Among our Founding Fathers there were those with no strong ideological commitment to a limited government and who in fact found governmental interference with economic activity desirable. Alexander Hamilton thought the infant United States needed protective tariffs and was not ready for free international trade. States rights were strong and that meant states, and not the federal government, played the major role in solidifying the political philosophy under which we live and prosper. However, these concepts evolved slowly and are still subject to dispute and dissension.
During the 18th century only England practiced free trade, the rest of Europe and the United States kept up their tariffs. In fact customs and duties on foreign goods provided ninety to a hundred percent of America's total federal revenue up to the time of the Civil War. After that customs provided fifty percent or more until the end of the century. Quotas were non-existent and there was ample movement of both people and capital.
The ratio of government spending to national income was just under ten percent in both England and the United States in the early 19th century . Two-thirds of that government spending was by the states and local governments and half of the one-third spent by the federal government was for education.
The panic of 1837 discredited government enterprise as the Great Depression almost a century later discredited private enterprise. It was a happy chance, that when casting about for solutions to the 1837 crash, policy makers turned to the philosophy espoused by Adam Smith and almost total laissez-faire and non-interventionism reigned in the United States for the next century. This led to the largest and quickest increase in living standards in the history of mankind.
Just why were Americans able to accomplish in less than two hundred years, what men, just as intelligent and living in lands with as many natural resources, had not been able to accomplish in the previous six thousand years?
Always, in other societies throughout man's history, humans fought for their share of the existing wealth, believing that it was only natural that A would have to suffer to satisfy the needs of B. That is what some professors and many of our politicians are claiming now as they attempt to revive the old class warfare rhetoric that is so common in other countries.
Too many in positions of power in Washington DC subscribe to the zero-sum philosophy which always destroys wealth, dissipates human energy and lowers the living standard of all. It simply is not true that one man's profit must be another man's loss. It simply is not necessary to take from the rich in order to better the lot of the poor and America's experience is proof that I speak the truth. By unfettering those capable of exercising the greatest creativity and productivity, the fortunes of all men are lifted.
Women had washing machines in this country when women, just as intelligent and just as capable were still pounding clothes on river stones in other countries. Automobiles, which were luxuries for only a tiny portion of the population in many parts of the world, were considered indispensible to all but the poorest American and enabled him to get around faster and therefore to put his energies into more productive enterprises. The jobs created by allowing capital to accumulate and be invested in ideas allowed Americans to benefit from the labor-saving devices that flowed out of its early factories, giving them more time to direct their energies to even greater productivity.
During the depression sixty years ago, a mechanic and his nine year old son built a suspension bridge across the Snake River out of discarded material from a dump site in Wyoming. They were able to find enough structurally sound iron and good steel cable and with the help of the drag-line rig they made entirely from junk they were able to construct a bridge which would have cost the government $50,000 to build; money that was not available. The bridge had no trouble passing county inspection and the farmers were eager to pay $2,500 for it. The mechanic, after paying for cement and gasoline, was able to clear $2,000 for his time and labor which helped carry his family through the lean years.
It has become fashionable to ridicule Reaganomics but the ideas are not only sound, they have worked miracles in the past and would work again if given half a chance. The trickle up, trickle down, trickle sideways theory suggests that when human energy and capital is not restricted by government, the whole of society benefits. Why then do so many intelligent, well-meaning people favor government intervention?
I believe British jurist and scholar, Albert Venn Dicey (1835–1922) had the answer: "The beneficial effect of State intervention, especially in the form of legislation, is direct, immediate, and, so to speak, visible, whilst its evil effects are gradual and indirect, and lie out of sight. . . few are those who realize the undeniable truth that State-help kills self-help. Hence the majority of mankind must almost of necessity look with undue favor upon government intervention."
The preceding quotation can be found in a 1988 essay by Milton and Rose Friedman titled Tides In The Affairs Of Men. The first tide, referred to as free markets and laissez-faire, rolled in on a wave of public opinion between 1776-1885 and was acted upon between 1840-1930. The second was the tide of collectivism which had it's public opinion dates noted as 1885-1970 and action set for 1930-1980. Public opinion swelled as the third tide, of market economies and limited government gathered momentum in 1970 and was put into practice with Ronald Reagan's election in 1980.
In England between 1830-1860 there was a bias towards individual labor, self-help and laissez-faire which worked to overcome the natural bias mentioned above. In England, ideas changed and socialism was heralded by the Fabian Society and George Bernard Shaw. The Fabians had worldwide and long lasting ramifications as evidenced by the adoption of centralized planning in India and other formerly British or European colonies (with the exception of Hong Kong). The welfare state in Britain was followed by the New Deal in the United States, a natural outgrowth of the American Economic Association which first appeared in the United States in 1885. Young economists who had studied in Germany returned to the U. S., imbued with the idea of a welfare state.
The in-roads made by collectivism in this country can be read in the history of legislation: Interstate Commerce Commission in 1887, Sherman Anti-Trust Act of 1890, Food and Drug Act of 1906, spurred by Upton Sinclair's novel The Jungle. Even earlier William Bryan Jennings popularized collectivist ideas and made the Populist Party dominant in the Midwest.
The first world war expanded the role of government, but still, as late as 1929 the federal government spent only 3.2% of the GNP on military, including veterans benefits and interest on the public debt which accounted for the largest percentage. At the same time state and local governments were spending three times as much or 9% of GNP, mostly on education and highways. Before the New Deal in the thirties, less than one percent of GNP was spent on welfare and such income support programs. The effect of the New Deal was awesome. In just twenty years spending by all levels of government, local, state and federal, was up to thirty-five percent of national income; by 1985 that had risen to forty-four percent. In that same time period new government agencies were created involving safety, business practices, education, the humanities and so on and so forth.
But the worst of it was the intrusion into people's lives, an intrusion that would not have been tolerated fifty years earlier. One major government program after another was started with the best of intentions only to result in more problems than solutions. Added to tariffs and quotas were things like price and wage restrictions, ceilings on interest rates and rents, zoning mandates and building codes. By 1980 almost every plank in the 1928 Socialist party had been enacted into law.
Viet Nam, Watergate and the failure of the welfare state in both Britain and the United States, tarnished government's role in this country. On a worldwide basis the results of the Chinese and Russian communist revolutions discredited planned economies in general. But what really paved the way for the Reagan Revolution was the pervasiveness of government and high taxes. Unfortunately too many politicians sabotaged Reaganomics and then claimed it didn't work. The Reagan proposals never had a chance. It was like putting a blindfolded prize fighter in the ring with his hands tied behind his back and then jeering and calling his defeat proof that he couldn't fight. Cutting back on government is like trying to put the genie back in the bottle. Everyone knows its easier to expand than contract, to spend than to save. As government expanded, so did its power to bestow favors. When it comes to limiting government it is only natural that those now vested interests will strongly resist the loss of privileges that they have come to regard as their right.
It must be understood that people are going to do what they want to do no matter how many obstacles are placed in their path. There are laws and restrictions against using drugs and driving fast but they don't stop behavior; they only punish it. Regulations establish a parent relationship between government and citizens. Incentives for this and taxes and fees for that in an effort to control citizens. Regulations attempt to harness human energy and succeed in making it less productive than it would otherwise be. Energy is diverted to filling out forms, waiting for permission, being inspected over and over. Regulation substitutes the power of a few for the diligence, knowledge and experience of the many whose work is being regulated. If it weren't enough that we suffer the ignorant telling experts how and what to do, consider the numerous restrictions that slow production. Members of a city council tell a mechanic he can't pull an engine on this street but can on that street, that a business can't post a sign whose dimensions are 10 x 11 but can if it is 9 x 12, a homeowner that he can't paint his house yellow but grey is just fine, a teenager that in order to get his friends to help wash cars after school and weekends he must get licenses, conform to zoning ordinance, fill out forms he doesn't understand for payroll taxes and workman's compensation for his friends.
Regulation means there aren't as many skating rinks or places that will rent horses or new medical procedures. Private activities are curtailed as government provides more services; services that demand more than your taxes—services that demand you give up your freedom. If ambulance service and health care are to be subsidized by taxpayers then potential beneficiaries must be made to wear seat belts and motorcycle helmets. It would probably be a good idea to ban sugar and fats and mandate exercise. Government is already looking closely at the environment a pregnant woman provides her fetus (or is it the government's fetus?). What happened to free choice?
I'll tell you what happened. Deaths occurred that could have been avoided by the use of seat belts. This exemplifies the problem. The government wants to protect people who make poor choices from themselves, and especially if it is the death of a child due to negligence of an adult. The public response may at first be motivated by altruistic feelings of compassion and genuine concern but it doesn't stop there. By picking up the tab for the results of irresponsibility society kills free choice. The outrage is not only about the preventable loss of life but subsidized health care makes it also about the tax dollars that must be collected to make society feel good about itself. In 2010 there was still another crusade to make people's choices for them and this time it was on the Internet. The federal government reasoned that average Internet users were not capable of getting several viewpoints when researching so the public workforce would create popups linking users to contrary opinions. A similar proposal was made to protect the public from all kinds of media by directing them from one station, or print vehicle to another thus controlling the manner in which people form their opinions.
Speaking of laws: In Brawley, California snow is forbidden within the city limits. I grew up in Berkeley where, like in most towns, there were some outdated laws on the books like prohibitions against whistling for a lost canary before 7 a.m. or smoking while fishing. Berkeley became the first town to ban smoking in public buildings and has since banded a myriad of items from Styrofoam to nuclear weapons. There are outdated and unenforceable laws throughout the nation. I would vote for anyone running for a Congressional office promising to work for legislation demanding that a hundred outdated laws be removed for each new law enacted and that no new law exceed the number of words in the original Constitution of the United States i.e. 4400 words which is less than 18 full pages.
America may not be perfect but is that necessarily the fault of our political structure? Could it be that the imperfections lie in the fact and the degree to which we have strayed from that structure?
Individual rights are a link between ethics and politics, moral codes and legal codes. As far as I know capitalism is the only form of government which can protect individual rights and thereby ensure that government adhere to moral law. Throughout most of history, society, (sometimes referred to as the common good or simply as government or the state) was put above the individual and was not bound by the same ethical codes that applied to individuals. The state had the power to use and dispose of individuals as it saw fit and any enjoyments accorded to individuals were considered favors bestowed by permission of the state which had the absolute right to withdraw such favors at any time. States , then, could be rightly said to have been amoral.
The United States of America, with it's recognition of individual rights as a limitation on the power of the state, was the first moral society in history. It held in its Declaration of Independence that as a moral principle an individual has absolute power over his own life by his very nature as a human. The United States Constitution made it perfectly clear that the only moral purpose of a government is the protection of individual rights and that any right of the collective should be severely limited. An individual's rights can be violated either by criminals or the government. Only in the United States a distinction was made between the two and the Constitution forbade the new government any legalized violation. In the Declaration of Independence it was stated that a primary reason for instituting governments in the first place was precisely to secure these rights. Thus the primary purpose of government was to protect the individual from criminals and the Constitution was written to protect the individual from the government; government was to act as a servant of men and not their ruler. The Bill of Rights expressly declared that the rights of individuals "supersede any public or social power."
Under capitalism all who participate in society benefit but those on the bottom rung benefit most from the creativity and hard work of those on the top. All other forms of government place society and society's rulers above moral law. Past governments derived power by appealing to the Divine Right of Kings, as did Pharaohs of Egypt; others, like the Greeks, succumbed to majority rule where the rights of the minority are trampled. Ancient forms of government regarded society as an end in itself and individual man as only a means to that end. Quite naturally it was accepted that therefore society could dispose of man, his talents, his labor, his property, the fruits of his labor and his very life. No one challenged the concept that what an individual man had was his only by the generosity of society as a whole.
America broke with this kind of thinking and experimented with a bold new idea. The idea that each man is in charge of his own human energy, his own destiny; that he is entitled and expected to assume responsibility and live with the consequences of his own actions. But the idea was only practiced briefly and imperfectly before it became diluted and sidetracked some eighty or ninety years ago. Today in the United States of America, we speak of what a man owes his country. "Ask not what your country can do for you, but what you can do for your country." However, when schools and knowledge are available to everyone in a society, one who has availed himself of the various opportunities to accumulate this knowledge does not automatically owe something back to society as most collectivists suppose. The equality of men with regard to knowledge is a right to the opportunity to master it, use it and take advantage of it. Society cannot have a moral responsibility to see that those who take advantage of their opportunities share the proceeds equally with those who, having their own opportunities, failed to use them. Who would not agree that those who make use of their opportunities are entitled to the benefits derived from their efforts? Yet many maintain that to reward people commensurate with their effort is to revert to the uncivilized concept of survival of the fittest.
Unrestrained majority rule always destroys freedom--it puts the minority at the disposal of the mob and easily leads to dictatorship. Leaders succumb to the temptation to buy votes with the promise of a free lunch which means increased government spending. This throws supply and demand out of whack; the overhead goes up and the effective use of human energy goes down and so does the nation's standard of living. Money cannot buy wealth that is not produced. People cannot be supported by the government; government must derive its support from the people. A majority eventually ends up voting itself goodies from the public trough. This means increased government spending which throws supply and demand out of gear, meaning the overhead goes up and the effective use of human energy goes down and so does the standard of living. Money cannot buy wealth that is not produced. Government cannot support people; people must support government. Whenever we give government responsibilities that properly belong to individuals we undermine personal freedom. Moral restraints are more efficient than outside legal restraints.
Capitalism is the most efficient way of increasing wealth because it offers powerful rewards and punishments and because it builds on experience. To the doer, not the certified expert or bureaucratic planner, goes the spoils. It grants riches to those very individuals who have proven their ability to forgo immediate gratifications in pursuit of long range goals, who refuse to waste or foolishly spend their wealth. Capitalism rewards commitment. The true frontiersmen of the twentieth century have been the often ascetic and almost always eccentric men who combine daring ideas with tenacious and fearless action.
Europeans in general scoffed at the new government on the other side of the Atlantic as too anarchistic. But the Founding Fathers never intended for the United States of America to be an anarchy; they realized no government could exist without the power to tax. The new Constitution attempted to resolve the inadequate taxing power in the ill-fated Articles of Confederation, while at the same time seeing that the individual was not sacrificed to the state by severely and specifically limiting the State's taxing power. Article I Section 9 Clause 4 specifically states that no direct tax shall be laid unless in proportion to the census. A direct tax is a tax attaching directly to the individual or his private property as opposed to a tariff or excise tax on goods as purchased or services as hired. "In proportion to the census" means the levy of a million dollar tax would be divided equally among the population without regards to the relative wealth of individuals-each would be expected to carry his share. Share did not mean according to the individual's ability to pay or percentage of wealth acquired; it meant share as a citizen counted in the census and accountable for a portion of the State's need. That safeguard to the rights of individuals went by the wayside in 1913 when, after taking three and a half years to ratify, the 16th Amendment allowing for an income tax based on a percentage of wealth, was passed. Is there anyone anywhere that does not believe that "the power to tax is the power to destroy"?
But an even larger drain for the flow of individual liberties was the wording of Article I Section 8 Clause 1, known as the general welfare clause. It is largely responsible for the present sacrifice of the individual to the state. Taxes are levied for innumerable purposes all in the name of the general welfare. The United States is the highest achievement of civilization's struggle toward individualism. Capitalism alone stands between civilization and the warfare of collectivized tribes. Throughout the ages there have been preachers advocating self-sacrifice. (1) "The primordial weapon used to penalize man's success on earth, to undercut his self-confidence, to cripple his independence, to poison his enjoyment of life, to emasculate his pride, to stunt his self-esteem and paralyze his mind." (2) "[It's] evil to live for yourself, but moral to live for your children; selfish to live for your children, but moral to live for your community; selfish to live for your community but moral to live for your country. Now you are letting this greatest of countries be devoured by any scum from any corner of the earth, while you concede that it is selfish to live for your country and that your moral duty is to live for the globe." (3) "Man's soul or spirit is his consciousness; the motor of his consciousness is reason; deprive him of freedom, i.e. that right to use his mind--and what is left of him is only a physical body, ready to be manipulated by the strings of any tribe." The preceding are quotations from various writings of Ayn Rand, perhaps best known for her stand against those who advocate altruism and self-sacrifice. In contrast I only oppose state enforced self-sacrifice which is what we have in a progressive tax system. There are many reasons people voluntarily choose to be altruistic and there is no such thing as self-sacrifice if it is an act chosen as an exercise of one's free will.
Property rights underlie all other rights and are rights, not to an object, but to action capable of producing that object. Property rights have been defined as a guarantee to an individual that if he is successful at earning property he will own that property and be free to keep it, use it or give it away if he so desires. A political system affects a society's economics, by protecting or impeding men's productive activities. An individual has the freedom to act according to his own judgment and in furtherance of his own goals; the only restriction being the obligation to abstain from violating the rights of his neighbors. These rights are not gifts but are part and parcel of the nature of mankind.
The political philosophy on which the United States was founded intended to restrict government force to retaliating against the initiators of force and to make that retaliation a moral imperative. Government rightly holds a monopoly on the legal use of physical force. But whereas a private citizen may do anything except that which is legally forbidden, a government official must be bound to do only those things that are legally enumerated. The government is to have only those rights delegated to it by its citizens for a specific purpose. Besides apprehending and punishing criminals the government has a duty to protect and enforce voluntary agreements between men. Courts of law are necessary to the peaceful workings of a free society. One man's decision to change his mind after a contract is made may cause harm to another who needs protection of the law. A society cannot function if one man receives a benefit and then refuses to pay for it. He would end up keeping the benefit by force, not by the voluntary consent of the second man and to allow this would be a violation of the second man's rights. But like so many philosophies that make sense on paper when it comes to implementation, it has never been fully accepted nor consistently practiced.
Property rights and the right of free trade are moral principles which define and protect an individual's freedom of action. They are political rights. Under Franklin Roosevelt the concept of economic rights was substituted for political rights. All kinds of things were promised but at the expense of one individual over another. An economic right became the right to enslave. To take the product of one man's work and redistribute it to another man who is said to be entitled to it, makes a slave of the producer. Rights to fair wages, fair prices, rights to jobs, shelter, food and so forth are bogus as there must be someone to pay the wages, to sell the goods, to hire the workers, to build the houses, to produce the food and these people have rights too. There are no rights of special groups like, consumers' rights, farmers rights, children's rights, rights of the unborn, workers, employees and employers. If more than one person is involved voluntary consent must be obtained from all parties. No man may obtain any benefits from others without their consent. Everyone is entitled to make his own choices but no one is entitled to force his choice on another. Government is force. In a truly civilized society mean deal with one another by reasoned discussion, persuasion and voluntary agreement. It is the proper role of government to allow people to live and work together peacefully to their mutual advantage by protecting benefits and combating the detriments which men bring upon one another.
I agree with those who recognize only three proper functions of government all of them involved with protecting the rights of individuals. (1) the law courts to objectively settle disputes (2) the police to protect citizens from criminals and (3) the military to defend citizens from foreign invasions. Today the government, instead of protecting individual rights is the worst violator of those rights. The following quotation comes from Ayn Rand's Capitalism page 336:
Instead of guarding freedom, the government is establishing slavery; instead of protecting men from the initiators of physical force, the government is initiating physical force and coercion in any manner and issue it pleases; instead of serving as the instrument of objectivity in human relationships, the government is creating a deadly, subterranean reign of uncertainty and fear, by means of non-objective laws whose interpretation is left to the arbitrary decisions of random bureaucrats; instead of protecting men from injury by whim, the government is arrogating to itself the power of unlimited whim--so that we are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history; the stage of rule by brute force.
I believe Supreme Court interpretations of our Constitution have derailed us from the pursuit of the political ideal envisioned by our founding fathers; particularly recent interpretations referring to our "right to life, liberty and the pursuit of happiness." It was once argued that because man must sustain life through his own effort, if he is denied the right to the product of his own initiative he is denied the right to life. Today the clause is often interpreted to mean a man has the right to the fruits of somebody else's effort. If he fails to earn the necessities to sustain his life, then, according to recent interpretations, the state has an obligation to provide those necessities. Those who disagree with the newer interpretation suggest that right refers to opportunity; an opportunity to obtain an object and not delivery of the object itself. They believe government's only legitimate role in a capitalist society is to protect what citizens have earned and their right to attempt to earn it. This is man's unalienable right. This philosophy works in a nation of optimists who believe in the basic goodness of mankind. I am an optimist and have witnessed over and over that goodness in action whenever neighbors, or strangers half way around the world experience a tragedy. It is an undeniable fact that Americans are among the first to offer a helping hand. Offer, means voluntarily without being forced to do so. Whenever our government sends aid it is sending the dollars of individual taxpayers --a collective--without the individual's permission it is theft. The story of Davey Crockett comes to my mind in these situations. When he was a member of Congress a group of his colleagues agreed that a war widow needed financial help and wanted to pass legislation to help her and other war widows financially. Congressman Crockett, reaching into his own pocket, suggested that everyone at the table do the same stressing that Congress had no authority to disperse the taxpayers money for charity. I have provided a link to the entire story excerpted from the 1884 biography The Life of Colonel David Crockett written by his friend by Edward S. Ellis.
In 1815, the Swiss economist, Simonde de Sismondi, wondered what we could do with any more production since the essential needs of man had already been adequately met. You and I know that as the population increased so did human needs. Science and technology continually came up with surprising breakthroughs to change the human condition. Because capital is so diversely controlled and can therefore be quickly and freely risked in new enterprises and flexibly applied to new ideas, a capitalist nation can grow and adapt to change with a swiftness and sureness that, by comparison, makes other nations look like they are languishing at the gate. There is no such thing as a stationary state. The essence of time is change; if you don't move forward, as an individual or a nation, you move backwards. [Update follows] Centralized regulation denies diverse reactions and sacrifices speed. The Financial Regulations, as first proposed in the spring of 2010, were such a backward step--a reaction to the earlier knee-jerk action known as the bailouts of 2008-2009. The free market would have required sacrifices and resulted in bankruptcies and mergers but it would have tackled and cleared up the root problem. Think of the free market as a surgeon that cuts out the tumor as opposed to the less skilled politicians that can only put a bandage on it while it festers for a better qualified physician to appear down the road.
So what is the definition of forward? Although no one would deny that freedom is better than slavery, critics fail to applaud the inevitable fact that the former produces wealth by unfettering the boundless creativity of entrepreneurs, whereas the later produces poverty. Such critics worship equality and place it far above freedom and wealth. They denounce capitalism as unjust and at best amoral; they would make it responsible for a variety of social ills including racism, sexism, ageism, environmental abuse, homelessness and even inflation and unemployment. They yearn for large-scale central planning which they claim is necessary to protect the planet and preserve and redistribute scarce resources. They view capitalism as a step backward in the evolution of mankind. They blame capitalism, that great perpetuator of inequality and greed, for the destruction of balance in the world between men and their environment, between the need to conserve and the need to consume, between social spending and private spending, between men and women, between young and old, between all races, and always, always they maintain, capitalism magnifies the gap between rich and poor- both nations and individuals.
A Letter to the Editor of the San Francisco Chronicle admonished readers "...let's pay our fair share to manage society. I don't believe it is a God-given right to have huge homes, fancy cars and an overall high life style when the country is in such poor shape."
In the 1930s, hardly a triumphant time for capitalism, Walter Lippman declared that for the first time in history, the capitalistic system gave mankind a way of producing wealth in which "the good fortune of others multiplied their own, in which at long last, the golden rule was economically sound and in which for the first time men could conceive a social order in which the ancient moral aspiration of liberty, fraternity and equality was consistent with the abolition of poverty and the increase of wealth."
Of course this "ancient moral aspiration" was not part of man's earliest history when he was still and only a predator. The claims of the spirit had to wait until the division of labor had begun and men became voluntarily dependent upon one another. Instead of heralding the end of man's primeval innocence and disrupting his illusory harmony with nature, the industrial revolution was the opportunity for man to indulge his spiritual yearnings in a practical manner; it was an opportunity to span the chasm between world and spirit. America's triumphs spring from moral codes and disciplines, religious commitments and faith.
Innovation, flexibility and creativity were the work horses providing the wealth that kept America classless and mobile. America's affluence has always been a by-product of the genius of free men, who while pursuing their own private interests, provided others with higher standards of living in the form of more and better jobs, higher wages and cheaper more abundant goods and services. There are those, however, who for their own reasons refuse to attribute these virtues to capitalism and claim instead these benefits were achieved by the intervention of government and unions. But somehow they are unable to account for the new machines and other innovations which made it all possible. In the 21st century they blame new machines and all technological advancements for stealing their jobs but also acknowledge the role of lawmakers enabling corporations to send their jobs overseas.
The voluntary cooperation of free individuals is a part of our American heritage. The progress in industry and manufacturing would not have been possible without it. And now we have politicians and others telling us that the United States of America is no longer populated by men and women of goodwill but that force is needed to make our business persons and industrialists accountable. The voluntary co-operation of the past was based on the recognition of human rights, human obligations and individual responsibility. The brotherhood of man is good business! Force, in the form of inspectors, lawyers, police and the myriad of forms which must be filled out when regulations are imposed on an industry from outside were earlier recognized as being too expensive. We have been experiencing the inevitable slow down as too much overhead saps energy that might otherwise be directed to greater production and creativity. Evidence that fifty years ago Pogo was a genius when he declared: "We see the enemy and it us".
By judicious use of the golden rule (do unto others as you would have others do unto you) America became the envy of the world. Sure, America had its share of crooks and con-men but, as in so many other areas, our leaders overreacted. Instead of focusing on the few bad apples, indiscriminate regulations were imposed on entire industries and professions
Capitalism is fueled by givers not takers. A capitalist succeeds by risking and creating, by cultivating what could be called an altruistic mindset, incorporating a keen regard for the needs of his fellow men. Giving is the essence of capitalism. Those who win by its precepts do so because they have learned to conserve, not consume wealth. Instead of indulging their appetites they are gluttonous in their desire to understand, to solve problems, to master and transform a small part of their environment and add to the common good, to build, to act, to do. We are talking about the constructive urge in men and women of all races and throughout history; the explorers, inventors, scientists, engineers, architects, men of medicine who find themselves obsessed with ideas and are extravagantly generous with their time, energy and wealth-often risking all to bring their ideas to fruition.
Central planning, with commissions or board members of one sort or another always work at cross purposes to the development of independent thinking. No board is capable of picking the right people or the right project to work on. Personal freedom in this country allowed natural selection to work and we had Eli Whitney, Thomas Edison, Goodyear, Burbank etc. They were all self-selected. Who would have picked Henry Ford or John Deere as promising inventors and probable manufacturers? Genius is an unpredictable quality; it doesn't work according to fixed rules or patterns but turns up in the most unexpected quarters. Inventive or scientific talent of a high degree can't be produced by bureaucratic edict nor discovered by formalized procedure. You can't tell a researcher what to find out-the biggest part of his job is to find out what there is to be found out. You can't order a person to have an inspiration. Creative ideas spring from within; they can't be forced from without.
It's almost impossible to measure the value of any useful invention. Increased industrial production is only part of the story; increased human efficiency may be the larger part. Consider the time wasted by people in daily living just 200 years ago. Just think how much energy was released throughout society with the wide spread use of electricity, telephones, engines, machinery, automobiles, airplanes and on and on. Henry Weaver wrote about John Deere and the innovations that took place during WW II in his highly recommended and wonderful book, The Mainspring of Human Progress. Many of the ideas expressed here were taken from his work and may be his own words which I inhaled almost fifty years ago.
The story of John Deere is illustrative because it clearly shows how American ingenuity applied to the simple plow changed the nation. For centuries ploughs had been made out of wood. Land in the Mississippi valley was considered worthless because the soil was either too hard for a wooden plough to cut through or so soft the muck stuck to the plough and immobilized it. John Deere was the first to make a metal plow from an old buzz saw disc. It cut through the prairie soil "like a hot knife through butter." Deere's invention made worthless land valuable and opened up a vast area of virgin country. But credit must be given to those who put up the money to make the ploughs and those who invented the reapers and other farm tools and the hard-working, risk-taking farmers who hastened to use them.
Deere's story showed the wealth producing possibilities of new ideas. But if John Deere hadn't been living in a free country where a blacksmith could aspire to own a factory, where mobility and dreams were possible, perhaps he never would have applied himself to solving the Midwestern soil problem. There have been many wonderful and far reaching inventions in the United States of America, but none as important or far reaching as the political structure with its principles of individual liberty and freedom; the principle that each person controls his own life energy and is responsible for his own acts and his relationships with others. This is the foundation and provides the opportunity for all other inventions.
Just before WW II an article was written about inventors and how so many inventions came about accidently and spontaneously. But the author ended by categorizing inventions into useful and non-essential gadgets. He put automatic transmissions, which were seen as a novelty with little purpose, into the later category and chastised the automobile industry for wasting time and energy on foolishness when there were serious things to be done. About a year later, when the U.S. was in the war we were taking a beating in the air and the experts agreed that what was needed was a hydraulic clutch in order to beat our enemies in altitude flying. The Germans had tried to use a hydraulic clutch in their altitude engine but gave up the idea, never being able to get them to work properly. Hydraulic clutches, frivolously perfected in American automobile factories made it possible for our pilots to out fly our enemies. The clutches were also installed in tanks, making it possible to train the operator in hours instead of weeks. The job no longer called for a muscular giant and it even became possible for the driver to help with the fighting in an emergency situation. More importantly the new tanks didn't have to stop when gears were shifted so were less of a target. The story illustrates how hopeless it is to choose what invention is essential and what non-essential.
The responsiveness of two hundred forty six million free people provided America with a better proving ground than could ever be set up by blue ribbon panels. In the automatic transmission story, mass production of hydraulic clutches could never have gotten beyond the experimental stage or even gotten started except for an open-minded dreamer-type American consumer always on the look out for progress, new products-a consumer that fails to draw lines between necessities and luxuries. About a half a million of these hydraulic clutches had been built before we even entered the war. The difference between here and Germany was the Americans did not have to invent on demand. Americans built those clutches for peacetime use. In America the experimenters and innovators were not confined to the research labs, the proving grounds and the factories. It was impossible to draw hard and fast boundaries between the best inventors, the runners up the amateurs and the everyday users. Boundary lines of all kinds are always fluctuating in America; continuously shifting back and forth.
Then, as now, those who provide the venture capital, invent new products, build businesses, accumulate inventory, create jobs-have no insurance against the failure. Weaver referred to them as followers of Say's Law, a principle of classical economics that says supply creates its own demand. Producers, collectively, in the course of production, create demand for their goods. This idea may be overly simplistic, but it contains economic truths and implications never refuted by Keynes or anyone else.
Early in the twentieth century, John Maynard Keynes reversed Say's Law and postulated that demand creates its own supply; in other words, "take and you will receive". It was no longer necessary, according to Keynes' theory, to have savings backing investment because with enough investments, savings would take care of themselves. He coined the phrases "effective demand" and "marginal efficiency of capital" and maintained that they both depend on anticipated profits.
Unfortunately demand-oriented politics are elitist, because of their tendency to create a more closed inaccessible and stratified social order which encourages unemployment and dependency. Because overtaxed businesses no longer can provide all the services desired in the marketplace, government bureaucracies proliferate, adding taxpayer subsidized competition which only hastens the decline of the private sector. Nonproductive government spending is supposed to increase the purchasing power of citizens and thereby stimulate demand. But, if it works at all, the effect is temporary and like an addiction the amount of subsidy needed to create the illusion of progress constantly increases.
It is a verifiable fact that welfare, unemployment payments and public-service jobs provided by government, act to deter productive activity and instead promote inequality and poverty. Profitable enterprises end up paying higher taxes, ostensibly to stimulate demand and consumption, but actually they undermine production which is the source of real demand. Critics of Reaganomics use these facts to discredit the so-called trickle-down theory. But this is a bastardized simulation of Reaganomics; the true Reaganomics calls for less government and more private sector involvement. Buying power originates with productive work at any level. 'Give and you will be given unto' is the formula for wealth and productive growth. Real aggregate demand is always an effect of production, not of government policy. However, a nation's wealth is more than the sum of its resources and the ability of its citizens to consume. Conspicuous consumption may sometimes signify surplus liquidity and lack of more solid wealth. George Gilder, in his book Wealth & Poverty pointed out countries such as Great Britain and Saudi Arabia, whose rich squander their money in conspicuous displays, may be countries with solid wealth problems; not favorable climates for investment. He reminded us that political stability and long term commitments and loyalties are necessary for long-term yields. Old maxims confirm the importance of thrift and remind us it is possible for even well paid workers to consume or waste all their earnings in a society where thrift is neither stressed nor valued. On the other hand, citizens with goals, values and imagination are likely to produce, save and invest; all necessary ingredients for the production of wealth.