When John F. Kennedy attacked economic "myths" in a famous speech at Yale University, he opened a Pandora’s Box. For everybody’s been talking about "myths" ever since—and the talk has resulted in the cultivation of far more monstrous myths than any that are in course of being demolished.
Bernard Nossiter’s The Myth-makers: An Essay on Power and Wealth (Houghton Mifflin, $4) is a distinct case in point. There are some good things in this book, notably the sections that deal with automation. But for the most part Mr. Nossiter accepts the newer mythology without questioning it.
For example, he swallows the Gardiner Means thesis about administered prices hook, line, and sinker, talking with plausible pseudo sophistication about "target pricing" as if the mere desire to sell a "standard volume" at a price guaranteed to pay a fixed amount of profit were certain of automatic fulfillment. The enormously significant work of A.D.H. Kaplan, whose Big Enterprise in a Competitive System shot the Means thesis full of holes, is not brought to bear on the discussion. What Kaplan proved, in the preferred modern statistical manner, is that the big are not eating up the little; that the list of the 100 largest corporations is in a constant state of flux; that price competition, frequently spurred by the availability of substitute items, is just as fierce as it ever was; that even in industries dominated by a Big Two or a Big Three or a Big Four there is "workable competition"; and that the worst price stiffnesses are to be found in nonconcentrated areas such as the building trades. These uncomfortable facts are mistaken for myths by Mr. Nossiter, who mentions the Brookings Institution three times without recognizing that it was Brookings which sponsored Professor Kaplan’s authoritative study.
Competition in Steel
Mr. Nossiter’s unwillingness to face facts which tend to vitiate his own pet theories crops up in a hundred little ways. He disputes one of J. Kenneth Galbraith’s more irrefutable ideas, that strong sellers beget strong buyers. There is no reason to believe, so Nossiter asserts, that General Motors, a strong buyer, can have much effect on a strong seller like U.S. Steel. No? Well, General Motors helped finance the McLouth Steel Company; and (to generalize the argument) the Ford Motor Company built its own steel plant at the River Rouge. Again, the automobile manufacturers winked three times when National Steel, a maverick, decided to acquire manufacturing facilities in the Detroit area. A further check on U.S. Steel, as a strong seller, is the fact that aluminum and plastics are acceptable substitutes for iron or steel for some parts of an automobile. Moreover, if big steel companies refuse to reduce their posted prices, is this any guarantee that they don’t shave their "administered" figures by hidden concessions, such as absorbing certain charges?
The whole area of hidden competition is something that economists like Mr. Nossiter tend to ignore, probably because it would take good detective work to ferret its secrets out. For myself, I know that my father, who sold furniture for sixty years, had one price in his window, and another price if he really had to make a sale to clear out inventory or to retain a customer for the future. Is there any reason to believe that this sort of competition isn’t universal any time there is a buyers’ market?
Mr. Nossiter belabors the case of steel, but he also says that steel "is not unique." This brings him to the question of monopolistic "union-employer alliances." He speaks of the Teamsters Union practice of giving concessions "in terms of its contracts to large truckers" which "thereby promotes President James Hoffa’s aim of eliminating the smaller firms." Admittedly, this is a nefarious state of affairs. But how successful is it in eliminating competition? At this moment the New York Central Railroad is just about to start a new service in handling dry bulk cargoes such as cement, plastic pellets, and so on. Using high-powered pneumatic pumping equipment, the Central can now transfer cement from a train to a short-haul truck without the expenditure of much time or money as measured by man hours. Since Hoffa has pushed trucking wages to a high point, the Central expects to undercut the long-haul trucking companies in an extremely important type of business.
Fact or Fancy?
It is this sort of thing that Mr. Nossiter ignores. He is also guilty of a distorting type of selectivity when he deals with history. For example, he says that American steel makers "spurned" for a full decade the new basic oxygen steelmaking technique which was developed in Europe in the early nineteen fifties. He quotes a Bethlehem Steel man as saying, "We don’t want to invest in a facility unless it will return, on the average, 20 per cent before taxes operating at 60 to 70 per cent of capacity." Well, Bethlehem, for its own good reasons, may have said that—but the fact is that the Jones and Laughlin Company went ahead a long time ago with the basic oxygen furnace, and now all the companies are following the J. and L. lead.
Mr. Nossiter is addicted to some crazy logic, often within the compressed space of a single paragraph. Thus, on page 63, he says that U.S. manufacturers spent $13.3 billion a year for new investment between 1958 and 1962. During this period, he says, "18 percent of their productive capacity was idle." Then he adds a statement that when plants are unused, "corporations are less inclined to push ahead with new investment." This may be perfectly true as a general observation, but hasn’t Mr. Nossiter just pointed to some $66 billion of new investment over the 1958-62 span? It is a strange logic that says when you invest, you don’t invest. But such logic crops up in several places in Mr. Nossiter’s book.
After plowing through pages of non sequiturs and distortions, it is a pleasure to come upon Mr. Nossiter’s discussion of automation. He points out that after World War I, the yearly gain in labor productivity was 2.7 per cent. By contrast, the yearly gain between 1950 and 1961 was 2.4 per cent. Yet the decade of the fifties was the one in which everybody was talking about what automation was supposedly doing by way of making productivity so efficient that it must eliminate the human hand and eye from payrolls.
Mr. Nossiter deduces from his comparative figures that the "pace of this displacement" of workers "has not broken into fresh ground." Says Mr. Nossiter, it is a "lack of total demand," not automation, that is the cause of "rising unemployment." This would seem to be obvious enough. But Mr. Nossiter does not tumble to the certainty that the government drag on the economy, whether it is expressed in terms of taxation, inflation, or bureaucratic interference, is far more a cause of unemployment than it is a consequence of it.
Mr. Nossiter takes issue with General Motors for wanting to earn 20 per cent on its investment "after taxes." He then objects to the high price of cars, as if the earnings target were to blame for prices. To my simple-minded way of looking at things, it seems obvious that if there hadn’t been a corporation profit tax of 52 per cent, plus innumerable taxes on practically everything that goes into a car, GM could have really lowered its prices. The "20 per cent after taxes" has little to do with the case, for GM would need a similar spread even in a low-tax economy in order to keep up with the competitive and innovating parade.
Mr. Nossiter is a national economics reporter for the Washington Post. He lives in Washington. One suspects that his book would have been vastly improved if he had only lived in Pittsburgh, Pennsylvania, or Cleveland, Ohio, where one can actually see men going to work in factories.
THE MESSIANIC CHARACTER OF AMERICAN EDUCATION by Rousas J. Rushdoony (Nutley, New Jersey: The Craig Press, 1963, 410 pp. $6.50).
Reviewed by Robert M. Thornton
Many there are who criticize current aspects of education without examining the underlying philosophy. Now Mr. Rushdoony has given us a history of educational philosophy in this country since the days of Horace Mann, and once again—as in Intellectual Schizophrenia—he gets down to bedrock.
In the Judeo-Christian tradition, the individual person takes priority over all collectivities. "Man is thus not a social animal who must run in the pack, and whose life is comprehended in the state, nor is he the creature of society or the state, but always and only the creature of God…" But the "basic presupposition of modern education" is "that man, a creature of the state, is truly man therefore in terms of the state rather than God." It is the widespread acceptance of this concept of man, says Rushdoony, that has led to the dangerous state of American education today.
In this age of the master-planner and social engineer the schools are used as "religious and political instruments for the total reshaping of man and his society and the conditioning of the child in terms of that way of life." The concept of man as a responsible creature is denied when he is viewed as a mere product of determining forces quite beyond his control. The school is to replace the family and "attend to the entire training of children—to be responsible for bodily health, intellectual training, and moral culture…."
Obviously, there are no easy remedies for the ills that beset American education. The basic premise of that philosophy must first be understood, and then refuted. Then drastic action is required; nothing less than the "radical disestablishment of the schools, the separation of school and state." This would, of course, be done by repealing the laws which make school attendance and school support compulsory. This accomplished, parents and not the state would have the responsibility for the education and training of their children. But here’s the rub. Parents today seem not at all reluctant to shrug off their responsibilities onto the school, the kindergarten, the nursery school, and the Sunday school.
What would happen if school support and attendance were no longer compulsory? We have had public schools as long as anyone now living can remember, so it is difficult for many people to imagine how we might get along without them. But Professor Carson, writing in these pages some months ago, reminded us that until the middle of the nineteenth century there were no state schools in this country, but only independent schools (state and independent are more accurate than public and private with respect to the description of schools). Church attendance and support, on the other hand, were compulsory in the early years of our country. Now that the situation is reversed, is there any great shortage of church buildings or a decline in church attendance? Are clergymen starving because they must depend on voluntary gifts to pay their salaries?
Today there are many who clamor for separation of church and state—even to the absurd extreme of equating Bible-reading in public schools with the establishment of a State Church. But many of these same persons do not see that the reasons they might advance in support of this separation of church and state apply equally to the relation of school and state. It is especially disheartening to see the churches acquiesce in the state’s claim that individuals belong to it and not to God.