The Reverend Dr. John K. Williams explores and explains the principles of freedom from his base in North Melbourne, Victoria, Australia.
One of the most dramatic stories in the Bible is the story of David and Goliath. Goliath, almost ten feet tall, was truly a fearsome figure. Every morning and every evening he, the champion of the militant Philistines, hurled his challenge at the Israelite army: Send one man out to do battle against me! If the representative of the Israelites won, the Philistines would become slaves of the Israelites. If he, Goliath, won the Israelites would become slaves of the Philistines.
David, a mere stripling of a lad, approached his king. He claimed experience in battle—had he not, when caring for his father’s sheep, actually killed a lion and a bear? Was he not therefore qualified to take on the giant?
Moved, perhaps, by the simplicity of the boy, King Saul agreed. David could fight Goliath. Indeed, David could do so wearing his, the king’s armor. Yet, having put on the armor, the lad decided to remove it and return it to Saul. It was too heavy and impeded his movements. The armor of Saul would have hindered, not helped.
David’s courage was exceeded only by his wisdom. If he were to have a chance of victory, he could not afford to do battle weighed down by unnecessary armor. Taking on the giant was courageous; to do so encumbered by the armor of Saul would be folly.
Many defenders of the freedom philosophy lack the wisdom of the youthful David. They do battle weighed down by the equivalent of Saul’s armor. They allow themselves to be burdened by that which hinders rather than helps their cause. They clutter their case by accepting propositions that have nothing to do with the free society or the free market.
“We should go back to the free market”
To defend the suggestion that we should go back to the free market is to assume a historical claim that in itself can alienate men and women. It suggests retreat. It conjures up a picture. The picture is that once upon a time economic liberty was the norm. Over the years humanity moved in new directions, initiating and bringing to birth a novel experiment in economics. Central plan ners would coordinate and direct what hitherto had been uncoordinated and directionless. While it may be true that a defective clock should have its “hands turned back” so they indicate the correct time, “turning the clock back” is an activity men and women do not warm to. They tend to side with those who valiantly push forward into new and uncharted territory. Those urging that we “go back” to the tried and the tested are perceived as cautious, indeed, perhaps somewhat nostalgic in disposition.
The truth is, of course, that those enthused by the arguing for the free market in a free society have sided with advance. The economy planned and directed by “experts” has, historically, been the norm. Monarchs knew what was best for their subjects and told them what to do. Feudal lords knew what was best for their serfs and directed their activities. Aristocrats knew what was best for the masses and dictated how these lesser mortals should spend their days.
Consider the France of Louis XIV. Every person had his or her place in society and kept to that place. The economy was carefully planned. State officials decided what industries should be established and where in France or its colonies they should be located. Imports and exports were carefully regulated. Prices were set by political figures. Governmental committees prescribed what patterns were to be woven in the State-owned tapestry works at Aubusson; indeed four long years of negotiation preceded the giving of permission to introduce “backwarp” into fabrics. Some two thousand pages were required to list the rules and regulations which were passed between 1666 and 1730 controlling the textile industry. The contemporary socialist would have been perfectly at home in such an environment!
It is the socialist, not the advocate of liberty, who yearns for the past! The welfare State is fast regressing to Louis XIV’s France. In February 1982 a special report was presented to the U.K. Parliament. Entitled Administrative Forms in Government it documented the burgeoning of government forms and leaflets in Great Britain. The two thousand pages of rules and regulations governing but one industry in France three centuries ago are modest in comparison! Over 2,000 million government forms and leaflets are used by the U.K. public annually—that means thirty-six forms for every man, woman, and child in the country! The forms, as befits government, are difficult to follow and fill out; “error rates of over 30%, either by [government officials] or the public, are common.” The report concludes by listing ten further “reports on forms” which people with nothing better to do can read.
Political Control the Norm
Political control of a nation’s economy has been the usual state of affairs. The eighteenth century lovers of liberty were the radicals. They attacked the remnants of feudalism, fought for the abolition of caste and privilege; battled for an extension of property rights so the powerful could no longer plunder at whim; agitated against entrenched, State-granted monopolies and protective tariffs which benefited the few but impoverished the many; and dreamed of an economic order controlled not by the edicts of government but by the uncoerced endeavors of the multitudes, freely producing and exchanging whatsoever goods they chose.
And they won! A hitherto unknown phenomenon emerged: sustained economic growth. In 1780 over 80% of French citizens spent 90% of their income on just sufficient bread to stay alive. In 1800 average life expectancy was, in France, twenty-seven for females and twenty-four for males. The vast multitudes in Europe and North America labored long and hard to survive. Recurrent famines were taken for granted. But matters changed. The working populace of England quadrupled between 1800 and 1900. Real per capita disposable income doubled between 1800 and 1850, and doubled again between 1850 and 1900. This 1,600% increase in available goods and services transformed the very nature of poverty, and what had once been luxuries enjoyed by the few became everyday realities possessed by nearly all.
Yet there were those who yearned for the past. There were those who wanted to turn back the clock. There were those who wanted to use the guns of government to guarantee continued possession of their wealth rather than to have that continued possession contingent upon the use of that wealth in ways which best and most efficiently satisfied the needs and desires of others. Even though they sought to lead nations back to the seventeenth and eighteenth centuries they had the impertinence to call themselves “progressives.” They spoke of a yearning of a “new” socialist society—yet in truth their yearning was but nostalgia for the past.
The lover of liberty is not urging anyone to “go back” to ancient ways. He rather urges men and women to go forward, knowing not where the creativity unleashed by the free market in the free society will take them. To speak of “going back” to the free market is to weigh oneself down with the armor of Saul.
“While less moral than socialism, capitalism is more productive”
How frequently lovers of liberty concede that their opponents are idealists. “Yes, I admire your ideals. Yet they are impractical. The market works. We must be realists!”
What is so moral or idealistic about socialism? Even in purely material terms, what is moral about the inability of the 30% of the workforce of the U.S.S.R. involved in agriculture to feed a nation which once exported grain, whereas the mere 4% of the workforce of the U.S.A. involved in agriculture feed an entire people and a great deal of the rest of the world as well? What is so moral about the fact that the real wages of Soviet industrial workers attained the level of 1913 only in 1963? What is so moral about the fact that many African States such as Tanzania which once boasted thriving agricultural bases listened to the advice of western intellectuals consumed by a pathological hatred of the very system that had delivered them from penury, collectivized (in the name of “agrarian reform”) agriculture, and now are dependent upon foreign aid for the most basic of food stuffs? Is not the “new French” philosopher Jean Francois Revel correct when he suggests that these “western experts” should “contemplate the stare of dying children looking . . . out of those pictures [from the Third World]” and commune with their consciences?
Yet the moral issues run deeper. The market economy ultimately reduces to a very simple reality. Person A is skilled at catching fish. Person B is skilled at growing bananas. Person A would prefer to surrender some of his fish and secure several bananas, and person B would prefer to surrender some of his bananas and secure several fish. So they swap! Each person surrenders what he values less and acquires what he values more. Each gains. Neither loses.
Yet suppose a third person, C, enters the picture. He uses or threatens to use force and makes A give some fish to B and to himself. B and C have gained, but poor old A has lost. The coerced exchange does not and can not benefit all.
When the State forgets that its task is simply to prevent people using actual or threatened force, theft, or fraud to acquire material goods, and starts deciding who “deserves” what and uses force to impose this “deserved distribution,” there are losers. In spite of socialists’ fantasies, the “winners” are not usually the poor. (Even if the poor were the “winners” the use of violence to take goods from those who produced them would still be immoral, but maybe the socialist could quiet his conscience by seeking refuge in the principle grasped by most evil-doers: “The end justifies the means.”) Yet in truth most “transfers” of wealth, direct and indirect, tend to favor the powerful, not the poor. Tariffs, agri cultural price support schemes, sub-sidles to health (most of which go to the medical profession), housing subsidies, subsidies to higher education—these do not benefit the poor. They hurt the poor and benefit the powerful! Then, of course, there remains the massive army of admin istrators, bureaucrats, and welfare workers presiding over the system: they most certainly benefit but can hardly be called “poor.”
The Welfare State
Most socialists, of course, concede that the “bureaucracy has got out of hand.” Their new and untried version of socialism will guard against this happening: Yet Ludwig von Mises saw, nearly four decades ago, that a burgeoning bureaucracy inevitably emerges in a welfare State. The reason is simple. In the market, individuals engaging in voluntary exchanges can only promote their own interests by furthering the interests of others. In the world of politics, however, this is not true. How can the politician further his own interests? The answer is clear: by transferring wealth to organized special interest groups! He can concentrate benefits, but disperse costs. Ordinary citizens simply cannot afford the time to dig out information as to where their taxes go. Hence powerful groups “win” and powerless individuals “lose.” And to administer the transfers more bureaucrats are required. The class of net tax recipients keeps growing; the class of net tax payers keeps shrinking.
The “law of the jungle” emerges. The voluntary, peaceful exchanges of the market are supplanted by the struggle to get to the government trough. One special interest group turns in anger on another which received “better treatment.” Just how “moral” is this divisive exercise of power to grab a share of what was stolen in the first place?
“Ah! But we socialists dislike selfishness. The free market enshrines it!”
The word “selfishness” is a slippery word. “Self-interest” is maybe better. Best of all, perhaps, is reference to an individual’s vision of the “good life” and his attempts to realize it. In a free society all are at liberty to formulate their own such visions and strive, non- coercively, to realize them. One man may desire a modest—indeed frugal—way of life with plenty of leisure to bask in the sun, gaze in delight at the beauties of the physical world, and think. Another may dream of amassing great wealth. Each is at liberty to pursue what he desires. Yet the allegedly “selfish” man—the one who seeks great wealth—can only do so by providing other people with what they desire at least cost to these people.
Adam Smith, in 1776, spoke of the “mean rapacity” of some “merchants and manufacturers” and, perhaps unkindly, claimed that such people “seldom meet together, even for merriment and diversion, but the conversation ends in conspiracy against the public.” That was precisely why he yearned for the free market in a free society. Limited by the rule of law, “mean” and “rapacious” people would have to serve the public if they were to improve their own situations. Indeed if one asks what political and economic structures are so designed that thoroughly despicable human beings, enjoying political or economic success, are least able to hurt their fellows, the answer can only be “the free society and the free market.”
Accepting the view that socialists are moral idealists, whereas those holding to the freedom philosophy are pragmatic realists, is to go into battle weighed down by the armor of Saul.
“Really, profits are very low. Successful businesses and corporations are not too greedy!”
A major company recently ran an advertisement showing the “break down” of the “corporation dollar.” Of the total, 95¢ went in salaries, wages, the costs of raw materials, and so on. Only 5¢ represented “profits”! Of that amount, 3¢ were plowed back into the corporation to purchase the machinery and equipment to provide one new job (the cost of which was in excess of $30,000) and 2¢ went to shareholders.
Now I sympathize with this advertisement. A recent survey revealed that most Australians believe corporations earn an after-tax profit of “about 40%.” A 1975 poll conducted by the U.S. Opinion Research Corporation revealed that most Americans estimate that manufacturers enjoy an after-tax profit of 33%. Indeed, Australian newspapers—and I would guess most U.S. and U.K. newspapers—rarely use the word “profits” without an adjective preceding it: “obscene profits,” “huge profits,” “record profits,” and so on.
Yet, while sympathetic, I reject the advertisement and what it represents. What does it “represent”? An apology! An acceptance of the view that “profits” are somehow unpleasant or evil! Such an apology, and such an acceptance, are but part of the cumbersome armor of Saul.
Profits are good. They are “good” for shareholders, but also “good” for countless other people. How the supporter of the freedom philosophy is to explain this to his neighbors who think otherwise is difficult to determine, but the way is most certainly not to reinforce widespread error.
Perhaps the first point to notice is the sheer silliness of a slogan which, in Australia, adorns many a bumper bar: “People before profits!” This slogan is but a “catchy” variant of an older slogan: “Production for use, not production for profit.”
The humble reality is that the person who produces goods or provides services people do not value is not going to make any profits at all! Really, that’s all there is to say on this matter. After all, having pointed out that 1 + 1 = 2, there is little point in discussing the matter further. Unless, of course, like A. N. Whitehead and Bertrand Russell who, in their Principia Mathematica,, went to great lengths to explore the hidden logical subtleties of what, to the ordinary man, is self-evident, one wishes to do the same in economics. Indeed, Ludwig von Mises did just that in his masterpiece, Human Action. Yet, for ordinary purposes, it is sufficient to point out that a company producing a commodity which people, in their fickleness or even good taste, do not wish to possess is not going to record massive profits!
I have no doubt that the Packard was a fine car. The American people, however, did not like it. Other companies made cars which the public preferred. Quite apart from any other consideration, the Packard was dearer than alternatives which performed just as well. So the people said “No thank you” to the manufacturers of the Packard and acquired what they wanted elsewhere. The manufacturers of the Packard did not record massive profits! The most useful products from the point of view of consumers turn out to be the most profitable. Were I to turn my clumsy hands to the making of clay models of Miss Piggy, I fear few admirers of that gracious lady would purchase my product. They want a model which looks like Miss Piggy! The needs of people dictate who does, and who does not, make a “profit.”
The Customer’s Choice
Yet the matter is more significant than that. Once upon a time people, getting rid of their garbage, either threw it into a garbage can or wrapped it in newspaper and put the resulting parcel into the garbage can. Then someone, somewhere, thought of plastic bags which, lining a garbage can, would make life easier and garbage cans less smelly! What was the first question that person had to ask? He had to ask what people would be prepared to pay for such bags! Would they pay $107 No—people would prefer either to keep that $10 or procure two paperback novels than to surrender that $10 or forego two paperback novels and own a plastic bag for the disposal of garbage. Would they pay $17 Maybe—but most people would prefer to forego the possession of the bag and procure, say, a pack of cigarettes than to forego the pack of cigarettes and obtain the bag. Would they pay 30¢? That sounds reasonable. Now what does the maker of plastic garbage disposable bags have to do? (He could, of course, reject the free market and try to charm a politician into making the purchase and use of such bags compulsory, but that is to reject both the free society and the market. Let us, however, ignore this cheat!) What he must do is find a way of manufacturing such bags below the “price” set by consumers. If he works out a way to make such bags for 1¢ he stands to make a “high” profit. Sadly—at least for the manufacturer-such a high profit would signal to others that they should get into the act and reduce the price of such bags—and make more modest, yet tolerable, profits! The critical point, however, is that profits demonstrate that producers have found ways whereby they use resources to produce a product at costs below the value people place upon the product. Profits are residuals. They represent not something wickedly “added” to a price, but the difference between a people-determined price and the costs of manufacturing some commodity.
Yet again, that is but part of the story. The time, physical labor, and resources which go into the making of plastic garbage bags could have been used to create some other commodity. How does one work out whether to use these resources to produce garbage bags, or some other product? The answer lies in the magic word “profit.” For profits simply show that people want disposable plastic garbage bags more than they want, say, plastic slippers! The company making large profits—in a genuinely free market—is using material resources, time, labor, and intelligence in a way satisfying what people want and need rather than using the same “ingredients” in ways which do not satisfy what people want and need. Limited resources are being allocated in a people-serving, responsible way.
No Apology Needed
To “apologize” for profits is to put on the heavy armor of Saul. Defenders of the philosophy of liberty do have a Goliath of prejudice and error to fight when it comes to “profits,” but they must not weigh themselves down by carrying an unnecessary load. Carefully, cogently, and non-aggressively, they must explain what profits are and why they are not “evil.” There is no other way.
David won. The mighty Goliath, sheathed in his bronze armor, was defeated by a youth bearing five stones, a shepherd’s bag, and a conviction that he came to do battle in the name of the “Lord of hosts.”
Truth is mighty, and it will prevail. The battle is not easy, but in truth the socialists have already lost. Their many experiments have failed. Yet their voice, like that of Goliath, resonates like thunder and brings terror to the hearts of many. There is a fight to be fought, and the de fender of liberty faces difficult tasks. Hence such a defender must say “No!” to the armor of Saul. He must not wear what weighs him down. lie must not carry burdens that in truth are not his to carry. His advisers, like King Saul, “mean well.” But like the lithesome youth, he must be careful.
“Saul made David put on his own armor and put a bronze helmet on his head and gave him his own breast plate to wear, and over David’s armor he buckled his own sword; but . . . David found he could not walk. ‘I cannot walk with these,’ he said to Saul . . . So they took them off.”