Lately, spokesmen for the AFL-CIO, enraged at the defeat of the common situs picketing bill, have taken to lecturing conservatives (meaning true liberals) for being “anti-people.” I often wonder what must go through such critics’ heads when they try to buy something for a dollar. Don’t they know what has happened to their country (and other countries throughout the world) as the currency has become progressively debauched to pay for all manner of well-meaning “pro-people” welfarist measures?
Some politicians have been catching on—the rejection of the $50 giveaway before it could reach the floor of the U.S. Senate is a good omen. Education, one is gratified to see, is taking hold. When the Committee for Monetary Research and Education held a symposium at Georgetown University in Washington, D.C., in November of 1974, the lead-off speaker was Senator William Proxmire of Wisconsin. Proxmire had not built his reputation as a conservative. But there he was, complaining about our “ponderous and burdensome government” which has been the major culprit in producing “first the creeping, then the running, and finally the galloping inflation.” His speech set the tone for all that followed.
The papers contributed by sixteen participants in the Georgetown symposium have been collected in a book, The Menace of Inflation: Its Causes and Consequences, edited by G. Carl Wiegand (Devin-Adair, $8.95). Surprisingly, this is a book of many facets. The contributors agree on the basic proposition that inflation in the modern world is generally due to the heavy monetization of government debt, which floods the markets with “purchasing power” before any goods have been created to absorb the extra “money” that has been spread around. But the basic economic phenomenon has a thousand dependent social consequences. You cannot debauch a currency without undermining a society in all its root ethical, religious, artistic, military and political assumptions. The “something for nothing” syndrome ruins different characters in different ways, which leaves plenty of room for diversity in the observations made by our sixteen essayists.
Isolating the various strands from the sixteen papers, editor Wiegand notes that inflation has created pauperism, destroyed public morals, and changed the country from a democracy into an oligarchy where 30,000 bureaucrats and politicians determine all our lives. Down the road looms the tyrant who will assuredly come following a final inflationary blow-off spasm.
The Political Costs
Lawrence Fertig, in his paper on the “political costs of inflation,” takes a dour look at what happens when nations inflate to “achieve growth.” The “growth” doesn’t happen. What does happen is a decline in essential capital investment and a fall in the standard of living. In the short run some well-positioned labor unions get a jump on the rest of the country. In England the money that once moved into “imperial” defense channels—a navy powerful enough to rule the world—now goes to support national medicine and government-owned steel mills. But the cradle-to-grave “gains” have only succeeded in spreading the poverty. Meanwhile the bill for sustaining the so-called Western alliance has had to be shouldered by the United States. Fertig tells us that the cost of supporting HEW (the Department of Health, Education and Welfare) makes it impossible to cut our own Federal expenditures back “without seriously eroding the defense budget.” So Britain had better not count on our arms. Inflation, it seems, must work to keep any alliance from pursuing a successful foreign policy.
Gary North, a philosopher and theologian as well as an economist, writes about the uncertainty that must afflict any country that cuts itself loose from accepted monetary standards. “A mind without fixed reference points,” he says, “is the mind of an infant or a lunatic.” As Ludwig von Mises pointed out long ago, the primary flaw of socialism is that lacking reference points in the market, it cannot make rational calculations. So we have governments by lunatics. The western socialisms haven’t gone all the way to lunacy, but they are approaching it. “Men,” says North, “plan for the future in terms of the present, and the present is no longer a reliable guide for the future when it is characterized by inflation.”
In his contribution to the Wiegand book, Lemuel Boulware “runs scared.” He is eighty years old, but it is not the world of our children that he is worried about. His mother lived to 103—and if inflation is not dealt with soon he is “not going to like what we find down my remaining 23 years.”
Impact on the “Third World”
In his own essay Carl Wiegand worries about non-oil-producing Third World countries that go on piling up debts they never will be able to repay. Ibrahim M. Oweiss defends the oil-producing shiekdoms against the charge that they are responsible for the troubles of the West or the poorer Third World nations. The general world inflation had already achieved a dizzying pace before the OPEC countries decided it was stupid to take payment for oil at the old prices in decaying western currencies. Who can blame them for trying to get a top price for a steadily wasting asset?
Most of the contributors to the Wiegand sections on how to remedy and stop inflation favor a return to the fixed reference of gold. Arthur Kemp, fearing that inflation is more of an addiction than a disease, would like to revive the gold standard in the orthodox sense, but in default of that he would accept Milton Friedman’s discipline of linking any annual increase in the money supply to productivity. Edward C. Harwood supports a standard of value expressed in a quantity of gold, but he also insists there will be no diminution of inflation until we return to self-liquidating commercial bank credit practices.
David Meiselman would have Congress fix by law the upper and lower limits by which the Federal Reserve may increase the supply of money. Philip Crane remarks that “gold is money; paper is a money substitute.” To the extent that we confuse the two, he says, “we create the basic problems which we face today.” Patrick Boarman thinks that floating exchange rates encourage international inflation, for they “make it still easier for each country to determine its own money supply and thus its prices.” C. Lowell Harriss argues that expenditures paid for out of high taxes can destroy the viability of an economy. They are as “anti-social” as inflation. Could price and wage controls be an answer? Yale Brozen says definitely no.
The concluding papers in the Wiegand book, by Hans Sennholz and Donald Kemmerer, are really ringing defenses of gold. Kemmerer lists thirteen standard objections to the gold standard, and, out of his capacious knowledge of monetary history, demolishes every one of them by the simple device of “going to the record.” That should be enough to convince a pragmatic country.
WE HOLD THESE TRUTHS by Lawrence Patton McDonald
(’76 Press, P.O. Box 2686, Seal Beach, California 90740, 1976)
180 pages
Reviewed by Hans F. Sennholz
Facts we choose to ignore and do not face squarely have a habit of stabbing us in the back. In self-defense we must not blindly overlook danger, but face it courageously and then seek to conquer it. Lawrence Patton McDonald’s book, We Hold These Truths, does just that, confronting the political and economic dangers that threaten to engulf society.
As a member of the U.S. House of Representatives from Georgia, that is, as a politician, McDonald displays exceptional courage, for his message openly challenges the mainstream of political and economic thought. He writes without regard for his political career, but with a sense of duty and the firm resolve of truth and honor. The book is a primer on the deterioration of the Republic of the Founding Fathers to the transfer democracy of today. His starting point is the U.S. Constitution as it was designed and adopted by men of vision and courage. And it concludes with a plea for re-establishment of constitutional government, as ordained by the Constitution. But he is not pleading for a return to 18th-century conditions; he is urging us to repair to the high ground of principle that motivated and guided the Founding Fathers.
The Constitution they created provided for a federal government that “was limited to defending us against foreign aggressions and against a few specified kinds of aggressions at home; and it could collect enough sales tax on things we bought to pay the tiny cost of its own operations in protecting us. Otherwise, it was so restricted that it could do nothing for us, except keep its tax collectors’ hands out of our pockets, stay out of our affairs, and leave us alone to sink or swim, survive or perish, on our own. If we had any problems we wanted government to help solve, we could only appeal to our local or state governments, because there were no grants available to us from Washington…. It left Americans so much freedom to manage their own lives that they quickly developed their portion of the backward, underdeveloped western hemisphere. They astonished the world with their unparalleled accomplishments.”
The book is an excellent narrative of the changes in legislation and jurisdiction since the early days. In simple, yet elegant style it describes the gradually changing social and economic thought that has permeated legislation, jurisdiction and administration and given rise to the redistributive society of today.
No particular branch of government, nor any one political party can be blamed for the changing values and aspirations that caused Americans to alter their social and economic order. More than one hundred years ago, a new trend of thought that cast doubt on the traditional private property-individual enterprise order and put its faith in political power and government coercion, began to sway the minds of American intellectuals and thought leaders. This explains our economic and social history which, after all, is more than a register or calendar of events, laws or policies. In the final analysis, man’s history springs from his system of thought and value, from social and economic philosophy that guides human action.
Dr. McDonald has provided us with a delightful introduction to political science and economics. It touches on such essential course material as the systems of government, on political organization and behavior, and government institutions and policies. It discusses critically such popular economic policies as foreign aid, Federal aid to education, to agriculture, labor, and anyone willing to apply. In short, We Hold These Truths is a great little book—noble in cause and design, competent in its execution.
