This speech by Leonard Read, given the year of FEE’s founding, provides excellent insight into the grave condition of policy at the time. Following the war, would the US turn to freedom or persist in war planning? The Keynesians at the time warned of disaster following decontrol. Read took a different view. This speech -- given to the National Butter, Poultry, and Egg Association on September 16, 1946 in Chicago, Illinois -- has never been published. The NBPEA worked closely with the Department of Agriculture to ration resources during the war. This copy of the speech is offered here courtesy of the Hagley Museum and Library, Archive and Manuscripts, Accession 1634 J. Howard Pew Personal Papers, Box 9, 1946, 'Foundation for Economic Education'.
Officially, the United States is still at war. This is because, so it is alleged, of the fearful things that would happen to the population if you and I, and our fellow Americans, were as free to carry on our affairs as before the war.
In fact, our rulers consider freedom to be so dangerous that in June of this year, the Federal Government was employing more people to control you and me than at the end of the war in August of last year. Outside of the War and Navy Departments, the number of Federal Employees rose from approximately 1,000,000 in August 1945, to 1,200,000 in June 1946, an increase of one-fifth. During July of this year, latest month for which figures are available, it rose by another 20,000 employees, a 1.6 per cent increase over the preceding month, and an 81.4 per increase over 1939.
At this rate, how soon will we be “decontrolled”?
This reluctance of government to surrender in peacetime the authority given it for war purposes is not new. It has existed after every war, both in this country and in others. The destruction of liberty has always been one of the chief evils of war, and this war is no exception to the rule.
Those who take their opinions from Washington and the Federal bureaucracy have come to regard liberty, not as man’s birthright, which government was established to protect, but as a special privilege to be doled out by a benevolent State. They see liberty, not as a necessity for man’s moral growth and economic progress, but as a rare luxury to be indulged in only under certain fortunate circumstances. They think of their fellow-citizens, not as adult individuals, capable of responsibility and discrimination, but as childlike masses, foolish and irresponsible.
If we accept this view, the question of when to “de-control” becomes as futile as the question of when people will cease to have problems and difficulties.
According to this opinion, the citizens’ problems -- housing shortages, strikes, inflation, deflation, bottlenecks, surpluses, unemployment or labor shortages -- all show the inability of the individual to take care of himself, and, consequently, prove the need for government intervention.
If we accept this view, the question of when to “de-control” becomes as futile as the question of when people will cease to have problems and difficulties. Every new event, problem or condition will be regarded as a new emergency continuance of extension of “control.”
Of one thing I am certain, therefore. If you listen only to Washington, you will never be decontrolled. New emergencies will produce new justifications, one after another, seeming to warrant, not decontrol, but new controls supposedly designed to make more effective the controls already in effect.
But what does this word “control" mean as applied to government intervention?
To answer that question one must first realize that government is by its very nature a restrictive agency. The difference between government and private agencies is that government has been given authority and means to use violence which might otherwise be directed against individuals, either from one’s fellow citizens or from foreign foes.
Government Destroys and Restrains
The essential nature of government is shown for what it is - a force for violence, injury, destruction and restriction...
This authority and means of violence bestow on government the power of compulsion, or coercion. It should never be forgotten, however, that coercion is always restrictive, never productive. Government may seize or borrow wealth; and it may seize, injure or threaten the physical person of its citizens. It may use the seized or borrowed wealth to hire someone to do its bidding. It may restrain conduct by seizing or threatening to seize the wealth and persons of those who do forbidden things or fail to do what is ordered. But it cannot actually compel anyone to do anything productive or creative. Government cannot make a person work, or even fight.
The fact that government cannot compel anyone to do its bidding, but can only restrain or injure those who fail, is demonstrated now and then, when certain individuals choose to accept the restraints of jail or death rather than obey orders. Then the essential nature of government is shown for what it is - a force for violence, injury, destruction and restriction, not for production, planning, or invention.
Therefore, whenever government appears to have accomplished something, remember that it is only by destroying or restricting something else. In judging a proposal for government intervention, consider what is to be destroyed or prevented as well as what the advocates put forth as the object to be accomplished.
When government restrains theft or private assault, it releases energy for production and creative purposes. When, however, the policeman turns from his job of preventing theft and mayhem to telling producers what to produce and how, the net result is a reduction in production and trade.
Government Does Not Produce
In fighting a war, this restriction of peacetime activity in favor of war-making may result in a temporary increase in military force. This is, by restriction the making of pleasure cars, and by taking wealth and using it to pay people to produce tanks and machines guns, there may result an increase in war production.
But peacetime production is another matter. Government officials have an authority to use violence against citizens, under certain circumstances, but this authority bestows no wisdom. The policeman cannot decide what producers want and need. Only producers can do this for themselves. Therefore, every attempt by government to direct production for civilian, peacetime use results in a net loss to the nation.
You will find, therefore , the world over and throughout all history that man has progressed in proportion as government intervention has been limited to its primary function of protecting producers against violence and predation, foreign or domestic. Even military power depends on the degree to which government is thus limited in the scope of its activities. Stagnation, confusion and retrogression have developed and persisted in proportion as gover has departed from its protective function and has turned to interfering with the freedom of producers.
What then shall we say about this problem of how and when of decontrol?
Suspension of OPA Increased Buying Power
A good example of how to decontrol was provided when, on the morning of July 1st of this year, the nation suddenly found itself released from price controls, except as a few static and local governments leaped governments leaped into the supposed breach with their own price control or rent control agencies.
What happened? According to official figures, the cost of living rose 5 per cent in July against 3 per cent in the preceding three months when OPA was still functioning.
You will better appreciate my idea of the nature of a government control if you will imagine yourself in the grip of this ruffian...
But the July rise in legal prices was nothing more than a partial official recognition of an inflation which had already taken place. In some cases, the supposed price increases amounted merely to a posting of prices which buyers had already been paying more or less illegally. In other cases, the change in official prices meant merely a discontinuance of subsides and a consequent shifting of part or the price from future tax bills to present grocery bills. In still other cases, the supposed price increase meant that buyers could once more obtain for single money payment what, under OPA they could get only for a legal price plus heavy expenditures for shoe leather, gasoline and tires used in shipping, together with enormous sacrifices of time and self respect in toadying and bribery.
The fact is that currency and credit inflation had already brought about deprecation of the purchasing power of money in spite of anything OPA could do. The sole effect of this agency has all along been to aggravate the depreciation of money’s purchasing power by choking down output of goods, while its fraudulent claims and deceitful tricks have blinded citizens to a violent currency and credit inflation, the disastrous effects of which will be felt for generation to come.
Producers have Unalienable Rights
Those who are now seriously debating how and when to decontrol, therefore, make me think of how a similar group might approach the problems a man flat on his back, struggling in the grasp of a burly ruffian who has him by the throat with knees firmly planted in his midriff. You will better appreciate my idea of the nature of a government control if you will imagine yourself in the grip of this ruffian; The following is about what I would expect the onlookers to say, even if most of them were businessmen.
“Of course,” they would say, “we must rescue him gradually. Certainly he should not be entirely freed before tomorrow morning and the day after next probably would be better.” If this sounds funny, remember that the C.E.D. recommended the retention of OPA until June 30, 1947 and even the U.S. Chamber wants rent controls until then.
Then, next , from these onlookers you would probably hear, “He is needed by his family and his customers so much that they might be overjoyed to see him freed just now, and give him too big a dinner or too much business.”
Or, they would say, “and if this good treatment induced him to overwork, he might have a breakdown, or he might get all his work done tomorrow and then have nothing to do the next day.”
And this comment would be certain, “ In the meantime we can give him a stimulant or put an oxygen tent over his face to keep him from being choked to death until it is time to take the ruffian’s hands off his neck.” Did that one sound fantastic? Can you think of a better analogy of a subsidy?
But the final crack would certainly be, “However, let’s find out first if he is a landlord. If he is, we can leave him there forever. He deserves strangling, anyway.”
So, while customer clamor for goods, many citizens support various government policies for restricting production and throttling trade, lest free enterprise produce too much too quickly and then have nothing to do. At the same time, however, they are willing that one government agency should apply an artificial stimulant by the way of a subsidy, to stimulate the enterprise which another agency is stifling and restricting.
Hunting Licenses Do Not Encourage Hunting
A good illustration of this policy of strangling of enterprise by one government agency while artificial respiration is being administered by another is to be found in the government’s housing policies. First of all, in the attempt to stimulate home-building for veterans, it restricts every other form of industry, both by taxation for subsidies and by restriction on other lines of construction, including hotels, apartment houses, and motels.
Secondly it hampers the building industry with red tape intended to restrict non-residential building, so that it is retarding even the building of homes which it seeks to promote. Priorities for materials restrict home building as hunting licenses restrict hunting. And licenses to build home are many times more difficult to obtain than licenses to kill deer or catch fish.
Finally, by rent controls, government destroys the incentive to use the existing housing efficiently and thereby creates the very housing shortage which is so often used as the best possible justification for continuing the OPA.
Most people think that war is somehow the cause of the housing shortage. As a matter of actual fact, however the citizens of the United State
s are today occupying more dwelling space per person than ever before in their history. Furthermore, this occupied dwelling space has increased faster than population since 1940 and it has increased fully as fast as the number of families. This astounding fact is revealed by a Bureau of the Census report of May 16 of this year.
Why then the “ housing shortage”?
The answer can be explained by an example. Was there talk of an automobile shortage in 1937? No! Why? Because, if you had the money, you could buy a car. Salesmen representing all companies were trying to sell them for immediate delivery.
Rent ceilings have created an opportunity and an economic incentive for millions or persons to spread out.
Now, suppose that on some Sunday afternoon a bureau in Washington had issued an edict that, no car could be sold for more than fifty dollars. Millions of families, previously content with no car at all, would have wanted to buy a car at the now,low prices. By Monday noon there would have been created an automobile shortfall of several millions of cars, as new buyers rushed to take advantage of the bargain. Whereas no one thought of a shortage
of automobiles following the decree reducing prices.
No Housing shortage before OPA
This is precisely why there is so much talk of a “housing shortage” in a nation which possesses more housing than any other nation in history. Note, first of all, that there is no shortage of houses for sale. Anyone who has the money enough can buy a house. That is because their is no ceilings have been placed on the selling price of homes and there is no law against offering whatever whatever price is necessary to persuade someone to sell. However, the selling prices of homes have been rising sharply because more and more people with money have found that purchase was the only way to get the housing they wanted.
The shortage of housing is a shortage of rentals at legal, ceiling rents. Money incomes of of most persons and families have, been rising since 1942, while legal rents on average have been permitted to rise only 4 or 5 per cent. Rents, therefore, are lower today in proportion to average money income than ever before in our history. They are a smaller proportion of the average family budget. In other words, most families, at the legally frozen rents, can afford considerably more housing and better housing than they had in 1942, and they are trying to get it.
As you know, one of the first things any person or family tries to do, after receiving a sizable pay increase, is to move to better living quarters. For years, millions families have been doing this, or trying to do it, and many have succeeded. Literally millions of individuals who have used to live in a furnished room, or who shared dwellings with one or more other persons, now have apartments or houses of their own. Furnished rooms which used to be rented, are now held as guest rooms or are left unoccupied. As a result, according to the census report which I mentioned, there was between April 1940 and November 1945, a 30 per cent increase in number of dwellings occupied by only one person, and a 22 per cent increase in 2-person dwellings, as against corresponding decreases in numbers of dwellings, housing more than five persons.
I recall wondering at the time about the feelings of the old hotel owners, who had to pay higher taxes in order to assist in financing competitors to drive them out of business.
There is the cause of the nation’s housing shortage. Rent ceilings have created an opportunity and an economic incentive for millions or persons to spread out. They have thereby created ceilings have created an opportunity and an economics incentive for millions of person to spread out. They have thereby created the housing shortage, lock , stock and barrel, a shortage which will remain as long as rents are kept below levels which would be established in free markets,
And to remedy this housing “shortage” which OPA has created, government seizes property from taxpayers to pay subsidies to produce building materials. It induces young Veterans to go heavily in debt to buy housing as high and rising prices, by offering to repay their loan out of further expropriations at some later date, in case of the Veterans cannot or will not themselves meet their obligations. By price ceilings, it creates one bottleneck after another in the supplies of materials. And by rent ceilings is discouraged investors from building or offering the rentals which many householders would prefer to the purchase or homes, especially at current prices.
Government Interference Gives Rise to Class Discriminations
However, an announcement was made last month by the National Housing Administration that higher rents would be allowed on new, low-cost houses than on comparable, existing houses. The owners of existing houses are to have their rents held not quite as low. This proposition says, in effect, that those who are already serving the community by providing housing are to be penalized, compared with those who may provide housing in the future.
The arbitrary distinction between the rent that can be collected on a new and a not-so-new house calls to mind what I observed in Chile a year or so ago. Santiago has a fine new hotel, resplendent in every way, far superior to most hotels in South America. I asked, “How come?” It was explained to me that the government, worrying about the unemployment problem, had offered freedom of taxes for many years on certain types of new construction. I recall wondering at the time about the feelings of the old hotel owners, who had to pay higher taxes in order to assist in financing competitors to drive them out of business. This kind of injustice is rearing its ugly head in the United States of America.
However, this sort of thing is typical bureaucratic nonsense. It is not only expected. It is unavoidable consequence of accepting the collective premise. And bureaucratic efficiency cannot overcome it. It can only make it worse.
Bureaucratic Efficiency is Efficiency in Restriction
The efficient application of an evil is worse than an inefficient application of the same evil. If OPA had been more efficient in enforcing price ceilings, the shortages and the restriction of output would have been just that much more severe. In fact, had it not been for the evasions of OPA controls during the war and since, production and trade would long ago have been brought to a standstill. Thanks your lucky stars for the ineffectiveness of OPA! At the same time, work to get rid of the whole outfit.
You ask me, then “When shall we decontrol”? My answer is simple -- as soon as you can induce Congress to repeal the laws giving these restrictive agencies their authority. How to de-control? How do you take your hands off someone’s throat? You take them off! These controls are nothing but the the suppression of human energy. Suppression, that’s all! Let all the controllers go home and become the kind of folks they are now controlling! Dangerous? Yes, just as dangerous as when the supreme Court declared the NRA invalid! Just as dangerous as removing a weight from your chest!
Let me support these contentions by dealing briefly with a certain historical myth which the advocates of “gradual decontrol” have created or accepted. That is the yarn that the boom and depression of 1919-1921 was the result of insufficient government’ control, or of abandoning war controls too soon, after the Armistice of 1918.
Government Interference Aggravated Difficulties after World War I
The fact is that the chief economic control which the United States Government acquired and used during the first World War was never relinquished, and the exercise of that control has been a leading factor in both the economic fluctuations and the increased interference with liberty which has taken place from 1919 to the present.
After 1915, statism, or government restriction of enterprise, was also extended, in this country as elsewhere, in the fields of foreign trade, agriculture, transportation and labor relations.
Each new government seizure of wealth or restriction of enterprise creates new problems, new emergencies, new shortages, plunder.
Do you recall that the successful presidential candidate in 1932 was elected on a platform and by campaign speeches calling for a dismantling of an overgrown Federal bureaucracy, a cessation of governmental meddling, reduction of government expenditures and taxes, a balanced budget, adherence to the gold standard, and a return to free, competitive enterprise? This platform, the speeches, and the election results registered a widespread recognition of the leading role government policies had played in causing and prolonging the depression which began in 1929.
As you may also recall, however, from April to June 1933, something of a coup d’etat, or bloodless revolution, took place in the United States. Somehow, our Federal Government was seized by an amalgamation of old and new collectivist gangs. And, through government control over money and banking, these bureaucratic and collectivist forces financed for themselves a new lease on life, which they have managed to hold and expand ever since.
Far from proving the instability of free enterprise or the dangers or liberty, United States history of the past 20 years or more shows how each new stateist intervention gives rise to new problems and greater emergencies. They show that the worst depressions are those produced and prolonged by government.
If there is a line or reasoning which can be used to justify any attempt by government to control prices or wages, or to redistribute wealth for one minute, one week or one year, it can be used to justify all such interferences forever. That is because every such argument is based on the premise that what any individual earns belongs, not to him, but to anyone or everyone else, according to what government decides.
“Our Enemy, the State!”
Once this collectivist premise is admitted as a justification for bureaucratic interference with producers, government becomes predatory rather than protective.
Each new government seizure of wealth or restriction of enterprise creates new problems, new emergencies, new shortages, plunder. Each of these new conditions, in turn , appears to provide new excuses for new “controls,” or restrictions, and for new seizures of wealth from some individuals for the supposed benefit of other.
Thus, as my friend, the late Albert J. Nock put it government becomes a State - the enemy of man.
Now , Today, as after other wars or crises brought on by Statism, the forces of individualism are again struggling to resume the offensive. This age-old struggle to reclaim man’s birthright of freedom again calls for the enlistment of every patriot. I think that most of you are eager to get into the fight. You want to know only what is the best and most effective way to combat the Frankenstein monster of collectivism which harries and harrasses us at every turn.
Every stop in human progress and reform, however, must start with an idea, and a revolution in political policy must begin with a revolution in political thinking.
As it works out, of course, the redistribution is really on the basis of political power.
But don’t think a revolution in ideas is accomplished by sissies and pink tea sociables. It demands a single-minded devotion to truth and right which has been as rare as the highest forms of physical bravery. How many persons do you know, among business me, for instance, who care enough about truth and right that they will publicly express precisely what their best judgement dictates as right? How many do you know who will present to their employees, to the public, to congressional committees, points of view which they believe to be valid but which are at complete odds with popular notions? how many teachers in schools and colleges will speak out to denounce current government policies for the fraud and theft they know then to be?
Even in America, men are being increasingly cowed and silenced by the popularity and prestige of the collectivist idea. In certain other countries, collectivism has almost entirely silenced the opposition.
No Unalienable Rights Under Collectivism
In fact, the collectivist way of thinking has held sway over most of the World for the most of time. Denying the concept of unalienable rights, it maintains that the individual’s efforts, his person and even his personality, belong to others, to the group; that the group can manage him in accordance with its own preference, it any way it wishes, for the benefit of whatever it decides to be its own good. According to this view, therefore, each person lives only by the sanction of others and for the sake of others -- the majority.
Under collectivism, you have the “managed economy,” that is, “controls.” Rent control, wage control, price control, working poor and the unemployed, control of so-called social benefits, control of veterans, control of the amount of money, control of interest rates, in short, control of everything. The professed aim of these controls is to take the wealth of producers and to re-distribute it on the basis of needs, or wants. As it works out, of course, the redistribution is really on the basis of political power.
The opposing view is the New World, American concept. Over the ages it has been a dream in the minds of only a few, but for a brief period it came near realization in this country. It is the individualistic concept.
Individualism Maintains the Dominion of Moral Law
Individualism maintains that the individual has unalienable rights, which cannot be taken away from him by any other person, nor by any number of persons, group or collection of other persons. It insists that each individual exists by his own right and for his own sake, and not for the sake of the group, the collective or the state.
Under individualism you have the free economy. The idea is, to each the full value of his product. There are no controls over the individual beyond a restriction of such acts as may be harmful to other, There are no controls over the individual beyond a restriction of such acts as may be harmful to others. His property and his income are his, except that share required to finance an honest government of limited powers. In the view of the individualist, the injunction, “Thou shalt not steal!" applies to legislators in their official lawmaking capacities as well as in their private affairs.
Under a government which observes moral law as an engineer takes account of physical law, the individual cultivates thrift, honesty, knowledge, self-discipline, self-restraint, good manners, good sportsmanship, because these virtues are essential to personal happiness and welfare and are necessary for getting along with fellow man.
These two opposing views of man’s relation to his fellows -- collectivism and individualism -- are the roots of two opposing ways of living together on this earth. The basic issue in the world today is between these two opposing systems. The case for the one, collectivism, is being made as never before, abroad and frightening pace.
A Challenge to Economic Education
The case for the other, individualism, is being made only by a few, incidentally, and, for the most part, unskillfully. Making the case for individualism, for the free economy and for limited government, explaining their meanings and high benefit, is the greatest educational challenge facing this nation today.
It is this task that the Foundation for Economic Education has set for itself. How competently we shall perform I do not know. How many will come to our support I cannot predict. I only know this: that we expect to bring the most skilled exponents of freedom obtainable to our work bench, and that the case will be made honestly and without any fear of popular notions to the contrary. No one is good enough for us who would not fight for freedom and its principles all alone.
My conclusion is simple. Divest the minds of American citizen of collectivistic and “managed economy” notions. It is in the end, the only way to de-control and to stay de-controlled.