All Commentary
Tuesday, May 1, 1984

Wealth, Socialism and the Free Market

Mrs. Malloy of Toronto is a free-lance writer specializing in science.

Why do some people ardently believe in socialism and others as passionately oppose it? The question had puzzled me for years until the answer came unexpectedly from a Toronto disk jockey whose favorite theme between songs used to be the coming socialist millennium which he, like many others at the time, regarded as inevitable.

“Although my views haven’t changed,” he was saying not long ago, “I don’t talk or argue about politics any more. I now realize that no matter what people say they believe, there is always an underlying reason. That reason is self-interest.”

How remarkable, I thought, that he today and Adam Smith over two centuries ago should have reached the same conclusion. Yet they interpret their self-interest quite differently, the disk jockey favoring a regulated society in which to live, Adam Smith an open one. Why?

This must be, I think, because they picture the economy as a whole quite differently. Such a visualization is of course such an impossible task that probably most people don’t bother to try, the exceptions being socialists and believers in the free economy. But their mental pictures of it, I conclude, must be as different as a single Golden Apple is from an apple tree that produces them in countless numbers.

The Golden Apple Theory of the Economy

Socialists, or Golden Apple theorists, to give them a name less emotionally toned for many people, seeing the economy as a unit, naturally look for one numerical figure to express it. Presto, one appears. It is the gross national product, or GNP for short. Now it is obvious that if I get more of it than you do, you will get less. And vice versa. There is no escape from this conclusion. Therefore, it follows that this is a competitive world, a dog-eat-dog existence in fact, where the powerless poor get poorer and the powerful rich get richer, unless they are forcibly restrained. This gives Government an essential moral mandate to be the restrainer and gives true believers in Golden Apple theory the driving motivation to work tirelessly toward making it a political reality, convinced that their motives are of the highest.

The theory began modestly enough in the minds of a few intellectuals. But not surprisingly, once it took political root, it eventually became irresistible to every government in the world. There can not be a person living today who is not profoundly affected by it, one way or another. Assists were undoubtedly provided by the two major World Wars which provided the necessity for the warring governments to seize control of all economic activities in their respective countries. And once this pattern had become established, sheer momentum helped to carry it along at war’s end. This would no doubt have slackened over time however, had it not been for the tireless efforts of dedicated Golden Apple theorists.

Through the years they have naturally sought positions in which they could have the greatest influence. The most direct route is of course politics, in both elected and permanent positions. Union leadership runs a close second. The media, which provide a very wide choice of possible careers, also exert strong appeal. So does social work, in teaching or in hands-on experience in implementing Golden Apple theory. Then there is the broad field of education, from the primary grades to university, providing the opportunity to persuade future as well as present generations. Curriculum development, policy making and teacher training are obvious choices. In the university, the social sciences offer the most direct means of promoting Golden Apple theory among impressionable and idealistic youth.

Rewards for Success

The payoffs for success in these occupations have been power, prestige and for some, a first hand in the till. But these are easily self-justified as deserved rewards for thinking that one thinks more about the welfare of others than of one’s own.

That the Golden Apple theorists have been successful there is no doubt. It is now politically entrenched that Government has a moral mandate to take charge of the GNP for the purpose of dividing it equitably among the populace as a whole. It is also taken for granted that Government is responsible for its care, nurture and growth. This task is theoretically made easier by nationalization of the means of production. But eventually, after some trial runs here and there, the people in the West have generally settled for what they believe to be a middle of the road “mixed economy,” which however leaves Government’s main mandate essentially undisturbed, no matter which political party happens to be in power.

Thus these governments have willingly assumed the task of patting their Golden Apple into shape, filling in its cavities with handouts and subsidies, flattening its “excess profits” bumps with extra taxation, stimulating its growth with tax cuts here and subsidies there—and when this fails, as it does, inflating it to create at least the illusion of growth. “Fine-tuning the economy” was the term used to describe all these activities until the difference between the intention and the results became too embarrassing. This had no effect on the activities themselves, however, which have a momentum of their own even when efforts are made to make them stop, as in the United States and Great Britain. In fact they continue to grow everywhere in such number and complexity that there is less and less of the Golden Apple to be divided among the populace be cause Government itself eats up more and more of it.

The Free Market in Contrast

In contrast, those who believe in a free market economy see the unitary figure of the GNP or Golden Apple as meaningless, mainly because it includes not only a country’s wealth but the cost of dividing it up as well. They see the whole economy instead run by free and responsible individuals voluntarily exchanging goods and services to mutual advantage (otherwise no voluntary exchange would be taking place). They see Government’s role as the important and necessary referee, ready to blow the whistle when an exchange is identified as not voluntary but forced.

Because everyone in the entire population is a customer, needing to be supplied with goods and services, those who believe in the free market see it as basically and willingly collaborative, not competitive in its essence as is the case with Golden Apple theory. The only competition that exists in a free market is between suppliers vying with each other for the customer’s favor, that is for the benefit of you and me. Overall this sends prices down and quality up and keeps everyone on his toes.

“Robber Barons”

“But what about the poor, the downtrodden, the disadvantaged, those unable to be responsible or to look out for themselves?” That is the question always raised by Golden Apple theorists who see society as composed of powerful manipulators and the powerless manipulated. They answer it by pointing out that Government must assume responsibility for everybody in order to be fair and protective of everyone’s rights.

But is this pessimistic view of human nature true? In a genuine free market, its freedom protected by government, how does human nature behave? Is an optimistic view possible from the existing facts?

Not many genuinely free markets have existed in the course of history. However the 19th century does provide an exception, imperfect though it was. It was then that our great charitable institutions, both local and international, were voluntarily founded. Also founded were schools, hospitals, research foundations, libraries, museums, and art galleries.

Why did the founders of these great institutions do what they did? Golden Apple theory has it that they were in fact “Robber Barons” who obtained their riches by ruthless competition, theft or exploitation of the powerless. Then in later years they either tried to whitewash their record by donations, or, to give them the benefit of the doubt, felt guilty enough to try to expiate their sins by contrite giving.

But is this a true picture? Is it not a distorted one, seen through the lens of Golden Apple theory? Much has been made of the faults of the 19th century—its slavery and child labor (both corrected during it), the colonialism of “the White Man’s Burden,” woman’s role as subservient helpmate, confined to children, church and kitchen, for example.

Nevertheless, compared to our anxiety-ridden, prone-to-violence 20th century, the 19th was more quality-conscious, civilized and peaceful; not only were great institutions founded but the sick were looked after and the starving fed. The fact that personal freedom and responsibility (which go together like the two sides of a coin) were taken for granted went far toward encour aging people’s creative responses to life’s challenges, personal feelings of optimism, gratitude for fortune’s favors and personal commitment toward helping the less fortunate.

The founder whose life-story I know best, Andrew Carnegie, typified this spirit. He is said to have regarded the wealth he earned by a combination of energetic work and good fortune to be a “sacred trust” to be given away as wisely as his life experience had made him capable. He wanted young people to have a more advantageous start than he had, so he provided scholarships. He wanted to provide life-long learning opportunities for all, so he founded libraries. He wanted to ensure the well-being of teachers after retirement, so he provided pensions. The seeds he sowed have borne fruit generation after generation, both in the United Kingdom where he was born, and in North America where he made his fortune.

His actions exemplified the spirit of the times in which he lived. It is unlikely, I believe, that any of the 19th-century people so motivated could have foreseen a forced stop to their benevolent activities, or that the wealthiest among them would ever be called “Robber Barons.” Somehow the 20th century seems the more impoverished in comparison, mainly perhaps because under the spell of Golden Apple theory we seem to have collectively forgotten how wealth is created.

The Sources of Wealth

Dictionaries define wealth as abundance, well-being, prosperity, felicity, happiness and independence as well as its moneyed meanings of riches, opulence and affluence. Wealth then is not merely money, that convenient means of exchanging goods and services among people. When the exchange is willingly mutual, both participants in the transaction are enriched in every sense of the word. When the exchange is forced, the money extracted becomes “the root of all evil,” dividing rather than uniting people, spreading woe instead of weal.

Weal, heal, health and wealth are all related Old English words. One can enjoy a wealth of many things besides money, a wealth of love for instance. Traditionally, wealth was seen as one of the rewards for right living, as in the old couplet: “Early to bed and early to rise, Makes a man healthy, wealthy and wise.”

But what is wealth’s source? Where does it come from? How is it created?

It is not created in the 20th-century mode by taking money from some people to give to others; or by gambling, which is the same thing; or by lobbying Government to give more or take less; or by finding or plugging loopholes in Government’s distributive regulations; or by listening to those who decry the “work ethic.”

The source of wealth is clearly Nature herself, in all her myriad forms. But it takes work and the sharing of the proceeds with others in mutual exchange to increase Nature’s wealth creatively. Even in the most primitive societies of today the hunters and the gatherers of fruits, nuts and berries are both enriched through sharing the results of their work.

But not all of Nature’s gifts are so obvious. Most are hidden, discoverable only by science—that art of asking questions of her in answerable form. The Industrial Revolution of the 19th century, which brought about the greatest acceleration of wealth in the hands of more people than had ever occurred before, was due to the scientific discoveries of the previous two centuries, linked to large-scale technology, that fruit of man’s inventive mind.

Adam Smith, writing at the dawn of it, could see that its potential wealth would spread throughout society, which would become enriched with each exchange, but only if the mutual exchanges were free and unimpeded. He was right. The standard of living rose dramatically throughout the century. The arts and humanities flourished equally with progress in science and technology. But this only happened because the political restrictions to the spread of wealth which had existed when he wrote The Wealth of Nations were eventually removed, largely thanks to the stimulus of his insights upon those who set about to repeal the restrictive laws.

It is a provision of Nature that each person is unique in talents, abilities and interests. The apparent purpose of this uniqueness is to serve our societal interdependence. “No man is an island,” as John Donne wrote over three centuries ago. The more we develop our own natural gifts to relate to others in mutual exchange, the greater they grow. This serves not only our own self-interest but that of others as well. The greater the number and variety of such exchanges, the greater the challenge, enrichment and inspiration of the individuals who make up society as a whole.

But this is not happening today nearly to the extent that it could. Again, as in Adam Smith’s day, the main impediment is the maze of political restrictions and guidelines which interfere with wealth’s creation and natural flow. The tragedy is for those people who are thus prevented from realizing what life could have meant for them. Among them are the unemployed as well as those who, full-time or part-time, devise, implement, impose, avoid or find or plug loopholes in the restrictions and guidelines. These people, and their name is legion, are thus impeded from finding their true calling and from creating new wealth, both spiritually and materially. Society as a whole is thereby greatly impoverished from what might have been.

Eleventh-Hour Rescue

But miraculously, an eleventh-hour rescue is again on the horizon, just as it was at the time of Adam Smith. Again the reason is that scientists have been quietly collaborating with the inventors of technology in exploring more of Nature’s secrets. The result has been a multi- faceted scientific and technological breakthrough in putting the new discoveries about the structure and behavior of atoms and molecules to use—representing an economy of scale never before seen. The accelerating growth of the highly visible field of microprocessors is being fol lowed closely by lasers, photoelectric cells, crop improvement through genetic control, new light on disease control and the domestication of bacteria for manufacturing purposes, to name but a few examples from the many.

The future for the creation and spread of wealth from this new field of microtechnology looks almost unimaginatively great, with one important proviso. That is, if the lessons of history are taken to heart and the new wealth so created is permitted to flow freely throughout society without impediment. This would have the additional beneficial result of freeing Government to concentrate upon protecting the populace as a whole from all exchanges which are not voluntary and mutual, but forced, both within and outside national borders.

The problem is that this can only happen when Golden Apple theory with its corollary of Government responsibility for all of society’s well-being loses its hold upon both the populace and upon Government.

Happily the original purpose of Golden Apple theory, still believed in by its proponents, was to equalize the opportunity for all to maximize their potential. This goal is shared by those who believe that the means to it is the free market of voluntary mutual exchange.

When Golden Apple theorists and believers in the free market agree to work together toward their shared goal, capitalizing on the lessons of the past, both good and bad, predictably wealth in its widest meaning will flow throughout society, challenging motivating and inspiring as it flows.