Presumably the ability to add, subtract, multiply and divide is one of those things that distinguishes men and women from the beasts. If this were universally the case even a fourth-grader should be able to understand that when the money supply is increased over and above the availability of goods, prices will rise. Two times one is always more than one times one. There is no mystery about inflation. The only mystery is that of human stupidity. There are always people who think that wage and price controls can be imposed by force, and there are always politicians to cater to them. The result, in history, has always been the same: a period of repressed inflation, followed by the breakdown of law and order and the disappearance of goods from the open market as the black marketeer takes over.
References have often been made to what happened to the Roman Empire when Diocletian, some time after his ascension to the throne in 284 A.D., tried to fix wages and prices in relation to an overvalued copper denarius. Strangely enough, however, there has been no available history of wage and price controls in any single volume. This deficiency impressed Robert L. Schuettinger and Eamonn F. Butler when, after the failure in 1974 of President Richard Nixon’s experiment in controls, they began looking into the subject.
The result has been a fruitful collaboration between Schuettinger, an American historian, and Butler, a British economic analyst, with research help from Andrew Chalk, a Walker Fellow in Economics at the Heritage Foundation in Washington, D.C. The volume they have produced is called Forty Centuries of Wage and Price Controls: How NOT to Fight Inflation, which comes with a discerning foreword by David I. Meiselman, who notes, somewhat despairingly, that the public opinion polls still show that a majority of U.S. citizens prefer mandatory controls to "guidelines." The book is published by the Heritage Foundation and distributed by Caroline House, Inc. (P.O. Box 161, Thorn-wood, N.Y. 10594, 186 pp., $9.95 cloth; $4.95 paperback).
The History of Controls
Mr. Schuettinger has been primarily responsible for the first half of the book, which accounts for thirty-nine out of the forty centuries of monkeying with natural market prices for goods, services and capital investment. It is a lamentable story that Schuettinger tells in rigorously condensed narrative. The Egyptians tried "planning" in their fifth dynasty (2830 B.C., or earlier), with an attempt to control the grain crop. Regulation of grain prices led to direction of planting and, eventually, to outright seizure of the fertile Nile acres by the monarch. With his "bronze law," the monarch set control of wages that showed an early addiction to belief in the "iron law" that supposes that wages cannot be allowed to rise above the bare necessities for keeping workers alive. There was no Francis Amasa Walker or John Stuart Mill—or Henry Ford—to tell the Egyptians that wages can be upwardly adjusted to productivity (it is what a worker can turn out in a given hour that counts), so it is hardly surprising that the Egyptian economy should have collapsed along with the political stability of the State.
It was the same story in the lands watered by the Tigris and the Euphrates. Sumeria had its period of respite under King Urakagina of Lagash, a precursor of Ludwig Erhard (see Antony Fisher’s Must History Repeat Itself?). Urakagina began his rule in 2350 B.C. by abolishing controls on wages and prices, and gave us a word for "freedom" for the first time in recorded history. (The word was "amargi," which means literally a "return to the mother.") But when Hammurabi promulgated his famous code in Babylon, it was filled with explicit economic directions. A field worker was to get eight "gur" of corn per annum; a herdsman was to get six. An experienced ass hired out for threshing should command ten "ga" of corn, but if the animal was young —a bestial apprentice—its hire should be one "ga." The pay for a potter was fixed at five grains of silver. And so it went. The historical records of "strong" government in Babylon show a decline in trade in the reign of Hammurabi and his successors, with the number of administrative documents—what we today would call bureaucratic paper work—increasing at a precipitous rate.
Lessons from China, Greece, and Rome
In ancient China, the attempt to get around the law of supply and demand fared no better. Mr. Schuettinger tells us about two perceptive Chinese economists who anticipated the formulation of Gresham’s Law. "As soon as paper is employed," so Yeh Shih wrote in the twelfth or thirteenth century A.D., "money becomes still less." (Meaning, of course, hard money.) And Yuan Hsieh noted that "because the paper money was too much, the price of commodities was dear."
The Greeks found it impossible to enforce laws set to control the grain trade, but the Romans didn’t learn anything from the Greek failure. Diocletian, when he took over, found himself victimized by the devaluations and the debasements of the coinage that had taken place under Claudius Victorinus. The trade of the Empire had been reduced to barter, the middle class was practically obliterated, and the proletariat was sinking into serfdom. Diocletian tried to "reform" it all by putting a stop to the production of debased gold and silver coins. But his new denarius, which was frankly of copper, was overvalued. To continue his "reform," Diocletian tried fixing the prices of goods and services while simultaneously suspending the freedom of people to decide what the copper denarius was really worth. The penalty for evading the famous Diocletian Edict of 301 A.D. was death. But killing traders did not bring goods to market. Diocletian was forced to abdicate, and when the barbarians took over it was often with relief to both the poor and the rich.
Coming on down to relatively modern times, Schuettinger has only a repetitive tale to tell. Washington’s army at Valley Forge almost starved to death during the period in which the Continental Congress was trying to fix commodity prices. The Law of the Maximum worked only havoc in French Revolutionary times. When, at the end, they were carrying Robespierre through the streets of Paris to his execution, the mob jeered "There goes the dirty Maximum." The Southern Confederacy tried to fix prices, but without effect until, in 1864, a currency reform reduced the money in the South by one third. It was then too late, for the Northern forces had already reduced the size of the Confederacy to rump proportions.
The research done on the German inflation by Andrew Chalk, with its quotations from Thomas Mann and Walter Eucken, is as shrewd as has ever been done. As Mann has written, "A straight line runs from the madness of the German Inflation to the madness of the Third Reich. . . . It was during the inflation that the Germans forgot how to rely on themselves as individuals and learned to expect everything from `politics,’ from the ‘state,’ from ‘destiny.’ . . . The millions who were robbed of their wages and savings became the ‘masses’ with whom Dr. Goebbels was to operate. . . . Having been robbed, the Germans became a nation of robbers."
The analytical chapters, largely the work of Eamonn Butler, make it undubitably plain that it is "the Federal Reserve rather than the coffee in Brazil, the freeze in Florida or even the Arab oil cartel which is the principal factor in the U.S. inflation story." But will the politicos take note? They seldom have.
INVENTORY OF THE PRIVATE PAPERS OF LUDWIG VON MISES Catalogued by L. John Van Til
(Public Relations Office, Grove City College, Grove City, Pennsylvania 16127) 1979
79 pages n $1.50 81/2" x 11" paperback.
Reviewed by Bettina Bien Greaves
Anyone seriously interested in the work and writings of the late Professor Ludwig von Mises will be glad to know that his papers have been preserved and are now available for research at Grove City College, Grove City, Pennsylvania.
When the Professor died in 1973, at the age of 92, his widow wanted to make sure that future generations of students would have access to the books and papers he had used when working on his own books and articles. His library of books was sold to Hillsdale College (Hillsdale, Michigan), but Mrs. Mises chose to retain his pamphlets, correspondence and other papers to dispose of separately. She spent a great deal of time and effort after his death sorting them out and arranging them to be easily viewed and analyzed. When this task was completed, she offered them to several large university libraries without finding a taker. Then Grove City College, a small liberal arts college in western Pennsylvania, made an offer she accepted.
A large part of the library Mises had assembled in Vienna, prior to his move to Switzerland in 1934, was destroyed when the Nazis marched into Austria in 1938. Fortunately, he had taken with him quite a few of his more important books and pamphlets. Thus, many pamphlets dating from his Vienna days were saved and are included here among these papers. He had very carefully filed them all by subject matter in suitably labeled pamphlet boxes and big brown envelopes. He kept the correspondence about his books in large cardboard cartons. The letters from personal friends, students and admirers, sometimes with carbon copies of his usually very brief replies, were filed in cabinets and desk drawers. This is the material that Mrs. Mises sorted through and that Grove City College’s Professor L. John Van Til has now painstakingly gone over.
This inventory consists of two long lists—one of pamphlets, reprints and book reviews arranged by language, and the other of correspondence. Items on both lists are arranged alphabetically by author and keyed by number to their location on the college library’s shelves. Professor Van Til’s most exciting findings, mentioned only in his Preface, are "thousands of pages of unpublished manuscripts." We presume these are in Mises’ own precise handwriting and are still to be gone over carefully before any decision may be made as to their disposition.
This inventory is preceded by a short biography of Mises, setting forth some of his more significant contributions and experiences. Students across the nation and the years interested in exploring Ludwig von Mises, the man, his ideas and his relationships with friends, students, admirers of his work and casual acquaintances, will be grateful to Mrs. Mises, Grove City College and Professor Van Til for making these materials available.