Mr. Chamberlin is a skilled observer and reporter of economic and political conditions at home and abroad. He has written a number of books, has lectured widely, and is a contributor to The Wall Street Journal and many nationally known magazines.
"The citizen of the United States is taught from his earliest infancy to rely upon his own exertions in order to resist the evils and the difficulties of life; he looks upon social authority with an eye of mistrust and anxiety, and he only claims its assistance when he is quite unable to shift without it….
"When a private individual meditates an undertaking, however directly connected it may be with the welfare of society, he never thinks of soliciting the cooperation of the government, but he publishes his plan, offers to execute it himself, courts the assistance of other individuals, and struggles manfully against all obstacles. Undoubtedly he is often less successful than the state might have been in his position; but in the end the sum of these private undertakings far exceeds all that the government could have done." Thus wrote Alexis de Tocqueville in Democracy in America, published in 1835.
At that time the young Republic of the United States represented the most complete flowering of the ideal of unlimited private initiative and opportunity. Monarchy had been swept away; there were no relics of feudal privileges; there was so much open land and so many industries to be developed that no one was compelled to labor under oppressive conditions or to accept unsatisfactory wages. There was no parasitic "big government"; there were no theories of the desirability of "deficit spending"; at one time the modestly run federal government hardly knew what to do with the surplus that had accumulated in the national Treasury.
The natural result was the tremendous outburst of free individual enterprise which impressed the observant and philosophical French visitor. And America was in line with the general trend of Western civilization. In Europe also, Adam Smith and thinkers of his school had discredited statist theories of economics. The advantages of leaving people alone to go as far as they could by their own industry and ability had supplanted the older idea that it was up to the government to regulate everything, including even what people of various social classes might wear.
Nineteenth Century Liberalism
Viewed in historical retrospect, the nineteenth century stands out as an era of true liberalism, when the close, intimate connection between political liberty, economic liberty, and general well-being was most generally recognized. Despotic and oligarchic forms of government were giving way to increasingly generous constitutions. If one glances through the pages of Macaulay’s highly readable History of England, composed when political reform and economic progress were in full tide, one finds passage after passage, explicitly and implicitly stressing the connection between individual freedom and general well-being. So there is this comment on an incident that occurred during the visit of Peter the Great to England near the end of the seventeenth century:
"He [Peter] heard with great interest the royal assent given to a bill for raising fifteen hundred thousand pounds by land tax, and learned with amazement that this sum, though larger by one half than the whole revenue which he could wring from the population of the immense empire of which he was absolute master, was but a small part of what the Commons of England voluntarily granted every year to their constitutional King."
The association between despotism and poverty, between liberty—political and economic—and prosperity was almost universally accepted in North America and in Western Europe in the nineteenth century. This era appears in retrospect as the golden age of genuine economic liberalism, of the belief that men fared best when they were subjected to the fewest state restrictions and were allowed to go as far as their individual ability and industry would carry them.
The paternalistic supervision which was always a characteristic of absolute monarchy had largely disappeared with the rise of self-governing institutions. Not yet arrived was the new paternalism of the twentieth century, with its extreme tyrannical forms of communism and fascism and its milder and more insidious expressions in socialism and the ever-expanding Welfare State, based on a more and more intensive pillaging of the thrifty for the benefit of the thriftless.
This era, when economic liberty was tried out in practice as never before, or since, was characterized by four freedoms, which have now completely disappeared in totalitarian states, and have been considerably curtailed, even in nations where political freedom has been preserved. These were:
(1) Freedom of the individual to regard what he earned as his own. Such taxes as were levied on personal income in the nineteenth century were negligibly small by current standards and were imposed, as a rule, only in response to some big emergency, such as the Civil War in the United States. There could scarcely have been a better incentive to hard work and the taking of risks than the knowledge that the fruit of the individual’s labor was his own, to dispose of as he liked.
(2) Freedom of movement. A few Americans are old enough to remember the period before World War I when no passport was required for travel in most European countries. Even Russia asked only for a passport and did not require a visa. Any European who desired could pull up stakes and travel or migrate where he liked without let or hindrance, or the necessity of obtaining permits to work in the land of his choice. This comparative freedom of movement brought millions of European settlers to the United States and built up American industry and agriculture much faster than would otherwise have been possible. The same was true, on a smaller scale, for the newly developing overseas lands, for Canada, Australia, New Zealand, South Africa.
This freedom of movement made nonsense of nationalist mercantilist economics. There were colonies of foreign businessmen, engineers, technicians, people engaged in all sorts of occupations, in Russia—something fantastically impossible today. There were more Germans earning their living in Paris than in all the German African colonies.
(3) Freedom of trade. There were still customs barriers in Europe, and the United States tariff went up and down, depending on whether Republicans or Democrats were in power. But the vast British Empire was open to all comers on a basis of free competition, and the smaller countries of northern Europe, the Netherlands, Belgium, the Scandinavian countries, were generally on a virtual free trade basis. The tariffs of that time raised prices here and there, but did not seriously affect the flow of trade. Such really crippling devices as import quotas were unknown.
(4) Freedom of investment. As a brilliant German economic editor, the late Gustav Stolper, puts it in his somewhat neglected book, The Age of Fable (Reynal and Hitchcock, 1942):
"Year in, year out, billions were invested by the great industrial European Powers in foreign countries, European and non-European. England and France held the lead, Germany joined them at a rapidly growing pace after the 1880′s. These billions were regarded as safe investments with attractive yields, desirable for creditors as well as debtors, with no doubts about the eventual return of both interest and principal. Most of the money flowed into the United States and Canada, a great deal into South America, billions into Russia, hundreds of millions into the Balkan countries, minor amounts into India and the Far East. The interest paid on these foreign investments became an integral part of the national income of the great industrial Powers, protected not only by their political and military might but—more strongly—by the general, unquestioned acceptance of the fundamental capitalist principles: sanctity of treaties, abidance by internal law, and restraint of governments from interference in business."
These four basic freedoms of the nineteenth century, along with the society, at once stable, progressive, and prosperous, which they helped so much to promote, took a terrific beating at the hands of the two great wars and the many social revolutions of recent times. Under communism and under fascism they were wiped out completely. And even in countries which retained political and civil liberties the trend toward state intervention and state direction of economic life was strong and unmistakable.
Yet the validity of these principles, which boil down to leaving the individual free to manage his own life and which have very important moral implications, has been strikingly vindicated by the results of doing away with them. It was rightly hailed as a big step forward when the principal European currencies were made substantially convertible in the beginning of 1959. Yet this was merely returning, with some limitations, to the situation which had prevailed in Europe for generations before World War I. The economic goals which the two competing organizations, the European Common Market and the European Free Trade Association, hope to achieve during this decade coincide very largely with the reestablishment of freedoms which were taken for granted in the nineteenth century. And at that time there was no supposed need to guarantee and implement these freedoms by means of a cumbersome international bureaucracy.
Communism and fascism, at variance as to means, were at one as regards the end: the destruction of individual liberty and the creation of a robot state by reserving for the government all important economic decisions. And the apostles of these totalitarian creeds found allies—unconscious and unwilling allies, no doubt—in groups which, while rejecting political dictatorship, went all out for state planning of the national economy, an objective which could not be effectively realized without state compulsion on a large scale.
An argument that was often heard during the thirties was that mass unemployment could only be averted by the Soviet method of a state planned economy. A point that was generally overlooked is that, while the Soviet Union had pretty full compulsory employment, the standard of living of the unemployed in the United States and Great Britain was higher than that of the Soviet employed.
The Argument Shifts
Now that unemployment has ceased to be a serious problem, the argument for a planned economy has shifted. We are asked to view with alarm a Soviet "rate of economic growth" faster than America‘s. The implication is that, unless America goes in for some type of government planned economy, the Soviet Union will realize the boasts of Stalin and Khrushchev, "catch up with and surpass" America economically and, in Khrushchev’s phrase, "bury us" without resorting to war.
But this numbers game of comparative growth is extremely tricky. There has been official admission in Moscow that Soviet methods of computing economic growth, different from ours, are calculated to exaggerate the real progress of Soviet industry. There is obviously much more room for percentage growth in Russia than in the United States in the output of automobiles, telephones, and many other products of which the United States already has an abundant supply, while the Soviet Union is only beginning production and distribution on any large scale.
Is there any convincing reason for the United States to "grow" in wheat and cotton output when heavy surpluses of these and many other commodities pile up unsold—and not unsold because anyone in the United States is going hungry for lack of bread or naked because of any shortage of cotton goods? America has already proved, in World War II, its ability to "grow" in military output as fast as any emergency may require.
Two Vivid Examples
If anyone wants a vivid illustration of how freedom raises and how lack of freedom depresses the standard of living, he should visit in quick succession, as I have done, West Berlin and East Berlin, the Zurich airport and the Prague airport. These are fair comparisons. The bombing of Berlin was distributed impartially between the sundered sections of the city. The people in the two parts of Berlin are of the same nationality and language, with the same educational background. As for the two airports, Switzerland is prosperous as a relatively free enterprise country; Czechoslovakia is the least damaged by war and the least impoverished of the Soviet satellite states. But what a contrast between what freedom has accomplished on one side, tyranny and state control on the other!
Despite its unfavorable geographical position, an island in a Red sea of surrounding Soviet-controlled territory, West Berlin has forged ahead tremendously since the first bleak postwar years. The Kurfuerstendamm looks like the principal avenue of any European country. There are all the normal accompaniments of a big city: lively traffic, open and well patronized movies, theaters, concert halls, more and more hotels and restaurants. Housing projects are rising on what were once piles of rubble. New and revived industries have helped to make up for the loss of employment which is the result of the fact that Berlin is no longer a capital.
Cross the long winding border between the two sectors and one has the feeling of being in another country. Reconstruction is largely limited to one show avenue, the Stalin-Allee. What were once the liveliest streets of old Berlin, Unter den Linden, Friedrichstrasse, Wilhelmstrasse, are bare and desolate. The few automobiles are state-owned. One has the feeling that a stranded traveler in East Berlin would find it very difficult to find a place where he could get a meal or find a roof over his head. So bleak and desolate is the atmosphere that it is easy to understand, quite apart from politics, the steady flow of refugees from communist-ruled East Germany to free enterprise West Germany.
On a smaller scale the two airports tell the same story. In Zürich one can buy at the airport a wide variety of articles. Most significantly, newspapers, magazines, and books in many languages are on sale. In Prague about all the airport offers is a few flyspecked communist propaganda posters and old copies of a pamphlet extolling the achievements of "socialist construction" in Czechoslovakia. The contrast between the richness and variety of life under freedom and the bleak drab poverty of life under communism could not be pointed up more effectively than by this quite unrehearsed contrast between the appearance of the two airports.
Luxury or Necessity?
A familiar argument of those who consciously or unconsciously favor state planned direction in economic life is that freedom is a kind of luxury which only a rich country can afford. This is emphatically putting the cart before the horse. It is not true that nations become rich and then adopt freedom as a kind of status symbol. The idea that peoples must choose between freedom and economic growth, between freedom and maximum economic development, is sheer nonsense.
There are so many spiritual implications in liberty that it deserves to be considered an end in itself. Even if state planning offered more material goods, people who have known and cherished liberty would rather live as free human beings on a more modest standard of living than sell their birthright for a mess of totalitarian pottage. But no such alternative exists. The fruits of totalitarianism are for the State, at most for a limited ruling class.
It is the peoples who have remained freest, who have been most successful in the art of orderly self-government, who have kept their governments on leash by a system of constitutional checks and balances, who will always fare best in the material goods of life.
Freedom does pay, in more ways than one.