A Reviewer’s Notebook – 1959/7

It is the test of an enduring classic that it has the ability to maintain an underground life dur­ing periods when its spirit or its morality or its lesson is not in fashion. andrew Dickson White’s Fiat Money Inflation in France, which has just been republished again by the Foundation for Eco­nomic Education with an introduc­tion by Henry Hazlitt (128 pp. $1,25 paper; $2,00 cloth), is such a classic. Both its spirit and its morality are old-fashioned, and its lesson (though inexorable) has been honored more in the breach than in the observance. But it has always come back, a source of in­disputable fact and wisdom for the discerning.

This time the republication of Fiat Money Inflation in France, with its many prophetic intima­tions, promises to have a major impact. The battle for and against inflation rages in Washington, with the tide seemingly running strongly against the stalwart few who object to the notion that gov­ernments are instituted among men to serve as grab-bags, In the country at large, however, the whole rigmarole of “social demo­cratic” economics (intervention­ism, Keynesian spending, the sac­rifice of all other values to the fetish of full employment) com­mands less intellectual prestige than it did a few years back. And in Europe, where the social demo­cratic ideas have raged through country after country like a plague, a real libertarian revival seems to be taking place in govern­ment itself, As is generally known, the ideas of Mont Pelerin Society libertarian professors have been dominant in West Germany for al­most a decade, More recently these ideas have crossed the Rhine: Charles de Gaulle has been taking his economic cues from Mont-Pelerinian Jacques Rueff, whose program calls for a stabi­lized and convertible currency, a balanced budget, fewer subsidies, and a relaxation of trade controls—in short, an end to inflation it­self.

The “movement of ideas,” then, should guarantee a more willing acceptance of certain deductions drawn by Henry Hazlitt from White’s pungent historical essay. The usual argument for inflation is that it favors the debtor classes, who are usually thought of as the poor. But Mr. Hazlitt, drawing upon White’s facts and reinter­preting them to fit the contempo­rary United States, notes that it is the rich who are ordinarily the chief debtors in any advanced eco­nomic society. Says Mr. Hazlitt: “In the United States today the chief debtors are the stockholders of the corporations,.., The credi­tors include the holders of life in­surance policies, and of govern­ment bonds, large and small,.,.” Whom, then, does inflation help? And whom does it hurt?

As Mr. Hazlitt says, “A poor man never gets to be a big debtor,” The only way the poor man can protect himself against inflation in our modern society is to belong to a union which has a monopolis­tic position, In French Revolu­tionary times there were no such unions, which meant that the fiat money inflation bore down most heavily on the very people whom the revolutionists professed to serve, But even today most work­ers aren’t in a position to get the “cost of living” increases that are becoming standard items in the “packages” demanded by the few big unions, Inflation, in the mod­ern United States, helps an aris­tocracy of labor; it bears down cruelly on a vast host of workers who either do their own individual bargaining or operate on a con­tract basis for themselves.

Andrew D. White (1832-1918)

Andrew Dickson White was a professor of history, an educator, and a diplomat; he helped to es­tablish Cornell University in New York State, and he led a famous campaign for the “equality of studies” in the post-Civil War era, His educational ideas, carried to excess, have done some harm, for they have led to the absurdity of giving college degrees for taking courses in flycasting, beekeeping, and home economics, When White was fighting against the primacy of Latin and Greek, however, it was the basic theoretical underpin­ning of science itself that was be­ing left out of account. To White, it seemed senseless to regard a Latin scholar as the social supe­rior of the chemist, the civil engi­neer, or the economist. Something had to be done to bring the post-Civil War university abreast of the modern world; hence, White, a realist, accepted the challenge.

As a historian, he looked for uni­formities of experience that might be formulated as natural law. When he was president of Cornell, the whole American West was seething with inflationary ideas, There was Greenbackism; there were the Free Silverites. William Graham Sumner’s History of the American Currency was replete with grisly instances of the work­ings of Gresham’s Law whenever the effort was made in the United States to build prosperity on irre­deemable paper, Because of the safety valve of the American fron­tier, however, the full force of in­flation had never been felt on these shores. There was always a new horizon for the indigent, the tem­porarily ruined, or the immigrant without a stake.

Monetizing Church Lands

To uncover the workings of the natural law of inflation, White, in a paper read before the Union League Club of New York in 1876, went back to the French Revolu­tionary experience with the as­signats and the mandats, paper money based on the properties which had been seized by the “peo­ples’ ” State from the Church or forfeited by emigres, The leaders of the French National Assembly thought they were being inordi­nately clever in making their first issue of paper money a mortgage on “a landed domain vastly greater than the entire issue.” And, since land acquired for paper money could be held for an indefinite pe­riod pending the return of finan­cial probity, or sold on the market for solid cash, the dodge might have worked if the national au­thorities had had the good sense to refrain from repeating it, With­in five months of the first issue, however, the new Revolutionary regime succumbed to temptation and issued a second batch of paper livres, In the following year—1791—the inflationary debauch was on,

Good men—the economist Du Pont de Nemours and the brilliant cook, Brillat-Savarin, were among them—warned against any issue of paper money, Other good men—Mirabeau, Talleyrand—thought a little inflation, just a very little, might be a good thing, But when Talleyrand argued that the effect of a second issue of assignats might be different from that of a first, he was overruled by an As­sembly that had tasted blood, White, in the course of a wonder­fully animated narrative, notes a “law of acceleration” that seemed to be at work as one inflationary issue of assignats followed another. When prices went out of whack with the inevitable depreciation of the circulating medium, the ex­tremists in the Assembly took over, Naturally, they turned to force, Price-fixing—the notorious Law of the Maximum—was in­voked in 1793. Then rationing was added. To make sure the merchants obeyed the Law of the Maximum, a spy system was organized, The death penalty was prescribed for anyone who refused to accept pay­ment in assignats, or for anyone who violated the Maximum laws.

With the guillotine poised above the throats of virtually all shop­keepers, farmers, and manufac­turers, it is scant cause for won­der that the people of France ceased more and more to do any business whatsoever, It was much safer to go on relief—even though the bread distributed by the au­thorities was sometimes indigest­ible. Speculators, however, knew how to protect themselves. With a great show of virtue they willing­ly did business, buying up land and goods for vast amounts of worth­less paper. Meanwhile, they bribed the legislators and dressed their wives in vulgar finery as the tone of “society” became more and more raffish, The speculators “un­loaded” their paper on the people before prostration set in.

Inflation, as Mr. Hazlitt points out, is always followed—in the end—by a “stabilization crisis,” In the France of 1799, the “stabili­zation crisis” produced Napoleon, a dictator, When the dictator re­fused to have any more traffic with assignats or mandats, France be­gan a long and painful convales­cence. Along with the dictator the French people got fifteen years of debilitating warfare, a vast blood­letting carried out in the name of la gloire. And all because, in 1790, a few men had decided that a little nip of inflation might be a good thing.

Other Causes of the Revolution

There were many other ele­ments, of course, that fed the flames of the French Revolution, First of all, there was the theory that all the people of a nation must be bound in all matters by the “general will” (meaning a 51 per cent vote) , Secondly, there were the linked “scientistic” ideas that man is perfectible and that the State can be the instrument of mak­ing his perfection a reality, Third­ly, there was what Frank Chodorov has called the operation of the Law of Parsimony—meaning that a steadily increasing number of people will cease to work for a liv­ing in any State that is philosoph­ically committed to supporting its citizens, Inasmuch as the French Revolutionary theorists believed what they believed, the inflation was probably an inevitable by­product of a general state of mind, But this does not invalidate White’s essay in the least. White does not say that inflation “caused” the excesses of the Revolution, He does indicate that it helped to in­tensify and prolong the excesses, And that is quite enough.

Four Days in July by Cornel Lengyel (New York: Doubleday & Company, 360 pp, $4,95)

Reviewed by E.A. Opitz

The full story of the Declaration of Independence is the whole his­tory of human liberty. The story of the Continental Congress which adopted that Declaration is a chap­ter in that history, one of the most important chapters. The Declara­tion sets forth the conviction that political liberty is part of the cov­enant between a man and his Maker, The general assumption hitherto was that such liberties as a man was permitted to exercise he had on loan from the sovereign­ty—variously conceived as the king, the society, or the majority. The Declaration stepped off, not so much in a new direction as into a new dimension, by resting sover­eignty in the Creator who endows men with the full stature of their humanity.

It may be accepted that the phil­osophical side of the Declaration is the most significant part of the story, but the importance of the human elements must not be over­looked, History is mostly biog­raphy, and the prime movers in the Continental Congress are men of such large caliber that its story is to some extent their story, And their story can be well and fully told, for these men were letter writers, diarists, and conversation­alists, Their day by day record of the great events in which they par­ticipated is voluminous and still available, Thus, one may tell the story of the Declaration of Inde­pendence in the words of the men who framed it, We can almost sit in on the debates which preceded its adoption,

The events in Philadelphia are brought to life in Cornel Lengyel’s book. It reads like a novel, but the author cites his sources chapter by chapter and assures us that the speeches and conversations, except for minor interpolations, are ver­batim, The purist who insists that history must be footnoted and dull may have a point or two to support his preference; there is some sub­ject matter better treated in small screen black and white rather than in Cinerama, But three dimen­sional color has a real place, and there is a place for books like Four Days in July, especially when they are as well done as this one,

Some of the men who figure prominently in Lengyel’s book air their religious opinions in a recent compilation entitled In God We Trust—insofar as these opinions can be revealed by excerpts from letters and other writings (Nor­man Cousins, editor. New York: Harper & Bros. 464 pp, $5.95) , The book is hardly a contribution to the literature of religion, because the real religion of the Founding Fathers is something which can only be inferred from the premises on which they habitually acted,

There is an old Latin motto which is rendered freely as “Our studies vanish into attitudes,” The Founding Fathers were legatees of a great religious tradition which had shaped in them the high stand­ards of courage, probity, and mor­als by which they lived. They be­lieved in a Supreme Being, to whom they were polite, and they hoped for immortality, but with­out enthusiasm. They had their religion by osmosis, not by conta­gion, Faith was a private matter, “I never told my own religion,” wrote Jefferson, “nor scrutinized that of another.” The fruits of re­ligion were visible in their lives, and for this we honor them,

In God We Trust is a useful piece of Americana. We under­stand our own history better when we know the religious opinions of the men who helped launch the American experiment. They un­derstood what some churchmen have never realized, that compul­sory religion is a contradiction in terms. By God’s grace, the Found­ing Fathers were not theologians, else the country would have been stillborn! They were gentlemen, and their abhorrence of religious conflict gave us the great principle of religious liberty.