W. A. Paton is Professor Emeritus of Accounting and of Economics, University of Michigan. He is author (or co-author) of a score of books and many articles, largely in the field of accounting. Since his retirement at Michigan, he has continued his writing and lecturing activities and has done part-time teaching at a dozen colleges and universities, in ten states.
There is some justification for saying that this is an age of reason in the physical sciences and engineering, but in the realm of economics it is a time of well-nigh unprecedented folly. Currently many Americans appear to have thrown their stock of common sense to the winds. It is true, of course, that man has suffered acutely throughout most of what we know of his history from superstition, religious quackery, tyranny, and fallacious notions about his physical environment. Although the only form of life on the planet capable of careful scrutiny and pondering with respect to himself and his surroundings, Homo sapiens has often proved to be an easy mark for the witch doctor, the soothsayer, the spellbinder, and other nonsense peddlers. But I doubt if at any earlier period were people generally so susceptible to economic pipe dreams and pie-in-the-sky proposals as we are today. If we don’t go beyond American history the case is clear.
Our forefathers, at no stage, would have widely accepted the view that the road to prosperity, the abundant life for all, is by way of blocking early entry to the working ranks, an enforced 40-hour — or less — work week, with the trimmings of minimum wage laws, paid vacations, featherbedding and soldiering, and retirement with a handsome pension after thirty years of service, coupled with a program of government handouts on a vast scale to those unemployed for almost any reason or excuse. They were addicted to hard work, recognized that we can’t consume what we don’t produce, and were skeptical of all schemes to pick ourselves up by our bootstraps. And they would be shocked by today’s widespread tide of vandalism, violence, and disorder, which is becoming a serious obstacle to efficient utilization of available resources and increasing — or even maintaining — the level of economic output.
It should also be noted that the astrologers, fortunetellers, seers, gurus, ESP experts, and assorted cult leaders as well as the economic con men — are flourishing these days.
In short, as an adjective to describe present-day attitudes, aims, and popular proposals for dealing with current economic problems, real or pseudo, the term "gullible" is a much more appropriate label for our society than "good" or "great."
There are explanations and excuses for the current state of economic confusion aside from the persistent streak of susceptibility to humbug to be observed in mankind. To refer again to the American scene, the fantastic changes in economic conditions and methods that have occurred in a few generations — often pointed out and also often forgotten — have undoubtedly contributed heavily to present-day misunderstanding and blindness regarding fundamental principles and requirements. The tremendous increase in production and standard of living resulting from the pioneering spirit, an excellent endowment of natural resources, and the technological surge, has beguiled many into thinking that the sky is the limit, that the well will never run dry, that all that is necessary to secure an abundance for everybody is taking from the haves and giving to the have-nots, that hard work and slow saving are outmoded.
A partial explanation of the willingness to accept economic programs that are largely poppycock is also found in the growing complexity of the economic structure, with its network of markets, elaborate fabric of banking and related facilities, multitude of business organizations, corporate and otherwise, and so on. Even in my boyhood days the state of the economy was so simple, with the family farm still a dominant feature, that there was less excuse for becoming befuddled as to the basics of economic behavior. In those days we all knew that we had to work and produce to live.
A sidelight that perhaps should be noticed is the availability of improved communication facilities. One of the great wonders of our time, surely, is the development of means making possible virtually instant communication to everybody, everywhere. But our radios and TV sets can be used for spreading folly as well as enlightenment, and the proponents of economic nostrums have not neglected to take advantage of this fact.
Back in 1896, when William Jennings Bryan first ran for president, he made a great impact with his wonderful voice and oratorical skill, although his "free-silver" monetary program was sheer tommyrot. If he had had the radio at his command — as did Franklin Delano Roosevelt in presenting his "fireside chats," likewise largely nonsense — he might well have won the election.
These few comments, obviously, are an inadequate account of the factors which have resulted in the shift in points of view and the growth of economic illiteracy in the past sixty to seventy years. They leave largely unanswered the crucial question: why have the majority of our citizens become willing to support and accept an array of socialist programs, while still giving lip service to the concept of an economy featuring private enterprise and a system of free markets? I have a few suggestions to offer that have a bearing on this phenomenon.
The Great Delusion
The outstanding delusion with which Americans have become afflicted, and which also plagues a host of our contemporaries in other countries, is the belief that economic problems can be dealt with most effectively by turning them over to the machinery of government. Indeed this belief in the power of government has become so embedded in many minds, throughout our population, as to constitute an article of faith, so to speak, to be taken for granted, immune to critical examination. And this delusion is also our taproot folly, the fountainhead of unsound views and policies. Upon close scrutiny it will be found that most of our misconceptions in the economic field, and the specific proposals and programs that promise what they can’t deliver, are rooted in the almost mystic view that resort to the apparatus of government is the ultimate solution for all economic difficulties and ailments.
The hold that this delusion has upon us is rather amazing in view of the historical record, and the very obvious limitations inherent in government. Any form or level of government is implemented by one or more human beings who has either seized power, by one means or another, or been granted power by some process in which at least some of the folks to be governed have participated. There is nothing mysterious or supernatural involved.
The person or persons functioning as an arm of government—the people that make up any bureau, commission, department, court, cabinet, city council, and the like or fill seats in such bodies as our national and state legislatures — don’t take on heroic proportions, don’t become supermen, simply by putting on the governmental mantle. At the best they are conscientious individuals trying to carry out the duties that presumably go with their positions. At the worst they are tyrants and crooks interested only in power for what they can get out of it, or fanatics and messiahs obsessed with the notion that they have the right to rule and know all the answers.
A Sorry History
The history of all forms of government to date is a sorry one. Governments generally have been inefficient, bloody, lacking high moral standards, and not dedicated to the best interests of the governed group. But a common human failing is the tendency to put on dark glasses when it comes to the lessons that history might teach us.
Having power is a ticklish assignment, in any activity, and restraints are required if those with power are to be kept within bounds. Our founding fathers understood this, and fashioned a remarkable governmental structure, designed to keep both kings and mobs at bay, and to be restricted to a limited set of controls and functions. They would certainly be appalled if they could take a look at the sprawling octopus of coercion that has developed, with tentacles of authority reaching in all directions.
The central concept that is so widely overlooked is that government, like other institutional arrangements, should be regarded as a specialized instrument, not a do-everything mechanism. The intrinsic function of government is to serve as the domestic policeman and to resist aggression from outsiders. And if the world were peopled exclusively by individuals wholeheartedly committed to respecting the rights of their fellow men, coercive government might well fade away to the vanishing point. In the prevailing state of affairs I grant the need for some government, but it would be a blessing if this necessary apparatus would tend to its knitting, not butt into the business of raising potatoes or building automobiles — to say nothing of going to the length of becoming guardian and guide over all our personal activities and welfare from the cradle to the grave.
Moreover, as government becomes overextended, takes on the role of Jack-of-all-trades, it tends to become increasingly inefficient. Anyone who has had any considerable experience in governmental control and operation of business knows very well that this is the case. No government agency is free from the political influences that tend to thwart attempts to improve methods and procedures. Lack of planning, inflexibility, waste, delay, are familiar features throughout government, at all levels.
There is also an inherent tendency for those in government business, even if well intentioned at the start, to become increasingly indifferent to their clients or customers. The history of the U. S. Post Office affords a notorious example. And as citizens become accustomed to the faults of government service, and to the obstacles in the way of making complaints felt, they gradually learn to put up with bad treatment, to take their lot for granted, to lose their inclination to resist.
It should also be noted that government interference in business operation, even if stopping short of a complete take-over, has the unfortunate effect of putting a damper on the initiative and ingenuity of owners and managers, and their technical staffs. An outstanding illustration is afforded by the long history of blundering in the regulation of our railway system.
Our Socialist Trend — Why?
But in spite of the plain evidence of government incompetence all about us, and the chilling impact of government interference and regulation on private initiative, many Americans — including a lot of folks who should know better — clamor for more of the same. Why have we become so benighted? Why do we believe we can have our cake and eat it too? Why is there so much fence straddling, often without awareness? I’ll attempt a brief answer to this query.
First, let’s take note of the efforts of the dedicated and persistent Fabians and Marxists who have long been in our midst. When I began systematic study of economics back in 1912 at the University of Michigan, there were a few avowed socialists on the faculty, and a sprinkling of their like in the student body. These people were not taken very seriously, however, by most of the campus population, and were certainly not regarded with great anxiety, as a possible menace to our way of life. But these advocates of the socialist state were indefatigable in efforts to spread their brand of gospel, and may have had some impact, at least as seed sowers. And perhaps they laid a groundwork that later on facilitated the growth of a swarm of procommunists, fellow travelers, and assorted "anticapitalists," bent on destroying the American system of government and private business enterprise.
Although capitalism has often been accused of fostering armed conflict between nations, the fact is that a condition of war is incompatible with a free-market economy. War inevitably expands the authority of central government and puts a brake on individual initiative and decision making. It seems very clear that our participation in World Wars I and II, and subsequent serious military involvement in the Far East, plus the overhanging fear of armed conflict and resulting vast "defense" expenditures, is the major explanation of the growing subservience to government power that we have been experiencing. And in between the two great war efforts, and in part induced by postwar turmoil and adjustment, came the "Great Depression" of the early 1930s, and the resulting programs for relieving distress, of which President Roosevelt was the master architect — programs that failed so miserably as to encourage said architect to push us into a second tremendous military adventure.
In view of this history, indeed, the great expansion of the mechanism of government, and the encroachment of government into the processes of both production and distribution throughout the economic pipe line, is hardly surprising. Perhaps the wonder is that we still have some vestiges left of a free society.
A Weak Defense
The defense of economic liberty, too, has been feeble and ineffective. Especially from the depression days on, the teaching of economics has been increasingly socialistic in most colleges and universities, taking the form of either downright condemnation of business and the market system or damning capitalism with faint praise. Religious leaders generally, never too well-disposed to private enterprise, have also become more aggressive with their half-baked attacks on American business. And many journalists and writers, growing up in war and depression days, have joined in the chorus of criticism. Even business executives, nominally supporters of economic freedom, have made a sorry showing. I find it hard to forget the way business leaders generally rushed to get on the bandwagon in the days when the effort was made to establish synthetic socialism, almost overnight, through adoption of the NIRA codes. Happily this effort failed because of a decisive ruling of the U.S. Supreme Court of that time. But many business leaders, with a seeming lack of clear comprehension of the essentials of a market economy, still participate in sawing off the limb they are sitting on while continuing to prate about "our system of free enterprise."
Perhaps it should also be noted that the socialist trend in America in the last few decades has been disguised as a great humanitarian movement. We have been making the trek into socialism under the banner of assorted welfare programs, caring for the ailing and unfortunate and the needs of "senior citizens," guarding the interests of consumers, conserving natural resources, cleaning up the environment, and so on. Even at this stage an avowed socialist or Marxist couldn’t be elected president in the United States, but a clever chap who promises that government will control the bad boys in business, and see that we are all well-housed, well-fed, and have an adequate standard of living in other respects, and be our protector, counselor, and guide in all our activities, may well make it.
The current outlook is rather bleak from the standpoint of those who believe that individual initiative and responsibility are characteristics worth preserving in our society. But it’s still important to keep the leaven of that point of view alive in the loaf.