The American Educational Establishment, 1993

What are undergraduates learning about wealth?


John Hospers is professor of philosophy (emeritus) at the University of Southern California, and author of numerous books, including Human Conduct, Understanding the Arts, and Introduction to Philosophical Analysis.

After seventy years, Communism is in eclipse in Eastern Europe. The career of the Total State, planned and carried out by Lenin and implemented by Stalin to its maximum extent, is now history, though what will rise up from its death-throes is not yet clear. Henry Hazlitt described dramatically in his 1952 novel Time Will Run Back what happens when a forward-looking ruler inherits Stalin’s empire. With remarkable prescience Hazlitt delineated the steps which a post-Communist government would have to take to restore a free market to Russia; hardly a word of his account would have to be changed if it were written today.[1] Meanwhile, in other parts of the world, the socialist stranglehold on various economies is being replaced, while not exactly with constitutional republics and a capitalistic economy, at least with regimes less hostile to the conditions for re-establishing economic prosperity.

But not in America. Here taxation and regulation continue apace, and government spending increases in spite of the runaway deficit. The “reality lesson” that hit Eastern Europe has not yet penetrated America, where the clamor for increased government services helped to swing the 1992 presidential election.

The Current Intellectual Climate

One might have expected that American higher education would spearhead the move toward economic freedom. But this has not occurred. The change, as historian Paul Johnson recently observed, “was certainly not the work of intelligentsia, of philosophers, economists and political theorists, or of academics generally. The universities had little or nothing to do with it, just as they had played virtually no part in the first Industrial Revolution of the late eighteenth century. Indeed, while Marxism was being progressively abandoned by the governments which had once ardently propagated it, it continued to be upheld and taught only in that traditional home of lost causes, the university campus.”[2]

As one who has taught numerous courses (including courses in political philosophy) on a university campus, I have had many occasions to observe the level of knowledge (or lack of it) among a succession of undergraduate students, and to take note of some of the books the students are required to read in various courses. Among the gems of economic wisdom which my students (and those of other instructors with whom I have compared notes) typically bring to these classes as “general background,” the following are just a few examples: (1) The reason why so many people are poor is that too many other people are rich. (Wealth is, apparently, a zero-sum game.) (2) The country would be better off if the rich were taxed more. (And if you tax the wealth-creators, what happens to the wealth and jobs and investment in future enterprises?) (3) To get more people employed, the government should put lots of people to work. (But public-sector jobs only increase everyone’s tax burden; only the private sector can create more revenue and erase debt.) (4) Businessmen don’t have a social conscience. (But they do create jobs—isn’t that better than giving people handouts?) These bits of economic wisdom could be multiplied indefinitely.

In the humanities at least, personal wealth is viewed with disdain: it is “noble” to forgo wealth (or at least to say one will do so) in order that prosperity can be “spread out more evenly among the people.” It is felt that government should have a tighter hold on the economy, so that income can be distributed more equitably. Many students, when asked whether they would prefer a society in which the distribution of wealth was 5-5-5-5-5 (assuming a society of five people) or one in which it was 5-10-100-500-1000 (as under capitalism), preferred the first, because “at least then no one would have more than anyone else.” (“What a dilemma,” Manuel Ayau said of this. “Poverty is bad, and everyone wants to see it abolished. Wealth is the absence of poverty. But wealth is evil. Yet only through the accumulation of wealth can investment occur, and without investment, there is only poverty.”[3])

Textbooks of the Welfare State

I shall describe briefly just a few of the books that are considered “hot items” in academia, which leave little mystery as to how such ideas are perpetuated. Most of these books are not written for the general reader, and remain quite unknown outside colleges and universities. They are not sold much outside university bookstores, and the public in general is unaware that these publications exist, and of what impact they may have on those who are assigned to read them.

According to Professor Nicholas Rescher, in two books, Welfare and Distributive Justice, the “problem of production” has been solved; technology will produce all the goods and services we need. The only remaining problem, he says, is that of distribution. The author then devotes his energies to determining how our “national resources” can be equitably distributed among the population.[4]

What should be the criteria for making this distribution? The first plausible criterion, he believes, is that of equality—that every person (or family?) should receive an equal income, just as everyone should be equally protected against crime. Satisfying this criterion would require the government at regular intervals to take from those who have more in order to give to those who have less, thus making poverty obsolete. Another plausible criterion is that of effort; people who work longer or harder should receive more than those who do less or do not work at all. There is, of course, a conflict between these two criteria in practice, and some accommodation between them must be effected. Still another suggested criterion is “conduciveness to the common good”: those who engage in activities helpful to others (such as social work) should be encouraged in their efforts by receiving more than those (such as manufacturers) who are not engaged in such socially constructive activity. And hovering over them all, there is the criterion of need: surely those who need more should receive more, and it should come from those who do not need it. He follows Anatole France’s dictum that “no one should have cake until everyone has bread.”

I will spare the reader the details of the analysis by which these various apparent conflicts are thrashed out. Common to them all is the assumption that the government should control the economy in the interests of "social justice.” Not everyone’s income need be equal, but no one should lack economic goods, and only the government is in a position to enforce the kind of distribution required if everyone is to escape poverty.

The most influential book in political philosophy of the past half century is John Rawls’ A Theory of Justice.[5] Rawls proposes a semi-socialistic scheme in which everyone’s “basic needs” are assured by the government. There can be some inequality of condition, but this inequality is subject to strict limitations: “All social primary goods—liberty and opportunity, income and wealth, and the bases of self-respect—are to be distributed equally unless an unequal distribution of any or all of these goods is to the advantage of the least favored.”[6] In deciding on any social policy, “we are to adopt the alternative the worst outcome of which is superior to the worst outcomes of the others.” The utilitarian rule “the greatest happiness for the greatest number” is transformed into “the greatest good for the least advantaged persons in society.” If the least advantaged persons in society are not benefited by a given policy, it should not be adopted, no matter how many other persons it may benefit. “Consider the worst that can happen under any proposed course of action, and decide in the light of that.”

Rawls does not provide examples, and we are left to wonder exactly how this would work out in practice. Almost any innovation that has lightened mankind’s drudgery and heightened his standard of living has surely made some people (however few) worse off than before. Surely the makers of buggies and covered wagons were “disadvantaged” by the invention of the automobile, just as the makers of sailing ships were made worse off by the invention of steamships a century earlier. If one were to prohibit any innovation that made a person or group worse off than they would have been without it, it would be difficult to find an example that would not be on the prohibited list.

A recent book in the same area is James Sterba’s How to Make People Just,[7] which has won enough academic publicity to be the subject of an entire issue of the journal Social Philosophy.[8] Sterba divides society into two groups, “the rich” and “the poor”; sometimes he refers to the first group as “the fortunate” and the second as “the disadvantaged.” The primary task of government is to make the second group less disadvantaged by making the first group less fortunate. The members of the first group are regularly referred to as “the exploiters.” “Capitalist exploitation,” says Sterba (p. 57), “differs from criminal activity only in that it is supported by conventional standards.” And if the capitalist exploiter refuses to turn over a portion of his income to these “disadvantaged,” then the disadvantaged have the right to take it away from them by force. “What is at stake is the liberty of the poor not to be interfered with when doing what is necessary to satisfy their basic needs from the surplus possessions of the rich” (p. 86).

The entire discussion proceeds from the point of view of the consumers of wealth (what are their needs and how can these be satisfied?) and never the producers of it. Indeed, capitalists are not recognized at all as the producers of wealth or providers of jobs or creators of capital to fulfill the desires of consumers. The producers of wealth are treated merely as means to the satisfaction of the needs of the non-producers. Any time or effort or planning they may have put into the process of production is never mentioned—they are milch-cows to be valued only for the goods and services that can be extracted from them. The fact that when the extraction has become very great, production falters or ceases, is never considered even as a possibility, and no historical lessons on this subject are ever cited. It is apparently assumed without question that the process of production will just go on and on, regardless of whether the producers are ever permitted any reward for their efforts. Nor is there any sense that under capitalism the standard of living has grown enormously, so much that most things that today’s Americans take for granted would have been undreamed of in George Washington’s day:

George Washington never heard of calories or vitamins; he lived on meats and starches through every winter; he never saw a glass of orange juice; his diet was so deficient that he lost his hair and teeth at an early age. His clothes were uncomfortable and unhygienic. He traveled on foot, on horseback, or in a springless carriage. His house had no toilet or bathtub, no furnace or heating stove, no light but candles. What was his standard of living? It was so high that forty years ago not one American in ten thousand aspired to it.[9]

Poverty—A Decree of Fate?

A question that leaps out (at one reader at least) of every page of Sterba’s book is a question he never asks: How did they (“the rich,” “the poor,” “the advantaged,” “the disadvantaged”) get that way? Is their condition the result of an inexorable decree of fate, or could they possibly have done something, or failed to do something, which placed them in their present position—and if so doesn’t this matter?

In the choices we make from day to day as individuals, we try to distinguish various degrees of worthiness among the candidates for our assistance. If a person we know is suddenly unemployed through no fault of her own, or if a person is ill or so handicapped as to be unable to work, then, if we are able, we give help to the person. But we do not always feel obliged to do so even if we are able: if we have warned a person against a course of action, and he embarks on it anyway and suffers financial hardship as a result, we do not feel as moved to assist him as we would if he was a victim of (for example) a paralytic stroke. Or if he is able-bodied but is looking only for that special highly paid job that alone will reward his great talents, and he refuses to accept any other, or if he refuses even temporarily to do labor that he finds “demeaning,” we may be less than sympathetic to him in his present plight. If a person can keep a job for only a day or two because, having spent years taking mind-altering drugs so that now most of his brain is gone, and he now lacks the span of attention required to understand even the simplest directions, we may be less inspired to help him than if his past behavior had nothing to do with his present condition. Rough classifications such as “the poor” and “the unemployed,” which pervade virtually all of the current crop of textbooks, are not specific enough: they do not distinguish among the causal factors that led to a person’s being assigned this classification.

Describe the specific case for me in detail, and only then may I know what to say; if I know only that he is poor, I do not yet know what I need to know to judge the case, or even to judge whether the fatalistic term “disadvantaged” applies to him. One first has to dig a bit to get the facts. “They make me unemployed,” he may say; “if they’d lend me the money to buy a truck I’d make the payments every month, but they won’t do it” (implication: it’s their fault). Perhaps what he says is true; yet it is possible that there are good reasons why he is denied credit: perhaps he quit previous jobs on an impulse (“I want to be free”); perhaps he would have a few extra drinks at the bar instead of making that required repair on his vehicle, as a result of which it would not function the next day when he needed it most for an important job.

The variations are endless. It may take some time for the uninitiated to discern the pattern in the lives of many people which keeps them in the category “the less fortunate.” When one sees this, one cannot simply blame the economy, or the bankers, or the hard-hearted employers; one must pinpoint the person himself, and reflect that these patterns of action which lead always to unemployment arise from within himself (perhaps it’s easier to complain and collect welfare than to get up for work early each morning?). If one buys his story and helps him, and he is in the same situation again in a few days or weeks, may there not be a lesson in this? Sterba’s proposal, that we should all be required by law to help him (and all those like him), as long as his income falls below a certain level, will only perpetuate his inclination to dependency. Simply placing people into two classes--those who should receive, and those who should be made to give to those who receive--fails to consider these countless factors that are essential to making considered judgments on a case-by-case basis.

In our voluntary dealings with others, we feel free to exercise our individual judgment as to whether a certain person, all things considered, should be found worthy of our help. Sterba, like predecessors, rejects individual help voluntarily provided, in favor of help to all persons in a prescribed class (“the poor”) provided through the coercive machinery of the law. We are no longer permitted to exercise our individual judgment about the cases before us. We are required to help sustain all those in a given category, and not permitted to consider what are the conditions which brought them into that category. But the thrust of all this is the very opposite of what it should be; the first question to ask, I suggest, is always a specific one: Does this person, in this circumstance (say a man who is able-bodied but rather disinclined to labor) deserve to be supported at public expense? Would you support him in these circumstances? If not, what is your justification for passing a law that requires everyone to support him?

One might summarize the attitude of the proponents of such a law: “The cause I believe in is so important that I will gladly force you to pay taxes to support it.” One may judge for oneself how noble this liberal rallying cry really is.

Concluding Reflections

There are many other reflections that would be too obvious to mention to readers of this magazine, but deserve mention here because they remain virtually unmentioned in the current crop of textbooks. (1) Once welfare programs become generally available, the class of ”the poor” soon becomes much larger than before. When something is available without cost, people outdo one another to receive it. (2) Care of the poor can come only from the surplus of production; it is on this surplus that all charity depends. One would think, then, that every effort would be made to ensure that the source of this bounty remain secure. But such concern is seldom hinted at. It is not seen that the final outcome of income-equalization is “splendidly equalized destitution” for everyone, and that this is the inevitable consequence of plundering those who have produced the world’s goods in order to give them to those who have not. (3) Nor is there any recognition, in speaking of “society’s goods” (with a view to how these can be distributed) that “society” is only a collection of individuals—that all production is the result of the labor of individuals. The collectivistic assumption (“we all did it together”) is simply false.

It is difficult to escape the conclusion that if followed through consistently, the world that Sterba and the others recommend would be a depressing one to live in. It would be a world characterized by original sin—social, not theological; a world in which every new individual born adds to the burden each of us must bear. I am not responsible for that new person being born (I may even have championed population control), yet I am obliged to help take care of that person’s needs, and do without many of the good things life has to offer in order to provide for each of these person’s “basic needs” (however “basic” may be defined):

Do you care to imagine what it would be like, if you had to live and to work, when you’re tied to all the disasters and all the malingering of the globe? To work—and whenever any man failed anywhere, it’s you who would have to make up for it. To work—with no chance to rise, with your meals and your clothes and your home and your pleasure depending on any swindle, any famine, any pestilence anywhere on earth. To work—with no chance for an extra ration, till the Cambodians have been fed and the Patagonians have been sent through college. To work on a blank check held by every creature born, by men whom you’ll never see, whose needs you’ll never know, whose ability or laziness or sloppiness or fraud you have no way to learn and no right to question.[10]

Sterba begins with the noble thought that no one should want, that everyone should be economically secure—and concludes that economic security is everyone’s right. The rich, apparently, have economic security already, and Sterba’s task is to make sure that it is also provided for the poor. But surely the truth is, that no one in the world has a very high degree of economic security. In the attempt to provide it for everyone, there is great risk that those on whom everyone depends for goods and service will lose it, with catastrophic results for everyone. In fact no one’s economic future is very secure, as Rose Wilder Lane brings out dramatically:

Anyone who says that economic security is a human right, has been too much babied. While he babbles, other men are risking and losing their lives to protect him. They are fighting the sea, fighting the land, fighting diseases and insects and weather and space and time, for him, while he chatters that all men have a right to security and that the government must give it to them. Let the fighting men stop fighting this inhuman earth for one hour, and he will learn how much security there is.

Let him get out on the front lines. Let him bring one slow freight train through a snowstorm in the Rockies. Let him drive one rivet to hold his apartment roof over his head. Let him keep his own electric light burning through one quiet cozy winter evening when the mist is freezing to the wires. Let him make, from seed to table, just one slice of bread, and we will hear no more from him about the human right to security.

No man’s security is greater than his own self-reliance. If every man and woman did not stand up to the job of living, did not take risk and danger and exhaustion and go on fighting for one thin hope of victory in the certainty of death, there would not be a human being alive today.[11]

The tragedy of today’s welfare-society planners is that they remain quite unaware of the kind of society to which, if their plans were fulfilled, they would be condemning the very groups of individuals whom they take such pains to protect.

When one reads with wearisome repetitiveness such recommendations for a socialist or semi-socialist society, one turns with relief to other sources, largely unmentioned in the halls of Academe, in which sanity is restored. Students have never read Bastiat, or even been informed that such a man existed; yet one sentence of the rigorously elegant prose of Bastiat seems worth thousands of words spewed forth by those who have too long ignored him. He expressed the fundamental principle with incomparable clarity:

Man struggles against pain and suffering. However, he is condemned by nature to suffering and to privation if he does not take upon himself the effort of work. Hence he has only the choice between two evils . . .

Up to now, however, no remedy has been found for it, except for one man to avail himself of the work of others . . . so that all work is for the one and all enjoyment for the other. Hence [we have] slavery and robbery.

[Today] the oppressor no longer directly compels the oppressed through his own strength. There is still a tyrant and a victim, but now the state, i.e. the law itself, is placed as a mediator between the two. What could be better for the purpose of stifling our doubts and vanquishing all resistance? We turn to the state and say to it: I find that between my enjoyment and my work there exists no relation that satisfies me. In order to bring about the desired balance, I would like to take away a little from others.

However, that would be dangerous were I to do it myself. Can you, state, facilitate matters for me? Can you not assign me to a favorable position, or assign a more unfavorable one to my competitor? Can you not grant me a special “protection” and, not without plausible reason, lend me capital which you have taken from its possessors? Or, can you not educate my children at public expense? or guarantee me a carefree life from age 50 onwards?

In this case the law would be acting for me, and I would have all the advantages of exploitation without its risks and its onus.[12] []

  1.   Henry Hazlitt, Time Will Run Back, Appleton-Century-Crofts, 1952. Reprinted by Arlington House. Also published as The Rediscovery of Capitalism.
  2.   Paul Johnson, Modern Times: From the Twenties to the Nineties, revised edition, Harper, 1991, p. 698.
  3.   Manuel Ayau, president of the Universidad Francisco Marroquín, Guatemala City, in a university pamphlet entitled “Yes, We Have No Bananas.”
  4.   Nicholas Rescher, Distributive Justice, Bobbs-Merrill, 1966, and Welfare, University of Pittsburgh Press, 1969.
  5.   John Rawls, A Theory of Justice, Harvard University Press, 1971.
  6.   Rawls, op. cit., p. 62. There are many other aspects of Rawls’ view. I discussed some of them in my review of Rawls’ book in The Freeman, December 1973 issue (pp. 751-758).
  7.   James Sterba, How to Make People Just, Rowman & Littlefield, 1988.
  8.   Social Philosophy, fall 1991 issue.
  9.   Rose Wilder Lane, The Discovery of Freedom, Arno Press and New York Times, 1943, p. 25.
  10.   Ayn Rand, Atlas Shrugged, Random House, 1957, pp. 669-670.
  11.   Rose Wilder Lane, op. cit., p. 60.
  12.   Frederic Bastiat, “L’État,” in Journal des Débats, September 15, 1848.


December 1993

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