Chapter XIII

Conclusion

In the 1920's and the 1930's, intellectuals in the United States were overwhelmingly persuaded that capitalism was a defective system inhibiting economic well-being and thereby freedom, and that the hope for the future lay in a greater measure of deliberate control by political authorities over economic affairs. The conversion of the intellectuals was not achieved by the example of any actual collectivist society, though it undoubtedly was much hastened by the establishment of a communist society in Russia and the glowing hopes placed in it. The conversion of the intellectuals was achieved by a comparison between the existing state of affairs, with all its injustices and defects, and a hypothetical state of affairs as it might be. The actual was compared with the ideal. At the time, not much else was possible. True, mankind had experienced many epochs of centralized control, of detailed intervention by the state into economic affairs. But there had been a revolution in politics, in science, and in technology. Surely, it was argued, we can do far better with a democratic political structure, modern tools, and modern science than was possible in earlier ages.

The attitudes of that time are still with us. There is still a tendency to regard any existing government intervention as desirable, to attribute all evils to the market, and to evaluate new proposals for government control in their ideal form, as they might work if run by able, disinterested men, free from the pressure of special interest groups. The proponents of limited government and free enterprise are still on the defensive.

Yet, conditions have changed. We now have several decades of experience with governmental intervention. It is no longer necessary to compare the market as it actually operates and government intervention as it ideally might operate. We can compare the actual with the actual.

If we do so, it is clear that the difference between the actual operation of the market and its ideal operation -- great though it undoubtedly is -- is as nothing compared to the difference between the actual effects of government intervention and their intended effects. Who can now see any great hope for the advancement of men's freedom and dignity in the massive tyranny and despotism that hold sway in Russia ? Wrote Marx and En-gels in The Communist Manifesto: "The proletarians have nothing to lose but their chains. They have a world to win." Who today can regard die chains of the proletarians in the Soviet Union as weaker than the chains of the proletarians in the United States, or Britain or France or Germany or any Western state ?

Let us look closer to home. Which if any of the great "reforms" of past decades has achieved its objectives? Have the good intentions of the proponents of these reforms been realized ?

Regulation of the railroads to protect the consumer quickly became an instrument whereby the railroads could protect themselves from the competition of newly emerging rivals -- at the expense, of course, of the consumer.

An income tax initially enacted at low rates and later seized upon as a means to redistribute income in favor of die lower classes has become a facade, covering loopholes and special provisions that render rates that are highly graduated on paper largely ineffective. A flat rate of 23% per cent on presently taxable income would yield as much revenue as die present rates graduated from 20 to 91 per cent. An income tax intended to reduce inequality and promote the diffusion of wealth has in practice fostered reinvestment of corporate earnings, thereby favoring die growth of large corporations, inhibiting die operation of the capital market, and discouraging the establishment of new enterprises.

Monetary reforms, intended to promote stability in economic activity and prices, exacerbated inflation during and after World War I and fostered a higher degree of instability there-after than had ever been experienced before. The monetary authorities they established bear primary responsibility for converting a serious economic contraction into the catastrophe of die Great Depresson from 1929-33. A system established largely to prevent bank panics produced die most severe banking panic in American history.

An agricultural program intended to help impecunious farmers and to remove what were alleged to be basic dislocations in the organization of agriculture has become a national scandal that has wasted public funds, distorted the use of resources, riveted increasingly heavy and detailed controls on farmers, interfered seriously with United States foreign policy, and withal has done little to help the impecunious farmer.

A housing program intended to improve die housing conditions of die poor, to reduce juvenile delinquency, and to contribute to the removal of urban slums, has worsened die housing conditions of the poor, contributed to juvenile delinquency, and spread urban blight.

In the 1930's, "labor" was synonymous with "labor union" to the intellectual community; faith in the purity and virtue of labor unions was on a par with faith in home and motherhood. Extensive legislation was enacted to favor labor unions and to foster "fair" labor relation. Labor unions waxed in strength. By die 1950's, "labor union" was almost a dirty word; it was no longer synonymous with "labor," no longer automatically to be taken for granted as on the side of the angels.

Social security measures were enacted to make receipt of assistance a matter of right, to eliminate die need for direct relief and assistance. Millions now receive social security benefits. Yet the relief rolls grow and the sums spent on direct assistance mount.

The list can easily be lengthened: the silver purchase program of the 1930's, public power projects, foreign aid programs of die post-war years, F.C.C., urban redevelopment programs, the stockpiling program -- these and many more have had effects very different and generally quite opposite from those intended.

There have been some exceptions. The expressways crisscrossing the country, magnificent dams spanning great rivers, orbiting satellites are all tributes to the capacity of government to command great resources. The school system, with all its defects and problems, with all the possibility of improvement through bringing into more effective play the forces of the market, has widened the opportunities available to American youth and contributed to the extension of freedom. It is a testament to the public-spirited efforts of the many tens of thousands who have served on local school boards and to the willingness of the public to bear heavy taxes for what they regarded as a public purpose. The Sherman antitrust laws, with all their problems of detailed administration, have by their very existence fostered competition. Public health measures have contributed to the reduction of infectious disease. Assistance measures have relieved suffering and distress. Local authorities have often provided facilities essential to the life of communities. Law and order have been maintained, though in many a large city the performance of even this elementary function of government has been far from satisfactory. As a citizen of Chicago, I speak feelingly.

If a balance be struck, there can be little doubt that the record is dismal. The greater part of the new ventures undertaken by government in the past few decades have failed to achieve their objectives. The United States has continued to progress; its citizens have become better fed, better clothed, better housed, and better transported; class and social distinctions have narrowed; minority groups have become less disadvantaged; popular culture has advanced by leaps and bounds. All this has been the product of die initiative and drive of individuals co-operating through the free market. Government measures have hampered not helped this development. We have been able to afford and surmount these measures only because of the extraordinary fecundity of the market. The invisible hand has been more potent for progress than the visible hand for retrogression.

Is it an accident that so many of the governmental reforms of recent decades have gone awry, mat the bright hopes have turned to ashes ? Is it simply because die programs are faulty in detail?

I believe the answer is clearly in the negative. The central defect of these measures is that they seek through government to force people to act against their own immediate interests in order to promote a supposedly general interest. They seek to resolve what is supposedly a conflict of interest, or a difference in view about interests, not by establishing a framework that will eliminate the conflict, or by persuading people to have different interests, but by forcing people to act against their own interest. They substitute the values of outsiders for die values of participants; either some telling others what is good for them, or the government taking from some to benefit others. These measures are therefore countered by one of the strongest and most creative forces known to man -- die attempt by millions of individuals to promote their own interests, to live their lives by their own values. This is die major reason why die measures have so often had the opposite of the effects intended. It is also one of die major strengths of a free society and explains why governmental regulation does not strangle it.

The interests of which I speak are not simply narrow self-regarding interests. On the contrary, they include the whole range of values that men hold dear and for which they are willing to spend their fortunes and sacrifice their lives. The Germans who lost their lives opposing Adolph Hitler were pursuing their interests as they saw them. So also are the men and women who devote great effort and time to charitable, educational, and religious activities. Naturally, such interests are the major ones for few men. It is the virtue of a free society that it nonetheless permits these interests full scope and does not subordinate them to the narrow materialistic interests that dominate the bulk of mankind. That is why capitalist societies are less materialistic than collectivist societies.

Why is it, in light of the record, that the burden of proof still seems to rest on those of us who oppose new government programs and who seek to reduce the already unduly large role of government? Let Dicey answer: "The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and, so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight. . . . Nor ... do most people keep in mind that State inspectors may be incompetent, careless, or even occasionally corrupt . . . ; few are those who realize the undeniable truth that State help kills self-help. Hence the majority of mankind must almost of necessity look with undue favor upon governmental intervention. This natural bias can be counteracted only by the existence, in a given society, ... of a presumption or prejudice in favor of individual liberty, that is, of laissez-faire. The mere decline, therefore, of faith in self-help -- and that such a decline has taken place is certain -- is of itself sufficient to account for the growth of legislation tending towards socialism."*

The preservation and expansion of freedom are today threatened from two directions. The one threat is obvious and clear. It is the external threat coming from the evil men in the Kremlin who promise to bury us. The other threat is far more subtle. It is the internal threat coming from men of good intentions and good will who wish to reform us. Impatient with the slowness of persuasion and example to achieve the great social changes they envision, they are anxious to use the power of the state to achieve their ends and confident of their own ability to do so. Yet if they gained the power, they would fail to achieve their immediate aims and, in addition, would produce a collective state from which they would recoil in horror and of which they would be among the first victims. Concentrated power is not rendered harmless by the good intentions of those who create it.

The two threats unfortunately reinforce one another. Even if we avoid a nuclear holocaust, the threat from the Kremlin requires us to devote a sizable fraction of our resources to our military defense. The importance of government as a buyer of so much of our output, and the sole buyer of the output of many firms and industries, already concentrates a dangerous amount of economic power in the hands of the political authorities, changes the environment in which business operates and the criteria relevant for business success, and in these and other ways endangers a free market. This danger we cannot avoid. But we needlessly intensify it by continuing the present widespread governmental intervention in areas unrelated to the military defense of the nation and by undertaking ever new governmental programs -- from medical care for the aged to lunar exploration.

As Adam Smith once said, "There is much ruin in a nation". Our basic structure of values and the interwoven network of free institutions will withstand much. I believe that we shall be able to preserve and extend freedom despite the size of the military programs and despite the economic powers already concentrated in Washington. But we shall be able to do so only if we awake to the threat that we face, only if we persuade our fellow men that free institutions offer a surer, if perhaps at times a slower, route to the ends they seek than the coercive power of the state. The glimmerings of change that are already apparent in the intellectual climate are a hopeful augury.

1 A. V. Dicey, op. cit., pp. 257-8.