It is part of our folklore that it took the Supreme Court decision of 1911 to break the grip of John D. Rockefeller’s Standard Oil holding company on the business of transporting and refining oil. But long before the dissolution of the “oil trust,” which had never been much more than a matter of dominating the small world of kerosene marketing, the Pew family of northwestern Pennsylvania was in the business of “producing petroleum, rock and carbon oil; transporting and storing same; refining, purifying, manufacturing, shipping, selling and marketing such oil and its various products.” (The quotation is from the incorporation statement of the Sun Oil Company of Ohio, dated 1890.)
The founder of Sun Oil, Joseph Newton Pew, was not at all intimidated by the “trustifiers” of our so-called Gilded Age. In 1886, which was four years before the enactment of the Sherman Anti-Trust law, the Pews were busy acquiring leases in the new trans-Appalachian oil and gas field of Lima, Ohio. Sun invaded the supposed monopolistic preserve of the Rockefellers before the “waste” by-product known as gasoline had become important to the new automobile economy. Uncommitted to kerosene, it was ready for the new world of Henry Ford, Ransom Olds and the other Detroiters who were, at the turn of the twentieth century, about to put America on wheels. When the Spindletop gusher came in on the Texas Gulf Coast in 1901, Sun was ready to build an East Coast refinery on the Delaware River at Marcus Hook and to transport Texas oil by tanker to markets that John D. Rockefeller could no more monopolize than King Canute could keep the tide from rising.
With his family background, it is hardly a mystery that J. Howard Pew, the son of Joseph Newton, never had any fear that America might be enslaved by an industrial oligarchy of any type. It was given to Howard Pew to carry on the work of independent forebears who found no quarrel between their deep religious convictions and the honest competition of an age that, in retrospect, was much less of a dog-eat-dog era than we have supposed.
Biography and History
In an absorbing little book called Faith and Freedom: The Journal of a Great American, J. Howard Pew (Grove City College, $6.00), Mary Sennholz has combined a sensitive biographical treatment of Howard Pew with a skilled job (she calls it a “compilation,” which is over-modest) of presenting, in paraphrase and direct quotation, Mr. Pew’s thoughts on religion, politics, charity, education and industrial enterprise. The combination makes for a remarkable testament that tells us more about an America that we are in danger of losing than can be found in scores of mere pretentious works.
The distinguishing characteristic of Howard Pew was that he was whole souled about everything he did. As a Presbyterian layman, he believed in the will of God and the gospel of Christ. He saw no conflict between Christianity and capitalism. It was not only good business, but good social relations, to offer a stock purchase plan to Sun employees and to refuse to make general lay-offs or wage reductions in depression years. Sun, in the post-World War II years when the government was imposing restrictive quotas on the importation of crude oil from abroad, kept its tankers employed with smaller loads, an “uneconomic” operation that actually paid off by keeping an organization both intact and enthusiastic.
Meanwhile Sun pushed technological change as both a human and an industrial duty. It helped the French inventor Eugene Houdry bring his catalytic cracking process to America in time to fuel more than half of all American war planes in 1942 and 1943. The Sun Shipbuilding Company was building half of all the new tankers in the country in 1943, the peak year of the war effort. And, as a prelude to meeting the energy crisis of recent years, Howard Pew carried out the costly venture of developing a process of getting good synthetic crude oil from the tar sands of Athabasca in the Canadian province of Alberta.
A Loyal Churchman
To Howard Pew, obedience to the will of God meant keeping his beloved Presbyterian church from moving out of its “ecclesiastical field.” The business of the clergy was to save souls, not to impose a socialism on society that would deny individual responsibility to behave in a truly Christian manner as a matter of voluntary commitment. A believer in the “theology of reformation,” not the “theology of revolution,” Howard Pew was deeply shocked by the selective nature of a “social gospel” that had much to say about Vietnam yet refused to speak out when Russians invaded Czechoslovakia or when Mao Tse-tung presided in China over the murder of millions of his countrymen. When he retired as the presiding operating officer of Sun Oil to go into the business of promoting good Christian education, he fought the many Protestant “modernists” who tried, as they are still trying, to identify morality with State compulsion in both social and economic life. Charity, to Howard Pew, implied a voluntary commitment; otherwise it was just organized thievery masquerading as good will.
Opposed to Statism
Howard Pew opposed Statism on principle. He would have been against it on grounds of conscience even if it had been compatible with industrial efficiency. Fortunately he was never compelled to go against the pragmatic evidence of the case. As a student of history he had noted that the “squirrel rifle” of the Pennsylvania frontiersmen, produced by an individualist gunsmith in Lancaster who cut a spiral groove inside the gun barrel that gave the bullet a rotary movement, was far superior to the Brown Bess musket favored by both the British politicians in London and the American Continental Congress. Washington had to fight the Congress for a limited supply of the Pennsylvania rifles, but he fooled the British and the Hessians into thinking he had more of them by the trick of dressing troops in the frontier coonskin and leather of the Pennsylvanians. The uniforming ruse was enough to start panic in the British; it could have been the determining factor in the war.
Howard Pew didn’t object to governments for being conservative. But since they must be conservative to keep faith with taxpayers, a point made by Ludwig von Mises in his book on bureaucracy, Mr. Pew thought they had no business invading the province of private industry, which has to be innovative to compete in the marketplace and to earn a dividend for investors. In his support of institutions such as Grove City College and the Foundation for Economic Education, Mr. Pew was engaged in a principled fight for keeping the categories straight. The business of the church is to hold men to moral values. Men with moral values will obey the Golden Rule in their business dealings. They will also live by the Parable of the Talents. The State, with its commitment to providing a just order in which free men can exercise their ingenuity, will not interfere with invention and the flow of energy. So the “freedom philosophy” will flourish.
Such was Howard Pew’s credo. He lived it to the full.
THERE’S NO SUCH THING AS A FREE LUNCH by Milton Friedman. (LaSalle, Illinois: Open Court, 1975), 330 pp., $9.95, $3.95 paper.
Also published in paper by Thomas Horton and Daughters, Glen Ridge, New Jersey 07028, under the title An Economist’s Protest, 2nd edition, $3.95.
Reviewed by William H. Peterson.
On August 17, 1971, two days after President Nixon launched his New Economic Policy on a dumbfounded world, ace University of Chicago economist Milton Friedman, past president of the American Economic Association and the Mont Pelerin Society, participated (as did I) in a telephonic conference of 12 economists commenting on the President’s historic action.
Ever the brilliant economist and debater, Friedman completely dominated the discussion. He pushed for floating exchange rates (which have since come to pass). He said the President’s shutting the gold window was but “window-dressing,” for the U.S. dollar had long been in effect an inconvertible currency. And, above all, he emphatically predicted that the wage-price controls would fail as they had ever since Diocletian’s Edict of 301 A.D., that they would prove a cloak for the deficit spenders in Congress and the easy-money boys in the Federal Reserve, that they would in fact breed greater inflation than ever in America in the 20th century (which they most certainly have).
Well, here is the genuine article, vintage Friedman, rare wine for free enterprisers, selected Newsweek columns from 1966-1974 (some of which appeared in an earlier edition entitled An Economist’s Protest). There is also his celebrated Playboy interview covering in one grand sweep a rather full panoply of his incisive views, plus his Fortune article on “Using Escalators To Help Fight Inflation,” his series in the New York Times on “Morality and Controls” and his corking analysis of our monolithic school system in his “The Voucher Idea” from the New York Times Sunday Magazine.
In short, this is practically a new book, and it is capital. In all there are 97 entries under such headings as energy, central planning, the Post Office, education, indexation, social responsibility, gold, the voluntary army, the plight of Britain, taxation, regulation and, of course, monetary policy. All of them are sharp and lively, full of timely examples, full of trenchant Friedman wit, full of that eternal verity that, no, Virginia, there is no such thing as a free lunch, that every bit of pork, every subsidy, every inflation, every politically-imposed inefficiency, is paid for, and paid for handsomely — by somebody.
This vintage Friedman is, as usual, rich in aphorisms:
· On inflation: “We know how to stop inflation — it isn’t terribly difficult — we simply don’t want to…. After a while people begin to think they’d rather have the sickness than the cure.”
· On pollution: “Even the most ardent environmentalist doesn’t want to stop pollution… He wants the right amount…”
· On poverty programs: “The law of supply and demand works very generally: If there is a demand for poor people, the supply of poor people will rise to meet the demand.”
· On Social Security: “If you talk about misleading labeling, Social Security is about as misleading as you can get. It has nothing to do with social and it has nothing to do with the security of society… The employer and the employee each supposedly pay 5.85 percent, but since the employer’s half is part of his total wage cost, it’s the employee who’s really paying the whole bill.”
· On social responsibility: “When an executive decides to take action for reasons of social responsibility, he is taking money from someone else — from the stockholders, in the form of lower dividends; from the employees, in the form of lower wages; or from the consumer, in the form of higher prices.”
To be sure, the irrepressible Friedman specializes in controversy, even among conservatives and libertarians. He is, for example, no fan of gold-backed currency. He is the founding father of the negative income tax. He is a long-time critic of the Federal Reserve; indeed, he even blames the Fed for causing the Great Depression, as he spelled out in his pioneering A Monetary History of the United States (with Anna J. Schwartz). His charge today to Dr. Arthur F. Burns and the other Fed governors: Stop manipulating the money supply, and hew to a steady money stock growth formula of about 4 percent a year.
But no matter if you’re a Friedmanphile or a Friedmanphobe, reading his book you come away with a feeling that here is a scintillating mind, a champion of the free market and a free society. For our money, Milton Friedman is a titan worthy of the next Nobel Prize in Economics. Voila, he has proven that while economics may be the science dismal it certainly doesn’t have to be the science dull.
THE COMING COLLAPSE OF THE POST OFFICE by Robert J. Myers (Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1975), 182 pp., $6.95
Reviewed by Melvin D. Barger.
Thirty years ago, the economist Ludwig von Mises demonstrated in a commentary on bureaucracy that the only alternative to profit-seeking business management is bureaucratic management. There is a popular delusion that public enterprises can be set right by adopting the methods and managers of private business, but Mises saw that this was impossible because of the fundamental difference between government and profit-seeking private enterprise. So the answer was to accept bureaucratic managers where necessary (say, in a police department), while at the same time curbing their powers by “bureaucratic makeshifts” to prevent them from becoming irresponsible spenders of public money who would disorganize the whole budget.
This was a wise observation that could have saved the United States billions of dollars; unfortunately, however, public policy is not shaped by students of Misesian economics. Nevertheless, events have a way of vindicating the wise master of the Austrian school. Robert J. Myers, in The Coming Collapse of the Post Office, shows what happened when the U.S. postal system was transferred from ordinary bureaucratic management to a new government corporation that was supposed to solve all of the then current problems. Myers, publisher of the liberal magazine, The New Republic, indulges in some hyperbole to imply in his title that the postal collapse already has occurred or came about only since the new postal corporation was launched on July 1, 1971. Some of us thought the postal system was in a mess under the old set-up, too. This reviewer, who had not taken the trouble to reread relevant portions of Mises or to heed the warnings of other libertarian stalwarts such as FEE’s Leonard Read, thought that the “government corporation” made sense and might conceivably bring needed improvements in postal services.
But whether you call it collapse or merely confusion, the postal corporation has been a colossal failure that is providing even less service than before and at much higher cost. According to Myers, postal corporation managers have become a self-serving elite and are now the highest paid executives in government. This reviewer remembers that the postal unions opposed the new corporation; ironically, they have been able to get much fatter labor contracts from the new organization than they were ever able to get from the old bureaucracy. Malinvestment is rampant in the new corporation, service is rapidly deteriorating, costs are spiraling in all directions, and mechanization programs have often been unsatisfactory. The corporation was supposed to “break even,” but it continues to operate at a deficit.
What went wrong? Myers comes very close to an accurate diagnosis of the problem, but his own conflicts of interest may have flawed an otherwise sound report. As publisher of a low-circulation intellectual magazine, he defends subsidies for publications. As the head of a magazine that rarely has a kind word for the business community, he voices constant criticism of Big Business and the profit motive. He even attempts to portray the failure of the postal corporation as another private business failure without explaining the significant differences between investor-owned companies and government enterprises.
If the book has an arch-villain, it is probably Frederick R. Kappel, the retired A T & T head whose 1967 Commission Report launched the idea of a postal corporation. Myers apparently sees the postal corporation as an extension of the same kind of shenanigans Kappel engaged in as chief of the Bell network, but it is noteworthy that the average citizen would be pleased to have mail services equaling the telephone system. Kappel’s great abilities simply did not carry over into government enterprises; indeed, his A T & T prestige may have helped foster the delusion that a government corporation would somehow “work.” For that reason, he probably deserves the blame that Myers heaps on him and various postal executives.
Despite his anti-business bias, Myers has high praise for the privately-owned United Parcel Service, the postal system’s largest and most successful competitor. However, he does not identify profit-seeking as a primary factor in UPS’s excellent service, nor does he really warm up to the idea of giving UPS a free hand with other types of mail.
Still, Myers does make a strong concession to the free marketplace by giving reasonable space to the libertarian argument that the Private Express Statutes should be repealed, permitting anybody to carry mail. He quotes Human Events publisher Robert Kephart as an opponent of government subsidy through non-compensatory postal rates of magazines and publications. “I would vastly prefer to see postal services demonopolized; and the rise of a free market competition in delivery of all classes of mail…”
According to Myers, this view has gained increasing support and respectability through the publication in 1974 of an American Enterprise Institute monograph by economist John Haldi. Haldi points out that the statutory postal monopoly has no economic justification, is no longer an important source of governmental revenue, and in no way promotes better or cheaper mail service. In fact, Haldi suggests, the monopoly probably impedes the development of better systems for delivering written communications. Haldi’s most telling argument, in Myers’ view, is implied in the question: Why, if the Postal Service constitutes a “natural monopoly,” does it require statutory protection?
In the end, Myers mentions, without advocacy, the repeal of the Private Express Statutes as one solution to the postal mess. He goes on to list other schemes, most of them variations of the intervention that has plagued the post office throughout its history.
Despite its interventionist tone, Myers’ book is a significant addition to the still-scarce current literature on postal problems and it has received considerable press attention. He should have diagnosed the failure of the new postal corporation as yet another failure of government rather than a business failure such as Penn Central or Rolls-Royce; after all, the executives of the postal corporation are under no constraint to make a profit or to heed the other disciplines of the marketplace. But Myers does show that government corporations are not the answer to the problems of government bureaucracy. He offers convincing proof that the autonomy of the government corporation becomes its undoing. Ludwig von Mises would have agreed, arguing that government bureaus such as the post office need “bureaucratic makeshifts” to keep them in line. But in a truly free market, with anybody permitted to carry mail, nobody would need the poor protection of such makeshifts in the first place.
