Guaranteeing Your IncomeF. A. Harper

What Would YouCall Mr. Hoiles?

Thaddeus Ashby

Why Teach Freedom?An Editorial

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Editorials

Why Teach Freedom? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 458The Morals of Yalta 453"Play Ball"......................................... 460

The FREEMAN is published monthly at Orange, Conn., by The Irvington Press, Inc.,Irvington-an-Hudson, N.Y. Copyrighted in the United States, 1955, by The IrvingtonPress, Inc., Leonard E. Read, President; Fred Rogers Fairchild, Vice President; ClaudeRobinson, Secretary; Lawrence Fertig, Treasurer; Henry Hazlitt and Leo Wolman.Entered as second class matter at the Post Office at Orange, Conn.

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EDITORIAL AND GENERAL OFFICES: Address the FREEMAN, Irvington-on­Hudson, N.Y. The editors cannot be responsible for unsolicited manuscripts unless reoturn postage, or better, a stamped, self-addressed envelope is enclosed. Manuscriptsmust be typed double-spaced. Articles signed with a name or initials do not necessarilyrepresent the opinion of the editors.

Printed in U.S.A. by Wilson H. Lee Co., Orange, Conn.

The FREEMAN is devoted to the promul­gation of the libertarian philosophy: thefree market place, limited government andthe dignity of the individual.

Making an ArticleThe writing of an expository piece-like "Guar­anteeing Your Income"-is a construction job,not unlike the building of a house. It startswith an idea. Whether or not the house or thearticle will meet with acceptance depends onthe pertinence of the idea. In the case of thehouse, the need for it is the first consideration:will it satisfy the chosen tenant? As for thearticle, the writer is primarily concerned withreaders: will they be interested?

The idea for many an article germinates inthe newspapers. What people are doing is anindication of what people are thinking about,and the article will get attention if it promisesto add something to that line of thought.Prominent in the headlines this last year hasbeen something called the Guaranteed AnnualWage. To an economist like Dr. Harper, thereseemed to be something ominous in GAW; thelittle that appeared in the newspapers, in theway of detail, suggested that the plan wouldimpinge on the nation's economy.

But what is the plan? For several monthsDr. Harper made inquiries, and all he couldlearn indicated that there is no specific plan,only generalities. The labor press was mostevasive; about all one could get from it wasthat the details of the GAW would he workedout in labor-management conferences.

That was meager material for an article.But the expository writer depends not so muchon the known facts as he does on the fittingof these facts into a pattern of thought, orphilosophy; he has to find the bricks and mortarof his article in his stored-up learning andunderstanding.

Having assured himself that the theme istimely and important, the task before the writeris the arduous one of selecting words, sentencesand paragraphs, and putting them in an orderthat will both entice and entertain the reader.Nobody likes to "push" himself through a pieceof reading matter.

To my knowledge, "Guaranteeing Your In­come" was rewritten twice, and I have no doubtthat the final draft underwent additional scrub­bing. But the labor paid off.

EDWARD MAHER has been an advertisingagency copy chief and editor of Liberty.

LEONARD E. READ, JR. is with the CaliforniaCotton Oil Corporation. This, his first attempta t article writing, shows promise.

HARLEY L. LUTZ, Professor Emeritus of PublicFinance at Princeton University, is now TaxConsultant for the NAM.

MALLORY CROSS JOHNSON ran across this pieceof Lincolniana while doing research work forthe FREEMAN and built an article around it.

VOL. 5, NO. 11

A Monthly

Libertarians

For

FRANK CHODOROVMABEL WOOD

IVAN R. BIERLY

MAY 1955

EditorManaging EditorBusiness Manager

THB

reeman

Contents

Articles

Guaranteeing Your Income F. A. HARPER 461Capitalism for the Many EDWARD MAHER 466Death and Taxes-Except for Coops .. LEONARD E. READ, JR. 469A Strange Alliance REV. EDMUND A. OPITZ 471Tale of a Coat CARTOON 473The Experiment-"Noble in Purpose" JOHN T. FLYNN 474Sources of Tax Reduction HARLEY L. LUTZ 477Even Lincoln Said It MALLORY CROSS JOHNSON 479What Would You Call Mr. Hoiles? ..... THADDEUS ASHBY 481

Books

A Reviewer's Notebook JOHN CHAMBERLAIN 484He Adds Little to Philosophy FRANK S. MEYER 486The Rathole HELMUT SCHOECK 486The Cost Was High OSCAR W. COOLEY 487"Robber Barons" DEAN RUSSELL 487The Unreal Dream WILLIAM HENRY CHAMBERLIN 488Oil and Imperialism HAL LEHRMAN 488Diplomacy of Brawl SUZANNE LA FOLLETTE 489God Is Liberty F. R. BUCKLEY 490Trade or War PAUL L. POIROT 490Stubborn Finland RICHARD M. PALMER 491Well Worth Reading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 492

Washington, D. C FRANK c. HANIGHEN 464

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FACTORlH~S IN SlX'I'fi'F.N f:ITJES.

for March 1955

These are a few of the comments on

"Monumental!"

That article you ran in April, "NoHeroes, No Villains," nlakes a lot ofsense to anybody who hasn't readeither of the two plays or the noveldiscussed. Anybody who has read theseworks will know that the writer talksthrough his balmy hat and doesn'tknow his literature fronl a hole in theground.

You ask some of your intellectualcontributors. Ask John Chamberlain orE. Merrill Root or Max Eastman, forexample. They'll tell you what a cock­eyed article you ran.

HOWARD E. SELTZER

New York, N. Y.

Re-public ,MoneyThe tax-exempt status of Foundationsis based, I believe, on the grounds thatthe usage of the Foundations' incomeis to be limited to educational, healthand kindred "humanitarian" matters.[See editorial "Public Money Is PrivateProperty," April.]

When, however, there is proof thatsuch expenditure of money is divertedto areas of propaganda, political or"social," the Foundations are not en­titled to claim tax-exemption, and suchincome should be construed as "publicmoney." So reasons the Report of theReece Committee.

Your attempt to draw an analogywith church-exemptions is ludicrous,for such exemptions are due to thechurches, as churches per se; Founda­tions are legally limited to non-propa­ganda fields.

The government, which is the people,has a right to claim monies unjustlykept on a false tax-deduction which,when applied to Foundations, is a colos­sal figure.

Scarsdale, N. Y. 1. H. SCHAUMBER

And April, TooAfter giving us such a splendid issueon the UN, I was bit fearful you wouldhave a little let-down with your Aprilissue. But you did no such thing.Practically every article in the issueis par or above.

The only sadness to me is that fartoo few Americans see and read theFREEMAN.

GEORGE W. MACAULEY

Grand Rapids, Mich.

Hear, Hearing!The article "No Heroes, No Villains,"(April) should get a hearing in thehigh schools and colleges of our coun-try. The students of today should begiven a correct picture of our sickliterary world ... Mr. F. R. Buckley'sarticle is a superb diagnosis of thesickness.

Boynton Beach, Fla. PEGGY WINK

Readers Also Re1adIn your January issue, you ran a shortnote about my recent article in theHarvard Business Review. The articledealt with racketeering in union healthand welfare funds, and your note saidthat anyone wanting single copies couldget one by writing to me. As of thisdate we have had 463 requests forsingie copies. A few requests forquantity were referred to the Review,which sold them.

The 463 requests to me came fromevery state in the union except Oregon.Sixteen academic institutions were rep­resented, also 17 high schools. Theremainder were business people. I justthought you would like to know howwidespread your readership is.Chicago, Ill. A. A. IMBERMAN

The U,N IssueI wish to extend my belated congratu­lations on your March issue. In at­tending to my studies in the field ofPolitical Science at Stanford Uni­versity, I find deliberately neglectedthat thought to which your magazinegives honest expression. One professor,when questioned about this particularissue on One Worldism and the UnitedNations, declared it to be of littlebenefit to the student interested in thesubject. And he went on with thetypical argument that isolationism wasdead and that the articles presentedwere written by authors who were un­realistic and living in the past. Hisretort is a fair example of the in­tellectual climate on this campus. Ihave yet to find here the new trendtoward conservatism which RaymondMoley recently stated is springing upon the college campuses.

May I again extend my congratula­tions and also express my great respectfor your courage and your decisive­ness in the midst of literature guidedby the confusion of thought which hasbeen accumulating and taking newforms throughout so many, manyyears.Stanford, Cal. PATRICIA GALLAGHER

. . . a great and timely exposure ofthat death trap, the United Nations.If every American, or even one tenthof the population could read it, it wouldkill that treasonable fraud . . .

I am sending herewith for thirtycopies of the March issue.

Portland, Oregon C. R. WEEDE

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It seems to

BACK in the year 1933, our Government, deliber­ately and without sound reasons, took us off the

Gold Standard. The price of gold was increased.The stage was set for inflation. Today, our dollarwill buy only about half what the 1939 dollar would.Every year for 13 years, between 1939 and 1952,our dollar lost 5 percent of what was left of its buy­ing power. For two years-1953 and 1954-the dropin value leveled off; but this year the down trendhas started again.

If this continues another decade, we may see theday when our dollar will not buy a loaf of bread.Our savings accounts will be practically wiped out,our insurance almost worthless, and our pensionplans so low in value that we will not dare retire.

It seems to me that it is time to go forward withthe Gold Coin Standard . . . the only tested andproved, sound tool of measurement. It permits usto measure reliably not only all our day-to-dayactivities, but our plans for the future. With a GoldCoin Standard as the base for all our activities, weknow at any time how much our labor will be ableto buy, and how much our insurance, savingsaccounts and bonds are worth. We can make planssoundly and safely for our future and that of ourchildren. And the .Gold Coin Standard permits usto make promises for future deliveries, as well asto measure promises made by others. That includesthe promises and actions of our Government as itdoes individuals and corporations.

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If we are to make real progress in this country ofours, and be able to measure that progress in termsof the past, the present and the future, we musthave a standard of measure. The best such standardthat man has tried is the Gold Coin Standard.

I want to talk with you again on this vitally basicsubject. In the meantime, give these thoughts yourdeepest consideration. Talk them over with yourfriends and neighbors . . . in fact, anyone who willlisten. And do not exclude from your conversationspublic officials and candidates for public office whocertainly should know what their neighbors thinkandwhat they expect of persons holding or aspiring topublic office. KENNAMETAL INC., Latrobe, Penna.

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reemanMAY 1955

Why Teach Freedom?

ASTUDENT writes: "I have read the pamphletsyou sent me, also most of the books you rec­ommended. I am more convinced than ever

that the planned economy is a dangerous delusionand that man's greatest good can be achieved onlythrough freedom. But I am troubled by the reactionof my professor when I try to talk to him alongthese lines. He is an honest thinker: I am sure ofthat. Also, I am sure that he has read more aboutthe free economy than I have. Why is it that herej ects the premises I present to him and refuses toa,ccept the facts 1 Can you explain this to me 1"

I can't, not unless I call upon an hypothesis thatis hardly provable. For many years I have strug­gled with the problem the student has put to me:why are some people libertarians, why are othersof equal learning and background Socialists1 Itisn't a matter of education. Once I attended theclosing session of a course given by the notedlaissez-faire economist, Ludwig von Mises, andlistened to the reactions of his students. It was ,agab-fest. Some gave distinct evidence of rejectingall they had learned from him in fift,een previouslectures, even what they had presumably read inhis book. 'Others were enthusiastic ,exponents ofhis thesis. Why1

The bureaucratic Socialist, of course, must beexcluded from this speculation. In his case, social­ism is ,a job, not necessarily a 'conviction. I knew athoroughgoing libe1'ltarian who entered the bureau­cratic service out of economic necessity; within sixmonths he sang the collectivist tune.

In the same class with the bureaucrat is the pro­fessor whose job depends on his going along withthe head of the department, or whose income is inpart derived as a "consultant" on government proj­ects. I have known one or two such who, in privateconversation, had some strong reservations on thecollectivism they taught in class. These, like thebureaucrats, are "bought-en" Socialists; theircases can be easily explained.

But how do you account for the socialistic atti­tude of those whose economic status ought to in­cline them to the opposite point of view1 I knowa very successful stockbroker who makes out a

458 THE FREEMAN

strong case for government ,manipulation of theeconomy; to him it is dogma, even though his com­fortable living is derived from the free marketplace. The story of a book is a case in point. In Godand Man at Yale, William F. Buckley, Jr. pointedout that the textbooks used in the freshman coursein economics decried the free 'economy and extolledplanning; the alumni bought his book, but alsoincreased their contributions to Yale. I have foundaudiences heavily sprinkled with "upper-bracket",men quite cool to the proposition that the income­tax amendment ought to be repealed on the groundthat it violates the right of property, whileaudiences consisting mainly of wage 'earners andsmall businessmen ask to be organized for action.Not that all rich men are Socialists, nor all poormen are libertarians, but that you cannot accountfor their attitudes along economic lines.

Neither education, background nor income canexplain either the Socialist or the libertarian.Whenever you try any of these criteria you arefaced with cases that refute your premise; youfind that both types come from penthouses andslums, that they include Ph.D.'s and illiterates.You are driven to the conclusion that if there isa causative principle it ,must be found somewherein the make-up of the person rather than in en­vironmental influences. Psychology does not help,for it too seeks explanations for mental attitudesin conditioning and shies away from the realm of'inherent traits or temperament. So, the best youcan do is to describe the Socialist-or the liber­tarian-as you have known him, and to leave the"why" of him alone; it is beyond undeTstanding.

The characteristic that invariably identifiesSocialists is an urgency to improve other people.It is a passion that blinds them to the fact ofi.mmutable individuality and leads to faith in thetherapy of for,ce. It is utterly irrational; so muchso that they find it necessary to cover up the im­pulse with an inordinate display of logic. Whenyou examine their arguments you find them basedon axioms which support their inherent drive. Inshort, they are so constituted that they cannot letother people alone.

Perhaps it is an inner need that impels theSocialist to his ideology, for I have never met anadvocate of government intervention who did notadmit, inadvertently, his own capacity for com­missariat functions. He always has a plan, to whichothers must submit, and his certainty that the planwill 'produce the contemplated results does not per­mit him to brook criticism. Always he is the fanatic.If you disagree with him it is not because you arein error, it is because you are sinful. You are notan ignoramus; you are a "class-conscious capi­talist," or a "reactionary," or at least an "anti­social." Why is it that name-calling is stock argu­ment with all Socialists?

That this inclination toward social improvementthrough force is an innate, not an acquired, char­acteristic is proven by the attitude of many ex­Socialists. I know a writer of repute who, thoughhe has rid himself intellectually of all Marxism,

of which he once was an articulate advocate, stillinsists that large fortunes ought to be regulated.Compulsion is in his innards. Former Communistsfind it difficult to accept fully the faith of thelibertarian in social improvement through in­dividual improvement; some kind of political regu­lation might work, though political regulation neednot lead to the Moscow excesses. It is not true that"once a Socialist always a Socialist"; but intel­lectual conversion does not automatically rule outthe possibility of an atavism.

If, then, the socialistic attitude-and, by impli­cation, that of the libertarian-stems from an in­gredient of personality, why put so much stresson education? The libertarian is particularly con­cerned over the spread of socialistic doctrine inthe schools and in the public press, and is mostanxious to bring his own philosophy into opposi~tion. On the face of it, this concern seems un­warranted, for an innate tendency toward freedomwill not be changed by words into an acceptanceof slavery.

Basically, this is true. But a character trait, likea seed, germinates best under proper cultivation,and the inclination toward freedom is strengthenedby intellectual conviction; as in the case of thestudent who wrote me. There are many who, likethis young man, are instinctively repelled by gov­ernment intervention but who crave intellectualsupport for their inclination. It is to them thatthe proponent of libertarianis,m must address him­self; the Socialist is beyond redemption. That isto say, the libertarian teaches not to "make" liber­tarians, but to find them.

Likewise, the socialist teacher does not makeconverts; he merely confirms the socialistic in­clination of his willing students. And there theintellectual battle between the two schools ofthought might rest.

But socialism is not an intellectual pursuit, itis primarily a drive for political power; and if itsproponents succeed in enthroning themselves, the

case for libertarian thought will be most difficult.Hence, the reason for seeking out the naturallibertarians through education is to prevent, byconstant and intelligent reiteration of its tenets,the suppression of the philosophy of freedom andthe driving of its advocates underground.

The Morals 01 Yalta'IF YOU were a prof.essional politician, you would

describe the recently revealed doings at Yaltaas "necessary under the conditions," "consistentwith the realities," "justified under the circum­stances." That is, if you were of one persuasion.If you were of the other persuasion, you wouldlabel the action taken at y,alta as "unwarranted,""indef.ensible," "diplomatic defeat."

Since you are not a professioDal politician, butjust a work-a-day citizen, the words that come toyour mind when you read what Stalin, Churchilland Roosevelt agreed upon sound like "perfidy,""inhuman," "sell-out," "rotten."

That is, you use a moral yardst:ick for yourjudgment, while the politician thinks in terms ofexpediency or political necessity. To you, Yaltawas "good" or "bad." To him, the effect of therevelations on his party's fortunes is the determin­ing factor.

This does not: ,mean that the politician, as aperson, is less moral than you are; he too wouldnot rob a widow, murder his best friend or cheatat cards. But in his particular business he cannotuse evaluations based on 'abstract principle; hecannot afford the luxury of ethics. Only that is"good" which is politically propit~ous.

The importance of amorality in politics, espe­cially international politics, is demonstrated bythe record of Yalta.

Mr. Stalin got everything he wanted because hewas singularly free of inhibitions and prohibitions.He was the consummate politician. He knew of norules that debarred hitting below the belt, if thatkind of fighting suited his purpose, and nothingin the way of ideals or tradition or popular opinionaffected his maneuvers. The Anglo-Saxons, on theother hand, could not~ play the gan1e straight be­cause they were burdened with "democratic" re­straints or with ideas that had nothing to do withthe business at hand.

Mr. Ghurchill was in no position to haggle oreven to bring up the original excuse for England'sentry into the war, "to save Poland." The empireover which he presided, as he well knew, was totter­ing, and he was under pressure to save it fromcomplete collapse; this was far more importantthan the f.ate of displaced persons. Besides, concernfor his vote-begotten crown made it necessary topresent his war-weary electorate with a speedy"victery." He paid the price the dictator demanded.

MAY 1955 459

Mr. Roosevelt was even more handicapped. Tug­ging at his elbow was a powerful "unconditionalsurrender" bloc, to whom the urge to put theMorgenthau Plan in operation was far more im­portant than the freedom of the Baltic peoples.Allied with this bloc was another that saw in theascendancy of the Soviets the fulfillment of alltheir dreams; they bothered him no end. Moretroublr some still was his own "moral" obsession­the establishment of an international insurancecompany, with the U.S.S.R. on the board of direc­tors, that would guarantee world peace forever.It was this obsession that seems to have been thetaproot of all the immoralities of Yalta.

The consummate politician won; the play-actorslost. This result had to be. In international politicsthe winner is always the one who, putting asideall make-believe, such as principles, ideals, abstrac­tions, plays according to the rule of immediateexpediency and let the devil take the hindmost.Power is always the ace in the hole, WoodrowWilson's "fourteen points" notwithstanding.

The politician knows this only too well. It is wewho insist on reading moral values into politics,who make of the game something that it is not andcannot be. Weare the "kibitzers" who like to inter­fere in the amoral game'; for that reason we mustnot know what's going on, then or until our inter­ference ,can no longer be effective. To appease usmortals (Stalin was fortunately not in that posi­tion), the politician will, make a display of moralpurposes in the preambles to his acts, or in hispublic pronouncements; but he will turn out to bea poor politician if he takes these purposes intothe game.

And when the records of the multitudinous inter­national pourparlers that have been held since 1945are made public, we run-of-the-:mill people will

- find much in them that will strike us as just asperfidious, just as rotten, as were the doings atY,alta. So it always was; so it will always be.

"Play Ball"T HE COUNTRY is still sound; baseball is still a

national passion. This observation is not in­tended to be facetious. Quite the contrary; for itshould be evident that so long as Americans re­spond with spirit to the highly competitive, in­tensely individualistic sport of the diamond, so­cialism will have hard going. The adulation of aWillie 'Mays, the exortation to "take the bum out,"the keen interest in batting averages -and the argu­ments over the relative skills of Duke Snider andTris Speaker give proof that at heart we are notegalitarians: we adore the champ, we relegate thebush leaguer to the bushes. More than that, weregister our unabashed preference for the "best"at the impartial turnstiles; there the freedom of

460 THE FREEMAN

choice, which is anathema to socialis~n, is brutallyexpressed. Fans are free men.

There may come a time when some congressmanfrom Brooklyn, annoy~d by the ineptitude of theDodgers, will put through a parity bill. When thathappens, when baseball is put under the aegis ofthe Department of Welfare, and the Secretary (alady, by precedent) rules that the Yankees must~ot be better than the Orioles, or that Antonelliand the bat boy must receive the same salaries,then we shall know that national decadence hasfinally set in. In that case, the game will not hebaseball; it will be beisbol.

The importance of this idiom of American in­dividualism is underlined by the efforts of ourSocialists to eradicate it. The Life AdjustmentEducationists (nee "progressives") are ,all forabolishing baseball and other competitive sports,and substituting such goosestep activities as classcalisthenics and group dancing. The purpose, ofcourse, is to squelch the urge for individual excel­lence and to prepare the youth of the country forthe acceptanee of' collectivistic ideas. It is in linewith the abolition of report cards ,: that record theachievement of the individual student, and withthe egalitarian practice of advancing the pupilwith his age group, regardless of his intellectualdeficiencies.

But, so long as there is a vacant lot in thevicinity, and baseball is kept free of the slimyhand of politics, these efforts will be unavail­ing. For the American boys will repair to it assoon as the bell rings the end of the tedious "self­expression" day and start picking up sides. AndBill will be picked to do the pitching because hehas shown that he can throw the ball harder thanany other boy in the neigborhood. Butch, the sec­ond best, will be relegated to the bench. When theteams are chosen there will be some who have notmade the grade. There will be heartaches, of course;but life is beset with such misfortunes, and it istime the future man learns to face them. He willpick up his glove and start on another lot to workhis way up to the "first" team. That's how top­notchers are made.

To be sure, it's the team that wins the games,not the individual members. And no one recog­nizes this more than the thoroughgoing individual­ist. He knows that the team consists of nine players,but he also knows that the team is not better thanthey are, individually. It is to advance the fortunesof the group that he strives to make himself thebest shortstop in the league. It is as a competitor,not as an egalitarian, that he adds to the glory ofhis outfit. The best team player is the fiercest in­dividualist.

And we who must enjoy the game vicariouslygive evidence of our innate individualism not onlyby cheering the feats of these perfectionists butalso by paying them in accordance with perform­ance. Baseball proves we are not Socialists.

Guaranteeing Your IncomeBy F. A. HARPER

A friend asked me to look into this so-called guar­anteed income plan; to obtain a copy of the "modelcontract" and see what its provisions are.

So I wrote to a noted labor authority and toseveral other places. It seems that a model contractdoesn't exist. At least I could not find one. Thenearest I could come to it was a yellow pamphletfrom the UAW-CIO entitled "Preparing A Guaran­teed Employment Plan. . . . That Fits U.A.W.Members Like a Glove." The main ideas of theplan are explained therein.

"Who is to participate?" All workers in anycompany that signs such a contract with the unionare in it. If as one of them you object, you can'tstay out.

"What do I get out of it?" If you are called towork at all during any week, you are to be paidthe full week's wage even if you are laid off duringpart of the week-even if laid off ,an hour afterarriving on the job Monday morning. And in eventof a longer shutdown, you are to continue toreceive pay for as much as a 52-week layoff. Butsuch detailed specifications are still subject tochange by negotiation for each individual contract.

"WhllJt wage am I to receive while not working?"You are to receive full pay for the week when youare laid off during the week. And if the layoffcontinues, or you are laid off for weeks at a time,you are to receive enough to enable you to main­tain "the same living standards as when fully em­ployed," whatever that may mean. But these detailsare also subject to negotiation.

"Does everyone get the full pay guarantee of 52weeks unemployment?" N'o. If you are a newworker, you first have to build up "seniority sta­tus." This means that you must first work twoyears, or some such length of time to be deter­mined by negotiation, before you attain the full52-week pay status. New workers have lesser claimsto layoff pay-less than 52 weeks-proportionatelyby the length of time they have worked.

"After having drawn unemployment pay for ayear on this basis, and having gone back to work,does a new 52-w1eek claim come into existence atonce?" No. It has to be rebuilt oveT a period oftwo years, or so, as with a new worker.

"Can I work at any other job during the layoff?"Yes, if the powers-that-be decide it is "suitable"work for you. They will assume control of that,in other words. But you will get guaranteed incomepayments only if needed to supplement your otherpay and bring it up to the "living standard" figure.

"Who pays the costs?" The employer, except as

state unemployment payments are available tocover a part of the guarantee.

"Where will the money come from?" Out of hiscurrent income from his sales, except that a s:maIIreserve fund is to be set up to be used for the52-week pay guarantee, in amounts and under spec­ifications to be negotiated with each contract.

"Who is to administer the plan?" A Board withan equal number of representatives of the employerand the union, plus an "impartial chairman tobreak deadlocks." (One wonders how he could breaka deadlock without being partial.)

And so it goes. Most of these specifications, ashas been said, are left for determination by nego­tia,tion with each contract. And so it is futile' totry to appraise the plan in terms of such thingsas whether payment rates are too high or not highenough, or whether reserve'S are adequate. Anyprecise specification becomes subject to specificattack, and so the UAW-CIO states that suchdetails are flexible. Apparently, they do not wantto endanger their general objective by stating de­tails in advance. The union leaders firmly demand,however, that some sort of guaranteed annual in­come plan be instituted on the best ter,ms obtain­able in the contract.

The "Ifs" in the Picture

The plan has unquestionable appeal to an em­ployee. Who doesn't prefer some income to noneat all? That is only a human urge we all mustendure, like the desire that a recently deceaseduncle shall have been industrious, frugal, and char­Hable toward all, especially tow'ard his poor nephew.

Last year the union had pressed a similar pro­posal, which was then stated in terms of "wageguarantee." Then someone apparently discoveredthat employees' families live the year around, andthe proposal evolved into: "Wages the year roundbecause families live the year round." Perhaps nextyear it will evolve further and become: "Incomefor life because a person lives during his entirelifetime."

Would the plan mean more income to you as anemployee over the next few years than you wouldget without it? That is where several "ifs" enterthe picture, which should be thought out carefully.

First, 'Suppose that your job is one where nextyear you were to have had full-time work on thejob anyhow. In that event the plan would be ofno use to you; and worse than that, you wouldlose by it because money that your employer could

MAY 1955 461

have used to pay you a higher wage would haveto be used to pay the administrative costs of theplan and to build up the res,erve fund required.

Now suppose that next year you are to be laidoff for part of the year. Then, seemingly, you wouldgain from the plan because you would be receivingpay for the time laid off, whereas otherwise youwould he receiving nothing. But ...

Where does the employer get this money he isto pay you? A part of it is to come from him ona "pay-as-you-go basis," which is a profound wayof saying that he is expected to reach down intohis pocket for it at the mom,ent of payment, ashe does for the church on Sunday. The other partcomes from a reserve fund which the employer issupposed to have built up over the years. But ithasn't been, so he must start that only after theplan is started. The reserve fund comes fro,m hispocket, too. So it all ,comes out of the ,employer'spocket.

Sales-and Your Wages

Now how does it get iIito the employer's pocketin the first place? This is important because unlessit is to come from a safe and continuing sourceyou, as an employee, would be foolish to rely uponit in time of need. It comes from the sales ofwhat is produced under his management. Unlesshe can keep his outgo-including wages-belowincome from sales, there can be no fund and nocontinuing pay.ments. If wages and other costshave been taking all the traffic could bear anyhow,there is no slack to be taken up to pay the costsof any pay-as-you-go guaranteed income.

Couldn't your employer obtain this money fromhis day-to-day operations? Perhaps. But thatmeans that he will have to pay you less now aswages than he otherwise' could have paid, in orderto be able to meet these contracted obligations forguaranteed, income. This applies not only to thepay-as-you-go part, but the reserve fund as well.They reduce what he is able to pay you as a currentwage, just as an increase in any other cost woulddo-an increase in taxes, or coal prices, or freightrates. It should be noted that all available cashof all United States manufacturing corporationswould carry their payrolls only about three months.Then they would be without any working cashwhatsoever with which to carryon their businesses.

So somebody's current wage rates will have tocarry the burden of the costs involved. If the em­ployee's income is to be guaranteed, somebody willhave to guarantee the market to the employer. Andnobody but consumers can do that, however deviousand concealed may be the picture as presented tous. The money can't really come from company re­serves or from the government. The governmenthas no independent source of income; all it paysout ,must first be taken from 'Consumers. And ifthis is forgotten, and the government is once en-

4:62 THE FREEMAN

throned as a middleman, it will take a cut. like anyother middleman and will also then be in positionto call the tune with union members who would,in effect, become government employees. Both com­pany officials and union officials would then beacting as agents of the government.

The question then really becomes this: wouldyou rather have your employer keep back furthermoney with which to pay any benefits under aguaranteed income plan, or would you prefer toget it now in current wages, to be used by youin whatever way you deem safest and best inguaranteeing your own future income? Would your,ather have it managed by your boss and yourunion under this plan-or perhaps through themby the government-or would you rather manageif for yourself?

Under the proposed plan of guaranteed income,if you don't like the way it is being operated andwant to change it, you-and others of like mind­must either gain control of the union or buyoutthe owner. If you manage your own guaranteedincome plan, however, you can change it themoment you decide how to improve its safety; andin event of need you can draw on your own privatefund as li~htly or as heavily as you wish, accordingto your prospects as you see them.

How about s'afety in the holding of your reservefund? Woula it be safer to keep it yourself? Whatwill the company do with the fund? Will they keepit idle so that inflation will go on robbing it ofits worth? What if the 'company uses the fund tooverexpand and then goes broke with the firstmajor depression-precisely at the time when youwere depending on the fund to pay you some in­come? Or what if the company goes broke for ,anyother reason-fund or no fund? Do you prefer totie your future to one company in that way, orwould it be safer for you to buy shares of owner­ship in several sound companies with your ownguaranteed income fund?

When your company lays off part of its force,who gets laid off first-the better or the poorerworkers? The poorer ones, of course. And presum­ing you are not one of these, do you want themto be paid from the reserve fund you have helpedbuild up, so that when a :more serious layoff hits,the fund will have been spent, leaving nothing tofulfill the guarantee of income-your income?

Suppose that through lower wages than couldhave been paid, you have helped build up a sizablereserve fund in one company and then want tochange jobs. Do you suppose that either the com­pany or the union is going to allow you to with­draw any of the fund and take it with you? Orwill the plan come to operate under national unioncontrol of all the res,erve funds of all employees ?Do you 'want to give anyone power to freeze youto your job, or to control where you shall go?

Under the proposed plan, when you are laid offsomebody besides yourself becomes empowered to

decide whether or not another job available to youduring the layoff period is ,a "suitable" job. Itmay be suitable to you, but if it is not suitableto those in control you will be forced to remainunemployed 'even though you want to work at some­thing available to you. That forces you to live on"your reserves" unnecessarily, thus weakeningyour protection against ,additional layoffs.

'Or what is to prevent some unscrupulous fellaw­employees from quietly getting unapproved and un­known jobs on the side during periods of layoff?They would then be getting pay from another jobwhile at the same time drawing unemployed "guar­anteed incom,e" from the fund you helped build up.That would erode your protection.

Precisely' the Wrong Plan

T'he whole thing boils down to the fact that thecosts of any such plan of guaranteed income must,in essence and in the long run, be paid by th~ em­ployees. No matter 'how the plan is stated, the em­ployer cannot really pay it out of his share bec'ausehis funds are insuffi,cient to do it if he is to con­tinue to operate a thriving business, safely financed.It cannot really be paid by the 'employer personally.H'e just deducts it from the pay check, that is -all.

Who wants to work if he would be paid for notworking? Under this plan it would be possible toget three y,ears pay for two years work. And thereis no way under God's heaven to produce threeyears product in two years time. So, since whatisn't produced just isn't available, the level of livingwould have to suffer. No guarante'e to maintain aliving standard without 'Work could supply even aloaf of bread that hasn't been produced.

Unemployment ,always is the result of a consumerrebellion against the priee of the product. Thismeans that it is a consumer rebellion against wagerates, really, because current pay for the nationas a whole is 'about five-sixths of the total cost ofproducing things. Careful students of these mat­ters, like Senator Paul Douglas and Professor A. C.Pigou of Britain, have told us that unemploy,mentcan be reduced by as much as three or four percent, merely by reducing wage ra.tes only one percent. 'That course of action, if the union officialswould only adopt it with an enthusiasm equal tothat for the guaranteed income plan, would aS8urecontinuous employment for most eV'eryone. It wouldprevent the necessity of any mass progr,am ofguaranteed income.

So the guaranteed incom'e plan amounts to doingprecisely the wrong thing. Since it is about thesa,me thing as a wage increase in times when theconsumer is already protesting against the highprice of the product, it gives further upward pres­sure to prices when the product is already notselling. Who is going to guarantee the market forproducts already overpriced and unsold?

In casting doubt on the proposed plan of guar-

anteed income, I would not, of cour:se, prohibit anyreally voluntary arrangement which both employerand employees of a given company may want. Suchan arrangement is just another way of getting paid,and if both parties want it that way they shouldbe allowed to do so. It would be nothing more thanlike shifting part of the pay to a Christmas bonus.Firms like Nunn...Bush and Procter & Gamble havehad a type of guaranteed income for a long enoughtime to say that some plan can be made to worksuccessfully, if both sides really want it. What Iquestion is only the forcing of any plan on eitherside by undue pressure or economic threat from theother side. And I doubt that any guaranteed in­come plan can be found that will be any panaceaagainst the forces of unemployment on a nationalbasis.

There is something incongruous when a unionthreatens a major work stoppage (strike) in thehope of gaining protection against work stoppages;when they are ready to spend $2,5 million of theirmembers' ,money in the process; when the "gain"promised is probably neither a gain nor the wayto -attain their laudable objective of continuousgainful employment for all who really want to work.And it is especially incongruous, if, as reported,the union has not bothered to canvass its memberson the matter of whether they prefer to have theirunion and company officials manage their s'ecurityreserves, or do it for themselves.

This incongruity, as well as many of the problemsI have raised about thls plan, would be dispelledif the union would ,merely put it to the vote of theirmembers, as in the following proposition:

Proposed, that the UAW-CIO set up its ownguaranteed income plan; that the union dues beincreased by whatever amount may be necessaryto pay all the costs of the unemployment wage andthe costs of its administration.

'This would allow the union to operate the plan,as efficiently as they can. It would avoid any inter­ference from employers who may have diverse in­terests from that of union members. It wouldeliminate the necessity of such a thing as an "im­partial" member of a com,mittee of diverse interests.It would allow the preservation of a member'srights in the fund when-still as a union member-he moves to another job in the same union. Noparalyzing strike would be required to force theplan upon any employer, since it would no longerbe any of the employer's business. And the $25million to be devoted to pressing for this plancould be put into the fund as a nest egg, ratherthan to dissipate it in trying to start this plan.

Reprints of this article may be secured from theFREEMAN, Irvington-on-Hudson, N. Y. at the follow­

ing prices: 10 copies $1.00, 25 copies $2.00, 50 copie~

$3.50, 100 copies $6.00, 1,000 copie8 $J,.5.00.

MAY 1955 463

by FrankO.

WA.SHINGTON, D.C •

What progress has been made in this session ofGongress in the direction of party realignment­that political Nirvana so ardently desired byconservatives? Little, if anything, is the answerof hitherto hopeful observers. In previous years,there were many occasions and quite a few issueswhich brought significant votes reflecting notonly similar ideas but also some parliamentarycooperation between conservative Democrats andRepublicans. One can re-call united front voteson such issues as modification of the T,aft-HartleyAct, the passage of the M,cCarran-Walter im­migration bill, and various tax and appropriationmeasures.

But in recent months, the renowned North­South "coalition" flunked (or perhaps the wordis "funked") on two big constitutional issues.The first was the vote on the censure of SenatorMcCarthy-the underlying issue of whi,ch (what­ever the popular emotional accompaniments) wasthe right of the Congress to investigate howfunds were spent by the Executive. On that,conservative Republicans, generally of the "Taft"persuasion, risked much by standing by theirguns and voting against the congressional con­demnation of the Wisconsin Senator. Most ofthese men usually counted on at least a dozenSouthern Democratic conservatives to go alongon such tests. In thls case, not a single Democratnorth or south of the Mason-Dixon line did so.The story is that the Democrati,c leadership con­sidered it vital to follow this course for a purelyparty reason-to widen the split in the GOP. It isrumored that the Democratic leadership had toput pressure on several Southerners to persuadethem to conform.

That took place in the closing days of the lastsession. In this, the 84th Congress, the conser­vative Republicans shirked the traditional role inthe case of the confirmation of Judge Harlan forthe Supreme Court. That Eisenhower appointeehad evaded answering a question from criticalSenators designed to bring out his thinking on theBricker Amendment issue-predominance of theConstitution over treaty law.

Some Southern Senators invoked this in theirstatements or speeches against the Harlan con­firmation. It may be that the thought of "white

464 THE FREEMAN

supremacy" was not entirely absent from theirminds. But the fact is that Senator Eastland(Miss.) in a three-hour speech emphasizing thisconstitutional issue offered an opportunity toconservative Republicans to rally to his banner.The voting shows that while eleven Democrats,all~outherners,voted "against," only two Repub­licans (both Westerners)-Welker of Idaho andLanger of North Dakota-joined them. It was amatter of surprise to find Jenner, Dirksen andBricker on the other side.

Where are the "wild jackasses" of yesteryear?In the twenties, during the succession of Repub­lican Administrations, that picturesque phrasewas coined to describe the unruly Republicansof the West. Offhand, veterans among politicalobservers can rec,all the independence of suchSenators as Norris, Howell, Brookhart, the twoLa Follettes (father and son), Nye, Frazier, etc.Party conformity meant much less than it does totheir political successors today. Often such out­breaks of party independence were "good politics"among the constituents who resented the "East­ern, Wall Street" crowd in command of the GOP.But isn't the same sectional sentiment still visiblewest of the Appalachians? Many signs point to it.Yet the representatives in Congress seem to reflectit to a much smaller degree than thirty years ago.Why? One answer is-the power of the Executivehas increased enormously during interveningyears, and the individuality and freedom of legis­lators has correspondingly been frustrated.

Major L'Enfant, the architect who laid out Wash­ington originally and designed the Capitol, facedthe Legislature's imposing building toward theEast-reportedly because he thought the citywould grow in that direction. The reverse hap­pened-the main part of the city grew up to theWest. Thus, while the Capitol architecturally hasits back to the White House, politically it facesWest-toward the Executive Mansion and theExecutive Agencies, from which all rewards flow.

It is true that patronage plums are not asnumerous (by reason of Civil Service and otherregulations) as formerly. But that is a bit decep­tive. A Senator may seek only one plum, a judge­ship for his principal backer out i~ his state.

That Senator, therefore, compromises his votingpositions on various issues, indeed his whole legis­lative attitude, just to obtain that important favorfrom the Executive. It has happened.

Sometimes, the member of Congress himselfhas a personal stake in his own legislative com­promising. In the press gallery, cyni,cs early inthe first months spotted Republican memberswhose line perceptibly shifted to harmonize withWhite House prejudices and jocularly referredto them as "Judge This" or "Judge That." Inthat hardboiled gallery, it was unnecessary tosay that the support of certain members (facingelection) for the Bricker Amendment or JoeMcCarthy would diminish in direct ratio to theincrease in Democratic strength in their con­stituencies; and that GOP members wi,th un­certain chances of re-election harbored hopes fora nice Presidential appointment. Since November,a number of accommodating "lame ducks" havereceived rewards for submissiveness.

Not only patronage, but also the various kindsof favors which legislators-pressed by local in­terests in their constituencies-seek from theSpending Power buttress the sway exerted bythe latter over policies on Capitol Hill. Thetendency to spend in order to elect has not goneout with Harry Hopkins and Har,ry Truman.Washington watched with cynical amusement theAdministration's orders for coal from Kentuckymines to help Senator Cooper's re-election bid.

A prominent New Deal Capitol columnist re­cently rema,rked that, despite his reputation for"leaving Congress alone," Eisenhower wieldsmuch stronger power over Congress than hispredecessor. In place of "Eisenhowe,r," he mightwell have said "the Palace Guard." Few observerswould disagree. The subtle but dominating in­fluence of the Executive is constantly workingfor legislative Gleichschaltung. In one case, theWhite House by its tentacles in the constituencygot a "libeTal" Republican named as administra­tive assistant to the member of Congress, whotraditionally has been anti-liberal. The changein that member's oratorical flavor was wondrousto see. In another, some invitations to WhiteHouse social functions performed miracles withthe wife of another "fundamentalist" Republicanmember; the results showed up in the voting.

As for the Democrats, party discipline alsoreduces the independence of many Senators andCongressmen whose natural bent would be to"play ball" with conservative Republicans. Oneconservative Democratic Senator was heard to ex­plain his vote for the Rayburn twenty-dollar taxcut. "The vote was scheduled for the day afterI was to receive funds for my subcommittee. Thewhip said I ought to vote for the 'Cut. I loathed it,but I had to do it. So I got the funds.

In view of the above picture, it should be nosurprise that valor and independence rate no

premium today on Capitol Hill. Whatever else itdid, the noisy Fulbright investigation of the stockmarket inspired some healthy thinking aboutfiscal matters. The Senator from Arkansas de­veloped an intense worry lest the operators atBroad and Wall should go into debt buyingsecurities. Many people here immediately askedwhy liberals like Fulbright display no such con­cern about Big Government's tendency to in­crease its own fiscal obligations. A wholesome lookat our federal debt structure followed.

That debt now has a temporary ceiling of $281billion, with a scheduled return to the formerceiling of $275 billion by June 30. But mean­while, the Administration seeks to increase theactual debt-for instance, by obligating the fed­eral government to the extent of $25 billion forroads. But that sum would not be added to theofficial debt. Senator Byrd exclaimed: "If thefederal government can properly borrow moneyin this fashion without recording it as debt, andspend it without budgetary control, it may beexpected that similar proposals will be made forfinancing endless outlays which may be desirablefor education, hospitals, public health, etc. Itcreates fis'cal confusion . . . and destroys con­fidence in government credit. You cannot avoidfinancial responsibility by legerdemain."

But even if Byrd's view eventually prevails,is the federal debt burden to be measured onlyin the range of $275-81 billion? Any Capitol Hilllegislator will remind you that our houses ofparliament have obligated us for what are calledcontinuing obligations. For instance, the DefenseDepartment has piled up some $49 billion (lastJune's figures) for goods for which it has con­trac,ted. These have to be paid for during thenext few years.

Then there are the "contingent liabilities." In­deed, so numerous and complex are these obliga­tions that no one here ventures an estimate oftheir approximate magnitude. One of these is Fed­eral Deposit insurance-$106 billion; and about$66 billion of other insurance. Also, just recentlythe Hoover Commission eSltimated the total loans,guarantees, committments, etc., of all agencies inthe Federal Housing field at about $49 billion.Additionally, one must not forget the obligationsof the Veterans Administration, the CommodityCredit Corporation, the Expor1t-Import Bank, theForeign Operations Administration, the FarmersHome Administration, ,and many others. Naturally,these are "contingent," but no one knows howmuch of this debt the federal government mighteventually have to meet. In view of this thought­provoking pic1ture, a legislator like Senator Ful­bright who would like to impose extraordinaryprudence on investors might well launch anotherinquiry to provide an answer to the question:"How much do we really owe?"

MAY 1955 465

Capitalism for the Many

By EDWARD MAHERHundreds oj thousands oj average Americanshave become part owners in industry throughinvestment plans Jor people oj modest means.

Like many people, William H. Reinhardt of Oak­land, California, used to think of Wall Street as amysterious place where bulls and bears swindleeach other between spells of fleecing lambs. Butthat was before he became a capitalist himself.

Mr. Reinhardt is a middle-aged counter clerk ina hardware store. One day last fall he and his wifewalked into the Oakland office of an invest­ment firm and arranged to buy shares of commonstock in Remington-Rand, Inc., on a monthly pay­ment basis. By this act they joined hundreds ofthousands of other people of modest means whoare becoming members of what Socialists call the"investor class" in a movement which is accelerat­ing rapidly and which holds great economic, socialand political significance for the future of thenation.

It used to be that common stocks were owned bythe very wealthy. But high income and estatetaxes on the one hand, and higher wages plus theentrance into this area of insurance· companiesand private retirement funds on the other, havechanged the situation. The pool of money is nowlarger than ever, but a larger proportion of it isowned by tens of millions of little investors. It istheir savings which must provide the capitalneeds of a rapidly expanding economy.

The need for investment capital is only part ofthe story. In a world torn by conflicting economicand political ideologies, it is essential for theAmerican people to understand how their freecapitalistic system works. There is no better waythan by acquiring part ownership of it.

So reasoned G. Kei,th Funston, the 44-year-oldformer Trinity College president, when he becamepresident of the N,ew York Stock Exchange in 1951.He decided that, since the American people wereaccustomed to the installment-plan method of pur­chasing automobiles, household equipment andother items requiring relatively large outlay,the way to attract millions of new investors wasto enable people to buy a share of American busi­ness on the same basis.

Accordingly, the Exchange developed a MonthlyInvestment Plan, now known as MIP, and launchedit in J,anuary 1954. To see how it works, let's lookat Mr. and Mrs. Reinhardt, who, together, becamethe twenty-five thousandth purchaser under theplan.

As they have no children, Mrs. Reinhardt works,

466 THE FREEMAN

as well as her husband. They are buying their ownhome, by "periodic payments out of income." Afterproviding themselves adequately with life insuranceand a steady nest egg in the savings bank foremer­gencies, they are able to set aside $100 a monthfrom their combined salaries for the purchase ofcorporate stock.

They chose Remington-Rand largely because Mrs.Reinhardt works there. In November the stockwas selling around $30 a share, so their firstmonth's payment bought them three and a frac­tion shares after deducting the broker'scommis­sion of $6. As the stock price has fluctuated dur­ing subsequent months, their $100 payments havebought them a greater or lesser number of shares.So it will go during the months and years aheadas long as the Reinhardts continue their MIPagreement.

Not for Speculators

MIP is predicated on ,steady, long-range invest­ing at regular intervals regardless of the ups anddowns of the stock market. It is not for speculatorsor the fellow looking for a quick profit, but for theconsistent, methodical saver who has a dependableincome and some cash in reserve so that he is un­likely to be in a position where he has to sell hisholdings when the market is down. If he uses goodjudgment-and free advice which he. can get fromhis broker-in selecting stocks in companies whichwill grow as the nation grows, any temporarydowns in price should be more than compensatedfor by long-term increase in value. If the marketgoes lower he will get mor,e shares for 'each regularpayment, thus reducing the average cost of theshares he holds.

The Reinhardts intend to hold onto their stock, lettheir investment earn dividends, which in turn,they plan to plow back into more stock. Mr. Rein­hardt says: "We don't sell stock; we buy it. Rem­ington-Rand is a good company and we think it andits profits will grow."

The one big difference between buying, say, afew shares of General Motors through MIP and theinstallment plan purchase of a TV set or a car isthat credit is not involved in the former transaction.The buyer of stocks "on time" is never in debt forhis holdings; instead of paying interest his moneybegins earning income for him immediately.

The minimum MIP agreement is $40 every threemonths, which is getting it down to where anyonewho can set aside $3 a week can become an investor.An agreement, of course, may be canceled by thepurchaser at any time. In this event, he can holdhis accumulated shares or he can have them soldat the market price and get an immediate checkfor the proceeds, less broker's commission.

MIP buyers are coming from all walks of lifeand showing considerable variety in their selectionof stocks. A Long Island aircraft worker, alert tothe rapid development of the area around him, isbuying Long Island Lighting Company at the rateof $40 a quarter. A Columbia University professorof English is buying Socony-Vacuum, RadioCorporation and Phelps-Dodge on three quarterlyplans of $50 each. A salesman for InternationalBusiness Machines in Providence, Rhode Island, isacquiring his own company's stock at the rate of$40 every three months.

President Funston of the Stock Exchange as­serts: "The MIP, which will enable millions ofpeople to acquire a direct ownership in our leadingcorporations on a pay-as-you-go basis, is the mostsignificant contribution to personal financial plan­ning in recent years."

As the idea spreads, housewives and secretaries,elevator operators and truck drivers, lawyers andaccountants, factory workers and farmers, arerealizing that a few dollars a week, which mightotherwise just slip through their fingers, can startthem on the road to financial improvement.

MIP is frequently used as a supplement to theinvestment clubs which are springing up all overthe country and catching interest abroad. An in­vestment club is simply a group of people-neigh­bors, friends or co-workers-who decide to chipin a fixed amount each at regular intervals for thejoint purchases ·of se,curities. Usually the amountis $10 a month, but it may beless or more. Membership is heldto a small number-ten to fifteenas a rule-otherwise the clubwould spend all its time arguingabout what stocks to buy, and itwould be difficult to get agree­ment.

Meetings are held once amonth at which individual mem­bers who have been assigned tostudy the status and prospectsof various companies make theirreports. The club then decidesby majority vote which to buy.Often the operations of a com­pany are followed for monthsbefore the club members con­clude it is a good investment. .

The investing principles usu­ally followed are those advo­cated by the National Associa-

tion of Investment Clubs which was founded in1951. The association, with headquarters in theNational Building in Detroit, is a nonprofit organ­ization which supplies instructions, accountingkits and other paraphernalia for getting a clubunder way, plus frequent bulletins of informationand advice---,all for $1 a year per club member.

It is not necessary to join the national associationin order to form a club. One was organized lastApril by a policeman in an eastern city. He inter­ested nine other men at the station house, and theyagreed to put in a minimum of $5 per month eachor any multiple thereof,each man getting pro ratacredit on ,the club's books for his contributions.After discussing the merits of various companies,they decided to buy du Pont and General Electricin alternate months, using MIP, and to reinvest alldividends.

The club's founder and president considers aninvestment plan to be vital for people in his calling."After 30 or 35 years on the job," he says, "we re­tire on a pension. But what with possible inflation,who knows what it will buy? By putting a littlemoney into common stock regularly we'll have abetter chance of making out than if we just dependon our pensions."

The Growth of Mutual Funds

In addition to MIP and the investment clubs, an­other factor operating to spread the grass-rootsownership of American business is the spectaculargrowth of mutual funds. A mutual fund is an in­vestment company which sells its own stock to thepublic and invest.s the money thus gathered in stocksand bonds. Each share of mutual-fund stock repre­sents part ownership of the securities thus bought,and profits and dividends from these securitiesare passed on to owners of the mutual fund stock.

MAY 1955 467

There are about 125 such funds now operating,many of them highly specialized. The· investor canbuy shares in a fund which is interested in thestocks of companies with seemingly great growthpotent,ial, or in one which emphasizes immediatedividend income. He can choose electronics, avia­tion, steel, tobacco or motors-there is a fund whichspecializes in each. Or he can have the safety ofwide diversification by selecting one of the manygeneral funds. In fact, one of the features of themutual funds is that an investor can thus buy 'asmall interest in many industries, instead of puttinghis eggs all in one basket.

Of course, the person who contem'plates puttinghis funds into a "mutual" should seek advice froma sound banker as to which fund he should choose.Some have a less conservative poHcy than others.

To attract small investors, many of the fundshave programs for buying out of income. They callthese "accumulation plans" and they work much thesame as MIP, being based on payments of $25, $50or $100 at ~egular intervals. At the end of 1954,some 212,000 such plans were in effect, with newones being started at the rate of six to seven thou­sand a month.

"Widespread ownership of stock, even in smallamounts, should increase public understanding ofthe American economy and induce people to paymore attention to the poHcies of business andgovernment," says Dr. Leo Wolman, professor ofeconomics at Columbia University. "It ought tohave a good effect on labor-management relationsbecause when workeTs share in the ownership ofbusiness they will be inclined to identify theirown interests with the prosperity of the businessby which they are employed. This new relationshipis bound to have a wholesome effect on labor rela­tions since employees concerned with the successof a company may be expected to subJect unionas well as business policies to careful s'Crutiny."

Company Stock-Purchase Plans

Many individual corporations are making part­owners of their own workers. The American Tele­phone & Telegraph Company has sold stock tomore than a quarter of a million of its employees,over 40 per cent of the total. Offerings are madefrom time to time under a generous buying ar­rangement. Any employee may elect to pur,chasestock at the rate of one share for each $500 ofannual wages, to be paid for by a payroll deduc­tion of $5 a month for each share. The companypays 2 per cent interest on the money, com-

pounded semi-annually, while it builds up andthen sells him shares at $20 below the marketprice at the time payment is completed.

General Electric and several other companiesgive stock to their employees. For example, underthe General Electric Savings and Stock Bonus Plan,payroll deductions up to $10 a week may be author­ized by an employee toward the pur,chase of U. S.savings bonds. Employees who deposit their bondswith the company and leave them there for fiveyears get their bonds back with all accrued inter­est plus a bonus in GE stock equal to 15 per centof the price they paid for the bonds. Furthermore,they get whatever dividends the stock contingentlycredited to them may have earned during theperiod.

'TWE'llty thousand GE employees became share­holders in 1954, and an additional 40,000 will be­come shareholders this year. The company is aim­ing to have 60 per cent of all employees becomeshareholders in four years' time.

As of March of this year, an American Instituteof Public Opinion Survey found that 6,900,000U. S. adults claim to own stocks listed on a stockex:change.

The National Association of Manufacturers,spokesman for 20,000 companies em'ploying 85 percent of the nation's industrial labor, believes thespread of stock owneTship will be a big boost to thecause of economic understanding in this complexage. Henry G. RU,er, 3rd, president of NAM, says:"There's nothing like owning a few shares of stockto lead a person to take an interest in what's hap­pening to the nation's economy. As this movementgrows, I look for people everywhere to adopt a muchmore enlightened attitude toward governmentspending, taxatio'il and other factors which affectbusiness growth and expansion."

Undoubtedly, too, as ownership of large enter­prise comes to lie more and more in the hands ofevery,day people, there will be a growing aware­ness on the part of industrial management ofits responsibilities to the rest of the community.

The most impressive fact about this grass-rootsinvesting movement is: millions of working peoplein the United States have reached a level of in­come where they can become the owners of theenterprises they work for-not in the Marxiansense of state ownership, but through true, private,individual ownership.

This is a new kind of capitalism for the worldto contemplate-capitalism for the many, not thefew. Communism or socialism will have a hard timematching it.

468 THE FREEMAN

Death and Taxes-

Except for Coops

By LEO'NARD E. READ, JR.

Not all corporations pay income! taxes. Not alldividends are added to income for tax purposes.Not that these corporations and stockholders areevading taxes. Far from it. They ,simply enjoya special exemption.

These are not 'eleemosynary institutions. Theyare businesses that, like those which have to payfrom 30 per cent to 52 per cent of their profitsto the government, operate to produce goods andrender services and hope to do so at a profit.They are business corporations, in every way,and are different from the non-exempt corpora­tions only in that they are called cooperativesor mutual companies. Because they are so called,they save in the aggregate an estimated one anda half billion dollars in taxes on incomes.

This privileged group of corporations includefarm and consumer coops, mutual fire and cas­ualty associations, savings and loan associations,credit unions, ,mutual savings banks, national farmloan associations, and ;so on. Farm and consumercoops alone own and operate thousands of pro­cessing and manufacturing plants and marketjust about all the commoditi'es used on the farmand in the home. They operate cotton gins, but­ter and milk plants, cotton-seed and soybeancrushing ,mills, canneries, food freezing plants,rice mills, chees'e factories, wineries, sugar mills,flour and cereal mills. They 'make heavy farm ma­chinery and home appliances. They run paint fac­tories and chicken hatcherie,s, saw mills and oilrefineries. They manufacture drugs and cosmetics.They even operate funeral parlors.

Coops now handle .approximately 75 per cent ofall fluid milk, 40 per cent of the nation's butter,50 per cent of the grain sold locally, 60 per centof the fruit and vegetable markets. In Californiaand Arizona 85 per cent of the citrus fruit mar­keting is done by coops. Coops operating underthe aegis of the Rural EI'ectrification Administra­tion, as well as under state and loca'l governmentagencies, generate and sell about 20 per cent ofthe 'electric power used in the country. Theirbanking operations run into the billions. In short,coops qualify as Big Business.

Yet these particular corporations pay no taxes

Cooperatives today are Big Business, yet theyoperate under special privileges most unjust tocorporations that pay high taxes on earnings.

on their earnings. The question is, how come?It all began on October 3, 1913, six months

after the SIxteenth A,mendment got into the Con­stitution. IOn that day, Congress passed a R'evenueAct, which provided for a 1 per cent tax "onthe entire net income arising or accruing fromall sources during the calendar year to every cor­poration, joint stock company or association. . .Provided, however, that nothing in this Sectionshall apply to labor, agricultural, or horticulturalorgamizations, or," etc. The reason advanced forthe exemption those days was to aid the farmer;it is believed, on the other hand, that politicalconsiderations played their part in 'creating thisspecial privilege. However, nobody paid much at­tention to the exemption, because the tax itself-1 per cent-was insignificant; it did not givethe coops any special edge in the competitivemarket.

Increased Taxes for Non-Coops

Things have changed since 1913. The mainchange, of course, has been the increase in taxeswhich corporations that do not be,ar the coop­erative label must pay. Under the present law,the nonprivileged corporation must send to thefederal government 52 cents out of every $1 ofincome it has earned during the year. 'Out ofthe remaining 48 cents it must pay its stock­holders something (or investors will shy awayfrom the corporation's securities) and use thebalance to do something about its obsolete ma­chinery, or for expansion. Obviously, the compet­ingcoop has an advamtage; it can plow back intothe business all of its earnings. (It also can plowback the "dividends" it "pays" its stockholders;how that is done will be discussed later.) Takenas a whole, the coops today have a minimum ofabout 1.5 billion dollars for expansion, which theircompetitors do not have. It follows that if thecoops were efficient in their management and pro­gressive in their policies, they could in time putthe taxpaying corporations out of business.

The statut.ory exemption of "labor, agriculturalor horticultural organizations" was broadened in

MAY 1955 46!

later legislation to include a host of other coops:mutual savings banks; building and loan associa­tions; mutual irrigation, telephone, insurance andreal estate companies; also religious, ,educationaland charitable organizations. As taxes on corpora­tions rose, coops and mutual companies prolif­erated, and some of them that qualified for theexemption (under Section 101 of the InternalRevenue Code) went in for operations hardlycontemplated by the lawmakers.

Not long ago, universities and charit.able or­ganizations were buying up and engaging in allsorts of businesses because they could operatethem tax-free. The competing taxpayers in thesebusinesses were aroused. Congress took notice;possibly the loss of revenue impelled them to passlegislation to halt the practice, but in the debatethe point was raised that the e~emption privilegecould ultimately result in the elimination of privatebusiness. The argument is just as true in thecase of coops and certain mutual organizations,but no effort was made to put them on a parwith their competitors, tax-wise.

The "Patronage Dividend"

In addition to the exemption enjoyed by thecoops as corporations, the members, who are ineffect stockholders, can avoid under Treasury rul­ings the payment of taxes on dividends issued tothem. These dividends are not required to be,and seldom are, paid in cash. A share of profitsis credited to each member's account, and in lieuof cash the member receives common stock, "re­volving fund certificates/' "certificates of equity,"or paper of similar designations. Aside from com­mon stock, these instruments inmost cases bearno interest; they are usually redeemable at afuture date, or at the discretion of the coop'sboard of directors. The "patronage dividend" isin reality a device whereby the coop receives fullcredit for returning its profits to members orpatrons, but is able to keep the actual cash inits capital structure, tax free. The patrons, whoare in reality stockholders, do not declare thedividends as income because the dividends are ina non-negotiable form and have no tangible mar­ket value.

There are a considerable number of coops whichdo not operate in accordance with the statute,and thes'e are called "non-exempt cooperatives."(The "non-exempt" status relieves the coop ofa requirement that tax-exempt coops must do atleast 50 per cent of their business with membeors.)They file regular corporate income-tax returnsand claim they pay income taxes just as privatecorporations do. However, thanks to what Congressand the courts call "great liberality," the TreasuryDepartment allows these coops to deduct or excludefrom their taxable incomes the amount.s allocated ordistributed as dividends on patronage.

470 THE FREEMAN

Congress has passed no law which allows thededuction of pat.ronage dividends from taxableincome. However, the Treasury Department justi­fies its failure to tax this income on the groundthat it represents a rebate, or an additional coston the goods sold. The only income tax that mustbe paid by the "non-exempt" coop is on suchsmall amount.s as are paid in cash dividends onstock, and on reserves which have not been al­located to patrons. Naturally, the general prac­tice of the "non-exempt" coop is to "payout"practically all profits in patronage dividends.

Governmental Generosity

The solicitude of the government for coops goesbeyond tax exemption in the case of those doinga banking business. Federal credit agencies ac­tually finance the purchase of equipment and build­ings by mutual banking enterprises. This, ofcourse, is done with ,money supplied by the tax­paying competing business'es. Through such gov­ernment.al generosity, coops have built up fortheir exclusive use a complete credit system: theCentral Bank for Cooperatives and the TwelveDistrict Banks for Cooperatives. These can offertheir member-customers, because of subsidies andexemptions, all sorts of loans at interest ratesthat the private taxpaying banks find it almostimpossible to meet.

It is obvious that the favorable position en­joyed by coops makes competition with the,m mostdifficult, and that selling out to the coops is inmany cases the only escape from failure. Oft.enthe competing corporations are of necessity com­pelled to shift their status from taxpayers totax-e~empt coops. Meanwhile, new coops are or­ganized to take advantage of the special privi­lege. In the beginning, coops were largely confinedto rural sections; they have now invaded thecities, particularly in the industrial secti8ns.Unions have set up coops for the benefit of theirmembers, offering food, oil, automobile equipmentand nearly everything the worker uses, at priceswhich reflect the tax-exempt privilege. How canthe t.axpaying store exist in such a set-up?

Whether or not coops are useful or legitimateis not the issue. Nobody can off,er any argumentagainst their existence. Certainly one must re­cognize the right of any doctor to be his ownlawyer, or any farmer or group of farmers to op­erate a merchandising business. The only questionat issue is the special privilege enjoyed by the coops.They are nothing but businesses, in every senseof the word, receiving a special dispensation fromthe government because they operate accordingto a semllintic formula. Equity and justiee demandthat either they be taxed the same as otherbusinesse.s or-which would be far better for thenation's economy-the others be accorded the3ame exemption that they enjoy.

A Strange Alliance

By REV. EDMUND A. OPITZ

Christian socialism is a little more than a centuryold; under different labels and in various dilu­tions it is still very much with us. Nearly everymodern denomination supports an official agencywhose weight is behind political intervention.Interdenominational agencies do likewise.

The Church is an institution which proclaimslove as the law of life and aims at saving thesoul, the personality, the nature of man; but it isin cahoots with those who promise to improveman's environment by political control of hiseconomic life. Political control means the legaluse or threat of violence, and socialism cannot dowithout it. Christian socialism is a hybrid of loveand violence.

Before this union could be consummated, a con­siderable accommodation had to be made on thereligious side. Many people in the nineteenth cen­tury had just enough exposure to religion toimmunize them against the real thing. Some ofthem were in Church. They neglected theologybecause of their preoccupation with social ques­tions, and tended to restrict religion to ethics.God, in their view, was an active agent withinthe social order, "a guarantor of progress and theassurance of a steady movement in history towarda cooperative commonwealth." They accepted thec-oncept of "a social organism," from which itfollowed that the salvation of the individual soulceased to have meaning-there could be no salva­tion for the individual apart from that of "societyas a whole."

This is a long way from the Gospel ethic. In theopinion of Ernst Troeltsch, the greatest modernauthority on Christian social teachings, the "firstoutstanding characteristic [of the Gospel ethic]is an unlimited, unqualified individualism. . . .Thi,s absolute individualism leads to just as abso­lute a fellowship of love among those who areunited in God." Political control of some peopleby others cannot be justified in terms of thisethic, or the theology which it implies.

It w,as in 1848 that F. D. Maurice, Charles King­sley and other English churchmen launched amovement designed to vindicate for the Kingdomof Christ, as they put it, its "true authority overthe realms of industry and trade, [and] forsocialism its true character as the great Christianrevolution of the nineteenth century." This groupsponsored cooperatives and founded a working­men',s coIIege, and it provided an incentive for

Any union of Christianity and socialismmust be "a hybrid of love and violence."

scores of later socialist organizations and jour­nals in the churches of England and America. Aslogan once popular among Christian Socialistssums up, rather too neatly, the rationale of theirprogram: "Chris,tianity is the religion of whichsocialism is the practice."

A counterpart movement in these United States,originating in the post Civil War period, wascalled the "social gospel." C. H. Hopkins writesthat it "involved a cri,ticism of conventionalProtestantism, a progressive theology and socialphilosophy, and an active program of propagan­dism and reform."

Early Christian :socialism was non-Marxist, andMarx complained that "Christian socialism is butthe holy water with which the priest consecratesthe heartburnings of the aristocrat." But by theturn of the century, according to Hopkins, Chris­tian socialism in America had be,come both Marx­ist and political. The Christian Socialist Fellow­ship, founded in 1906, pledged loyalty to theInternational Socialist Movement as a means ofrealizing the social ideal of Jesus. Its publicationreached as many as twenty thousand clergymen.

Within the first decade or so of the twentiethcentury, most of the larger denominations ap­pointed official social action agencies or com­missions, but "the climax of official recognitionof social Christi~nity was attained in the organ­ization of the Federal Council of the Churchesof Ghrist in America in 1908," writes Hopkins.H. F. May, in a church history, says that bymeans of the Federal Council, "Social Gospeladvocates were able to put American Protestant­ism officially and repeatedly on record in com­paratively concrete terms as a warm supporterof labor's cause."

Today there are not many doctrinaire Socialistsleft, in the churches or out. Socialism has beenput into practice, and the results are not quite upto the promise. Besides, socialistic theory hasbeen so badly riddled that only a few hardy bigotscling to it. So the present strategy of the social­izers, whether their motives are religious orsecular, is to adopt a pragmatic approach to socialproblems. This is more slippery than socialism.

Reinhold Niebuhr says in a recent book, "Weneed a pragmatic attitude toward every institu­tion of property and government ..." And JohnC. Bennett, writing about the Evanston report ona Responsible Society says7 HThe emphasis

MAY 1955 471

has been on a pragmatic approach to economicproblems which takes for granted a great deal ofstate action but which also seeks to give an im­portant place to private centers of economic power. . ." The practical import of playing socialism byear is to endorse political improvisation on purelyexpedient grounds, to the neglect of moral con­siderations. Thus, if it is politically feasible torob a minority of Peters to pay a majority ofPauls, the fa,ct that the Pauls have votes is thedetermining factor.

'SemanticConfusion

The pragmatic approach to social problems ischaracteristic of the organization known asChristian Action whose chairman is John C. Ben­nett of Union Theological Seminary, and whosehonorary chairmen are Reinhold Niebuhr ofUnion and Liston Pope of Yale Divinity School.Christian Action stems from the Fellowship ofSociaHst Christians, an organization founded in1932. This group was composed of men who be­lieved themselves to be both Christian and social­ist, but who-to stress their primary loyalty-putthe accent on Christian and made socialist anadjective. But the socialist faith gradually evap­o:rarb.ed, leaving the pragmatic experimentalapproach as a residue. The group changed itsname as well as its platform and emerged asChristian Action in 1951. Perhaps it is significantto observe that Christian is now the adjective, andthe stress is on action.

Christian A,ction was formed in 1951 because ofthe conviction that "liberal America needs astrong and informed voice on social policy tocombat the inroads of both communism and ofr~action." The organization's literature furtherstates that "Protestantism needs a new under­standing of the relation of the gospel of JesusChrist to decisions on social issues, and of itsown prophetic role in American society." Chris­tian Action's understanding of this prophetic rolemay be gleaned from the pages of its quarterly,Christianity and Society: to find religious sanc­tions for the New and Fair Deals, to underwriteand promote the social changes that have oc­curred in this country in the past twenty years.ANew York seminary professor, speaking for thegroup says, "We accept with gratitude the resultsof the New Deal rev@lution in America."

What is the current ideology of Christian Ac­tion? John Bennett writes, "Christian Actionknows that the whole topography of 'left' and'right' has changed, that no political discussionbased upon it makes any sense today. The mostfateful development has been the Stalinist be­trayal of the left." After laying down a stricturein one sentence and breaking it in the next, hegoes on to say, "even democratic socialism is noself-sufficient solution to our problems.... Eco-

472 THE FREEMAN

nomic activities should be undertaken for thesake of the whole society, and economic powershould be under the control of the whole society."Semantic confusion is a prominent plank in everysocial action program.

The group also labors under the delusion thatit is a tiny persecuted minority. Liston Pope says,"With the virtual disappearance of the communistleft and the others who have departed the move­ment, the Christians who believe in social actionfind themselves in camps farthest out. The left,except for Christian social action, virtually hasdis;appeared in the United States." What hasreally happened, of course, is that the so-calledleft has disappeared as a protest group, only toemerge as the current conservatism. But althoughthey are powerfully entrenched everywhere, thesocial actionists still speak in the accents ofmartyrdom.

Before one can apply moral principles to anysituation he must have some understanding of thetechnicalities involved. There are certain inherentdemands and imperatives in a socialist organiza­tion of society, and these must be known before aman can determine whether or not ,they conflictwith his system of values. Socialism makes itsimmediate impact on economic life. Comes therevolution,and gov,ernment takes over the nation'sproductive property; its factories, farms, banks,mines, communication systems and whatever elsethe State wants. Government, the monopolist, con­trols production and, consequently, consumption.

In point of fact, production is only indirectlycontrolled under socialism; people are controlled.The lives of the vast majority are under theguidance and direction of those who wield polit­i,cal power. This is a denial of the right of everyman to make and carry out his own peacefuldecisions, of his right to be free to follow thedicta,tes of his conscience. The theory of naturalrights is displa,ced by the theory that humanbeings have no rights ex,cept those provisionallylent them by the State.

'The person ·cannot be 'Sovereign in a collec­tivized 'Society, and this fact is of great signif­icance for the Christian. The idea of naturalrights or personal sovereignty is a secularizedversion of the Christian idea of man; it merelymakes the Christian idea available for politicalimplementation. It is impossible to plan a societyfrom the top down and still maintain the fictionthat people have a right to plan their own lives;human rights must be denied in practice and intheory in a socialized society.

But, having gone thus far, socialist theory musttake a further step. H·aving denied human rights,it must seek some sort of cosmic sanction forputting some men at the disposal of other men. Itfinds this cosmic sanction in some sort of mate­rialismwhich denies the God-.concept. Christiansocialism is a contradiction in terms.

Tale of a CoatCHA'1GITY

<SOD BLESSYOU'

/'

'J:Ihe WELFAR.:m STA.TE

1: NEeD ACOAT- GIVEME YOURS!

(Reprints of this cartoon may be secured at one dollar ahundred from the FREEMAN, Irvington-on-Hudson, N. Y.)

The Experiment­

"Noble in Purpose"

By JOHN T. FLYNNTwenty-three years of government tinkering with ourfree economy-in the name of "prosperity"-have leltus with a fifty-cent dollar and a huge national debt.

During the last twenty-three years we have beenmoving through an experiment that has been called"noble in purpose"-namely, to guarantee prosper­ity to a nation through government action. It maybe divided into two sectors-the First New Dealof President Roosevelt and the War Deal of Presi­dents Roosevelt, Truman and Eisenhower.

Looked at superficially, the experiment seems tohave been successful. In 1929 there were 31,000,000non-agricultural workers employed. In 1953 therewere 49,660,000. In 1929 the national income was$87,355,000,000. In 1940 it was 132 billion andin 1953 it was something over 307 billion.

It would be a shocking travesty on truth to leavethe matter with this statement. In the first place,the increase in income is not accurately revealedin these bald figures. The income in 1929 was invery different dollars from the income of 1953 or1954. Our dollars are only fifty-cent dollars com­pared with the 1929 dollars. What is more, thepopulation has increased. The per capita incomeof the nation in 1929 was $700. In 1953 it was$1,900. But these 1953 dollars had a very differentpurchasing power. In other words, the per capitaincome of the nation was $700 in 1929; it was $600in actual purchasing power in 1940 after Mr. Roose­velt had been in office for eight years. By 1945,when the war ended, it was $1,300-that is, 1,300fifty-cent dollars or $650 in actual purchasingpower, the dollar having been cut in half as a buy­ing dollar by the vast borrowing of the war andits inevitable inflation. By 1950 the per capita in­come was 1,500 fifty-cent dollars, or $750 in actualpurchasing power. By 19,54 it was $1,900 in fifty­cent dollars, or $950 compared with p-rewar pur­chasing power.

This small rise of $250 in average per capitapurchasing power was accomplished by fantasticborrowing by the federal government. The incomeof the nation was increased from roughly 87 billionto 300 billion. But it took two dollars to buy whatone would buy in 1929. And this income of 300billion fifty-cent dollars was not all clear. After thecitizen got this income, the government proceededto share it with him, taking a heavy bite in taxes. Ihave been using a figure based on per capita income

474 THE FREEMAN

merely to compare the actual meaning of thesefigures. But in practice the government did nottax its citizens on the basis of per capita income.It taxed them on the basis of actual individual in­come, 'with taxes which began at 20 per cent forthe lowest taxable income and rose to 91 per centof incomes in excess of $300,000.

The results obtained seem great when stated interms of dollars, but not in terms of purchasingpower-first because the dollar had shrunk to halfits value in the market place and, second, becausethe government confiscated vast billions in taxesand other billions in loans. One thing, however, wasaccomplished-unemployment was practically ex..tinguished. This was not done until the UnitedStates entered the war at the end of 1941.

Failure of New Deal Planning

From March 1933 to December 1941-a periodof eight and a half years-Mr. Roosevelt and hisN'ew Deal had ample time in which to demonstratethe thesis that the government could take overthe planning and direction and financing of theeconomic system and produce prosperity. Hisfailure in those first eight and a half years wascomplete. He admitted it. Confronted with thisdisaster he cried out: "Nobody tells me what to do."In his four-year term President Hoover had spentan average of $3,700,000,000 a year. In his eightyears (1933 to 1941) Roosevelt spent an averageof $7,500,000,000 a year, 'almost half of it borrowedmoney.

In 1932, when Roosevelt was elected, there wereon relief 4,155,000 households, containing 16,620,­000 persons. In 1940, eight years later, there were4,227,000 households on relief, containing 16,908,­000 persons. In this period farm employment felloff and has never recovered.

There were 11,586,000 unemployed in 1932 whenRoosevelt was elected. In 1939, in spite of all thespending and borrowing, there were still 11,369,000unemployed. In the next year, as the European wargot under way and Roosevelt began to turn to warmeasures, there were still 10,656,000 unemployed.These are the figures of the American Federation

of Labor, at that time the most reliable surveyavailable.

Roosevelt's tragic failure was his inability tonote that the task before him was to restore andimprove the -conditions within which the system ofprivate enterprise could function at its highestefficiency. Its health had been greatly impairedin the years preceding: the crash. Mr. Hoover hadpointed out these defects. But in 1931, two yearsafter he entered the White House, a DemocraticCongress was installed in power, ablaze with eager­ness to exploit the depression-which came as apresent from Fate to the Democrats to open the wayfor their control of the government in 1932. Mr.Hoover's warnings, given cautiously to businessleaders, about the wild stock speculation, easycredit, bad banking practices, abuses of the corpo­rate system went unheeded. When the Democratsgot control of Congress, the great problem of theeconomic safety of the nation became a mere foot­ball for politicians who saw an opportunity to dis­credit their political enemies and a vision of re­turn to power.

Politicians Prolonged the Depression

No student of government can afford to losesight of the sobering fact that the powers of govern­ment, however small or great, will always bewielded by politicians whose supreme business isto at'tain office and use it to promote themselvesand their party. From the moment Hoover lostcontrol of the House, his ability to accomplish any­thing constructive against the depression was gone.There is not the slightest doubt that the depressionof 1929 could have been kept within narrow boundsbut for the unhappy mischance that put the powersof Congress into the hands of a group of politiciansinterested not in curing the depression but in ridingthe whirlwind into power. They attained this endjust as the disorder was rising to a dramatic climax,as President Roosevelt was being ushered into theWhite House.

No honest student of this episode can bl4nd him­self to the fact that, .. as already outlined, PresidentRoosevelt made no headway against the depressionin his first two terms. An incredible array ofalphabetical bureaus was turned loose on almostevery sector of the social, economic and politicalsystem. Yet no serious impression was made onthe depression. None was made until Hitler launchedhis attack on Poland and thus brought Europe onceagain into war-the second World War. Out ofthat war Mr. Roosevelt got his magic rabbit whichwould produce a wild, disorderly brood of some­thing called "recovery." If it has had any valuewhatever, it is in making available to our genera­tion the knowledge of the one kind of governmentaction that can create a boom. When, therefore, weare asked if government can assume the obligationof creating and sustaining a high degree of pros-

perity for everybody "from the cradle to the grave,"the answer must be in the affirmative. But themeans is one which any civilized citizen must con­template with terror. There is only one magic gov­ernment rabbit-and that is war.

But out of this experience we have learned whatwiser men have known for centuries; that warslaunched not for defense but to produce. economicbooms actually produce only disasters-endlessdisasters and, among them, when the fever abates,deeper and more terrible depressions. The onsetof this disease and its tragic consequences areeasily traceable in our own experience-which hasnot yet come to its end, though the end is discerni­ble through the fog.

The problem, of course, of the bedeviled politiciancaught in a depression is to create jobs and widelydispersed income. This he usually does by two of theoldest instrumentalities in history-putting greatmasses of men into the armed services, puttingother millions into the war factories, and payingthe bills with confiscatory taxes and governmentborrowing. The borrowing is absolutely essentialto the Whole monstrous trick. Now let us see howit has worked for us and where it has left us. Thefigures are eloquent.

In 1929, 31,296,000 persons were employed innon-agricultural pursuits. In 1940 this was littleimproved. But by 1941 we became entangled in theEuropean war. Mr. Roosevelt, who had complainedthat "no one tells me what to do," now needed nofurther advice. Non-agricultural employment roserapidly. By 1942 it had risen to 44,500,000. Morethan 13 million additional people had been put towork-3,555,791 of them in the armed services,at sixty dollars a month and keep. At the peak ofthe war employment, there were 45,000,000 em­ployed. Over 12 million of these were in the armedservices.

The government had found work for the idle inthe war effort-civil and military. In 1929 thegovernment employed 851,233 persons in thecivilian and armed services. In 1945, when the warended, the number employed by the government incivilian and armed services stood at 15,692,000.

The War Economy

General employm.ent rose rapidly because of thegreat numbers working in the defense industries.But in addition to these, the great streams of in­come in the hands of workers created a market forall sorts of civilian goods. Whether our governmentflung itself into the arms of war in flight fromthe Old Devil Depression or not is of no conse­quence here. What is relevant is that eleven yearsafter the crash of 1929 private employ,ment hadnot increased. In fact, in 1940 total employment,including government civil and military, had risenonly slightly. No important impression was madeon the depression in the eleven years preceding

MAY 1955 475

Pearl Harbor, notwithstanding the expenditure of$29,500,000,000 in borrowed money in addition tothe taxes collected. The boom came with the war inEurope. It .cost a staggering sum in taxes and anincrease in the debt from 48 billion to 258 billionas of the end of the war, and 278 billion as I write.

What we have done is to create an increase inthe per capita national income from $700 in1929 to $1,900 in 1953, but actually $950 in realpurchasing power compared with 1929 becausethese are really fifty-cent dollars. To do this wehad to take an estimated fifteen million young menand women from their jobs and schools into thearmed services. We had to pile on the backs of. theA'merican people a debt of 278 billion dollars, witha continuing interest charge of six or seven billiondollars a year as far ahead as we can see-an in­terest charge twice as great ,as the total cost ofgovernment in 1930. The ,costliest price we paidwas 407,000 men killed and 670,000 wounded inWorld War Two, and another 33,000 dead and103,000 wounded in the Korean War. And tragicalmost beyond understanding is the appalling factthat communist Russia got one-half of Europeand two-thirds of Asia as the prize, while we re­main trapped in a series of foreign complicationswith war clouds still drifting over us from everycontinent.

An Ancient Gimmick

Of course, the reckless war spending created aboom here, but a thoroughly unhealthy boom. Theimmense prosperity created during and after thewar was not due to government taxation or evento government borrowing from citizens. Had thegovernment limited itself to taxing and spendingthere would have been no war boom. It was due togovernment borrowing at the banks. The secret ofthis ancient gimmick has been known since JohnLaw created the first deposit bank under Louis XV.Nation after nation has blown up booms by warsfought on bank loans. And in every case they havepaid the penalty in depressions and even extinc­tion in the end.

Certainly government can aid the private enter­prise system by creating a hospitable environmentwithin which it can function at its highest efficiency.But all we have seen here has been an angry anddisordered war on· the free economic system, firstby taxing it to feebleness and then reviving it with

huge drafts of inflationary money gas., The warboom we have witnessed was created, not by taxa­tion, but by the immense confiscation of privateincomes under the guise of loans and by borrowingat the banks. When Mr. Roosevelt was elected, thenational debt was $19,400,000,000. He had in­creased it to $48,961,000,000 by the time we enteredthe war. In the years from 1941 to 194,6, thegovernment borrowed from 11 to 65 billion dollarsa year for a total of 226 billion in five years.

Taxes, of course, figure in this, in that thegovernment went back to the vast streams of in­come thus created to tax them again and spendthem again. This policy has been continued todate by President Eisenhower. In 1953, the federalgovernment employed 6,047,000 persons in the civiland military establishments, as compared withonly 851,233 in 1929. As a matter of fact, thereare as many or more people employed in the civiland military establishments as there were in 1946,the year after the war ended. In the meantime thenation is saddled with a debt of 278 billion dollars.And the interest on this alone----$6,475,000,000 forthis year-is more than the total cost of all thefederal government activities, including the Armyand Navy, two years after Mr. Roosevelt tookoffice.

There is no sign of an end to this desperatepolicy. In 1953 and 1954 the federal budgets werealmost twice as great as in 1947, two years afterWorld War Two. This is likely to be true also forthe year 1955, when all reports are in. But theproblem is that the one great scarecrow that hasbeen used throughout history to make people sub­mit to taxes and debt is now missing. That is actualwar-though it is clear our government flirtsdangerously with that grim boondoggle. War scaresand fantastic invasions of the economic systemare used as substitutes for actual war itself. Howwill it all end? It will end precisely as the orgyof private debt, including bank loans, ended in1929. How long will it last? Who can tell? Will itend in the collapse of the .system of free enterprise-which has already withstood the shock of onedreadful depression and a great and terrible war?Does any leader or any group have a program forthe restoration of the free .system within theAmerican RepubUc ? 'The time grows short.. Or arewe, like England, France, Italy, Spain and almostevery country in Europe, to sink down into theprison of a socialist State?

The State makes use of money which it extort.s from me to unjustly impose fr,eshconstr1aint:s upon me; this is the case ... when it pretends to regulate my moralsand my manners, to limit my labor or my expenditure, to fix the price of mymerchandis,e or the rate of my wages. With the coin which I do not owe it andwhich it steals from me it defrays the expense of the persecution which it, in­flicts upon me. Let us beware of the encroachments of the State, ,and suffer itto be nothing more than a watchdog. HIPPOLYTE TAINE (1828-1893)

476 THE FREEMAN

Sources of Tax Reduction

By HARLEY L. LUTZAnalyzing the President's Economic Report, an experton tax problems shows why total production cannotbe increased by getting the government into business.

That the President's annual Economic Report toCongress should place major emphasis on what thegovernment has done was to be expected. After all,it was prepared by a governmental agency, theCouncil of Economic Advisors. But, in so doing, theReport does reveal at different points and in variousways a philosophy of government that attracts at­tention; it undertakes, rather unsuccessfully, tosteer a course between free enterprise and a plannedeconomy. And sinee the Council of Eeonomic Ad­visors is a governmental ageney, the views andproposals of the Report carry a weight that nonongovernmental organization could carry in ex­pressing its vie\vs.

The tone of the report is set, on page 2, by anenumeration of basic tenets which are said to under­lie the Administration's economic actions and itsfuture program. Four of the six propositions ad­vaneed there deal with what the federal govern­ment is doing or intends to do, and only two relateto the private economy as a matter of major con­eern. Another example of the emphasis on thesuperior role of government is in this sentencefrom page 48: "Budget polieies can help to promotethe objeetive of maximum production by wiselyallocating resources first, between private and pub­lic uses, second, among various governmental pro­grams."

This is a disturbing statement because, in myview, it points directly toward the planned, andeventually the socialized, economy. It says in somany words that maximum production can be pro­moted by permitting the budgeting authority, inits superior wisdom, to determine the allocation oftotal resources between private and public uses.From this it follows that if the budget authorityshould decide to increase the public share of tofalresources, the private share would be correspond­ingly diminished. Concretely applied, this meansthat if in its superior wisdom the governmentshould increase its budget in order to apply moreof it to the production of particular goods such assteel, rubber, aluminum, electric power, or otherthings, there would be less private resources anda smaller total of private production than wouldotherwise be the case. It is impossible to avoid theimplication that total production can he incre'asedby getting the government into business throughabsorption via the budget of a larger share oftotal resources.

Economic production is the peculiar domain ofprivate capital and effort. Government encroach­ment into that domain is not condueive to a largertotal, particularly in a society which is as wellequipped as is our own with private managerialcompetence and all else that contributes to pro­ductive efficiency. Long ago Adam Smith observedthat the functions of sovereign and trader could notbe merged without detriment to the perfor!manceof one function or the other. The business of gov­ernment is to govern, and our society will advancemost rapidly if the public functions and servicesare kept within that sphere, and if the portion oftotal resources drawn into public use is held to theminimum required for the efficient performance ofthe necessary public services.

The "Money Pump~~ D,elusion

This conception of the nature and function ofthe budget rej ects the doctrine that the chief pur­pose of the budget, and of the spending and taxingpower, is to pump money into or out of the econ­omy as determined by the aims and intentions ofa superplanning agency. Adam Smith said thatwhen a ruler attempted to superintend the industryof private people and to direct it toward the em­ployments most suitable to the interest of thesociety, he was undertaking a duty in the attempt­ing to perform which he must always be exposedto innumerable delusions, and for the proper per­formance of which no human wisdom or knowl­edge could ever be sufficient.

I would direct particular attention to the gapbetween certain expressions of our national ob­j ectives and aspirations, on one hand, and theomission from the Report of adequate reeognitionof the actions required if these lofty and \vorthyends are to be attained.

On page 4 is this statement : "Our economic fu­ture depends on the full use of the great treasurehouse of intelligence, skill, energy and confidenceof the American people." And again, from the samepage: "... unless there are satisfactory jobs forthose who seek useful employment, and unlesshuman labor is devoted increasingly to the pro­duction of goods and services that improve thequality of life, our gains in productivity may bedissipated."

One more statement, this one on page 6:

MAY 1955 477

Public policy must also protect incentives andencourage a spirit of enterprise and innovationamong people. The man or woman who, in the hopeof personal betterment, works harder, designs anew product, creates a new method, invests in anew business, moves to a better job, or sugges,tsa new idea to his employer must believe that therewards of initiative and effort are worth while.Through all of its policies the government mustencourage enterprising action by business managers,investors and workers, in an environment that iskept basically free and competitive.

These are splendid statenlents of our personaland national objectives and aspirations. They areentitled to command, and I believe that they docommand, universal approval and support. With aplatform such as these passages provide, anyonewho continued to read through the report wouldexpect to find an equally forthright and construc­tive program where'by the objectives set out thereare to be attained.

In this respect, however, the report is disap­pointing. It fails to recognize adequately the greatimportance of private capital formation as one ofthe most essential conditions for the provision ofsatisfactory jobs, for the increased production ofgoods and services that improve the quality of life,and for the desired advance of the level of well­being. There are references to the things that gov­ernment is doing to aid small business, to curbmonopoly, to expand so-called "public" assets, andto extend social security bene,fits. These and theother actions described, which constitute a com­bination of policing and paternalistic measures,may have beneficial effects. They cannot possiblyserve however, as adequate substitutes for thegrowth of the nation's stock of the private capitalwhich increases our productive potential.

This lack of emphasis on, or adQ'quate recognitionof, the importance of steady growth of our capitalis the more surprising in view of the rate at whichthe labor force is growing, and of the capital in­vestment which i.s required, on the average, to pro­vide a productive, well-paid job for each newworker. It is equally amazing to find that, al­though there is a clear grasp of the bearing ofheavy taxes on incentive and the provision of jobopportunities, there is so little concern about the de­fects of the federal tax structure. On page 49 itis said:

It should nevertheless be recognized that presenttaxes are still a heavy burden. Lower taxes wouldtend to encourage work, promote more efficient busi­ness practices, and create more jobs through newinvestments.

This is an excellent description of an importantline of action that must be taken if we are to havethat glorious economic future which, on page 4,we are told may be ours. But on the subject of taxrelief, the report offers stones instead of bread.It is said that there can be no tax reductions thisyear, not even those that were agreed upon a year

478 THE FREEMAN

ago. Maybe there can be something next year, ifexpenditures are reduced. As for next year, theReport says, page 49:

Congress might then consider enacting a general,though modest, reduction in taxes and, at the sametime, continue the program which was begun lastyear of reducing barriers to the free flow of fundsinto risk-taking and job-creating investments.

In my judgment, here is another weakness of theEconomic Report, namely, the failure to carrythrough from the perfectly clear perception of thebad effects of heavy taxes to a firm and definiteposition on the necessity of prompt corrective ac­tion. The removal of other barriers to the free flowof funds into risk-taking and job-ereating invest­ments is a desirable step but it will be relativelyfutile unless there is also removed the very ob­structive barrier of the high taxes on incomes, andthe gross discriminations of the steeply progressiverates of taxes on individual incomes.

The Factor of E,conomic Growth

There are two sources of tax reduction. Thetraditional measure of such reduction has beenthe amount by which the public spending has been,or can be, reduced. The Economic Report placesthe principal prospect for tax cuts on this tradi­tional basis.

Another source of tax reduction which hithertohas been generally disregarded is econom'ic growthof the eountry. This factor has been recognizedin the President's recentmessage.s. The NationalAssoci.ation of Manufacturers has recently pub­lished a new tax program which proposes to utilizethe growth factor as a source of tax reduction. Thisis, of necessity, a long-range program, the pro­j ections of which are based on the historic growthtrend without regard to the annual variations ortemporary reversals of that trend. As a first step,a series of reductions in the rates of corporationand individual taxes is projected over a five-yearperiod.

The two points at which the tax-rate reductionswould be made, unde'r this plan, are the corporationtax rate and the progressive element of the in­dividual rate scale. By a series of annual reductionsover five years the top rate in each case could bebrought down to 35 per cent. On the assumptionthat there would be, on the average over this period,a continuation of economic growth at the historicrate of 3 per eent, there would be provided asmuch revenue through the period as is now ob­tained from the present high rates.

As an illustration, if the federal revenue re­quirement over the next five years were not to ex­ceed, say $60 billion a year, this level of revenuecould be maintained because of the expansion ofthe taxable corporate and individual income bases,even with the proposed annual rate reductions.The possibility of a serious military crisis cannot

be ruled out in any period, much less the present;but this ever-present possibility provides no reasonto forego constructive planning for national growthand prosperity. If and when the nation shouldagain be faced with a great military crisis, itwill he better prepared to meet the situation ifinvestment and production have been maximizedin the meantime.

The reason for concentrating the reductions thatare realizable from the growth factor on the highrates of income tax is that these rates are the mostpenalizing on incentive, effort, enterprise and capi­tal formation. The case for action here fits per­fectly with the excellent 'Statements which I havealready read from the Report concerning the re­lease of our creative energies, the provision ofenough satisfactory jobs, the importance of lettingevery industrious, ambitious, creative personrealize that the rewards of his effort will yieldpersonal betterment. The reduction of penalizing,discriminatory taxes is the one effective and con­vincing way of demonstrating that we really meanwhat is said on this matter.

The plan does not deal expressly with the firstbracket rate of the individual tax, but it is em­phasized that during and after the execution of theplan, every opportunity of further tax reductionarising from budget cuts or a more rapid rate ofeconomic growth than the plan assumes, should beapplied to a reduction of the first bracket rate.

If it be said that inasmuch as the plan assume~

continued growth, why should the available ticketsfor tax reduction be used in this particular way,my answer is that there is no assurance that thegrowth will continue, and especially is this so ifwe do not work and plan for it. The Report says,correctly, that there is no way of lifting morethan a corner of the veil that separates the presentfrom the future, and that we shall achieve thegrand economic future awaiting us only by wisemanagement of our national household. The bestassurance we can give that economic growth willcontinue is to remove the barriers and impedimentsmost likely to prevent it. Chief among these impedi­ments is the ball and chain of high and discrimina­tory tax rates.

Even Lincoln Said ItBy MALLORY CROSS JOHNSON

If you don't understand the problem of the "publicdebt," you are in good company. Abraham Lincolndidn't understand it either. In a message to Con­gress, December 6, 1864, he wrote: "Men readilyperceive that they can not be much oppressed bya debt which they owe to themselves."

This idea has often been repeated, ,especiallysince 1933. It is a standard reply to those who ex­press anxiety about the size and rapid growth ofour public debt: 278 billion dollars, and still grow­ing.

In Lincoln's day nobody bothered about thenational debt because there wasn't any to speak of.Before the Civil War, the federal government gen­erally balanced its budget; a few small debts werecleared up within a few years. Lincoln's remarkabout the people owing the national debt "to them­selves" was purely academic.

When the government spends .money, it first hasto get it from someone who has earned it-by tax­ation or borrowing. To repay what it borrows fromTom, the government must get the amount bytaxing Dick (and Tom). When the governmentdoesn't dare raise taxes enough to pay Tom all itowes him, it waters the currency by printing dollarsor granting credit to itself backed by its ownbonds: this is inflation, a deceitful form of taxa­tion. Then Harry, who has retired on his savings;

Dick, who is taxed to pay Tom in part; and Tom,who finally gets his money back-all three find theirdollars are worth only fifty cents compared to tenyears ago when they first began to "borrow moneyfrom themselves."

Where has the other fifty cents gone? Why doesit take a dollar to buy things that cost fifty centsten years before? Until Tom, Dick and Harry figureout how the government operates its shell game­begin to wonder what happened to that other fiftycents--the game will continue to work. The "otherfifty cents" was spent chiefly on goods that havebeen destroyed or used up: ships, planes, ammuni­tion, barracks; or given away in the form of ma­chineryfor Russians, food for Greeks, tractors forHindus, a movie industry for Indonesians, pensionsfor Frenchmen, dentures and wigs for Englishmen.The money was spent and is gone. It cannot be re­turned to us any more than the things it paid forcan be returned.

If they understood it better, Tom, Dick and Harrymight say to their officials: "All right, we'd havepaid for the reasonable costs of war if we'd beenasked to; we're not so sure we want to give moneyto everyone in the world who asks for it, if wewon't get any of it back. Of course we'll give,through private charities, to those who are reallystarving. But regardless of what we would or

MAY 1955 479

wouldn't have paid for, we don't like being fooled.You were lying when you promised to return ourmoney. There's something about this debt businessthat doesn't s·eem right."

It isn't right. You won't get back one cent, yetyou have precious little to say about how it will bespent. The government propagandists will do allt.hey can to convince you that you do have a sayabout where the money goes, and that you do oweit to yourself. They will insist you can controlspending by the way you vote; but politicians havebeen promising to balance the budget for more thantwenty years, and breaking their promises withmonotonous regularity. Voters continually elect of­ficials who say they'll spend no more than theytake in. No candidate to my knowledge has everbeen elected on the promise that he would g·et usfurther into debt.

The Deht We "Owe Ourselves~'

But how can you "owe it to yourself"? Supposeyou had saved a hundred dollars, put it in the bank,then spent half to buy a new coat. Would you gohome and say to your wife: "I bought a new coatfor fifty dollars today, dear. Since I owe myself thefifty dollars, that, plus the fifty left in the bank,is still worth a hundred, so we're no worse off t.hanbefore." Sounds silly, doesn't it? The only way tobring your bank balance up to a hundred dollarsagain is to earn fifty dollars more and deposit it.

That is what the government has us do. Since weare the only source of the government's money, its·ends us out to earn what it owes us, which it thentakes from us to pay ourselves back. Then it says:"Now you have been repaid; you have your hundreddollars again." But before we recovered the hundreddollars in our account we had to earn, besides thefirst hundred, another fifty-which adds up to a

hundred and fifty. What happened to the otherfifty? The government spent it, just as you spentyour money on your coat. The only differ,ence is, ifyou spend it you have the coat. If the governmentspends it, Englishm·en get wigs, Indonesians getmovies, and more bureaucrats get a living withoutprodueing anything.

Maybe you think this money is being well spent.Maybe not. But whatever your opinion, don't kidyourself. Whether you think it outrageous or ad­mirable doesn't affect the truth of the matter: thatis, a fraud is being perpetrated on the public (youand me) by the government. Our bank deposits, lifeinsurance premiums, and other forms of personalsavings are heavily "inv,ested," in the form of gov­ernment bonds, in this debt "we owe to ourselves."Therefore, we as a group can collect on those sav­ings only to the extent w·e pay another premium(tax) enabling the government to redeem thosebonds, so the insurance companies and banks canfulfill their obligations to us. Isn't "owing it toourselves" wonderful! It only costs us double.

What do you think of the neighbor who borrowsfive dollars from you and never pays it back? Thekind who always promises to give it to you "nexttime"-but next time he "hasn't got it on himright now." H,e's hardly the kind you would will­ingly lend money to, is he? When politicians come tobeg, borrow, or tax more dollars from you, insistingthat you can't be much oppressed by a debt whichyou "owe yourself"-don't believe them. Face thefact bravely that if you want your government todispense "benefits" to all the world (including your­self), the money is coming out of your pocket-andstaying out.

Whether or not we approve of inflation and a278 billion dollar debt, let us ,stop deceiving our­selves and face the truth. Certainly we owe that toourselves.

ANew Libertarian Magazine

The staff of the FREEMAN is most pleased to welcome a new libertarian magazine.The first issue will appear this month. Titled Ideas on Liberty, it is published bythe Foundation for Economic Education, Irvington-on-Hudson, New York. Thisbi-monthly, 96 page, pocket-sized journal of opinion will contain from fifteen totwenty articles on the general subjects of economics, government, religion, lawand education. The articles will be about half originals and half reprints fromother sources-both classical and current. The originals may be staff-written orcontributed.

Ideas on Liberty will be sent to each person on the Foundation's mailing list.If you are not on that list, you may get a complimentary copy on request.

480 THE FREEMAN

What Would You

Call Mr. Hoiles?By THADDEUS ASHBY

I wrote to a friend, asking about R. C. Hoileswho had offered me a job writing editorials forone of his newspapers.

"Know only rumors about him," my friend re­plied. "... rumor says he owns ten newspapers. . . is the richest man in Orange County, Cali­fornia ... hated by people who don't know him. . . loved by those who do know him . . . mayget, your dander up ... will give you the freedomto write as you please so long as you answerquestions without evasion about what youbelieve. . ."

But who is R. C. Hoiles? Briefly, he is chiefexecutive and philosophic mentor of FreedomNewspapers, an empire that stretches fromBucyrus, Ohio, down through five Texas cities,includes one paper each in New Mexico and Colo­rado, bounces through two California cities. At76, Hoiles is looking around for new territory.

Why Hoiles is hated is interesting. But first,who hates him?

Time calls him "terrible-tempered." The N a­tion's Schools says Hoiles pours "poison into thepublic consciousness." The Milwaukee Journalclasses him among the "bigoted, stingy and luna­tic" elements. McCall's magazine says that Hoilesis "lacking in public spirit," "eccentric," and a"menace to public education." The MilwaukeeJournal reports that "his editors and printersgrind their teeth to the roots as they handle hiscopy." Time says "He shouts his letters andcolumns to a long-suffering secretary..."

The "long-suffering" secretary, who has takendictation from Hoiles for nine years and seemsto grow prettier in his service, notices these thingsabout her boss:

"Every morning a new rosebud in his lapel,picked from his rose garden.

"The twinkle in his eye when he asks for yourreaction to an idea he's mulling over-to 'haveit tested.'

"His keen interest in marriage and children­and even the little romances that sometimes budin an office. I well remember his interest when Ireceived roses for my desk in my 'courting days.'

"He stresses and demonstrates his belief thatan employee is an 'associate' who doesn't workfor an employer, but with him.

R. C. Hailes

"He admits to being 'biased' about his grrund­children."

As for those editors who "grind their teeth tothe roots as they handle his copy," I can tell youabout that: I was editor of the Colorado SpringsGazette Telegraph editorial page for two yearsand handled Mr. Hoiles' column six days a week.The only time I ground my teeth was when hisdictated sentences ran into non-stop marathons.Time thought some editors grind their teeth overhis ideas. I never met them. The ones I knewqualified as such ardent individualists themselvesthey either agreed with Hoiles or went even fartherthan he did with their individualistic ideas.

A Foe of Compulsion

Hoiles won much of his fame in the field ofideas by opposing tax-supported schools. He con­tends they are immoral because they are basedon compulsion. "Teachers can't discuss tax-sup­ported schools intelligently because they are vic­tims of the system. How can an inmate of a houseof prostitution discuss chastity? It is no morepossible to make constructive suggestions abouttax-supported schools than about murder, arson,robbery or any other crime. The only constructivesuggestion would be to discontinue murder, etc."

Hoiles has a standing offer of $500 to any su­perintendent of schools in the circulation area ofthe Freedom Newspapers who will answer severalquestions within a limit of one minute for eachquestion. Since he is a firm believer in the GoldenRule, two of the questions are:

If Bill Smith sets up a private school and forcesJohn Jones to either help pay for its upkeep orleave town-would he be violating the GoldenRule? If the majority of the community set uptheir own school and force the minority to either

MAY 1955 481

help pay for its upkeep or leave town-would theybe violating the Golden Rule? The point of thequestions is that "the government has no rightto do anything which is immoral for the individualto do."

As yet, no school superintendent has tried topick up the $500.

One of the first things Hoiles does when hebuys a newspaper is to refuse to sign a closedshop contract with the union. He has a strike onhis hands. (Characteristically, when the unionstruck his plant in Santa Ana, California, Hoileswalked back and forth with the men on the pic­ket line, trying to make them see his point ofview.) You would think that the men thrown outof jobs would be filled with hatred for him. Hereis the testimony I got from one of his make-upmen:

"I was in sympathy with the union. Of course,I quit when the strike was called. I went toPueblo to work on a union paper. I soon got tiredof it. I could do as much work in an hour asa union man did all day. They told me to slowdown. Then, one warm day I opened a windowand was promptly informed by the shop stewardthat there was a union man who got paid foropening windows, and was I trying to throw himout of work? I came back to Hoiles. I like workinghere and wouldn't go back to a union shop underany circumstances."

Principle is ever the guiding star with Hoiles,whether iill a contest with the union or in hisrelation with advertisers. At one time he wasrunning news stories about a group of local busi­nessmen who had formed what constituted ananti-chain-store organization. The reporter wascalled into the front office and asked whether thestories were true. The reporter said he wouldvouch for them. "Wait a minute," said Hoiles.A few minutes later there came from the inneroffice this bold c"hallenge to Hoiles' biggest ad­vertisers:

"You can take your advertising out of my paper.That's your business. But I'm running this paperand I'll say what is to be printed in it. If thestories are true, and we think they have newsvalue, they're going to be rUin whether you likeit or not."

In his early days Hoiles exposed a case ofcorruption involving a Cleveland paving contract­ing firm. Shortly afterward he was awakened bya terrific explosion which ripped off the front ofhis home. A little later a hired hoodlum wired afew sticks of dynamite under the hood of Hoiles'car. Hoiles tramped on the starter, heard somecoughing illl the motor and drove to a fillingstation. A white-faced mechanic discovered thedynamite, which had not, God knows why, ex­ploded.

One of Hoiles' associates wrote during the daysof the bombing and dynamiters: "During these

482 THE FREEMAN

hectic times, all of those who worked with Mr.Hoiles did so because they knew he had gutsand because he inspired loyalty, hard work andadmiration. Almost at once, Mr. Hoiles could bethe most lovable yet the most exasperating man;the most stimulating and the most depressing,depending upon the current operation of his ex­ceptionally active mind and intellectual pursuits."

Time says that Hoileshas a Stone Age philo­sophy, but concedes "one touch of liberalism inthe Hoiles record: during the war, he campaignedto give the Japanese-Americans a break."

That's not quite his only touch of liberalism.Hoiles is completely liberal in the classical,Frederic Bastiat sense. He opposes the SmithAct and all laws which outlaw Communists. Heopposes the McCarran Act and often fights forbetter treatment of "wetbacks" as well as allother immigrants. Crusading for a liberal immi­gratiOinpolicy, Freedom Newspapers often quotethe poem on the base of the Statue of Liberty:

Give me your tired, your poor,Your huddled masses yearning to breathe free.Send these, the homeless, tempest-tossed to me,I lift my lamp beside the golden door!

Hoiles fights the draft and UMT because heis convinced that all initiated force is wrong:he's against the draft, emergency or no emer-

The Faith of R. C. HoilesI have faith that to the degree we have freetrade and no immigration. quotas we will havepeace and good will amongst men.

I have faith that our country would be betterprotected by voluntary soldiers than hy draftedsoldiers.

I· have faith that our ,government would betterprotect every person's unalienable rights if itwas supported on a voluntary hasis rather thanby taxes.

I have faith that we will he better educated byvoluntary, competitive schools than by govern­ment schools.

I have faith that competition will create bothmaterial and spiritual developm.ent.

I have faith in Illyself and llly wife andchildren and grandchildren, and in all men whowill answer questions without evasion ahout whatthey are advocating.

I have faith that man is perfectable even ifhe is fallihle.

I have faith in work.I have faith that life is good.I have faith that a governm.ent is a good gov­

ernment that only does what each and every in­dividual has a moral and ethical right to do.

I have faith that gaining understanding ofnature's laws is the best way to be useful toone's self and to his fellow-man.

gency.. In fact, he believes the draft created theemergency. "We wouldn't get into foreign warswithout draft.ed men forced to fight them." Hebelieves we are absolutely wrong to defend For­mosa (or Europe) with drafted men and taxmoney. "If men want to volunteer to fight forFormosa, that's their right."

Another liberalism of Hoiles which Time missedis his uncompromising belief in free trade. Hefrequently denounces self-alleged libertarians whoadvocate protectionism. Hoiles often quotes: "Iam for free trade because I believe that mankindwill trade or fight." "If goods do not cross bor­ders, soldiers will."

Time called Hoiles a "prune face"-it was thenearest thing to complete accuracy Time saidabout him. He wouldn't win a beauty contest.He wouldn't win a popularity contest either. "I'mnot entered in either one," Hoiles says. His faceis usually all squeezed up int.o a question mark."Why?" is one of his mottoes.

"Define Your Terms!""

He will sit and talk to you all day if you havesomething to say. He probes at you, coming infrom all sides. "Define your terms if you woulddiscourse with me," he says. When you're throughdefining them, you know a lot more about whatyou believe than you did before. He sharpensyour wits.

Though a good golfer and able to move com­fort.ably in the country club set, Hoiles remainsthe most unsophisticated millionaire I ever met.Sitting at a table for six in his club, he talkedpolities with me all through dinner, ignoringeverybody else at the table. We discussed Bastiat'stheory of value-none of the golf-bridge set knewwhat in blazes we were talking about, but Hoilespaid them no heed.

When he finds a man with an idea he is offlike a hound after a fox. If you know any younglibertarians seeking a career in the newspaperbusiness, send them to Hoiles; if they want towork he might find a place for them; if he doesthey will learn to work, while taking part inthe practical battle of man vs. State.

Hoiles may find some young-minded libertarianat a party; he then loses all track of time. Likea philosopher in the Athenian grove, he will con­tinue asking questions as long as your batteriesreturn his bright fire. His wife has to tell himthat the guests are leaving and won't he saygoodbye to them and go to bed? "Oh? In a mo­ment," he says, and turns back to you, asking,"But how do you know Jesus act.ually said 'Renderunto Caesar'?"

Intelligent men find it a pleasure to argue withHoiles. He will, on rare occasions when provedwrong, change his position. Whenever this hap­pens he talks about it for years, shaking his head

with admiration. "There's one man who made mechange my mind," he'll say, marvelling at theevent.

He still talks about Frank Chodorov as "oneman who proved me wrong." The issue was taxes."Taxes are all right," Hoiles used to say, "aslong as people pay them voluntarily; I believe involuntary taxes."

"That's a contradiction in terms," Chodorovsaid. "The one thing that distinguishes taxes fromvoluntary cont.ributions is the element of force.There's no such thing as voluntary taxes."

Hoiles thought that over, screwing up his face."You're right," he admitted. "Then I'm againstall taxes." He has been 'ever since.

Of all the columns by R. C. Hoiles I remember,I thought the one called "The Faith of R. C.Hoiles" was the best, for it sums up those indi­vidualist beliefs which make his enemies call hima "crackpot" and his friends revere him. Someexcerpts from it are in the box on page 482.

Once a big publisher in the West asked me :"What kind of man is Hoiles? Is he a genius ora scoundrel? I've heard both."

I thought a while. "He's the kindest man Iever met," I said. "You've heard he's againsttax-supported schools, tax-supported old age pen­sions, social security, child labor laws, taxes ofalny kind. You've heard how he throws labor unionsout on their ears. But I say he is kind becausehe respects men as individuals. You feel he wantsto find the best that's in you and drag it out ofyou where you both can st.and and admire it.He looks for the truth in a man."

I remember how I met him. I was ~ steel­worker. I had spent my days working as a secondhelper on the open hearth, my nights writing anovel about it, and my meals drinking beer. Icame down with a mild case of t.b. After a yearrecuperating, I felt ready to go back to work onthe novel.

I first read about Hoiles in that vitriolic articlein Time, which made him sound like the meanestman alive. I thoroughly agreed with the senti­ments Time attribut.ed to Hoiles, especially hisopposition to tax-supported schools. I sent Hoilesfour articles on schools. He bought them. Then Iasked him to finance the novel I was working on.He wrote back and said he wouldn't subsidize mebut he would give me a job writing editorials inColorado Springs; the climate would be good forme. He believed that a steady job with responsi­bility would do more for me and my novel thana subsidy.

Maybe you wouldn't call Hoiles a charitableman. But he has a capacity for bringing out aman's best self. I call this the highest kindness.

William Johnson, editor of Faith and Freedom,wrote to Hoiles on his seventy-fifth birthday: "Ifthere were a typical individualist, you would bemy standard."

MAY 1955 483

~

A Reviewer's NotebookiBy JOHN CHAMBERLAIN J

~~

Once upon a time, for my sins, Ispent a month for Fortune Mag­azine reading practically everynovel about a businessman thathad ever been written in the UnitedStates. The amount of concentratedbilge that I passed through mymind is horrendous to contem­plate even in distant retrospect.Practically every young novelistwho eame out of a family thatmade its living by business seemedto be fighting a Freudian war withhis father. If the old man was infinance, then the son saw him asa pirate like Dreiser's Frank Cow­perwood. If Pop was a big shot inrailroading, he was a power maniaclike the Collis P. Huntington ofFrank Norris' The Octopus. If hebelonged to Rotary or Kiwanis, hewas a Babbitt. If he was a warmanufacturer, he loaded the gov­ernment down with defective air­planes or paper shoes. And so itwent, through a long and drearycatalogue of villainy.

The penchant for stereotypes hashad a forty-year run, and it is onlyrecently that one or two brave soulsamong our novelists have come toques,tion it. Three years ago, inExecutive Suite, Cameron Hawleydared suggest that businessmenmight proceed from a variety ofmotivations, just like other humanbeings. Executive Suite ·may havebeen rough-hewn as a work of art,but it was the first refreshingtreatment of a business themesince Sinclair Lewis' Dodsworthand Booth Tarkington's The Pluto­crat, both of which included a fairmeasure of sympa,thy for the life ofconjuring productivity out of amatching of men and money. Andnow that John P. Marquand has got­ten around to the subject of busi­nes,,; in Sincerely, Willis Wayde(511 pp., Boston: Little, Brown,$3.95), we have another departurefrom the stereotype.

It is a departure, however, onlybecause Mr. Marquand is such an

484 THE FREEMAN

observing creator of character thathe can triumph over a defectivesense of values. The portrait ofWillis Wayde is sensitively done­but the intellectual schematizationof the book through which WillisWayde moves is all wrong! TheRomans had a saying about money,"non olet"-it does not smell. Butthe "commercial instinct," which iswhat Willis Wayde had from birth,mayor may not smell, dependingupon the uses to which it is put.Mr. Marquand understands theworkings of the "commercial in­stinct" wherever it appears,whether it is in an older genera­tion of businessman or among themodern bre'ed. But Mr. Marquand,who hails from that "settled" partof the United States which onefinds in the old communities to thenorth of Boston, has an inheritedor an ingrained prejudice. To him"non olet"-it does not smell-ap­plies only to money which is in­herited. Money which is in processof contemporaneous creation in­evitably involves the making ofcompromises by businessmen-andthis compromising is what offendsMr. Marquand's patrician nostrils.

So the patrician proceeds to mis­read his own story. Marquandrightly sees that the third andfourth generations of Harcourts inClyde, Massachusetts, are not up torunning the old Harcourt Mill, anancient integer in the rubber belt­ing industry, with the efficiencythat makes for good wages anddecent profits. Old Henry Harcourtis the last of his· breed with the"commercial ins,tinc.t." Son BrysonHarcourt hasn't got it-he is anoutdoor man who prefers yachtingat Marblehead to worrying aboutrubber belting patents. As forgrandson Bill, he is a nice guy,but he just doesn't want to bebothered. Bill's sister Bess mighthave made a good inheritor of theHarcourt Mill, but the mere fact

of her sex was against her. At anyrate, nobody thought of trainingBess to take over, whether in herown name or in the name of what­ever husband she might acquire.

The family circumstances beingwhat they were, old Henry Har­court did the best he could whenhe turned to young Willis Wayde,the son of a mechanical engineerfrom the West who had advised theHarcourt Mill to acquire the Klauspatents. Young Willis was dazzleda bit by the rigidities and subtledistinctions of Clyde society. Sincethe "commercial instinct" was in­born with Willis, he proceeded touse it to gain personal acceptancein Clyde. But Bess Harcourt wasambivalent about Willis. He was anattractive boy, no doubt, but hewas certainly no aristocrat. Hisexternal humility, a protective thingwith Willis while he was learninghis way around in Clyde, madeBess think of Uriah Heep. Besscouldn't take that.

Uriah Heep or not, it took Willisto save the Harcourt Mill. Thishappened years after Willis hadgone to New York and New Jersey.He did it by the process of merg­ing Harcourt with his own RahwayBelt. And then he did the un­forgivable thing: he put both Rah­way and Harcourt into the largerfirm of Simcoe, with headquartersin Chicago- and closed down theHarcourt factory in Clyde becauseit was an inefficient unit.

To Bill and Bess Harcourt, this,vas an outrageous failure ofnoblesse oblige toward a whole setof Clyde retainers who had workedfor years in the old factory. More­over, Willis' wife Sylvia, thedaughter of a Harvard geologyprofessor, thought it a bit cold­blooded on Willis' part. But Willis'attitude was that business wasbusiness. You had to do what wasgood for the stockholders, and youhad to make a profit or go under.

As a patrician, Mr. Marquand is

obviously on the side of Bess andBill Harcourt. What he does notsee is that the young Harcourtshad forfeited their right to be crit­ical of Willis Wayde when they re­fused to take responsibility for theproperty they would some day in­herit. The true aristocrat does notturn over his ultimate moral deci­sions to an agent; he stays withhis responsibilities, and lives ordies by the result. The troublewith both Bess and Bill was thatthey wanted it both ways. Theyliked the money which Willis Waydemade for them. But they were un­willing to do the hard work thatwas necessary if the fate of theHarcourt IVlill were to remain intheir own hands.

Marquand understands the "why"of Willis Wayde's decisions. Buthe can't resist making fun of theman for being a business climber.He does this by giving Bess thelast word in the book. The lastword should have been Willis',however. For Bess, after all, is thefundamentally stupid victim of aperverted code that only recognizesenergy when it is ancestral. Bessshould have married Willis in thefirst place, as her grandfatherwished in his secret heart. If shehad, the Harcourt lVIill would haveslugged it out with both Rahwayand Simcoe and won the battle.And she would have remained inthe driver's seat, a true aristocr,atinstead of a phoney one.

As always, Mr. Marquand carriesoff hi5 novel with deft command ofhis flashback technique. The meth­od is not original with him, buthe is such a master of it he hasmade it peculiarly his own. Andhe has set a style: for example,Hamilton Basso's recent The Viewfrom Pompey's Head (409 pp., NewYork: Doubleday, $3.95) reads, inits conceptual outline, like a south­ern version of Marquand's Point ofNo Return. But Mr. Basso's valuesare sounder than Marquand's hap­pen to be in Sincerely, Willis Wayde.To Mr. Basso, both ancestor wor­ship and commercial climbing arevariant forms of a single humanurge-the urge to establish one'sown personal identity in a worldthat can be harsh and alien nomatter where one is born. Mr.Basso sees his characters sub specie

aeternitatis-and he comes closeto turning his own Point of NoReturn into Sophoclean drama.Whether he is writing about south­ern "Shintoists," or about "youcan't go home again" refugees wboseek success in New York City, orabout a novelist who has climbedup out of the "mudsill" world ofAlabama white trash only to dis­cover that he has a touch of thetarbrush through an octoroonmother, Mr. Basso comprehendsthat everyone is caught in the samesadness. The record of humanityis a struggle to make patternsagainst the enduring dark, andnobody can escape the human lot.The most that any novelist can dois map the contours of the darklingplain where the ignorant armiesclash by night.

Novels can be written in two fun­damental ways-the "social" wayof Henry James, which Marquandand Basso both accept as their par­ticular convention, and the poetic­symbolic way of Nathaniel Haw­thorne. Ralph de Toledano's Dayof Reckoning (179 pp., New York:Henry Holt, $3) is in the lattertradition. Mr. de Toledano's meth­od is to concentrate so much real­ity in a single vehicle that it be­comes not reality but poetic alle­gory.

Into a story about communistimmoralism and the individual an­swer thereto, Mr. de Toledano hasthrown the Carlo Tresca case, theJuliet Poyntz case, the Krivitskycase and the Trotsky case, pIus anumber of overtones of the SpanishCivil War. Since the Westernworld, through some process ofcorruption which few people havethe wit or the patience to under­stand, has manifestly welshed onits duty to bring the murderers ofTresca, Poyntz, Krivitsky andothers to justice, Mr. de Toledano'sPaul Castelar decides to take jus­tice into his own hands. This isalways dangerous to do, for it im­plies that there are times when thefunctions of prosecution, judge,jury and hangman must be exer­cised by a single individual whois willing to accept a terrible re­sponsibility. Mr. de Toledano'spoint is that evil must be con­fronted somehow-and he appar­ently believes that God speaks

through the Paul Castelars of thisworld when "society," as repre­sented by a corrupt or weaklingD.A. and a complaisant police, re­fuses to be the agent of DivineJustice.

The moral ambiguity of Cas­telar's position is accepted by Mr.de Toledano as one of those indi­vidual crosses that must be bornein an age that refuses to makemoral sense of its own predicament.The dilemma is the old one of JohnBrown. Was he saint, or was hefanatic? And if fanatic, was heGod's chosen vessel nonetheless?There are no pat answers to any ofthese questions, but human beingsmust on occasion try to answerthem. Right or wrong, P'aul Cas­telar is a figure of transcendantimportance to our time. And it ispart of our time's disease that mostof our literary media refuse to lookour Paul Castelars in the face.They are part of the corruptionthat has let the murder of CarloTresca go unsolved and unavenged.

Having used up my space on themost provocative of the recentnovels, I haven't room to deal justlyor adequately with Clinton Ros­siter's Conservatism in America(327 pp., New York: Knopf, $4).Like other books of its type, thisraises more questions than it set­tles. Rossiter writes a fluent, agree­able prose; he has learning; andhe is obviously on the side of theangels in the contemporary strug­gle against communism. But he lacksany clear conception of the depend­ence of the good community onindividual variation.

Rossitel" prizes certain phrasessuch as the "primacy of the com­munity," but he offers no principle,nor even any good rule of thumb,by which an individual may distin­guish between the community as asociety of free men and the com­munity as a constrictive socialmechanism which throttles for thesake of throttling. His conservatismis' distinctly "without tears." Thegood and bad points of it shouldbe discussed at essay length-andthe essay would have to come togrips with a more important ques­tion: is the issue really between"conservatism" and "liberalism,"or is it between coercion and thevoluntary way of life?

MAY 1955 485

He Adds Little to PhilosophyThe Public Philosophy, by Walter

Lippmann. 189 pp. Boston: Little,Brown & Company. $3.50

"The public philosophy" is appar­ently Mr. Lippmann's private lan­guage for "natural law." With themajor premise of his thesis one canfully agree: that the possibility ofconstitutional democracy dependsupon the acceptance of permanentlyvalid principles of morals and pol­itics as supreme over the desiresand power of majorities no lessthan of minorities. The larger partof the book is devoted to the state­ment of this premise, a statementwhich has been made much betterbefore and to which MOr. Lippmannadds little, if anything.

Nor can one disagree with hisminor premise, that a de,cay in theunderstanding of these principles,together with the growth of an anti­constitutional subservience to themajority, has brQught about a seri­ou! danger to the very survivalof constitutional democracy.

The conclusions, however, whichhe draws from his premises madethis reader, at least, wonder if Mr.Lippmann had studied the sameAmerican Constitution and the samephilosophical sources that the restof us have-and whether he lives inthe same twentieth-century worldwe do. His main practical con­clusion, that the result of the risein the power of the masses in theUnited States and the Westerndemocra,cies has been a strengthen­ing of the legislative armand an"enfeeble,ment, verging on paraly­sis" -of the executive, would seemin the light of the history of thepast fifty years to be a flat contra­diction of the facts. Never havePresidents held in their hands any­thing like the cumulatively increas­ing power of Theodore Roosevelt,Woodrow Wilson, Franklin Roose­velt, Harry Truman and DwightEisenhower. It is true that there isa "functional derangement" in ourpolitical society, but it is the exactreverse of that which Mr. Lipp­mann invents. It is the enormouslyswollen power of the exeeutive.This is the effect of crude democ­racy and the attrition of constitu­tionality, and this is the "derange­ment" from whiich we suffer.

486 THE FREEMAN

As with the relationship betweenthe executive and legislative, sowith some of his other conclusions.The inalienable right of the in­dividual viS-a-vis the State, whichis the underlying principle of theAmerican Constitution, becomestransformed into the civic duty tobridle the power of the "ruled" andstrengthen the "rulers." Freedomof speech and the rights of prop­erty become privileges to begranted by the State within thelimits of the necessities of the"good society." From beginning toend the book refuses to recognizethat such an entity as the individualexists. The entire realm of dis­course is that of social groups­"masses," "rulers," "the ruled,""the corporate nation."

Despite all his discussion of nat­ural law and his appeals to theFounding Fathers, what in actual­ity Mr. Lippmann seems to be con­cerned with is the aggrandizementof an "elite" and the further re­m'oval of checks upon their power.It is not necessary to disagree withhim when he attacks unlimitedpower in the hands of "the people"and of the demagogues who speakin their name, to condemn his mid­twentieth-century vers/ion of thephilosopher king, his demand forfull governmental power for thosewho possess "the inwardness of theruling man. . . the noble masterof his own weaker and meaner pas­sions."

The American idea is equallyhostile to either kind of power. Itis hostile to power; and the fram­ers of the American Constitutioncreated the first governmentalstructure in history consciouslydesigned to protect the individualby preventing the ,concentration ofpower, whether in "aristocratic" or"democratic" hands. The issue to­day is not whether power shouldrest in the hands of majorities orof minorities; nor were the con­clusions the Founding Fathersdrew from their understanding ofthe natural law, of which Mr. Lipp­mann writes so glibly, concernedwith that issue. The true issue,then and now, was and is betweenthose who stand for the aggrandize­ment of power, in whosesoeverhands it may rest, and those whowish to check power and control it.

The American principle - derivedfrom natural law, which places theinalienable value of ea,ch individualabove all other politicalconsiderations-is that power should btlshackled by checks and balance~.

so that the individual remains freeand government restricted andlimited. The true disease of ourcommonwealth is not Mr. Lipp­mann's romance of the pitiably en­feebled exe,cutive. It is the attritionof that principle (and of its corol­lary, that the economy must remainfree of gQvernment control). A re­turn to that principle is undoubted­ly of the gravest urgency for thewelfare of the Republic, but Mr.Lippmann's rhetoric is a will 0' thewisp, leading the unwary readernot toward but still farther awayfrom it. FRANK S. MEYER

The RatholeBillions, Blunders and Baloney: The

Fantastic Story of How UncleSam Is Squandering Your MoneyOverseas, by Eugene W. Castle.278 pp. New York: Devin-AdairCompany. $3.50

In fast-moving style this book giveseverything the title promises. Chieftarget for Mr. Castle's wit is theUnited States Information Agency.

Last Mar,ch USIA requested $~8,­

500,006 for the coming fiscal year.On that occasion James Reston ofthe New York Times wrote: "TheUnited States spends more moneyand energy on Government informa­tion and propaganda than any na­tion in the Western world, yet ismore widely misunderstood thanany other leading nation."

More t:klan half of Mr. Gastle'sbook focuses on this s·ad fact. Afterreading his story of incredible nai­vete and waste, one has the key toMr. Reston's puzzle.

There may be a few errors in therecount. But as a whole Mr. Castleaims well. Besides its main theme,the book also shows why govern­ment agencies are so permanent.For instance, USIA bureaucrats as­sign the agency's top brains to theworthy cause of selling the Americantaxpayer on the absolute need for anagency which costs him almost 90million dollars a year.

I wish Mr. Castle had scannedand printed some of the stuff the

"Robber Barons"

FREE, ENTERPRISEBOOKSELLERS

SEND FOR PRICE ILlST OF BOOKSON FREE ENTERPRISE, SOCIALISM.

produce more, at no cost to the tax­payer. Farmers of the Southea~t areapplying supple,mental water to theirland, boosting crop yields. In In­diana it has been proved that irri­gation of light soils doubles the yieldof corn. By heavier fertilization, useof improved seeds and better controlof weeds, the production of Americanfarms in the last fifteen years hasbeen increased 40 per cent, andagronomists state that this is justa beginning.

Moley might well have pointed outthat the government's reclamationprogram is not only extravagant butis a major assault on freedom. Likeother government excursions intoproduction, it uses money taken fromall the taxpayers to finance addi­tional competition for some of them..Being forced to subsidize your com­petitor is not the Ameriean enter­priser's idea of fair play.

OSCAR W. COOLEY

The Banditti of the Plains, by A. S.Mercer. 195 pp. Norman: TheUniversity of Oklahoma Press.$2.00

The Banditti of the Plains could beoffered as proof that the "robberbaron~" did exist; that the big cat­tle owners of fifty to a hundredyears ago unquestionably resortedto murder to impose their winsupon the "little people" who estab­Hshed homes and farms on the cat­tle ranges. Yes, it could be so used.But the main point that this bookproves is the unquestionable factthat the "robber barons"-in in­dustry as well as in agriculture­could not have operated withoutthe help of government. Our offi­cials-presidents, senators, gov­ernors and sheriffs-either joinedin with or tolerated this evil ofsome persons using legal or illegalviolence to impose their wills uponother persons. Unfortunately, thisevil still exists, though now inquite another form. DEAN RUSSELL

Fox River Grove, Ill.Box 497

The Cost Was HighWhat Price Federal Reclamation?

by Raymond Moley. 72 pp. W'ash­ington, D. C.: American Enter­prise Association, 1012 14th StreetN. W. $1.00

Reclamation-the word calls up avision of arid deserts transformedinto verdant farms .by the magic ofwater. Uninhabited wastes becomebusy, populous ,countrysides. Theg.rim day of ,mass hunger, foreseenby Malthus, is pushed further intothe future.

After reading Raymond MoleyJsaccount of a h.alf century of social­ized reclamation in the UnitedStates, one suspects the vision is amirage.

When the first reclamation actwas passed in 1902, the farmer wasgiven ten years in which to paythe cost of reclaiming his land. Thisperiod was soon doubled, and in the

"1920's it was raised to forty years.In 1939 all pretense that reclamationwould pay for itself was' given up.

The reason, ,apparently, is the cost.For example, the three millionacres or so whi'ch the ReclamationBureau plans to bring to fruitionby 1959 will cost Cac/cording to theBureau's own estimates, which inthe past have proved to be aboutone-third of the actual cost) anaverage of $700 an acre. True, thisincludes the cost of power develop­ment, but it does not include in­terest on investment, which over theyears will run to several times theconstruction ,cost.

Never since the program wasstarted has Congress required farm­ers to pay interest on the govern­ment',s investment in bringing waterto their land. On some proJects whichcombine power with irrigation, thatpart of the power earnings whichshould constitute interest on invest­ment in power facilities is beingused to amortize the irrigation plant.This practice was branded by Sena­tor Knowland as "double-dealing"and "financial sleight-of-hand."

Is reclamation of arid lands thepractical way for growing Americato keep the pantry full? Moley thinksnot. He points out that in the sub~

humid East, South and Middle Westthere is unused' farm land equal tosix times the 'arid acres' which theBureau has earmarked for watering.And land now in use c'an be made to

"Voi,ce" beamed out in recent years.At any rate, several years ago Ilistened to it in Europe. Amongother beauties there was one broad­cast which featured in detail ,a dog'sfuneral in New York.

The smaller part of the bookpleads for ending "foreign aid."Mr. Castle asks why we shouldspend money, for instance, to teachnatives somewhere how to read(most likely free pamphlets broughtin by Moscow) if our own childrenget less and less education becauseof inadequate s'chools?

It is interesting that "liberal" re­viewers of the book took the merci­less attack on USIA much betterthan the brief and quite moderatecriticism of the foreign-aid mania."Point Four" must be dear to them.

As Qxpected, a frank book on sodelicate a topic got hit with the fullarsenal of the collectivistic book-'review circuit. And that is cant,:ridi'cule and hypocrisy. For in­instance, the Saturday Review piecetook offense at Mr. Castle's bluntlanguage. Singled out were hiswords "rathole, giveaway, slushfund, do-gooders, shakedown, One­Worlders." Yet the very same re~

view saw fit to hurl against Mr.Castle: "R·anting, sneering, thecharming objectivity of the DailyWorker. He fouls himself up at ahigher rate than permissable evento a cub."

Fortunately, American anthropol­ogists working abroad report evermore evidence showing the whole"Point Four"approa,ch was utterlyunrealistic and possibly detrimen­tal to all concerned. Apparently,what kept those countries unde­veloped was Cand is) a social cli­mate of the kind our "liberals" andBritain's Socialists are so eager tofoment and expand everywhere. Itis the almost universal myth thatany success of someone must meanloss to someone else.

Ironically, "underdeveloped coun­tries"-that is, their leaders­pledge themselves the more em­phatically to socialism the louderthe United States talks about her"obligation" to keep them from col­lapsing economically. Ever sincethe new Asian aid program croppedup in Washington, Nehru's Indiadisplayed an even bolder, almostobsessive commitment to the lux­ury of a socialist society.

HELMUT SCHOECK

MAY 1955 487

The Unreal DreamReflections on the Failure of So­

ciali~,m, by Max Eastman. 128 pp.New York: Devin-Adair Com­pany. $2.75

Sometimes a powerful and passion­ate refutation of a wrong idea turnsinto an affirmative vindication of aright idea. Burke started out to ex­pose the fallacies of the ideologuesof the French Revolution-fallacieswhich were restated more than a.century later by the leaders of theRussian Bolshevik Revolution. Heended by presenting a memorablepicture of an organic society whichdoes not spring from the mina ofsome facile theorist, but is enrichedand strengthened by a hundredties of history and tradition.

When Friedrich Hayek wrote TheRoad to Serfdom he set up impor­tant signposts for the road to free­dom. And Max Eastman, in a bril­liant and penetrating exposure ofthe reasons for the moral and ma­terial failure of socialism, comes upwith some very challenging andstimulating ideas as to what shouldbe the goals of a free society. Inrejecting the false utopia of col­lectivism, he offers the dream ofa state of affairs where free citizens"are normally found to be posses­sors of land or capital or both."

Forty years ago Max Eastmaneditor of a radical magazine suc~cessively known as the Masses andthe Liberator, believed that Marx­ian socialism was a scientific blue­print for the enlargement of humanopportunity and liberty. Now hisdisillusionment is complete; his re­cantation is without reservations.He characterizes the whole idea ofextending freedom, or justice, orequality, or any other civilizedvalue to the lower classes throughcommon ownership of the means ofproduction as "a delusive dream, abubble that had taken over a cen­tury to burst."

"When I am denounced as a turn­coat by the true believers it doesindeed bring a blush to my cheek,but only because it took me so longto turn my coat."

A principal reason why socialistexperiments failed, from the blood­less experiment of Robert Owen inNew Harmony, Indiana, to the san­guinary tyranny of the SovietUnion and Red China, is that the

488 THE FltEEMAN

original dreamers of the socialistfaith failed to reckon with the reali­ties of human nature. The aggres­sive, competitive, pugnacious ele­ments in the make-up of the normalbeing were overlooked.

Eastman tosses away the unrealdream of a social order from whichthe element of individual and groupstruggle and competition is ban­ished. What he proposes is to ex­tend the check-and-balance theorywhich dominates the political in­stitutions of the American Constitu­tion to economic and social life. Ineconomics, as in politics, no onepower or interest should be all­powerful. He shows a keen senseof the necessity of giving the righteconomic answer if freedom is toprevail in the age-old struggleagainst tyranny. As he puts it, andhe possesses in unusual measurethe gifts of elegant expression andlucid exposition:

"We can choose a system in whichthe amount and kind of goods pro­duced is determined by the imper­sonal mechanism of the market,issuing its decrees in the form offluctuating prices. Or we can choosea system in which this is deter­mined by commands issuing from apersonal authority, backed by armedforce. . . We have to choose. Andthe choice is between freedom andtyranny."

WILLIAM HENRY CHAMBERLIN

Oil and ImperialismOil Diplomacy: Powderkeg in Iran,

by Nashrollah Saifpour Fatemi.405 pp. New York: WhittierBooks, Inc. $4.50

It is 'written that a people with­out history is a happy people.Iranians might still be enjoying theblissful, unchronicled obscurity towhich they were entitled after eclipseof their ancient Persian splendors-if only they had not been af­flicted with the kind of riches,vhich attracts modern internationalburglars: oil.

For most of the last hundredyears, a compulsion to bestowor withhold foreign economic con­cessions has enlivened Persian rec­ords. In 1867 the imperial Russiansnluscled in on Caspian Sea fishing,which explains why the Soviets, notthe Iranians, still hold the world

market for caviar from Persiansturgeon. When an early shah gavea British firm the tobacco monop­oly, his enraged subjects forgot hevvas "the Breathing Image of God."First they stopped smoking. Thenthey assassinated him. Exclusiveconcessions were handed aroundfor nearly everything. One of them,to the French for archaeologicaldiggings, raised the first hard clueto petroleum-and thereby pro­voked alarge amount of history.

It all began in 1901 with the ill­famed concession to Australian pro­motor William Knox D'Arcy of "spe­cial and exclusive privileges to pros­pect, obtain, exploit, develop, pre­pare, export and sell natural gas,petroleum, asphalt and mineral waxthroughout the Persian Empire forsixty years." These rights werespirited over to a British company.Young Churchill, converting theNavy from coal to oil, put His Maj­esty's Government in as partne'f.

Rivals when the field was clear,England and Russia collaboratedwhen third parties threatened. Twicethey partitioned Iran into everwider "zones of influence." In WorldWar One they joined against theGermans, who were spreadingrumors that the Kai.ser had oblig­ingly turned Moslem. Later every­body wanted Iranian oil, even theJapanese. American oil companies,invited by the Iranians to save themfrom Anglo-Russian attentions,were tricked or bamboozled off.

In 1946, after failing to extortan oil concession, the Red Armygrabbed at all of Azerbaijan-andfailed again, this time due to Ameri­can firmness. Five years later theIranians firmed up, too, and blastedout the Anglo-Iranian Oil Company,along with Britain. In August 1954Iran agreed to let an internationalconsortium reopen giant Abadan.

Dr. Fatemi reports an appallingamount of imperialist iniquity. Redmachinations occupy a large place,but British knaveries even more,presumably because the British·were most successful. His evidenceconfirms that the Anglo-Iranian OilCompany was intolerably arrogant;London unconscionably bullying.

But the Iranian story still re­mains to be told. Except for barestnlention, the author ignores entirelythe local greed, corruption, fanati­cism and sheer Parliamentary bed­lam which contributed so much to

Street

------------------------------------

City Zone State .

This seems a forlorn hope. Forthe crowd is the bulwark of theFourth Estate (including radio andtelevision) which is at once itsmanipulator and the means throughwhich it exercises power. Uponthat power depends the fate ofpoliticians, in the West at least.The politicians do not dare ignorethe crowd, and the Fourth Estatemust continue to ID,anipulate it, forthat is the condition of its own im­portance.

Besides, where are the experts?Mr. Huddleston himself cites theappalling ignorance of modern dip­lomats. Certainly the counsel of

by MAX EASTMAN

Reflectionson the

FAILUREof

SOCIALISM

The' progresSiive disillusionment of Max Eastman with socialism and com­munism is fascinatingly documented in this new book. It is unmistakablythe most beautifully written, most carefully reasoned and most per­suasively argued case against Marxian and Fabian Socialist ideology thathas yet appeared.

"... it should be the most useful of all means to bring some reasoninto the nlinds of thousands of college students and others who think itis not only smart to be a Socialist but safe..." Raymond Moley

only $2.75

"In this thoughtful essay Max Eastman explains why socialismwas bound to fail and why it really failed. He analyzes the re­sentment and envy that made such self-styled fighters for free­dom as Bernard Shaw and the Webbs turn into uncritical cham­pions of Stalinism. His book is the most devastating critique ofthe fashionable bigotry of our age."

THE DEVIN-ADAIR COMPANY23 East 26th Street, New York 10, N.Y.

Gentlemen: Please send me. __ .....copies of REFLECTIONS ON THEFAILURE OF SOCIALISM by Max Eastman to $2.75 enclosed 0 Please send your catalog

Nalne (,please print) ..

Ludwig von Mises commentson Max Eastman's new book:

ment, and at the end manipulated byLitvinov into a pro-Soviet "popularfront" whose influence still poisonsWestern thinking. And he regardsthe UN as an organization whichhas already made a reality of theOrwellian slogan, "War is Peace."

He points out that Soviet expan­sion could easily have been stoppedin 1944 and 1945. But Rooseveltand Churchill, instead, gave Stalinall the aces. Although it is nowtoo late to recover our vast losses,we can at least, he suggests, playour remaining cards with greaterskill. The crowd must stay silentand leave the game to the experts.

Diplomacy of Brawl

Iran's disaster. Further, the book isa triumph of bad structure. Twoout of twenty-two chapter,g seem tohave benefited from rewriting. Therest are jumbled beyond the per­missible limit. Dr. Fatemi quoteswithout attribution, introducesnames without identification, andplunges forward without possibilityof pursuit. HAL LEHRMAN

Popular Diplomacy and War, bySisley Huddleston. 285 pp. WestRindge, N. H.: Richard R. Smith,Inc. $3.50

Sisley Huddleston had watched thediplomats at work for forty yearsand had covered their conferencesbetween world wars. In this book,which was his last, he attributes to"the advent of the masses" the dis­asters that have overtaken mankindsince World War One.

Diplomacy, he says, is no longerthe affair of experts, negotiatingsecretly in the world's foreign of­fices and often, like Disraeli beforethe Berlin Congress of 1878, avert­ing war while the war spirit is ram­pant. Our present diplomats are"clamor boys"-prime ministers,foreign ministers, ambassadors-at­large-who fly from capital to capi­tal and conference to conference,holding futile conversations andcloaking their futility in mendaciouscommuniques.

Mr. Huddleston defines the diplo­macy of true statecraft as "the artof doing just enough ... to achievenational objectives that must in thenature of the case be limited." Butthe crowd, he says, ignores limita­tions. It is excitable, emotional, bel­ligerent. The crowd and its manipu­lators-the demagogues, the press,radio, television-"have all butruined scientific statecraft, rationaldiplomacy, and the prospect of worldpeace."

The crowd, he says, was at theConference of Versailles, boththrough the press and through thebloodthirsty wartime promises of thepeacemaking politicians. Its pres­sures resulted in an unviable andvengeful treaty which led inevitablyto a second world war. He dealscaustically with the League of N'a­tions, always an obstacle to a quietand reasonable European readjust-

those rated experts has helped uslittle in recent years; vide thefutile and expensive "containment"policy of our "top expert" on Rus­sia, Mr. George F. Kennan.

Possibly there is no answer tothe problem that Mr. Huddlestonposes, but it must be said that hehas posed it courageously and ably.His book goes far toward explain­ing the tragic dilemma of our time.

SUZANNE LA FOLLETTE

God Is LibertyApproaches to God, by Jacques

Maritain. 128 pp. New York:i- Harper and Brothers. $2.50

~ndividualism without belief in God[s a philosophical basket case. In­dividualists who argue their inter­pretation of politics or history with­:put the certitude of God, a certitudeln His· existence which must be asphysically real as a banged-up shin,talk rubbish; usually at length. IfGod is -not acknowledged, the prem­ises become ridiculous. M. Maritainputs it: "[without belief in God]

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490 THE FREEMAN

It is not possible rationally to justifyfundamental moral notions such as... inalienable right, or the intrinsicdignity of the human person." That'swhy conservatives who are skepticalof the Divine should read this book.

I t is not necessary to be a philos­opher. As M. Maritain shows, thereare approaches to God quite apartfrom the philosophical. There is,for example, the "natural or pre­philosophic knowledge of God," anintuitive approach which cannothelp but be apparent to the personwho asks himself, as M. Maritainmakes us ask ourselves, I exist?

. The question mark refers not tothe truth of our existence, a factwhich the author calls "formidable,sometimes elating, sometimes sicken­ing or maddening," but to the im­plications which naturally ariseout of this fact. M. Maritain devel­ops these implications in such an in­formal way that we come easily toan intuitive knowledge of God,which, in its own way, is as preciseas mathematics.

There are other ways of knowingGod without struggling for thediscipline of philosophy. God is im­manent in the artistic personality,in the creation of beauty. He is na­tural to the moralist. And the personinclined to mystical experience be­comes a "friend" of God, predis­posed to discover Him. It remainsonly a matter of seeing how suchtraits in our character lead us logi­cally to God. M. Maritain is success..ful in nudging us from such un..formalized inertia to the fullrecognition of "the natural desire tosee that First Cause whose exist..ence is shown to us through thenatural approaches to God [which]is, in human reason, the mark ofthe possibility ... of a knowledgeof God superior to reason...."

M. Maritain does not neglectphilosophy. With a jolt, he takes usinto the perplexities of ThomasAquinas. The jolt comes from thefact that Thomas Aquinas is sowonderfully clear when edited byJacques Maritain. He modernizesthe great theologian's five philosophi­cal proofs of the existence of Godwithout doing violence to them. Acomparison with the original canbe made through the appendix; itwill show that M. Maritain has re­tained the thunderous logic ofAquinas while pruning terms of

purely philosophical interpretationand discarding outmoded empiricalexamples. Maritain replaces twelfth­century analogies to the physicalworld with twentieth-century oneswhich help us follow the reasoning.·The only fault one can find withwhat he did to Aquinas is that hesometimes failed to do it to himself.

. In the section of his book dealingwith Thomistic approaches to God,he is sometimes noetic in his choiceof language (he uses this word him­self; it means "purely intellectualapprehension"). My three diction­aries yielded to me that entropymeans "a mathematical factor whichis a measure of the unavailableenergy 'in a thermodynamic system"(huh?), but no amount of searchenlightened me on his use of univo­city. For your information, whenyou run across ananke stenai, itmeans dire necessity; you may stillwonder whether it was necessary tobe so dire. F. R. BUCKLEY

Trade or WarHow Can Europe Survive? by Hans

F. Sennholz. 336 pages, includingindex. New York and Toronto:D. Van Nostrand. $4.00

Lest the title mislead, this bookshould be of interest to every per­son whose urge is to live at libertyand in peace. In the title and text,Europe is hardly more than thestage. Any other geographic settingwould also serve to mirror the eter­nal drama of individuals seekingways and means for survival andprogress within society.

"How big is society?" men askthemselves, and many have thoughtthat a United States of Europe wasthe proper answer. In this study,Dr. Sennholz critically examinessuch recent theories of unificationas the Federal Union of Democra­cies of Clarence Streit, the SocialistMovement for the United States ofEurope, and the European Federa­list Union. He also .analyzes theBenelux Economic Union, the Euro­pean Payments Union, the Euro­pean Coal and Steel Community,the North Atlantic Treaty Organi­zation, and similar attempts at par­tialapplication of the larger plansfor European federation.

Though invaluable as text andreference for students of finance

and trade, those particular chaptersdo not make scintillating reading.The author had no choice ; politicalhistory is bound to be dull whenthere is nothing to record but repe­titian of the same old mistake. Withinfinite patience he explains howthat mistake is embodied in eaehof the latest attempts at the polit­ical integration of nations. If gov­ernment indulges special interestswithin its own sphere of nationalsovereignty-if it is a "Welfare"State-then it is a mistake to as­sume a common interest with anyother "Welfare" State.

A nation which attempts tariffprotection and price support forits agriculture or industry, orplaces restraints upon the move­ment of people and capital intoand out of the country, or other­wise interferes with trade at homeand abroad, can hardly expect thepeople of other nations to supportthose designs to injure them. Norcan international cartels and simi­lar treaty efforts ever lead towardpeaceful unification, because thosemeasures also involve a use offorce, the ,consequences of whichare counterforce and war.

Those who gain political powerin time of war are reluctant toreturn that power to the people.Instead, they try to persuade thepeople that government is theirgreat defender, and pretend thatprivate enterprise instead of warhas failed. In the periods of hard­ship which accompany and followwars, the people still trust govern­ment to protect them from the rig­ors of open competition. They sur­render their liberty, and the gov­ernment uses its power to furtherclog the ,channels of trade.

If people understood this rela­tionship, Dr. Sennholz contendsthat they would not search forpeace through intergovernmentalalliances. They would simply pro­ceed with the peaceful business ofindustry and commerce, first in­sisting that their own governmentleave them alone in their domestictrade. In other words, those whovalue freedom and understand theadvantages of unsubsidized and un­hampered market relationships willsee the fallacy and will abandonthe attempts at a national WelfareState. Then they will be ready forpeaceful cooperation and economicunification with those who are

willing to trade in other lands. Theonly help needed from any govern­ment is that it protect life, libertyand property without prejudice, andstop meddling with the freedom tomove and~the freedom to trade pri­vate property and sound money.But governments will never volun­teer to curb their own powers. Thathas to be done by people who havefaith in their own competitive abi­lities. Dr. Sennholz has given theexplanations, ideas and principlesupon which to build such faith.

PAUL L. POIROT

Stubborn FinlandThe Memoirs of Field Marshal

Mannerheim, by Carl GustavBaron von Mannerheim. 540 pp.New York: E. P. Dutton andCompany, $5.75

People ill to the point of pain withreading about how we-the West­have knuckled under to the Com­munists again are entitled to someliterary relief. There is a fine pal­liative dose of it. for them in thememoirs of Finland's Field MarshalMannerheim.

Mannerheim's book is an accountof his country's stubborn and virtu­ally unique habit of standing up tothe Soviet Union. He tells of thetroubl,e this habit has got Finlandinto, and (more important) of thetroubles it has spared her. The oldwarrior-patriot explains the inspi­ration for F<inland's defiance of hergargantuan and voracious neigh­bor: the generation that bled theRepublic of Finland into existenceis with her still.

Mannerheim's memoirs are enter­taining as well as instructive.In 1917, after the Bolshevistpteroda,ctyl had displaced the Tsar­ist eagle, one of its rep,tilian eggshatched in Finland. Against this"workers' gov,ernment" G e n era IMannerheim, late of the ImperialRussian Army, mustered his com­patriots' pitchforks and fowlingpieces. When victory and independ­ence had been won, the formerRussian Grand Duchy pondered be­coming a monarchy. While it did,Mannerheim served as regent. Hesubsequently helped in the draftingof the republican constitution-thisdespite his wholehearted preferencefor a royal form of government.

Then came the Winter War of1939-40-a war which AmericanCommunists and their kissing cous­ins would dearly love to be allowedto forget. The rampant bear wasflung to his haunches by a fiercelittle adversary. Mannerheim's su­perb generalship had made up lorhis country's lack of military prep­aration and for a time seemed likelyto overcome the Soviet Army. Thefield marshal, in this part of hismemoirs, makes authoritative andenlightening comment on the oldques,tion of whether Stalin deliber­ately threw inferior troops at theFinns in order to dupe Hitler onthe real quality of the Red Army.

In this war Finland survived asa nation, but Finnish earth andpeople were cleaved from the fa­therland. The Finns, Mannerheimwrites, took solace in their bereave­ment from what had happened toLatvia, Esthonia and Lithuania­they parleyed (as we are doing) anddisappeared down the red gullet.

In 1941, when Finland againbattled Russia, it stood with astrange ally. Some people might likeMannerheim to be more apologeticabout the German collaboration, butthen they are people who never feltqueasy about our love-feast withthe Soviet Union. Victorious Russia,still bent on bleeding Finland intohelplessness, put away the swordand resorted to the leech. Manner­heim's memoirs do not tell all thestory of how the free world sufferedFinland to be fined for valor, buthe describes the preposterousl~r

Draconian reparations which Rus­sia demanded of her tiny and· ex­hausted neighbor. Readers can fillin from their recollections of re­cent newspaper reports how Fin­land has again survived with honorand integrity. RICHARD M. PALMER

Any" book reviewed 'in this Book Section(or any other current book) supplied byreturn mail. You pay only the bookstoreprice. We pay the postage, anywhere inthe world. Catalogue on reflues~.

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EDUCATIONTechnically trained people are es­sential to business, but no more sothan the liberal arts graduate whocan look beyond day-to-day problemswith a mind broadened by the knowl­edge of modern -economic, social andpolitical conditions. Business is dis­covering that education is a differentthing from trade school proficiency,and a more valuable thing in topmanagement. The trained thinkersbusiness needs know that free enter­prise is essential to a democraticphilosophy. The challenge businessfaces is to find ways of keeping theseconcepts foremost.

Leaders For Leadership, by David F.Austin. 12 pop. Write to: J. CarlisleMacDonald, Ass't to Chairman,United States Steel Corp., 71 Broad­way, New York 6, N. Y. Free

SMEARSAlthough Facts Forum has con­sistently backed radio programscarefully designed to present bothsides of current topics, this organi­zation has been the target of sanc­timonious liberals in a gutter cam­paign directed at taking the pro­grams off the .airways and ruiningFacts Forum. The liberals are in fullbattle dress, using the weapons mostdear and most familiar to the'm­the distorted fact,' the personal slur,the blatant lie. What makes DrewPearson, Marquis Childs, the HeraldTribune and the Daily Worker waxso wroth is that the conservativeside of an argument is presentedalong with the liberal side. Compari­sons must be odious-to them.

Case History of a Smear Camp,aign,by Hardy Burt and Associates. 28pp. .Dallas, Texas: Facts Forum.Single copy free

FREEDOMHerbert Hoover warns: "Among thedelusions offered us by fuzzy-mindedpeople is that imaginary creature,the Common Man. It is dinned intous that this is the Century of theCommon 'Man. The whole idea is an-

other cousin of the Soviet proletariat.The Uncommon Man is to be whittleddown to size. It is the negation ofindividual dignity and a slogan ofmediocrity and uniformity." Free­dom is not won, it is not retained, bythe monstrous uniformity of themass. It is the individual of talentwho is at once the flower and thetrunk of liberty.

Freedom . . . Triumph of the Un­common Man, by Ben Moreell. 14 pp.Public Relations Department, Jones& Laughlin Steel Corporation, Pitts­burgh 30, Pa. Single copy free

ONE WORLDBy a vote of the Supreme Court, 5to 3, President Truman was con­strained from seizing the steel in­dustry. Those judges who dissented,did so on the grounds that certainprovisions of the UN Charter gavethe President the authority for anaction which would otherwise proveunconstitutional. According to thesethree judges, we are bound to theUN by treaty, and treaty overridesinternal law. Recently, in Rice vs.Sioux City Memorial Park, the Su­preme Court split 4-4 on the sameinterpretation. The Constitution wasupheld by the grace of one judge.Can we afford to do without theBricker Amendment any longer?How long will we have a choice?

Repair the Broken Chain-Pass theBricker Amendment, by ClarenceE. Manion. 4 pp. Manion Forum ofOpinion, South Bend, Ind. 10 cents

From an editorial in the New YorkTimes, April 8, 1953: "The resolu­tion is dangerous because it forbidsany treaty that would allow any for­eign power or any international or­ganization to control the constitu­tional rights of American citizenswithin the United States." This quo­tation refers, of course, to the pro­posed Bricker Amendment. The edi­torial is shocking evidence that anamendment must be passed. At­tempts to define which executiveagreements should be required toreceive the sanction of national legis-

lat.ion before they become effectiveas domestic law, and which shouldnot, are impractical. A blanket pro­hibition is necessary if freedom andsovereignty are to survive.

The Increasing Need for a Constitu­tional Amendment on Treaties andExecutive Agreements, by Frank E.Holman. 31 pp. The Argus Press,Seattle, Wash. Single copy free

ECONOMICSBy 1975, the only chance for respect­able living by growing numbers ofolder citizens is a current accelera­tion of real savings and investmentprograms. Building the supply ofcapital goods fast enough to keepahead of a surging population is theone way to have a _rising standardof living. This requires a lot morebusiness investment and a lot lessdependence on the social s,ecurityscheme of taxing others for one'slivelihood. The greater the numberof individuals with personal savingsand with shares in cooperative in­dustrial programs, the greater theassurance that proper distribution ofthe production of the future will beachieved.

Economie Challenge of Longevity,by Allen W. Rucker. Harvard Busi­ness Review, Nov-Dec, 1954. 12 pp.Reprints: Harvard Business Review,Soldiers Field, Boston 63, Mass. $1.00

LABORAbuses of power by labor leadersmust be eliminated or our govern­ment will be changed to labor social­ism. Constitutional liberties and thefree economy of a free people willdisappear. Labor leaders demandmonopoly control of all employments;this is the Marxian socialist dicta­torship of the proletariat disguisedas an 'evolutionary instead of a re­volutionary program. The truth isthat lawlessness by organized laborreflects the increasing lawlessness ofthe American people.

Lawlessness in High Places, by Don­ald R. Richberg. 20 pp. Donald R.Richberg, 1000 Vermont Avenue,N. W., Washington 5, D. C. Singlecopy free

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