[This essay is taken from Chapter 24 of Man vs. The Welfare State (1969).]
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From
time to time over the last thirty years, after I have talked or written about
some new restriction on human liberty in the economic field, some new attack on
private enterprise, I have been asked in person or received a letter asking,
"What can I do" — to fight the inflationist or socialist
trend? Other writers or lecturers, I find, are often asked the same question.
The
answer is seldom an easy one. For it depends on the circumstances and ability
of the questioner — who may be a businessman, a housewife, a student, informed
or not, intelligent or not, articulate or not. And the answer must vary with
these presumed circumstances.
The
general answer is easier than the particular answer. So here I want to write
about the task now confronting all libertarians considered collectively.
This
task has become tremendous, and seems to grow greater every day. A few nations
that have already gone completely Communist, like Soviet Russia and its
satellites, try, as a result of sad experience, to draw back a little from
complete centralization, and experiment with one or two quasi-capitalist
techniques; but the world's prevailing drift — in more than 100 out of the 111
or so nations and mini-nations that are now members of the International
Monetary Fund — is in the direction of increasing socialism and controls.
The
task of the tiny minority that is trying to combat this socialistic drift seems
nearly hopeless. The war must be fought on a thousand fronts, and the true
libertarians are grossly outnumbered on practically all these fronts.
In
a thousand fields the welfarists, statists, socialists, and interventionists
are daily driving for more restrictions on individual liberty; and the
libertarians must combat them. But few of us individually have the time,
energy, and special knowledge in more than a handful of subjects to be able to
do this.
One
of our gravest problems is that we find ourselves confronting the armies of
bureaucrats who already control us, and who have a vested interest in keeping
and expanding the controls they were hired to enforce.
The
Federal Government now embraces some 2,500 different functioning agencies,
bureaus, departments, and divisions. Federal full-time permanent civilian
employees are estimated to reach 2,693,508 as of June 30, 1970.
And
we know, to take a few specific examples, that of these bureaucrats 16,800
administer the programs of the Department of Housing and Urban Development,
106,700 the programs (including Social Security) of the Department of Health,
Education, and Welfare, and 152,300 the programs of the Veterans
Administration.
If
we want to look at the rate at which parts of this bureaucracy have been
growing, let us refer again to the Department of Agriculture. In 1929, before
the United States Government started crop controls and price supports on an
extensive scale, there were 24,000 employees in that Department. Today,
counting part-time workers, there are 120,000, five times as many, all of them
with a vital economic interest — to wit, their own jobs — in proving that the
particular controls they were hired to formulate and enforce should be
continued and expanded.
What
chance does the individual businessman, the occasional disinterested professor
of economics, or columnist, or editorial writer, have in arguing against the
policies and actions of this 120,000-man army, even if he has had time to learn
the detailed facts of a particular issue? His criticisms are either ignored or
drowned out in the organized counterstatements.
This
is only one example out of scores. A few of us may suspect that there is much
unjustified or foolish expenditure in the United States Social Security
program, or that the unfunded liabilities already undertaken by the program
(one authoritative estimate of these exceeds a trillion dollars) may
prove to be unpayable without a gross monetary inflation. A handful of us may
suspect that the whole principle of compulsory government old age and
survivor's insurance is open to question. But there are some 100,000 full-time
permanent employees in the Department of Health, Education, and Welfare to
dismiss all such fears as foolish, and to insist that we are still not doing nearly
enough for our older citizens, our sick, and our widows and orphans.
And
then there are the millions of those who are already on the receiving end of
these payments, who have come to consider them as an earned right, who of
course find them inadequate, and who are outraged at the slightest suggestion
of a critical re-examination of the subject. The political pressure for
constant extension and increase of these benefits is almost irresistible.
And
even if there weren't whole armies of government economists, statisticians, and
administrators to answer him, the lone disinterested critic, who hopes to have
his criticism heard and respected by other disinterested and thoughtful people,
finds himself compelled to keep up with appalling mountains of detail.
The
National Labor Relations Board, for example, hands down hundreds of decisions
every year in passing on "unfair" labor practices. In the fiscal year
1967 it passed on 803 cases "contested as to the law and the facts."
Most of these decisions are strongly biased in favor of the labor unions; many
of them pervert the intention of the Taft-Hartley Act that they ostensibly
enforce; and in some of them the Board arrogates to itself powers that go far
beyond those granted by the Act. The texts of many of these decisions are very
long in their statement of facts or alleged facts and of the Board's
conclusions. How is the individual economist or editor to keep abreast of the
decisions and to comment informedly and intelligently on those that involve an
important principle or public interest?
Or
take again such major agencies as the Federal Trade Commission, the Securities
and Exchange Commission, the Food and Drug Administration, the Federal
Communications Commission. These agencies often combine the functions of
legislators, prosecutors, judges, juries, and administrators.
Yet
how can the individual economist, student of government, journalist, or anyone
interested in defending or preserving liberty, hope to keep abreast of this
Niagara of decisions, regulations, and administrative laws? He may sometimes
consider himself lucky to be able to master in many months the facts concerning
one of these decisions.
"The
armies of bureaucrats have a vested interest in keeping and expanding the
controls they were hired to enforce."
Professor
Sylvester Petro of New York University has written a full book on the Kohler strike
and another full book on the Kingsport
strike, and the public lessons to be learned from them. Professor Martin Anderson
has specialized in the follies of urban renewal programs. But how many are
there among those of us who call ourselves libertarians who are willing — or
have the time — to do this specialized and microscopic but indispensable
research?
In
July, 1967, the Federal Communications Commission handed down an extremely
harmful decision ordering the American Telephone and Telegraph Company to lower
its interstate rates — which were already 20 percent lower than in 1940, though
the general price level since that time had gone up 163 percent. In order to
write a single editorial or column on this (and to feel confident he had his
facts straight), a conscientious journalist had to study, among other material,
the text of the decision. That decision consisted of 114 single-spaced
typewritten pages.
We
libertarians have our work cut out for us.
In
order to indicate further the dimensions of this work, it is not merely the
organized bureaucracy that the libertarian has to answer; it is the individual
private zealots. A day never passes without some ardent reformer or group of
reformers suggesting some new government intervention, some new statist scheme
to fill some alleged "need" or relieve some alleged distress. They
accompany their scheme by elaborate statistics that supposedly prove the need
or the distress that they want the taxpayers to relieve. So it comes about that
the reputed "experts" on relief, unemployment insurance, Social
Security, Medicare, subsidized housing, foreign aid, and the like are precisely
the people who are advocating more relief, unemployment insurance, Social
Security, Medicare, subsidized housing, foreign aid, and all the rest.
Let
us come to some of the lessons we must draw from all this.
We
libertarians cannot content ourselves merely with repeating pious generalities
about liberty, free enterprise, and limited government. To assert and repeat
these general principles is absolutely necessary, of course, either as prologue
or conclusion. But if we hope to be individually or collectively effective, we
must individually master a great deal of detailed knowledge, and make ourselves
specialists in one or two lines, so that we can show how our libertarian
principles apply in special fields, and so that we can convincingly dispute the
proponents of statist schemes for public housing, farm subsidies, increased
relief, bigger Social Security benefits, bigger Medicare, guaranteed incomes,
bigger government spending, bigger taxation, especially more progressive income
taxation, higher tariffs or import quotas, restrictions or penalties on foreign
investment and foreign travel, price controls, wage controls, rent controls,
interest rate controls, more laws for so-called "consumer protection,"
and still tighter regulations and restrictions on business everywhere.
This
means, among other things, that libertarians must form and maintain
organizations not only to promote their broad principles — as do, for example,
the Foundation for Economic Education at Irvington-on-Hudson, N. Y., the
American Institute for Economic Research at Great Barrington, Mass., and the
American Economic Foundation in New York City — but to promote these principles
in special fields. I am thinking, for example, of such excellent existing
specialized organizations as the Citizens Foreign Aid Committee, the
Economists' National Committee on Monetary Policy, the Tax Foundation, and so
on.
"It
is not merely the organized bureaucracy that the libertarian has to answer; it
is the individual private zealots."
We
need not fear that too many of these specialized organizations will be formed.
The real danger is the opposite. The private libertarian organizations in the
United States are probably outnumbered ten to one by Communist, socialist,
statist, and other left-wing organizations that have shown themselves to be
only too effective.
And
I am sorry to report that almost none of the old-line business associations
that I am acquainted with are as effective as they could be. It is not merely
that they have been timorous or silent where they should have spoken out, or
even that they have unwisely compromised. Recently, for fear of being called
ultraconservative or reactionary, they have been supporting measures harmful to
the very interests they were formed to protect. Several of them, for example,
came out in favor of the Johnson Administration's tax increase on corporations
in 1968, because they were afraid to say that that Administration ought rather
to have slashed its profligate welfare spending.
The
sad fact is that today most of the heads of big businesses in America have
become so confused or intimidated that, so far from carrying the argument to
the enemy, they fail to defend themselves adequately even when attacked. The
pharmaceutical industry, subjected since 1962 to a discriminatory law that
applies questionable and dangerous legal principles which the government has
not yet dared to apply in other fields, has been too timid to present its own
case effectively. And the automobile makers, attacked by a single zealot for
turning out cars "unsafe at any speed," handled the matter with an
incredible combination of neglect and ineptitude that brought down on their
heads legislation harmful not only to the industry but to the driving public.
It
is impossible to tell today where the anti-business sentiment in Washington,
plus the itch for more government control, is going to strike next. In 1967
Congress allowed itself to be stampeded into a dubious extension of Federal
power over intrastate meat sales. In 1968 it passed a
"truth-in-lending" law, forcing lenders to calculate and state
interest rates the way Federal bureaucrats want them calculated and stated.
When, in January, 1968, President Johnson suddenly announced that he was
prohibiting American business from making further direct investments in Europe,
and that he was restricting them elsewhere, most newspapers and businessmen,
instead of raising a storm of protest against these unprecedented invasions of
our liberties, deplored their "necessity" and hoped they would be
only "temporary."
The
very existence of the business timidity that allows these things to happen is
evidence that government controls and power are already excessive.
Why
are the heads of big business in America so timid? That is a long story, but I
will suggest a few reasons:
1.
They
may be entirely or largely dependent on government war contracts.
2.
They
never know when or on what grounds they will be held guilty of violating the
antitrust laws.
3.
They
never know when or on what grounds the National Labor Relations Board will hold
them guilty of unfair labor practices.
4.
They
never know when their personal income tax returns will be hostilely examined,
and they are certainly not confident that such an examination, and its
findings, will be entirely independent of whether they have been personally
friendly or hostile to the Administration in power.
It
will be noticed that the governmental actions or laws of which businessmen
stand in fear are actions or laws that leave a great deal to administrative
discretion. Discretionary administrative law should be reduced to a minimum; it
breeds bribery and corruption, and is always potentially blackmail or blackjack
law.
"Discretionary
administrative law should be reduced to a minimum; it breeds bribery and
corruption."
Libertarians
are learning to their sorrow that big businessmen cannot necessarily be relied
upon to be their allies in the battle against extension of governmental
encroachments. The reasons are many. Sometimes businessmen will advocate
tariffs, import quotas, subsidies, and restrictions of competition, because
they think, rightly or wrongly, that these government interventions will be in
their personal interest, or in the interest of their companies, and are not
concerned whether or not they may be at the expense of the general public. More
often, I think, businessmen advocate these interventions because they are
honestly confused, because they just don't realize what the actual consequences
will be of the particular measures they propose, or fail to perceive the
cumulative debilitating effects of growing restrictions on human liberty.
Perhaps
most often of all, however, businessmen today acquiesce in new government
controls out of sheer timidity.
A
generation ago, in his pessimistic book, Capitalism, Socialism,
and Democracy (1942), the late Joseph A. Schumpeter maintained the
thesis that "in the capitalistic system there is a tendency toward
self-destruction." And as one evidence of this he cited the
"cowardice" of big businessmen when facing direct attack:
They talk and plead — or hire
people to do it for them; they snatch at every chance of compromise; they are
ever ready to give in; they never put up a fight under the flag of their own
ideals and interests — in this country there was no real resistance anywhere
against the imposition of crushing financial burdens during the last decade or
against labor legislation incompatible with the effective management of
industry.
So
much for the formidable problems facing dedicated libertarians. They find it
extremely difficult to defend particular firms and industries from harassment
or persecution when those industries will not adequately or competently defend
themselves. Yet division of labor is both possible and desirable in the defense
of liberty, as it is in other fields. And many, who have neither the time nor
the specialized knowledge to analyze particular industries or special complex
problems, can be nonetheless effective in the libertarian cause by hammering
incessantly on some single principle or point until it is driven home.
Is
there any single principle or point on which libertarians could most
effectively concentrate? Let us look, and we may end by finding not one but
several.
One
simple truth that could be endlessly reiterated, and effectively applied to
nine-tenths of the statist proposals now being put forward or enacted in such
profusion, is that the government has nothing to give to anybody that it
doesn't first take from somebody else. In other words, all its relief and
subsidy schemes are merely ways of robbing Peter to support Paul.
Thus,
it can be pointed out that the modern Welfare State is merely a complicated
arrangement by which nobody pays for the education of his own children, but
everybody pays for the education of everybody else's children; by which nobody
pays his own medical bills, but everybody pays everybody else's medical bills;
by which nobody provides for his own old-age security, but everybody pays for
everybody else's old-age security; and so on. As noted before, Bastiat exposed
the illusive character of all these welfare schemes more than a century ago in
his aphorism: "The State is the great fiction by which everybody tries to
live at the expense of everybody else."
"The
government has nothing to give to anybody that it doesn't first take from
somebody else. In other words, all its relief and subsidy schemes are merely ways
of robbing Peter to support Paul."
Another
way of showing what is wrong with all the State handout schemes is to keep
pointing out that you can't get a quart out of a pint jug. Or, as the State
giveaway programs must all be paid for out of taxation, with each new scheme
proposed the libertarian can ask, "Instead of what?" Thus,
if it is proposed to spend another $1 billion on putting more men on the moon
or developing a supersonic commercial plane, it may be pointed out that this $1
billion, taken in taxation, will not then be able to meet a million personal
needs or wants of the millions of taxpayers from whom it is to be taken.
Of
course, some champions of ever-greater governmental power and spending
recognize this very well, and like Professor J.K. Galbraith, for instance, they
invent the theory that the taxpayers, left to themselves, spend the money they
have earned very foolishly, on all sorts of trivialities and rubbish, and that
only the bureaucrats, by first seizing it from them, will know how to spend it
wisely.
Another
very important principle to which the libertarian can constantly appeal is to
ask the statists to consider the secondary and long-run consequences of their proposals
as well as merely their intended direct and immediate consequences. The
statists will sometimes admit quite freely, for example, that they have nothing
to give to anybody that they must not first take from somebody else. They will
admit that they must rob Peter to pay Paul. But their argument is that they are
seizing only from rich Peter to support poor Paul. As President Johnson once
put it quite frankly in a speech on January 15, 1964: "We are going to try
to take all of the money that we think is unnecessarily being spent and take it
from the 'haves' and give it to the 'have nots' that need it so much."
Those
who have the habit of considering long-run consequences will recognize that all
these programs for sharing the wealth and guaranteeing incomes must reduce
incentives at both ends of the economic scale. They must reduce the incentives
both of those who are capable of earning a higher income, but find it taken
away from them, and those who are capable of earning at least a moderate
income, but find themselves supplied with the necessities of life without
working.
"They
will admit that they must rob Peter to pay Paul. But their argument is that
they are seizing only from rich Peter to support poor Paul."
This
vital consideration of incentives is almost systematically overlooked in the
proposals of agitators for more and bigger government welfare schemes. We
should all be concerned about the plight of the poor and unfortunate. But the
hard two-part question that any plan for relieving poverty must answer is: How
can we mitigate the penalties of failure and misfortune without undermining
the incentives to effort and success? Most of our would-be reformers and
humanitarians simply ignore the second half of this problem. And when those of
us who advocate freedom of enterprise are compelled to reject one of these
specious "antipoverty" schemes after another on the ground that it
will undermine these incentives and in the long run produce more evil than
good, we are accused by the demagogues and the thoughtless of being
"negative" and stony-hearted obstructionists. But the libertarian
must have the strength not to be intimidated by this.
Finally,
the libertarian who wishes to hammer in a few general principles can repeatedly
appeal to the enormous advantages of liberty as compared with coercion. But he,
too, will have influence and perform his duty properly only if he has arrived
at his principles through careful study and thought. "The common people of
England," once wrote Adam Smith, "are very jealous of their liberty,
but like the common people of most other countries have never rightly
understood in what it consists." To arrive at the proper concept and
definition of liberty is difficult, not easy.[1]
So
far, I have written as if the libertarian's study, thought, and argument need
be confined solely to the field of economics. But, of course, liberty cannot be
enlarged or preserved unless its necessity is understood in many other fields —
and most notably in law and in politics.
We
have to ask, for example, whether liberty, economic progress, and political
stability can be preserved if we continue to allow the people on relief — the
people who are mainly or solely supported by the government and who live at the
expense of the taxpayers — to exercise the franchise. The great liberals of the
nineteenth and early twentieth centuries, including John Stuart Mill and A.V.
Dicey, expressed the most serious misgivings on this point.
This
brings me, finally, to one more single issue on which all those libertarians
who lack the time or background for specialized study can effectively
concentrate. This is in demanding that the government provide an honest
currency, and that it stop inflating.
This
issue has the inherent advantage that it can be made clear and simple because
fundamentally it is clear and simple. All inflation is government
made. All inflation is the result of increasing the quantity of money and
credit; and the cure is simply to halt the increase.
If
libertarians lose on the inflation issue, they are threatened with the loss of
every other issue. If libertarians could win the inflation issue, they could
come close to winning everything else. If they could succeed in halting the
increase in the quantity of money, it would be because they could halt the
chronic deficits that force this increase. If they could halt these chronic
deficits, it would be because they had halted the rapid increase in welfare
spending and all the socialistic schemes that are dependent on welfare
spending. If they could halt the constant increase in spending, they could halt
the constant increase in government power.
The
devaluation of the British pound, first in 1949 and again in 1967, may as an
offset have the longer effect of helping the libertarian cause. It exposes the
bankruptcy of the Welfare State. It exposes the fragility and complete
undependability of the paper-gold international monetary system under which the
world has been operating since 1944. There is hardly one of the hundred or more
currencies in the International Monetary Fund, with the exception of the
dollar, that has not been devalued at least once since the IMF opened its doors
for business. There is not a single currency unit — and there is no exception
to this statement — that does not buy less today than when the Fund started.
At
the moment of writing this, the dollar, to which practically every other
currency is tied in the present system, is in the gravest peril. If liberty is
to be preserved, the world must eventually get back to a full gold standard
system in which each major country's currency unit must be convertible into
gold on demand, by anybody who holds it, without discrimination. I am aware
that some technical defects can be pointed out in the gold standard, but it has
one virtue that more than outweighs them all. It is not, like paper money,
subject to the day-to-day whims of the politicians; it cannot be printed or
otherwise manipulated by the politicians; it frees the individual holder from
that form of swindling or expropriation by the politicians; it is an essential
safeguard for the preservation, not only of the value of the currency unit
itself, but of human liberty. Every libertarian should support it.
I
have one last word. In whatever field he specializes, or on whatever principle
or issue he elects to take his stand, the libertarian must take a
stand. He cannot afford to do or say nothing. I have only to remind him of the
eloquent call to battle on the final page of Ludwig von Mises's great book, Socialism,
written 35 years ago:
Everyone carries a part of society
on his shoulders; no one is relieved of his share of responsibility by others.
And no one can find a safe way out for himself if society is sweeping toward
destruction. Therefore everyone, in his own interests, must thrust himself
vigorously into the intellectual battle. None can stand aside with unconcern;
the interests of everyone hang on the result. Whether he chooses or not, every
man is drawn into the great historical struggle, the decisive battle into which
our epoch has plunged us.
[1] I strongly recommend The Constitution of Liberty, by F.A.
Hayek (University of Chicago Press, 1960).
Henry Hazlitt (1894–1993 was a libertarian philosopher, economist, and journalist for The Wall Street Journal, The New York Times, Newsweek, and The American Mercury, among other publications. He is best known for Economics in One Lesson, available in both trade paperback and MP3 CD.