanan concedes, a collective defense may be a service to one citizen and be considered a distinctly negative “service” by another:

The common availability of collective goods or services does not, of course, imply that similar evaluations are placed on these by different persons. The Vietnam War effort demonstrated this point. The services of the plane that bombed North Vietnam in October, 1968, were equally available to all U.S. citizens. But the value placed on these services may have ranged from significantly positive levels … to significantly negative levels for those who felt that continued bombing was both immoral and a barrier to peace negotiations. [30]

To Professor Buchanan, the “classic” example of a collective good is the lighthouse. The beams of the lighthouse are indivisible: “If one boat gets all the light beams, all boats may do likewise.” [31] Or, as Samuelson has put it, “A businessman could not build it for a profit, since he cannot claim a price from each user.” [32] The theory is that it would be virtually impossible for a lighthouse keeper to row out to each boat to demand payment for use of the light. And that hence lighthouses have always been supplied by government.

But, first, the problem has now been eliminated by modern technology. It is now technologically highly feasible for a lighthouse’s rays to be available only to that boat that has the proper electronic equipment, and to pay a fee for the use of that equipment. But, apart from this, it turns out, as Ronald Coase has discovered, that from the seventeenth until the early nineteenth centuries, the British lighthouse system was developed and operated by private enterprise. The lighthouse owners hardly bothered about collecting a fee from each boat on the spot. Instead, the owners employed agents at ports who found out what routes each ship entering the port had sailed and therefore what lighthouses the ship had passed and charged them accordingly. [33]Furthermore, additional users of lighthouses will impose higher costs for providing them. More ships will increase the likelihood of congestion in the protected waters and will require more navigational aids. [34]

In his trenchant critique of the offhanded way in which economists, from Mill to Samuelson and Arrow, have wrongly used the lighthouse as an example of a collective good, Coase concludes:

These references by economists to lighthouses are not the result of their having made a study of lighthouses or having read a detailed study by some other economist. Despite the extensive use of the lighthouse example in the literature, no economist, to my knowledge, has ever made a comprehensive study of lighthouse finance and administration. The lighthouse is simply plucked out of the air to serve as an illustration….

This seems to me to be the wrong approach…. [G]eneralizations are not likely to be helpful unless they are derived from studies of how such activities are actually carried out within different institutional frameworks.…

The account in this paper of the British lighthouse system … shows that, contrary to the belief of many economists, a lighthouse service can be provided by private enterprise…. The lighthouses were built, operated, financed and owned by private individuals, who could sell the lighthouse or dispose of it by bequest. The role of the government was limited to the establishment and enforcement of property rights in the lighthouse. The charges were collected at ports by agents from the lighthouses. The problem of enforcement was no different for them than for other suppliers of goods and services to the shipowner. [35]

The analogous navigational aid for air traffic, the services of the air-control tower, can be and is sold separately to individual consumers. Control towers will distribute radar information, for example, to whoever has radar equipment, but the equipment must be purchased by individual users. And heavier use of airspace or airport runways requires more navigational aids and therefore more expenses to service the users. [36]

Radio and television have been cited as collective goods since servicing another viewer allegedly involves no additional cost. But additional service is far from costless, and viewers are separable and excludable; therefore radio and TV fail both tests of a collective good. An increased viewing audience means supplying more, and more varied, programs. And new users must either be supplied with a stronger signal or may require cable or stronger antennas because of the increased congestion. Moreover, consumers are excluded now from television. To watch television programs they must buy sets and then must either pay as they go (various forms of pay TV) or else advertisers must pay, imposing on many viewers the psychic costs of commercials. And public television imposes on its viewers the psychic costs of being subjected to lengthy requests for donations. [37]

Moreover, in a sense the collective goods case for radio and television proves too much. For movies may also be said to be “costless” if additional viewers fill empty seats in a theater. Must movies, too, be nationalized, be supplied only by government, and perhaps be free to all?

Research has also been termed a “collective good”; don’t we all enjoy the benefits of the research and inventions of Edison, Faraday, et al., without paying for them? But of course we do pay for the fruits of research, and we pay separably. For we must purchase the papers or books of researchers, or pay fees for lectures, demonstrations, or consulting. Those who do not pay such fees are excluded from learning of or absorbing these new ideas. And, of course, the holders of patents and copyrights are able to obtain the income from these inventions or discoveries while excluding other producers. [38]

Again, this argument proves too much. For not only patents and inventions are produced by creators: There is also art, sculpture, music, literature, philosophy. Are we to say that all these products of the human spirit are “collective goods” because we cannot be fully excluded from enjoying the products of Beethoven, Shakespeare, or Vermeer? Must all artists therefore be nationalized?

Another commonly cited example of a collective good is insect control by airplane spraying. It is alleged to be impossible to exclude land underneath from being sprayed, and the marginal cost of adding more land sprayed is zero. But if new residents live in previously uninhabited areas, then extra cost is incurred in servicing them, and the same is true if they are engaged in activities that attract insects. More airplane time and fuel must be used as well as more spray. Furthermore, the airplane could often, if it wished, exclude specific parcels of land from its spray. And more important, many of those receiving this “service” have not wanted it and have objected to the spraying as vigorously as the pacifist has protested the use of violence in defense. Indeed, a shift in public attitudes toward chemical sprays has greatly reduced their use in recent years. But if some people consider a service such as a spray as “bad,” how can it be an indivisible, positive collective good?

Moreover, as Goldin points out, individual consumers have another option: to buy their own spray guns and spray their own property. In that case, each individual could choose and pay for the type and amount of spray that he precisely desires. [39]

For many reasons, then, there are no collective goods, and even if there were, as we have already seen, their supply would be coercive if furnished by government and taxation. But there is yet another vital point: For even if a good or service could only be supplied “collectively,” why must that collection be compulsory? Why couldn’t individuals pool their resources voluntarily, as in club dues, and make voluntary contributions for the supply of the service? [40] Or, as Gustave de Molinari argued, couldn’t a government even contract for the supply of collective services with private, competitive, and therefore more efficient firms? [41]

Or, as Spencer Heath urged, on the model of real estate developments, shopping centers, and hotels, couldn’t such “collective” or “public” goods as police, fire, roads, sanitation, and so on, be supplied by a large private firm with tenants paying for these services in their rents? [42]

Finally, if we look at human history, we find that every good, without exception, that economists glibly term a “collective good” has actually been successfully supplied by the free market. Not only do private guards and patrols exist, and private lighthouses in the past, but there have been societies, such as medieval Ireland, that supplied a complex network of defense service and insurance – including police, crime insurance, and competitive courts – without a State or taxation. Competing market courts serviced for centuries the vitally important fairs of Champagne in the Middle Ages. Common-law courts were marked by competitive, nongovernmentally appointed judges. Private guards and private arbitrators exist successfully even in our society where the State monopolizes most forms of defense. [43]

It seems clear, then, that voluntary rather than governmental supply of the collective good would be possible in every case; the only objection might be, not that the good – defense, firefighting, or whatever – could not be supplied, but that “too little” would be supplied. But that brings us to the second line of argument by the proponents of government.

External Benefits

If forced to retreat from the “strong” concept of collective goods, the advocates of government supply or subsidization of such goods, fall back on a “weak,” and therefore more plausible argument. Even though every collective good might be furnishable by private means, “not enough” will be supplied because of the difficulty or impossibility of capturing enough payment from “free riders” who benefit from these services without paying for their benefits. Government supply, or taxation of free riders to subsidize supplies, then becomes required in order to “internalize the external benefits” acquired, but not paid for, by the free riders. [44]

But this argument generates far more difficulties than it solves. It proves too much in many directions. In the first place, how much of the deficient good should be supplied? What criterion can the State have for deciding the optimal amount and for gauging by how much the market provision of the service falls short? Even if free riders benefit from collective service X, in short, taxing them to pay for producing more will deprive them of unspecified amounts of private goods Y, Z, and so on. Weknow from their actions that these private consumers wish to continue to purchase private goods Y, Z, and so on, in various amounts. But where is their analogous demonstrated preference for the various collective goods? We know that a tax will deprive the free riders of various amounts of their cherished private goods, but we have no idea how much benefit they will acquire from the increased provision of the collective good; and so we have no warrant whatever for believing that the benefits will be greater than the imposed costs. The presumption should be quite the reverse. And what of those individuals who dislike the collective goods, pacifists who are morally outraged at defensive violence, environmentalists who worry over a dam destroying snail darters, and so on? In short, what of those persons who find other people’s good their “bad?” Far from being free riders receiving external benefits, they are yoked to absorbing psychic harm from the supply of these goods. Taxing them to subsidize more defense, for example, will impose a further twofold injury on these hapless persons: once by taxing them, and second by supplying more of a hated service.

Since the tax-and-subsidy, or government-operation, route abandons the process of the market, there is no way of knowing who the “negative free riders” are, and how much they will be suffering from an increased tax. We do have a pretty good idea, however, that one or more of these people exists: that there is at least one pacifist, anti-dam environmentalist, anarchist opposed to all government actions, and so on, in every society. But in that case, the free-rider as well as the “stronger” collective-good argument for the neutrality of government falls to the ground.

The young Herbert Spencer, in his great treatise Social Statics, declared that an individual should be able to opt out of taxation, to “ignore the State,” and to renounce its services. [45] Criticizing his own work a half-century later, Spencer, in hisAutobiography, employs the free-rider argument. “Mr. Spencer,” he charges,

actually contends that the citizen may properly refuse to pay taxes, if at the same time he surrenders the advantages which State aid and State protection yield him! But how can he surrender them? In whatever way he maintains himself, he must make use of sundry appliances which are indirectly due to governmental organization; and he cannot avoid benefiting by the social order which government maintains. Even if he lives on a moor and makes shoes, he cannot sell his goods or buy the things he wants without using the road to the neighboring town, and profiting by the paving and perhaps the lighting when he gets there. And, though he may say he does not want police guardianship, yet, in keeping down footpads and burglars, the police necessarily protect him, whether he asks them or not. Surely it is manifest … that the citizen is so entangled in the organization of his own society that he can neither escape the evils nor relinquish the benefits which come to him from it. [46]

The later Spencer was properly refuted, on his own earlier grounds, by “S.R.” “S.R.” points out first that on the later Spencer’s own grounds, a man at least has the right to refuse to pay for advantages that he can relinquish. “S.R.” then quotes from the earlier Spencer’s application of his “law of equal freedom”:

If every man has freedom to do all that he wills, provided he infringes not the equal freedom of any other man, then he is free to stop connection with the State – to relinquish its protection and to refuse paying toward its support. It is self-evident that in so behaving he in no way trenches upon the liberty of others; for his position is a passive one, and while passive he cannot become an aggressor.. .. He cannot be coerced into a political combination without a breach of the law of equal freedom; he can withdraw from it without committing any such breach; and he therefore has the right to withdraw.

“S.R.” then proceeds: “Is a man who refuses to pay for incidental advantages he has not solicited an aggressor? Is it a breach of the law of equal freedom to withdraw from a combination that, in working for itself and pursuing its own benefit, indirectly benefits one who is perfectly willing to forego the blessings of the uninvited beneficence?” “S.R.” then points out that Spencer is implicitly modifying his equal freedom formula to say that anyone can do whatever he wishes, provided not only that he does not infringe on anyone else’s freedom, but also provided “that no one confers upon him benefits which he cannot wholly surrender while remaining a producer and trader.”

“S.R.” then tellingly supplies the logical reductio of the free-rider argument:

Has an individual the right to withhold proper contributions from neighbors who, individually or collectively, benefit him by caring for their own interests? If my neighbors hire private watchmen, they benefit me indirectly and incidentally. If my neighbors build fine houses or cultivate gardens, they indirectly minister to my pleasure. Are they entitled to tax me for these benefits because I cannot “surrender” them? [47]

Thus the free-rider argument proves far too much. After all, civilization itself is a process of all of us “free-riding” on the achievements of others. We all free-ride, every day, on the achievements of Edison, Beethoven, or Vermeer. When capital investment increases, and technology improves, the real wages of workers and the standard of living of consumers increase, even though they have contributed nothing to these advances. By simply continuing to work and consume, laborers and consumers receive the benefits of the inventions and investments of others without paying for them. So what must we infer from this? Are we all to wear sackcloth and ashes? If our neighbors are wiser, prettier, or happier, we all benefit in countless ways. So what must we do about it? Must we all be taxed to subsidize their beauty and wisdom?

And if people feel that not enough beauty, wisdom, inventions, police protection, and so on, will be provided by consumer payment and because of free riders, they are perfectly at liberty to subsidize provision of such goods on their own, individually or through societies or foundations. By doing so, the donor will demonstrate that, to him, the expected psychic benefit from his subsidy is worth more than the money he pays.

It will be objected that potential donors will not donate if they are rankled by the spectacle of free riders who stubbornly refuse to donate for the benefits they receive. And, further, that consumers on the market will not be willing to purchase these goods if they know that free riders abound. If we wished to moralize here, we might respond that these persons might be well advised to attend to their own affairs without wallowing in envy at benefits received by others. But, in any case, if the rankling at the existence of free riders is strong enough, these persons are always free to boycott the miscreants, either by not trading with them or by general ostracism. [48]

The consumers or donors can also, if they wish, get around the free-rider problem by making contracts, either singly or in organized fashion, that will pay for the “collective good,” but only on condition that everyone else, including the potential free riders, pay as well. This form of contract would enable those willing to pay, in effect, to put the choice to the free riders: Either you join in paying or the service will not be provided. [49]

Transaction Costs

It has been objected that the “transaction costs” of identifying the free riders or channeling donations, or organizing boycotts or of making conditional contracts, are “too high,” and that therefore those who want these services are justified in turning to the government to force the free riders to pay.

There are several grave fallacies in the transaction costs argument for taxation. In the first place, it ignores the transaction costs of the government process itself. The implication is that government is a costless Mr. Fixit, levitating angelically above the fray and busily correcting “market failures.” If private persons have difficulty in identifying free riders, will government be able to limit its taxation to free riders only? What of the external costs of the inevitable taxation beyond the free rider? And, as we have seen, since market and demonstrated preference through individual action is not available to government, there is no way that government can either identify the free riders or the “negative free riders,” or to discover how much benefit each person would derive from the subsidized supply and therefore how much each person should be taxed. There are also the inevitable grave inefficiencies in the political supply of goods and services and in the political process itself that need not be expounded here. At any rate, there is no reason to assume that the transaction costs of turning to government will be lower than those of private operation, and every reason to assume the opposite.

Second, another definitive rebuttal of the transaction-cost argument for government is the impossibility of comparing transaction costs, not simply of private and government action, but at any time and in any situation. For costs, like utilities, are subjective, and therefore nonmeasurable and noncomparable between persons. There is no such thing as social transaction costs or any social costs whatever. [50] Any government action will impose enormous psychic cost on the anarchist; any private action will do likewise for the dedicated totalitarian. How are we to compare them? If an entity does not and cannot exist, then it is senseless to take as one’s goal that it be minimized.

And third, even if transaction costs were measurable and comparable, we must ask: What is so terrible about transaction costs? On what basis are they considered the ultimate evil, so that their minimization must override all other considerations of choice, freedom, or justice? [51] After all, if minimizing these dread costs were truly the be-all and end-all, we could all pledge to obey one dictator, one Brezhnev or Idi Amin, in all things, and then everyone would have the assurance of knowing everyone else’s relevant value-scales. Other problems would abound, but at least transaction costs would be forced down to a minimum.

Coercion as “Really” Voluntary

A final fallback argument for the voluntariness of taxation and government asserts that every member of society wishes to pay for the collective goods but will do so only if everyone else pays. Therefore the seeming coercion of taxation is a fallacy, for everyone voluntarily pays in the serene knowledge that all beneficiaries are paying. In a kind of Hegelian leap, we are all voluntarily and cheerfully forcing ourselves to be free. [52]

This argument adds a heavy dose of mysticism to the other collective goods and external benefits arguments. For how do we know that everyone is voluntarily paying knowing that everyone else is doing so? There is no evidence, there is no social compact whatever to that effect. Is all that they pay supposed to be voluntary, or just some? Are they perhaps in mourning that their payments are not higher? And what of the anarchist and the pacifist and the tax rebel? Is their bitter opposition to taxation only a cloak for their cheerful acceptance? On what basis are we supposed to accept this curious doctrine?

There is, in short, no warrant whatever for Baumol’s contention that every individual prefers to be coerced into paying for a service rather than have none of it supplied at all. Moreover, this argument ignores the options as discussed above, of conditional contracts to finance the service voluntarily, or of voluntary boycotts of free riders. [53]

A popular argument holds that the fact of democracy establishes the voluntary nature of government. This idea need not detain us here long. As Herbert Spencer pointed out, democracy at best can only reduce the number of people being coerced; it does not eliminate coercion:

By no process can coercion be made equitable…. The rule of the many by the few we call tyranny: the rule of the few by the many is tyranny also…. “You shall do as we will, and not as you will,” is in either case the declaration; and if the hundred make it to the ninety-nine, instead of the ninety-nine to the hundred, it is only a fraction less immoral. Or two such parties, whichever fulfills this declaration necessarily breaks the law of equal freedom: the only difference being that by the one it is broken in the persons of the ninety-nine, whilst by the other it is broken in the persons of a hundred. And the merit of the democratic form of government consists solely in this, that it trespasses against the smallest number. [54]

Spencer concludes that “the very existence of majorities and minorities is indicative of an immoral state.” For the “enactment of public arrangements by vote,” he points out, “implies that the desires of some cannot be satisfied without sacrificing the desires of others … implies therefore, organic immorality.” [55]

Spencer goes on to point out that the doctrine that men may only be taxed by their own consent implies their right not to pay taxes, to “ignore the State.” He then notes the reply of the statists that “this consent is not a specific, but a general one, and that the citizen is understood to have assented to everything his representative may do, when he voted for him.” Spencer’s rebuttal to this democratic mythos is definitive:

But suppose he did not vote for him; and on the contrary did all in his power to get elected some one holding opposite views – what then? The reply will probably be that, by taking part in such an election, he tacitly agreed to abide by the decision of the majority. And how if he did not vote at all? Why then he cannot justly complain of any tax, seeing that he made no protest against its imposition. So, curiously enough, it seems that he gave his consent in whatever way he acted – whether he said yes, whether he said no, or whether he remained neuter! A rather awkward doctrine this. Here stands an unfortunate citizen who is asked if he will pay money for a certain preferred advantage; and whether he employs the only means of expressing his refusal or does not employ it, we are told that he practically agrees; if only the number of others who agree is greater than the number of those who dissent. And thus we are introduced to the novel principle that A’s consent to a thing is not determined by what A says, but by what B may happen to say! [56]

The Unanimity Principle

Sensing the problems of coercion by majority rule, social theorists from Calhoun (the “concurrent majority” theory) to Wicksell and Buchanan (the Unanimity Principle) have been trying to arrive at a polity free of this coercion. Although the search for a way out of coercion may be commendable, the seeming voluntariness of the Unanimity Principle suffers from two grave flaws. First, Wicksell and Buchanan apply the Unanimity Principle only to changes in the status quo, that is, to new acts of taxation and expenditure. But this simply ratifies existing property titles, and assumes that these existing property titles are just and must be maintained. In short, the ratification of changes from the zero point only by unanimous consent, virtually freezes that zero point permanently. But should it be? Suppose that, previous to the installation of the Unanimity Principle, a group of persons, either by their own violent conquest or through State action, had stolen and confiscated the property of another large group and called that property their own. The Unanimity Principle would then prohibit the victims from taking back their property, since such action would have to gain the consent of the robbers. In his classic article on the Unanimity Principle, Knut Wicksell first acknowledged this problem and then brusquely dismissed it. Thus Wicksell first concluded:

If there are within the existing property and income structure certain titles and privileges of doubtful legality or in open contradiction with modern concepts of law and equity, then society has both the right and the duty to revise the existing property structure. It would obviously be asking too much to expect such revision ever to be carried out if it were to be made dependent upon the agreement of the persons primarily involved. [57]

But having admitted that, Wicksell then proceeded as if it had not been said, asserting that “no [such] measure should be carried out unless it have the prior unanimous or at any rate overwhelming support of the whole people.” [58]

Second, the Unanimity Principle turns out to be something less than unanimous. Pacifists, tax rebels, and anarchists are apparently inconvenient to the goal of achieving unanimity in taxation, so the proponents speak of “relative unanimity” (Buchanan and Tullock), “approximate unanimity” (Wicksell), or “virtual unanimity” (the later Spencer). But these are all oxymorons, comparable to the phrase “only a little pregnant.” Unanimity must mean consent by all and nothing less. [59] Anything less is necessarily coercive and not voluntary. [60]

J.B. Say on Taxation

In contrast to almost all other economists, J.B. Say was astonishingly clear-sighted about the true nature of the State and of taxation. In Say there was no vain, mystical quest for a truly voluntary State or for a benign quasi-business firm supplying services to the grateful public. Say saw clearly that government supplies services to itself and its favorites, that all government spending is therefore consumption spending by the politicians and the bureaucracy, and that that spending is extracted by coercion at the expense of the taxpaying public.

As Say points out: “The government exacts from a taxpayer the payment of a given tax in the shape of money. To meet this demand, the taxpayer exchanges part of the products at his disposal for coin, which he pays to the tax-gatherers.” Eventually, the government spends the money on its own needs, and so “in the end .. . this value is consumed; and then the portion of wealth, which passes from the hands of the taxpayer into those of the tax-gatherer, is destroyed and annihilated.” Were it not for taxes, the taxpayer would have spent his money on his own consumption. As it is, “The state … enjoys the satisfaction resulting from the consumption.” [61]

Say goes on to attack the “prevalent notion, that the values, paid by the community for the public service, return to it again …, that what government and its agents receive, is refunded again by their expenditures.” Say is indignant:

This is a gross fallacy; but one that has been productive of infinite mischief, inasmuch as it has been the pretext for a great deal of shameless waste and dilapidation. The value paid to government by the tax-payer is given without equivalent or return: it is expended by the government in the purchase of personal service, of objects of consumption. [62]

At this point Say revealingly quotes with approval Robert Hamilton’s likening of government to a robber in refuting the argument that taxation is harmless because the money is recirculated into the economy by the State. Hamilton compares this impudence to the “forcible entry of a robber into a merchant’s house, who should take away his money, and tell him he did him no injury, for the money, or part of it, would be employed in purchasing the commodities he dealt in, upon which he would receive a profit.” Say then adds “that the encouragement afforded by the public expenditure is precisely analogous.” [63]

Say bitterly goes on to denounce the “false and dangerous conclusion” of writers who claim that public consumption increases general wealth. “If such principles were to be found only in books,” Say went on, “and had never crept into practice, one might suffer them without care or regret to swell the monstrous heap of printed absurdity.” But unfortunately they have been put into “practice by the agents of public authority, who can enforce error and absurdity at point of the bayonet or mouth of the cannon.”[64] Once again, Say sees the uniqueness of government as the naked exercise of force and coercion.

Taxation, then, is the coercive imposition of a burden on members of the public for the benefit of consumption by the ruling class, by those in command of the government. Say writes:

Taxation is the transfer of a portion of the national products from the hands of individuals to those of the government, for the purpose of meeting the public consumption of expenditure…. It is virtually a burthen imposed upon individuals, either in a separate or corporate character, by the ruling power … for the purpose of supplying the consumption it may think proper to make at their expense; in short, an impost, in the literal sense. [65]

Thus Say is not impressed with the notion, properly ridiculed by Schumpeter, that all of society somehow voluntarily pay their taxes for the general benefit; instead, taxes are a burden coercively imposed upon society by the “ruling power.” Neither is Say impressed if the taxes are voted by the legislature: For “what avails it … that taxation is imposed by consent of the people or their representatives, if there exists in the state a power, that by its acts can leave the people no alternative but consent?”

Taxation, Say clearly pointed out, cripples rather than stimulates production, for taxation robs people of resources that they would rather use in a different way:

Taxation deprives the producer of a product, which he would otherwise have the option of deriving a personal gratification from, if consumed … or of turning to profit, if he preferred to devote it to any useful employment…. [T]herefore, the subtraction of a product must needs diminish, instead of augmenting, productive power. [66]

Say continues with a devastating critique of the argument that taxation is useful in stimulating people’s exertions and the development of industry. But first, industry is looted to satisfy the demands of the State, and hence productive capital is crippled:

Mere exertion cannot alone produce, there must be capital for it to work upon and capital is but an accumulation of the very products, that taxation takes from the subject: … in the second place, it is evident, that the values, which industry creates expressly to satisfy the demands of taxation, are no increase of wealth; for they are seized on and devoured by taxation.

As for the argument that taxes stimulate exertions:

To use the expedient of taxation as a stimulative to increased production, is to redouble the exertions of the community, for the sole purpose of multiplying its privations, rather than its enjoyments. For, if increased taxation be applied to the support of a complex, overgrown, and ostentatious internal administration, or of a superfluous and disproportionate military establishment, that may act as a drain of individual wealth, and of the flower of the national youth, and an aggressor upon the peace and happiness of domestic life, will not this be paying as dearly for a grievous public nuisance, as if it were a benefit of the first magnitude? [67]

Say is also properly critical of Ricardo for maintaining that the suppression of one branch of private industry by taxation will always be compensated by a diversion of capital to some other industry. Say rebuts that:

I answer, that whenever taxation diverts capital from one mode of employment to another, it annihilates the profits of all who are thrown out of employ by the change, and diminishes those of the rest of the community: for industry may be presumed to have chosen the most profitable channel. I will go further, and say, that a forcible diversion of the current of production annihilates many additional sources of profit to industry. Besides, it makes a vast difference to the public prosperity, whether the individual or the state be the customer…. [In the latter case] wealth and production decline in consequence, and prosperity vanishes, leaving behind the pressure of unremitting taxation. [68]

Say concludes with a scornful attack on the very idea that taxation and government spending add to national wealth:

It is a glaring absurdity to pretend that taxation contributes to national wealth, by engrossing part of the national produce, and enriches the nation by consuming part of its wealth. Indeed, it would be trifling with my reader’s time, to notice such a fallacy, did not most governments act upon this principle, and had not well-intentioned and scientific writers endeavored to support and establish it. [69]

Say’s basic recommendation on the tax question was, in consequence, simple, trenchant, and clear-cut: “The best scheme of finance is, to spend as little as possible; and the best tax is always the lightest.” [70] In short, that government is best that spends and taxes least. But then, paraphrasing Thoreau’s and Benjamin R. Tucker’s logical extension of the similar conclusion of Jefferson: May we not say that that government is best that spends and taxes not at all? [71]

The Neutral Tax

Any quest for a nonredistributive neutral tax, such as free-market economists indulge in, must succeed in providing criteria for two basic questions about taxes: (a) how much taxes should be paid? and (b) who should pay them? The free market answers questions of “who” and “how much” very easily for its goods and services. But free-market economists have been singularly unsuccessful in providing either of these criteria for taxation. [72]Thus the answer of laissez-faire economists to the former question – that taxation should be limited strictly to protection or defense – founders, not only on the coercive nature of the payment, but also on the nonhomogeneity of the defense service. Defense, as we have seen above, is not a homogeneous lump but a good available in different quantities and qualities, in marginal units. Since the free market has been abandoned in this area, there is no way to arrive at any rational criteria for the optimal total amount or distribution of government defense, or of any other good or service.

Taxpayers and Tax-Consumers

It might be claimed that neutral taxation could be achieved in one way, if in no other: if the precise amounts that each individual paid in taxes were returned to him in government expenditure. Thus if A paid $1,000 in taxes in a certain year, B paid $500, and C $300, and so on, then A would receive $1,000, B $500, and so on. It might be thought that such a taxation system would be at best absurd; for why construct an elaborate machinery that would simply take and then give back the same amounts to each person? Why then have taxation at all? But there is a grave flaw even in this attempt at a neutral tax: neglect of the bureaucratic handling charge.

For even if such a precisely equal tax-and-payment mechanism were constructed, there would have to be salaries paid to the bureaucracy administering the system (and to the politicians ruling the administrators). But these bureaucrats, then, would, in contrast to the rest of society, be net tax-receivers, and hence by at least the amount and dispensation of their salaries, the fiscal system could not be neutral to the market economy. For even if A, B, C, and so on, paid and received the equivalent amounts, bureaucrats B1, B2, B3, and so on, would be net tax-recipients, and in essence, would be paying no taxes at all. Their net incomes functioning in the bureaucracy will necessarily have to be subtracted from the net incomes of other members of society. And therefore the very existence and operation of government, as John C. Calhoun brilliantly pointed out, establishes at the very least a class struggle between the net tax-recipients and the net taxpayers. Calhoun’s analysis is worth quoting at length:

So deeply seated, indeed, is this tendency to conflict between the different interests or portions of the community that it would result from the action of the government itself, even though it were possible to find a community where the people were all of the same pursuits, placed in the same condition of life, and in every respect so situated as to be without inequality of condition or diversity of interests. The advantages of possessing the control of the powers of the government, and thereby of its honors and emoluments, are, of themselves, exclusive of all other considerations, ample to divide even such a community into two great hostile parties…. And what makes this evil remediless through the right of suffrage of itself … is the fact that, as far as the honors and emoluments of the government and its fiscal action are concerned, it is impossible to equalize it. The reason is obvious. Its honors and emoluments, however great, can fall to the lot of but a few, compared to the entire number of the community and the multitude who will seek to participate in them. But without this there is a reason which renders it impossible to equalize the action of the government so far as its fiscal operation extends….

Few, comparatively, as they are, the agents and employees of the government constitute that portion of the community who are the exclusive recipients of the proceeds of the taxes. Whatever amount is taken from the community in the form of taxes, if not lost, goes to them in the shape of expenditures or disbursements. The two – disbursement and taxation – constitute the fiscal action of the government. They are correlatives. What the one take from the community under the name of taxes is transferred to the portion of the community who are the recipients under that of disbursements. But as the recipients constitute only a portion of the community, it follows, taking the two parts of the fiscal process together, that its action must be unequal between the payers of the taxes and the recipients of their proceeds. Nor can it be otherwise; unless what is collected from each individual in the shape of taxes shall be returned to him in that of disbursements, which would make the process nugatory and absurd. Taxation may, indeed, be made equal, regarded separately from disbursement. Even this is no easy task; but the two united cannot possibly be made equal.

Such being the case, it must necessarily follow that some one portion of the community must pay in taxes more than it receives back in disbursements, while another receives in disbursements more than it pays in taxes. It is, then, manifest, taking the whole process together, that taxes must be, in effect, bounties to that portion of the community which receives more in disbursements than it pays in taxes, while to the other which pays in taxes more than it receives in disbursements they are taxes in reality – burdens instead of bounties. This consequence is unavoidable. It results from the nature of the process, by the taxes ever so equally laid….

Nor would it be less a bounty to the portion of the community which received back in disbursements more than it paid in taxes because received as salaries for official services, or payments to persons employed in executing the works required by the government, or furnishing it with its various supplies, or any other description of public employment – instead of being bestowed gratuitously. It is the disbursements which give additional and, usually, very profitable and honorable employments to the portion of the community where they are made … and hence, to the extent that the disbursements exceed the taxes, it may be fairly regarded as a bounty. The very reverse is the case in reference to the portion which pays in taxes more than it receives in disbursements. With them profitable employments are diminished to the same extent, and population and wealth correspondingly decreased.

The necessary result, then, of the unequal fiscal action of the government is to divide the community into two great classes: one consisting of those who, in reality, pay the taxes and, of course, bear exclusively the burden of supporting the government; and the other, of those who are the recipients of their proceeds through disbursements, and who are, in fact, supported by the government; or in fewer words, to divide it into taxpayers and tax-consumers.

But the effect of this is to place them in antagonistic relations in reference to the fiscal action of the government and the entire course of policy therewith connected. For the greater the taxes and disbursements, the greater the gain of the one and the loss of the other, and vice versa; and consequently, the more the policy of the government is calculated to increase taxes and disbursements, the more it will be favored by the one and opposed by the other.

The effect, then, of every increase is to enrich and strengthen the one, and impoverish and weaken the other. [73]

Thus if a bureaucrat receives an income of $30,000 per year, and pays $10,000 to the government in taxes, he is in reality not paying taxes at all. His tax payment is a bookkeeping fiction; in reality, he is simply a net tax-consumer to the tune of $20,000.

Calhoun has thus shown that the very existence of taxation creates at least two conflicting classes: the ruling and the ruled, and that the ruling class are the net tax-consumers and the ruled the net taxpayers. The ruling classes comprise the full-time politicians and bureaucrats receiving government salaries, as well as the private sellers of goods and services to the governments or recipients of outright government subsidy. There is hence no way for government or for taxation to be neutral. Moreover, the greater the amount and degree of taxation/expenditures by government, the more important will be this unneutrality, this diversion of output and income from producers on the market to the State and the receivers of its largess. The greater the extent of government operation, therefore, the greater the class conflict in the society.

Proportional Taxation

Setting aside for a moment the problem of inherent nonneutrality stemming from the existence of taxation and expenditures, let us examine further the specific types or forms of taxes. Is there any form that might be called neutral to the market? Many economists have assumed that proportional taxation for each taxpayer (whether on incomes, property, or intangible “sacrifice”) will leave the distribution of income or wealth the same as before, and therefore be neutral to the market. Thus to Edwin Cannan proportional property taxation serves as a “sufficiently accurate standard” of neutrality, so that “the distribution of wealth between individuals” is the same as “it would be in the absence of State action.” [74] To Blum and Kalven, proportional sacrifice, presuming this intangible could be measured, has “the virtue … that it remains neutral as to the relative distribution of satisfactions among taxpayers. Under it they are all equally ‘worse off’ after taxes.” [75]

At first blush, proportionality appears to leave market distribution the same. If, for example, a tax of 10 percent is levied on all incomes, is not the distribution of incomes left the same (setting aside the above insoluble problem of net tax-consumers)? It is true that if A earns $30,000 a year, B earns $20,000, and C earns $10,000, and each pays 10 percent, the relative proportions of their income after taxes will remain the same as before ($27,000, $18,000, and $9,000). But this question misconceives the very idea of the neutral tax. The point of a tax neutral to the market is not to leave the income distribution the same as if a tax had not been imposed. The point of a neutral tax is to affect the income “distribution” and all other aspects of the economy in the same way as if the tax were a free-market price. Only if a tax has the effect of a surrogate free-market price, only if, in a profound sense, it is part of the market, could it be neutral to that market. And it should be evident that no free-market price leaves income distribution the same. If every market price were proportional to the income of the purchaser, if David Rockefeller had to pay $1,000,000 for a box of Wheaties, then there would be no point in having a higher income, and we would have an extraordinarily complex and unworkable form of compulsory equality of incomes.

The market does not form prices proportional to incomes; the market is characterized by uniform pricing, by a strong tendency toward the same price for the same good or service regardless of the income or personality of the buyer. [76]

Taxation and Benefits

If the market charges all consumers the same price for a particular service, it would seem that some form of equal (rather than equiproportional) taxation might be neutral to the market. One time-honored criterion attempting to arrive at such neutrality is the “benefit” principle: that each should pay taxes in accordance with the benefits he receives from the State. Those receiving the same benefits would pay the same amount of tax. There are many grave problems with this approach, however. First, in contrast to the marketplace, there is no way whatever for an external observer to gauge anyone’s benefits as derived from government. Since “benefits” are subjective, we cannot measure anyone’s benefit on the market either, but we can conclude, from a person’s voluntary purchase, that his (expected) benefit was greater than the value to him of the money given up in exchange. If I buy a newspaper for 25 cents, we can conclude that my expected benefit is greater than a quarter. But since taxes are compulsory and not voluntary, we can conclude nothing about the alleged benefits that are paid for with them. Suppose, in analogy, that I am forced at gunpoint to contribute 25 cents for a newspaper and that that newspaper is then forcibly hurled at my door. We would be able to conclude nothing about my alleged benefit from the newspaper. Not only might I be willing to pay no more than 5 cents for the paper, or even nothing on some days, I might positively detest the newspaper and would demand payment to accept it. From the fact of coercion there is no way of telling. Except that we can conclude that many people are not getting 25 cents’ worth from the paper or indeed are positively suffering from this coerced “exchange.” Otherwise, why the need to exercise coercion? Which is all that we can conclude about the “benefits” of taxation. [77]

To Adam Smith, the benefit principle dictated proportional income taxation: “The subjects of every state ought to contribute toward the support of government, as nearly as possible .. . in proportion to the revenue which they respectively enjoy under protection of the state.” [78]

Other writers have even used the benefit principle to justify progressive taxation. Yet there is no warrant whatever for assuming equi-, or even more than, proportional benefit from government. In one model the alleged benefit from government is to be simply deduced from one’s income, and it is claimed that this indicates a proportionately greater “benefit from society.” But there are many flaws with this approach. For first, since everyone benefits from participating in society, the fact that A earns more than B must be attributed to individual differences in ability or productivity rather than to the benefits of society. And second, “society” – the pattern of voluntary exchanges of goods and services – is most emphatically not identical to the State, the coercive extractor of taxation.

If, indeed, we are to tax people in accordance with their benefit from government, we would have to tax all the net tax-consumers to the amount of their subsidies. We would have to tax 100 percent of the salaries of bureaucrats, of the incomes of welfare recipients and of defense contractors, and so on. We would then have our ideal model of the neutral tax where all recipients of government funds would systematically repay them to the taxpayers – an absurd if rather charming state of affairs. If we leave subsidies to concentrate only on supposedly common services such as police protection, then we would have to conclude that the poor benefit far more from police protection than the wealthy, since the wealthy could far better afford to pay for their own protection. We would therefore have to conclude, not that the rich benefit as much as or more than the poor, but far less. We would have to conclude that the poor and the infirm, far more in need of protection than the rich, should be taxed far more heavily than the rich and the able-bodied. [79]

Moreover, the market is misconstrued by the benefit principle. For on the market people do not pay in accordance with benefits received. The chess addict and the indifferent players pay the same price for the same chess set, and the opera enthusiast and the novice pay the same price for the same ticket. On the market, people tend to pay the same price for the same good, regardless of benefit. The poor and the weak might be the most eager for protection, but, in contrast to the benefit principle, they would not pay more for the same degree of protection on the market. And finally, everyone on the market enjoys a net benefit from exchange. If the entire benefit were taxed away (assuming this subjective concept could be measured), then this practice would totally violate market principles, where net benefits from exchange are always maintained.

The Equal Tax

If the market means having everyone pay the same price for the same service, perhaps then each person should pay the same tax, equal in absolute amount? The equal tax, or “poll tax,” is surely a far closer approximation to neutral taxation than any of the more common forms of taxation. It would indeed preserve the market principle of same price for same service. It would also be particularly appropriate for a democratic polity, where one person, one vote prevails, or for a regime that attempts to adhere to the principle of “equality before the law.” [80]

But even the equal tax cannot be said to be neutral to the market. In the first place, it is impossible for observers outside the market, such as government, to gauge what service is “equal” to another service. Equality of service is not technological identity but similarity in the minds of the consumers. Only the free market, then, can determine different qualities or degrees of a service. Second, and even more important, there is no indication that for a particular taxpayer, the government is supplying a “service” at all. Since the tax is compulsory, it may well be that the “service” has zero or even negative value for individual taxpayers. Thus, a pacifist, philosophically opposed to any use of violence, would not consider a tax levied for his and others’ police protection to be a positive service; instead, he finds that he is being compelled, against his will, to pay for the provision of a “service” that he detests. In short, equal pricing on the market reflects demands by consumers who are voluntarily paying the price, who, in short, believe that they are gaining more from the good or service than they are giving up in exchange. But taxation is imposed on all people, regardless of whether they would be willing to pay such a price (the equal tax) voluntarily, or indeed whether they would voluntarily purchase any of this service at all.

The poll tax works particular hardship on those who would not ordinarily be participating in the market economy. Hence it (as well as the income tax) is payable in money and has been used as a fearsome whip to force natives in undeveloped countries out of subsistence or barter production and into working for money wages. Working for capitalists becomes the only way these natives can pay the tax. Thus Sir Percy Girouard, the British governor of Kenya, freely admitted, in the early twentieth century, that taxation was levied on the native to force him to go to work for British employers. The hut tax “is the only method,” opined Sir Percy, “of compelling the native to leave his reserve for the purpose of seeking work. Only in this way can the cost of living be increased for the native.” [81] In the Congo Free State, the problem in that Belgian colony, as Parker Moon put it, was: “Would the natives willingly go out into the jungle to collect rubber and tusks for the State?” For, “little appreciating the dignity of labor, the Congo negroes evinced a marked distaste for the task which their humane sovereign expected them to perform. Accordingly, another civilized innovation was introduced – taxes.” [82] Moon illuminates the relationship between taxation and forced labor in colonial countries:

In tropical Africa … the problem is how to make the natives work at all, for Europeans. Actual slavery is everywhere condemned, and vanishing…. Compulsory labor, once the fashion in Central Africa, is falling more and more under censure, though it is still utilized by governments when they need natives for railroad or road construction, or other public works….

Taxation is a favorite method of stimulating native industry. In many African colonies hut and poll taxes are imposed, ranging from fifty cents to several dollars per capita. The amount seems small enough, by our standards, but to the negro without money it is a large sum. He can earn it by working on a plantation or in a mine, for white employers, at wages that vary from five cents a day, or less, in Congo, Northern Rhodesia, and other regions, to six or seven cents in Kenya, perhaps twenty cents in the interior of Nigeria, and fifty cents or more in South Africa. At such wages it takes a native months to save enough to pay the tax for his family. [83]

Conclusion

Free-market economists have successfully extended their critical analyses of government to all areas of State operation and intervention – all except one. Taxation, the heart and soul of government, has escaped unscathed. Free-market economists have either avoided the topic of taxation altogether or have provided concepts that, while claiming to help limit government, have in reality offered apologies for the extension of State power. The view that income taxes are “better” than excise taxes; the call for proportional or degressive income taxation; the Friedman negative income tax; the Buchanan-Tullock Unanimity Principle; and the collective-goods, external-benefits, and transaction costs arguments for government and taxation, have all served to place the imprimatur of economics on the status quo or on extensions of government rather than to limit or roll back State power. All this has followed the course traced by Bertrand de Jouvenel three decades ago: From the idea of divine right down to modern times concepts originally meant to limit State power have been turned by the State and its advocates into rationales for its further extension. [84]

Much the same thing has happened to the noble concept of neutral taxation. The idea that taxation, and therefore government’s fiscal operation, should be neutral to the market – should not disturb the operations of the market nor divert it from its free course – is a noble but impossible one. As we have seen here, taxation can never be neutral to the market, and the impossibility of this dream is rooted in the very nature of taxation and government. Neutral taxation is merely a chimera. It is perhaps because of this impossibility that this concept, in the hands of the modern public-choice theorists and others, has so quickly become yet another device for ratifying the status quo of State power.

We are forced, then, to the realization of crucial points from which free-market economists seem to have been fleeing as from the very plague. That neutral taxation is an oxymoron; that the free market and taxation are inherently incompatible; and therefore either the goal of neutrality must be forsaken, or else we must abandon the institution of taxation itself.

Notes

[1] Thus lobbying or other government-related activities by any business firm would not be neutral to the market.

[2] On the structure of production and capital, see among other works, Eugen von Böhm-Bawerk, Capital and Interest, 3 vols (South Holland, Ill: Libertarian Press, 1959), and Ludwig M. Lachmann, Capital and Its Structure (Kansas City: Sheed Andrews and McMeel, 1978).

[3] Both would be determined by the social rate of time preference as determined on the market, the premium of present as compared with future goods – an agio which would be the resultant of all the time-preference schedules by individuals on the market, in much the same way as consumer demand is the embodiment of the marginal-utility schedules of individuals. See Murray N. Rothbard, Man, Economy, and State, 2^nd ed. (Los Angles: Nash, 1970), 1, chap. 6; Frank A. Fetter, Capital, Interest, and Rent: Essays in the Theory of Distribution (Kansas City: Sheed Andrews and McMeel, 1977), pt. 2.

[4] That is, each unit of each factor will tend to receive its discounted marginal revenue product, its marginal value productivity discounted by the rate of interest. So each unit of land and labor will tend to receive its DMRP, and the capitalist (or lender) will receive the discount (in the form of interest or long-run profit). Only in the never-never land of general equilibrium would each factor always receive its DMRP; in the real world, the positive or negative differences would reflect entrepreneurial profits and losses. See Rothbard, Man, Economy, and State, chap. 7.

[5] On the concept and implications of “demonstrated preference,” see Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics” (New York: Center for Libertarian Studies, 1977), esp. pp. 2–7, 26–30; reprinted in The Logic of Action One.

[6] This, however, is a long way from saying, with conventional neoclassical economists, that general equilibrium and perfect knowledge are facts of reality, or, with the rational-expectations economists, that the market always perfectly forecasts the future. If this were true, there would be no room for entrepreneurship at all, and the most dynamic and vital aspect of the market economy would go unremarked and unexplained. See Gerald P. O’Driscoll, Jr., “Rational Expectations, Politics, and Stagflation,” in Time, Uncertainty, and Disequilibrium: Exploration of Austrian Themes, Mario J. Rizzo, ed. (Lexington, Mass: Lexington Books, 1979), pp. 153–76.

[7] For convenience, “members” and “donors” shall be used interchangeably throughout, although in many cases donors are technically not “members” of the organization.

[8] The lack of precise guidance in nonprofit organizations is not a criticism of their existence; this lack is simply a part of the nature of the case, and it is taken into account by the donors when they make their “investment” decisions in the organization.

[9] In a trivial sense, of course, being willing to accept a free gift by a charity is also a demonstration of preference by the recipient, but only in the trivial sense that he prefers more of a good to less. The recipient is not sacrificing any good or service in exchange.

[10] It is curious that statist critics of the market invariably denounce “production for [monetary] profit” as greedy and selfish, and instead uphold “production for use” as unselfish and altruistic. On the contrary, producers can only make monetary profits to the extent that they serve otherconsumers. Logically, altruists should deeply admire the successful pursuit of monetary gain on the market.

It is also curious that many writers believe that the maximum-(monetary)-profit assumption for business motivation may have been true for personally owned nineteenth-century firms, but that it no longer holds for the modern corporation. On the contrary, it is precisely the modern corporation where “impersonality” of investment and producer decision will tend to dominate, since the personal wishes of single owners are no longer nearly as important. Unprofitable nepotism, for example, is far more likely to reign in the mom and pop store than in the large corporation.

[11]

[12] Burglars, as distinct from robbers, do not confront their victims directly and so present him with no choice; but they employ physical coercion by seizing his property without his consent.

[13] Franz Oppenheimer, The State (New York: Vanguard Press, 1926), pp. 24–27.

[14] Ibid.

[15] Albert Jay Nock, On Doing the Right Thing, and Other Essays (New York: Harper and Bros., 1928), p. 145.

[16] Mises, Human Action, p. 196.

[17] Ibid, p. 197.

[18] Ibid., p. 198. This is not to imply that Mises believed that the State could or should be abolished; instead, he believed that the world should bepreponderantly a product of contractual relations. (Italics mind.)

[19] We speak here of “voluntary” in the nontrivial sense that distinguishes it from the “involuntary” or “coerced” payment to thieves.

[20] In the preceding sentence, Schumpeter wrote: “The state has been living on a revenue which was being produced in the private sphere for private purposes and had to be deflected from these purposes by political force.” Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper and Bros., 1942).

[21] John R. Hicks, “The Valuation of the Social Income,” Economica (May 1940), cited in Alex Rubner, Three Sacred Cows of Economics (New York: Barnes and Noble, 1970), p. 54.

[22] Hicks to Rubner, Sept 28, 1966. In Rubner, Sacred Cows, p. 54n.

[23] James M. Buchanan, The Public Finances, 3^rd ed. (Homewood, Ill.: Richard d. Irwin, 1970), pp. 62–63.

[24] After identifying the essence of government as coercion, and after carefully analyzing each type of government and “political entrepreneurship,” Montemartini concludes that “there are no public, or collective needs in the strict sense of the word, as opposed to private needs. It is always real individuals who calculate the advantages of imposing on the community the production of certain specific goods.” And these individuals’ valuations will differ; “The calculations of economic advantage differ from one associate to another when it comes to determining the needs to be satisfied collectively.” Hence, the production of “collective goods” is always coercive: “The collectivization of the satisfaction of some needs always aims at a participation in the costs of economic units which would not voluntarily have so participated.” Giovanni Montemartini, “The Fundamental Principles of a Pure Theory of Public Finance,” in Classics in the Theory of Public Finance, Richard Musgrave and Alan Peacock, eds. (New York” Macmillan, 1958), pp. 150–51.

[25] Kenneth D. Goldin, “Equal Access vs. Selective Access: A Critique of Public Goods Theory,” Public Choice 29 (Spring 1977): 60.

[26] Ibid., pp. 65–66.

[27] Ibid., pp. 60–61.

[28] Ibid., p. 61. Goldin amusingly adds: “A medieval lord could scarcely be a ‘free rider’ on a neighboring lord’s defense efforts. If he did not have his own defenses, he would probably suffer attacks from his neighbor.” Cf. Wicksell: “Side by side with the national army, many countries have voluntary rifle clubs and similar institutions which sometimes constitute no mean military force.” Knut Wicksell, “A New Principle of Just Taxation,” in Classics in the Theory of Public Finance, Musgrave and Peacock, eds., p. 90.

[29] Goldin, “Equal Access vs. Selective Access,” pp. 61–62.

[30] Buchanan, Public Finances, pp. 25–26. Buchanan errs, however, in claiming that “few persons” would place a negative value on internal law and order. Pacifists would, and how “few” they may be will vary, and their number is unknown in any case. Even the existence of one pacifist negates the very concept of defense as a collective good, just as the existence of one anarchist negates the very concept of a collective good supplied by the State.

[31] Ibid., p. 23.

[32] Paul A. Samuelson, Economics, 6^th ed. (New York: McGraw-Hill, 1964), p. 159. In his 10^th edition, Samuelson, perhaps in an unacknowledged response to Professor Coase’s noteworthy article (see below), gives the case away by adding, after “from each user” the words “without great difficulty” (p. 160). For he thereby concedes that lighthouses are not ”collective goods.”

[33] “The tolls were collected at the ports by agents (who might act for several lighthouses)…. The toll varied with the lighthouse and ships paid a toll, varying with the size of the vessel, for each lighthouse passed. It was normally a rate per ton (say 1/4d or 1/2d) for each voyage. Later, books were published setting out the lighthouses passed on different voyages and the charges that would be made.” Ronald H. Coase, “The Lighthouse in Economics,” Journal of Law and Economics 17 (October 1974): 364–65.

[34] Goldin, “Equal Access vs. Selective Access,” p. 62.

[35] Coase, “The Lighthouse in Economics,” p. 375. As Goldin remarks, “Lighthouses are a favorite textbook example of public goods, because most economists cannot imagine a method of exclusion. (All this proves is that economists are less imaginative than lighthouse keepers.)” Goldin, “Equal Access vs. Selective Access,” p. 62.

[36] Since commercial airports are all owned by (largely municipal) government, the pricing of their runway and other services is scarcely akin to market pricing; generally, landing and takeoff fees are set far too low to clear the market, and the resulting shortage is rationed by increased and dangerous air congestion. See Ross D. Eckert, Airports and Congestion (Washington, D.C.: American Enterprise Institute, 1972).

[37] See Goldin, “Equal Access vs. Selective access,” pp. 64–65.

[38] Ibid., pp. 63–64.

[39] Ibid., p. 54.

[40] Cf., Melvin W. Reder, “Review of Baumol’s Welfare Economics and the Theory of the State,” Journal of Political Economy (December 1953): 539.

[41] Gustave de Molinari, The Society of Tomorrow (New York: G.P. Putnam’s Sons, 1904), pp. 71–72, 84–86. In earlier years, this Belgian-born nineteenth-century French economist believed that all services now supplied by government could be supplied better and more efficiently by privately competitive firms on the free market. See Gustave de Molinari, The Production of Security (New York: Center for Libertarian Studies, May 1977); and David M. Hart, “Gustave de Molinari and the Anti-Etatiste Liberal Tradition” (history, honors thesis, Macquarie University, Australia, 1979).

[42] Spencer Heath, Citadel, Market and Altar (Baltimore, Maryland: Science of Society Foundation, 1957). For the most developed work on the Heathian proposal, see Spencer Heath, The Art of Community (Menlo Park, California: Institute for Humane Studies, 1970). Disney World is a spectacular example of a successful business firm supplying all of these services out of tourists’ fees.

[43] Thus see Joseph R. Peden, “Property Rights in Celtic Irish Law,” Journal of Libertarian Studies 1 (Spring 1977): 81–95; Bruno Leoni,Freedom and the Law (Los Angeles: Nash, 1972); and William C. Wooldridge, Uncle Sam the Monopoly Man (New Rochelle, NY: Arlington House, 1970).

[44] Gordon Tullock advances the curious argument that revolutions are impossible (or virtually so) because individual revolutionaries work and sacrifice whereas the entire public reaps the benefits; hence the public are free riders on the efforts of revolutionaries. (Gordon Tullock, “The Paradox of Revolution,” Public Choice 9 [Fall 1971]: 89–99.) If he were consistent, Professor Tullock should therefore advocate that government tax people and subsidize revolutionaries in order to solve the problem of “underproduction of revolution!” In point of fact, of course, revolutions do take place from time to time, and they occur because much of the public has placed high on their values scales the success of the revolution. In short, a strongly held ideology among the public can overcome the free-rider problem for revolution. People’s “interest” is not only job or immediate monetary payment, but also the attainment of such concepts as justice, liberty, and so on, none of which has any place in the economic calculus of the public-choice theorists.

[45] Herbert Spencer, Social Statics (London: John Chapman, 1851), chap. 19, “The Right to Ignore the State,” pp. 206–16.

[46] Herbert Spencer, An Autobiography (New York: d. Appleton, 1904), 1, pp. 417–18.

[47] “S.R.,” “Spencer as His Own Critics,” Liberty 14 (June 1904): 2.

[48] Attacking the late Spencer’s argument, in Man vs. the State, for taxation for defense based on the free rider, “S.R” points out that that Spencer “overlooked the fact that there are several methods of securing cooperation for necessary ends, some manifestly non-aggressive and consonant with the principle of equal freedom. It is, of course, unfair for any man to enjoy the benefits of peace and stability while declining to share the risks, sacrifices, and burdens entailed by actual and probable attacks from within or without; but such an unsocial and mean-spirited individual can be brough to terms by the boycott, material and moral.” “S.R.,” “Spencer and Political Science,” Liberty 14 (February 1904): 2.

[49] I am indebted to Dr. David Gordon of the Center for Libertarian Studies for pointing this out to me.

[50] Even Professor Buchanan, one of the founders of public-choice theory, admits the subjectivity and hence the noncomparability of costs. James M. Buchanan, Cost and Choice: An Inquiry in Economic Theory (Chicago: Markham, 1969).

[51] If transaction costs are to be absolute and override all other considerations, then the transaction cost theorists are taking the very same position they deride in ethicists: that is, rendering their values absolute, with no trade-off for other values. If transaction-cost economists are to scorn ethicists for ignoring cost-benefit considerations, why are they to be allowed to ignore ethics?

[52] Professors Buchanan and Tullock and the public-choice theorists are the outstanding modern proponents of this theory, which was also enunciated by Professor Baumol. See William J. Baumol, Welfare Economics and the Theory of the State (Cambridge, Mass.: Harvard University Press, 1952), and idem, “Economic theory and the Political Scientist,” World Politics (January 1954): 275–77.

[53] See Rothbard, Toward a Reconstruction of Utility and Welfare Economics, pp. 33ff. On collective goods and external benefits, also see Rothbard, Man, Economy, and State, 2, pp. 883–90.

[54]

[55] Ibid., p. 211.

[56] Ibid., pp. 211–12.

[57] Knut Wicksell, “A New Principle of Just Taxation,” in Classics in the Theory of Public Finance, Musgrave and Peackock, ed., p. 109.

[58] Ibid.

[59] Thus, “S.R.”‘s critique of the later Spencer’s argument for compulsory military service, compulsory justice, and compulsory taxation, to the effect that there is “virtual unanimity” behind these forms of State action, pointed out: “The word virtual is fatal. The question is evaded, not answered. Has the one man, or the insignificant group of men, that refuses to support the State, even in the simplest of its functions, the right to stand alone, to ignore it? Spencer never refuted his own early demonstration of this right.” “S.R,” “Spencer and Political Science,” p. 2.

[60] Here we might note the curious position of Laffer-Wanniski that the tax rate that maximized government revenue along the “Laffer curve” is, for some obscure reason, the point at which the electorate desires to be taxed. (Italics Wanniski’s.) Jude Wanniski, “Taxes, Revenues, and the ‘Laffer Curve’” in The Economics of the Tax Revolt, Arthur Laffer and Jan Seymour (New York:” Harcourt Brace Jovanovich, 1979), p. 8.

[61] Jean-Baptiste Say, A Treatise on Political Economy, 6^th ed. (Philadelphia: Claxton, Remsen and Haffelfinger, 1880), pp. 412–13.

[62] Ibid., p. 413.

[63] Ibid., p. 413n. Say likens government to a robber at another point. He states that government’s claim to a right over individual property, which it makes through taxation, is pure usurpation. The government is no more the proper owner of its claimed property than a thief over the property he has robbed. Ibid., p. 414n.

[64] Ibid., pp. 414–15.

[65] Ibid., p 446.

[66] Ibid., p. 447.

[67] Ibid., pp. 447, 447n–448n.

[68] Ibid., p. 452n. In a charming aside, Say chides Ricardo for erring because of his penchant for introducing “the unbending maxims of geometrical demonstration.” For, “in the science of political economy, there is no method less worthy of reliance.”

[69] Ibid., p. 447.

[70] Ibid., p. 449. Here we may note with amusement Frédéric Bastiat’s reaction to these passages of Say. In the light of Bastiat’s reputation as a laissez-faire extremist” in contrast to Say’s “moderation,” we might note that Bastiat was shocked at the extremism of Say’s views: Doesn’t the State supply some services to the public? Frederic Bastiat, Economic Harmonies (Princeton, N.J.: D Van Nostrand, 1964), p. 567.

[71] In a famous passage, Thoreau wrote: “I heartily accept the motto – ‘That government is best which governs least,’ and I should like to see it acted up to more rapidly and systematically. Carried out, it amounts to this, which also I believe – ‘that government is best which governs not at all.’” Or, as Tucker concluded succinctly: “That which governs least is no government at all.” Henry D. Thoreau, “Civil Disobedience” [1849], in Walden and Other Writings (New York: Modern Library, 1937), p. 635; Benjamin R. Tucker, Instead of a Book (New York: B.R. Tucker, 1893), p. 14.

[72] Thus Ludwig von Mises, by far the most thoughtful and systematic of free-market economists, devotes only a few unsatisfactory paragraphs to the subject of a neutral tax, or indeed to taxation in general While conceding the impossibility of a neutral tax in the real world, he maintains without demonstration that it would be possible in a world of general equilibrium. And, despite its conceded impossibility, he seems to advocate pursuing the neutral tax as an ideal. (He also does not explain why everyone’s income would be equal in general equilibrium.) Apart from this, Mises maintains that taxes, despite “directly curtail[ing] the taxpayer’s satisfaction,” are “the price he pays for the services which government renders to … each of its members.” He warns that taxes should remain “low,” but the only criterion offered for this lowness is that they “do not exceed the amount required for securing the smooth operation of the government apparatus”; in that case, “they are necessary costs and repay themselves.” We may here reiterate all the questions we’ve discussed above, emphasizing such problems as: How much service? To which members? How about pacifists? Who pays the necessary costs and who gets repaid and then some? And what exactly is the “smooth operation of the government apparatus,” and [why] should that be the overriding desideratum? Mises, Human Action. Pp. 730–31, 733–34, 738.

[73] John C. Calhoun, A Disquisition on Government (New York: Liberal arts Press, 1953), pp. 14–18.

[74] Edwin Cannan, “Minutes of Royal Commission on Local Taxation,” 1899,” in Readings in the Economics of Taxation, Richard Musgrave and Carl Shoup, eds. (Homewood, Ill: Irwin, 1959), pp. 182–83.

[75] Walter Blum and Harry Kalven, Jr., The Uneasy Case for Progressive Taxation (Chicago: University of Chicago Press, 1953), p. 44.

[76] A similar critique could be leveled against any form of proportional tax, for example, on sales or property.

[77] In contrast to benefit theory, which naïvely assumes that people “purchase” government services in much the same way as they purchase goods and services on the market, at least sacrifice theory assumes in the words of Blum and Kalven, “that the taxes are a necessary evil falling up on a distribution of money, and therefore upon a distribution of satisfactions, which is otherwise acceptable.” Uneasy Case for Progressive Taxation, p. 44. The basic problem with sacrifice theory is that it doesn’t explain why people must bear the burdens of sacrifices of taxation, why that is, we must turn from talk of benefits and free choice on the market to talk to burden and sacrifice in the sphere of government.

[78] Adam Smith, The Wealth of Nations (New York: Modern Library, 1937), p. 777. Smith added immediately that “the expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute to their respective interest in the estate.” Presumably, however, these tenants also get benefits from the estate greater than their pro-rata expenses, and if they do not, or even if they do, they can sell their share and leave – an option not available to the taxpayer.

[79] Mill put the case very well: “If we wanted to estimate the degrees of benefit from the protection of government we should have to consider who would suffer most if that protection were withdrawn: to which question if any answer could be made, it must be, that those would suffer most who were weakest in mind or body, either by nature or by position. Indeed, such persons would almost infallibly be slaves. If there were any justice, therefore, in the theory of justice now under consideration, those who are least capable of helping or defending themselves, being those to whom the protection of government is the most indispensable, ought to pay the greatest share of its price.” John Stuart Mill, Principles of Political Economy(New York: D. Appleton, 1901), 2, pp. 398.

[80] In recent years, the poll tax was used to designate a voting requirement, in effect a tax on voting, in the southern states. But originally, the poll tax was simply an equal tax per head, and the payment for voting was simply one method of enforcing the tax. On poll taxes, see Merlin H. Hunter and Harry K. Allen, Principles of Public Finance (New York: Harper and Bros., 1940), pp. 265–70. Many early poll taxes were graduated rather than uniform. C.F. Bastable, Public Finance (London: Macmillan, 1895), pp. 433–34.

[81] Cited in Parker T. Moon, Imperialism and World Politics (New York: Macmillan, 1930), p. 132. In South West Africa, the British accomplished the same purpose with a dog tax, levied per native dog. “Many of the natives, of course, were too poor to pay any such tax, and consequently in four months over one hundreds members of the Bondelzwarts tribe alone were condemned, for non-payment of the tax, to pay a fine of two pounds or spend two weeks in jail. To obtain the money for tax and fines, the natives would have to work for white ranchers and mine-owners.” Ibid., p. 504.

[82] Ibid., p. 86.

[83] Ibid., p. 563.

[84] Bertrand de Jouvenel, On Power, Its Nature and the History of Its Growth (New York: Viking Press, 1949)

The Best of Murray Rothbard

This first appeared in The Libertarian Forum, Vol VI, NO.2, September, 1974

In March, 1968, the august authorities of the international monetary Establishment undertook a reform that would copper-rivet their rule and banish gold forevermore. Since World War II, the basis of the international monetary order had been the Bretton Woods system, in which every national currency was fixed in terms of the almighty dollar, and the dollar in turn was fixed in price at $35 an ounce of gold. The capstone of the system was the $35 an ounce gold system, which all the leading economists and bankers and bureaucrats assured us was written in tablets of stone. Never, never would an alteration of the magical $35 figure take place. The problem was that as American inflation continued and grew, the free markets of the world evaluated the dollar as ever less and less valuable in relation to the hard money, gold. Hence, the free gold markets of the world – notably London and Zurich – felt enormous pressure upward on the gold price from $35 an ounce. In order to maintain the price at $35, the United States Treasury kept dumping gold on the free market. But inflation and the subsequent acceleration of upward pressure, meant that the U. S. Treasury lost even more gold than continued to flow abroad from the ever-weakening dollar. Finally, a dollar panic on the free gold market in the spring of 1968 led the world Establishment to reconstitute the international monetary system: to end the pesky gold problem and eject it from the monetary order.

The countries decided to ignore the free gold market by sundering the gold market in two: from March, 1968 on, the monetary authorities would simply ignore the free gold market, would have nothing further, ever to do with it. Let it go to blazes! Instead, the Federal Reserve System would continue to redeem the dollar at the rate of $35 per ounce in gold, to any Central Banks that wished such redemption; and the Central Banks would continue to evaluate gold at this ordained price. There would now be “two-tiers” in the gold market, or rather, two “markets”; and the world Central Banks would simply go about their business, insulated from the free market. Gold would be cut off from the real business of the monetary authorities, and would remain as only an accounting device between governmental central banks. To maintain this, all the Central Banks pledged themselves never, ever to buy or sell gold again in the free market, or in any way outside their own cozy cabal.

It is instructive to remember how the whole raft of anti-gold economists, from Milton Friedman and Fritz Machlup on the right to the Samuelsons on the left, greeted this development. They all solemnly assured us that it was not gold that propped up, or gave backing to, the dollar. The truth was the other way round! Now cut off from its dollar moorings, they opined, gold would soon fall to its “proper”, non- monetary price on the free gold markets: in short, to somewhere around $10 an ounce. The wicked gold speculators and the evil South Africans (the largest suppliers of new gold) would at last get their comeuppance.

The rest is history. In the years since, not once did the free-market gold price fall below $35 an ounce; on the contrary, it has generally been considerably above that, and as accelerating inflation has weakened public confidence in the dollar and other fiat currencies (a process intensified by the U. S. abandoning all gold redemption in August, 1971), the price of gold has risen ever more sharply. Proposals of pro-gold economists to double the price of gold to $70 an ounce were, until very recently, greeted with ridicule by the anti-gold economic Establishment. A price of $70 was considered absurdly high and out of the question by almost all of the “experts.” And yet, at last reading, the price of gold on the free market had risen to no less than $150 an ounce, and the end is scarcely in sight. Once again, it is us “gold bugs” who have had the last laugh; gold has once again buried its would-be undertakers.

Now, at last, in November, 1973, in a little-heralded move, the U. S. and its allies in the monetary Establishment have thrown in the towel. The two-tier gold system, the lofty isolation of the Central Banks from the free gold market, is no more. The U. S. and the other nations announced that no longer would there be the two-tier isolation; from now on, any Central Bank would be free to buy or sell its gold at will.

Incredibly, the United States was able to save face on making the announcement by conning the media into claiming that here, once more, was the coup de grace to gold and to all the wicked speculators and “gold hoarders.” Fed Chairman Arthur Burns loftily announced that now Central Banks would be able to sell gold on the free market and thereby bring the price down. What Dr. Burns neglected to mention, of course, is that Central Banks would also be free to buy gold and dump some of their supply of excess and unwanted dollars. Whether gold was to be the winner or the loser from the liquidation of the two-tier system became obvious when no Central Bank was observed rushing to sell any of its precious stock of gold. And, indeed, they would have to be unusually dimwitted to do so. If you were a central banker, would you sell gold at $150 an ounce when all indications were that gold would keep rising in the future?

Another result of the crumbling of the two tiers is to render obviously and strikingly idiotic the “official” U. S. definition of the dollar as weighing 1/42 of a gold ounce (i.e. the official U. S. gold price of $42 an ounce). So long as the two tier system remained, we could preserve the fiction of $42 (embodying two tiny devaluations over the last few years from $35), because the Central Bank “market” was to be kept insulated from the unclean doings on the free gold market. But now that Central Bank isolation has been ended, the $42 an ounce price becomes so much hot air. In fact, every Central Bank, including even the fanatically anti- gold Federal Reserve Bank, will be increasingly and irresistibly tempted to upvalue their gold stocks from the phony $42 to the realistic free gold price. Any country that does so will find that, as if by magic, it will have nearly four times as much precious gold as it did before (i.e. their stock of gold ounces will be worth four times as much.) Why should the U. S., for example, struggle along with a dwindling and puny gold stock of $11 billion when, by simply recognizing the facts of reality, it could jump instantaneously to something like $40 billion?

No, gold is alive and flourishing throughout the world. Its health, and its role, is better than it has been in decades, and its prognosis is terrific. Natural law is once again winning the fight against the schemes of economic dictators.

The Best of Murray Rothbard

This first appeared in The Libertarian Forum, Vol VI, NO.6-7, June-July,1972

John F. Kennedy; Malcolm X; Martin Luther King; Robert F. Kennedy; and now George Corley Wallace: the litany of political assassinations and attempts in the last decade rolls on. (And we might add: General Edwin Walker, and George Lincoln Rockwell. In each of these atrocities, we are fed with a line of cant from the liberals and from the Establishment media. In the first place, every one of these assassinations is supposed to have been performed, must have been performed, by “one lone nut” – to which we can add the one lone nut who murdered Lee Harvey Oswald in the prison basement. One loner, a twisted psycho, whose motives are therefore of course puzzling and obscure, and who never, never acted in concert with anyone. (The only exception is the murder of Malcolm, where the evident conspiracy was foisted upon a few lowly members of the Black Muslims.) Even in the case of James Earl Ray, who was mysteriously showered with money, false passports, and double identities, and who vainly tried to claim that he was part of a conspiracy before he was shouted down by the judge and his own lawyer – even there the lone nut theory is stubbornly upheld.

It is not enough that our intelligence is systematically insulted with me lone nut theory; we also have to be bombarded with the inevitable liberal hobby horses: a plea for gun control, Jeremiads about our “sick society” and our “climate of violence”, and, a new gimmick, blaming the war in Vietnam for this climate and therefore for the assault on George Wallace. Without going into the myriad details of Assassination Revisionism, doesn’t anyone see a pattern in our litany of murdered and wounded, a pattern that should leap out at anyone willing to believe his eyes? For all of the victims have had one thing in common: all were, to a greater or lesser extent, important anti-Establishment figures, and, what is more were men with the charismatic capacity to mobilize large sections of the populace against our rulers. All therefore constituted “populist” threats against the ruling elite, especially if we focus on the mainstream “right- center” wing of the ruling classes. Even as Establishmenty a figure as John F, Kennedy, the first of the victims, had the capacity to mobilize large segments of the public against the center-right Establishment.

And so they were disposed of? We can’t prove it, but the chances of this pattern being a mere coincidence are surely negligible. If the only problem is a “sick society”, a “climate of violence”, and the absence of gun laws, how come that not a single right-centrist, not a single Nixon, Johnson, or Humphrey, has been popped at?

Like
ladies’ hemlines, there are changing fashions in libertarian writing.
Libertarians, who pride themselves as individualists, are all
too often lemmings following the latest trend. The very latest
trend among libertarians is to write vehemently, indeed “intolerantly,”
about the importance of tolerance, and how much they grrr, hate
“intolerant people.” Every manjack and his brother is denouncing
“intolerance” these days, along with a lot of gaseous pseudo-philosophic
hokum about the relationship between one’s ideas and one’s “tolerance”
toward the ideas of others.

There
is a curious anomaly here that has gone unnoticed. One of the
things that strikes a person who first encounters Modal Libertarians
is their surpassing rudeness, their overwhelming boorishness,
their total lack of manners. It is libertarians, and only libertarians,
who will call you up, as a perfect stranger, and proceed to denounce
you for various deviations, or for alleged contradictions on page
851. It is only libertarians who, learning a few syllogisms about
liberty, and having read next to nothing, consider themselves
perfectly qualified to harangue learned men on their alleged errors.
It is only libertarians who conclude, simply by virtue of announcing
themselves as libertarians, that your house is their house and
your possessions their possessions: an implicit assumption of
communism of libertarian possessions. And oddly enough, or maybe
not so oddly, the very people who are bleating most loudly against
“intolerance” are some of the worst offenders. The “philosophy”
is really a smoke screen, for the real problem is decent manners
and their lack of them; and when some of us react against those
boors, we are of course denounced for being “intolerant.” The
ill-mannered wish to ride roughshod over the rest of us, and then
howl about “intolerance” whenever we decide to resist. Note the
typical Modal ploy: shifting the focus of attention from manners
and behavior to abstruse discussions of philosophy. This move
enables them to focus on the charge that we are intolerant of
their “ideas,” that we are betraying our responsibility of engaging
in continuing dialogue or “conversation” about ideas, when the
real problem is them; their boorish Aaggression” and lack of manners.

Manners
are vital to the quality of life; civility is a crucial requirement
of civilization. It softens edges, and makes social life worth
living. Note that I am not calling for the punctilio of a seventeenth-century
Spanish grandee: just ordinary decent behavior. But that is what
is so sorely lacking. Much of the current wave of Political Correctness
is a crazed attempt to continue and to justify swinish behavior,
while trying to substitute a host of formal rules for decent politeness.
But these formal rules are the reverse of manners, for they are
used as clubs to impose one’s will on others, all in the name
of “sensitivity.”

Thus,
suppose that someone is talking or speaking, either at a gathering
or a formal lecture, and happens to refer to Ms. X as a “distinguished
actress.” The feminist language police are then apt to appear,
shouting out that “actress” is an “insensitive” and sexist word
and that the speaker must use the gender-neutral term “actor”
(or who knows, maybe next it will be “actperson”). Here is a typical
case where in the name of imposing “sensitivity,” the thought
police are deliberately taking over in a power play, cowing the
speaker through smears when everyone knows he was simply using
standard terminology, and being unbearably rude and barbaric in
the course of that takeover.

The
thought police have only one virtue: clarity. At least you know
what side they are on. But how about our “anti-intolerance” Modals?
What would they have to say here? Would they condemn the feminists
for being “intolerant?” Or would they condemn us for being “intolerant”
of the thought police? Or maybe both? All is confusion. On the
other hand, focus on decent manners and the answer becomes clear.
The rude boors in this example are the feminist thought police.
The philosophic tail-chasing that says, as one recent Modal writer
put it, “we must be tolerant even of the intolerant” would be
simply irrelevant here. For there is no obligation of any sort
to be polite to rude people. On the contrary, those who have breached
civility are “the aggressors,” and should be tossed out on their
ear. To absorb and agree with this point, one does not need any
high-flown philosophic theory: just plain common sense and a sense
of decency.

It
strikes me too that since Modal libertarianism is lifelong adolescent
rebellion against one’s parents, one’s neighbors, and the bourgeoisie
generally, that this revolt against good manners, and its displacement
into bleating about the “philosophy of tolerance,” is characteristic
Modal behavior. The Modal rebels against what used to be standard
parental teaching about manners, and challenges such teachings
with pseudo-profound blatherings about tolerance, metaphysics,
and the theory of knowledge.

A
final point about the private telling of jokes, which can be one
of the great charms of social intercourse. Jokes, of course, almost
always have some group or other as the butt of the joke:
whether it be gender, age, religion, occupation, or ethnic group.
The Politically Correct grinches, having no sense of humor whatever,
are trying in effect to outlaw every joke as “insensitive” to
some group or other, and therefore not politically correct. But
hyper-sensitivity is one of the great barriers to civilized discourse
and social relations, and can make such relations virtually impossible.
Every such group, instead of being encouraged to bellyache, should
get off its high horse. Modal Libertarians, of course, are up
there with the anti-joke grinches, in the name of “tolerance”
rather than “sensitivity.” The Modals are just as despotic and
just as crippling of joy through rotten manners.

Suppose,
for example, someone, Mr. A, is telling a joke of which the butt
is Group G. Simple politeness and good manners would lead Mr.
A not to tell the joke if one of his listeners, say Mr. B, is
obviously a member of Group G. On the other hand, if A doesn’t
realize it, or it turns out that one of B’s friends or relatives
happens to be a G, it would be incredibly boorish for B to denounce
A as bigoted, insensitive, and all the rest. Modals should be
stuck here; for they would have to figure who to denounce: A,
for being “bigoted” against Group G; B for being “intolerant”
of A’s jokes; or both for being intolerant of the other. In practice,
of course, we know how Modals come down, and it is invariably
with the “sensitive” and the Politically Correct. The emphasis
on manners, in contrast, would, in effect, tell B to pipe down,
stop being boorish, and lighten up: humor is one of the great
joys of the world.

This
essay is included, with many others, in the Lew Rockwell-edited
Irrepressible Rothbard

Buy
it

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

1969

• Preview
  Issue, March 1, 1969:
  Why the Libertarian | The Nixon Administration: Creeping Cornuellism
  | State of Palestine Launched | ‘Private’ Enterprise at Work |
  A People’s Court? | Sitting on the Sidewalk Outlawed |
• Vol.
  1.1, April 1, 1969: The Scientific Imperial Counsellor: ‘To
  Restore Faith in Government’ | FBI and CIA (K. Hess) | ‘Dear Ted’:
  Prelude to Repression?
• Vol.
  1.2, April 15, 1969: Tax Day | Tax Revolt in Wisconsin | Tax
  Revolt (K. Hess) | Transformation of a Newspaper
• Vol.
  1.3, May 1, 1969: The Student Revolution | My Taxes (K. Hess)
• Vol.
  1.4, May 15, 1969: Mailer for Mayor | Repression, Domestic
  and Foreign (K. Hess) | SDS and Black Self-Determination (S. Halbrook)
  | The Panthers and Black Liberation
• Vol.
  1.5, June 1, 1969: The Movement Grows | The Coming White Terror
  (K. Hess) | Don’t Tread on Me
• Vol.
  1.6, June 15, 1969: Massacred at People’s Park | Where are
  the Specifics? (K. Hess) | Confiscation and the Homestead Principle
• Vol.
  1.7, July 1, 1969: The Meaning of Revolution | What the Movement
  Needs (K. Hess)
• Vol.
  1.8, July 15, 1969: Nixon’s Decisions | SDS – Two Views
  (MNR and L. Liggio)
• Vol.
  1.9, August 1, 1969: Revolution in Minnesota | The Real Rebels
  (K. Hess) | Nelson’s Waterloo | The New Deal and Fascism | Heinlein
  and Liberty: A Warning (W. Clark)
• Vol.
  1.10, August 15, 1969: Listen, YAF | Leaders and Heroes (K.
  Hess) | Against the Volunteer Military (W. Block)
• Vol.
  1.11, September 1, 1969: National Liberation | Reform (K.
  Hess) | The Czech Crisis, Part I (L. Liggio) |
• Vol.
  1.12, September 15, 1969: The Revolution Comes to YAF (Tuccille)
  | The YAF Power Play
• Vol.
  1.13, October 1, 1969: Anarcho-Rightism | Conservative Libertarianism
  (K. Hess) | National Review Rides Again | Abolition: An Acid Test
• Vol.
  1.14, October 15, 1969: We Make the Media | Class Analysis
  | The Czech Crisis (L. Liggio)
• Vol.
  1.15, November 1, 1969: The Conference | Robin Hood Revisionism
  (K. Hess)
• Vol.
  1.16, November 15, 1969: Ultra-Leftism | Neoliberals in German
  Politics (L. Liggio) | A YAF Conversion
• Vol.
  1.17, December 1, 1969: The Anti-War Movement | A Letter to
  Moloch | The Airline Cartel | A Leftist Looks at YAF
• Vol.
  1.16, December 15, 1969: Notes on Repression | Cults and Criticisms
  (K. Hess) | The Military-Industrial-University Complex (G. O’Driscoll,
  Jr.)

1970

• Vol.
  2.1, January 1, 1970:
  Anarcho-Communism | The Working Class (B. Goring) | Lurking in
  the Wings (J.M. Cobb) | My Loyalty Oath (A.C. Bardsley)
• Vol.
  2.2, January 15, 1970: AHA Convention (L. Liggio) | From Libertine
  to Libertarian (J. Tuccille) | What’s Your Excuse Now? | Against
  Taxation | USIA Network | Organized Crime (J. Peden)
• Vol.
  2.3, February 1, 1970: Biafra, RIP | Left and Right: The Psychology
  of Opposites (J. Tuccille) | Massacres in Vietnam (L. Liggio)
• Vol.
  2.4, February 15, 1970: The Task Ahead | Meet Libertarians
  | Phony Libertarianism (J. Tuccille)
• Vol.
  2.5, March 1, 1970: Free Bill Kunstler! | People Justice (J.
  Peden) | Doctors and Drugs
• Vol.
  2.6, March 15, 1970: The New Left: RIP | For a New America
• Vol.
  2.7, April 1, 1970: The Mad Bombers | The Knudson Revolt |
  Liberty and the University (E.G. Dolan) | Tax Resistance (J. Tuccille)
  | Census Resistance
• Vol.
  2.8, April 15, 1970: The Cure For Air Pollution | U.S. Imperialism
  (V. Ninell | The Individualist | The Tuccille Book
• Vol.
  2.9, May 1, 1970: Farewell To The Left | Natural Allies Revisited
  (J. Tuccille)
• Vol.
  2.10, May 15, 1970: The State of the Movement (L. Liggio)
• Vol.
  2.11, June 1, 1970: The New Movement: Peace Politics | The
  New Libertarianism | The Judges | The Lenin Centennial (E.G. Dolan)
• Vol.
  2.12, June 15, 1970: The Nixon Mess | Anarchism and Government
  (J.V. Peters) | Abortion Repeal | From the “Old Curmudgeon”
• Vol.
  2.13-14, July 1, 1970: On Civil Obedience | From the “Old
  Curmudgeon”
• Vol.
  2.15-16, August 1, 1970: Hatfield for President? | Black Flag
  for a New Decade (E.G. Dolan) | The State: Enemy of Latin America
  (S.P. Halbrook) | Bits and Pieces (J. Tuccille) | Nixon and the
  Economy (G.P. O’Driscoll, Jr.)
• Vol.
  2.17, September 1, 1970: The Socialist Scholars Caper | More
  on Ardrey | Bits and Pieces (J. Tuccille)
• Vol.
  2.18, September 15, 1970: Fall Reading | A Not So Radical
  Guide (G.P. O’Driscoll, Jr.)
• Vol.
  2.19, October 1, 1970: When Revolution? | Bits and Pieces:
  On Sexism (J. Tuccille) | The Case for Elites | From the “Old
  Curmudgeon” | Gems of Statism
• Vol.
  2.20, October 15, 1970: Polarization | O Canada (J. Peden)
  | Gun Laws (Stephen Halbrook)
• Vol.
  2.21, November 1, 1970: White Terror in Quebec | Gems of Statism
  | Free Enterprise and Free Education (E.G. Dolan) | Bits and Pieces
  (J. Tuccille) | The Shaffer Dictionary (B. Shaffer)
• Vol.
  2.22-23, November 15-December 1, 1970: The Elections | Retreat
  from Freedom | Stirrings, Right and Left | Power and Market |
  Bits and Pieces: Optimism One (J. Tuccille) | The Shaffer Dictionary
  (B. Shaffer)
• Vol.
  2.24, December 15, 1970: Death of the Left | Hawaii –
  Growth and Repression | Anarchism – A New Convert

1971

• Vol.
  3.1, January 1971:
  Nixonite Socialism | To Our Readers | Social Darwinism Reconsidered
  | Native Americans and Property Rights (L.P. Liggio) | Bits and
  Pieces (J. Tuccille) | Knee-Jerk Radicalism
• Vol.
  3.2, February 1971: Take Off | Come One! Come All! | Libertarianism:
  A Warning (T.R. Machan) | On Women’s Liberation (E.G. Dolan) |
  Living Free | Bits and Pieces: The Psychological-Political Dichotomy
  (J. Tuccille) |
• Vol.
  3.3, March 1971: Take Off II | Facing Bureaucracy (N.H. Crowhurst)
  | In Defense of Non-Romantic Literature (J. Tuccille) | From the
  “Old Curmudgeon”
• Vol.
  3.4, April 1971: The Conning of America | Stateless Societies:
  Ancient Ireland (J.R. Peden) | Bits and Pieces (J. Tuccille) |
  A Libertarian Rebuttal: Conservatism Examined (J.D. Davidson)
  | Army Intelligence Reads The Forum
• Vol.
  3.5, June 1971: How to Destatize | Syndical Syndrome | Jerome
  Daly Once More | The Senate and the Draft | Bits and Pieces (J.
  Tuccille) | Nixonite Socialism
• Vol.
  3.6-7, July-August 1971: Dumping Nixon | Liberty: From Rand
  to Christ (J.R. Peden) | Comment | Bits and Pieces: Presidential
  Politics (J. Tuccille) | Traditional China and Anarchism (M. Rubinstein)
  | From the Old Curmudgeon
• Vol.
  3.8, September 1971: The End of Economic Freedom | You Read
  it Here
• Vol.
  3.9, October 1971: Attica | Reprint Bonanza | Disestablish
  Public Education (L.P. Liggio) | A Note on Revolution (R.A. Childs,
  Jr.)
• Vol.
  3.10, November 1971: Nixon’s NEP | We Fight the Freeze | Confession
  – Pavlovian Style (L.E. Moran) | Libertarian Wit: Review
  of Tuccille’s It
  Usually Begins With Ayn Rand by The Old Curmudgeon
• Vol.
  3.11, December 1971: The UN and The War | Mises Festschrift
  | The Population Hysteria (J. Tuccille) | Libertarian Conference

1972

• Vol.
  4.1, January 1972:
  Politics ’72 | Purist Deviationism: A Strategic Fallacy (W.
  Danks) | Libertarians Versus Controls | The Shaffer Dictionary
  | On Punishment: Two Comments and a Reply
• Vol.
  4.2, February 1972: Phase II Cracking | The Political Circus
  | For Croatia | The Shaffer Dictionary | The Movement Marches
  On | Immortality and the Law (J. Tuccille) | From the Old Curmudgeon

• Vol.
  4.3, March 1972: The Party | The Shaffer Dictionary | The
  Rising Sun (L.P. Liggio) | The Political Circus | From the Old
  Curmudgeon | The Lone Eagle (J.D. Doenecke)
• Vol.
  4.4, April 1972: A Bunch of Losers | Ashlosky for President
  (E.G. Dolan) | Philosophy and Immortality (J. Tuccille) | The
  Conservation Question (G.P. O’Driscoll, Jr.) | Short People,
  Arise!
• Vol.
  4.5, May 1972: Nixon’s World | The Party Once More | Review
  of John Hosper’s Libertarianism,
  Part I (R.A. Childs) | The Liar as Hero (W. Block) | From the
  Old Curmudgeon | The Shadow Cabinet | Frank S. Meyer, RIP
• Vol.
  4.6-7, June-July 1972: McGovern??? | The Party Emerges |
  Another Lone Nut | Review of John Hosper’s Libertarianism,
  Part II (R.A. Childs) | Anationalism and Immortality (J. Tuccille)
  | The Polish Ham Question (W. Block) | Arts and Movies | Garbage
  in New York (J.R. Peden) | Academic Freedom? (P. Sherman)
• Vol.
  4.8-9, August-September 1972: (This issue features Joseph
  Peden as editor) Confronting Leviathan | Arbitration: A Fundamental
  Alternate Institution (R. Fucetola, III) | The Law of the Sea
  | Transnational Relations | Review of Bruno Leoni’s Freedom
  and the Law (G. Greenberg) | Localism and Bureaucracy
  In the 19th Century China (M. Rubenstein) | Bombing the Dikes
  | America’s Newest Enemies
• Vol.
  4.10, October 1972: November?? | No, No McGovern | McGovern
  for President (L. O’Driscoll, G. O’Driscoll) | Open Letter to
  the Internal Revenue Service (J. Tuccille) | Nixon or McGovern?
  (J. Peden) | Archy’s Last Gasp | The Slumlord as Hero (W. Block)
  | The Schmitz Ticket | Unity or Cadre
• Vol.
  4.11, November 1972: Beyond the Sixties | From the Old Curmudgeon
  | The Senate Rated | The Strip Miner as Hero (W. Block) | The
  Elections | Whither the Democracy? | Revisionism From the Center:
  A Review Essay (C.R. Tame) | Arts and Movies
• Vol.
  4.12, December 1972: The Movement | Hospers on Crime and
  the FBI | The Blackmailer as Hero (W. Block) | From the Old
  Curmudgeon | Ezra Pond, RIP (J.D. Davidson) | We Make the Electoral
  College! | Freedom, Pot, and National Review | A Response to
  the Challenge (T. Machan) | The Editor Replies | Bormann Once
  More

1973

• Vol.
  5.1, January 1973:
  The Apotheosis of Harry | Sex Breaks Up a Cult | The Pimp as Hero
  (W. Block) | Review of A. Ernest Fitzgerald’s The
  High Priests of Waste (R. Sherrill) | The Other North
  American Election (S.E. Konkin III) | Arts and Movies | From the
  Old Curmudgeon
• Vol.
  5.2, February 1973: The Sticks in the Closet | Hospers Replies
  (J. Hospers) | The Editor Rebuts | The Old Curmudgeon as Hero
  (W. Block) | A Libertarian Poll | Movement Magazines
• Vol.
  5.3, March 1973: The Mayoral Circus | The Blackmailer as Villain
  (G. Greenberg) | The Blackmailer as Hero: A Reply (W. Block) |
  Heroes and Scapegoats (W. Block) | Life vs. Death: The Final Barricade
  (J. Tuccille) | The Rise of Roy Ash (B. Evers) | Denial of Protection
  (T. Machan)
• Vol.
  5.4, April 1973: Present at the Creation | Tax Rebellion |
  Personal ‘Freedom’: Review of Harry Browne’s How
  I Found Freedom in an Unfree World (R.A. Childs) | The
  IBM Case: A Comment (D.T. Armentano) | Contra Psychological “Liberation”
  | Jim Davidson and the Week That Was | From the Halls of Montezuma…
  (J.R. Peden) | Monthly Index of Liberty
• Vol.
  5.5, May 1973: Notes on Watergate | Review of Murray Rothbard’s
  For
  A New Liberty (J.N. Schulman) | Floyd Arthur ‘Baldy’ Harper,
  RIP | McGovern vs. Rothbard | Arts and Movies | Anti-Tax Demonstration
  (K.W. Kalcheim) | Hospers On Rothbard’s Rebuttal (J. Hospers)
  | The Editor’s Final Rebuttal
• Vol.
  5.6, June 1973: The Mayoral Circus II | Blockian Ethics (R.
  Halliday) | Blockian Ethics – A Reply (W. Block) | The Editor
  Comments | Harry Browne Replies (H. Browne) | The Editor Rebuts
  | Feds and Rebs (K.W. Kalcheim) | The Need For a Movement and
  a Party | Rothbardiana | The Old Curmudgeon
• Vol.
  5.7, July 1973: Economic Mess | On Man and Perfection (T.
  Machan) | Harper’s Last Article | Liberty or Order: 1970 Domestic
  Spying Plan (B. Evers) | Pareto on the Prospects for Liberty (V.
  Pareto) | Public Schools: The counterattack Begins (J.R. Peden)
  | Arts and Movies
• Vol.
  5.8, August 1973: Oil and American Foreign Policy (J. Hegel
  III) | 101 Way to Promote Libertarian Ideas | News Notes (J.R.
  Peden) | The Meaning of War
• Vol.
  5.9, September 1973: American Monopoly Statism (J.R. Stromberg)
  | Libertarianism and Social Transformation (S. Halbrook) | Use
  Immunity: Let the Punishment Fit the Crime (J.R. Peden) | Comment
  (J.R. Peden)
• Vol.
  5.10, October 1973: Hands off the Middle East! | Libertarians
  and Culture: A Challenge (J.D. Davidson) | Send Money! | ‘The
  Libertarian’: The Gospel According to Lefevre | Revolution in
  Chile | Friedman’s Value-Free Value: Human Liberty (T. Machan)
  | Technology Forever (J. Tuccille) | Arts and Movies
• Vol.
  5.11, November 1973: Ludwig von Mises, RIP | Libertarian Party
  | From the Old Curmudgeon | The Middle East | Music: The Art No
  One Thinks About (K. LaFave) | Arts and Movies | The Fall of the
  Republic | Mr. First Nighter, Soft on the Enemy? (H.P. Noctis)
  | For Conspiracy Theorists Only! | The ‘Final Solution’ to the
  Arab Problem
• Vol.
  5.12, December 1973: Congress ’73 | Are We Another Rome? (J.R.
  Peden) | The Machinery of Freidman (J. Salerno) | Maddox Attacks
  Revisionism (B. Evers) | Rand on the Middle East

1974

• Vol.
  6.1, January 1974:
  Energy Fascism | Mises and History (L.P. Liggio) | Danish Delight
  | Arts and Movies
• Vol.
  6.2, February 1974: Two Tiers Crumble | Relevance? | What
  Kind of ‘Purity’? | An Open Letter to Irving Kristol | Political
  Kidnapping | Rothbardiana | Arts and Movies | Background of Middle
  East Conflict (B. Evers) | Save the Oil Industry! | The Home Front:
  Review of G. Perrett’s Days
  of Sadness, Years of Triumph (J.D. Doenecke) | 101 Ways
  to Promote Libertarian Ideas
• Vol.
  6.3, March 1974: Seven Days in May?? | European Politics (L.P.
  Liggio) | The British Elections | Libertarianism and Humanist
  Psychology (M. Andrews) | Why No Oil Refineries | How to Deal
  With Kidnapping | Libertarian Songs | Libertarian Dinner Club
  | Civil Liberties, Selective Style
• Vol.
  6.4, April 1973: Five Years Old! | FLP Convention: One Step
  Forward, One Step Back | The Mysterious World of the CLA | Phillip
  H. Willkie, RIP | Arts and Movies | Review of John T. Flynn’s
  As
  We Go Marching (W. Stewart)
• Vol.
  6.5, May 1974: Impeach the (Expletive Deleted) | BFL Expands
  | Uncle Miltie Rides Again | Purity and the Libertarian Party
  | The Growth of Revisionism from the Centre: A Review Essay (C.R.
  Tame) | Rhodesia – Unjust Land Seizure (B. Evers)
• Vol.
  6.6, June 1974: Reflections on the Middle East | European
  Politics (L.P. Liggio) | For Tuccille (R.L. MacBride) | Arts and
  Movies | For Kurdistan | The Hiss Case Revisited | From the Old
  Curmudgeon | Contra Federal Campaign Funding (B. Evers)
• Vol.
  6.7, July 1974: World-Wide Inflation | Destutt de Tracy: Early
  French Classical Liberal (L.P. Liggio) | Conservative Myths in
  History: Review of E.v. Kuehnelt-Leddihn’s Leftism:
  From De Sade and Marx to Hitler and Marcuse (R. Raico)
  | Comment on the CLA (L. Kinsky) | The Prophetic Vision of Hillaire
  Belloc (J.P. McCarthy) | New Rothbard Book
• Vol.
  6.8, August 1974: Whoopie!! | Kennedy Marriage Revisionism
  | Libertarian Advance | School or Jail?: Review of W. Rickenbacker’s
  The
  Twelve Year Sentence (J.R. Peden) | From the Old Curmudgeon
  | In Search of the Old Curmudgeon (J.D. Davidson) | About Quotas
  (W.R. Havender) | Arts and Movies
• Vol.
  6.9, September 1974: Natural Law, or The Science of Justice
  (L. Spooner) | Only One Heartbeat Away | The Non-Dismal Science
  (L.P. Liggio)
• Vol.
  6.10, October 1974: The Ford in Our Present, Or Can Greenspan
  Save Us? | LP Platform | Austrian Economics on the Rise (R.M.
  Ebeling) | Davidson and ‘Women’s Lib’ (L.V. Seawright) | Science
  and Human Liberty (T. Machan) | Hayek and the Nobel Prize
• Vol.
  6.11, November 1974: The Elections | Voting and Politics |
  After Rabat, What? | Economic Determinism, Ideology, and the American
  Revolution | Report from Europe
• Vol.
  6.12, December 1974: The Emerging Crisis | Libertarian Scholarship
  Advances | Women’s Lib: Goldberg Replies to Kinsky (S. Goldberg)
  | Boston Libertarian Dinners! | Henry Hazlitt Celebrates 80th
  Birthday | Arts and Movies

1975

• Vol.
  7.1, January 1975:
  Government and the Economy | Society Without a State | The Demise
  of Fractional Reserve Banking (K.E. Peterjohn)
• Vol.
  7.2, February 1975: Oil War and Oil Imperialism, I | Oil
  War and Oil Imperialism, II (J.R. Stromberg) | Tax Rebellion
  in Willimantic | Foreign Affairs (L.P. Liggio) | The Day-Care
  ‘Shortage’ | Sense on Oil – At Last!
• Vol.
  7.3, March 1975: Inflationary Depression |Arts and Movies
  | Profits Regulation and Inflation (H.C. Herring III, F.A. Jacobs)
  | The Aliens Are Among Us (J.N. Schulman) | Spooner vs. Liberty
  (C. Watner) | ‘Under’-Population | Forthcoming Spring Books

• Vol.
  7.4, April 1975: The Death of a State | LP Convention –
  Come One, Come All! | The AIB Conference: From Scholarship to
  Political Activism In Assassination Revisionism (A. Fairgate)
  | Nozick Award | Assassination Revisionism Once More | Arts
  and Movies
• Vol.
  7.5, May 1975: Mayaguez, By Jingo | Peasants and Revolution:
  A Review Essay (J.R. Stromberg) | Hobbes and Liberalism (B.
  Evers) | Say’s Law Revisited (R.M. Ebeling) | Libertarian Ripoff
  of the Month Dept.
• Vol.
  7.6, June 1975: The Case for Optimism | From Crank-Up to
  Crack-Up (L.v. Mises) | The Bankruptcy of Liberalism | On Income
  Differences (W.R. Havender) | The Ethics Gap | Burton K. Wheeler,
  Montana Isolationist, RIP (L.P. Liggio)
• Vol.
  7.7, July 1975: Dictatorships | The Division of Labor and
  the Libertarian Movement (T.G. Palmer) | Fanfani’s Fall (L.P.
  Liggio) | The Second Austrian Conference | From the Old Curmudgeon

• Vol.
  7.8, August 1975: Winston Churchill: An Appreciation (R.
  Raico)
• Vol.
  7.9, September 1975: The LP Convention | ALL Founded | Depression
  and Inflation (R.M. Ebeling) | Rothbardiana | On the Women’s
  Liberation, or the Male Chauvinist Pig as Hero (W. Block)
• Vol.
  7.10, October 1975: The Sinai Trap | Is the Grass Any Greener…?
  Review of Laura & Odie Faulk’s The
  Australian Alternative | Arab Wars | Arts and Movies
  | From the Old Curmudgeon | Class Analysis and Economic Systems
  (D. Osterfeld) | “Libertarian” Sci-fi | Friedman and the Liberals
  (T. Machan)
• Vol.
  7.11, November 1975: Politics: November ’75 | Foreign Affairs
  Review (L.P. Liggio) | Is Dayan Just Another Rommel?: Review
  of A. Bober’s The
  Other Israel: The Radical Case Against Zionism (J.P.
  Stromberg)
• Vol.
  7.12, December 1975: Stop Reagan! | On Nozick’s Anarchy,
  State, and Utopia, I | Whither Anarchy? Has Robert Nozick
  Justified the State? (R. Barnett) | From the Old Curmudgeon:
  My New Year’s Wish for the Movement | LP Literature | The Polish
  Question In Roosevelt-Churchill-Stalin Diplomacy (L.P. Liggio)
  | Right-Center Chic

1976

• Vol.
  8.1, January 1976:
  U.S. Out of Angola! | FDR and the Isolationists (B. Bartlett)
  | Right-Wing Libertarians and the Cold War (J.R. Stromberg) |
  MacBride vs. Reagan | The ABM Slips Away | Libertarian Bicentennial
  | Arts and Movies | Free Doug Kennell | Libertarian Environmentalists
• Vol.
  8.2, February 1976: The Presidency ’76: The Morning Line |
  We Make the Media! | Revisionism and Libertarianism | Center for
  Libertarian Studies Formed! | Fuller, Law, and Anarchism (R.E.
  Barnett) | Von Hoffman vs. Schlesinger
• Vol.
  8.3, March 1976: The Early Primaries | Libertarian Feminists
  Organize | African Roundup | The Lebanon Tragedy | Capitalism,
  Socialism, and Bureaucratic Management (D. Osterfeld) | The State
  vs. the Amish (J.R. Peden) | Foreign Affairs (L.P. Liggio)
• Vol.
  8.4, April 1976: FLP Split! | Combatting Conservatism | A
  Political Party, Once More | The ‘Defense Gap’ Mythology
• Vol.
  8.5, May 1976: The Zen Candidate: Or, Browning Out In the
  Movement | On Nozick’s Anarchy,
  State, and Utopia, II | The Invisible Hand Strikes Back
  (R.A. Childs, Jr.) | Arts and Movies
• Vol.
  8.6, June 1976: Ford Vs. Carter? | Who’s Behind…? | Secession,
  The Essence of Anarchy: A Libertarian Perspective on the War For
  Southern Independence (J.R. Stromberg) | The Psycho-Presidency
  | Economic Scapegoats: Heroes or Scoundrels? Review of W. Block’s
  Defending
  the Undefendable (B. Evers)
• Vol.
  8.7, July 1976: MacBride’s New Book | News From Spain | CLS
  Booms! | Democratic Convention Notes | Arts and Movies | Foreign
  Affairs: Palestine (L.P. Liggio) | The Education Grab | Russia!
  (J.D. Doenecke)
• Vol.
  8.8, August 1976: The State As An Immoral Teacher (Ouida)
  | Cold War Revisionism (W.E. Grinder)
• Vol.
  8.9, September 1976: Education by Bribes and Coercion (A.
  Herbert) | Thinking About Revolution: Two Books of Importance
  | The First Two Years of WWII (J.P. McCarthy)
• Vol.
  8.10, October 1976: To the Elections | The LP Convention |
  Libertarianism for Profit? A Letter and Reply | ‘Benediction’
  Speech at the LP Convention | Storm Over the ‘Scum’: Defending
  the Undefendable Block | A Letter From Britain
• Vol.
  8.11, November 1976: The LP: Retrospect and Prospect | Kuhn’s
  Paradigms (L.P. Liggio) | Toward a Libertarian Movement | Health
  and Liberty | Metric Mania
• Vol.
  8.12, December 1976: Carter & Co. – Back at the Old Stand
  | Nobel Prize for Friedman | Kropotkin’s Ethics and the Public
  Good (W.M. Evers) | From the Old Curmudgeon | New Libertarian
  Scholarly Journal!

1977

• Vol.
  10.1, January 1977:
  LP Election Scoreboard | More on Carter & Co. | Life With Mises
  (R.M. Ebeling) | Arts and Movies | Fair Trial vs. Free Press:
  Court Decision Imperils Press (B. Evers) | Land Reform: Portugal
  and Mexico | Relaxation in China? | vive Le Quebec Libre
• Vol.
  10.2, February 1977: The War Over Foreign Policy | Libertarianism
  and Property Rights (W. Block) | One Man Against OSHA | From the
  Old Curmudgeon | The Natural Gas Caper | Anarcho-Capitalism and
  the Defense of the Nonstate | Arts and Movies
• Vol.
  10.3, March 1977: The New End of Ideology? | In Defense of
  Gradualism (R. Poole, Jr.) | The Fallacy of Gradualism: A Reply
  (T.G. Palmer) | Human Rights at Home: the Flynt Case | the New
  L.R. | A Black Writer’s View of Roots
  (A. Wortham) | A Great Day for Freedom | From the Old Curmudgeon:
  The “Libertarian” Church | Kidnappers at Large | America and ‘Human
  Rights’ – East Timor Division | Arts and Movies | Zaire –
  Katanga Rises Again
• Vol.
  10.4, April 1977: At the Summit | The Death of General Hershey
  | The Great Felker Caper | The Historians’ Betrayal | The Tuccille
  Defection | Carter on Inflation | Jesus and Marx: Review of Dale
  Vree’s On
  Synthesizing Marxism and Christianity (J.D. Doenecke)
  | Arts and Movies
• Vol.
  10.5, May 1977: Begin Begins | Liberty and the Drug Problem
  (R. Childs) | Power, Obedience, and Education: a Review Essay
  (J.R. Stromberg) | Arts and Movies | Who are the South Moluccans?
• Vol.
  10.6, June 1977: The Water ‘Shortage’ | the State and Education
  (A.W. Wright) | The ‘Humane’ N-Bomb | Arts and Movies | Open Door
  Imperialism: Review of W.A. Williams The Tragedy of American
  Diplomacy (R.D. Grinder) | Racism or Sexism: Which Way? |
  The FLP Goofs Again
• Vol.
  10.7, July 1977: Do You Hate the State? | Should Abortion
  Be a Crime? The Abortion Question Once More | Canadian Breakup
  | Exciting New Magazine: Inquiry | In Defense of Pirateering (J.M.
  Oliver) | Seeking the Political Kingson: A Review Essay (J.D.
  Doenecke)
• Vol.
  10.8, August 1977: Tax Rebellion in Illinois! | Panama Canal
  Question | Arts and Movies | Convention Report | Keynote Address
  to the LP Convention
• Vol.
  10.9, September 1977: The Bakke Case | Higher Education: The
  View of Insiders (J.D. Doenecke) | Defending the Defendable (G.
  Greenberg | Toward a Libertarian Theory of Abortion (W. Block)
• Vol.
  10.10, October 1977: The New York Mayorality | Do You Love
  Liberty? (D.F. Nolan) | Arts and Movies | That Noble Dream (J.D.
  Doenecke) | Public Parks: the New York City Case (W. Block) |
  Abortion: An Exchange | The Sadat Hype
• Vol.
  10.11, November 1977: Two Exits | Arts and Movies | Rent Control:
  the New York City Case (W. Block) | The Critique of Interventionism
  (R.M. Ebeling) | Rendering Unto Caesar: Those Preachers Again
  (J.D. Doenecke)
• Vol.
  10.12, December 1977: L’Affaire Efron | Truth On the Scaffold
  (J.D. Doenecke) | Arts and Movies

1978

• Vol.
  11.1-2, January-February 1978:
  The Last Word on Efronia | Market Prospects for Nuclear Power
  (P.L. Lilly)
• Vol.
  11.3-4, March-April 1978: Strengthening the LP | Block and
  the Rights of the Father (J. Maxwell) | Assassination Revisionism
  | Block on Abortion (R.E. Bissell) | Arts and Movies
• Vol.
  11.5-6, May-June 1978: Victory for Tax Revolt! | Solidarity
  – But Not Forever (J.D. Doenecke) | Arts and Movies
• Vol.
  11.7-8, July-August 1978: Camp David and After | Abortion
  Rights of the Child (J. Sadowsky) | Why Free Schools Are Not Free
  (F. Chodorov) | Slaves Contracts and Inalienable Will (S. Richman)
  | The Street Peddler (W. Block) | Arts and Movies | The ABM Rises
  from the Grave (B. Birmingham)
• Vol.
  11.9-10, September-October 1978: Lessons of People’s Temple
  | Bring Back Belloc (T. Palmer) | Shall the State Educate the
  People? (T. Hodgskin) | Newsletters of Libertarian Interest |
  Toward Freedom of Choice in Education (J.R. Peden) | Rub-a-dub-dub
  Three Men in a Tub (S. Richman)
• Vol.
  11.11-12, November-December 1978: LP Breakthrough | And Gladly
  Teach: Power and the Professors (J.D. Doenecke)

1979

• Vol.
  12.1, January-February 1979:
  The Space War | An Anarchist Without Adjectives (W. Grosscup)
  | The Political Economy of Inflation: Government and Money (T.G.
  Palmer)
• Vol.
  12.2, March-April 1979: Ten Years Old! | Abraham Lincoln (L.
  Lamberton) | The Thatcher Myth (D.R. Steele) | In Defense of Free
  Immigration (R. Ebeling)
• Vol.
  12.3, May-June 1979: Listen Again, YAF | John C. Calhoun (L.
  Lamberton) | Libertarians on the Battlements | ‘S Wonderful, ‘S
  Marvelous | LP Radical Caucus Formed | Crime and Sacrifice (W.
  Block)
• Vol.
  12.4, July-August 1979: Nuclear Power Crisis | Nuclear Power:
  Beyond ‘For’ or ‘Against’ (M. Mueller) | Technological Facts on
  Nuclear Energy | Review of The
  Disaster Lobby (R. Childs) | Excerpt from The Disaster
  Lobby (M.J. Grayson & T.R. Shepard, Jr.) | SLS Proposal (M.
  Mueller) | Current LP Planks (B. Evers & M. Rothbard) | Late Bulletin:
  LR Suppresses Free and Open Debate on Nuclear Power
• Vol.
  12.5, September-October 1979: The Iran Threat | Zionism as
  It Sees Itself (E. Berger) | The Duelist (W. Block) | Prose in
  the Social Science: Problems and Remedies (J.D. Doenecke) | Deflation:
  the Time Is Now (R.L. Formaini)
• Vol.
  12.6, November-December 1979: The Menace of Opportunism |
  Law in Anarchy (C.B. Olson) | Opportunism Revisited | Billboards
  (W. Block)

1980

• Vol.
  13.1, January-February 1980:
  And Now Afghanistan | Notes on Iran, Afghanistan, etc. by the
  Old Curmudgeon | “Revolutionary” Fascism: A Review of Jorge Edwards’
  Persona
  Non Grata (A.C. Cuzan) | The Ruling Class: Kolko and Domhoff
  (L. Lamberton)
• Vol.
  13.2, March-April 1980: The Presidential Campaign: The Need
  for Radicalism | The Nuclear Issue | Quebec: Province or Nation?
  (L.P. Liggio) | Canadian Separatism: the Second Front (S.E. Konkin
  II)
• Vol.
  13.3, May-June, 1980: Opportunism, Nukes, and the Clark Campaign
  | Fired from LR | Evers for Congress | Some Thoughts on
  Supply-Side Economics (R.M. Ebeling) | Abortion and Self-Ownership:
  A Comment (G.H. Smith) | Free Market Revisionism: A Comment (R.L.
  Formaini)
• Vol.
  13.4, July-August 1980: Ethnic Politics in New York | The
  Boston Anarchists and the Haymarket Incident (W. McElroy) | Is
  It Legal to Treat Sick Birds? | “Free-Market” Congressman in Action?
  | Isolationism Reconsidered (B.D. Riccio)
• Vol.
  13.5-6, September-December 1980: The Clark Campaign: Never
  Again | Clark for President: A Campaign Critique (D.F. Nolan)
  | Arts and Movies

1981

• Vol.
  14.1-2, January-April 1981:
  It Usually Ends with Ed Crane (Special Conflict Issue) | The
  War for the Soul of the Party | George Jacob Holyoake, Libertarian
  Agitator (R.A. Cooper)
• Vol.
  14.3-4, June-July 1981: Crane/Cato Once More: An Open Letter
  to the Crane Machine | Catogate: Who’s the Mole (or Moles) at
  Cato? | The Moral Foundations of Property Rights (B. Summers)
  | Against the ERA (W. McElroy) | Contra Reason: Review of Arianna
  Stassinopoulos’ After
  Reason (R.A. Cooper) | For
  a New Liberty Back
• Vol.
  15.5-6, August 1981-January 1982: Big News! Lib. Forum Reorganized!
  | LP/10: A Mixed Bag | The Kochtopus: Convulsions and Contractions
  | Hayek’s Denationalized Money | Arts and Movies | Against a
  Government Space Program (T.M. Coughlin) | Consolation for Activists

1982

• Vol.
  16.1, February 1982:
  Are We Being Beastly to the Gipper? Part I | This is the Movement
  You Have Chosen | Arts and Movies
• Vol.
  16.2, March 1982: Are We Being Beastly to the Gipper? Part
  II | Campaign Memoirs Spring/Summer 1981 (E. Franzi) | This is
  the Movement You Have Chosen | Exit Marty Anderson | Movement
  Jabs | Arts and Movies
• Vol.
  16.3, April 1982: To the Gold Commission | Roosevelt and Dissent
  (J.D. Doenecke) | This is the Movement You Have Chosen | Are We
  Being Too Beastly to the Gipper? Part III
• Vol.
  16.4, May 1982: Oh, Oh, Oh, What A Lovely War! | The Historical
  Claims to the Falklands | Felix Morley, RIP | Are We Being Beastly
  to the Gipper? Part IV | Changing Judgments and Alliances | Real
  World Notes
• Vol.
  16.5, June 1982: More on the Falklands | Free Texas,
  RIP (M. Greenberg) | Fuhrig for Senate | Arts and Movies
• Vol.
  16.6, July 1982: Double Victory for Aggression | Flat-Rate:
  the Latest Con | Houston: The Turning of the Tide | Are We Being
  Too Beastly to the Gipper? Part V
• Vol.
  16.6, August 1982: Smear: The Story of Update – Part
  I (D. Welles) | Crane’s Grand Design for Update | The Post Office
  as Censor (D.M. Petersen) | The Assault on Abortion Freedom |
  Will the REAL Tom Palmer Please Stand Up? (D. Welles) |
  Don’t Cry For Iraq
• Vol.
  16.7, September 1982: Blockbuster at Billings | The Death
  of Reaganomics | Smear: The Story of Update – Part II (D.
  Welles)
• Vol.
  16.8, October 1982: The Massacre | Debate On ERA (J.K. Taylor
  and W. McElroy) | Smear: The Story of Update – Part III (D.
  Welles)
• Vol.
  16.8-9, November-December 1982: The Election | The LP and
  The Elections | The War In the British Movement | New Grass-Roots
  Hard-Money Group | The New Libertarian Vanguard | The Real
  World | Arts and Movies | Falkland Followup

1983

• Vol.
  17.1, January 1983:
  The Economy: the Year Ahead | Leave the Street Vendors Be! (J.D.
  Wiseman) | Movement Memories
• Vol.
  17.2, February 1983: For President: Gene Burns | The Crane
  Machine Revealed | Eubie Blake: RIP | Economic Notes | The Logic
  of Anarchy | Margaret Mead: Justice at Last! | Four Ways to Insure
  a Very Short Phone Conversation
• Vol.
  17.3, March 1983: The New Menace of Gandhism | The Burns Campaign
  | An Open Letter to the English Movement
• Vol.
  17.4, April 1983: Movement Depression | Free Franzi | Arts
  and Movies | 1776: A Buffoonery (E. Franzi) | The Pentagon’s Budget
  Through Soviet Eyes (J.D. Wisman) | Crane Machine Notes
• Vol.
  17.5-6, May-June 1983: frontlines, RIP | Leonard Read, RIP
  | The New Menace of Gandhism (W. McElroy) | Gandhism Once More
  | The Real Conventioneers’ Guide to New City | FDR: The Truen
  Legacy (J. Harris)
• Vol.
  17.7-8: Ronald Reagan, Warmonger | Letters on Gandhi | High
  Tech ‘Crime’: A Call for Papers | Arts and Movies | Cassandra
  Moore for Palo Alto City Council
• Vol.
  17.9-10, September-October 1983: Up From Chaos: Total Victory:
  How Sweet It Is! | Keeping Low-Tech
• Vol.
  17.11-12, November-December 1983: New Airline Massacre: Where’s
  the Outrage? | The Bergland Campaign | Life In “1984″ | Living
  Liberty, and All That | Reagan War Watch, Part I | Mercantilism
  and Public Choice (R.A. Cooper)

1984

• Vol.
  18.1-2, January-February 1984:
  Bergland Campaign in High Gear | The Nebraska Seven (D. Bergland)
  | Who Is the Real Mafia? (E. Franzi) | Crisis ’83: The Council
  of Foreign Relations and the Libertarian Party (H.S. Katz) | Reagan
  War Watch, Part II
• Vol.
  18.3-4, March-April 1984: Campaign Fever ’84 | Arts and Movies
  | This is the Movement You Have Chosen | New York Politics | Still
  Keeping Low Tech | Fifteen Years Old!
• Vol.
  18.5-6, May-June 1984: Democrats Self-Destruct | Eric Mack
  and the Anarchist Case for War | New Crane Machine Floperoo |
  Prohibition Returns!
• Vol.
  18.7-8, July-August 1984: Patriotic Shlock: the Endless Summer
  | Democratic Convention Notes | Arts and Movies | The Miss America
  Caper
• Vol.
  18.9-12, September-December 1984: The State of the Movement:
  The Implosion | Why the Apotheosis of Ronnie?

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

It is traditional
at the turn of the year to survey the state of the economy and
to try to forecast what lies ahead. Despite the Pollyanna chorus
with which we have been deluged for the last year by “conservative”
and “free-market” economist-whores for the Nixon Administration,
we can state flatly that the state of the economy is rotten, and
destined to get worse.

In the 1960
campaign there first appeared the curious phenomenon of “anarcho-Nixonites,”
several friends of mine who had become aides to Dick Nixon, and
who assured me that Tricky Dick had assured them that he was “really
anarchist at heart”; once campaign pressures were over, and Nixon
as President was allowed his head, we would see an onrush toward
the free market and the libertarian society.

In the 1968
campaign, anarcho-Nixonism redoubled in intensity, and we were
assured that Nixon was surrounded by assorted Randians, libertarians,
and free-market folk straining at the leash to put their principles
into action.

Well, we
have had two years of Nixonism, and what we are undergoing is
a super-Great Society – in fact, what we are seeing is the
greatest single thrust toward socialism since the days of Franklin
Roosevelt. It is not Marxian socialism, to be sure, but neither
was FDR’s; it is, as J. K. Galbraith wittily pointed out in New
York (Sept. 21) a big-business socialism, or state corporatism,
but that is cold comfort indeed.

There are
only two major differences in content between Nixon and
Kennedy-Johnson (setting aside purely stylistic differences between
uptight WASP, earthy Texan, and glittering upper-class Bostonian):
(1) that the march into socialism is faster because the teeth
of conservative Republican opposition have been drawn; and (2)
that the erstwhile “free-market” conservatives, basking in the
seats of Power, have betrayed whatever principles they may have
had for the service of the State.

Thus, we
have Paul McCracken and Arthur F. Burns, dedicated opponents of
wage-price “guideline” dictation and wage-price controls when
out of power, now moving rapidly in the very direction
they had previously deplored.

And National
Review, acidulous opponent of the march toward statism under
the Democrats, happily goes along with an even more rapid forced
march under their friends the Republicans.

Let us list
some of the more prominent features of the Nixonite drive –
features which have met no opposition whatever in the conservative
press. There took place during 1970 the nationalization of all
railroad passenger service in this country. Where was the conservative
outcry? It was a nationalization, of course, that the railroads
welcomed, for it meant saddling upon the taxpayer responsibility
for a losing enterprise – thus reminding us of one perceptive
definition of the economy of fascism: an economy in which big
business reaps the profits while the taxpayer underwrites the
losses.

There took
place also the Nixonite fight for the SST [Supersonic Transport]
boondoggle, in which $300 million are going to follow a previous
$700 million of taxpayers’ money down the rat hole of gigantic
subsidy to an uneconomic mess. Bill and Jim Buckley can find only
ecological pollution as an argument against the SST – an
outright looting raid upon the taxpayer without even a flimsy
cover of “national security” as a pretext.

The only
argument seems to be that if we do not subsidize the SST, our
airlines will have to purchase the plane from – horrors!
– France; on this sort of argument, of course, we might as
well prohibit imports altogether, and go over to an attempted
self-efficiency within our borders. How many SST’s might be purchased
on an unsubsidized market is, of course, problematic; since the
airlines are losing money as it is, it is doubtful how much revenue
they will obtain from an airfare estimated at 40% higher than
current first-class rates.

And then
there is the outright $700 million gift from the U. S. government
to Lockheed, to keep that flagrantly submarginal and uneconomic
company in business indefinitely.

And then
there is agitation for the friendly nationalization of Penn Central
Railroad. Senator Javits is already muttering about legislation
for the federal bailing out of all businesses suffering losses,
which is the logical conclusion of the current trend.

Neither has
any note been taken of the Nixon Administration’s plan for tidying
up the construction industry. Many people have scoffed at the
revisionist view (held by such New Left historians as Ronald Radosh)
that the pro-union legislation of the twentieth century has been
put in at the behest of big business itself, which seeks a large,
unified, if tamed labor union junior partnership in corporate
state rule over the nation’s economy. And yet the Railway Labor
Act of 1926, which in effect compulsorily unionized the railroad
industry in exchange for compulsory arbitration and a no-strike
policy, was put in at the behest of the rail industry, anticipating
the later labor policy of the New Deal.

And now the
construction industry has gotten the Nixon Administration behind
a similar plan; all the members of the present small but pesky
and powerful construction unions are to be dragooned into one
big, area-wide industrial union, and then to be subject to massive
compulsory arbitration. The fascization of America proceeds apace.

To top it
off, the Administration is readying two socialistic “welfare”
measures of great importance: one further socializes medicine
through nationwide major medical “insurance” to be paid by the
long-suffering poor and lower-middle class Social Security taxpayer.
And surely it is only a matter of time until the disastrous Friedman-Theobald-Nixon
scheme of a guaranteed annual income for everyone is forced through
Congress, a scheme that would give everyone an automatic and facile
claim upon production, and thereby disastrously cripple the incentives
to work of the mass of the population.

In the area
of the business cycle, it should be evident to everyone by this
time, the Administration, trying subtly and carefully to “fine-tune”
us out of inflation without causing a recession, has done just
the opposite; bringing us a sharp nationwide recession without
having any appreciable impact upon the price inflation. A continuing
inflationary recession – combining the worst of both worlds
of depression and inflation – is the great contribution of
Nixon-Burns-Friedman to the American scene.

While it
is true that a recession was inevitable if inflation was to be
stopped, the continuing inflation was not inevitable if the Administration
had had the guts to institute a truly “hard” money policy.

Instead,
after only a few months of refraining from monetary inflation,
the Administration has been increasingly opening the monetary
floodgates in a highly problematic attempt to cure the recession—while
at the same time failing to recognize that one sure result will
be to redouble the chronic rise in prices.

But now the
Administration has swung around to the Liberal thesis of monetary
and fiscal expansion to cure the recession, while yelling and
griping at labor and employers not to raise wages and prices –
a “guidelines” or “incomes” policy that is only one step away
from wage and price controls. This direct intervention is supposed
to slow down the wage-price spiral. In actual fact, the direct
intervention cannot slow down price increases, which are caused
by monetary factors; it can only create dislocation and shortages.

Pumping in
more money while imposing direct price control and hoping thereby
to stem inflation is very much like trying to cure a fever by
holding down the mercury column in the thermometer. Not only is
it impossible for direct controls to work; their imposition adds
the final link in the forging of a totalitarian economy, of an
American fascism. What is it but totalitarian to outlaw any sort
of voluntary exchange, any voluntary sale of a product, or hiring
of a laborer.  

But
once again Richard Nixon is responsive to his credo of big business
liberalism, for direct controls satisfy the ideological creed of
liberal while at the same time they are urged by big business in
order to try to hold down the pressure of wages on selling prices
which always appears in the late stages of a boom.

While
we can firmly predict accelerating inflation, and dislocations
stemming from direct controls, we cannot so readily predict whether
the Nixonite expansionism will lead to a prompt business recovery.
That is problematic; surely, in any case we cannot expect any
sort of rampant boom in the stock market, which will inevitably
be held back by interest rates which, despite the Administration
propaganda, must remain high so long as inflation continues. All
in all, how much more of Nixonite “anarchism” can freedom stand?

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

Michael
W. Miles, The
Odyssey of the American Right (New York: Oxford University
Press, 1980).

By
now it is no news to anyone that public opinion in America has
shifted sharply to the right and that an authentic leader of American
conservatism may well assume the presidency in 1981. And yet,
despite this surge, there is still no adequate treatment of the
American Right or of the permutations and transformations it has
undergone in the past half-century or so. George Nash’s The
Conservative Intellectual Movement in America Since 1945
(1976) was a careful and encyclopedic compendium of the various
ideological tributaries and branches of conservatism, but no book
has yet come along to describe and analyze the right-wing movement
as such and to place it in its historical context.

Michael
Miles’s uninspired account tries to fill the gap, but unfortunately,
it is a notable failure. For one thing, Miles suffers from a basic
absence of insight; he simply doesn’t understand the conservatives,
their various “wings” and incarnations, or what they were and
are trying to do. His failure in the foreign policy area is egregious;
whenever he gets himself into a hole, he just makes new categories
– “isolationist,” “internationalist,” “old nationalist,”
and “new nationalist,” none of them carefully defined or distinguished
from one another. What are we to make of Miles’s assertion, for
example, early in the book, that Senator Joseph McCarthy “denounced
the New Deal and internationalist foreign policy as equivalents
of treason,” which is followed approximately a hundred pages later
by the author’s admission that McCarthy was an "internationalist”
or (whatever this may mean) a “new nationalist”?

Miles’s
conceptual confusion – fatal in this kind of enterprise – is just
as painfully evident in his discussion of classical or “true”
liberalism. In the United States, he asserts, “true liberalism
meant true Republicanism,” from which it follows that although
in England classical liberalism called for free trade, in the
United States “true liberalism was compatible with protective
tariffs… [and] countenanced not only the tariff but huge land
grants, tax benefits, and other subsidies to business, which ate
its fill at what Vernon Louis Parrington called the ‘Great Barbecue.’”
Elsewhere, Miles talks senselessly of the “old laissez-faire
capitalist order and its foreign policies of protectionism
and Pacific First.”

In
tying classical liberalism to the Republican party, Miles could
scarcely be more ignorant of nineteenth-century American history.
The classical liberal party throughout the nineteenth century
was not the Republican, but the Democratic party, which fought
for minimal government, free trade, and no special privileges
for business. Moreover, laissez faire is nothing if not
determined opposition to protectionism in any of its guises. As
for Pacific First, it was the last of the New England laissez-faire
individualists who formed the Anti-Imperialist League at the
turn of the twentieth century and battled hard against America’s
imperial conquest of the Philippines and the brutal suppression
of the Philippine national independence movement.

Miles
also tries to link classical liberalism in America with xenophobia,
ultranationalism, “Americanism,” and the Know-Nothing party of
the l850s, and he sees modern classical liberalism as a blend
of libertarian economics and repression of immigrants. Since this
bizarre conjunction depends entirely on Miles’s positing of the
Republicans as the avatars of classical liberalism, the less said
about it the better.

Generally,
Miles tries to offer documentation, however feeble, for his rather
wild generalizations. But when he refers to the libertarian strand
in pre- and post-World War II conservatism he enters a world totally
of his own creation. Libertarians, he believes, were opposed to
civil liberties; in America, he writes, “the ‘libertarians’ had
a consistent record since the 1930s of defending the free market
while attacking the Bill of Rights.” Miles also opines that the
“‘libertarians’ derived from the old Protestant right.”

Well,
who exactly were these libertarians? Miles doesn’t bother to say.
There were only a handful. The outstanding libertarian, H. L.
Mencken, mentioned only in passing by Miles – and as a “conservative”
– is justly famous for having fought hard for the Bill of Rights
all of his life. So, too did the essayist Albert Jay Nock, who
doesn’t even rate a mention in Miles; and then there was Nock’s
leading disciple Frank Chodorov, who gets passing notice (with
only marginal distortion) as a “right-wing anarchist.” So did
all the libertarians. The only person named as a libertarian by
Miles is National Review editor Frank Meyer. Although Meyer
was significantly more libertarian than the other NR editors (not
a difficult feat), he did go along with Buckley’s expulsion of
the libertarians from the conservative movement in the late 1950s,
part of the purge of embarrassing “extremists” of all sorts that
was to clear the movement’s path to future power. And while it
is true that Meyer, at least, attacked the Bill of Rights during
the 1930s, he could hardly have been termed a libertarian at the
time, since he happened to be one of the leading members of the
U.S. Communist Party.

Neither
were many of these libertarians “Protestants.” Meyer and Chodorov
were Jewish, Mencken was an atheist, and Nock, although a lapsed
Anglican minister, could hardly have belonged to any of the sects
that Miles, in his obsolescent way, identifies with the Calvinist
Protestants who were supposed to have ushered in the spirit and
institutions of Western capitalism.

Miles
is correct that the modern conservative movement was born as a
reaction against Roosevelt’s New Deal. Yet although he notes that
the Liberty League, the major organization opposing the New Deal
in its first term, was formed by conservative Democrats, he soon
falls into his usual cadence and portrays the league as a Republican
institution. In fact, given the origins of modern conservatism,
its nucleus was a necessarily disparate coalition of anti-New
Deal forces. The philosophical thrust was provided by libertarians
like Mencken and Nock, and the political base was formed by the
waning group of classical liberal Democrats like the Liberty Leaguers
Albert Ritchie of Maryland and Senator James A. Reed of Missouri.

Most
of the opponents, of course, were Republicans, who had never been
classical liberals or libertarians. They were led by Herbert Hoover,
whose whole political career had been dedicated to foisting the
“government-business alliance” on America. In opposing the New
Deal’s leap into a more advanced form of statism, these Republican
politicians were forced to use the unfamiliar rhetoric of classical
liberalism, in which they had little genuine belief. After
all, what other rhetoric was there? So began that grievous disjunction
between high-sounding free market and libertarian discourses and
actual statist practice that has marked conservatism ever since.

World
War II confused matters further. Many conservative internationalists
– like Dean Acheson and Lewis W. Douglas, who had left the early
New Deal in disgust with its heterodox economic creeds – were
happy to rejoin the Roosevelt team as part of the World War II
crusade, and many Progressive isolationists joined the anti-New
Deal coalition. In the turbulence of the great leap further to
statism during the war, the latter found themselves becoming sympathetic
to free-market economics as well. Senators Borah, Nye, and Wheeler
are examples in politics; Harry Elmer Barnes, Frank Hanighen,
and John T. Flynn among intellectuals.

The
right-wing movement thus emerged after World War II very different
from what it had been before. Once opposed to domestic statism,
in the name of the free market and personal liberty, it came to
encompass not only hostility to war and foreign intervention but
also to American statism in the international arena. When he introduces
such labels as “new nationalist” and “Pacific First,” Miles gets
the whole exceedingly important story muddled.

In
all of Miles's book there is no hint that the hard core of the
political Right was solidly anti-interventionist throughout the
postwar years. Senator Wherry of Nebraska, and in the House such
ultras as the libertarian Howard Buffett of Nebraska (Robert Taft’s
Midwest campaign manager in 1952), and George Bender of Ohio were
opposed to all intervention.

Bender
was Taft’s right-hand man in the House, and for those who totally
identify the American Right with advocacy of militarism, hysterical
anti-Sovietism, and global adventuring, this characteristic statement
of his from a speech of March 28, 1947, might prove illuminating:

I
believe that the White House program [for aid to Greece and
Turkey – the "Truman Doctrine"] is a reaffirmation of the nineteenth
century belief in power politics. It is a refinement of the
policy first adopted after the Treaty of Versailles in 1919
designed to encircle Russia and establish a “Cordon Sanitaire”
around the Soviet Union. It is a program which points to a new
policy of interventionism as a corollary to our Monroe Doctrine
in South America

Bender,
who collaborated with pacifist scholars and intellectuals, was
also fond of referring to Chiang Kai-shek’s regime as “fascist,”
and he considered the Voice of America to be nothing more than
“a vast foreign propaganda machine.”

Indeed,
the opposition to Truman’s entry into the Korean War consisted
almost solely of the Communist party on the left and the ultraconservative
Republicans in the House on the right, which led some liberal
publications at the time to refer to the Kremlin – Chicago
Tribune isolationist axis. It is easy to forget that the right-wingers,
in those years, were not the only red-baiters.

One
obstacle to analyzing the conservative movement of the early postwar
years is exclusive concentration on its undoubted political leader,
Robert A. Taft. Although both a free-market man and a noninterventionist,
Taft, partly due to his addiction to compromise as a way of life,
faltered on both counts throughout his career. Second-echelon
militants like Wherry and Buffett are far more revealing of the
right-wing ideology of the period than is Taft himself.

But
why the ferocious red-baiting? If the Conservative movement of
the 1930s and 1940s was basically classical liberal and libertarian,
as I would contend, how come the witch-hunts against Communists
and fellow travelers? How come McCarthyism?

In
the first place, we must realize, as even Miles does fleetingly,
that Joe McCarthy was not himself a right-winger, but came in
fact from the moderate, internationalist wing of the Republican
party. Even in his book seeking to indict General George Marshall
for continuing “treason" the charges begin no earlier than
the middle of World War II. The senator did not use the familiar
indictment of Marshall by the right: that he had collaborated
in Roosevelt's alleged plot to provoke the Japanese into attacking
Pearl Harbor. McCarthy did not use this charge against Marshall
because he had no quarrel with our entry into that war – only with
the alleged “appeasement” of Russia toward the end.

But
McCarthy himself is not the major problem. Why did the right wing,
even if isolationist on the Cold War, countenance or even cheer
McCarthy on? The answer is rooted in what had happened to the
conservative movement during the war. Even though it had shut
up shop as an organized movement after Pearl Harbor, it had been
antiwar, and as such was subjected to repression once the war
had started. Antiwar writers like Flynn, Barnes, Mencken, Nock,
and Oswald Garrison Villard were driven from their customary outlets
by the interventionists. Flynn and Barnes were forced to publish
their pioneering Pearl Harbor revisionist pamphlets privately,
since no firm would publish them. Various isolationists were jailed
as alleged agents for the Germans or Japanese, and, in the most
disgraceful act of repression – an attempt to prove seditious
conspiracy via content analysis of numerous tracts opposing the
war – the U.S. government put dozens of isolationists and others
through a lengthy mass sedition trial.

The
conservatives were understandably embittered at such treatment,
and in assessing blame they pardonably hit upon the Communists
as at least partly responsible for their plight. Again, it is
all too easy to forget that from the onset of the Popular Front,
and especially after the German attack on Russia made them; ardent
prowar converts, the Communists were in many ways the left wing,
and the point men of the Roosevelt New Deal. They applauded and
led the way in repressing isolationists and hailed the Smith Act
when it was originally used to arrest Trotskyist opponents of
the war effort. When we add the observations that Communism is,
to say the least, an aggravated form of statism, and that World
War II, as the right wing had predicted, produced a far more powerful
Soviet Union, the red-baiting of the right falls into perspective.

The
right wing at first did not apply this fierce anti-Communism to
foreign policy. But in a sense, McCarthy was a transitional figure
in the radical and fateful shift from Old Right to New Right in
the mid-1950s. The last gasp of the old, classical liberal Right
was its militant opposition to the Korean War – as well as
the Andrews-Werdel third-party presidential ticket in 1956 (scarcely
noted by Miles), which had as its foreign policy plank strict
nonintervention in the affairs of other nations. In focusing on
such marginalia as the infusion of Catholics into the Right –
unbeknownst to Miles, they had been leaders of the isolationist
movement in World War II – and in manipulating his old-nationalism/new-nationalism
categories, Miles misses the whole point of the shift from Old
to New Right. In fact, in all but the most trivial sense, he seems
barely aware that such a shift took place at all.

What
happened was this. The political leaders of the Old Right began
to die or retire. Taft’s death in 1953 was an irreparable blow,
and one by one the other Taft Republicans disappeared from the
scene. In fact, Taft’s defeat in the bitterly fought 1952 convention
was to signal the end of the Old Right as a political force. It
is typical of Michael Miles’s myopia that the only difference
he sees between Barry Goldwater, the leader of the New Right,
and the Taftites is that Goldwater was more “optimistic” than
they. In fact, Goldwater was — and is – an all-out interventionist
in foreign affairs; it is both symbolic and significant that Goldwater
was an Eisenhower, not a Taft delegate to the 1952 Republican
convention.

Meanwhile,
the intellectual leaders of the Old Right too were fast disappearing.
Nock and Mencken were dead or inactive, and Colonel Robert McCormick,
publisher of the Chicago Tribune, died in 1955. The
Freeman, although the leading right-wing journal in the late
forties arid early fifties, had never been a powerful force; by
the mid-fifties it was weaker than ever. Since the thirties, the
Right had suffered from a dearth of intellectuals; it had seemed
that all intellectuals were on the left. A disjunction therefore
existed between a tiny cadre of intellectuals and writers, and
a large, relatively unenlightened mass base. In the mid-1950s,
with a power vacuum in both the political and the intellectual
areas, the Right had become ripe for a swift
takeover. A well-edited, weIl-financed magazine could hope to
capture the dazed right wing and totally transform its character.
This is exactly what happened with the formation of National
Review in 1955.

In
a sense, Joe McCarthy heralded the shift when, after his censure
by the Senate, he feebly changed his focus in early 1955 from
domestic Communism to the championing of Chiang Kai-shek.
For National Review, led by Bill Buckley and William Rusher,
was a coalition of young Catholics – McCarthyite and eager to
lead an anti-Communist crusade in foreign affairs – and ex-Communists
like Frank Meyer and William S. Schlamm dedicating their energies
to extirpating the God that had failed them. NR filled
the power vacuum, and with Rusher as point man in the political
arena, it managed, in a scant few years, to transform the
American right wing beyond recognition. By the early 1960s, the
Rusher forces had captured the Young Republicans and College Young
Republicans, established Young Americans for Freedom as their
campus arm, and had taken over the Intercollegiate Society of
Individualists as a more theoretical organ.

By
the 1960 GOP convention, Barry Goldwater had become the political
leader of the transformed New Right. By 1960, too, the embarrassing
extremists like the John Birch Society had been purged from the
ranks, and the modern conservative movement was in place. It combined
a traditionalist and theocratic approach to “moral values,”
occasional lip service to free-market economics, and an imperialist
and global interventionist foreign policy dedicated to the glorification
of the American state and the extirpation of world Communism.
Classical liberalism remained only as rhetoric, useful in attracting
business support, and most of all as a fig leaf for the grotesque
realities of the New Right. (This entity is not to be confused
with the fundamentalist factions now on the warpath
against abortion and ERA.)

In a few brief years the character of the right wing had been
totally transformed: Once basically classical liberal, it had
become a global theocratic crusade. Such is the lack of acumen
and memory among the right-wing masses that few even noted that
any shift had occurred – but why does Michael Miles fall into
the same trap?

Murray
N. Rothbard (1926–1995), the founder of modern libertarianism
and the dean of the Austrian School of economics, was the author
of The
Ethics of Liberty and For
a New Liberty and many
other books and articles. He was also academic vice president
of the Ludwig von Mises Institute and the Center for Libertarian
Studies, and the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

Well,
I’ll tell you, Max. All those battles that you and the other lesser
guys, like FDR and Acheson, fought together, I was there too,
every time, on the other side, trying my best to kick you in the
shoulder. (Max’s shoulders are about on a level with other people’s
shins.)

On
the basis of his 2,000-year perspective, Max has some sage advice
for all of us American youngsters. What is it? Surprise: that
we should once again follow this path of what he calls “the fusion
of Wilsonian idealist ends with realistic Hamiltonian means.”
Sure: as someone who has never been able to make up his mind about
who is the single most evil politician in American history: Hamilton,
or Wilson, that’s a real appealing combination. Myself, I prefer
a counter-fusion: isolationist ends (Borah? Nye? Lindbergh?) joined
to Jeffersonian means. Now how does that grab you, Max?

Now
comes the concrete applications of Max’s fusion for today’s world.
First, Max urges both parties to embrace his fusion: “Only
thus can they show they are ‘presidential’.” That’s it, Max: above
all, the dice must be loaded in this wonderful “democratic” game
you’re always prating about: make sure that the dumb American
masses get no choice. Right?

And
what does this fusion entail? First, “heroic alliance measures”
(English translation: massive subsidy and control) “to shore up
the new Russian republics” (well, only one republic is
“Russian,” but Max can’t allow petty details to disturb the grand
sweep of his strategic vision). “Shore up” against what,
exactly? Here it comes: “against plunging into a ‘Russia first’
ethnic and anti-Semitic nationalism.” Ahh. I guess, in his own
heavy-footed way, Max Lerner has outlined for us with great clarity
the neocon version of the New World Order: an order where not
only any America First trend is stamped out, but also any “Russia
first” or anyone else first movement everywhere in the world,
in order to eradicate all nationalisms and “anti-Semitism.” Does
this mean that the United States is supposed to run the world
in order to crush all nationalism and anti-Semitism throughout
the globe? Can this foreign policy doctrine be sold, in all its
candor and clarity, to the American public? Is Max willing to
take a democratic vote on this issue?

All
nationalisms must be stamped out, it seems, but one. For Israel
must be supported to the hilt and beyond. Of course, bipartisan
all-out support for Israel would mean, in Max’s words, “a rejection
of Patrick Buchanan and America’s most dangerous isolationist
movement since the dark days on the eve of World War II.” But
Max admits he’s got a tough row to hoe. For President Bush is
persisting in terrible anti-Israel policies, “his petty personal
grudge against Yitzhak Shamir” (who, knowing Shamir, could possibly
have a personal grudge against this lovable character?); his “false
realism” in courting “terrorist” Arab countries (Hey, Max, your
pal Shamir has no mean terrorist record himself); and Bush’s “indifference”
to the “plight” of new immigrants to Israel (English translation:
Shamir’s urge to settle these immigrants in Arab areas). And behind
Bush, says Max, is the even more terrible “James Baker and his
media claque” (Go ahead, say it, Max: his “amen corner”). Well,
how about the Democrats? No, because none of the Democratic candidates
are denouncing Bush and Baker for their “betrayal of the American-Israeli
alliance” (alliance against whom exactly, Max?).

Sorry,
methinks the chances for Max’s bipartisan fusion are dwindling
every day. The glory days of you and those other guys battling
the German-American Bund are long gone, Max. Face it, and come
on, for Heaven’s sake. Max, shut up already.

Frankly,
I prefer the wisdom of Mel Brooks’s 2000-year-old man. Any day
in the week.

This
essay is included, with many others, in the Lew Rockwell-edited
Irrepressible Rothbard

Buy
it

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

Twenty years ago I was an extreme right-wing Republican, a young
and lone "Neanderthal" (as the liberals used to call
us) who believed, as one friend pungently put it, that "Senator
Taft had sold out to the socialists." Today, I am most likely
to be called an extreme leftist, since I favor immediate withdrawal
from Vietnam, denounce U.S. imperialism, advocate Black Power
and have just joined the new Peace and Freedom Party. And yet
my basic political views have not changed by a single iota in
these two decades!

It
is obvious that something is very wrong with the old labels, with
the categories of "left" and "right," and
with the ways in which we customarily apply these categories to
American political life. My personal odyssey is unimportant; the
important point is that if I can move from "extreme right"
to "extreme left" merely by standing in one place, drastic
though unrecognized changes must have taken place throughout the
American political spectrum over the last generation.

I
joined the right-wing movement — to give a formal name to
a very loose and informal set of associations — as a young
graduate student shortly after the end of World War II. There
was no question as to where the intellectual right of that day
stood on militarism and conscription: it opposed them as instruments
of mass slavery and mass murder. Conscription, indeed, was thought
far worse than other forms of statist controls and incursions,
for while these only appropriated part of the individual’s property,
the draft, like slavery, took his most precious possession: his
own person. Day after day the veteran
publicist John T. Flynn — once praised as a liberal and then
condemned as a reactionary, with little or no change in his views — inveighed
implacably in print and over the radio against militarism and
the draft. Even the Wall Street newspaper, the Commercial and
Financial Chronicle, published a lengthy attack on the idea of
conscription.

All
of our political positions, from the free market in economics
to opposing war and militarism, stemmed from our root belief in
individual liberty and our opposition to the state. Simplistically,
we adopted the standard view of the political spectrum: "left"
meant socialism, or total power of the state; the further "right"
one went the less government one favored. Hence, we called ourselves
"extreme rightists."

Originally,
our historical heroes were such men as Jefferson, Paine, Cobden,
Bright and Spencer; but as our views became purer and more consistent,
we eagerly embraced such near-anarchists as the voluntarist, Auberon
Herbert, and the American individualist-anarchists, Lysander Spooner
and Benjamin R. Tucker. One of our great intellectual heroes was
Henry David Thoreau, and his essay, "Civil Disobedience,"
was one of our guiding stars. Right-wing theorist Frank Chodorov
devoted an entire issue of his monthly, Analysis, to an appreciation
of Thoreau.

In
our relation to the remainder of the American political scene,
we of course recognized that the extreme right of the Republican
Party was not made up of individualist anti-statists, but they
were close enough to our position to make us feel part of a quasi-libertarian
united front. Enough of our views were present among the extreme
members of the Taft wing of the Republican Party (much more so
than in Taft himself, who was among the most liberal of that wing),
and in such organs as the Chicago Tribune, to make us feel
quite comfortable with this kind of alliance.

What
is more, the right-wing Republicans were major opponents of the
Cold War. Valiantly, the extreme rightist Republicans, who were
particularly strong in the House, battled conscription, NATO and
the Truman Doctrine. Consider, for example, Omaha’s Representative
Howard Buffett, Senator Taft’s midwestern campaign manager in
1952. He was one of the most extreme of the extremists, once described
by The Nation as "an able young man whose ideas have tragically
fossilized."

I
came to know Buffett as a genuine and thoughtful libertarian.
Attacking the Truman Doctrine on the floor of Congress, he declared:
"Even if it were desirable, America is not strong enough
to police the world by military force. If that attempt is made,
the blessings of liberty will be replaced by coercion and tyranny
at home. Our Christian ideals cannot be exported to other lands
by dollars and guns."

When
the Korean War came, almost the entire old left, with the exception
of the Communist Party, surrendered to the global mystique of
the United Nations and "collective security against aggression,"
and backed Truman’s imperialist aggression in that war. Even Corliss
Lamont backed the American stand in Korea. Only the extreme rightist
Republicans continued to battle U.S. imperialism. It was the last
great political outburst of the old right of my youth.

Howard
Buffett was convinced that the United States was largely responsible
for the eruption of conflict in Korea; for the rest of his life
he tried unsuccessfully to get the Senate Armed Services Committee
to declassify the testimony of CIA head Admiral Hillenkoeter,
which Buffett told me established American responsibility for
the Korean outbreak. The last famous isolationist move came late
in December 1950, after the Chinese forces had beaten the Americans
out of North Korea. Joseph P. Kennedy and Herbert Hoover delivered
two ringing speeches back-to-back calling for American evacuation
of Korea. As Hoover put it, "To commit the sparse ground
forces of the non-communist nations into a land war against this
communist land mass [in Asia] would be a war without victory,
a war without a successful political terminal . . . that would
be the graveyard of millions of American boys" and the exhaustion
of the United States. Joe Kennedy declared that "if portions
of Europe or Asia wish to go communistic or even have communism
thrust upon them, we cannot stop it."

To
this The Nation replied with typical liberal Red-baiting:
"The
line they are laying down for their country should set the bells
ringing in the Kremlin as nothing has since the triumph of Stalingrad";
and the New Republic actually saw Stalin sweeping onwards "until
the Stalinist caucus in the Tribune Tower would bring out in triumph
the first communist edition of the Chicago Tribune."

The
main catalyst for transforming the mass base of the right wing
from an isolationist and quasi-libertarian movement to an anti-communist
one was probably "McCarthyism." Before Senator Joe McCarthy
launched his anti-communist crusade in February 1950, he
had not been particularly associated with the right wing of the
Republican Party; on the contrary, his record was liberal and
centrist, statist rather than libertarian.

Furthermore,
Red-baiting and anti-communist witch-hunting were originally launched
by liberals, and even after McCarthy the liberals were the most
effective at this game. It was, after all, the liberal Roosevelt
Administration which passed the Smith Act, first used against
Trotskyites and isolationists during World War II and then against
communists after the war; it was the liberal Truman Administration
that instituted loyalty checks; it was the eminently liberal Hubert
Humphrey who was a sponsor of the clause in the McCarran Act of
1950 threatening concentration camps for "subversives."

McCarthy
not only shifted the focus of the right to communist hunting,
however. His crusade also brought into the right wing a new mass
base. Before McCarthy, the rank-and-file of the right wing was
the small-town, isolationist middle west. McCarthyism brought
into the movement a mass of urban Catholics from the eastern seaboard,
people whose outlook on individual liberty was, if anything, negative.

If
McCarthy was the main catalyst for mobilizing the mass base of
the new right, the major ideological instrument of the transformation
was the blight of anti-communism, and the major carriers were
Bill Buckley and National Review.

In
the early days, young Bill Buckley often liked to refer to himself
as an "individualist," sometimes even as an "anarchist."
But all these libertarian ideals, he maintained, had to remain
in total abeyance, fit only for parlor discussion, until the great
crusade against the "international communist conspiracy"
had been driven to a successful conclusion. Thus, as early as
January 1952, I noted with disquiet an article that Buckley
wrote for Commonweal, "A Young Republican’s View."

He
began the article in a splendid libertarian manner: our enemy,
he affirmed, was the state, which, he quoted Spencer, was "begotten
of aggression and by aggression." But then came the worm
in the apple: the anti-communist crusade had to be waged. Buckley
went on to endorse "the extensive and productive tax laws
that are needed to support a vigorous anti-communist foreign policy";
he declared that the "thus far invincible aggressiveness
of the Soviet Union" imminently threatened American security,
and that therefore "we have to accept Big Government for
the duration — for neither an offensive nor a defensive war can
be waged . . . except through the instrument of
a totalitarian bureaucracy within our shores." Therefore,
he concluded — in the midst of the Korean War — we must all support
"large armies and air forces, atomic energy, central intelligence,
war production boards and the attendant centralization of power
in Washington."

The
right wing, never articulate, has not had many organs of opinion.
Therefore, when Buckley founded National Review in late
1955, its erudite, witty and glib editorials and articles
swiftly made it the only politically relevant journal for the
American right. Immediately, the ideological line of the right
began to change sharply.

One
element that gave special fervor and expertise to the Red-baiting
crusade was the prevalence of ex-communists, ex-fellow travelers
and ex-Trotskyites among the writers whom National Review brought
into prominence on the right-wing scene. These ex-leftists were
consumed with an undying hatred for their former love, along with
a passion for bestowing enormous importance upon their apparently
wasted years. Almost the entire older generation of writers and
editors for National Review had been prominent in the old left.
Some names that come to mind are: Jim Burnham, John Chamberlain,
Whittaker Chambers, Ralph DeToledano, Will Herberg, Eugene Lyons,
J. B. Matthews, Frank S. Meyer, William S. Schlamm and Karl Wittfogel.

An
insight into the state of mind of many of these people came in
a recent letter to me from one of the most libertarian of this
group; he admitted that my stand in opposition to the draft was
the only one consistent with libertarian principles, but, he said,
he can’t forget how nasty the communist cell in Time magazine
was in the 1930′s. The world is falling apart and yet these people
are still mired in the petty grievances of faction fights of long
ago!

Anti-communism
was the central root of the decay of the old libertarian right,
but it was not the only one. In 1953, a big splash was
made by the publication of Russell Kirk’s The
Conservative Mind. Before that, no one on the right regarded
himself as a "conservative"; "conservative"
was considered a left smear word. Now, suddenly, the right began
to glory in the term "conservative," and Kirk began
to make speaking appearances, often in a kind of friendly "vital
center" tandem with Arthur Schlesinger Jr.

This
was to be the beginning of the burgeoning phenomenon of the friendly-though-critical
dialogue between the liberal and conservative wings of the Great
Patriotic American Consensus. A new, younger generation of rightists,
of "conservatives," began to emerge, who thought that
the real problem of the modern world was nothing so ideological
as the state vs. individual liberty or government intervention
vs. the free market; the real problem, they declared, was the
preservation of tradition, order, Christianity and good manners
against the modern sins of reason, license, atheism and boorishness.

One
of the first dominant thinkers of this new right was Buckley’s
brother-in-law, L. Brent Bozell, who wrote fiery articles in National
Review attacking liberty even as an abstract principle (and not
just as something to be temporarily sacrificed for the benefit
of the anti-communist emergency). The function of the state was
to impose and enforce moral and religious principles.

Another
repellent political theorist who made his mark in National Review
was the late Willmoore Kendall, NR editor for many years. His
great thrust was the right and the duty of the majority of the
community — as embodied, say, in Congress — to suppress
any individual who disturbs that community with radical doctrines.
Socrates, opined Kendall, not only should have been killed
by the Greek community, whom he offended by his subversive criticisms,
but it was their moral duty to kill him.

The
historical heroes of the new right were changing rapidly. Mencken,
Nock, Thoreau, Jefferson, Paine — all these either dropped from
sight or were soundly condemned as rationalists, atheists or anarchists.
From Europe, the "in" people were now such despotic
reactionaries as Burke, Metternich, DeMaistre; in the United States,
Hamilton and Madison were "in," with their stress on
the imposition of order and a strong, elitist central government
— which included the southern "slavocracy."

For
the first few years of its existence, I moved in National Review
circles, attended its editorial luncheons, wrote articles and
book reviews for the magazine; indeed, there was talk at one time
of my joining the staff as an economics columnist.

I
became increasingly alarmed, however, as NR and its friends grew
in strength because I knew, from innumerable conversations with
rightist intellectuals, what their foreign policy goal was. They
never quite dared to state it publicly, although they would slyly
imply it and would try to whip the public up to the fever pitch
of demanding it. What they wanted — and still want — was
nuclear annihilation of the Soviet Union. They want to drop that
Bomb on Moscow. (Of course, on Peking and Hanoi too, but for your
veteran anti-communist — especially back then — it is
Russia which supplies the main focus of his venom.) A prominent
editor of National Review once told me: "I have a
vision, a great vision of the future: a totally devastated Soviet
Union." I knew that it was this vision that really animated
the new conservatism.

In
response to all this, and seeing peace as the crucial political
issue, a few friends and I became Stevensonian Democrats in 1960.
I watched with increasing horror as the right wing, led by National
Review, continually grew in strength and moved ever closer
to real political power.

Having
broken emotionally with the right wing, our tiny group of libertarians
began to rethink many of our old, unexamined premises. First,
we restudied the origins of the Cold War. We read our D.F. Fleming
and we concluded, to our considerable surprise, that the United
States was solely at fault in the Cold War, and that Russia was
the aggrieved party. And this meant that the great danger to the
peace and freedom of the world came not from Moscow or "international
communism," but from the U.S. and its Empire stretching across
and dominating the world.

And
then we studied the foul European conservatism that had taken
over the right wing; here we had statism in a virulent form, and
yet no one could possibly think these conservatives to be "leftist."
But this meant that our simple "left/total government — right/no
government" continuum was altogether wrong and that our whole
identification of ourselves as "extreme rightists" must
contain a basic flaw. Plunging back into history, we again concentrated
on the reality that in the 19th century, laissez-faire
liberals and radicals were on the extreme left and our ancient
foes, the conservatives, on the right. My old friend and libertarian
colleague Leonard Liggio then came up with the following analysis
of the historical process.

First
there was the old order, the ancien régime, the regime
of caste and frozen status, of exploitation by a despotic ruling
class, using the church to dupe the masses into accepting its
rule. This was pure statism; this was the right wing. Then, in
17th and 18th century western Europe, a liberal and radical opposition
movement arose, our heroes, who championed a popular revolutionary
movement on behalf of rationalism, individual liberty, minimal
government, free markets, international peace and separation of
church and state, in opposition to throne and altar, to monarchy,
the ruling class, theocracy and war. These — "our people" — were
the left, and the purer their vision the more "extreme"
they were.

So
far so good; but what of socialism, which we had always considered
the extreme left? Where did that fit in? Liggio analyzed socialism
as a confused middle-of-the-road movement, influenced historically
by both the libertarian left and the conservative right. From
the individualist left the socialists took the goals of freedom:
the withering away of the state, the replacement of the governing
of men by the administration of things, opposition to the ruling
class and a search for its overthrow, the desire to establish
international peace, an advanced industrial economy and a high
standard of living for the mass of the people. From the right
the socialists adopted the means to achieve these goals — collectivism,
state planning, community control of the individual. This put
socialism in the middle of the ideological spectrum. It also meant
that socialism was an unstable, self-contradictory doctrine bound
to fly apart in the inner contradiction between its means and
ends.

Our
analysis was greatly bolstered by our becoming familiar with the
new and exciting group of historians who studied under University
of Wisconsin historian William Appleman Williams. From them we
discovered that all of us free marketeers had erred in believing
that somehow, down deep, Big Businessmen were really in
favor of laissez-faire, and that their deviations from
it, obviously clear and notorious in recent years, were either
"sellouts" of principle to expediency or the result
of astute maneuverings by liberal intellectuals.

This
is the general view on the right; in the remarkable phrase of
Ayn Rand, Big Business is "America’s most persecuted minority."
Persecuted minority, indeed! Sure, there were thrusts against
Big Business in the old McCormick Chicago Tribune and in
the writings of Albert Jay Nock; but it took the Williams-Kolko
analysis to portray the true anatomy and physiology of the American
scene.

As
Kolko pointed out, all the various measures of federal regulation
and welfare statism that left and right alike have always believed
to be mass movements against Big Business are not only now backed
to the hilt by Big Business, but were originated by it for the
very purpose of shifting from a free market to a cartelized economy
that would benefit it. Imperialistic foreign policy and the permanent
garrison state originated in the Big Business drive for foreign
investments and for war contracts at home.

The
role of the liberal intellectuals is to serve as "corporate
liberals," weavers of sophisticated apologias to inform the
masses that the heads of the American corporate state are ruling
on behalf of the "common good" and the "general
welfare" — like the priest in the Oriental despotism
who convinced the masses that their emperor was all-wise and divine.

Since
the early ’60s, as the National Review right has
moved nearer to political power, it has jettisoned its old libertarian
remnants and has drawn ever closer to the liberals of the Great
American Consensus. Evidence of this
abounds. There is Bill Buckley’s ever-widening popularity in the
mass media and among liberal intellectuals, as well as widespread
admiration on the intellectual right for people and groups it
once despised: for the New Leader, for Irving Kristol, for the
late Felix Frankfurter (who always opposed judicial restraint
on government invasions of individual liberty), for Hannah Arendt
and Sidney Hook. Despite occasional bows to the free market, conservatives
have come to agree that economic issues are unimportant; they
therefore accept — or at least do not worry about — the
major outlines of the Keynesian welfare-warfare state of liberal
corporatism.

On
the domestic front, virtually the only conservative interests
are to suppress Negroes ("shoot looters," "crush
those riots"), to call for more power for the police so as
not to "shield the criminal" (i.e., not to protect his
libertarian rights), to enforce prayer in the public schools,
to put Reds and other subversives and "seditionists"
in jail and to carry on the crusade for war abroad. There is little
in the thrust of this program with which liberals can now disagree;
any disagreements are tactical or matters of degree only. Even
the Cold War — including the war in Vietnam — was begun
and maintained and escalated by the liberals themselves.

No
wonder that liberal Daniel Moynihan — a national board member
of ADA incensed at the radicalism of the current anti-war and
Black Power movements — should recently call for a formal
alliance between liberals and conservatives, since after all they
basically agree on these, the two crucial issues of our time!
Even Barry Goldwater has gotten the message; in January 1968 in
National Review, Goldwater concluded an article by affirming that
he is not against liberals, that liberals are needed as a counterweight
to conservatism, and that he had in mind a fine liberal like Max
Lerner — Max Lerner, the epitome of the old left, the hated
symbol of my youth!

In
response to our isolation from the right, and noting the promising
signs of libertarian attitudes in the emerging new left, a tiny
band of us ex-rightist libertarians founded the "little journal,"
Left and Right, in the spring of 1965. We had two major purposes:
to make contact with libertarians already on the new left and
to persuade the bulk of libertarians or quasi-libertarians who
remained on the right to follow our example. We have been gratified
in both directions: by the remarkable shift toward libertarian
and anti-statist positions of the new left, and by the significant
number of young people who have left the right-wing movement.

This
left/right tendency has begun to be noticeable on the new left,
praised and damned by those aware of the situation.

(Our
old colleague Ronald Hamoway, an historian at Stanford, set forth
the left/right position in the New Republic collection, Thoughts
of the Young Radicals [1966.) We have received gratifying
encouragement from Carl Oglesby who, in his Containment
and Change (1967), advocated a coalition of new left and
old right, and from the young scholars grouped around the unfortunately
now defunct Studies on the Left. We’ve also been criticized, if
indirectly, by Staughton Lynd, who worries because our ultimate
goals — free market as against socialism — differ.

Finally,
liberal historian Martin Duberman, in a recent issue of Partisan
Review, sharply criticizes SNCC and CORE for being "anarchists,"
for rejecting the authority of the state, for insisting that community
be voluntary, and for stressing, along with SDS, participatory
instead of representative democracy. Perceptively, if on the wrong
side of the fence, Duberman then links SNCC and the new left with
us old rightists: "SNCC and CORE, like the Anarchists, talk
increasingly of the supreme importance of the individual. They
do so, paradoxically, in a rhetoric strongly reminiscent of that
long associated with the right. It could be Herbert Hoover….but
it is in fact Rap Brown who now reiterates the Negro’s need to
stand on his own two feet, to make his own decisions, to develop
self-reliance and a sense of self-worth. SNCC may be scornful
of present-day liberals and ‘statism,’ but it seems hardly to
realize that the laissez-faire rhetoric it prefers derives
almost verbatim from the classic liberalism of John Stuart Mill."
Tough. It could, I submit, do a lot worse.

I
hope to have demonstrated why a few compatriots and I have shifted,
or rather been shifted, from "extreme right" to "extreme
left" in the past 20 years merely by staying in the same
basic ideological place. The right wing, once in determined opposition
to Big Government, has now become the conservative wing of the
American corporate state and its foreign policy of expansionist
imperialism. If we would salvage liberty from this deadening left/right
fusion on the center, this needs be done through a counter-fusion
of old right and new left.

James
Burnham, an editor of National Review and its main strategic
thinker in waging the "Third World War" (as he entitles
his column), the prophet of the managerial state (in The Managerial
Revolution), whose only hint of positive interest in liberty
in a lifetime of political writing was a call for legalized firecrackers,
recently attacked the dangerous trend among some young conservatives
to make common cause with the left in opposing the draft. Burnham
warned that he learned in his Trotskyite days that this would
be an "unprincipled" coalition, and he warned that if
one begins by being anti-draft one might wind up opposed to the
war in Vietnam: "And I rather think that some of them are
at heart, or are getting to be, against the war. Murray Rothbard
has shown how right-wing libertarianism can lead to almost as
anti-U.S. a position as left-wing libertarianism does. And a strain
of isolationism has always been endemic in the American right."

This
passage symbolizes how deeply the whole thrust of the right wing
has changed in the last two decades. Vestigial interest in liberty
or in opposition to war and imperialism are now considered deviations
to be stamped out without delay. There are millions of Americans,
I am convinced, who are still devoted to individual liberty and
opposition to the leviathan state at home and abroad, Americans
who call themselves "conservatives" but feel that something
has gone very wrong with the old anti-New Deal and anti-Fair Deal
cause.

Something
has gone wrong: the right wing has been captured and transformed
by elitists and devotees of the European conservative ideals of
order and militarism, by witch hunters and global crusaders, by
statists who wish to coerce "morality" and suppress
"sedition."

America
was born in a revolution against Western imperialism, born as
a haven of freedom against the tyrannies and despotism, the wars
and intrigues of the old world. Yet we have allowed ourselves
to sacrifice the American ideals of peace and freedom and anti-colonialism
on the altar of a crusade to kill communists throughout the world;
we have surrendered our libertarian birthright into the hands
of those who yearn to restore the Golden Age of the Holy Inquisition.
It is about time that we wake up and rise up to restore our heritage.

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

In
the spring of 1979, a fateful – and fatal – shift took place in the
direction and strategic vision of our leading libertarian institutions:
foundations, youth movements, journals, etc. The shift was a classic
leap into opportunist betrayal of our fundamental principles.

The
early, pre-1976 days of the modern libertarian movement suffered
from having no strategic vision at all. For that reason, it scarcely
deserved the name of movement; the guiding concept was what I
call “educationism”: that libertarians write, lecture, teach,
and spread the word, and that somehow the victory of liberty would
one day magically be achieved. From 1976 on, in contrast, the
movement began to flourish under a movement-building, or cadre-building,
perspective; the idea was to concentrate on building a movement
of knowledgeable libertarians, of men and women who would be deeply
committed to hard-core libertarian principle.

This
“cadre” would get involved in single-issue coalitions where the
particular issues advanced the libertarian cause (anti-draft,
drug law repeal, tax-slashing, or whatever). In that way, the
effectiveness of the cadre would be multiplied, and the consciousness
of many of our allies would be widened to see the consistency
and merit of the broader libertarian perspective.

This
strategic perspective is of course a long-range one, but it is
the only one that can possible succeed. At all times, the cadre
holds high the banner of pure principle, and then applies that
principle to the crucial issues of the day. But this course requires
a lifelong commitment to what Mao aptly called a “protracted struggle”;
it is no movement for those who rush in and burn out in a few
months.

COUP
D'TAT

In
any ideological movement, the temptation to take quick shortcuts,
the lure of betraying principle for supposed short-run gain, can
become almost irresistible. But usually sellouts have occurred
after the movement has taken power, or else when it is teetering
on the brink of power. But it is surely rare for an ideological
movement to sell out when it merely sniffs the faintest whiff
of possible power some day in the future. Surely this is gutlessness
and venality of an unusually high order. Yet this began to happen
to the growing libertarian movement in early 1979, and is happening
right now before our eyes.

This
new opportunist strategy we might call, with considerable and
much-merited sarcasm, the “quick-victory” model. The reasoning
goes something like this: All this principle stuff is just a drag
on the machinery. We can gain a rapid and enormous leap forward
in votes, money, membership, and media influence. But to gain
these great goals we must quietly but effectively bury these annoying
principles, which only put off voters, money, influence, etc.

It
is too slow to get votes and support by holding high the banner
of libertarian principle and slowly converting people to it; far
quicker to abandon our own principles and adopt the program dear
to the hearts of those who might bring us votes, money, and influence.

The
problem, of course, is that even if money, votes, and influence
are achieved by this route, what are they being achieved for?
A major purpose, for example, of the Libertarian Party is to educate
the public, but to educate them to what? Presumably, to libertarian
principles. But if we present to the public watered-down pap hardly
distinguishable from liberals, conservatives, or centrists on
various issues, there will be no true education. The public will
receive education, not in liberty, but in pap, and whatever votes
are achieved will not be for liberty but for watered-down treacle.
In the process, our glorious principles are betrayed and forgotten,
and so the cause of liberty is worse off, even with several million
votes, than it was before the sellout strategy took hold. So everyone
loses, and no one benefits – except perhaps the opportunists themselves,
who may personally gain in power and income from the whole shabby
process.

How,
then, were the opportunist connivers going to handle all the stiff-necked
and principled purists in the Libertarian Party? The answer was
simple, and typical of the process of betrayal occurring in ideological
parties: Let the purists have their platform, which indeed has
gotten harder core and more radical with each national convention.
And then, simply control the Presidential candidate, and he ignores
the platform. And then the party can quietly go to hell, except
of course when needed as foot soldiers for ballot drives. Besides,
they believed they could get away with this strategy with only
a minimum of hassle from us purist malcontents. So far, in fact,
the tactic has worked, and will continue to work unless and until
genuine libertarians throughout the country rouse themselves and
begin to do something effective about it. And the first step is
to raise all of our voices loud and clear against this repellent
takeover of our party.

MEDIA
HYPE

What
specific form has this opportunist sellout taken? Specifically,
the opportunists have targeted as their constituency young, middle-class
liberals, the sort of articulate people who tend to mould voter
opinion, the sort of people who read the New York Times
and watch CBS News. Better yet, they are the sort of people who
write the New York Times and make CBS News. In short, young,
middle-class, liberal media people. Who needs cadre, who needs
intellectual content, who needs principle, who needs grass-roots
organizing, or single-issue coalitions or all the other patient
boring work that might eventually gain victory for libertarian
principle? Who needs all of that when, with a considerable infusion
of money and a big dilution of principle, we can “win” quickly
with razzle-dazzle, direct mail, and media hype?

It
is this living for the media and media influence above all that
accounts not only for the betrayal of principle, but also for
the kinds of ideological deviations that the opportunists have
indulged in. It is time to recognize that patient argument on
each of these issues is beside the point; the opportunists are
simply not interested in which stand on any given issue might
be consistent with libertarianism and which is not. All they care
about is finding some plausible libertarian-sounding rationale
for a position which will suck in the votes and support of the
media and the media-oriented constituency.

For
example: how are white, middle-class liberal youth to be sucked
in to supporting [the ticket]? Easy. What has been the biggest,
in fact virtually the only, issue animating this group for the
last several years? Hysterical and ill-informed opposition to
nuclear power. So: we promise them, No Nukes.

How
about the sort of white, middle-class liberal women who read the
New York Times, etc? Clearly, their big issue for years
has been the ERA, so [the] opportunist institutions come out vigorously
for this amendment.

What
are the other basic views of the media constituency? Mainly they
are soft liberals: that is, they favor the welfare state, but
worry about its high costs, and wish for some sort of mild reduction
in Big Government. So: [the ticket] has now promised that welfare
will not be cut in a libertarian regime: in one version, until
private institutions take up the welfare burden (fat chance!)
or, in another, until “full employment” is achieved (no chance
at all). So, middle-class liberals are assured: No Welfare Cuts.
No “Goldwater extremism” here.

In
accordance with the opportunist strategy, [the ticket] has given
up talking about basic principle (too radical) and wants to talk
only about what he will do in his first year in office (Huh?).
What he will do, of course, is to be “responsible,” and therefore
not do much of anything that middle-class liberals or the media
might consider threatening. So he talks only about a “large” tax
and budget cut, but nothing really radical or principled like
repealing the income tax.

What
about drugs? Here [the ticket and its] handlers know that middle-class
liberals mainly smoke marijuana anyway, so favor its legalization,
but anything like heroin – much more a working class or ghetto drug – scares
the hell out of them. So [the ticket] bravely comes out for legalization
of “soft” drugs like marijuana, and refuses to talk about heroin,
which means of course, an implicit acceptance of the idea of keeping
heroin and other hard drugs illegal. The implication is clear,
and cannot be wriggled out of by the sophistical and evasive reply
that [the ticket] has nowhere said explicitly that heroin should
be outlawed.

Neither
are our middle-class liberals very fond of illegal working-class
Mexican immigrants, and so [the ticket] has maintained that illegal
Mexican immigration should continue to be restricted until welfare
disappears. But then, of course, that has to stay until full employment,
etc. So: No Mexicans.

But
this is what happens when opportunists begin to sanction the idea
of structured destatization, of saying that we can't repeal Statist
Law A until B is repealed, and we can't repeal B until we get
rid of C, etc. To the media, this of course seems very “responsible”
and respectable. Sure, it's respectable; and for the very same
reason, it means that we, as libertarians, are advocating the
indefinite and hence the permanent freezing in place of the statist
structure. The quick victory model turns out, on analysis, to
be a quick victory only for the power and income of the opportunists
themselves; for the cause of liberty, it means a permanent burial.

It
all amounts to a monstrous betrayal; those who hanker after votes,
media influence, and respectability should have stayed where they
belonged and where they can get these goodies more rapidly: in
the Democratic and Republican parties.

Why,
then, has the [ticket] remained fairly sound on a foreign policy
of non-intervention? Not, surely, because of some lingering devotion
to principle. But because their beloved constituency – youthful
white middle-class liberals – is fairly dovish, and so they believe
that hay can be made with these people by sticking to non-intervention.
But, even here, [the ticket] has already compromised by incorporating
Canada and Mexico into the U.S. defense perimeter. (In short:
fight the Russians in Mexico, but don't let the Mexicans in?)
Also, [it] now talks of a gradual withdrawal from NATO.

Lately,
[the ticket] has taken to summing up his position as that of a
“low-tax liberal.” What we have to recognize is that this is not
simply a catchy phrase to get the attention of the media. This
is precisely what libertarianism has sunk to after a year of being
remolded by the campaign's power elite. The marvelous structure
of libertarian principle has been reduced simply to “low-tax liberalism.”

So
watered down are our principles that we can already point to several
key areas where Ronald Reagan is significantly more libertarian
than [the ticket]. [The ticket] is against Nukes; Reagan is not.
[The ticket] is for ERA; Reagan is for equal rights without the
infusion of government. [The ticket] is for restricting Mexican
immigration; Reagan is for a Common Market with Mexico, which
presumably means free immigration. [The ticket] links welfare
cuts to “full employment”; Reagan makes no such unnecessary link.
And we are yet to be convinced that the proposed tax cut will
be significantly bigger than the Reagan Kemp-Roth tax cut.

“LOW-TAX
LIBERALISM”

Let's
put it this way: if you were an ardent tax-cutter, would you vote
for a man who might well be elected, or for a man with no chance
who promises a slightly bigger cut? If libertarianism is to be
buried, there seems to be no point in voting for a Libertarian
Party. If only Reagan's election did not likely mean the incineration
of the human race in nuclear war, libertarians might well find
his candidacy very tempting at this point in the campaign.

So,
if the LP candidate is to hawk “low-tax liberalism” instead of
libertarianism, why vote for [the ticket] at all? Why not for
someone with a better chance to win, or, to put it another way,
why not vote for an authentic low-tax liberal; why not Jerry Brown,
for example, that master of liberalism of lower budgets and lower
expectations? Or at least that is Brown's image, and image is
all that [the ticket]'s handlers care about.

More
to the point: what about John Anderson? For though Anderson gives
no sign of being for lower taxes, his firmly entrenched media
image is that of someone, to use the old cliché, “liberal
on social issues and conservative on fiscal issues.” As he has
rushed to return the embrace of his newfound constituency of white
middle-class liberals, Anderson's foreign policy has become increasingly
dovish. And as for the media, well everyone knows that the “Anderson
difference” has literally been created by the media. He is the
media's darling, and [the ticket] is bound to remain a humble
suitor left standing in the wings.

This,
then, accounts for the panic and near-hysteria on the part of
the [ticket's] managers over the Anderson candidacy. Anderson,
they wail, has taken away “our” constituency. Tough. It couldn't
have happened to a more deserving group of guys. It is indeed
poetic justice for a group of people to sell their souls for a
mess of pottage and then not even get the pottage. Then, maybe,
after November, these people will leave us alone and return to
the major parties. And maybe then we will have a party whose candidates
run on the platform and not over it, who stand up for pure and
consistent principle, who are more interested in grass-roots cadre
building than in media hype.

Maybe
then we will again have a “party of principle.” What eventually
killed the New Left was that they forgot about grass-roots organizing
in their thirst for media attention. Let us hope that we don't
follow the same route. So perhaps the best thing that could happen
to save our souls and our principles is for the meretricious “quick-victory”
model to lead to a quick defeat, even on the opportunists' own
terms: in media flash and numbers of vote.

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

More
than any other single period, World War I was the critical watershed
for the American business system. It was a “war collectivism,”
a totally planned economy run largely by big-business interests
through the instrumentality of the central government, which served
as the model, the precedent, and the inspiration for state corporate
capitalism for the remainder of the twentieth century.

That inspiration
and precedent emerged not only in the United States, but also
in the war economies of the major combatants of World War I. War
collectivism showed the big-business interests of the Western
world that it was possible to shift radically from the previous,
largely free-market, capitalism to a new order marked by strong
government, and extensive and pervasive government intervention
and planning, for the purpose of providing a network of subsidies
and monopolistic privileges to business, and especially to large
business, interests. In particular, the economy could be cartelized
under the aegis of government, with prices raised and production
fixed and restricted, in the classic pattern of monopoly; and
military and other government contracts could be channeled into
the hands of favored corporate producers. Labor, which had been
becoming increasingly rambunctious, could be tamed and bridled
into the service of this new, state monopoly-capitalist order,
through the device of promoting a suitably cooperative trade unionism,
and by bringing the willing union leaders into the planning system
as junior partners.

In many ways,
the new order was a striking reversion to old-fashioned mercantilism,
with its aggressive imperialism and nationalism, its pervasive
militarism, and its giant network of subsidies and monopolistic
privileges to large business interests. In its twentieth-century
form, of course, the New Mercantilism was industrial rather than
mercantile, since the industrial revolution had intervened to
make manufacturing and industry the dominant economic form. But
there was a more significant difference in the New Mercantilism.
The original mercantilism had been brutally frank in its class
rule, and in its scorn for the average worker and consumer.[2] Instead, the new dispensation cloaked
the new form of rule in the guise of promotion of the overall
national interest, of the welfare of the workers through the new
representation for labor, and of the common good of all citizens.
Hence the importance, for providing a much-needed popular legitimacy
and support, of the new ideology of twentieth-century liberalism,
which sanctioned and glorified the new order. In contrast to the
older laissez-faire liberalism of the previous century, the new
liberalism gained popular sanction for the new system by proclaiming
that it differed radically from the old, exploitative mercantilism
in its advancement of the welfare of the whole society. And in
return for this ideological buttressing by the new “corporate”
liberals, the new system furnished the liberals the prestige,
the income, and the power that came with posts for the concrete,
detailed planning of the system as well as for ideological propaganda
on its behalf.

For their
part, the liberal intellectuals acquired not only prestige and
a modicum of power in the new order, they also achieved the satisfaction
of believing that this new system of government intervention was
able to transcend the weaknesses and the social conflicts that
they saw in the two major alternatives: laissez-faire capitalism
or proletarian, Marxian socialism. The intellectuals saw the new
order as bringing harmony and cooperation to all classes on behalf
of the general welfare, under the aegis of big government. In
the liberal view, the new order provided a middle way, a “vital
center” for the nation, as contrasted to the divisive “extremes”
of left and right.

I.

We have no
space here to dwell on the extensive role of big business and
business interests in getting the United States into World War
I. The extensive economic ties of the large business community
with England and France, through export orders and through loans
to the Allies, especially those underwritten by the politically
powerful J.P. Morgan & Co. (which also served as agent to
the British and French governments), allied to the boom brought
about by domestic and Allied military orders, all played a leading
role in bringing the United States into the war. Furthermore,
virtually the entire Eastern business community supported the
drive toward war.[3]

Apart from
the role of big business in pushing America down the road to war,
business was equally enthusiastic about the extensive planning
and economic mobilization that the war would clearly entail. Thus,
an early enthusiast for war mobilization was the United States
Chamber of Commerce, which had been a leading champion of industrial
cartelization under the aegis of the federal government since
its formation in 1912. The Chamber’s monthly, The Nation’s
Business, foresaw in mid-1916 that a mobilized economy would
bring about a sharing of power and responsibility between government
and business. And the chairman of the U.S. Chamber’s Executive
Committee on National Defense wrote to the du Ponts, at the end
of 1916, of his expectation that “this munitions question would
seem to be the greatest opportunity to foster the new spirit”
of cooperation between government and industry.[4]

The first
organization to move toward economic mobilization for war was
the Committee on Industrial Preparedness, which in 1916 grew out
of the Industrial Preparedness Committee of the Naval Consulting
Board, a committee of industrial consultants to the Navy dedicated
to considering the ramifications of an expanding American Navy.
Characteristically, the new CIP was a closely blended public-private
organization, officially an arm of the federal government but
financed solely by private contributions. Moreover, the industrialist
members of the committee, working patriotically without fee, were
thereby able to retain their private positions and incomes. Chairman
of the CIP, and a dedicated enthusiast for industrial mobilization,
was Howard E. Coffin, vice-president of the important Hudson Motor
Co. of Detroit. Under Coffin’s direction, the CIP organized a
national inventory of thousands of industrial facilities for munitions-making.
To propagandize for this effort, christened “industrial preparedness,”
Coffin was able to mobilize the American Press Association, the
Associated Advertising Clubs of the World, the august New York
Times, and the great bulk of American industry.[5]

The CIP was
succeeded, in late 1916, by the fully governmental Council of
National Defense, whose Advisory Commission – largely consisting
of private industrialists – was to become its actual operating
agency. (The Council proper consisted of several members of the
Cabinet.) President Wilson announced the purpose of the CND as
organizing “the whole industrial mechanism… in the most effective
way.” Wilson found the Council particularly valuable because it
“opens up a new and direct channel of communication and cooperation
between business and scientific men and all departments of the
Government…”[6] He also hailed the personnel of the
Council’s Advisory Commission as marking “the entrance of the
nonpartisan engineer and professional man into American governmental
affairs” on an unprecedented scale. These members, declared the
President grandiloquently, were to serve without pay, “efficiency
being their sole object and Americanism their only motive.”[7]

Exulting
over the new CND, Howard Coffin wrote to the du Ponts in December,
1916, that “it is our hope that we may lay the foundation for
that closely knit structure, industrial, civil and military, which
every thinking American has come to realize is vital to the future
life of this country, in peace and in commerce, no less than in
possible war.”[8]

Particularly
influential in establishing the CND was Secretary of the Treasury
William Gibbs McAdoo, son-in-law of the President, and formerly
promoter of the Hudson and Manhattan Railroad and associate of
the Ryan interests in Wall Street.[9] Head of the Advisory Commission was
Walter S. Gifford, who had been one of the leaders of the Coffin
Committee and had come to government from his post as chief statistician
of the American Telephone and Telegraph Co., a giant monopoly
enterprise in the Morgan ambit. The other “nonpartisan” members
were: Daniel Willard, president of the Baltimore and Ohio Railroad;
Wall Street financier Bernard M. Baruch; Howard E. Coffin; Julius
Rosenwald, president of Sears, Roebuck and Co.; Samuel Gompers,
president of the AF of L; and one scientist and one leading surgeon.

Months before
American entry into the war, the Advisory Commission of the CND
designed what was to become the entire system of purchasing war
supplies, the system of food control, and censorship of the press.
It was the Advisory Commission that met with the delighted representatives
of the various branches of industry, and told the businessmen
to form themselves into committees for sale of their products
to the government, and for the fixing of the prices of these products.
Daniel Willard was, unsurprisingly, put in charge of dealing with
the railroads, Howard Coffin with munitions and manufacturing,
Bernard Baruch with raw materials and minerals, Julius Rosenwald
with supplies, and Samuel Gompers with labor. The idea of establishing
committees of the various industries, “to get their resources
together,” began with Bernard Baruch. CND commodity committees,
in their turn, invariably consisted of the leading industrialists
in each field; these committees would then negotiate with the
committees appointed by industry.[10]

At the recommendation
of the Advisory Commission, Herbert Clark Hoover was named head
of the new Food Administration. By the end of March, 1917, the
CND appointed a Purchasing Board to coordinate government’s purchases
from industry. Chairman of this Board, the name of which was soon
changed to the General Munitions Board, was Frank A. Scott, a
well-known Cleveland manufacturer, and president of Warner &
Swasey Co.

Yet centralized
mobilization was proceeding but slowly through the tangle of bureaucracy,
and the United States Chamber of Commerce urged Congress that
the director of the CND “should be given power and authority in
the economic field analogous to that of the chief of state in
the military field.”[11] Finally, in early July, the raw materials,
munitions, and supplies departments were brought together under
a new War Industries Board, with Scott as Chairman, the board
that was to become the central agency for collectivism in World
War I. The functions of the WIB soon became the coordinating of
purchases, the allocation of commodities, and the fixing of prices
and priorities in production.

Administrative
problems beset the WIB, however, and a satisfactory “autocrat”
was sought to rule the entire economy as chairman of the new organization.
The willing autocrat was finally discovered in the person of Bernard
Baruch in early March, 1918. With the selection of Baruch, urged
strongly upon President Wilson by Secretary McAdoo, war collectivism
had achieved its final form.[12] Baruch’s credentials for the task
were unimpeachable; an early supporter of the drive toward war,
Baruch had presented a scheme for industrial war mobilization
to President Wilson as early as 1915.

The WIB developed
a vast apparatus that connected to the specific industries through
commodity divisions largely staffed by the industries themselves.
The historian of the WIB, himself one of its leaders, exulted
that the WIB had established

a system
of concentration of commerce, industry, and all the powers of
government that was without compare among all the other nations…
It was so interwoven with the supply departments of the army
and navy, of the Allies, and with other departments of the Government
that, while it was an entity of its own… its decisions and
its acts… were always based on a conspectus of the whole situation.
At the same time, through the commodity divisions and sections
in contact with responsible committees of the commodities dealt
with, the War Industries Board extended its antennae into the
innermost recesses of industry. Never before was there such
a focusing of knowledge of the vast field of American industry,
commerce, and transportation. Never was there such an approach
to omniscience in the business affairs of a continent.[13]

Big-business
leaders permeated the WIB structure from the board itself down
to the commodity sections. Thus, Vice-Chairman Alexander Legge
came from International Harvester Co.; businessman Robert S. Brookings
was the major force in insisting on price-fixing; George N. Peek,
in charge of finished products, had been vice-president of Deere
& Co., a leading farm equipment manufacturer. Robert S. Lovett,
in charge of priorities, was chairman of the board of Union Pacific
Railroad, and J. Leonard Replogle, Steel Administrator, had been
president of the American Vanadium Co. Outside of the direct WIB
structure, Daniel Willard of the Baltimore & Ohio was in charge
of the nation’s railroads, and big businessman Herbert C. Hoover
was the “Food Czar.”

In the granting
of war contracts, there was no nonsense about competitive bidding.
Competition in efficiency and cost was brushed aside, and the
industry-dominated WIB handed out contracts as it saw fit.

Any maverick
individualistic firm that disliked the mandates and orders of
the WIB was soon crushed between the coercion wielded by government
and the collaborating opprobrium of his organized business colleagues.
Thus, Grosvenor Clarkson writes:

Individualistic
American industrialists were aghast when they realized that
industry had been drafted, much as manpower had been… Business
willed its own domination, forged its bonds, and policed its
own subjection. There were bitter and stormy protests here and
there, especially from those industries that were curtailed
or suspended… [But] the rents in the garment of authority
were amply filled by the docile and cooperative spirit of industry.
The occasional obstructor fled from the mandates of the Board
only to find himself ostracized by his fellows in industry.[14]

One of the
most important instrumentalities of wartime collectivism was the
Conservation Division of the WIB, an agency again consisting largely
of leaders in manufacturing. The Conservation Division had begun
as the Commercial Economy Board of the CND, the brainchild of
its first chairman, Chicago businessman A. W. Shaw. The Board,
or Division, would suggest industrial economies, and encourage
the industry concerned to establish cooperative regulations. The
Board’s regulations were supposedly “voluntary,” a voluntarism
enforced by “the compulsion of trade opinion – which automatically
policed the observance of the recommendations.” For “a practice
adopted by the overwhelming consent and even insistence of…
[a man's] fellows, especially when it bears the label of patriotic
service in a time of emergency, is not lightly to be disregarded.”[15]

In this way,
in the name of wartime “conservation,” the Conservation Division
set out to rationalize, standardize, and cartelize industry in
a way that would, hopefully, continue permanently after the end
of the war. Arch W. Shaw summed up the Division’s task as follows:
to drastically reduce the number of styles, sizes, etc., of the
products of industry; to eliminate various styles and varieties;
to standardize sizes and measures. That this ruthless and thoroughgoing
suppression of competition in industry was not thought of as a
purely wartime measure is made clear in this passage by Grosvenor
Clarkson:

The World
War was a wonderful school. . . . It showed us how so many things
may be bettered that we are at a loss where to begin with permanent
utilization of what we know The Conservation Division alone
showed that merely to strip from trade and industry the lumber
of futile custom and the encrustation of useless variety would
return a good dividend on the world’s capital… It is, perhaps,
too much to hope that there will be any general gain in time
of peace from the triumphant experiment of the Conservation
Division. Yet now the world needs to economize as much as in
war.[16]

Looking forward
to future cartelization, Clarkson declared that such peacetime
“economizing… implies such a close and sympathetic affiliation
of competitive industries as is hardly possible under the decentralization
of business that is compelled by our antitrust statutes.”

Bernard Baruch’s
biographer summarized the lasting results of the compulsory “conservation”
and standardization as follows:

Wartime
conservation had reduced styles, varieties, and colors of clothing.
It had standardized sizes… It had outlawed 250 different types
of plow models in the U.S., to say nothing of 755 types of drills…
mass production and mass distribution had become the law of
the land… This, then, would be the goal of the next quarter
of the twentieth century: “To Standardize American Industry”;
to make of wartime necessity a matter of peacetime advantage.[17]

Not only
the Conservation Division, but the entire structure of wartime
collectivism and cartelization constituted a vision to business
and government of a future peacetime economy. As Clarkson frankly
put it:

It is little
wonder that the men who dealt with the industries of a nation…
meditated with a sort of intellectual contempt on the huge hit-and-miss
confusion of peacetime industry, with its perpetual cycle of
surfeit and dearth and its internal attempt at adjustment after
the event. From their meditations arose dreams of an ordered
economic world.

They conceived
of America as “commodity sectioned” for the control of world
trade. They beheld the whole trade of the world carefully computed
and registered in Washington, requirements noted, American resources
on call, the faucets opened or closed according to the circumstances.
In a word, a national mind and will confronting international
trade and keeping its own house in business order.[18]

Heart and
soul of the mechanism of control of industry by the WIB were its
sixty-odd commodity sections, committees supervising the various
groups of commodities, which were staffed almost exclusively by
businessmen from the respective industries. Furthermore, these
committees dealt with over three hundred “war service committees”
of industry appointed by the respective industrial groupings under
the aegis of the Chamber of Commerce of the United States. It
is no wonder that in this cozy atmosphere, there was a great deal
of harmony between business and government. As Clarkson admiringly
described it:

Businessmen
wholly consecrated to government service, but full of understanding
of the problems of industry, now faced businessmen wholly representative
of industry… but sympathetic with the purpose of government.[19]

And:

The commodity
sections were business operating Government business for the
common good… The war committees of industry knew, understood,
and believed in the commodity chiefs. They were of the same
piece.[20]

All in all,
Clarkson exulted that the commodity sections were “industry mobilized
and drilled, responsive, keen, and fully staffed. They were militant
and in serried ranks.”[21]

The Chamber
of Commerce was particularly enthusiastic over the war service
committee system, a system that was to spur the trade association
movement in peacetime as well. Chamber President Harry A. Wheeler,
vice-president of the Union Trust Co. of Chicago, declared that:

Creation
of the War Service Committees promises to furnish the basis
for a truly national organization of industry whose preparations
and opportunities are unlimited. . . . The integration of business,
the expressed aim of the National Chamber, is in sight. War
is the stern teacher that is driving home the lesson of cooperative
effort.[22]

The result
of all this new-found harmony within each industry, and between
industry and government, was to “substitute cooperation for competition.”
Competition for government orders was virtually nonexistent, and
“competition in price was practically done away with by Government
action. Industry was for the time in… a golden age of harmony,”
and freed from the menace of business losses.[23]

One of the
crucial functions of wartime planning was price-fixing, set in
the field of industrial commodities by the Price-Fixing Committee
of the War Industries Board. Beginning with such critical areas
as steel and copper early in the war and then inexorably expanding
to many other fields, the price-fixing was sold to the public
as the fixing of maximum prices in order to protect the public
against wartime inflation. In fact, however, the government set
the price in each industry at such a rate as to guarantee a “fair
profit” to the high-cost producers, thereby conferring a large
degree of privilege and high profits upon the lower-cost firms.[24] Clarkson admitted that this system
was a tremendous invigoration of big business and hard on small
business. The large and efficient producers made larger profits
than normally and many of the smaller concerns fell below their
customary returns.[25]

But the higher-cost
firms were largely content with their “fair profit” guarantee.

The attitude
of the Price-Fixing Committee was reflected in the statement of
its Chairman, Robert S. Brookings, a retired lumber magnate, addressed
to the nickel industry: “We are not in an attitude of envying
you your profits; we are more in the attitude of justifying them
if we can. That is the way we approach these things.”[26]

Typical of
the price-fixing operation, was the situation in the cotton textile
industry. Chairman Brookings reported in April, 1918, that the
cotton goods committee had decided to “get together in a friendly
way” to try to “stabilize the market.” Brookings appended the
feeling of the larger cotton manufacturers that it was better
to fix a high long-run minimum price than to take full short-run
advantage of the very high prices then in existence.[27]

The general
enthusiasm of the business world, and especially big business,
for the system of war collectivism can now be explained. The enthusiasm
was a product of the resulting stabilization of prices, the ironing
out of market fluctuations, and the fact that prices were almost
always set by mutual consent of government and the representatives
of each industry. It is no wonder that Harry A. Wheeler, president
of the United States Chamber of Commerce, wrote in the summer
of 1917 that war “is giving business the foundation for the kind
of cooperative effort that alone can make the U.S. economically
efficient.” Or that the head of American Telephone and Telegraph
hailed the perfecting of a “coordination to ensure complete cooperation
not only between the Government and the companies, but between
the companies themselves.” The wartime cooperative planning was
working so well, in fact, opined the chairman of the board of
Republic Iron and Steel in early 1918, that it should be continued
in peacetime as well.[28]

The vitally
important steel industry is an excellent example of the workings
of war collectivism. The hallmark of the closely knit control
of the steel industry was the close “cooperation” between government
and industry, a cooperation in which Washington decided on broad
policy, and then left it up to Judge Elbert Gary, head of the
leading steel producer, United States Steel, to implement the
policy within the industry. Gary selected a committee representing
the largest steel producers to help him run the industry. A willing
ally was present in J. Leonard Replogle, head of American Vanadium
Co. and chief of the Steel Division of the WIB. Replogle shared
the long-standing desire of Gary and the steel industry for industrial
cartelization and market stability under the aegis of a friendly
federal government. Unsurprisingly, Gary was delighted with his
new powers in directing the steel industry, and urged that he
be given total power “to thoroughly mobilize and if necessary
to commandeer.” And Iron Age, the magazine of the iron
and steel industry, exulted that

it has
apparently taken the most gigantic war in all history to give
the idea of cooperation any such place in the general economic
program as the country’s steel manufacturers sought to give
it in their own industry nearly ten years ago

with the
short-lived entente cordiale between Judge Gary and President
Roosevelt.[29]

It is true
that wartime relations between government and steel companies
were sometimes strained, but the strain and the tough threat of
government commandeering of resources was generally directed at
smaller firms, such as Crucible Steel, which had stubbornly refused
to accept government contracts.[30]

In the steel
industry, in fact, it was the big steelmakers – U.S. Steel,
Bethlehem, Republic, etc. – who, early in the war, had first
urged government price-fixing, and they had to prod a sometimes
confused government to adopt what eventually became the government’s
program. The main reason was that the big steel producers, happy
at the enormous increase of steel prices in the market as a result
of wartime demand, were anxious to stabilize the market at a high
price and thus insure a long-run profit position for the duration
of the war. The government–steel industry price-fixing agreement
of September, 1917, was therefore hailed by John A. Topping, president
of Republic Steel, as follows:

The steel
settlement will have a wholesome effect on the steel business
because the principle of cooperative-regulation has been established
with Government approval. Of course, present abnormal profits
will be substantially reduced but a runaway market condition
has been prevented and prosperity extended… Furthermore, stability
in future values should be conserved.[31]

Furthermore,
the large steel firms were happy to use the fixed prices as a
rationale for imposing controls and stability upon wages, which
were also beginning to rise. The smaller steel manufacturers,
on the other hand, often with higher costs, and who had not been
as prosperous before the war, opposed price-fixing because they
wished to take full advantage of the short-run profit bonanza
brought about by the war.[32]

Under this
regime, the steel industry achieved the highest level of profits
in its history, averaging twenty-five percent per year for the
two years of war. Some of the smaller steel companies, benefiting
from their lower total capitalization, did almost twice as well.[33]

The most
thoroughgoing system of price controls during the war was enforced
not by the WIB but by the separate Food Administration, over which
Herbert Clark Hoover presided as “Food Czar.” The official historian
of wartime price control justly wrote that the food control program
“was the most important measure for controlling prices which the
United States… had ever taken.”[34]

Herbert Hoover
accepted his post shortly after American entry into the war, but
only on the condition that he alone have full authority over food,
unhampered by boards or commissions. The Food Administration was
established without legal authorization, and then a bill backed
by Hoover was put through Congress to give the system the full
force of law. Hoover was also given the power to requisition “necessaries,”
to seize plants for government operation, and to regulate or prohibit
exchanges.

The key to
the Food Administration’s system of control was a vast network
of licensing. Instead of direct control over food, the
FA was given the absolute power to issue licenses for any and
all divisions of the food industry, and to set the conditions
for keeping the license. Every dealer, every manufacturer, distributor,
and warehouser of food commodities was required by Hoover to maintain
its federal license.

A notable
feature introduced by Hoover in his reign as Food Czar was the
mobilization of a vast network of citizen volunteers as a mass
of eager participants in enforcing his decrees. Thus, Herbert
Hoover was perhaps the first American politician to realize the
potential – in gaining mass acceptance and in enforcing government
decrees – in the mobilizing of masses through a torrent of
propaganda to serve as volunteer aides to the government bureaucracy.
Mobilization proceeded to the point of inducing the public to
brand as a virtual moral leper anyone dissenting from Mr. Hoover’s
edicts. Thus:

The basis
of all… control exercised by the Food Administration was the
educational work which preceded and accompanied its measures
of conservation and regulation. Mr. Hoover was committed thoroughly
to the idea that the most effective method to control foods
was to set every man, woman, and child in the country at the
business of saving food… The country was literally strewn
with millions of pamphlets and leaflets designed to educate
the people to the food situation. No war board at Washington
was advertised as widely as the U.S. Food Administration. There
were Food Administration insignia for the coat lapel, store
window, the restaurant, the train, and the home. A real stigma
was placed upon the person who was not loyal to Food Administration
edicts through pressure by the schools, churches, women’s clubs,
public libraries, merchants’ associations, fraternal organizations,
and other social groups.[35]

The method
by which the Food Administration imposed price control was its
requirement that its licensees should receive “a reasonable margin
of profit.” This “reasonable margin” was interpreted as a margin
over and above each producer’s costs, and this cost-plus “reasonable
profit” for each dealer became the rule of price control. The
program was touted to the public as a means of keeping profits
and food prices down. Although the Administration certainly
wished to stabilize prices, the goal was also and more importantly
to cartelize. Industry and government worked together to
make sure that individual maverick competitors did not get out
of line; prices in general were to be set at a level to guarantee
a “reasonable” profit to everyone. The goal was not lower
prices, but uniform, stabilized, non-competitive prices for all.
The goal was far more to keep prices up than to keep them
down. Indeed, any overly greedy competitor who tried to increase
his profits above prewar levels by cutting his prices,
was dealt with most severely by the Food Administration.

Let us consider
two of the most important food-control programs during World War
I: wheat and sugar. Wheat price control, the most important program,
came in the wake of wartime demand, which had pushed wheat prices
up very rapidly to their highest level in the history of the United
States. Thus, wheat increased by one dollar a bushel in the course
of two months at the start of the war, reaching the unheard of
price of three dollars a bushel. Control came in the wake of agitation
that government must step in to thwart “speculators” by fixing
maximum prices on wheat. Yet, under pressure by the agriculturists,
the government program fixed by statute, not maximum prices
for wheat but minima; the Food Control Act of 1917 fixed
a minimum price of two dollars a bushel for the next year’s wheat
crop. Not content with this special subsidy, the President proceeded
to raise the minimum to two dollars and twenty-six cents a bushel
in mid-1918, a figure that was then the precise market price for
wheat. This increased minimum effectively fixed the price of wheat
for the duration of the war. Thus, the government made sure that
the consumers could not possibly benefit from any fall in wheat
prices.

To enforce
the artificially high price of wheat, Herbert Hoover established
the Grain Corporation, “headed by practical grain men,” which
purchased the bulk of the wheat crop in the United States at the
“fair price,” and then resold the crop to the nation’s flour mills
at the same price. To keep the millers happy, the Grain Corporation
guaranteed them against any possible losses from unsold stocks
of wheat or flour. Moreover, each mill was guaranteed that its
relative position in the flour industry would be maintained throughout
the war. In this way, the flour industry was successfully cartelized
through the instrument of government. Those few mills who balked
at the cartel arrangement were dealt with handily by the Food
Administration; as Garrett put it: “their operations… were reasonably
well controlled… by the license requirements.”[36]

The excessively
high prices of wheat and flour also meant artificially high costs
to the bakers. They, in turn, were taken under the cozy
cartel umbrella by being required, in the name of “conservation,”
to mix inferior products with wheat flour at a fixed ratio. Each
baker was of course delighted to comply with a requirement that
he make inferior products, which he knew was also being enforced
upon his competitors. Competition was also curtailed by the Food
Administration’s compulsory standardization of the sizes of bread
loaves, and by prohibiting price-cutting through discounts or
rebates to particular customers – the classic path toward
the internal breakup of any cartel.[37]

In the particular
case of sugar, there was a much more sincere effort to keep down
prices – due to the fact that the United States was largely
an importer rather than a producer of sugar. Herbert Hoover and
the Allied governments duly formed an International Sugar Committee,
which undertook to buy all of their countries’ sugar, largely
from Cuba, at an artificially low price, and then to allocate
the raw sugar to the various refiners. Thus, the Allied governments
functioned as a giant buying cartel to lower the price of their
refiners’ raw material.

Herbert Hoover
instigated the plan for the International Sugar Committee, and
the United States government appointed the majority of the five-man
committee. As Chairman of the committee, Hoover selected Earl
Babst, president of the powerful American Sugar Refining Co.,
and the other American members also represented refiner interests.
The ISC promptly fixed a sharp reduction of the price of sugar:
lowering the New York price of Cuban raw sugar from its high market
price of six and three-quarter cents per pound in the summer of
1917 to six cents per pound. When the Cubans understandably balked
at this artificially forced price reduction of their cash crop,
the United States State Department and the Food Administration
collaborated to coerce the Cuban government into agreement. Somehow,
the Cubans were unable to obtain import licenses for needed wheat
and coal from the United States Food Administration, and the result
was a severe shortage of bread, flour, and coal in Cuba. Finally,
the Cubans capitulated in mid-January, 1918, and the import licenses
from the United States were rapidly forthcoming.[38] Cuba also induced to prohibit all
sugar exports except to the International Sugar Committee.

Apparently,
Mr. Babst insured an extra bonus to his American Sugar Refining
Company; for, shortly, officials of competing American refineries
were to testify before Congress that this company had particularly
profited from the activities of the International Sugar Committee
and from the price that it fixed on Cuban sugar.[39]

Although
the American government pursued with great diligence the goal
of pushing down raw material prices for United States refiners,
it also realized that it could not force down the price of raw
sugar too low, since the government had to consider the
marginal United States cane and beet-sugar producers, who had
to receive their duly appointed “fair return.” Jointly to harmonize
and subsidize both the sugar refiners and the sugar growers
in the United States, Mr. Hoover established a Sugar Equalization
Board that would simultaneously keep the price of sugar low
to Cuba while keeping it high enough for the American producers.
The Board accomplished this feat by buying the Cuban sugar at
the fixed low price and then reselling the crop to the refiners
at a higher price to cover the American producers.[40]

The result
of the artificially low prices for sugar was, inevitably, to create
a severe sugar shortage, by reducing supplies and by stimulating
an excessive public consumption. The result was that sugar consumption
was then severely restricted by federal rationing of sugar.

It is not
surprising that the food industries were delighted with the wartime
control program. Expressing the spirit of the entire war-collectivist
regime, Herbert Hoover, in the words of Paul Garrett:

maintained,
as a cardinal policy from the beginning, a very close and intimate
contact with the trade. The men, whom he chose to head his various
commodity sections and responsible positions, were in a large
measure tradesmen… The determination of the policies of control
within each branch of the food industry was made in conference
with the tradesmen of that branch… It might be said… that
the framework of food control, as of raw material control, was
built upon agreements with the trade. The enforcement of the
agreements once made, moreover, was intrusted in part to the
cooperation of constituted trade organizations. The industry
itself was made to feel responsible for the enforcement of all
rules and regulations.[41]

Also separate
from the War Industries Board were the nation’s railroads, which
received the greatest single ministration of government dictation
as compared to any other industry. The railroads, in fact, were
seized and operated directly by the federal government.

As soon as
the United States entered the war, the Administration urged the
railroads to unite as one in behalf of the war effort. The railroads
were delighted to comply, and quickly formed what became known
as the Railroads’ War Board, promising faithfully to pursue a
goal that they had long sought in peacetime: to cease competitive
activities and to coordinate railroad operations.[42] Daniel Willard, president of the
Baltimore & Ohio Railroad and Bernard Baruch’s predecessor
as head of the WIB, happily reported that the railroads had agreed
to vest their War Board with complete authority to override individual
railroad interests. Under its Chairman, Fairfax Harrison of the
Southern Railroad, the War Board established a Committee on Car
Service to coordinate national car supplies. Aiding the coordination
effort was the Interstate Commerce Commission, the longtime federal
regulatory body for the railroads. Once again, the government-promoted
monopoly was an inspiration to many who were looking ahead to
the peacetime economy. For several years the railroads had been
agitating for “scientific management” as a means of achieving
higher rates from the ICC and a governmentally imposed cartelization;
but they had been thwarted by the pressure of the organized shippers,
the industrial users of the railroads.

But now even
the shippers were impressed. Max Thelen, chairman of the California
Railroad Commission, president of the National Association of
Railway and Utilities Commissions, and the leading spokesman for
the organized shippers, agreed that the critical railroad problem
was “duplication,” and the “irrational” lack of complete inter-railroad
coordination. And Senator Francis G. Newlands (D., Nev.), the
most powerful congressman on railroad affairs as the chairman
of a joint committee on transportation regulation, opined that
the wartime experience was “somewhat shattering on old views regarding
antitrust laws.”[43]

Soon, however,
it became clear that the system of voluntary private coordination
was not really working well. Traffic departments of individual
roads persisted in competitive practices; the railroad brotherhood
unions were persistently demanding substantial wage increases;
and the railroads and organized shippers locked horns over railroad
demands for an across-the-board rate increase. All groups felt
that regional coordination and overall efficiency would best be
achieved by outright federal operation of the railroads. The shippers
first proposed the scheme as a method of achieving coordination
and to forestall higher freight rates; the unions seconded the
plan in order to obtain wage increases from the government; and
the railroads cheerfully agreed when President Wilson assured
them that each road would be guaranteed its 1916/17 profits –
two years of unusually high profits for the railroad industry.
With the federal government offering to take on the headaches
of wartime dislocation and management, while granting the roads
a very high guaranteed profit for doing nothing, why shouldn’t
the railroads leap to agreement?

The most
enthusiastic Administration proponent of federal operation of
the railroads was Secretary of the Treasury McAdoo, a former New
York railroad executive and close associate of the Morgan interests,
who in turn were the leading underwriters and owners of railroad
bonds. McAdoo was rewarded by being named head of the United States
Railroad Administration after Wilson seized the railroads on December
28, 1917.

Federal rule
by the Morgan-oriented McAdoo proved to be a bonanza for the nation’s
railroads. Not only were the railroads now fully monopolized by
direct government operation, but also the particular railroad
executives now found themselves armed with the coercive power
of the federal government. For McAdoo chose as his immediate assistants
a group of top railroad executives, and all rate-setting powers
of the ICC were shifted to the railroad-dominated Railroad Administration
for the duration.[44] The significance of the shift is
that the railroads, although largely responsible for the inception
and growth of the ICC as a cartelizing agency for the railroad
industry, had seen control of the ICC slip into the hands of the
organized shippers in the decade before the war. This had meant
that the railroads had found it very difficult to win freight
rate increases from the ICC. But now the wartime federal control
of the railroads was shunting the shippers aside.[45] McAdoo’s brazen appointment of railroad
men to virtually all the leading positions in the Railroad Administration,
to the virtual exclusion of shippers and academic economists,
greatly angered the shippers, who had launched an intense barrage
of criticism of the system by midsummer of 1918. ‘This barrage
came to a head when McAdoo increasingly turned the direction of
the RA, including the appointment of regional directors, over
to his principal assistant, railroad executive Walker D. Hines.
Shippers and ICC commissioners complained that

railroad
lawyers from the entire country descended on Washington, told
their troubles to other railroad lawyers serving on McAdoo’s
staff, and were “told to go into an adjoining room and dictate
what orders they want.”[46]

As in the
case of the War Industries Board, the railroad executives used
their coercive governmental powers to deal a crippling blow to
diversity and competition, on behalf of monopoly, in the name
of “efficiency” and standardization. Again, over the opposition
of shippers, the RA ordered the compulsory standardization of
locomotive and equipment design, eliminated “duplicate” (i.e.,
competitive) passenger service and coal transportation, shut down
off-line traffic offices, and ordered the cessation of competitive
solicitation of freight by the railroads.

All of these
edicts reduced railroad services to the hapless shippers. There
were still other coerced reductions of service. One ended the
shippers’ privileges of specifying freight routes – and thereby
of specifying the cheapest routes for shipping their goods.
Another upset the peacetime practice of making the railroads liable
for losses and damages to shipments; instead, the entire burden
of proof was placed upon the shippers. Another RA ruling –
the “sailing day plan” – ordered freight cars to remain in
their terminals until filled, thus sharply curtailing service
to small-town shippers.

The granting
of absolute power to the railroad-dominated RA was cemented by
the Federal Control Act of March, 1918, which ex post facto
legalized the illegal federal takeover. Working closely with railroad
lobbyists, the RA, backed by the full support of President Wilson,
was able to drive through Congress the transfer of rate-making
powers to itself from the ICC. Furthermore, all power was taken
away from the invariably shipper-dominated state railroad commissions.

The RA hastened
to exercise its rate-setting powers, announcing freight rate increases
of twenty-five percent across the board in the spring of 1918
– an act that permanently cemented shipper hostility to the
system of federal operation. To add insult to injury, the new
higher rates were set without any public hearings or consultation
with other agencies or interests involved.

II.

Historians
have generally treated the economic planning of World War I as
an isolated episode dictated by the requirements of the day and
having little further significance. But, on the contrary, the
war collectivism served as an inspiration and as a model for a
mighty army of forces destined to forge the history of twentieth-century
America. For big business, the wartime economy was a model of
what could be achieved in national coordination and cartelization,
in stabilizing production, prices, and profits, in replacing old-fashioned
competitive laissez-faire by a system that they could broadly
control and that would harmonize the claims of various powerful
economic groups. It was a system that had already abolished much
competitive diversity in the name of standardization. The wartime
economy especially galvanized such business leaders as Bernard
Baruch and Herbert Hoover, who would promote the cooperative “association”
of business trade groups as Secretary of Commerce during the 1920s,
an associationism that paved the way for the cooperative statism
of Franklin Roosevelt’s AAA and NRA.

The wartime
collectivism also held forth a model to the nation’s liberal intellectuals;
for here was seemingly a system that replaced laissez-faire not
by the rigors and class hatreds of proletarian Marxism, but by
a new strong State, planning and organizing the economy in harmony
with all leading economic groups. It was, not coincidentally,
to be a neomercantilism, a “mixed economy,” heavily staffed by
these selfsame liberal intellectuals. And finally, both big business
and the liberals saw in the wartime model a way to organize and
integrate the often-unruly labor force as a junior partner in
the corporatist system – a force to be disciplined by their
own “responsible” leadership of the labor unions.

For the rest
of his life, Bernard Mannes Baruch sought to restore the lineaments
of the wartime model. Thus, in summing up the experience of the
WIB, Baruch extolled the fact that:

many businessmen
have experienced during the war, for the first time in their
careers, the tremendous advantages, both to themselves and to
the general public, of combination, of cooperation and common
action…

Baruch called
for the continuance of such corporate associations, in “inaugurating
rules” to eliminate “waste” (i.e., competition), to exchange trade
information, to agree on the channeling of supply and demand among
themselves, to avoid “extravagant” forms of competition and to
allocate the location of production. Completing the outlines of
a corporate state, Baruch urged that such associations be governed
by a federal agency, either the Department of Commerce or the
Federal Trade Commission

an agency
whose duty it should be to encourage, under strict Government
supervision, such cooperation and coordination…[47]

Baruch also
envisioned a federal board for the retraining and channeling of
labor after the war. At the very least, he urged standby legislation
for price control and for industrial coordination and mobilization
in the event of another war.[48]

During the
1920s and 1930s, Bernard Baruch served as a major inspiration
of the drive toward a corporate state; moreover, many of the leaders
of this drive were men who had served under him during the heady
days of the WIB and who continued to function frankly as “Baruch’s
men” in national affairs. Thus, aided by Baruch, George N. Peek,
of the Moline Plow Company, launched in the early 1920s the drive
for farm price supports through federally organized farm cartels
that was to culminate in President Hoover’s Federal Farm Board
in 1929 and then in Roosevelt’s AAA. Peek’s farm equipment business,
of course, stood to benefit greatly from farm subsidies. Hoover
appointed as first Chairman of the FFB none other than Baruch’s
old top aide from World War I, Alexander Legge of International
Harvester, the leading farm machinery manufacturer. When Franklin
Roosevelt created the AAA, he first offered the job of director
to Baruch, and then gave the post to Baruch’s man, George Peek.

Neither was
Baruch laggard in promoting a corporatist system for industry
as a whole. In the spring of 1930, Baruch proposed a peacetime
reincarnation of the WIB as a “Supreme Court of Industry.” In
September of the following year, Gerard Swope, head of General
Electric and brother of Baruch’s closest confidant Herbert Bayard
Swope, presented an elaborated plan for a corporate state that
essentially revived the system of wartime planning. At the same
time, one of Baruch’s oldest friends, former Secretary William
Gibbs McAdoo, was proposing a similar plan for a “Peace Industries
Board.” After Hoover dismayed his old associates by rejecting
the plan, Franklin Roosevelt embodied it in the NRA, selecting
Gerard Swope to help write the final draft, and picking another
Baruch disciple and World War aide General Hugh S. Johnson –
also of the Moline Plow Company – to direct this major instrument
of state corporatism. When Johnson was fired, Baruch himself was
offered the post.[49]

Other leading
NRA officials were veterans of war mobilization. Johnson’s chief
of staff was another old friend of Baruch’s, John Hancock, who
had been Paymaster General of the Navy during the war and had
headed the naval industrial program for the War Industries Board;
other high officials of the NRA were Dr. Leo Wolman, who had been
head of the production-statistics division of the WIB; Charles
F. Homer, leader of the wartime Liberty Loan drive; and General
Clarence C. Williams, who had been Chief of Ordnance in charge
of Army war purchasing. Other WIB veterans highly placed in the
New Deal were Isador Lubin, United States Commissioner of Labor
Statistics in the New Deal; Captain Leon Henderson of the Ordnance
Division of the WIB; and Senator Joseph Guffey (D., Pa.), who
had worked in the WIB on conservation of oil, and who helped pattern
the oil and coal controls of the New Deal on the wartime Fuel
Administration.[50]

Another leading
promoter of the new cooperation subsequent to his experience as
wartime planner was Herbert Clark Hoover. As soon as the war was
over, Hoover set out to “reconstruct America” along the lines
of peacetime cooperation. He urged national planning through “voluntary”
cooperation among businessmen and other economic groups under
the “central direction” of the government. The Federal Reserve
System was to allocate capital to essential industries and thereby
to eliminate the competitive “wastes” of the free market. And
in his term as Secretary of Commerce during the 1920s, Hoover
assiduously encouraged the cartelization of industry through trade
associations. In addition to inaugurating the modern program of
farm price supports in the Federal Farm Board, Hoover urged the
coffee buyers to form a cartel to lower buying prices; established
a buying cartel in the rubber industry; led the oil industry in
working toward restrictions on oil production in the name of “conservation”;
tried repeatedly to raise prices, restrict production, and encourage
marketing co-ops in the coal industry; and tried to force the
cotton textile industry into a nationwide cartel to restrict production.
Specifically in furtherance of the wartime abolition of thousands
of diverse, and competitive products, Hoover continued to impose
standardization and “simplification” of materials and products
during the 1920s. In this way, Hoover managed to abolish or “simplify”
about a thousand industrial products. The “simplification” was
worked out by the Department of Commerce in collaboration with
committees from each industry.[51]

Grosvenor
Clarkson hailed the fact that:

it is probable
that there will never again be such a multiplicity of styles
and models in machinery and other heavy and costly articles
as there was before the restrictions necessitated by the war…
The ideas conceived and applied by the War Industries Board
in war are being applied in peace by the Department of Commerce…[52]

Not the least
of the influential groups dazzled and marked by the experience
of war collectivism were the liberal intellectuals. Never before
had so many intellectuals and academicians swarmed into government
to help plan, regulate, and mobilize the economic system. The
intellectuals served as advisers, technicians, framers of legislation,
and administrators of bureaus. Furthermore, apart from the rewards
of newly acquired prestige and power, the war economy held out
to such intellectuals the promise of transforming the society
into a “third way” completely different from the laissez-faire
past that they scorned or the looming proletarian Marxism that
they reviled and feared. Here was a planned corporate economy
that seemed to harmonize all groups and classes under a strong
and guiding nation-state with the liberals themselves at or near
the helm. In a notable article, Professor Leuchtenburg saw the
war collectivism as “a logical outgrowth of the Progressive movement.”[53] He demonstrated the enthusiasm of the Progressive
intellectuals for the social transformation effected by the war.
Thus, the New Republic hailed the “revolutionizing” of
society by means of the war; John Dewey hailed the replacement
of production for profit and “the absoluteness of private property”
by production for use. Economists were particularly enchanted
by the “notable demonstration of the power of war to force concert
of effort and collective planning,” and looked for “the same sort
of centralized directing now employed to kill their enemies abroad
for the new purpose of reconstructing their own life at home.”[54]

Rexford Guy
Tugwell, ever alert to the advance of social engineering, was
soon to look back wistfully upon “America’s wartime socialism”;
lamenting the end of the war, he declared that “only the Armistice
prevented a great experiment in control of production, control
of price, and control of consumption.” For, during the war, the
old system of industrial competition had “melted away in the fierce
new heat of nationalistic vision.”[55]

Not merely
the NRA and AAA, but virtually the entire New Deal apparatus –
including the bringing to Washington of a host of liberal intellectuals
and planners – owed its inspiration to the war collectivism
of World War I. The Reconstruction Finance Corporation, founded
by Hoover in 1932 and expanded by Roosevelt’s New Deal, was a
revival and expansion of the old War Finance Corporation, which
had loaned government funds to munitions firms. Furthermore, Hoover,
after offering the post to Bernard Baruch, named as first Chairman
of the RFC, Eugene Meyer, Jr., an old protg of Baruch’s, who
had been managing director of the WFC. Much of the old WFC staff
and method of operations were taken over bodily by the new agency.
The Tennessee Valley Authority grew out of a wartime government
nitrate and electric-power project at Muscle Shoals, and in fact
included the old nitrate plant as one of its first assets. Moreover,
many of the public power advocates in the New Deal had been trained
in such wartime agencies as the Power Section of the Emergency
Fleet Corporation. And even the innovative government corporate
form of the TVA was based on wartime precedent.[56]

Wartime experience
also provided the inspiration for the public housing movement
of the New Deal. During the war, the Emergency Fleet Corp. and
the United States Housing Corp. were established to provide housing
for war workers. The war established the precedent of federal
housing, and also trained architects like Robert Kohn, who functioned
as chief of production for the housing division of the United
States Shipping Board. After the war, Kohn exulted that “the war
has put housing ‘on the map’ in this country”; and in 1933, Kohn
was duly named by President Roosevelt to be the director of the
New Deal’s first venture into public housing. Furthermore, the
Emergency Fleet Corp. and the United States Housing Corp. established
large-scale public housing communities on planned “garden city”
principles (Yorkship Village, N.J.; Union Park Gardens, Del.;
Black Rock and Crane Tracts, Conn.), principles finally remembered
and put into effect in the New Deal and afterward.[57]

The oil and
coal controls established in the New Deal also rested on the precedent
of the wartime Fuel Administration. Indeed, Senator Joseph Guffey
(D., Pa.), leader in the coal and oil controls, had been head
of the petroleum section of the War Industries Board.

Deeply impressed
with the “national unity” and mobilization achieved during the
war, the New Deal established the Civilian Conservation Corps
to instill the martial spirit in America’s youth. The idea was
to take the “wandering boys” off the road and “mobilize” them
into a new form of American Expeditionary Force. The Army, in
fact, ran the CCC camps; CCC recruits were gathered at Army recruiting
stations, equipped with World War I clothing, and assembled in
army tents. The CCC, the New Dealers exulted, had given a new
sense of meaning to the nation’s youth, in this new “forestry
army.” Speaker Henry T. Rainey (D., Ill.) of the House of Representatives
put it this way:

They [the
CCC recruits] are also under military training and as they come
out of it… improved in health and developed mentally and physically
and are more useful citizens… they would furnish a very valuable
nucleus for an army.[58]

III.

Particularly
good evidence of the deep imprint of war collectivism was the
reluctance of many of its leaders to abandon it when the war was
finally over. Business leaders pressed for two postwar goals:
continuance of government price-fixing to protect them against
an expected postwar deflation; and a longer-range attempt to promote
industrial cartelization in peacetime. In particular, businessmen
wanted the price maxima (which had often served as minima
instead) to be converted simply into outright minima for the postwar
period. Wartime quotas to restrict production, furthermore, needed
only to remain in being to function as a frank cartelizing for
raising prices in time of peace.

Accordingly,
many of the industrial War Service Committees, and their WIB Section
counterparts, urged the continuance of the WIB and its price-fixing
system. In particular, section chiefs invariably urged continued
price control in those industries that feared postwar deflation,
while advocating a return to a free market wherever the specific
industry expected a continuing boom. Thus, Professor Himmelburg
concluded:

Section
chiefs in their recommendations to the Board consistently followed
the wishes of their industries in urging protection if the industry
expected price declines and release of all controls when the
industry expected a favorable postwar market.[59]

Robert S.
Brookings, Chairman of the Price-Fixing Committee of the WIB,
declared that the WIB would be “as helpful… during the reconstruction
period as we have during the war period in stabilizing values.”[60]

From the
big-business world, meanwhile, Harry A. Wheeler, president of
the United States Chamber of Commerce, presented to Woodrow Wilson
in early October, 1918, an ambitious scheme for a “Reconstruction
Commission,” to be composed of all the economic interests of the
nation.

The WIB itself
concurred, and urged the President to allow it to continue after
the war. Baruch himself urged upon Wilson the continuation of
at least the minimum price-fixing policies of the WIB. However,
Baruch was gulling the public when he foresaw a postwar WIB as
guarding against both inflation and deflation; there was no inclination
to impose maximum prices against inflation.

The great
problem with these ambitious plans of both industry and government
was President Wilson himself. Perhaps a lingering attachment to
the ideals, or at least to the rhetoric, of free competition prevented
the President from giving any favorable attention to these postwar
schemes.[61] The attachment was particularly nourished by Secretary
of War Newton D. Baker, of all Wilson’s advisers the closest to
a believer in laissez-faire. Throughout October, 1918, Wilson
rejected all of these proposals. The response of Baruch and the
WIB was to put further pressure on Wilson during early November,
by publicly predicting and urging that the WIB would definitely
be needed during demobilization. Thus The New York Times
reported, the day after the Armistice, that

War Industries
Board officials declared there would be much work for that organization
to do. They foresee no serious industrial dislocation with the
Government’s grip on all war industries and material held tight.[62]

The President
remained adamant, however, and on November 23 he ordered the complete
disbanding of the WIB by the end of the year. The disappointed
WIB officials accepted the decision without protest; partly because
of expected congressional opposition to any attempt to continue,
partly from the hostility to continued controls by those industries
anticipating a boom. Thus, the shoe industry particularly chafed
at any continuing controls.[63] The industries favoring controls,
however, urged the WIB at least to ratify their own price minima
and agreements for restricting production for the coming winter,
and to do so just before the disbandment of the agency. The Board
was sorely tempted to engage in this final exploit, and indeed
was informed by its legal staff that it could successfully continue
such controls beyond the life of the agency even against the will
of the President. The WIB, however, reluctantly turned down requests
to this effect by the acid, zinc, and steel manufacturers on December
11.[64] It only rejected the price-fixing plans, however,
because it feared being overturned by the courts should the Attorney
General challenge such a decision.

One of the
most ardent advocates of continued WIB price control was the great
steel industry. Two days after the Armistice, Judge Gary of U.S.
Steel urged the WIB to continue its regulations, and declared
that “The members of the steel industry desire to cooperate with
each other in every proper way…” Gary urged a three-month extension
of price-fixing, with further gradual reductions that would prevent
a return to “destructive” competition. Baruch replied that he
was personally “willing to go to the very limit,” but he was blocked
by Wilson’s attitude.[65]

If the WIB
itself could not continue, perhaps the wartime cartelization could
persist in other forms. During November, Arch W. Shaw, Chicago
industrialist and head of the Conservation Division of the WIB
(whose wartime work in fostering standardization was being transferred
to the Department of Commerce) and Secretary of Commerce William
Redfield agreed on a bill to allow manufacturers to collaborate
in “the adoption of plans for the elimination of needless waste
in the public interest,” under the supervision of the Federal
Trade Commission. When this proposal fizzled, Edwin B. Parker,
Priorities Commissioner of the WIB, proposed in late November
a frankly cartelizing bill that would allow the majority of the
firms in any given industry to set production quotas that would
have to be obeyed by all the firms in that industry. The Parker
plan won the approval of Baruch, Peek, and numerous other government
officials and businessmen, but WIB’s legal counsel warned that
Congress would never give its consent.[66] Another proposal that interested
Baruch was advanced by Mark Requa, Assistant Food Administrator,
who proposed a United States Board of Trade to encourage and regulate
industrial agreements that “promoted the national welfare.”[67]

Whatever
the reason, Bernard Baruch failed to press hard for these proposals,
and so they died on the vine. If Baruch failed to press matters,
however, his associate George Peek, head of the Finished Products
Division of the WIB, was not so reticent. By mid-December, 1918,
Peek wrote Baruch that the postwar era must retain the “benefits
of proper cooperation.” In particular,

proper
legislation should be enacted to permit cooperation in industry,
in order that the lessons we have learned during the war may
be capitalized… in peacetime… Conservation;… standardization
of products and processes, price fixing under certain conditions,
etc., should continue with Government cooperation.[68]

By late December,
Peek was proposing legislation for:

some kind
of an Emergency Peace Bureau… in order that businessmen may,
in conjunction with such a Bureau, have an opportunity to meet
and cooperate with Governmental cooperation…[69]

The leading
business groups endorsed similar plans. In early December, the
Chamber of Commerce of the United States called a meeting of the
various industrial War Service Committees to convene as a “Reconstruction
Congress of American Industry.” The Reconstruction Congress called
for revision of the Sherman Act to permit “reasonable” trade agreements
under a supervisory body. Furthermore, a nationwide Chamber referendum,
in early 1919, approved such a proposal by an overwhelming majority;
and president Harry Wheeler urged the “cordial acceptance by organized
business” of regulation that would ratify business agreements.
The National Association of Manufacturers, before the war devoted
to competition, warmly endorsed the same goals.

The last
gasp of wartime cartelization came in February, 1919, with the
establishment by the Department of Commerce of the Industrial
Board.[70] Secretary of Commerce William C. Redfield, formerly
president of the American Manufacturers Export Association, had
long championed the view that government should promote and coordinate
industrial cooperation. Redfield saw an entering wedge with the
transfer of the WIB’s Conservation Division to his department
shortly after the Armistice. Redfield continued the wartime stimulation
of trade associations, and to that end established an advisory
board of former WIB officials. One of these advisers was George
Peek; another was Peek’s assistant on the WIB, Ohio lumber executive
William M. Ritter. It was Ritter, in fact, who originated the
idea of the Industrial Board.

The Industrial
Board, conceived by Ritter in January, 1919, and enthusiastically
adopted and pushed by Secretary Redfield, was a cunning scheme.
On its face, and as promoted to President Wilson and to others
in the Administration and Congress, the Board was merely a device
to secure large price reductions, and thereby to lower
the inflated level of general prices and to stimulate consumer
demand. It was therefore seemingly unrelated to the previous cartelizing
drive and hence won the approval of the President, who established
the new Board in mid-February. At Ritter’s urging, George Peek
was named chairman of the IB; other members included Ritter himself;
George R. James, head of a major Memphis dry-goods concern and
former chief of the Cotton and Cotton Linters section of the WIB;
Lewis B. Reed, vice-president of the U.S. Silica Co. and another
former assistant to Peek; steel castings manufacturer Samuel P.
Bush, former head of the WIB’s Facilities Division; Atlanta steel-fabricating
manufacturer Thomas Glenn, also a veteran of the WIB; and two
“outsiders,” one representing the Labor Department and the other
the Railroad Administration.

No sooner
did the IB get under way than it pursued its real, but previously
camouflaged, purpose: not to reduce, but rather to stabilize prices
at existing high levels. Moreover, the method of stabilization
would be the longed-for but previously rejected path of ratifying
industrial price agreements arrived at in collaboration with the
Board. Deciding on this cartelizing policy in early March, the
IB moved toward the first application in a conference with, unsurprisingly,
the steel industry on March 19–20, 1919. Opening the conference,
Chairman George Peek grandly declared that the event might prove
“epoch-making,” especially in establishing “real genuine cooperation
between Government, industry, and labor, so that we may eliminate
the possibility of the destructive forces…”[71] The steel men were of course delighted,
hailing the “great Chance…
to come into close contact with the Government itself…”[72] The IB told the steel industry that any agreement
to sustain prices agreed upon by the conference would be immune
from the antitrust laws. Not only was the price list offered by
the IB to the steel men still very high even if moderately lower
than existing prices; but Peek agreed to announce to the public
that steel prices would not be lowered further for the remainder
of the year. Peek advised the steel men that his statement would
be their biggest asset; for “I don’t know what I wouldn’t have
given in times past if in my own business I could say that the
government of the United States says this is as low a price as
you could get.”[73]

The IB-steel
agreement lowered steel prices by a modest ten to fourteen percent.
The small, high-cost steel producers were disgruntled, but the
big steel firms welcomed the agreement as a coordinated, orderly
reduction of inflated prices, and especially welcomed the Board’s
guarantee of the fixed price for the remainder of the year.

The elated
IB proceeded with similar conferences for the coal and building
materials industries, but two dark clouds promptly appeared: the
refusal of the government’s own Railroad Administration to pay
the fixed, agreed-upon, price for steel rails and for coal; and
the concern of the Justice Department for the evident violation
of the antitrust laws. The railroad men running the RA particularly
balked at the reduced but still high price that they were going
to be forced to pay for steel rails – at a rate that they
declared was at least two dollars per ton above the free-market
price. Walker D. Hines, head of the RA, denounced the TB as a
price-fixing agency, dominated by steel and other industries,
and he called for the abolition of the Industrial Board. This
call was seconded by the powerful Secretary of the Treasury Carter
Glass. The Attorney General concurred that the IB’s policy was
illegal price-fixing, and in violation of the antitrust laws.
Finally, President Wilson dissolved the Industrial Board in early
May, 1919; wartime industrial planning had at last been dissolved,
its formal cartelization to reappear a decade and a half later.

Yet remnants
of wartime collectivism still remained. The high wartime minimum
wheat price of two dollars and twenty-six cents a bushel was carried
over to the 1919 crop, continuing until June, 1920. But the most
important carry-over of war collectivism was the Railroad Administration:
the government’s operation of the nation’s railroads. When William
Gibbs McAdoo resigned as head of the RA at the end of the war,
he was succeeded by the previous de facto operating head,
railroad executive Walker D. Hines. There was no call for immediate
return to private operation, because the railroad industry generally
agreed upon drastic regulation to curb or eliminate “wasteful”
railroad competition and coordinate the industry, to fix prices
to insure a “fair profit,” and to outlaw strikes through compulsory
arbitration. This was the overall thrust of railroad sentiment.
Furthermore, being in effective control of the RA, the roads were
in no hurry to return to private operation and jurisdiction by
the less reliable ICC. Although McAdoo’s plan to postpone by five
years the given 1920 date for return to private operation gained
little support, Congress proceeded to use its time during 1919
to tighten the monopolization of the railroads.

In the name
of “scientific management,” Senator Albert Cummins (R., Iowa)
proceeded to grant the railroads’ fondest dreams. Cummins’ bill,
warmly approved by Hines and railroad executive Daniel Willard,
ordered the consolidation of numerous railroads, and would set
the railroad rates according to a “fair,” fixed return on capital
investment. Strikes would be outlawed, and all labor disputes
settled by compulsory arbitration. For their part, the Association
of Railroad Executives submitted a legislative plan similar to
the Cummins Bill. Also similar to the Cummins Bill was the proposal
of the National Association of Owners of Railroad Securities,
a group composed largely of savings banks and insurance companies.
In contrast to these plans, the Citizens National Railroad League,
consisting of individual railroad investors, proposed coerced
consolidation into one national railroad corporation, and the
guaranteeing of minimum earnings to this new road.

All of these
plans were designed to tip the prewar balance sharply in favor
of the railroads and against the shippers, and, as a result, the
Cummins Bill, in passing the Senate, ran into trouble in the House.
The trouble was fomented by the shippers, who demanded a return
to the status quo ante when the shipper-dominated ICC was in charge.
Furthermore, for their part the wartime experience had embittered
the shippers, who, along with the ICC itself, demanded a return
to the higher quality service provided by railroad competition
rather than the increased monopolization provided by the various
railroad bills. Unsurprisingly, however, one of the leading nonrailroad
business groups favoring the Cummins Bill was the Railway Business
Association, a group of manufacturers and distributors of railroad
supplies and equipment. The House of Representatives, in its turn,
passed the Esch Bill, which essentially reestablished the prewar
rule of the ICC.

President
Wilson had put pressure on Congress to make a decision by threatening
the return of the railroads to private operation by the given
date of January 1, 1920, but, under pressure of the railroads
who were anxious to push the Cummins Bill, Wilson extended the
deadline to March 1. Finally, the joint conference committee of
Congress reported out the Transportation Act of 1920, a compromise
that was essentially the Esch Bill returning the railroads to
the prewar ICC, but adding the Cummins provisions for a two-year
guarantee to the railroads to set rates providing a “fair return”
of five and a half percent on investment. Furthermore, on the
agreement of both shippers and the roads, the power to set minimum
railroad rates was now granted to the ICC. This agreement was
the product of railroads eager to set a floor under freight rates,
and shippers anxious to protect budding canal transportation against
railroad competition. Furthermore, although railway union objections
blocked the provision for the outlawing of strikes, a Railroad
Labor Board was established to try to settle labor disputes.[74]

With
the return of the railroads to private operation in March, 1920,
war collectivism finally and at long last seemed to pass from
the American scene. But pass it never really did; for the inspiration
and the model that it furnished for a corporate state in America
continued to guide Herbert Hoover and other leaders in the 1920s,
and was to return full-blown in the New Deal, and in the World
War II economy. In fact, it supplied the broad outlines for the
Corporate Monopoly State that the New Deal was to establish, seemingly
permanently, in the United States of America.

Notes

[1] From A New History of Leviathan, Ronald Radosh
and Murray N. Rothbard, eds., New York: E.P. Dutton & Co.,
1972, pp. 66–110)

[2] On the attitudes of the mercantilists toward labor, see
Edgar S. Furniss, The
Position of the Laborer in a System of Nationalism (New
York: Kelley & Millman, 1957). Thus, Furniss cites the English
mercantilist William Petyt, who spoke of labor as a “capital
material… raw and undigested… committed into the hands of
supreme authority, in whose prudence and disposition it is to
improve, manage, and fashion it to more or less advantage.”
Furniss adds that “it is characteristic of these writers that
they should be so readily disposed to trust in the wisdom of
the civil power to ‘improve, manage and fashion’ the economic
raw material of the nation.” p.41.

[3] On the role of the House of Morgan, and other economic
ties with the Allies in leading to the American entry into the
war, see Charles Callan Tansill, America
Goes to War (Boston: Little,
Brown & Co., 1938), pp. 32–134.

[4] Quoted in Paul A. C. Koistinen, “The ‘Industrial-Military
Complex’ in Historical Perspective: World War I,” Business
History Review (Winter, 1967), p. 381.

[5] The leading historian of World War I mobilization of
industry, himself a leading participant and director of the
Council of National Defense, writes with scorn that the scattered
exceptions to the chorus of business approval “revealed a considerable
lack… of that unity of will to serve the Nation that was essential
to the fusing of the fagots of individualism into the unbreakable
bundle of national unity.” Grosvenor B. Clarkson, Industrial
America
in the World War (Boston: Houghton Muffin Co., 1923),
p. 13. Clarkson’s book, incidentally, was subsidized by Bernard
Baruch, the head of industrial war collectivism; the manuscript
was checked carefully by one of Baruch’s top aides. Clarkson,
a public relations man and advertising executive, had begun
his effort by directing publicity for Coffin’s industrial preparedness
campaign in 1916. See Robert D. Cuff, “Bernard Baruch: Symbol
and Myth in Industrial Mobilization,” Business History Review
(Summer, 1969), p. 116.

[6] Clarkson, op. cit., p. 21

[7] Ibid., p. 22

[8] Koistinen, op. cit., p. 385

[9] Originating the idea of the CND was Dr. Hollis Godfrey,
president of the Drexel Institute, an industrial training and
management education organization. Also influential in establishing
the CND was the joint military-civilian Kerner Board, headed
by Colonel Francis J. Kerner, and including as its civilian
members: Benedict Crowell, chairman of Crowell & Little
Construction Co. of Cleveland and later Assistant Secretary
of War; and R. Goodwyn Rhett, president of the People’s Bank
of Charleston, and president as well of the Chamber of Commerce
of the United States. Ibid., pp. 382, 384.

[10] As one of many examples, the CND’s “Cooperative Committee
on Copper” consisted of: the president of Anaconda Copper, the
president of Calumet and Hecla Mining, the vice-president of
Phelps Dodge, the vice-president of Kennecott Mines, the president
of Utah Copper, the president of United Verde Copper, and Murray
M. Guggenheim of the powerful Guggenheim family interests. And
the American Iron and Steel Institute furnished the representatives
of that industry. Clarkson, op. cit., pp. 496–497; Koistinen,
op. cit., p. 386.

[11] Clarkson, p. 28.

[12] Scott and Willard had successively been Chairman, which
post was then offered to Homer Ferguson, president of the Newport
News Shipbuilding Co. and later head of the United States Chamber
of Commerce.

[13] Clarkson, op. cit., p. 63

[14] Ibid., pp. 154, 159.

[15] Ibid., p. 215.

[16] Ibid., p. 230.

[17] Margaret L. Coit, Mr.
Baruch (Boston: Houghton Muffin Co., 1957), p. 219.

[18] Clarkson, op. cit., p. 312

[19] Ibid., p. 303.

[20] Ibid., pp. 300–301.

[21] Ibid., p. 309. On the War Industries Board,
the commodity sections, and on big-business sentiment paving
the path for the coordinated industry-government system, see
James Weinstein, The
Corporate Ideal in the Liberal State, 1900–1918
(Boston: Beacon Press, 1969), p. 223 and passim.

[22] In The Nation’s Business (August, 1918), pp.
9–10. Quoted in Koistinen, op cit., pp. 392–393.

[23] Clarkson, op. cit., p. 313.

[24] See George P. Adams, Jr., Wartime
Price Control (Washington, D.C.: American Council on
Public Affairs, 1942), pp. 57, 63–64. As an example, the
government fixed the price of copper f.o.b. New York at 23
cents per pound. The Utah Copper Co., which produced over 8
percent of the total copper output, had estimated costs of 11.8
cents per pound. In this way, Utah Copper was guaranteed nearly
100 percent profit on costs. Ibid., p. 64n.

[25] Clarkson, op. cit

[26] Adams, op. cit., pp. 57–58.

[27] Weinstein, op. cit., pp. 224–225.

[28] Melvin I. Urofsky, Big
Steel and the Wilson
Administration (Columbus, Ohio: Ohio State University
Press, 1969), pp. 152–153

[29] Urofsky, op. cit., pp. 153–157. In his important
study of business-government relations in the War Industries
Board, Professor Robert Cuff has concluded that federal regulation
of industry was shaped by big-business leaders, and that relations
between government and big business were smoothest in those
industries, such as steel, whose industrial leaders had already
committed themselves to seeking government-sponsored cartelization.
Robert D. Cuff, “Business, Government, and the War Industries
Board” (Doctoral dissertation in history, Princeton University,
1966).

[30] Urofsky, op. cit., p. 154.

[31] In Iron Age (September 27, 1917). Quoted in
Urofsky, pp. 216–217

[32] Urofsky, pp. 203–206. Also see Robert D. Cuff and Melvin
I. Urofsky, “The Steel Industry and Price-Fixing During World
War I,” Business History Review (Autumn, 1970), pp. 291–306.

[33] Urofsky, op. cit., pp. 228–233.

[34] Paul Willard Garrett, Government
Control Over Prices (Washington, D.C.: Government Printing
Office, 1920), p.42.

[35] Garrett, op. cit., p. 56

[36] Ibid., p. 66.

[37] Ibid., p. 73.

[38] See Robert F. Smith, The United States and
Cuba (New York: Bookman Associates, 1960), pp. 20–21.

[39] Smith, op. cit., p. 191.

[40] Garrett, op. cit., pp. 78–85.

[41] Ibid. pp. 55–56.

[42] See K. Austin Kerr, American
Railroad Politics, 1914–1920 (Pittsburgh: University
of Pittsburgh Press, 1968), pp. 44 ff.

[43] Kerr, op. cit., p.48.

[44] McAdoo’s “cabinet,” which assisted him in running the
railroads, included Walker D. Hines and Edward Chambers, respectively
chairman of the board and vice-president of the Santa Fe R.R.;
Henry Walters, chairman of the board of the Atlantic Coast R.R.;
Hale Holden, of the Burlington R.R.; A.H. Smith, president of
the New York Central R.R.; John Barton Payne, formerly chief
counsel of the Chicago Great Western R.R.; and Comptroller of
the Currency John Skelton Williams, formerly chairman of the
board of the Seaboard R.R. Hines was to be McAdoo’s principal
assistant; Payne became head of traffic. The Division of Operation
was headed by Carl R. Gray, president of the Western Maryland
R.R. One Unionist, W.S. Carter, head of the Brotherhood of Firemen
and Engineers, was brought in to head the Division of Labor.

[45] Kerr, op. cit., pp. 14–22.

[46] Ibid., p. 80.

[47] Bernard M. Baruch, American
Industry in the War (New York: Prentice-Hall, 1941),
pp. 105–106.

[48] Coit, op. cit., pp. 202–203, 218.

[49] Ibid., pp. 440–443.

[50] See William E. Leuchtenburg, “The New Deal and the
Analogue of War,” in John Braeman et al., eds., Change
and Continuity in Twentieth-Century America
(New York: Harper & Row, 1967), pp. 122–123.

[51] See Herbert Hoover, Memoirs
(New York: Macmillan, 1952), Vol. II, pp. 27, 66–70; on
Hoover and the export industries, Joseph Brandes, Herbert
Hoover and Economic Diplomacy (Pittsburgh: University
of Pittsburgh Press, 1962); on the oil industry, Gerald D. Nash,
United
States Oil Policy, 1890–1964 (Pittsburgh: University
of Pittsburgh Press, 1968); on coal, Ellis W. Hawley, “Secretary
Hoover and the Bituminous Coal Problem, 1921–1928,” Business
History Review (Autumn, 1968), pp. 247–270; on cotton
textiles, Louis Galambos, Competition
and Cooperation (Baltimore: Johns Hopkins Press, 1966).

[52] Clarkson, op. cit., pp. 484–485.

[53] Leuchtenburg, op. cit., p. 84n.

[54] Ibid., p. 89.

[55] Ibid., pp. 90–92. It was very similar considerations
that also brought many liberal intellectuals, especially including
those of the NewRepublic, into at least a temporary admiration
for Italian Fascism. Thus, see John P. Diggins, “Flirtation
with Fascism: American Pragmatic Liberals and Mussolini’s Italy,”
American Historical Review (January, 1966), pp. 487–506.

[56] Leuchtenburg, op. cit., pp. 109–110.

[57] Ibid., pp. 111–112.

[58] Ibid., p. 117. Roosevelt names union leader
Robert Fechner, formerly engaged in war labor work, as director
of the CCC to provide a civilian camouflage for the program.
p. 115n.

[59] Robert F. Himmelburg, “The War Industries Board and
the Antitrust Question in November 1918,” Journal of American
History (June, 1965), p. 65.

[60] Ibid.

[61] Ibid., pp. 63–64; Urofsky, op. cit.,
pp. 298–299.

[62] Quoted in Himmelburg, p. 64.

[63] Favoring continuing price controls were such industries
as the chemical, iron and steel, lumber, and finished products
generally. Opposing industries included abrasives, automotive
products, and newspapers. Ibid., pp. 62, 65, 67.

[64] Urofsky, op. cit., pp. 306–307.

[65] Ibid., pp. 294–302.

[66] Himmelburg, op. cit., pp. 70–71.

[67] Ibid., p. 72; Weinstein, op. cit., pp.
231–232.

[68] Himmelburg, op. cit., p. 72.

[69] Robert D. Cuff, “A ‘Dollar-a-Year Man’ in Government:
George N. Peek and the War Industries Board,” Business History
Review (Winter, 1967), p. 417.

[70] On the Industrial Board, see Robert F. Himmelburg,
“Business, Antitrust Policy, and the Industrial Board of the
Department of Commerce, 1919,” Business History Review
(Spring, 1968), pp. 1–23.

[71] Himmelburg, “Industrial Board,” p. 13.

[72] Professor Urofsky surmised from the orderly and very
moderate price reductions in steel during the first months of
1919 that Robert S. Brookings had quietly given the steel industry
the green light to proceed with its own price-fixing. Urofsky,
op. cit., pp. 307–308.

[73] Himmelburg, “Industrial Board,” p. 14n.

[74] On the maneuvering leading to the Transportation Act
of 1920, see Kerr, op. cit., pp. 128–227.

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

And
what is "desecrate" supposed to mean? What specific
acts are to be outlawed? Burning seems to be the big problem,
although the quantity of flag-burning in the United States seems
to be somewhere close to zero. In fact, most flag burning occurs
when patriotic groups such as the American Legion and the Veterans
of Foreign Wars solemnly burn their worn-out American flags
in the prescribed manner.

But
if burning the flag is to be banned, are we to clap numerous
American Legion or VFW people in the hoosegow? Oh, you say that
intent is the crucial point, and that you want to outlaw hippie
types who burn U.S. flags with a sneer and a curse. But how
are the police supposed to figure out intent, and make sure
that the majesty of the law falls only upon hippie-sneerers,
and spares reverent, saluting Legionnaires?

But
if the supporters of the proposed flag amendment are mired in
absurdity, the arguments of the opponents are in almost as bad
a shape. Civil libertarians have long placed their greatest
stress on a sharp difference between "speech" and
"action," and the claim that the First Amendment covers
only speech and not actions (except, of course, for the definite
action of printing and distribution of a pamphlet or book, which
would come under the free press clause of the First Amendment).

But,
as the flag amendment advocates point out, what kind of "speech"
is burning a flag? Isn’t that most emphatically an action –
and one that cannot come under the free press rubric? The fallback
position of the civil libertarians, as per the majority decisions
in the flag cases by Mr. Justice Brennan, is that flag burning
is "symbolic" speech, and therefore, although an action,
comes under the free speech protection.

But
"symbolic speech" is just about as inane as the "desecration"
doctrine of the flag-law advocates. The speech/action distinction
now disappears altogether, and every action can be excused and
protected on the ground that it constitutes "symbolic speech."

Suppose,
for example, that I were a white racist, and decided to get
me a gun and shoot a few blacks. But then I could say, that’s
OK because that’s only "symbolic speech," and political
symbolic speech at that, because I’m trying to make a political
argument against our current pro-black legislation.

Anyone
who considers such an argument far-fetched should ponder a recent
decision by a dotty leftist New York judge to the effect that
it is "unconstitutional" for the New York subway authorities
to toss beggars out of the subway stations. The jurist’s argument
held that begging is "symbolic speech," and expressive
argument for more help to the poor. Fortunately, this argument
was overturned on appeal, but still "symbolic arguers"
are everywhere in New York, clogging streets, airports, and
bus terminals.

There
is no way, then, that flag laws can be declared unconstitutional
as violations of the First Amendment. The problem with flag
laws has nothing to do with free speech, and civil libertarians
have gotten caught in their own trap because they do in fact
try to separate speech and action, a separation that is artificial
and cannot long be maintained.

As
in the case of all dilemmas caused by the free speech doctrine,
the entire problem can be resolved by focusing, not on a high-sounding
but untenable right to freedom of speech, but on the natural
and integral right to private property and its freedom of use.
As even famed First Amendment absolutist Justice Hugo Black
pointed out, no one has the free-speech right to burst into
your home and harangue you about politics.

"The
right to freedom of speech" really means the right to hire
a hall and expound your views; the "right to freedom of
press" (where, as we have seen, speech and action clearly
cannot be separated) means the right to print a pamphlet and
sell it. In short, free speech or free press rights are a subset,
albeit an important one, of the rights of private property:
the right to hire, to own, to sell.

Keeping
our eye on property rights, the entire flag question is resolved
easily and instantly. Everyone has the right to buy or weave
and therefore own a piece of cloth in the shape and design of
an American flag (or in any other design) and to do with it
what he will: fly it, burn it, defile it, bury it, put it in
the closet, wear it, etc. Flag laws are unjustifiable laws in
violation of the rights of private property. (Constitutionally,
there are many clauses in the Constitution from which private
property rights can be derived.)

On
the other hand, no one has the right to come up and burn your
flag, or someone else’s. That should be illegal, not because
a flag is being burned, but because the arsonist is burning
your property without your permission. He is violating your
property rights.

Note
the way in which the focus on property rights solves all recondite
issues. Perhaps conservatives, who proclaim themselves defenders
of property rights, will be moved to reconsider their support
of its invasion. On the other hand, perhaps liberals, scorners
of property rights, might be moved to consider that cleaving
to them may be the only way, in the long run, to insure freedom
of speech and press.

Murray
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The
Rothbard-Rockwell Report.

Murray
Rothbard Archives

This unsigned editorial, written by Murray N. Rothbard, appeared in the April 15, 1969, issue of The Libertarian (soon to become The Libertarian Forum).

April 15, that dread Income Tax day, is around again, and gives us a chance to ruminate on the nature of taxes and of the government itself.

The first great lesson to learn about taxation is that taxation is simply robbery. No more and no less. For what is “robbery”? Robbery is the taking of a man’s property by the use of violence or the threat thereof, and therefore without the victim’s consent. And yet what else is taxation?

Those who claim that taxation is, in some mystical sense, really “voluntary” should then have no qualms about getting rid of that vital feature of the law which says that failure to pay one’s taxes is criminal and subject to appropriate penalty. But does anyone seriously believe that if the payment of taxation were really made voluntary, say in the sense of contributing to the American Cancer Society, that any appreciable revenue would find itself into the coffers of government? Then why don’t we try it as an experiment for a few years, or a few decades, and find out?

But if taxation is robbery, then it follows as the night the day that those people who engage in, and live off, robbery are a gang of thieves. Hence the government is a group of thieves, and deserves, morally, aesthetically, and philosophically, to be treated exactly as a group of less socially respectable ruffians would be treated.

This issue of The Libertarian is dedicated to that growing legion of Americans who are engaging in various forms of that one weapon, that one act of the public which our rulers fear the most: tax rebellion, the cutting off the funds by which the host public is sapped to maintain the parasitic ruling classes. Here is a burning issue which could appeal to everyone, young and old, poor and wealthy, “working class” and middle class, regardless of race, color, or creed. Here is an issue which everyone understands, only too well. Taxation.

This article is featured in chapter 2 of Making Economic Sense

Our country is beset by a large number of economic myths that distort public thinking on important problems and lead us to accept unsound and dangerous government policies. Here are ten of the most dangerous of these myths and an analysis of what is wrong with them.

Myth 1: Deficits are the cause of inflation; deficits have nothing to do with inflation.

In recent decades we always have had federal deficits. The invariable response of the party out of power, whichever it may be, is to denounce those deficits as being the cause of perpetual inflation. And the invariable response of whatever party is in power has been to claim that deficits have nothing to do with inflation. Both opposing statements are myths.

Deficits mean that the federal government is spending more than it is taking in in taxes. Those deficits can be financed in two ways. If they are financed by selling Treasury bonds to the public, then the deficits are not inflationary. No new money is created; people and institutions simply draw down their bank deposits to pay for the bonds, and the Treasury spends that money. Money has simply been transferred from the public to the Treasury, and then the money is spent on other members of the public.

On the other hand, the deficit may be financed by selling bonds to the banking system. If that occurs, the banks create new money by creating new bank deposits and using them to buy the bonds. The new money, in the form of bank deposits, is then spent by the Treasury, and thereby enters permanently into the spending stream of the economy, raising prices and causing inflation. By a complex process, the Federal Reserve enables the banks to create the new money by generating bank reserves of one-tenth that amount. Thus, if banks are to buy $100 billion of new bonds to finance the deficit, the Fed buys approximately $10 billion of old Treasury bonds. This purchase increases bank reserves by $10 billion, allowing the banks to pyramid the creation of new bank deposits or money by ten times that amount. In short, the government and the banking system it controls in effect “print” new money to pay for the federal deficit.

Thus, deficits are inflationary to the extent that they are financed by the banking system; they are not inflationary to the extent they are underwritten by the public.

Some policymakers point to the 1982–83 period, when deficits were accelerating and inflation was abating, as a statistical “proof” that deficits and inflation have no relation to each other. This is no proof at all. General price changes are determined by two factors: the supply of, and the demand for, money. During 1982–83 the Fed created new money at a very high rate, approximately at 15% per annum. Much of this went to finance the expanding deficit. But on the other hand, the severe depression of those two years increased the demand for money (i.e., lowered the desire to spend money on goods) in response to the severe business losses. This temporarily compensating increase in the demand for money does not make deficits any less inflationary. In fact, as recovery proceeds, spending picked up and the demand for money fell, and the spending of the new money accelerated inflation.

Myth 2: Deficits do not have a crowding-out effect on private investment.

In recent years there has been an understandable worry over the low rate of saving and investment in the United States. One worry is that the enormous federal deficits will divert savings to unproductive government spending and thereby crowd out productive investment, generating ever-greater long-run problems in advancing or even maintaining the living standards of the public.

Some policymakers once again attempted to rebut this charge by statistics. In 1982–83, they declare deficits were high and increasing while interest rates fell, thereby indicating that deficits have no crowding-out effect.

This argument once again shows the fallacy of trying to refute logic with statistics. Interest rates fell because of the drop of business borrowing in a recession. “Real” interest rates (interest rates minus the inflation rate) stayed unprecedentedly high, however – partly because most of us expect renewed inflation, partly because of the crowding-out effect. In any case, statistics cannot refute logic; and logic tells us that if savings go into government bonds, there will necessarily be less savings available for productive investment than there would have been, and interest rates will be higher than they would have been without the deficits. If deficits are financed by the public, then this diversion of savings into government projects is direct and palpable. If the deficits are financed by bank inflation, then the diversion is indirect, the crowding-out now taking place by the new money “printed” by the government competing for resources with old money saved by the public.

Milton Friedman tries to rebut the crowding-out effect of deficits by claiming that all government spending, not just deficits, equally crowds out private savings and investment. It is true that money siphoned off by taxes could also have gone into private savings and investment. But deficits have a far greater crowding-out effect than overall spending, since deficits financed by the public obviously tap savings and savings alone, whereas taxes reduce the public’s consumption as well as savings.

Thus, deficits, whichever way you look at them, cause grave economic problems. If they are financed by the banking system, they are inflationary. But even if they are financed by the public, they will still cause severe crowding-out effects, diverting much-needed savings from productive private investment to wasteful government projects. And, furthermore, the greater the deficits the greater the permanent income tax burden on the American people to pay for the mounting interest payments, a problem aggravated by the high interest rates brought about by inflationary deficits.

Myth 3: Tax increases are a cure for deficits.

Those people who are properly worried about the deficit unfortunately offer an unacceptable solution: increasing taxes. Curing deficits by raising taxes is equivalent to curing someone’s bronchitis by shooting him. The “cure” is far worse than the disease.

One reason, as many critics have pointed out, is that raising taxes simply gives the government more money, and so the politicians and bureaucrats are likely to react by raising expenditures still further. Parkinson said it all in his famous “Law”: “Expenditures rise to meet income.” If the government is willing to have, say, a 20% deficit, it will handle high revenues by raising spending still more to maintain the same proportion of deficit.

But even apart from this shrewd judgment in political psychology, why should anyone believe that a tax is better than a higher price? It is true that inflation is a form of taxation, in which the government and other early receivers of new money are able to expropriate the members of the public whose income rises later in the process of inflation. But, at least with inflation, people are still reaping some of the benefits of exchange. If bread rises to $10 a loaf, this is unfortunate, but at least you can still eat the bread. But if taxes go up, your money is expropriated for the benefit of politicians and bureaucrats, and you are left with no service or benefit. The only result is that the producers’ money is confiscated for the benefit of a bureaucracy that adds insult to injury by using part of that confiscated money to push the public around.

No, the only sound cure for deficits is a simple but virtually unmentioned one: cut the federal budget. How and where? Anywhere and everywhere.

Myth 4: Every time the Fed tightens the money supply, interest rates rise (or fall); every time the Fed expands the money supply, interest rates rise (or fall).

The financial press now knows enough economics to watch weekly money supply figures like hawks; but they inevitably interpret these figures in a chaotic fashion. If the money supply rises, this is interpreted as lowering interest rates and inflationary; it is also interpreted, often in the very same article, as raising interest rates. And vice versa. If the Fed tightens the growth of money, it is interpreted as both raising interest rates and lowering them. Sometimes it seems that all Fed actions, no matter how contradictory, must result in raising interest rates. Clearly something is very wrong here.

The problem is that, as in the case of price levels, there are several causal factors operating on interest rates and in different directions. If the Fed expands the money supply, it does so by generating more bank reserves and thereby expanding the supply of bank credit and bank deposits. The expansion of credit necessarily means an increased supply in the credit market and hence a lowering of the price of credit, or the rate of interest. On the other hand, if the Fed restricts the supply of credit and the growth of the money supply, this means that the supply in the credit market declines, and this should mean a rise in interest rates.

And this is precisely what happens in the first decade or two of chronic inflation. Fed expansion lowers interest rates; Fed tightening raises them. But after this period, the public and the market begin to catch on to what is happening. They begin to realize that inflation is chronic because of the systemic expansion of the money supply. When they realize this fact of life, they will also realize that inflation wipes out the creditor for the benefit of the debtor. Thus, if someone grants a loan at five percent for one year, and there is seven percent inflation for that year, the creditor loses, not gains. He loses two percent, since he gets paid back in dollars that are now worth seven percent less in purchasing power. Correspondingly, the debtor gains by inflation. As creditors begin to catch on, they place an inflation premium on the interest rate, and debtors will be willing to pay it. Hence, in the long run anything which fuels the expectations of inflation will raise inflation premiums on interest rates; and anything which dampens those expectations will lower those premiums. Therefore, a Fed tightening will now tend to dampen inflationary expectations and lower interest rates; a Fed expansion will whip up those expectations again and raise them. There are two, opposite causal chains at work. And so Fed expansion or contraction can either raise or lower interest rates, depending on which causal chain is stronger.

Which will be stronger? There is no way to know for sure. In the early decades of inflation, there is no inflation premium; in the later decades, such as we are now in, there is. The relative strength and reaction times depend on the subjective expectations of the public, and these cannot be forecast with certainty. And this is one reason why economic forecasts can never be made with certainty.

Myth 5: Economists, using charts or high-speed computer models, can accurately forecast the future.

The problem of forecasting interest rates illustrates the pitfalls of forecasting in general. People are contrary cusses whose behavior, thank goodness, cannot be forecast precisely in advance. Their values, ideas, expectations, and knowledge change all the time, and change in an unpredictable manner. What economist, for example, could have forecast (or did forecast) the Cabbage Patch Kid craze of the Christmas season of 1983? Every economic quantity, every price, purchase, or income figure is the embodiment of thousands, even millions, of unpredictable choices by individuals.

Many studies, formal and informal, have been made of the record of forecasting by economists, and it has been consistently abysmal. Forecasters often complain that they can do well enough as long as current trends continue; what they have difficulty in doing is catching changes in trend. But of course there is no trick in extrapolating current trends into the near future. You don’t need sophisticated computer models for that; you can do it better and far more cheaply by using a ruler. The real trick is precisely to forecast when and how trends will change, and forecasters have been notoriously bad at that. No economist forecast the depth of the 1981–82 depression, and none predicted the strength of the 1983 boom.

The next time you are swayed by the jargon or seeming expertise of the economic forecaster, ask yourself this question: If he can really predict the future so well, why is he wasting his time putting out newsletters or doing consulting when he himself could be making trillions of dollars in the stock and commodity markets?

Myth 6: There is a tradeoff between unemployment and inflation.

Every time someone calls for the government to abandon its inflationary policies, establishment economists and politicians warn that the result can only be severe unemployment. We are trapped, therefore, into playing off inflation against high unemployment, and become persuaded that we must therefore accept some of both.

This doctrine is the fallback position for Keynesians. Originally, the Keynesians promised us that by manipulating and fine-tuning deficits and government spending, they could and would bring us permanent prosperity and full employment without inflation. Then, when inflation became chronic and ever greater, they changed their tune to warn of the alleged tradeoff, so as to weaken any possible pressure upon the government to stop its inflationary creation of new money.

The tradeoff doctrine is based on the alleged “Phillips curve,” a curve invented many years ago by the British economist A.W. Phillips. Phillips correlated wage rate increases with unemployment, and claimed that the two move inversely: the higher the increases in wage rates, the lower the unemployment. On its face, this is a peculiar doctrine, since it flies in the face of logical, commonsense theory. Theory tells us that the higher the wage rates, the greater the unemployment, and vice versa. If everyone went to their employer tomorrow and insisted on double or triple the wage rate, many of us would be promptly out of a job. Yet this bizarre finding was accepted as gospel by the Keynesian economic establishment.

By now, it should be clear that this statistical finding violates the facts as well as logical theory. For during the 1950s, inflation was only about one to two percent per year, and unemployment hovered around three or four percent, whereas later unemployment ranged between eight and 11%, and inflation between five and 13 %. In the last two or three decades, in short,both inflation and unemployment have increased sharply and severely. If anything, we have had a reverse Phillips curve. There has been anything but an inflation- unemployment tradeoff.

But ideologues seldom give way to the facts, even as they continually claim to “test” their theories by Facts. To save the concept, they have simply concluded that the Phillips curve still remains as an inflation-unemployment tradeoff, except that the curve has unaccountably “shifted” to a new set of alleged tradeoffs. On this sort of mind-set, of course, no one could ever refute any theory.

In fact, current inflation, even if it reduces unemployment in the short-run by inducing prices to spurt ahead of wage rates (thereby reducing real wage rates), will only create more unemployment in the long run. Eventually, wage rates catch up with inflation, and inflation brings recession and unemployment inevitably in its wake. After more than two decades of inflation, we are now living in that “long run.”

Myth 7: Deflation – falling prices – is unthinkable, and would cause a catastrophic depression.

The public memory is short. We forget that, from the beginning of the Industrial Revolution in the mid-18th century until the beginning of World War II, prices generally went down, year after year. That’s because continually increasing productivity and output of goods generated by free markets caused prices to fall. There was no depression, however, because costs fell along with selling prices. Usually, wage rates remained constant while the cost of living fell, so that “real” wages, or everyone’s standard of living, rose steadily.

Virtually the only time when prices rose over those two centuries were periods of war (War of 1812, Civil War, World War I), when the warring governments inflated the money supply so heavily to pay for the war as to more than offset continuing gains in productivity.

We can see how free-market capitalism, unburdened by governmental or central bank inflation, works if we look at what has happened in the last few years to the prices of computers. Even a simple computer used to be enormous, costing millions of dollars. Now, in a remarkable surge of productivity brought about by the microchip revolution, computers are falling in price even as I write. Computer firms are successful despite the falling prices because their costs have been falling, and productivity rising. In fact, these falling costs and prices have enabled them to tap a mass-market characteristic of the dynamic growth of free-market capitalism. “Deflation” has brought no disaster to this industry.

The same is true of other high-growth industries, such a electronic calculators, plastics, TV sets, and VCRs. Deflation, far from bringing catastrophe, is the hallmark of sound and dynamic economic growth.

Myth 8: The best tax is a “flat” income tax, proportionate to income across the board, with no exemptions or deductions.

It is usually added by flat-tax proponents, that eliminating such exemptions would enable the federal government to cut the current tax rate substantially.

But this view assumes, for one thing, that present deductions from the income tax are immoral subsidies or “loopholes” that should be closed for the benefit of all. A deduction or exemption is only a “loophole” if you assume that the government owns 100% of everyone’s income and that allowing some of that income to remain untaxed constitutes an irritating “loophole.” Allowing someone to keep some of his own income is neither a loophole nor a subsidy. Lowering the overall tax by abolishing deductions for medical care, for interest payments, or for uninsured losses, is simply lowering the taxes of one set of people (those that have little interest to pay, or medical expenses, or uninsured losses) at the expense of raising them for those who have incurred such expenses.

There is furthermore neither any guarantee nor even likelihood that, once the exemptions and deductions are safely out of the way, the government would keep its tax rate at the lower level. Looking at the record of governments, past and present, there is every reason to assume that more of our money would be taken by the government as it raised the tax rate back up (at least) to the old level, with a consequently greater overall drain from the producers to the bureaucracy.

It is supposed that the tax system should be analogous to roughly that of pricing or incomes on the market. But market pricing is not proportional to incomes. It would be a peculiar world, for example, if Rockefeller were forced to pay $1,000 for a loaf of bread – that is, a payment proportionate to his income relative to the average man. That would mean a world in which equality of incomes was enforced in a particularly bizarre and inefficient manner. If a tax were levied like a market price, it would be equal to every “customer,” not proportionate to each customer’s income.

Myth 9: An income tax cut helps everyone; not only the taxpayer but also the government will benefit, since tax revenues will rise when the rate is cut.

This is the so-called “Laffer curve,” set forth by California economist Arthur Laffer. It was advanced as a means of allowing politicians to square the circle; to come out for tax cuts, keeping spending at the current level, and balance the budget all at the same time. In that way, the public would enjoy its tax cut, be happy at the balanced budget, and still receive the same level of subsidies from the government.

It is true that if tax rates are 99%, and they are cut to 95%, tax revenue will go up. But there is no reason to assume such simple connections at any other time. In fact, this relationship works much better for a local excise tax than for a national income tax. A few years ago, the government of the District of Columbia decided to procure some revenue by sharply raising the District’s gasoline tax. But, then, drivers could simply nip over the border to Virginia or Maryland and fill up at a much cheaper price. D.C. gasoline tax revenues fell, and much to the chagrin and confusion of D.C. bureaucrats, they had to repeal the tax.

But this is not likely to happen with the income tax. People are not going to stop working or leave the country because of a relatively small tax hike, or do the reverse because of a tax cut.

There are some other problems with the Laffer curve. The amount of time it is supposed to take for the Laffer effect to work is never specified. But still more important: Laffer assumes that what all of us want is to maximize tax revenue to the government. If – a big if – we are really at the upper half of the Laffer Curve, we should then all want to set tax rates at that “optimum” point. But why? Why should it be the objective of every one of us to maximize government revenue? To push to the maximum, in short, the share of private product that gets siphoned off to the activities of government? I should think we would be more interested in minimizing government revenue by pushing tax rates far, far below whatever the Laffer Optimum might happen to be.

Myth 10: Imports from countries where labor is cheap cause unemployment in the United States.

One of the many problems with this doctrine is that it ignores the question: why are wages low in a foreign country and high in the United States? It starts with these wage rates as ultimate givens, and doesn’t pursue the question why they are what they are. Basically, they are high in the United States because labor productivity is high – because workers here are aided by large amounts of technologically advanced capital equipment. Wage rates are low in many foreign countries because capital equipment is small and technologically primitive. Unaided by much capital, worker productivity is far lower than in the United States. Wage rates in every country are determined by the productivity of the workers in that country. Hence, high wages in the United States are not a standing threat to American prosperity; they are the result of that prosperity.

But what of certain industries in the U.S. that complain loudly and chronically about the “unfair” competition of products from low-wage countries? Here, we must realize that wages in each country are interconnected from one industry and occupation and region to another. All workers compete with each other, and if wages in industry A are far lower than in other industries, workers – spearheaded by young workers starting their careers – would leave or refuse to enter industry A and move to other firms or industries where the wage rate is higher.

Wages in the complaining industries, then, are high because they have been bid high by all industries in the United States. If the steel or textile industries in the United States find it difficult to compete with their counterparts abroad, it is not because foreign firms are paying low wages, but because other American industries have bid up American wage rates to such a high level that steel and textile cannot afford to pay. In short, what’s really happening is that steel, textile, and other such firms are using labor inefficiently as compared to other American industries. Tariffs or import quotas to keep inefficient firms or industries in operation hurt everyone, in every country, who is not in that industry. They injure all American consumers by keeping up prices, keeping down quality and competition, and distorting production. A tariff or an import quota is equivalent to chopping up a railroad or destroying an airline for its point is to make international transportation artificially expensive.

Tariffs and import quotas also injure other, efficient American industries by tying up resources that would otherwise move to more efficient uses. And, in the long run, the tariffs and quotas, like any sort of monopoly privilege conferred by government, are no bonanza even for the firms being protected and subsidized. For, as we have seen in the cases of railroads and airlines, industries enjoying government monopoly (whether through tariffs or regulation) eventually become so inefficient that they lose money anyway, and can only call for more and more bailouts, for a perpetual expanding privileged shelter from free competition.

This article is featured in chapter 62 of Making Economic Sense by Murray Rothbard and originally appeared in the June, 1990 edition of The Free Market

Riots in the streets; protest against a hated government; cops arresting protesters. A familiar story these days. But suddenly we find that the protests are directed, not against a hated Communist tyranny in Eastern Europe, but against Mrs. Thatcher’s regime in Britain, a supposed paragon of liberty and the free market. What’s going on here? Are anti-government demonstrators heroic freedom-fighters in Eastern Europe, but only crazed anarchists and alienated punks in the West?

The anti-government riots in London at the end of March were, it must be noted, anti-tax riots, and surely a movement in opposition to taxation can’t be all bad. But wasn’t the protest movement at bottom an envy-ridden call for soaking the rich, and hostility to the new Thatcher tax a protest against its abstention from egalitarian leveling?

Not really. There is no question that the new Thatcher “community charge” was a bold and fascinating experiment. Local government councils, in many cases havens of the left-wing Labour Party, have been engaging in runaway spending in recent years. As in the case of American local governments, basic local revenue in great Britain has been derived from the property tax (“rates” in Britain) which are levied proportionately on the value of property.

Whereas in the United States, conservative economists tend to hail proportionate taxation (especially on incomes) as ideal and “neutral” to the market, the Thatcherites have apparently understood the fallacy of this position. On the market, people do not pay for goods and services in proportion to their incomes. David Rockefeller does not have to pay $1000 for a loaf of bread for which the rest of us pay $1.50. On the contrary, on the market there is a strong tendency for a good to be priced the same throughout the market; one good, one price. It would be far more neutral to the market, indeed, for everyone to pay, not the same tax in proportion to his income, but the same tax as everyone else, period. Everyone’s tax should therefore be equal. Furthermore, since democracy is based on the concept of one man or woman, one vote, it would seem no more than fitting to have a principle of one man, one tax. Equal voting, equal taxation.

The concept of an equal tax per head is called the “poll tax,” and Mrs. Thatcher decided to bring the local councils to heel by legislating the abolition of the local rates, and their replacement by an equal poll tax per adult, calling it by the euphemism, “community charge.” At least on the local level, then, soaking the rich has been replaced by an equal tax.

But there are several deep flaws in the new tax. In the first place, it is still not neutral to the market, since – a crucial difference – market prices are paid voluntarily by the consumer purchasing the good or service, whereas the tax (or “charge”) is levied coercively on each person, even if the value of the “service” of government to that person is far less than the charge, or is even negative.

Not only that: but a poll tax is a charge levied on a person’s very existence, and the person must often be hunted down at great expense to be forced to pay the tax. Charging a man for his very existence seems to imply that the government owns all of its subjects, body and soul.

The second deep flaw is bound up with the problem of coercion. It is certainly heroic of Mrs. Thatcher to want to scrap the property tax in behalf of an equal tax. But she seems to have missed the major point of the equal tax, one that gives it its unique charm. For the truly great thing about an equal tax is that in order to make it payable, it has to be drastically reduced from the levels before the equality is imposed.

Assume, for example, that our present federal tax was suddenly shifted to become an equal tax for each person. This would mean that the average person, and particularly the low-income person, would suddenly find himself paying enormously more per year in taxes – about $5,000. So that the great charm of equal taxation is that it would necessarily force the government to lower drastically its levels of taxing and spending. Thus, if the U.S. government instituted, say, a universal and equal tax of $10 per year, confining it to the magnificent sum of $2 billion annually, we would all live quite well with the new tax, and no egalitarian would bother about protesting its failure to soak the rich.

But instead of drastically lowering the amount of local taxation, Mrs. Thatcher imposed no such limits, and left the total expenditure and tax levels, as before, to the local councils. These local councils, Conservative as well as Labour, proceeded to raise their tax levels substantially, so that the average British citizen is being forced to pay approximately one-third more in local taxes. No wonder there are riots in the streets! The only puzzle is that the riots aren’t more severe.

In short, the great thing about equal taxation is using it as a club to force an enormous lowering of taxes. To increase tax levels after they become equal is absurd: an open invitation for tax evasion and revolution. In Scotland, where the equal tax had already gone into effect, there are no penalties for non-payment and an estimated one-third of citizens have refused to pay. In England, where payment is enforced, the situation is rougher. In either case, it is no wonder that popularity of the Thatcher regime has fallen to an all-time low. The Thatcher people are now talking about placing caps on local tax rates, but capping is scarcely enough: drastic reductions are a political and economic necessity, if the poll tax is to be retained.

Unfortunately, the local tax case is characteristic of the Thatcher regime. Thatcherism is all too similar to Reaganism: free-market rhetoric masking statist content. While Thatcher has engaged in some privatization, the percentage of government spending and taxation to GNP has increased over the course of her regime, and monetary inflation has now led to price inflation. Basic discontent, then, has risen, and the increase in local tax levels has come as the vital last straw. It seems to me that a minimum criterion for a regime receiving the accolade of “pro-free-market” would require it to cut total spending, cut overall tax rates, and revenues, and put a stop to its own inflationary creation of money. Even by this surely modest yardstick, no British or American administration in decades has come close to qualifying.

This article is featured in chapter 78 of Making Economic Sense by Murray Rothbard and originally appeared in the March, 1991 edition of The Free Market

There has been a veritable revolution in the attitude of the nation’s economists, as well as the public, toward our banking system. Ever since 1933, it was a stern dogma – a virtual article of faith – among economic textbook authors, financial writers, and all establishment economists from Keynesians to Friedmanites, that our commercial banking system was super-safe. Because of the wise establishment of the Federal Deposit Insurance Corporation in 1933, that dread scourge – the bank run – was a thing of the reactionary past. Depositors are now safe because the FDIC “insures,” that is, guarantees, all bank deposits. Those of us who kept warning that the banking system was inherently unsound and even insolvent were considered nuts and crackpots, not in tune with the new dispensation.

But since the collapse of the S&Ls, a catastrophe destined to cost the taxpayers between a half-trillion and a trillion-and-a-half dollars, this Pollyanna attitude has changed. It is true that by liquidating the Federal Savings and Loan Insurance Corporation into the FDIC, the Establishment has fallen back on the FDIC, its last line of defense, but the old assurance is gone. All the pundits and moguls are clearly whistling past the graveyard.

In 1985, however, the bank-run – supposedly consigned to bad memories and old movies on television – was back in force, replete with all the old phenomena: night-long lines waiting for the bank to open, mendacious assurances by the bank’s directors that the bank was safe and everyone should go home, insistence by the public on getting their money out of the bank, and subsequent rapid collapse. As in 1932-33, the governors of the respective states closed down the banks to prevent them from having to pay their sworn debts.

The bank runs began with S&Ls in Ohio and then Maryland that were insured by private insurers. Runs returned again this January among Rhode Island credit unions that were “insured” by private firms. And a few days later, the Bank of New England, after announcing severe losses that rendered it insolvent, experienced massive bank runs up to billions of dollars, during which period Chairman Lawrence K. Fish rushed around to different branches falsely assuring customers that their money was safe. Finally, to save the bank the FDIC took it over and is in the highly expensive process of bailing it out.

A fascinating phenomenon appeared in these modern as well as the older bank runs: when one “unsound” bank was subjected to a fatal run, this had a domino effect on all the other banks in the area, so that they were brought low and annihilated by bank runs. As a befuddled Paul Samuelson, Mr. Establisment Economics, admitted to the Wall Street Journal after this recent bout, “I didn’t think I’d live to see again the day when there are actually bank runs. And when good banks have runs on them because some unlucky and bad banks fail . . . . we’re back in a time warp.”

A time warp indeed: just as the fall of Communism in Eastern Europe has put us back to 1945 or even 1914, banks are once again at risk.

What is the reason for this crisis? We all know that the real estate collapse is bringing down the value of bank assets. But there is no “run” on real estate. Values simply fall, which is hardly the same thing as everyone failing and going insolvent. Even if bank loans are faulty and asset values come down, there is no need on that ground for all banks in a region to fail.

Put more pointedly, why does this domino process affect only banks, and not real estate, publishing, oil, or any other industry that may get into trouble? Why are what Samuelson and other economists call “good” banks so all-fired vulnerable, and then in what sense are they really “good”?

The answer is that the “bad” banks are vulnerable to the familiar charges: they made reckless loans, or they overinvested in Brazilian bonds, or their managers were crooks. In any case, their poor loans put their assets into shaky shape or made them actually insolvent. The “good” banks committed none of these sins; their loans were sensible. And yet, they too, can fall to a run almost as readily as the bad banks. Clearly, the “good” banks are in reality only slightly less unsound than the bad ones.

There therefore must be something about all banks – commercial, savings, S&L, and credit union – which make them inherently unsound. And that something is very simple although almost never mentioned: fractional-reserve banking. All these forms of banks issue deposits that are contractually redeemable at par upon the demand of the depositor. Only if all the deposits were backed 100% by cash at all times (or, what is the equivalent nowadays, by a demand deposit of the bank at the Fed which is redeemable in cash on demand) can the banks fulfill these contractual obligations.

Instead of this sound, noninflationary policy of 100% reserves, all of these banks are both allowed and encouraged by government policy to keep reserves that are only a fraction of their deposits, ranging from 10% for commercial banks to only a couple of percent for the other banking forms. This means that commercial banks inflate the money supply tenfold over their reserves a policy that results in our system of permanent inflation, periodic boom-bust cycles, and bank runs when the public begins to realize the inherent insolvency of the entire banking system.

That is why, unlike any other industry, the continued existence of the banking system rests so heavily on “public confidence,” and why the Establishment feels it has to issue statements that it would have to admit privately were bald lies. It is also why economists and financial writers from all parts of the ideological spectrum rushed to say that the FDIC “had to” bail out all the depositors of the Bank of New England, not just those who were “insured” up to $100,000 per deposit account. The FDIC had to perform this bailout, everyone said, because “otherwise the financial system would collapse.” That is, everyone would find out that the entire fractional-reserve system is held together by lies and smoke and mirrors, that is, by an Establishment con.

Once the public found out that their money is not in the banks, and that the FDIC has no money either, the banking system would quickly collapse. Indeed, even financial writers are worried since the FDIC has less than 0.7% of deposits they “insure,” estimated soon be down to only 0.2% of deposits. Amusingly enough, the “safe” level is held to be 1.5%! The banking system, in short, is a house of cards, the FDIC as well as the banks themselves.

Many free-market advocates wonder: why is it that I am a champion of free markets, privatization, and deregulation everywhere else, but not in the banking system? The answer should now be clear: Banking is not a legitimate industry, providing legitimate service, so long as it continues to be a system of fractional-reserve banking: that is, the fraudulent making of contracts that it is impossible to honor.

Private deposit insurance – the proposal of the “free-banking” advocates – is patently absurd. Private deposit insurance agencies are the first to collapse, since everyone knows they haven’t got the money. Besides, the “free bankers” don’t answer the question why, if banking is as legitimate as every other industry, it needs this sort of “insurance”? What other industry tries to insure itself?.

The only reason the FDIC is still standing while the FSLIC and private insurance companies have collapsed, is because the people believe that, even though it technically doesn’t have the money, if push came to shove, the Federal Reserve would simply print the cash and give it to the FDIC. The FDIC in turn would give it to the banks, not even burdening the taxpayer as the government has done in the recent bailouts. After all, isn’t the FDIC backed by “full faith and credit” of the federal government, whatever that may mean?

Yes, the FDIC could, in the last analysis, print all the cash and give it to the banks, under cover of some emergency decree or statute. But . . . there’s a hitch. If it does so, this means that all the trillion or so dollars of bank deposits would be turned into cash. The problem, however, is that if the cash is redeposited in the banks, their reserves would increase by that hypothetical trillion, and the banks could then multiply new money immediately by ten-to-twenty trillion, depending upon their reserve requirements. And that, of course, would be unbelievably inflationary, and would hurl us immediately into 1923 German-style hyper-inflation. And that is why no one in the Establishment wants to discuss this ultimate fail-safe solution. It is also why it would be far better to suffer a one-shot deflationary contraction of the fraudulent fractional-reserve banking system, and go back to a sound system of 100% reserves.

This first appeared in The Libertarian Forum, June 1971

The libertarian movement has long been far stronger on ultimate principle than it has in strategic thinking. While we cannot overrate the importance of providing a theoretical picture of the society toward which we are striving, we have done much more of this needed theorizing than we have considered how in the world to get from our current “here” to the ideal “there.” This deficiency of strategy and tactics is highlighted by our general failure to consider two dramatic recent victories for liberty, for destatizing, and to ponder what lessons they may offer for future strategy. These recent victories are the generally rapid movement for the repeal of abortion laws, and the successful movement to rollback and eventually abolish rent controls in New York State.

To use those much-abused terms once more, the “right- wing” of the libertarian movement tends to be pure “educationists”, while the “left-wing” tends to call for immediate destruction of existing society. Both strategies are self- defeating, and both in effect insure that the success of liberty can never be achieved. The educationists call for increased devotion to education, to spreading the ideas and the scholarship of libertarianism throughout society, for a new form of “cultural revolution” in behalf of reason and liberty. Now while I wholeheartedly endorse the proposal for ever-wider education, the problem is that this strategy is necessary but scarcely sufficient for victory, i.e. for translating these libertarian concepts into the real world. The educationist view tends to hold that as more people are converted, the State will somehow automatically wither away. But how? And by what mechanism? Often the educationists explicitly rule out all possible mechanisms for pressuring the State to roll itself back or dismantle itself: violence is dismissed as evil, mass demonstrations as coercive, voting or influencing politicians as injuring libertarian purity, civil disobedience as violating the principle that while the laws are on the books they must be obeyed. But how then is the State to be rolled back? The educationists have thereby systematically ruled out all ways but one: convincing the men in power to resign.

In short, Richard Nixon or Lyndon Johnson or Henry Kissinger or whoever is supposed to read Atlas Shrugged or Power and Market or Human Action or This Bread is Mine or whatever and say: “Eureka! This is it! They’re right, and I’ve been wrong. I resign and look for honest employment.” Now certainly such instant conversions by our sinners are conceptually possible, and once in a while, in isolated cases, they indeed happen, and should be saluted and cheered. But surely history shows that such large-scale conversions are highly unlikely, to say the least; no ruling elite in history has voluntarily surrendered its power on any grounds, much less on massive recognition of its own sins. And surely for libertarians to rest their strategic perspective on such conversion of sinners would be folly indeed. And yet that is the strategic dead-end to which our educationists would consign us.

It is true that our left-wing R-r-revolutionaries confront the problem of Power, which the educationists do not; but their strategic prescription of instant and indiscriminate destruction is not only self-defeating but suicidal as well. The moral legitimacy of self-defense against the State is beside the strategic point: the point being that the use of violence only serves to alienate the very American public whom we are trying to convince. And “alienate” is of course a very tame word here: “polarize”, “enrage”, would be far more accurate. Another point which the violent revolutionaries forget is that there has never been a successful armed revolution against a democratic government; all toppled governments have been seen by the public to be outside themselves, either as dictatorships or monarchies (Cuba, China, Russia, 18th Century France, 17th Century England) or as imperial powers (the American Revolution, the Algerian Revolution). The Left is fond of pointing to the Tupamaros of Uruguay as a successful urban guerrilla movement, but the evident point here is that the Tupamaros have not at this writing succeeded, or shown any signs of doing so. So long as free elections exist, then, the use of violence by American rebels will only prove suicidal and counterproductive.

We must reject then both strategies: the defeatist torpor of the educationists, and the frenzied nihilism of the Revolutionaries. What then should be our positive strategy? This is a difficult problem, especially since the art of strategy and tactics depends on the forces at work at the particular time. But here is a prime strategic lesson: that while we must be pure and consistent in principle, we must be flexible in tactics. We must be willing to adopt any tactic that seems likely to bring about the goal of liberty, any tactic, that is, that is not in itself immoral and itself violates the libertarian creed. Take, for example, the MayDay Tribe demonstrations this spring in Washington. In contrast to the effective and moving demonstrations that preceded Mayday, the goal of the Tribe seemed to be to blockade and “trash” private automobiles, thus typically expressing the Left’s hatred against the private car. For the libertarian, however, not only was the Mayday tactic counterproductive in alienating the great bulk of Americans, it also violated libertarian principle by directing its ire against private property – the very thing that the libertarian is concerned to defend and expand. No genuine libertarian could consider such trashing in any way except with abhorrence.

For a more positive model, let us consider the two most prominent victories for destatizing in recent years: the repeal of abortion laws and the substantial removal of rent control in New York. How did these victories come about? Let us consider the rent decontrol case first, as a simpler model. Rent control has been imposed in New York since World War II, and a few years ago it was even imposed anew on postwar buildings. Seemingly, it was a system destined to last forever. All these years, the aggrieved landlords of New York had protested, but in vain. The new recent ingredient was clearly the patent failure and collapse of housing in New York City in the last few years. For few new apartment houses have been built in recent years, due to rent controls and zoning restrictions; existing housing has deteriorated, and abandonments of houses by landlords unable to pay taxes have increased, adding to the plight of the homeless. Furthermore, the Liberal claim that rent controls are merely a temporary device until the apartment shortage disappeared was given the lie by the fact that the shortage of apartments in New York has gotten visibly worse rather than better. In short, as a result of rent controls and high property taxes, the housing situation in New York has reached a crisis stage, and it was this crisis situation that impelled the state authorities to turn to new solutions – to turn, indeed, onto the firm path of decontrol. But the lesson here is that the government cannot be induced to change its ways by theory alone; it was the crisis situation brought about by controls that led Governor Rockefeller and the state legislators to turn to the free-market theorists who were there with the decontrol solution at hand. Theory, however correct, will not be put into effect unless a crisis situation arrives to force the government out of its habitual bureaucratic inertia and onto a search for new solutions.

Abortion reform also had the ingredients of sound libertarian theory at work plus a crisis situation. The theory had been propounded for years by pro-abortion groups, but was accelerated recently by the fact that the Women’s Lib groups, in their raucous and annoying manner, had stumbled across a purely libertarian theory which they propounded with force and effect: that every woman has the absolute right to own and control her own body. The attention devoted to Women’s Lib by the media assured that the politicians finally were able to hear, not a wishy-washy liberal plea for moderate abortion reform, but the extreme” – and consistent – view that the State had no right to pass any abortion restrictions whatever.

While libertarian theory had been firmed up and spread more aggressively, a crisis situation was becoming ever more blatant: and this was the massive, nonviolent civil disobedience of women and doctors who obtained their abortions illegally. And not only were increasing numbers of women and doctors willing to ignore the law; but others were increasingly willing to broaden the fuzzy zone that often exists between legality and illegality: for example, doctors willing to stretch the definition of “endangering the health of the mother”, which made abortion permissible. Furthermore, it was also becoming evident that, taking place as they did under conditions of illegality, the abortions were both unnecessarily expensive and unnecessarily dangerous. In the case of abortions, then, it was mass civil disobedience that brought about the crisis situation, while the spread of libertarian theory made the government more willing to turn to the de-statizing solution. But not only theory: also the use of the theory to pressure the politicians, by petition, by noise, by threat of votes, etc.

As the Marxists would say, there is needed for victory both the “objective conditions” and the “subjective conditions. The objective conditions refer to crisis situations in the real world; for libertarians, finding crisis situations is easy, especially since these crises (e.g. the abortion mills, housing decay) have invariably been created by the government itself. The subjective conditions refer to the need for groups of libertarians to propound the libertarian solutions to these crises and to pressure the politicians when the objective conditions are ripe. Both methods were applied in the successes of housing and abortion – and both successes were won without a self-conscious group of pure libertarians bringing their wider and more systematic doctrines to bear on the struggle. How much greater will the success be when libertarians will have made their mark as an active, expanding, self-conscious movement, stepping into crises as they appear and providing the benefit of their far more systematic insight, or, to paraphrase the Marxists, “raising the level of libertarian consciousness” among all parties concerned! Times, moreover, are going to be increasingly ripe for this sort of action, because crises are piling up as the failure of the Welfare-Warfare State becomes increasingly manifest in field after field: education, foreign policy, conscription, welfare, transportation, etc. As crisis situations multiply, libertarians will find their own opportunities multiplying as well, provided we are not stultified by the educationists or discredited by the nihilists. And we must remember that if we do not pursue these opportunities, more sinister forces – socialists or more likely fascists – will be standing in the wings to offer their alternatives to the failure of the Liberal-Conservative Consensus. Considering the numerous failures and tyrannies of socialism and fascism it will be easy to discredit these alternatives – provided that we are there to offer liberty as the only rational – and reasonable – alternative to the existing order. But a reasonable alternative emphatically does not include insane blatherings about “ripping off Amerika”. Liberty is profoundly American; we come to fulfill the best of the American tradition, from Ann Hutchinson and Roger Williams to the Declaration of Independence, the Bill of Rights, and the Jeffersonian movement, and beyond. AS Benjamin R. Tucker put it, we are “unterrified Jeffersonian democrats”, and we come not to destroy the American dream but to fulfill it.