Mr. Chamberlin is a skilled observer and reporter of economic and political conditions at home and abroad. In addition to writing a number of books, he has lectured widely and is a contributor to The Wall Street Journal and numerous magazines.
The proposal to make travel outside this hemisphere a crime is a tremendous step backward from the ideal of working for maximum freedom of movement for men, goods, and capital— the three freedoms that made the nineteenth century, after the end of Napoleon’s wars, one of the most peaceful and prosperous in human history.
The proposed tax has about every fault a tax could have. It is inherently unjust, because it makes a crime of something that is inherently innocent and beneficial. It is discriminatory. It is restrictive. It is most probably unenforceable. It is a confession that the dollar is no longer good for a very important purpose: payment of travel expenses.
One of the latest Soviet "anecdotes," or sour jokes, is about a communist professor who waxes enthusiastic before his students about Soviet achievements in the exploration of space.
"Soon," cried the professor, "you will be able to go to the moon, to Mars, to Venus."
Whereupon a student timidly interjected: "Yes, Professor, but when can we go freely to Vienna and Rome and Paris?"
One of the clearest distinctions between the citizen of a free country and the subject of the totalitarian state is the inalienable natural right of the former to travel, even to take up permanent residence abroad. For the latter it is a privilege, sparingly granted and usually to persons of proved enthusiasm for the regime. Should the United States penalize and restrict and discourage foreign travel to certain parts of the world, it would move with one big step into the totalitarian camp. That such a measure could even be proposed is an ominous sign of the restrictions on individual liberty which are threatened when managed money and a managed economy begin to replace the normal operations of the free market.
The excuse for making travel in Europe a crime is that Americans spend more in Europe than Europeans spend in the United States, that the United States has been running a deficit in its balance of international payments and that a cut down in American tourist spending would be a means of reducing this deficit. This line of argument is utterly specious and fallacious, especially for representatives of a country which has been constantly preaching to European nations the virtues of free international trade and the scrapping of restrictions.
One might just as reasonably, indeed with less harmful results for individual liberty and the benefits of free international contact, propose an embargo on the half billion dollars of foreign alcoholic drinks which are annually imported into this country or on our billion dollars a year of foreign coffee.
Actions and Reactions
The weakness in all such unilateral restrictions is that they invite and sometimes force reprisals. A punitive tax on Americans traveling in Europe will not encourage European tourists to visit this country. Nor is it likely to stimulate the market for sales of American goods abroad. Foreign airlines which will be hard hit by restrictions on American travel will cut down their purchases of American planes. In short, in the case of travel as of trade, one restriction provokes a counter restriction on the other side, until the whole world is drawn into a downward spiral of depression.
It is worth remembering that the United States, at the outset of the 1929-33 depression, adopted the highly protectionist Smoot-Hawley tariff on the ground that this would soon make business boom again. It didn’t; indeed, this tariff legislation was one of the contributory causes in making the depression one of the longest and most severe in modern economic history.
No law is worth passing that is not enforceable. The American public should have learned this lesson from the sorry experience of national prohibition, adopted for idealistic reasons and abandoned in disgust and disillusionment when its principal consequences were widespread disrespect for law and a formidable increase in racketeering and crime. Such legislation, given today’s conditions, is riddled with obvious loopholes for evasion. An American today may transfer dollars to any European country and exchange them for British pounds, French or Swiss francs, German marks, and so on.
So the proposed requirement —degrading and unpleasantly reminiscent of procedures in communist-ruled countries — that every traveler, before departure, show to some inquisitive bureaucrat his stock of funds in cash and travelers’ checks, would also be completely futile. He might have dispatched a much larger sum to London, Paris, Frankfurt, or Zurich before boarding plane or ship.
Control of Foreign Exchange
To make enforcement of a tax on travel even remotely plausible, the government would have to take one of the most retrograde steps in United States economic history. It would have to impose stringent, all-out exchange control, requiring official approval for any exchange of dollars for foreign currencies. The disastrous effect of any such measure on the greatest trading nation in the world, where banks daily handle enormous numbers of transfers of dollars into foreign funds, would be almost incalculably disastrous, assuming that any such task were manageable at all.
It is almost impossible to calculate the amount of outright suffering, to say nothing of exasperating inconvenience, that exchange control — the demand that every individual convince some faceless bureaucrat of his need for foreign funds — would involve. One thinks of such contingencies as the death or disability of a relative or close friend living abroad, for instance.
Moreover, the United States, as the biggest trading nation in the world, necessarily carries out every day uncounted thousands of transactions in foreign exchange. Imagine the chaos that would follow if every such transaction had to be submitted for bureaucratic approval, with long explanations, filed in triplicate or quadruplicate, to prove its necessity! Only people who have lived under a regime of exchange control can appreciate what a blessing it is to have a currency that is freely and readily transferable and exchangeable.
One can reduce the case against the proposed punitive tax on travel outside the western hemisphere to the simplicity of an axiom in geometry. Such a measure would be quite futile and open to scores of evasive devices unless foreign exchange control in all its rigor were clamped down. But such a development would bring ruinous consequences to the foreign export trade which helps our international balance of payments infinitely more than it is injured by tourist spending.
Toward a Dead End
Should the United States be so misguided as to adopt measures penalizing and controlling the travel expenditures of its citizens, it would be starting down a road followed, at various times, by many nations, a road that has always led to failure and frustration. At the end of World War II almost all the countries of Western Europe were tied up in hard knots of red tape, with exchange control, artificial fixed rates of exchange for their currencies, rationing at home and quotas for imports. Their trade with each other was practically on a barter basis, with every nation demanding that its trading partner buy as much from it as it sold.
All experience shows that international trade is a dynamic, competitive enterprise which flourishes best with the least government meddling and interference. Europe had no more chance to regain its potential in production and international exchange with its postwar handicaps than an athlete could win the hundred-yard dash encumbered with an assorted variety of crutches and bandages. Except for the "black markets" in everything from goods to currency, setting at nought official rules and regulations, economic life might well have ground to a complete standstill.
Bit by bit, rationing and its inevitable accompaniment, black markets, went into the discard. Honest money replaced the inflated paper currencies, officially valued far above their real worth as measured in the realistic "black markets."
Once money was thus able to resume its proper function as a medium of exchange, the absurd lapse into beggar-your-neighbor, barter methods went the way of rationing and phony fixed values for inconvertible paper currencies. It no longer became necessary for a country to fear, like bubonic plague, the development of an unfavorable balance of trade with some other country. Under a system of multilateral trade, made possible by stable, freely exchangeable currencies, a deficit in dealings with one country was made up by a surplus in exchange with another.
Zurich vs. Prague
Sometimes a visible object lesson is worth pages of theoretical disquisition in showing the contrast between a system that is working well and one that is working badly. Some years ago, in the course of a European trip, I had occasion to fly from Zurich, in Switzerland, to Prague, the capital of communist-ruled Czechoslovakia.
The Kloten airport in Zurich was stocked with everything in goods and services a traveler might desire. There were magazines and books in many languages; a vast assortment of Swiss chocolate; watches and cuckoo clocks. There were exchange booths where one could buy or sell any currency in the world. Here were the outward fruits of a genuinely free economy. One might add that there was not the slightest difficulty in entering or leaving Switzerland —only a minute’s glance at passports for identification.
From the moment when the plane touched down at Prague the atmosphere was completely different. Passports had to be surrendered for an indefinite period to armed police. The atmosphere in the airport was as drab and dreary as the atmosphere in Zurich had been pleasant and friendly. Nothing was on sale from any foreign country, except, as I recall, a bedraggled copy of an Italian communist newspaper. Zurich lived by free international intercourse, and looked it. Prague lived in the shut-in isolationism of a totalitarian state and a totalitarian economy —and looked it. Punitive travel restrictions will be a long step from the Zurich model to the Prague. Is this really what Americans desire?
Of course, the arguments may be heard that the proposed penalties are for a limited period, two years, and that they represent a necessary means of protecting the exchange value of the dollar, threatened by America’s inability to sell as much abroad in goods and services as it buys abroad. Neither of these arguments carries much weight.
Ignoring the Basic Problem
It is a matter of general experience that restrictions and penalties are far easier to impose than to withdraw. The new hordes of bureaucrats who, under the proposed legislation, will start their congenial task of prying, snooping, and spying into the affairs of American foreign travelers will be reluctant to relinquish their new powers. And what assurance is there, or can there be, that the dollar or America’s stock of gold will be in any better plight two years hence than they are today? There has been a thundering silence about any intention to adopt the measures which would relieve the pressure of domestic inflation, which is a prime cause of America’s balance-of-payments difficulties.
Such measures would be drastic cuts in swollen government spending and a check on the reckless pumping of new money into our system by the Federal Reserve. One of the wisest comments on the folly and undesirability of penalizing travel is that of Professor Gottfried Haberler of Harvard University, an internationally known authority on currency and balance-of-payments problems:
General nondiscriminatory payments restrictions could perhaps be justified as a temporary measure if something decisive were done at the same time to correct the fundamental disequilibrium. But nothing of this sort has been proposed. On the contrary, the Federal Reserve continues to pump money at a record rate into the economy. Hardly a week passes without the President signing into law new programs costing billions of dollars, criticizing Congress at the same time for not spending more.
If inflation is not stopped and the financial house put in order, a devaluation of the dollar becomes unavoidable. An open devaluation, preferably in the form of a floating rate, would be far better than one disguised in a multitude of haphazard, discriminatory taxes and controls of which the existing and presently proposed batch is only the beginning.
It seems doubtful whether devaluation of the dollar, should it become necessary, would have serious practical consequences for the value of the dollar in terms of other currencies, as it would almost certainly be followed by similar moves in other countries. In any case, nothing could be worse than a step into the fatal bog of exchange control, whether from the standpoint of the American people, the American economy, or the world economic situation. The proposed levy on travel is a striking example of trying to deal with a superficial symptom while leaving untouched the basic causes of disequilibrium and inflation.
We were the first to assert that the more complicated the forms assumed by civilization, the more restricted the freedom of the individual must become.