All Commentary
Sunday, October 1, 1972

A Reviewer’s Notebook – 1972/10


Somewhere, so George Roche III believes, the American people took a wrong turn. It was not that their values were wrong — their forebears had come to the New World in order to find space for individual development. The American wanted to be “his own man,” to carve out a business, or to develop himself culturally, morally and professionally, without having to ask permission from those who had been placed above him in a social environment that enforced status. But, in coping with a big continent, the American somehow permitted technology to create what Dr. Roche calls “enmassment.” The big organization bred collectivism, with all its corroding effects on the freedom of the individual to be himself.

What was the nature of the mistake that led to “enmassment”? In The Bewildered Society (Arlington House, $8.95), a book which the author describes as a strange mixture of “puffs and pans,” Dr. Roche tends to blame everything on the propensity of baffled human beings to try to fight fire with fire. His description of what happened is compelling. The genius of a free people unleashed tremendous creative forces in an open environment. Seeking the advantages of “economies of scale,” our Rockefellers, Carnegies and J. P. Morgans turned little companies into big companies, using the special legal advantages accorded to the corporation to gain ends that had a tremendous potential both for good and for bad. If men had only been willing to tackle their environment without asking for special favors from government, so Dr. Roche avers, the railroads, the steel companies, the oil refining companies and the real estate operators would have developed in an orderly way that would not have hurt the little man. But the temptation was too great: the State, throughout the nineteenth century, had too much to give, and it was in the cards that forceful and adaptive men would combine to conjure special advantages out of the Great Benefactor in Washington.

Men Are Known By the Company They Keep

Dr. Roche is ambivalent about the men whom Matthew Josephson called the Robber Barons. They are to be blamed, so Dr. Roche says, for courting government to gain such special privileges as tariffs and grants of land. But in acting as a pressure group the nineteenth century tycoonery was behaving like everybody else. The government owned title to most of the empty continent. Settlers in search of a good quarter section of land rallied to the slogan, “Vote yourself a farm.” Everybody was in on the take, as was perhaps inevitable under the circumstances. When “society” as a whole is to blame for a state of mind, there is little point in making special villains out of those who proved most efficient in providing what people wanted. The “robber baron” enriched himself, but in many instances he also enriched even those who were forced to sell out to him.

What Dr. Roche seems to be telling us is that the American people in the latter half of the nineteenth century should have found some nongovernmental way of protecting themselves against the “enmassment” called into being by the corporate form. After all, nobody compelled farmers to make themselves dependent on cash crops and monoculture agriculture. Producer and consumer cooperatives might have been formed to bring the benefits of “economies of scale” to the little fellow. When Edison developed the power plant, farmers might have availed themselves of small-scale electrical power components, as “Boss” Kettering of General Motors originally suggested. If individuals had formed associations to buy tracts of land and then subdivided the acreage to suit themselves, we could have avoided some of the uglier results of urban sprawl. When Henry Ford started making his Model T, he hoped that people would divide their time between working for employers and raising their own vegetables on their own acres. The car might have enabled a man to take industrial employment in prosperous times without quitting a base on the land that could tide a family over periods of depression.

Turning to Government

Instead of trying to solve their problems by voluntary association and individual ingenuity, however, the American people allowed themselves to be seduced by the idea that Big Government could be utilized to control and regulate Big Business in such a way that the little competitor would have a chance. For a time, “trust-busting” beguiled the common man. But the Populists, the Mugwumps and the Progressives discovered to their chagrin that business had an uncanny way of dominating the very State machinery that was supposed to give protection to the “public” or to the “consumer.” Theodore Roosevelt tried to distinguish between “good” and “bad” trusts and wound up in the arms of George Perkins of the House of Morgan. To fight World War I, Woodrow Wilson had to call Bernard Baruch and other Wall Street tycoons to Washington to head up the war production agencies. The bankers soon learned how to make use of government-created paper to enrich themselves.

As Dr. Roche tells the story, “reform” could not stay the processes that led to ever greater “enmassment.” The New Deal attempts to save the small farmer ended by giving superior help to the big farmer, who used the universalized benefits of the AAA to buy machinery that his little competitor could not afford. Instead of halting the movement to the central city, our “progressive” agriculture reforms hastened it.

Wartime Interventions

Two big wars and a couple of small ones completed the centralizing process. Education was forced into line when the government, in order to fight the wars, had to subsidize the universities to provide research and development for the so-called military-industrial complex.

In spite of everything, Dr. Roche has not lost his nerve or his sense of proportion. His historical chapters are enough to make anybody a pessimist, but, in a sudden right-about-face, our hitherto gloomy analyst discovers that only some “twenty-five per cent of all goods and services are produced by the 500 largest industrials.” Controverting Professor Galbraith, Dr. Roche says this must mean that “seventy-five per cent of our goods and services are not produced by ‘the techno structure.’ ” Continuing his exploration of the factors that are currently working to halt the processes of “enmassment,” Dr. Roche notes that the big producers need the small producers just as much as the small businessman needs the big. Western Electric, for example, has 40,000 suppliers. And the small businessman provides the major support to America’s 6,000 nonprofit organizations, 320,000 churches, and 100,000 private welfare organizations. We don’t, in short, need the Big State to solve our problems. “Enmassment” need not grow if individuals have the will to do things either alone or in voluntary groups.

Softness at the Top

Will enough people read Dr. Roche to rekindle an old faith in the individual? This is, indeed, the question. The day I finished reading The Bewildered Society I picked up The New York Times and opened it to a story of a survey “of 456 of the richest, most powerful and most influential persons in the United States.” What the survey reveals is “a high level of acceptance of Government intervention in the economy, approval of most of the things that make up the welfare state, and rejection of hard-line anti-communism in foreign policy.”

With such softness at the top, has Dr. Roche a chance of making his gospel stick? We can only hope that his still, small voice will somehow reach 456 “leaders” who know not what they do.

 

THE SPOILS OF PROGRESS: Environmental Pollution in the Soviet Union by Marshall I. Goldman (Cambridge, Mass.: MIT Press, 1972), 372 pp., $7.95.

Reviewed by Gary North.

Once again, Professor Goldman has demonstrated his remarkable grasp of the economics of the Soviet Union (see the review in the November, 1968 issue of THE FREEMAN). This time he focuses on the whole problem of pollution: ownership, social costs, pricing, responsibility, legislation, and so forth.

First, he demolishes the myth of “clean socialism.” There is no guarantee that the state ownership of the means of production will result in cleaner skies, purer water, and rational allocation of clean resources. The actual practice of the Soviet Union indicates the reverse: “One of the major arguments throughout this study has been that the concentration of economic and political power in the hands of the Soviet state can be and has been a major factor in the creation of environmental disruption. In the Soviet government’s drive toward industrialization and economic growth all too often there has been no person or group around with any power to stand up for the protection of the environment.”

State power, in theory, may be a tool for doing good, but in practice we measure the results. The quest for aggregate economic growth — a mania, says Goldman, which was first given to the modern world by the Stalinist Five Year Plans — has granted bonuses to managers for minimizing factory costs at the expense of the environment. Fines for damaging the environment seldom match bonuses for reaching quotas. And even these fines are seldom imposed on factory managers. “So far it is the poacher (that is, individual citizens) that [is] being harassed, while governmental institutions (factories and municipalities) are frequently left to themselves. The real polluters for the most part are not rigorously regulated or penalized…. Yet it is the government institutions (municipal, service, manufacturing, and agricultural) that are responsible for damage hundreds of times more destructive than that of the poachers.”

Marxism propounds two economic theories that are almost guaranteed to produce environmental disruption: the abolition of private ownership and the free (gratuitous) cost of scarce economic resources.

“In a socialist society it would seem that it would be more difficult to stimulate preventive action in both the case of public and private social costs. Because private land ownership is prohibited in the USSR, the individual has less of a vested interest in fighting the construction of a new factory in his neighborhood or the mining of some raw material in the area.” The best motivation, operationally, is simply “the fear of private loss.” Thus, the USSR has eliminated what Goldman calls the first line of defense against pollution.

By regarding natural resources as free goods, managers have been led to underestimate costs, waste resources, locate factories uneconomically, and destroy valuable assets. Developers of Black Sea resorts used sand from the beaches to make cement. This removed the protection from the pounding winter waves. In 1968 all the trucks in the Abkhazia Republic had to be used in order to bring in materials to save collapsing hotel foundations. The erosion in some cases cannot be reversed, and whole sections of the beaches are disappearing.

Lake Baikal, the largest mass of pure water on earth, is steadily being polluted. Kislivodsk, the mountain resort protected from the weather by a ring of mountains, has had its mountain cover cut away by a limestone quarry, and the winter is now getting in. The Caspian Sea is being lowered rapidly. Dust storms now hit the Ukraine every other year. Yet the only successful protest against one government agency is a protest by some other agency.

Lying managers, rigged cost-benefit analyses, bureaucratic intransigence, impotent national legislation, utopian schemes, and pollution of all kinds are the spoils of Soviet progress. Expenditures to curb air pollution in the Soviet Union are only one-tenth of expenditures in the United States. Their spirit may be willing but their price system is weak. Gold-man’s book is a ringing refutation of all those who would argue that capitalism is the primary cause of the “environmental crises.” 


  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.