All Commentary
Wednesday, October 1, 1975

Stop, Thief!

Mr. anderson is President of the Employers Association in Milwaukee.

When I see what is happening to the average, honest, responsible citizens of this country today, especially those in retirement or close to it, my blood begins to boil. And I am intolerant of those in positions of authority and thought leadership who have convinced most of these people that the accelerating erosion of their earnings is due to some mystical alliance of forces that no one really understands.

In fact, I believe it’s about time that a lot of people get angry —and angry enough to fight back and make some noise doing it. What should be shouted from the hilltops, and repeated until it penetrates even the intellectual smog on the Potomac, is the fact that there is no mystery about this erosion. It is caused by inflation. Only government growth and spending is causing it and only government retrenchment can, and must, stop it.

But, let’s back up and fill in a bit! It is a sad fact—and this adds to our frustration — that very few people really understand that the great promise of this free-market economy was that each passing year should bring a higher value to invested savings, not a lower value. Years ago when a man retired, each of his dollars actually bought more in the following years than when he earned it.

This was the very essence of the free market and the high productivity which was brought about by capital accumulation. But most of our educators haven’t even recognized this free-market principle. And because of this failure, it is today considered almost unchallengeable that more money is necessary for a growing economy… that if we pump more money into the system, we’ll get economic growth.

Purchasing Power

A corollary to this is the current orthodoxy which tells us that the way to share in increased productivity is to raise wages and salaries. Nonsense! Our history clearly shows that the free economy has shared its productivity in the form of more valuable dollars. Furthermore, this is the just and humane way because it automatically benefits those who helped make this possible, including those retired on fixed incomes. Without inflation, the millions of retired people should be looking forward to increasing real income each year instead of the haunting prospect that they will have less and less…. and may, in fact, face dependence on their children or on the state.

What a terrible thing we are doing to these people whose productivity and savings should have brought to all of us, workers and retirees alike, a rising standard of living. Instead, they face the demoralizing prospect of dependency — and they don’t know why! A bewildering, dimensionless fog of words booms at them from newspapers, radio and TV telling them, in effect, that those in authority who could “save” them don’t know why all this is happening — but, they say, they are working desperately to “discover” why, and will then “order” solutions.

I repeat, this is a terrible — an immoral — thing that is happening to Mr. and Mrs. Average American. Truth and facts seem to have no place in this climate of political expediency. There seems to be a conspiracy to avoid the simple, irrefutable fact that our periods of greatest economic growth and most rapid increase in the value of our money and savings were not those when the most new dollars were pumped into the economy nor when we had the most general increases in wages.

It is truly disturbing that this fact is startling news to most people, even graduates in economics, and those in Washington, who propose to “save” us. But, the supporting facts are perfectly clear. They show us that the past few decades of inflation, of collective bargaining with massive negotiated wage increases, were not the period of our greatest economic growth or increase of real income. Far from it! Our national real income per capita rose most rapidly from 1874 to 1913. That rise, which averaged 4.7% a year, was over twice as much as we have been able to generate since 1947 while inflation has been on the rise and negotiated wage increases have been in the headlines. Not one person in a hundred realizes that the general price level actually dropped substantially after 1874 for most of 40 years (e.g., over 20 per cent by 1894) and only regained the 1874 level just prior to 1913. Most of us, however, are painfully aware that prices rose 100 per cent in the 26 years from 1947 to 1973 and that higher wages did not buy as much. In other words, rising wages do not always mean rising real income. Somehow in the confusion of inflation, the significance of real income growth and how it occurred has been lost. To those who will open their eyes, it is perfectly clear that pumping up the money supply (inflation) as we have been doing for over 30 years — has not raised real income nor brought security for the aging.

Going back now, let’s look at a typical employee who retired on a fixed income around 1900. We see why he and his wife could live better each year. His concern about dependency decreased each year. Contrast this with today’s retiree whose fixed income lost 8.8 per cent of its value in 1973 and 12 per cent in 1974 — over 20 per cent in just 2 years — and who now is haunted by the growing fear of dependency. Had he retired late in 1965 on a fixed dollar income, those dollars in 1975 would buy only 60 per cent as much as they would have 10 years earlier.

Show me the humaneness or justice of this kind of treatment of those who produced and saved to be independent and who, in this process, provided the capital which should increase productivity and living standards. It is a tragic miscarriage of justice; I think they are being robbed.

Political Hazards

So, I am speaking as one who is angry and one who is fed up with the double talk and the mystery that has been woven around what is happening to us. But, I am not unmindful of the political hazards of combating this orthodoxy. The “new economics” has convinced us that more money and deficit spending is beneficial and it has blinded us to the truths about real growth and its rewards to all those who worked and saved to cause the growth. Neither am I unmindful that a number of economists who know these truths, but, believing that political forces preclude free-market solutions, suggest only compromises that they believe are politically palatable. I am completely convinced that the proposal of such expediencies by respected economists has been responsible, at least partially, for the aura of mystery and frustration which prevails.

How can we ever expect to set our course toward real economic growth, toward the free market and toward more security in old age, without some spokesmen for the ideal? With only politically expedient proposals, where is our true guide toward what is right and humane? Where, indeed! For as we flounder in the morass we have created, it becomes ever more apparent that spokesmen for what is right will not appear among the nation’s leaders, nor will our course be set toward real, long-range solutions unless more of us get disturbed and irritated enough to shout our disapproval of what is going on.

When so few seem to have any notion of how things really ought to be in a free-market economy, without inflation, the need for understanding becomes truly desperate.

Aren’t you a little mad? Why not shout a little!