All Commentary
Thursday, March 1, 1973

The Northwood Idea

Dr. Watts is Director of Economic Education, Northwood Institute, Midland, Michigan, a private college dedicated to the philosophy and practice of free enterprise. This article is from remarks at a recent faculty meeting there.

What I have to say about the “Northwood Idea” is not original with me. I have tried to do little but put together what I have gleaned from discussions with many persons at Northwood — trustees, administrators, faculty and students; but perhaps this summary may be useful and it may be that my concluding point deserves a little more emphasis than we usually give it.

At the outset, we should note that the Northwood philosophy is based on what, for want of a better phrase, we may call the Judeo-Christian Ethic.

Next, I shall refer to our emphasis on work and thrift, not merely as economic virtues to produce so-called “material welfare,” but as spiritual therapy; that is, as necessary means for “spiritual development” — welfare in its nonmaterial aspects.

Finally, I shall remind you of the necessity for business, that is, for commerce and finance, including advertising and selling, bookkeeping, accumulation of cash reserves, banking, and the dickering of free markets. Business in this sense of the term is an essential aspect of every great civilization, and I believe it is necessary for the development of truly human and humane character and personality. That concluding idea, I expect, is the most distinguishing feature of what I have to say.


As to the Judeo-Christian Ethic, I’ve been tempted to use instead the “Bourgeois Ethic,” the ethic of the tradesman; but Karl Marx and others have given that phrase so nasty a connotation that I know I would have two strikes against me at the outset if I called our moral code the “Bourgeois Ethic.” Yet, whatever we call it, the moral basis for our Northwood philosophy is the ethic which is necessary for a good life as a trader or financier.

The Idea of Individual Responsibility

It begins with the idea of individual responsibility. This is the psychological basis for the Judeo-Christian Ethic.

The Ten Commandments and the moral injunctions of both the Old and the New Testaments were always directed to the individual: “Thou shalt have no other gods before me”; “Thou shalt not make unto thee any graven image”; “Honor thy father and thy mother: that thy days may be long upon the land which the Lord thy God giveth thee.”

These commandments were directed to one person, the individual, who is thereby charged with responsibility for his choices.

In other words, humans must choose — that’s what I mean by individual responsibility and self-determination. Ideas and acquired values determine our specific actions, and they may prompt us to ignore various influences in the outside environment. We can direct our own actions to prolong and enrich our lives, or we can choose suicidal paths as people choose to smoke when they have abundant evidence that it shortens life. We can choose to jump off cliffs, we can choose to play Russian roulette; or we can choose ways of life, ways of health and welfare.

The Idea of Moral Law

Of equal importance in the Judeo-Christian Ethic is recognition of the enduring nature of Moral Law. The essence of this moral law is summed up in the “Golden Rule,” and it derives from the fact that humans need one another.

Without other human beings, we cannot be born, cannot be reared, cannot prosper; and to have the cooperation of other humans—to avoid the conflicts which would be suicidal for humans —we must follow the “Golden Rule.” When we apply it in practice, we find it is the unifying principle of those commandments that refer to the relations between the individual and his fellows: “Thou shalt not steal,” “Thou shalt not kill,” and “Thou shalt not bear false witness.”

Now, it should be clear that obedience to Moral Law means voluntary cooperation and freedom. If we don’t steal, we leave other persons free to use their talents in peaceful cooperative ways to produce goods for their own use, for exchange, or for gifts to others, such as gifts to one’s family or heirs.

Therefore, we have a state of individual freedom if we live by the “Ten Commandments.” We have private property and numberless associations for voluntary cooperation. And humans develop as humans and make progress only in this condition of individual freedom and voluntary association established by adherence to these moral principles. Therefore, these moral principles are antecedent to and take precedence over all manmade laws and customs.

Respect for Property

In other words, these enduring moral principles require of us respect for the property rights of other people — that is, respect for their rights to control their own persons and for their rights to control those things which they obtain in voluntary cooperation, whether by gift, by voluntary exchange, or by the productive use of these things. Living by these principles requires that we fulfill our contracts, that we speak the truth, and that we revere the laws of Life and Nature. The human need for this reverence appears in the first four of the “Ten Commandments.”

We should note, incidentally, that this voluntary cooperation and exchange is doubly productive of benefits in contrast to the one-sided gain that anyone may get by coercion, as for example, by burglary, by slavery, or by taxation. In voluntary cooperation, all participants must benefit if the cooperation is to continue, for if it is voluntary, anyone may withdraw when he feels he is not benefiting, when he feels that the gains are distributed unjustly or going entirely to one person or group at the expense of the time and energy of others.

We should note also that living by the Golden Rule involves respect for privacy — the right to be let alone and the right to choose one’s associates. Coercion — the attempt to compel people to associate with others — leads to conflict rather than to the attitudes and actions which are mutually beneficial. Freedom established by the Moral Law of the Golden Rule and the Ten Commandments includes the moral right to withdraw from an unwelcome contact with other persons, as well as the right freely to cooperate in mutually beneficial ways.

As Paul wrote in his “Second Letter to the Corinthians” 2000 years ago, “Be ye not unequally yoked with unbelievers; for what fellowship hath righteousness with unrighteousness and what communion hath light with darkness?… Wherefore come out from among them and be separate saith the Lord… and I will receive you.” (II Cor. 6: 14-17)

Conditions of Sale

I mention this because it is sometimes said that, by our rules at Northwood prohibiting the use of liquor and marijuana and requiring the women students to return to the dormitories at a certain time, we are coercing the students. This is not true. We are thereby merely exercising our moral rights and duties in selecting those student associates who are to use the facilities provided by the college founders and supporters. We use no coercion to en, force these rules. To say that choosing our associates is coercion is a misuse of the term coercion. We choose only to disassociate ourselves from those who are not willing to abide by our rules.

Our rules are conditions for continued use of Northwood’s facilities. We must have such rules, or standards, and we must separate ourselves from anyone not willing to accept them, if the Northwood Idea is to have meaning and effect.


Next, I wish to call attention to Northwood’s emphasis on work and thrift as marks and means of human progress. It is fashionable in some circles nowadays to disparage both of these. But, work is merely persistent, purposeful effort, and investment of human time and energy for long-range, indirect benefits.

Long-range benefits are those that occur in the future. Indirect benefits are those that may first benefit another person, but bring a return benefit of some sort later.

Such planned, purposeful effort for a long-range or indirect benefit is surely necessary for human survival and progress; and the traits of character and personality developed by such effort we regard as virtues.

Thrift is the postponement of present consumption in order to obtain greater satisfactions in the future. Like work, it requires the highest human qualities of understanding and imagination to foresee the future and to hold it in mind in order to gain the necessary self-restraint. In short, work and thrift require understanding, self-control. They are means, not only of self-development but of service to others.

Without Savings and Tools, We’d Still Live in Caves

Where would we be today had it not been for the thrift and work involved in the creation of our buildings, and the production of the myriad of tools, or capital goods, that we use? The answer is we would still be living in caves, eking out a short-lived, hand-to-mouth existence derived from the roots and grubs we could dig up, the small animals we could catch in our hands, and the berries we could get in season.

Everything that we call the material aspects of civilization, and the moral and spiritual ones as well, our understanding that enables us to live longer, to live better and to cooperate — all of this comes from the thrift and work, the accumulations of thousands of years of human effort, inventiveness, planning, thrift and self-discipline.

This Puritan Ethic — this system of values, this way of life —is essential to human living, not only economically but for developing the qualities that are most distinctively human, the qualities that make us humane. It is mental, moral, and spiritual “therapy,” to use a modern cliché.


Finally, if we are to have cooperation, we must exchange services; and as the cooperation gets more and more complicated we need specialists to work out the terms and procedures of the multitudinous exchanges. Therefore, we must use money and credit; and we must have traders and financiers, advertisers, brokers and salesmen, accountants and collection agencies to complete the exchanges, including those exchanges which are made over a period of time and which therefore require credit and finance.

Finance is the monetary aspect of credit. Credit is merely a delayed exchange, an incomplete exchange. In every civilized society, most exchanges take time to complete because they are indirect, three-cornered or four-cornered exchanges, taking place over a distance and involving roundabout (capitalistic) methods of production. In all such time-consuming transactions, we must have credit (trust and waiting). Therefore, money, credit and financial experts are as necessary for civilized life and progress as tools and machines, mechanics and engineers.

Business, then, means those aspects of voluntary cooperation which we call commerce and finance, and the function of the businessman is to promote, inspire, and guide cooperation. He organizes and teaches competitive cooperation — cooperation to provide better opportunities for life and for a more abundant life. These business activities — organizing, inspiring, leading and teaching cooperation — promote development of the highest qualities of mind, character, and personality.

Now, from time immemorial —from the first introduction of money and the specialists who traded and promoted trades — business has been widely regarded with suspicion and looked down upon as a degrading occupation. In primitive societies, the view prevails that a merchant or money lender profits only at the expense of producers. This belief helps explain why such societies remain backward, or “under-developed.”

Of course, this belief is an entire misjudgment as to what most of a businessman’s wealth consists of and what he contributes to the value of other producers’ services and incomes. Most of his wealth consists of the means for serving his customers, and he contributes some of the most essential ingredients of human progress.

Wherever this disparaging attitude toward business becomes general, you’ll find that business is harassed, regulated, plundered, and repressed; and under such persecution, the character and wisdom of businessmen tends to be low. Where opinion-makers teach that business is a dishonest racket, then those that are willing to be racketeers or cheats will monopolize business, while achievers who value the good opinion of their fellows will choose other occupations, such as politics and the military. Then we find the kind of government the Pharaohs had in ancient Egypt, or that prevailed as the Roman Republic gave way to the Empire. Under such oppressive governments, a businessman must be something of a trickster to survive.

Spreading Hostility

As hostility to businessmen grows, politicians tax them more heavily, while debasing and inflating the currency to maintain an illusion of prosperity. Then, when these policies cause rising price levels, a deluded populace demands price controls, which ambitious politicians are all too ready to impose.

The resulting shortages and “black markets” provide further excuses for more government action to combat these supposed evidences of private “greed.”

This cancerous growth of government produces political “leaders” who promise peace and plenty even while they squander the fruits of industry in pauperizing the poor and waging “perpetual war for perpetual peace.”

The result must be, sooner or later, a spreading decline in the quality of life despite (or because of) the increasing largess to “the poor” and the privileged, the rise of great new public works, and the display of awe-inspiring armaments.

Civilization progresses when business is widely regarded as Horatio Alger represented it in his stories 75 or more years ago. In those once-popular tales, work and thrift in honest business service were the high road to personal success in the broadest sense of that word. That view of business helped attract able, enterprising youths into business careers. It prevailed in this country long before Alger wrote and helps explain the astounding economic and cultural progress of the United States during the past two centuries.

On the other hand, insofar as we lose the Horatio Alger understanding and spirit, we succumb to increasing paternalism and despotism, collectivism and war, which demoralize and belittle the individual and produce a widespread cultural decline. This has happened time and time again in history, and if we don’t learn the lesson from this history, we shall be doomed to repeat it.

Every nation has developed and flowered — with art, music and the other ornaments and means of civilization — only on the basis of flourishing business, trade and commerce. This was true of the Phoenicians, Ancient Greece, and Ancient Egypt, the Chinese civilization, the Byzantine Empire, Venice, Florence, Spain, England, France, Germany and the United States. Go through the history of each and you’ll find in its origins this period in which commerce and finance were highly regarded and relatively free in a developing civilization.

Again and again, however, these eras of progress have ended as the intelligentsia became worshippers of the Almighty State. Then these intellectuals — scribes and priests — became more and more scornful of businessmen; and business lost its vision because it lost its men of vision. Men of talent and imagination, instead, accepted the faith of the state-employed intellectuals that a well-schooled elite must make more and more choices for the general run of the population and compel the inferior masses to accept this planning and direction of their lives.

Submerging the Individual

With this elitist excuse for tyranny, governments organize militaristic and imperialistic gangs to substitute forms of slavery for the voluntary cooperation of free individuals. Then, as in Communist China and Russia today, even the ablest of the ruling bureaucracies find that any individual is expendable — trapped and exploited or liquidated — as millions of humans are sacrificed on the altars of Planned Perfection. The Moral Law of the Golden Rule and of the Ten Commandments may be violated, but not with impunity. He who harms others, harms himself; he who deceives another, cheats himself.

This faith in Moral Law, I find, permeates the thinking of our Northwood administration and faculty. Along with it goes insistence on the fact of individual responsibility and a broad, long-range view of personal success. A businessman’s moral responsibility is no less than that of a teacher, physician, minister, artist or writer.

Essential to the Northwood Idea, then, is appreciation of the unlimited opportunities for character development in voluntary business enterprise.

Temptations correspond to the opportunities, and each occupation has its own peculiar temptations as it has its own peculiar opportunities. As few find the “strait gate” and “narrow way” of righteousness in other walks of life, likewise few businessmen will claim that they have always followed the right path in their own work. Only those who look for business profits in life-supporting efforts that are mutually beneficial can achieve success in the true meaning of that word.

This, I believe, may be the most distinctive feature of the Northwood Idea — the view that our graduates should look on business not merely as an easier way to attain ease and affluence, but as an opportunity for utilizing their highest human qualities and attaining lasting satisfaction in a life well spent.  



Courtesy: A Saving Grace

To be disagreeable is high treason against your role in civilization. Examples of this crime are: to say some sickening thing offhandedly and make the victim writhe, or to provoke others into breach of good manners, or to indulge in crude behaviour or language. There is no possible excuse for vulgarity.

The Royal Rank of Canada Monthly Letter, September, ¹972 

  • Dr. Watts (1898-1993) , author and lecturer, was the Burrows T. Lundy Professor of the Philosophy of Business at Campbell College, North Carolina, and Director of Economic Education for Northwood Institute, with headquarters at Midland, Michigan.