Adolf A. Berle’s The American Economic Republic (Harcourt, Brace and World, 247 pp., $4.50) has been praised by the believers in the "mixed economy," and damned out of hand by libertarians. From the standpoint of pure economics, this reviewer should be lining up with the libertarians in condemning or dismissing Mr. Berle’s work. Yet, among all its defects, The American Economic Republic has one great virtue that libertarians should welcome. The virtue is to be found in Berle’s discussion of the role of imagination, mind, and will in finding new uses for capital.
As Mr. Berle puts it, capital is not simply a matter of money or machinery. Expressed in terms of dollars, the
Having correctly put his finger on the shortcomings of economists who continue to think of capital as "dead" dollars and not as something that demands imaginative "going concerns" to make it humanly fruitful, Mr. Berle then proceeds to back-pedal for long and confusing stretches.
What vitiates most of The American Economic Republic is Mr. Berle’s passion for making distinctions that have only a surface plausibility. His biggest error is the attempt to distinguish between "active" and "passive" property. According to Berle, "active" property is a tractor, a farm, a house, a proprietor-operated industry. "Passive" property, on the other hand, is any stock ownership that does not play its direct part in the workings of management. Mr. Berle considers most stockholders to be completely isolated from business.
The distinction is tenable only on the assumption that most stock ownership has no effect on management decisions in such things as allocating new capital. If this reviewer had not gone through an apprenticeship writing corporation stories for Fortune Magazine, he might have been impressed by Mr. Berle’s reasoning. But in many a mill town, from
To sustain his distinction, Berle would no doubt argue that the recent decision of the Kennecott Copper Company to cut down on the dividend rate in order to build new facilities in
Nineteenth Century Capitalism
When it comes to looking back on the history of
Well, just a half a century ago, in 1913, Henry Ford was coming to the decision that the minimum automobile wage should be $5 a day (or more than $10 a day in terms of the 1963 dollar). A $50a-week minimum wage would be little enough in modern
Again, what was "intolerable" about working for a good man like Captain Bill Jones in a Carnegie mill in nineteenth century
Jones and Fritz were humane bosses who established great esprit de corps. Steel mill work in the nineteenth century was dangerous, but there were those who loved it. And the capitalist "governing classes" of the nineteenth century in
When it comes to the "transcendental margin," meaning the surplus of production that goes to "achieve ends transcending the calculation of individual material advantage," does Berle think for a minute that there was no such margin back in 1820, or 1870, or 1900? On Mr. Berle’s own showing,
In trying to establish distinctions that are not distinctions. Berle has to assume in spite of his own evidence that the nature of man has somehow changed in the twentieth century. Today, he says, the "scientific institute of scholars" is the primary decision-maker in capital allocations. Well, wasn’t it always thus? Eli Whitney was a scholar, just out of Yale, when he invented the cotton gin. He had no capital, yet he was the "decision-maker" that fastened the slave plantation system on the South for fifty years. And he had only a War Department contract when he started to apply mass production principles to the manufacture of guns. How does this differ in any basic sense from what goes on today? Whitney had ideas and he attracted capital for their exploitation. Similarly, that twentieth century Harvard scholar and chemist, Dr. Carothers, had ideas about synthetic fibers. The Du Ponts backed Carothers’ brains with money in the age-old capitalistic way.
Adolf Berle is far more sympathetic to free enterprise than he was in his New Deal days. But he still can’t see that the principles of freedom do not change, for they are grounded in the eternal nature of man.
The Free and Prosperous Commonwealth by Ludwig von Mises, translated by Ralph Raico (D. Van Nostrand Company, 207 pp., $5.50).
Reviewed by Percy L. Greaves, Jr.
THERE are right answers to our social problems, and Ludwig von Mises, truly an economiste extraordinaire, packs his books with them.
Back in 1927 he pictured the pitfalls ahead for nations whose governments grant privileges to the political groups that keep them in power. More than a generation ago, he foresaw that the existence of such privileges would disrupt world trade and lead to political persecutions, wars between the western powers, and bloodshed in
Mises, then an Austrian citizen, wrote this book in German as a warning to all Europeans, and especially the Germans. If his book had been read, digested, and heeded by the thought leaders of that day, the world would have been spared a multitude of miseries and millions of needless deaths. The horrors of the past cannot be undone. However, it is never too late to learn the elementary principles that whole populations must practice if men are ever to live in harmony with a continuing multiplication of human comforts. So we can be happy that Ralph Raico, a bright and promising graduate student, has made this book available in English as The Free and
The contents are actually better described by the English subtitle, An Exposition of the Ideas of Classical Liberalism. Mises writes of liberalism in its true and original meaning, the limitation of political power to the restraint, proscription, and prevention of antisocial actions which disrupt man’s peaceful pursuit of happiness.
Liberalism in this sense prescribes the private ownership and control of all productive property. It holds that the private owners of such property can advance their own welfare only by offering consumers higher values than can be duplicated elsewhere for the same expenditure of funds or effort. The security of such property from theft encourages all sorts of investments in socially productive facilities. These increased investments, along with increased specialization of labor, account for the higher living standards of market societies.
Progressive societies of this type can exist only in areas where peace is preserved at the factory gates and market place. Under real liberalism, the function of government is to maintain that peace by protecting the lives and property of all who come to rely on the market for their supplies of necessities, as well as the luxuries that become the necessities of the next generation.
Unfortunately, as Mises writes in the new Preface, "the tenets of this nineteenth-century philosophy of liberalism are almost forgotten…. In the
Today, most modern "liberals" think they have found a shortcut to economic prosperity—massive political action. They hold that the injustices of our world can all be corrected by the political direction of a "more equal" distribution of wealth. The first step they advocated was to levy confiscatory taxes on corporations and higher than-average personal incomes for "redistribution" among those groups whose votes they sought.
When it was found that such taxes slow down production, the next step of the self-styled "liberals" has been to even up wealth by the injection of newly created sums of money into the bank accounts and pocketbooks of those whose political support is considered necessary. These recipients are expected to spend the artificially created "legal tender" promptly and thus bring about "full employment" and a business boom.
As Mises tells us, "those who advocate equality of income distribution overlook the most important point, namely, that the total available for distribution, the annual product of social labor, is not independent of the manner in which it is divided. The fact that that product is today as great as it is… is entirely the result of our social institutions. Only because inequality of wealth is possible in our social order, only because it stimulates everyone to produce as much as he can and at the lowest cost, does mankind today have at its disposal the… wealth now available for consumption. Were this incentive to be destroyed, productivity would be so greatly reduced that the portion that an equal distribution would allot to each individual would befar less than what even the poorest receives today."
How can we stem the present tide of pseudo liberalism? How can we start a surge toward real liberalism? Here is the answer in the words of Mises:
"There is nothing in the world more powerful than ideologies and ideologists and only with ideas can one fight against ideas…. Against what is stupid, nonsensical, erroneous, and evil, liberalism fights with the weapons of the mind, and not with brute force and repression…. In a battle between force and an idea, the latter always prevails…. The minority that desires to see its ideas triumph must strive by intellectual means to become the majority."
This little book is full of the right ideas. Unlike some of the other fundamental books of Mises, this volume is exceedingly easy to read. Those who shudder at heavy tomes will find it written in simple style and delightfully clear. If we are to avoid the complete collapse of our market society, on which each of us has become so dependent for our very means of survival, the contents of this great book should be widely read and spread.