The Reverend Mr. Opitz is a member of the staff of the Foundation for Economic Education.
Human existence has always been precarious. Man is always exposed to natural calami-ties-including other men. Famines and epidemics have recurred with appalling frequency during history, and entire populations have been ravaged from time to time. There cannot be, in the nature of things, any guarantee that a man will reap where he has sown. Drought or flood may ruin his crops, or some other man may raid the harvest. The producer is constantly threatened by a forcible transfer of his wealth—effected on a small scale by robbery, and on a large scale by war. Men have never learned to live comfortably with the all-pervading uncertainty of life, and they have grasped at every straw which promises to introduce a reasonable security into it.
It is economic uncertainty which makes the modern man most nervous. The Great Depression of the 1930′s is kept so fresh in his mind that he is willing to allow a lot of political intervention by the federal government because he believes that there is no other way to prevent a recurrence of the big bust of 1929. If we grant the premise that political action can make the economy depression-proof, it becomes easy to accept the conclusion that it is the duty of government to shore up the economy at every critical point. But is the premise sound? “Probably not,” is the conclusion forced upon us by an analysis of the economic and political factors in the situation.
The market place is the cornerstone of society. The human community does not flower except as men are able to exchange their surplus energies voluntarily as goods, services, and ideas. If individuals were completely self-sufficient, society would be unnecessary, if not inconceivable. A society is impossible unless there be some exchange, and it is rich and complex in the degree to which exchanges multiply; and on every level exchanges multiply naturally unless they are sabotaged. The quality of goods, services, and ideas exchanged will depend, of course, on the endowment and enlightenment of the people who do the exchanging. When economic exchanges are voluntary, there is a market economy; if the exchanges are politically controlled or directed, we have a planned society or collectivism.
Collectivism contains its own cure in the long run; the looting of the market place on which it thrives gradually dries up production. The producer will not continue to produce when he realizes that the fruits of his labor are systematically taken away from him. He will tend toward a hand-to-mouth existence. Too many parasites will kill the host.
But it is not collectivism, a completely socialized economy, which is today the real problem for many people. Socialism has been given its chance in several major countries and has been unable to redeem its promises. Political interventionism, or a middle-of-the-road policy, for the sole purpose of “making capitalism work” is the present position of those who distrust the working of a free market system. The boom and bust cycle is inherent in the market economy, they believe, and so they would correct what they regard as the faulty operation of the economic order by political action.
Division of labor, or specialization according to skill—the foundation of any human grouping entitled to be called a society—is the front end of an economic process requiring an exchange of the fruits of specialization for its completion. The benefits of specialization result from the energy thus conserved, but the benefits are dissipated to the extent that exchanges are inhibited. The convenient label for multiple voluntary exchanges is “the market,” personified by buyer and seller, and a duality of interest is intrinsic to their relationship.
The seller wants to get a high price for his goods and services, whereas the buyer wants to pay a low price. Buyer and seller haggle over price; and if a sale takes place, it means that each man feels he got the best deal the market offered him at the time. Buyer and seller both feel that exchanging at the mutually acceptable price is better than any available alternative—such as not exchanging at all. Buyer and seller must each have gained at least 51 per cent satisfaction or the transaction would not have jelled. Thus it may be true to say that a cloud of discontent always hangs over the market, but the human situation is not all sunshine. The market is an imperfect device, merely because it consists of people in action, but it is by far the best of all possible alternatives for carrying on the business of society.
On occasion, a paralysis seems to settle on the market. Exchanges diminish in number, and production, in consequence, dries up. Is there something in the market process itself which is so self-stultifying that an outside force must intervene to unshackle it? In other words, is an industrial stagnation a free market phenomenon? Or is it the cumulative effect of political interference with the market? Analysis points inexorably toward the latter.
Idle men, idle factories and machines, idle fields and mines betoken an economic depression. The major feature of a depression, as it strikes the public eye, is mass unemployment. Factories are closed, business stagnates, and millions who want jobs can’t find them at their price. As the depression lengthens or deepens, human suffering increases. Unmet human wants and needs intensify, but a sort of paralysis seems to prevent these wants and needs from being met in the only way they can be met—by economic activity. Economic activity is, basically, the application of human energy to natural opportunities, aided by tools, i.e., capital. To say that there is mass unemployment is only another way of saying that the three primary factors of production—land, labor, and capital—are not getting together despite their powerful affinity for each other. What’s keeping them apart?
Unless land, labor, and capital can get together, there is no production. Economic activity, in which these three factors are joined, is a consequence of human wants, needs, and desires which cannot be satisfied except out of production, These wants and needs are, normally, the stimuli that drive a man into productive activity. If man were a creature without wants, or if his wants could be satisfied by wishing, he would not work, and economic activity would decline toward zero. But this is not the problem posed by a depression. In such a depression as this country suffered from 1929 to 1939, economic activity underwent a steep decline in spite of pressing human needs. The urgent unmet needs and wants which are the natural initiators of the productive process by which they can be met, somehow failed to get production going. Land, labor, and capital stayed apart even though urgent human needs exerted their strong pressures to bring these factors together. Something must have counteracted these pressures.
The three factors of production normally join forces in response to human needs. If there are obvious economic needs and no production results from them, the clear inference is that some force is at work to keep the three factors apart. There is a monkey wrench in the machinery; if we could identify and remove it, perhaps the machinery would start up again. This monkey wrench is not to be found among economic forces or factors. Thus we are forced to ask: Is it not the intrusion of a noneconomic element which tends to paralyze the productive process?
What is economic activity? If we carry this question back to its basic level, we are confronted with the facts of biology. Man, as a biological organism, cannot survive unless he can meet his creaturely needs from the products of human labor—his own or some other man’s. When these needs are satisfied, man becomes something more than a mere biological organism, and another set of needs comes into play. In his efforts to satisfy these, man engages in the disinterested pursuit of truth, in the quest for beauty, and in worship. These activities are normal to man, but they are not primarily economic activities.
On the economic level, human desires are not constant but recurring. A person eats to the point of satiety, but soon he will be hungry again. He builds a shelter, but after every storm, it needs fixing. Periodically he outgrows his clothing or else it wears out and he needs new. In brief, there are moments when the economic urge ebbs, and in those moments it is natural for land, labor, and capital to lie idle. But shortly, the self-starting cycle gets under way again naturally as satiety wears off and recurring wants and needs reach a certain urgency. This urgency overcomes the natural desire to loaf and take one’s ease, and man goes back to work. That is to say, he picks up his tools and starts to dig. In more sophisticated societies he has a wider variety of choices; he may perform functions or render services that appear remote from labor in or upon the earth. But unless someone does the farming and foresting, the mining and fishing, no one will stay long in the professions or the service occupations.
Economic activities are immensely varied, but they are all interrelated. And they are an almost automatic response to the nagging demand of human wants which cannot be satisfied except by the fruits of human labor.
“But this,” someone may object, “is Robinson Crusoe economics. It is obvious that Crusoe is not bothered by unemployment because he is his own market. He is steadily employed because his very survival depends on it. But in a complex society the situation is quite different.” But is the situation so different?
In a simple economy the producer satisfies his own needs directly; he is his own consumer. A complex economy, on the other hand, derives from the discovery that each individual can achieve maximum satisfaction for his own needs and desires by guiding his production according to the consumer demands of other people. That is to say, he produces for the market, and as a result of this specialization there is more of everything for everybody. This results in economic progress—the steady transformation of luxuries into necessities.
The wants and desires of each person are virtually limitless, and human ingenuity continues to devise better ways of satisfying them. Each person in this interrelation thus constitutes an insatiable demand for the goods and services produced by the labor of any other person or combination, and any-other-person-or-combination is therefore faced with all the work he can cope with, and more.
Presumably every person would like to possess a magic formula for satisfying his wants and needs without work, but most of us have learned that the world is not so constructed as to yield up its goods without the expenditure of energy. We have learned that our wants find their fullest satisfaction in the context of the voluntary and reciprocal exchanging of goods and services, which are always in short supply. Everyone wants more goods and services than he now has, and thus there is a constant demand to produce them. Goods and services are the result of applying human energy to the earth’s resources, and the context in which they are produced is a job. The insatiable demand for goods and services, then, is equivalent to an endless supply of jobs to meet the demand for economic satisfactions. An endless supply of jobs means a chronic shortage of labor and the prospect of continuous employment.
On the basis of economic considerations alone it is difficult to see how there could be a shortage of jobs. On the level of production and exchange, how can we account for unemployment in the face of unsatisfied economic demands? To say this is not to deny the fact of depressions; it is merely to suggest that economic paralysis must have noneconomic causes.
Is there some element which is frequently found in association with economic factors but which bears no intrinsic relation to them? The answer is: Yes, government. There is always politics in the market place, for reasons deeply rooted in human nature. Men being what they are—creatures who seek to satisfy their needs and desires with a minimum of effort, the market place is subject to raids on it by those who try to take something out of it without putting anything commensurate into it. This being so, the market place needs to be defended in order to maintain the energy exchanges which form the matrix of society. The natural elements which compose the market place—goods, services, and ideas set in motion by men seeking varied satisfactions—need a social element to defend the men who engage in the exchange. This element is government, and thus economics becomes involved with political action.
There are few guaranteed results in human affairs. There is no assurance that the extra energy which the market bestows upon people will not be used wrongly and become real evil. Release a man from drudgery and he may explore the furthest reaches of human thought, or he may sink to the depths of degradation. The market place is a blank page. It has no character of its own, but it does respond sensitively to human evaluations, and it does reflect the real appraisal people put upon various items by recording the amount of energy they will expend to get them. Nor is there any assurance that government will not be perverted.
Some men comprising the policing establishment are not long in discovering that they are in a strategic position for conducting predation, and that predation seems to pay better than policing. In conducting this operation they rarely go it alone; they need the partnership of nonpolitical persons who do not wield political power but who benefit by the exercise of it—at the expense of the other members of society. In this operation these men are but following the mandates of a natural urge to seek satisfactions in the easiest manner; they have persuaded themselves that predation is a labor saver however immoral it might be.
It is this deep-rooted human desire to live at the expense of someone else which, in the first place, gives rise to government as the producer’s means of defending himself, and in the second place, causes government itself to go sour and overstep its proper bounds. Unless human beings live a hand-to-mouth existence, this desire cannot be starved out. As soon as men produce a relative abundance, as they will if they are free to produce and exchange, the abundance attracts the predator, leaving the producer no choice but to protect himself directly or hire a policeman to protect him. The obvious benefits of specialization result invariably in the selection of the latter method, the employment of an agency which keeps the peace by restraining peacebreakers. The political agency cannot be dispensed with unless society is dispensed with, so the essence of the political problem is the difficult art of keeping government brass-bound and copper-riveted within the norms of morality.
But our contemporaries view the political problem in a different light. Every advanced country today is operating on the fallacious belief that free men left to their own devices cannot take care of their creaturely needs, with the corollary illusion that it is government which organizes society, directs and channels energy exchanges, and provides an object in the service of which men and women may realize themselves. This dubious ideology is collectivism. Collectivism elevates government to a role where it usurps functions that belong to other institutions or to individuals.
Government has enjoyed a cancerous growth in modern times for two reasons. One of these reasons has deep roots in the past; it is ignorance of a proper theory of government which would detail the reasons for establishing government in the first place and set forth the precise moral norms by which it is properly bounded. This demands a clear understanding in the domain of the private and personal, as sharply distinguished from the other-personal; the distinction, in short, of what is mine from what is yours. It is right and my duty to exercise control over what is mine; but it is a moral evil for me to attempt to exercise control over what is yours. It is the great defect of much political thought that this distinction is so feebly made.
The history of political theory is largely an account of the means whereby some men are able to control and direct the lives of other men, as the word “govern” itself bears witness. The word is derived from the Latin word meaning “to steer” and the Greek word for “rudder.” The new departure in political thought is to be the devising of arrangements by which persons are left free to govern themselves.
The second reason for the cancerous growth of government is the miraculous material productivity of modern times. Popular ignorance of the proper functions of the political agency has everywhere resulted in the use of the agency to sabotage the market place for the supposed benefit of some at the expense of others. This evil has been kept pretty well in check throughout history by the almost universal poverty of mankind. Until modern times, there has only rarely been sufficient goods in the market place to warrant the trouble of setting up the political machinery to siphon them off. It is only in modern times, as a result of inventions and the relative freedom of the Liberal Era, that material goods have spewed forth in such abundance as would warrant construction of the political machinery to systematically and legally loot the market place.
Predation is not resorted to unless it is thought to pay; and historically when looting has taken place, it is an accumulation of wealth that has been looted. To cite but three out of thousands of examples: the Mongol invasion of China, the Spanish conquest of Peru, the English conquest of India. In each of these instances, a civilization which had accumulated great wealth was subjected to attack and invasion for the primary purpose of looting that wealth. This was the only kind of predation worth-while in past ages. Except on a comparatively minor scale in chattel slavery, there was no concerted effort on the part of a large number of people to live by predation in the form of a continuous levy on current production.
It has been only within the last century or so that conditions have arisen which would sow the notion in some minds that production is such a never-failing and healthy stream that it could withstand being tapped and bled at numerous points and still continue to flow. These are the basic premises of collectivism: that there is a virtually automatic source of production, which will go on and on like the sorcerer’s mill, and that the problem resolves itself into tapping the flow successfully for the right people. But this operation puts an increasing pressure on the goose which lays the golden eggs and eventually kills it. There comes a time when producers refuse to go on being victimized.
It has been pointed out that economic transactions have, from the beginning, been involved with politics, ostensibly to keep predators out of the market. If we know that political action has always played a role in economic affairs, and if we eliminate economic action as a cause of depressions, then we are in a position to examine objectively the theory that improper political action is the culprit behind boom and bust.
Collectivism is a poison, and the thing to do with a poison is to avoid it altogether—not take it in small doses under illusion that it has curative powers. Collectivism in small doses is what we are offered in such nostrums as Keynesianism, the Welfare State, and the middle-of-the-road policy. These fragments of socialism are sold to us on the promise that they will make the market economy work and keep us out of collectivism. But because they are premised on a complete misunderstanding of the market economy, they actually sabotage it and thus drive us closer to the state socialism they hope to avoid. Free market capitalism doesn’t have to be made to work; it works naturally, by itself, within the framework of the proper moral and institutional guarantees to life, liberty, and property.
