All Commentary
Wednesday, February 1, 1984

Capitalism And Nature

Richard H. Crum is now retired, having taught history and the classics at Lehigh University.

The retreat from reason takes many forms. One of its strongest thrusts is the irrational drive of twentieth-century man, led by the irrationalists of the state and their intellectual acolytes, to enchain the producers in society. This they do by physical force, which is the state. Defying the laws of human nature and the principles of economics, they suppose that “somehow” it will succeed. What they mean is: “somebody” will pay.

It is unnerving and sad to see our wonderful, diverse and interesting country slide toward the dull stagnation of over-governed Britain, where the rich somehow remain rich but a newcomer trying to build his own business can get crushed by official paperwork and taxes. America is not perfect, but it is much closer to it economically than any other country—thanks, largely, to that maligned evil—profit: the devil for which intellectuals like Michael Harrington, in The Twilight of Capitalism, blame the energy crisis, urban blight, stagflation, youth crime, lax school discipline and almost every other social ill.

Such critics base their entire historical outlook on a parochial interpretation of the politico- economic crisis in the United States in the early 1930s. They seem genuinely to believe, like Eliphaz the Temanite in his dialogue with Job (XXII 5-10), that the very fact that a man is rich proves him to be a public robber. Even George Santayana, in a letter to Sidney Hook, said of our current system of production: “This labour in fact subtracts from their value, in so far as it is forced labour; and this is the crying sin of our industrialism: that it forces millions of men to labour hopelessly in order to supply themselves—or the capitalists among them—with a lot of rubbish.” (Published in Modern Age, Spring, 1977, p. 78)

There are two ways of living off others: free exchange or coerced exchange, trading or taxing and taking, cooperation or war. When a sufficient number of nonproducers has reached the public trough, you have inflation. Then the cry goes out for more controls. But controls tell lies. So-called price-controls are economic falsehoods by which people are placed in deeper bondage. There are no shortages in the free market, only under government intervention. The first duty of a citizen is to see through the deceptive jargon of his would-be rulers. Capitalism releases the hu man spirit. All other systems mask and enslave it. Freedom is the invisible hand, the magnetic force that draws from each of us his best service to others.

Statist economies always stagnate, collapse and produce general poverty. The reason: stagnation is contrary to the facts of human nature. Collectivist economists, in their attempt to repeal these facts, betray themselves into the logical absurdity of asserting that slavery could not have achieved the wonders of a free economy, but that in a complex technological economy we must have slave labor, i.e., government controls and exorbitant taxation.

Consequences of Compulsion

Observe the psychological consequences of being compelled to live in a Communist society. People simply steer clear of politics, try to stay out of trouble, work as little as possible and acquire what consumer goods they can to make life tolerable. “I would say 98 percent of the people are just apolitical,” one Western diplomat said. “They work at their jobs as little as possible and worry about how to get a car and get away to a cottage in the country.” They do open up now and then, and slyly. “We are building a new metro,” one Prague man said. “It is being built on the Russian system. It will be finished in 27 years.”

An example of the sour jibes at the Workers’ Homeland in satellite countries is this. A Russian man sees his friend Alexei coming down the street one snowy day wearing only one shoe. “Ah, Alexei,” he says, “I am sorry to see you have lost a shoe.” “No,” Alexei says, “I have found one.”

Bribery in Communist countries is a routine of life. Medical service is free. But if you want to jump to the head of a long line at the clinic or doctor’s office, you slip someone a bribe. If you want a good cut of meat, you slip the butcher two packs of cigarettes. “You have to pay a bribe for everything,” one working wife complained.

Money can’t buy food when grocers don’t have it to sell. In Iron Curtain countries it is not unusual to walk a mile to the grocery and stand in line for butter. When your turn comes, you may be told there is no butter, or no meat or even vegetables. It seems almost impossible that in a farming village people would be without produce, but the state gathers up farm products and then distributes them around the country.

Note what has happened in the United States in the past half century to the comparative costs of mailing a letter versus making a long distance call on our privately owned telephone system. So the government has broken up the Bell system. The same government has decreed that A.T. & T. may earn only 71/2% as a result of its enormous inventiveness and investment in plant, structure, brains and equipment. You can get 5% in a bank or 121/2% in a mutual bond fund by just sitting still. If a company shows good earnings, it immediately has Internal Revenue on its back bleeding it of well over 50% under the pretext of the “Undivided profits tax.” The enterprise that feeds, supplies and provisions us is already subject to minimum wage and maximum profit regulations. How long will it be before the arc is closed—with limitation of maximum wage? Marxian economics will then be complete.

Now it is true that experienced observers—at least those with earthy shrewdness—are gravely concerned about the concentration of ownership and control, the growth of profitable holding- companies, mergers and conglomerates. When this process extends to the marketplace of ideas, as in the growing number of one- and two-newspaper cities, it is especially disturbing, because ideas are the most important thing in the world and publicity is the most powerful instrument that can be wielded. But the answer to concentration of power in the hands of patroons is not concentration of power in the hands of politicians. Grafting reform of limited abuses with unlimited ambition has started the political fortunes of several American family trees.

No One Knows How to Make the Command Society Work

It is commonly better for the managers of a command economy if fifteen men are assigned to do one man’s work. So assigned or not, that is approximately what fifteen socialist workers will normally do. They have and can have no incentive to do otherwise. The managers can have no rational way to allocate resources to their most desired and effective uses. As F. A. Hayek demonstrated so memorably in The Road to Serfdom, no one knows how to make socialism work.

Two centuries ago we were a poor nation where men and women worked 12 to 18 hours a day at least six days a week. Child labor was required for most families to survive. Horses and oxen plowed fields and pulled wagons. Electrical power did not exist. The internal combustion engine was a hundred years away. There was no running water in homes. Life was hard. We know what we have today by contrast. Wages have reached a level unprecedented in any economy. We produce in an hour what it took our forefathers a week to produce. We travel in five hours a distance that took them six months. One half of all the goods produced in the past 10,000 years have been produced in the United States in the past two hundred.

“Oh, but capitalism failed dismally during the Depression,” someone says. The answer is that the whole complex of make-work projects, WPA, PWA, CCC and the rest, did nothing for the economy.

Today the beneficent oak which was our strength is in trouble. The problem is big, centralized government which has encrusted the roots and branches with such parasitical mushrooms as CAB, EPA, EEOC, FAA, FCC, FPC, FTC, ICC, NLRB, OSHA and SEC. All these bureaucratic regulatory agencies have grown at the expense of our free enterprise system. They exercise control over our lives, telling us and the businesses we own and for which we work what we can and cannot do. Not one of these burdensome bureaus was required to make America’s economy the greatest on earth.

One Control Leads to Others

Experience with human action shows that there can’t be a little socialism, any more than a man can partly murder or a woman be partly pregnant—there can only be a lot. Every measure to control any aspect of the economy dislocates some other aspect or activity. The latter, being closely tied in, therefore requires control in turn. The great oak can give its vitality to mistletoe and still thrive, but there comes a point when any parasite will destroy its host. The pretty bindweed with its bright pink morning-glory blossoms must be snipped off at the root or it will strangle the chrysanthemum and the rose. Let political direction invade any area of economic or cultural life and it constricts, winding itself round and round sprouting vested interests bound to insure its perpetuation. Then farmers insist that we continue to pay them not to farm, educators raven for federal funds and direction, we have “urban renewal” fiascos, womb-to-tomb paternalism.

Can we frame a plan or elect a planner that will efface in other people a myriad intellectual errors and emotional compulsions? Who would be so rash as to claim he can dispel every mistaken notion from his friend, or indeed even from himself? Socialism, as Leonard Read constantly reminded us, will wither away when we fix our attention on a better idea. Looking back on the process, we shall hardly know at what point the unsound idea was replaced by a sound one. We need a growing comprehension of the miracle of the free market, a sort of Gresham’s law in reverse: a good idea driving out a bad one.

Historically, with sporadic but blessed exceptions, government has shackled and robbed. In a free society, instead, it would be limited to protecting against violence and fraud. Healthy growth would proceed naturally from the innate impulse of every person to improve his situation.

The Key to Progress

Capitalism challenges us to save, invest, invent new tools and better methods, employ others in the endeavor to maximize earnings by providing an improved product at lower cost. But more than that, there is a relationship between a life in business and a stable and mature adult personality. Here we have, not a faultless, but to a measurable degree a rational and even humane system of rewards in return for productive effort expended. Private enterprise can produce more sensibly motivated and competently educated children, more creative ferment in the arts, better sensitized achievable and spontaneous social conscience, and so on through the categories of meaningful life.

The ethics of enforced altruism, as in China, will play itself out sooner or later. Here is the way things should be: each person with eyes on his own aspirations, spiritual and material, not on another’s satisfaction. When each makes the most of himself or herself—enlightened self-interest—then each becomes your and my servant unknowingly. Paradoxical as it sounds, in a free society, with all too human exceptions, every man and woman is going about doing what he or she wants to do.

The vital distinction between the market economy and the welfare state is simply rights and opportunities versus handouts. Our real problem is overgrown government. Its rightful function is to implement justice according to agreed-upon rules, to keep the peace, maintain a fair field with no favoritism. Let each of us put this question to himself: Do we genuinely believe in the free market for the conduct of creative activities as superior to controlled exchange, whether in industry, farming, education, or whatever? If the answer is yes, we are making progress in understanding freedom.

With his manuscript, Professor Crum offered his list of some 87 volumes of references or readings on liberty. A copy of that list is available on request.