When trade is truly free, peace is present.

For thousands of years, nations have fought each other to get “raw materials,” which they then usually refused to share with other nations. Thus the wars go on, from one generation to the next—almost always to get goods and services that would have been readily available at lower prices (in blood, as well as money) if markets were free.

More than anything else, that’s what free trade is all about—peace. For when trade is free (truly free, in all nations, among all people), peace is necessarily present. It is the only possible arrangement to accommodate that peaceful activity. But when trade is forbidden, a form of war automatically exists to some degree—both within nations and among nations.

Some unknown writer a hundred years or so ago expressed that sentiment on free trade and peace in dramatic terminology: If goods don’t cross borders, armies will. He was right.

If I could travel freely in Russia, and trade my goods and services with like-minded Russians on terms negotiated by us as traders, it would be impossible to induce me to spoil that desirable arrangement by fighting them. It works both ways. What in the world would we fight about if we could peacefully visit and trade with each other; baseball versus ballet?

But as it is, I am literally scared of the Russians. I just don’t know what they’re doing behind those walls that are designed to keep their own people in and me out. Perhaps they’re plotting against me. Maybe they even want to kill me. Since I don’t know for sure, perhaps we’d better send more missiles to Europe. Be prepared, whatever the cost. I just don’t trust people I can’t visit and trade with.

When you get right down to it, that’s the basis of fear, as well as wars that grow out of fear, i.e., it’s mostly lack of information. And I’m quite sure it works both ways. The Russians are doubtless as scared of me as I am of them. That “fear of the unknown” will begin to evaporate when individuals and groups from one country have full opportunity to travel and trade freely in other countries. That’s the secret of peace; and in its absence, the best we can hope for is an armed-to-the-teeth standoff.

While I’m quite certain that the path to peace is the abolition of all restrictions on trade and travel for peaceful persons in any nation, i don’t know how to persuade the Russians to agree. Their system of common ownership of all means of production and distribution seems to forbid much (if any) trade between individual Russians and individuals from other countries. For how can you trade with a person who can’t own resources of any kind?

Consumers are harmed by all forms of special interest legislation. Three are examined here.

We human beings have always organized ourselves into groups to increase our ability to get the goods and ser vices necessary for survival. Even our most primitive ancestors eventually learned that production (and thus survival) could be increased by organizing and specializing.

When we use this organization for peaceful production, it usually proves successful. But when we organize to increase our possession of products by plundering our neighbors, the ultimate consequences are usually more costly than profitable.

Both of these methods for increasing our supply of products and services are still used in the United States today. When the method of voluntary exchange of goods and services is used, the results are successful indeed; production skyrockets and prosperity is widespread. But special interest groups inevitably organize to increase their share by voting for laws that compel us to pay for products and services we don’t want at their “special privilege” prices.

When special interest legislation is used, when voluntary exchange is interfered with, all of us consumers are directly and indirectly harmed. Ultimately, even the special interest groups find the consequences of this approach to be more costly than profitable.

I’m here selecting three of the most familiar and harmful of these special interest laws for brief examination. They are price supports for farmers, legally imposed wage increases for employees, and rent controls for tenants.

Price Supports injure us consumers by keeping inefficient producers in business, or they encourage producers to take uneconomic actions that eventually increase costs, or they directly and immediately increase the price of the supported product, or (most likely) they increase the cost to us consumers by a combination of all three categories.

Further, as is now becoming increasingly obvious, even the recipients of the price supports (the producers) are also injured—frequently to a much greater degree than are we general consumers of their products. For example, so many farmers have been literally forced into bankruptcy by the government’s “support programs” that were supposed to help them by keeping prices higher than they would be in a market economy.

Beguiled by our government’s promise to pay for unwanted production, farmers bought (or held on to) land at double and treble the price it would be in a free market; and they increased production accordingly. That, of course, only worsened a situation that had been caused in the first place by more production than we consumers would buy at prices needed to keep all those farmers in business.

In an effort to decrease the unwanted production, our government began paying farmers to keep a part of their land idle. Our government then began buying and storing vast quantities of the excess production at a cost of billions of dollars to us consumers (taxpayers). But “political considerations” forced the officials to dispose of the surplus products by giving them away to low-income groups and by selling them below cost in the world agricultural market. Both of those giveaway programs reduced the number of paying customers. That, in turn, put further pressure on the farmers to reduce prices in order to sell the products that were not bought by government but had to be sold to us consumers directly.

Eventually, of course, the economic reality of consumer demand and producer supply re-established itself in our still reasonably free economy. And the recipients of the price supports (the farmers) ended up the most injured of all. Their liabilities in debts were soon much higher than their assets in overpriced land and unreliable political promises for special treatment. They were bankrupt.

Farmers seem strangely unaware that they, too, are consumers. And as consumers, they just can’t pay the artificially inflated prices for products they themselves have to buy to stay in business. When they voted for “special privilege laws for farmers,” they simply ignored the connection between their price supports and the rising prices for all products and services. The consequences of governmental interventions in the market place can’t be restricted to just one item or category; there’s a “neighborhood effect” that inevitably affects all prices to the detriment of all consumers.

Labor Laws Decrease Productivity

Similar economic consequences also come from labor laws that interfere with the market allocation and price of that particular factor of production. Those laws usually increase the cost of labor above the market price, or decrease the productivity of labor, or both. In turn, those uneconomic political decisions cause an increase in prices to all consumers of the products and services.

Once again, the recipients of those “special interest” labor laws frequently end up as the most injured of all. They price themselves out of the market, especially the world market. Their employers move or go bankrupt. The employees then turn to their government for welfare support. And thus their economic misfortunes are compounded by loss of personal pride that usually comes from lengthy unemployment, plus the inevitable decrease in respect by many of their neighbors. That, of course, is the most destructive consequence of all.

When I buy a product, my invariable policy is to look behind the label, and to search for the best quality and lowest price. I’m not unduly interested in who produces it, or where. In fact, if it comes from abroad at a lower price, I know that products in general are thereby increased for us consumers; we get the wanted product, plus the additional products we buy with the “leftover” money.

As a third example of the harm done by these governmental interferences in a market economy, consider housing, Rent controls do great injury to us consumers in general but, more likely than not, they are especially damaging to persons who live in the price-controlled apartments.

The first and immediate effect of rent controls on housing is to stop the building of new houses and apartments for rent. That’s why there hasn’t been a single house or apartment building constructed by private investors at rent-controlled prices in New York City since those laws were imposed “temporarily” in 1942. The reason is simple: You and I, as reasonably prudent investors, will not voluntarily agree to build products that are obviously price-limited below the market in a situation that’s controlled by politicians. Those elected officials are well aware that “more tenants vote than landlords.” That fact also explains why those “temporary laws” are likely to remain with us until all the buildings controlled by them finally disappear—either literally or by conversion to more profitable categories.

In an attempt to increase housing in New York, Governor Thomas Dewey sponsored a law in 1954 to permit the owners of new apartments to charge market prices. While that did induce new construction of apartments for rent, the continuing rent controls on all pre-war apartments contributed greatly to the near-destruction of a once- great city. Here’s a personal story to show how it works.

When I first visited New York in 1937, the first bed I slept in was a sofa in the apartment of a friend living in the South Bronx. That area was a friendly and well-tended neighborhood with thousands of apartments, rented mostly to families with moderate incomes. I visited there again in 1948, after six years of rent controls. It was still a desirable neighborhood, but the deteriorating process had begun.

An inevitable companion of rent control is the decay of the buildings. The owners of those buildings act precisely as you and I always act with our own investments. We look for safety and a good return. And just as you and I would have done, the owners of those rent-controlled properties began to skimp on upkeep and to transfer back into a market economy whatever capital they could recover from gross income.

When that process became obvious, the tenants organized to keep the rents low and legally to compel the owners to paint and repair the buildings and to provide adequate heat during the winter. But turning to the law to force investors to spend their money uneconomically never works. Since you and I don’t act that way, why do we expect the owners of rental buildings to act against their own self-interests?

In due course, the more desirable tenants began to move out of those deteriorating rent-controlled buildings in the South Bronx. Their places were increasingly taken by unemployed people existing on government welfare. That development soon induced almost all of the original tenants to move out.

Rent control laws help nobody, perhaps least of all the tenants trapped by them. Even high-income tenants frequently remain in their present locations and thus forgo more desirable jobs because of the higher rents they would have to pay if they accepted the offer of a better job and moved to another city. Anyway, rent-controlled tenants in general are increasingly being dispossessed by the owners who convert their uneconomic rental buildings into cooperatives and condominiums in an effort to get a market return on their investments.

The economy of the Republic of China on Taiwan is largely based on private ownership and production-for-profit. The officials are elected and are responsible to the wishes of the people in general.

The economy of the communist government on the mainland, the People’s Republic of China, is based on total government ownership of all resources and all means of production. That system of social ownership, i.e., planned production by everyone for the benefit of all, necessarily requires a dictatorship to run it.

While the communist armies clearly won the long war in China between the two sides in the 1940s, their current leaders are now beginning to abandon the economic system they fought for and have followed since 1949.

The communist leaders on the mainland are now increasingly endorsing the basic economic idea that free-market production guided by the desire for profit is (in most areas of daily living) superior to government-directed production for the general welfare. That development deserves the serious attention of all of us who value human freedom. Here’s why:

Along with a trend toward the market economy, a different form of government necessarily begins to emerge in practice. For when a people are free to choose as consumers, a large shift in authority must necessarily begin to flow from the central government to local groups and individuals who determine what to produce ‘and how best to do it in order to meet consumer demand. The checks and balances of market-directed production and of voluntary selling and buying begin to displace the arbitrary decrees of government officials. That’s a first necessary step toward some form of democratic government.

I first became personally involved in studying and comparing the two Chinas when I entered communist China as a tourist a few years ago. It was a short visit, totally under the supervision of government guides during the entire trip. While I enjoyed it (first-class hotels, excellent food, fascinating archeological sites, and such), I had almost no direct contact with the Chinese people. Even so, I saw enough drabness, regimentation, and sullenness to convince me I wouldn’t want to live and work there. I am, however, now living and working in the Republic of China on Taiwan as a Visiting Professor at the National University. My observations and experiences here have been markedly different from those on the mainland. And I’m convinced that the difference stems basically from the economic systems of the two countries.

I’ve never seen nor heard of more individual economic activity than I’ve encountered here on Taiwan. It seems at least as frantic as that generated by their Chinese cousins in Hong Kong. Across the street from the faculty housing compound where I live, new businesses are suddenly born every day when entrepreneurs drive up (truck or bicycle-cart), roll out a tarpaulin on the sidewalk, and begin selling any number of items. I’ve bought “designer jeans” there for $9, and “brand name” $16 sweat-suits for $4. I can get leather jackets at perhaps 20 per cent of the price I’d pay at home. Caps, bananas, gloves, oranges, cigarettes, face powder, books, watermelons—you name it and it’ll eventually show up on a street corner in my neighborhood. And that’s only a hint of what goes on all over this city (Taipei) of some two-and-one-half million people.

The Two Chinas Compared

That’s what free enterprise and the profit motive do. It works every time it’s tried. Given half a chance, it’ll work in communist China as well as here. In fact, it is working .there. Under even a rudimentary sort of free market in food production, apparently the communist Chinese are now finally getting enough to eat. And many are now earning enough money as private business people to buy TV sets, an occasional motorcycle (no cars yet, however), and building materials to repair their government-owned and government-assigned housing units.

When I compare what’s available in the Republic of China (most especially housing) with the pathetic situation in the People’s Republic on the mainland (or in Russia or Cuba), I wonder how any person can defend communism as the friend of the workers.

In 1984, the Republic of China enjoyed a high 10.92 per cent economic growth. And the per capita income exceeded $3,000. Meanwhile in communist China, per capita income is somewhere between $300 and $500. Communist officials are reluctant to supply this type of information, and the few statistics they make available are often contradictory. In any case—with their great economic leaps forward, their cultural revolutions to purify the spirit of the people, and the inevitable communist leadership intrigues—the per capita income in mainland China doesn’t seem to have improved much over the past 30 years.

The Miracle on Taiwan

The Republic of China is rapidly turning from an underdeveloped country into a highly industrialized nation with a large surplus in its balance of payments account. Private enterprise and the market economy have worked their magic again on Taiwan—as they always do every where when permitted to operate. And while the United States rendered valuable assistance in supplying both armaments and economic aid, the “miracle” of Taiwan was mostly accomplished by the people of Taiwan and their government. Here’s an absurdly brief summary of how they went about it.

In harmony with the “Principles of the People” advocated by Dr. Sun Yat-sen (the first president of China in 1912 and the leader of the revolution against the imperial Ching or Manchu dynasty), the government started with food production. To increase it, they instituted a “land to the tillers” program to encourage peasant ownership on easy terms. The government compensated the former landowners by giving them equity-shares in the new industries that immediately began to appear on Taiwan. And as had been promised, the United States government “matched” every dollar of this new capital that had been invested in industrial development of all categories, both public and private. The Taiwanese people themselves were encouraged to invest their earnings in the new companies that were springing up all over the island. Foreign investors were also invited in to “take advantage of the cheap and hard-working labor to be found there.”

Again in harmony with the teachings of Dr. Sun Yat-sen, the government itself maintained complete ownership of twelve key industries—steel, railroads, utilities, and such. But light industry and agriculture were left to private ownership and the dictates of the customers in a market economy. The “market test” of the value of products and services was also supposed to apply to the government-owned industries—a theoretical idea that’s difficult to apply in practice. But for the most part, anyone could start his own company and make whatever he thought he could sell for a profit. (In communist China under total government ownership, there was strict rationing of almost everything; and it still exists there today for the items most wanted by the consumers.)

Economic and Political Liberty

True, the economy of Taiwan is not a free market economy as we know it in the United States; it’s more like that of Great Britain, with government ownership of major industries. (In fact, Dr. Sun most likely got his economic ideas from the Fabian socialists in England where he lived and studied for several years.) But when the Taiwanese economy is compared with the communist economic system on the mainland, it is free indeed. And while the dominant political party on Taiwan (the Kuomintang) doesn’t exactly encourage competing political parties (there are two more), the people generally have a choice among candidates when they vote for their rep resentatives to the National Assembly and to the other national and local offices. The economy and government of the Republic of China on Taiwan today are unquestionably the freest and most democratic the Chinese people have ever known in their long history.

The results of this Taiwan-style market economy and representative government have generally been a distinct improvement. Education: attendance is required through ninth grade, and it is thereafter available (and essentially tuition-free through the university level) for all those showing sufficient aptitude according to competitive examinations open to everyone. Religion: choose your own, or even start a new one. Travel: live where you please, and travel anywhere except to communist China. Jobs and material possessions: in essence, there is full employment, and as I view the constant traffic jams, it seems to me that “everybody” owns a car or motor- cycle—and also a color TV set, considerable electrical equipment in homes that are mostly owned by the people who live in them, and well-styled clothing for every season. Medical: I have found the hospitals and doctors here to be reasonably close to the standards I’ve been accustomed to in New York—and medical care is generally available to everyone in one form or another.

This “living example” of the results of freedom for almost 20 million nationalist Chinese on Taiwan has faced the communist Chinese on the mainland for the past 35 years. As the standard of living here has constantly gone up, it has remained essentially stationary there. And that fact is known to millions of the mainland Chinese, and most especially to the communist leaders. Perhaps that explains why those leaders have announced that they intend to apply market-oriented principles to their own economy in an effort to satisfy the pressing material needs of the one billion Chinese under their authority.

A Step Toward Freedom

But can they go from total control of all resources and all production to a considerable degree of freedom of choice? Might this “new economic policy” get out of control and result in a demand by the Chinese people for political freedom? After all, that result happened several times in Eastern Europe, and at least once in Russia itself. We can’t know, of course, if it will happen in communist China. But the leaders of the Republic of China on Taiwan would be short-sighted indeed to take any action to impede this trend toward economic freedom for the mainland Chinese. They might even support it by taking no action to discourage the “illegal” trade now rapidly developing between the two Chinas.

For example, during the past 12 months, there has been as much as one billion dollars in trade from Taiwan with mainland China—all technically illegal. Most of it has been indirect via Hong Kong and other countries along the Chinese border, but some of it has been direct by privately owned “fishing boats” from Taiwan to various Chinese ports. And this trade is growing steadily. It could soon be two billion, then three, and so on. This practical “assistance to the development of a free market on mainland China” needs no encouragement but merely the absence of official discouragement. And the same policy might also be applied to the “illegal” visits by Taiwanese Chinese to see relatives on the mainland.

No one on Taiwan really knows how many Chinese from here have “vacationed in Hong Kong” and then gone on into mainland China, where they are most welcome. The communist border officials don’t even record their entry in the passports issued by the Republic of China, since the visits are “illegal.” Instead they merely give them a slip of paper that can be discarded before they return to Taiwan! The number of these visits is substantial, and is growing.

As a result of these visits and trade, the Chinese on the mainland hear firsthand about the freedom and prosperity of their relatives on Taiwan. And, no doubt, these visits also remind them that the only way they can get out of China is to slip past guards, dogs, and barbed wire and then perhaps swim for three hours through shark-infested waters to Hong Kong. These comparisons can only encourage the ever-present desire for similar freedom to trade and travel in the People’s Republic of China.

Exchange Is the Key

It is clear to me that the Republic of China on Taiwan has nothing to fear when its system is compared with that of the People’s Republic of China on the mainland. Further, the material level of living in both Chinas is automatically raised by this exchange of products. Obviously, each party to the trade gains something he would rather have than what he gives up in exchange. That’s the purpose of all trade, both domestic and foreign.

Unfortunately, many government leaders on Taiwan seem unaware of the power of ideas, and some of them are now campaigning for strict enforcement of the long-existing laws against travel and trade with red China. I’m convinced, however, that if the Legislative Assembly decides to enforce those laws, they will thereby destroy the only possible development that could permit some sort of mutually acceptable contact (not necessarily formal reunification) between the two Chinas.

Human freedom starts with the free market and stops with the controlled market. That’s necessarily the case since it is people who are controlled, not markets. That’s all that any government is ever designed to do, i.e., to control people. And that’s the purpose of all laws. (Can you name a law that isn’t designed to compel or prevent someone from doing something?) And the law itself eventually follows the market. If people are free to voluntarily exchange their goods and services, the law is (or soon will be) in harmony with that economic situation.

And it is well to remember that freedom feeds on itself. People with a little economic freedom want more freedom, and they will automatically move in that direction until stopped by the police powers of government. A powerful example of this tendency is evident in communist China today. The communists there have always posted guards along the Hong Kong border in an effort to prevent their people from escaping into a free market economy. And now that the government has created an experimental “free zone” within China along the same border with Hong Kong, additional guards are now posted between the communist China “free zone” border and the rest of China. The purpose, of course, is to prevent the Chinese people from escaping from the more-controlled areas of China into the less-controlled areas of China.

When the communist leaders finally and fully understand that economic freedom brings a corresponding degree of political freedom, they may try to return to complete economic controls. The result could be a revolution, as occurred in East Germany, Czechoslovakia, Hungary, and even in Russia itself. That result would present all sorts of intriguing possibilities to the leaders of the Republic of China who still claim to be the only legitimate government of all China.

But suppose the mainland communists continue this trend toward a market-type economy based on Dr. Sun’s principles? (After all, the communists claim Dr. Sun as their founder, too.) And suppose that this increasing economic freedom on the mainland is followed in due course by a representative type of government in the People’s Republic of China? In short, suppose the two divided Chinas end with somewhat the same economic and governmental systems? Then who would be president or prime minister or first secretary of all China? Would he come from Taiwan or the mainland?

The Liberal-socialist is always positively for something. But the conservative-libertarian is all too frequently merely against something. That’s why the socialists are winning.

Now personally I’m positively for every good thing there is. For example, I’m aggressively in favor of higher standards for education-and more and better education—than any socialist I ever met. I want the best possible medical care for everyone. With all my heart, I desire that every family in the United States and elsewhere shall be well fed, well clothed, and well housed.

While the socialists campaign for minimum wages and minimum standards of living, I shall continue positively to explain to people how the free market will bring maximum wages, high standards, and more goods and services for everyone. I’m for the maximum and against the minimum.

If people only realized it, the advocates of these minimums and averages are their deadliest enemies. The socialists want to depress the people to a common level; the libertarian wants to elevate each individual person to his highest capabilities.

The socialists want to standardize people; the libertarian wants to encourage and assist each person to develop his own personality and potentiality to the fullest.

The socialists want to restrict and forbid and control; the libertarian wants to remove the artificial and man-made obstacles to peace, progress, and plenty.

Since that is what you and I favor, why don’t we say so? If we explain our viewpoints consistently and effectively, we will soon put the socialists on the defensive where they belong. For when it comes to an interest in the true welfare of people, the socialists are small men of little vision.

Yes, machines do destroy jobs. In fact, that’s the purpose of machines, i.e., to do the work formerly done by labor. And if a machine doesn’t replace human labor, the making of that machine has been a waste of scarce resources, including the skilled labor that invented and constructed the machine in the first place.

Usually, however, this relationship between machines and jobs is expressed more softly, e.g., machines decrease the costs of production, thus permitting lower prices to consumers; or machines are helpful to mankind because they can do the boring and repetitive tasks, thus freeing human laborers for the more interesting aspects of production. Both statements are true, of course. But in every case, the purpose of a machine is to replace human beings and wipe out existing jobs. That’s good, however, not bad; for that process is the basis of all human progress.

In various of his essays and speeches, Frederic Bastiat clearly saw this relationship between machines and jobs. And as usual, after pointing out “what is seen,” he also looked behind popular opinion for “what is not seen.”

“I see some machine replacing 20 or 100 workers,” wrote Bastiat. (“Human versus Mechanical Labor”) But if it’s true, he continued,”that the domain of invention [machines] and that of labor [jobs] cannot expand except at each other’s expense, then it must be in places where there are the most machines—in the [textile districts of England], for example—that one should expect to find the fewest workers.” But there’s where you find many thousands of workers at their new jobs of operating those machines! Bastiat continued:

The mistake made by the opponents of . . . machines is in evaluating them according to their immediate and temporary effects instead of following them out to their general and ultimate consequences.

The immediate effect of an ingenious machine is to make a certain quantity of manual labor superfluous for the attainment of a given result. But its action does not stop there. Precisely because this result is obtained with less effort, its product is made available to the public at a lower price; and the total savings thus realized by all purchasers enables them to satisfy other wants, that is, to encourage manual labor in general to exactly the same extent that it was saved in the particular branch of industry that was recently mechanized. The result is that the level of employment does not fall, even though the quantity of consumers’ goods has increased.

Let us give a concrete example of this whole chain of effects.

Suppose that the French people buy ten million hats at fifteen francs each; this gives the hatmaking industry an income of 150 million francs. Someone invents a machine that permits the sale of hats at ten francs. The income of this industry is reduced to 100 million francs, provided that the demand for hats does not increase. But the other fifty million francs are certainly not for that reason withdrawn from the support of human labor. Since this sum has been saved by the purchasers of hats, it will enable them to satisfy other wants and consequently to spend an equivalent amount for goods and services of every kind. With these five francs saved, John will buy a pair of shoes; James, a book; Jerome, a piece of furniture, etc. Human labor, taken as a whole, will thus continue to be supported to the extent of 150 million francs; but this sum will provide the same number of hats as before, and, in addition, satisfy other needs and wants to the extent of the fifty million francs that the machine will have saved. These additional goods are the net gain that France will have derived from the invention. It is a gratuitous gift, a tribute that man’s genius will have exacted from Nature. We do not deny that in the course of the transformation a certain amount of labor will have been displaced; but we cannot agree that it will have been destroyed or even lessened.

Machines Mean Progress

The beneficial effects of machines are far greater than Bastiat stated—or even imagined in the 1840s in France. One of his examples of how machines increase production without decreasing the number of jobs was the textile industry in England. So I’ll start there too, and dwell briefly on the fantastic outpouring of machines during the Industrial Revolution, and the effect that development had on jobs and the “quality and length of life.”

I’ll begin by citing a few statistics I believe to be correct. And since figures never speak for themselves, but must always be spoken for, I’ll offer my interpretation of their meaning.

Population of England and Wales

1600       5 million (rough estimate)
      1700       51/2 million (rough estimate)
      1750       61/2 million (rough estimate)
      1801       9 million (census)
      1820       12 million (census)
      1831       16 million (census)

In London in 1750, about 70 per cent of all children died before age five.

In London in 1830 (80 years later), about 30 per cent of all children died before age five.

The so-called Industrial Revolution in England had no particular beginning date; it was a long and slow development. But the hundred years between 1750 and 1850 are the dates most often used when referring to the advent of power-driven machinery, the development of the factory system, rapid industrialization, and the laissez-faire or “free market” economy. And that’s the period Bastiat usually had in mind when he referred to the effects of machinery and mass production.

At the time Karl Marx was describing the degrading living conditions of the people who worked in those early factory towns of industrial England, these statistics were readily available to him. For it was in “the world’s greatest library” (the British Museum) that he did most of his research and writing on the “exploitation theory” that he developed into a book that shook the world. There’s just no way he could have overlooked those statistics on the population-explosion that occurred in England with the advent of power-driven machinery and mass production. Since there’s no reason to suggest he didn’t believe what he was saying, perhaps he just didn’t believe the statistics.

Since I can’t know, I’ll leave it with this: Karl Marx was a far better reporter than he was an economist and philosopher. The terrible and depraved living conditions of the “working classes in England” were as he described them, perhaps even worse. But he was so busy looking at the rotten trees that he never did see the flourishing forest in which they were located.

Children Lived Longer

With the advent of machinery and child labor in factories, children were living longer; a drop in the death rate from 70 per cent to 30 per cent in 80 years is a mark of tremendous progress by any measurement. An explosion of the population from a somewhat static level of six or so million in 1750 to more than 16 million in 80 years is almost unbelievable. (Perhaps that’s why Karl Marx ignored the statistics; they strained credulity.)

At any rate, he predicted categorically that widespread poverty, mass starvation, and death among the working classes would be the inevitable results of capital formation and industrialization in a market (nonsocialist) economy of private ownership. His prediction was totally wrong.

The population exploded because people began to live longer. After 1830, the rise was even faster, as hundreds of thousands of Britons poured out of those islands and settled all over the world. But I stopped my statistics with 1831 in order to forestall any possible use of invalid reasons for those impressive figures.

For example, public health measures were almost nonexistent in England in 1830; in fact, the crowded conditions in those industrial towns caused them to become far more unsanitary and disease-ridden than they had been a hundred years before. So that possibility for the increasing life span can be ruled out.

Nor were there any breakthroughs in medicine. The vaccines that were to save the lives of so many children didn’t even begin to come along for another 30 years or so.

Nor was there a “green revolution” to increase the supply of food. True, the potato was coming into popularity around 1800, with its four-fold increase in food production even on marginal agricultural lands. But that was occurring mostly in Ireland and Poland. The potato didn’t become a staple in England and Wales until the middle of the century.

Increasing Freedom

Even if government welfare schemes and controls over the economy could cause a rise in the material level of living, that was not a factor in this particular increase in longevity. For government interventions in the economy were actually decreasing during this period. Per- centagewise, there was less government welfare instead of more. The economy became increasingly free.

I can find only one reason for the increase in longevity and population. With machines, people produced more than they did without machines, and they were paid wages for their work. True enough, they were paid only a pittance for their long hours of exhausting and dangerous labor. But at least they were paid more than they had been paid before entering those primitive factories and mines. And with the little money they were paid, they could buy food, something they couldn’t do before they had any jobs at all.

As a result of their spending of the pennies (wages) they earned, food began to come into England from all over the world. And even though those workers had only a little food in their bellies, they and their children lived longer than they did without any food at all. As the machines improved, the operators of the machines produced still more, and they were paid more; not much more, it’s true, but a little more. Thus they could buy even more food and live even longer—especially the children.

Finally there was enough capital (machines) available to enable a man to produce enough to put his children into schools, if he wished to do so. It was machines under private ownership, not child labor laws, that finally took children out of the factories and put them into schools. If this surprises you, think of what would necessarily happen to children today if there were no ma chines; we would all be grubbing from dawn to dusk—most likely for grubs themselves. And millions of us would soon die of starvation.

In addition to a dramatic increase in the life span of human beings in general, machines also rendered another signal service; specifically, machines were mostly responsible for the abolition of human slavery, a mass wiping-out of the jobs of millions of human beings. But, again, that’s the purpose of machines, i.e., to abolish jobs by replacing human labor with mechanical labor.

The Columbia Encyclopedia tells us that “The British, in abolishing slavery, were primarily motivated by economic, not humanitarian, interests. While the institution produced great wealth under the mercantilist system, it became unprofitable with the rise of industrial capitalism.”

Machines Displaced Slaves

H. G. Wells, in The Outline of History, discusses the same idea: “A vast proportion of mankind in the early civilizations was employed in purely mechanical drudgery. At its onset, power-driven machinery did not seem to promise any release from such unintelligent toil . . . . [But as the mechanical revolution] went on, the plain logic of the new situation asserted itself more clearly. Human beings were no longer wanted as a source of mere indiscriminated power. What could be done mechanically by a human being could be done faster and better by a machine.”

Whatever else slaves might be used for, it’s certain they couldn’t be trusted with the responsibility of operating the power-driven ships, trains, and factory machines that were becoming increasingly common in the western world of the late 18th and early 19th centuries. Thus the ever-present moral arguments against slavery were soon buttressed by the overriding economic arguments against it.

Beginning in 1833, the British Parliament rapidly outlawed the practice of slavery throughout their vast empire. Of course, it could have been merely a remarkable coincidence that slavery diminished as mechanical sources of power increased. For example, what about slavery in the United States? Since this nation had many machines, why wasn’t slavery voluntarily abolished here?

Slavery in America

The history of human bondage in the United States also lends support (with a reverse twist) to the theory that machines, rather than morality or education, may have been of primary importance in determining the issue of slavery. Roger Burlingame, in his Backgrounds of Power, explains that reverse twist while discussing Eli Whitney’s 1793 invention of the gin for cleaning cotton.

“The gin led directly to a social, economic, and political crisis. By increasing a hundred fold the productivity per worker in separating short-staple cotton from its tenacious seeds, it produced an unbalance between cleaning and picking, planting and cultivation. The faster the cotton was cleaned, the more labor was required in the field. Thus slavery, moribund in 1790, became a dominant institution . . . .”

Before the cotton gin, not much cotton was grown in the South because it was too expensive to clean by hand, even when the hands belonged to a slave. But Whitney’s first crude machine enabled a man to clean 50 pounds of cotton a day, and rapid improvements to the machine soon doubled that amount. The resulting demand for cotton caused its cultivation to become highly profitable. But picking cotton was such a backbreaking and monotonous task that it was the last job a free man would take. Since, at that time, there was no machine to relieve the drudgery of the job—and since no education or skill was required—it automatically fell to slaves.

Those are two tremendous advances in the well-being of mankind that can be attributed directly to machines that were designed to put men out of work, and did. (1) With machines, we produce more, and have more, and live longer—even though we actually work less. (2) Since human slaves can’t compete with inhuman machines, millions of slaves lost their jobs.

When you stop to think about it, that’s a remarkable achievement for something (mechanization) that’s traditionally considered the deadly enemy of the working man. The mass education that’s made possible only by machines, seems merely to have intensified our hatred and fear of our benefactor.

As Bastiat said, machines do indeed eliminate specific jobs. But the net result of the machines (capital formation) is to actually increase the number of jobs available in the economy. You can satisfy yourself on this point by using a five-year period to measure it.

For example, in 1980, there were a given number of jobs in the United States, along with a given amount of capital (machines). During the five-year period from 1980 to 1985, those machines eliminated hundreds of thousands of jobs. But if you compare the number of jobs at the beginning and end of that five-year period, there will be more jobs now than in 1980.

Further, the new jobs will tend to be less physically demanding, because of the machines, than the jobs they replaced. The total pay for the added jobs will be higher (on the average) than for the jobs of five years ago. In addition, there is likely to be a decrease in the number of hours worked for the higher pay. That’s what machines are all about.

This relationship holds true, however, only as long as our laws are designed to encourage capital formation, i.e., more machines. If the advent of more efficient machines is forbidden or impeded, the result will indeed be more jobs—but hours of work will lengthen, the work will be come more physically demanding, and pay will plummet downward.

Frederic Bastiat’s satirical paragraph written 135 years ago could just as easily have been written today: “A curse on machines! Every year, their increasing power condemns to pauperism millions of workers, taking their jobs away from them, and with their jobs their wages, and with their wages their bread! A curse on machines!”

An Increasing Reliance on Government Welfare

Why do we continue to think of machines as “the enemy”? I don’t really know. I can easily understand why “an automated welding process” would be thought of as an enemy by the man who just lost his job to one. And even though I don’t advocate any government interventions against peaceful people in a free market economy, I don’t protest unduly the “retraining programs,” or “unemployment compensation” to offer temporary support to a willing worker seriously searching for another job, or any other “politically realistic” measures designed to ease the transition from a lost job to another job. I tend to look on those measures like taxes, i.e., a cost for living in reasonable harmony with hundreds of millions of people with different viewpoints.

But that’s not the problem; after all, those “job transitions” involve thousands (not millions) of people. Thus the problem goes much deeper. I suspect it’s a general fear of the free market that’s based on personal responsibility for our own free choices. We enjoy freedom to choose, of course. And as long as our choices turn out reasonably well, we’ll defend it as a “human and inalienable right.” But when the choices turn out to be unfavorable, we turn to a “greater power” for help. That’s certainly understandable; it proves only that we’re human beings. That “power” used to be God and, perhaps, voluntary help from our neighbors. Increasingly, however, we’re turning to government for help—all over the world.

Where the market is freest, human liberty is highest. If labor is controlled (e.g., slavery), there is neither a free market nor freedom. If capital is controlled (e.g., government ownership), you can’t produce without permission; that’s not freedom. The free market economy and human freedom are mutually dependent; destroy one, and the other automatically falls.

Frederic Bastiat didn’t write those precise words, but he clearly saw and described the relationship. And in the process of identifying the various institutions that have plundered the French people over the centuries, he dwelled at length on the disastrous consequences stem-ruing from the actions of the only institution that can plunder legally—the government.

Woe to the people who cannot limit the sphere of action of the state! Freedom, private enterprise [i.e., the market economy], wealth, happiness, independence, personal dignity, all vanish . . . . Throughout history, plunder has been practiced through abuses and excesses of government . . . . The only remedy is the progressive enlightenment of public opinion . . . . [which Bastiat believed to be “sovereign”] until the people finally come to realize that it is better to leave the greatest possible number of goods and services to be exchanged by the interested parties at freely negotiated prices in the market economy.^*

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* This extract (condensed and translated by me) is from the essay, “The Physiology of Plunder.” The Complete Works of Bastiat (Guillaumin, Paris, 1878; vol. 4), p. 141 ff. This essay is also in the translation of Bastiat’s book, Economic Sophisms (Foundation for Economic Education, 1964).

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While Bastiat developed his theme well indeed in that particular essay (and I especially recommend it to you), my objective is to apply the same principle to the activities of our own government in the United States today. I’ll begin with a statement I’ll be repeating several times in this chapter: Governments never control prices. No government ever has controlled a price. No government ever will control a price. It simply can’t be done.

Governments control people (you and me) and nothing else. Governments tell the seller of a loaf of bread (or the owner of a rental apartment) what price to charge. Thus it’s obviously the owner who’s controlled; the price itself couldn’t care less.

Freedom and the Market

Sometimes the specific price the owner must charge is the minimum. Sometimes it’s the maximum. Sometimes the same price is both minimum and maximum. Whichever, it’s never the price that would be determined by peaceful people freely exchanging their goods and services in the market place. And always the control is on the person who owns the product or service. The process is one of “people control,” and (as Bastiat said) the inevitable result is loss of freedom, independence, and personal dignity—as well as the production of fewer goods and services.

Few Americans (when asked to identify the foundations of their freedom) will agree with me that it’s basically the free market economy. Instead, they identify the source as our Constitution, or democracy in general, or religious teachings, and so on. In every case, however, they’re identifying the results, not the cause. If you have a market economy, all of these desirable attributes necessarily exist or soon appear. If there’s no free market, however, there’s no possibility of a free press, or elections to change leaders, or any of the other freedoms we enjoy. For all freedoms (repeat all) depend on the existence of private ownership of the means of production in a free market economy where production is directed by the desires of the owners to earn a profit.

Since most people consider that statement both startling and questionable (admittedly it is a minority viewpoint), let’s see how a reasonably well-educated and rational person could arrive at such a conclusion in today’s socialistic world. In short, why do I persist in such an extreme viewpoint when probably more than 90 per cent of our educators, communicators, and religious leaders hold the contrary viewpoint?

Let’s begin with this: Freedom for both religious and non-religious activities is guaranteed in the Russian constitution. It’s a meaningless guarantee, however, because of the absence of private ownership and control of the means to implement freedom of religion in practice. For example, how can you have freedom of religion when you can’t own a church? Or even rent one? Since all resources (all buildings) are owned in common, necessarily you must have the permission of the owner (government) to use the church building. Do you imagine that (even if the government gave you permission to use one of its church buildings) you could preach in it a sermon on “private ownership with responsible stewardship” as recommended in the Bible?

Private Ownership

When the Russian government assumed ownership of all the synagogues “for the benefit of all the people,” freedom of religion for Jews automatically and necessarily disappeared, i.e., since their temples were henceforth to be used in the best interests of all the people, obviously they couldn’t logically continue to be used by a group of zealots with a religion contrary to the idea of government ownership of all buildings and resources. True enough, the Jews are sometimes permitted (given permission by government) to attend services in one of the several synagogues owned and still maintained by the communist authorities. That arrangement is not exactly what we ordinarily mean by freedom of religion, however.

My thesis is that the free market economy is the key to all freedoms. In fact, the market and freedom are really synonymous terms. If the market is totally free, all presses and churches and assembly halls and speaking podiums are privately owned and are operated for a profit. Thus, each person can preach (or hear preached) whatever appeals to him. And anyone can pay to have published whatever idea he wants to write and circulate. But if private ownership is abolished, there’s no possibility of freedom in those or any other areas, i.e., everything is necessarily by permission of the owner—the government, the police force.

For example, let’s apply this idea to two nations where the economies are currently almost totally controlled, where all resources and all means of production and distribution are owned in common by all the people—Russia and Cuba. There is no freedom of any kind in either of those nations today. Freedom is a physical and mental impossibility that can’t even be imagined there. While certain actions by the people (including church attendance) do have the appearance of freedom of choice, we must remember that those actions are necessarily by permission of the government, and can be rescinded arbitrarily tomorrow “for the good of the people who own everything.”

In those unfortunate countries, no person can write what he pleases and have it published, or even send it through the mails to his own friends, without police permission. Nor can you hire a hall to make a speech, or to assemble together to hear a speech, without police permission. In neither country is there even a mechanism to establish a newspaper, much less a newspaper in opposition to government. Nor can you establish an opposition political party. Where would you meet? It’s doubtful the government would offer you one of its halls to denounce the government. You couldn’t even meet in a park or the woods; they’re also owned by the people, i.e., the government.

No Personal Choice

There simply is no possibility of human freedom of choice when there is common ownership of all resources, including a place to stand on. When all resources must be used for the benefit of all the people instead of for the profit of the “greedy private owners,” there’s simply no “mechanism” you can use to practice your own brand of freedom of anything.

But imagine, if you will, what would be the inevitable results if the government could exercise no control over the peaceful economic activities of people in general. In short, imagine a market economy in those nations.

Publishers and editors could then be either for controls over the economy or against them. Even the editor who favored a controlled economy would be free to say so, if the market were free. Of course, many people would doubtless denounce those editors and publishers who made such proposals. But in a market economy where presses are privately owned and operated for a profit, there is nothing more they can do about it, except to refuse to buy the newspapers they disagree with and hope those papers go broke from lack of subscribers. In short, the press cannot possibly avoid being free in a free market.

Now reverse the situation again and imagine that all newspapers are owned in common (by the government) and are operated for the benefit of all the people. Imagine that private ownership and the market economy have been abolished. Obviously, there cannot be a free press under that arrangement. Just as the owner of The New York Times will never denounce himself in his own newspaper, just so will the owners of Izvestia and Pravda never denounce themselves in their newspapers. The situation presents a physical and intellectual impossibility for a free press when the government owns all of the presses.

As another example, try to imagine the existence of freedom of religion in a controlled economy of common ownership. Just how would you go about it mechanically? For example, the Latter Day Saints (Mormons) send their missionaries all over the world—literally to any nation they can get into. For the most part, those people preach personal responsibility for one’s own economic welfare, the private ownership of property, the free market economy, and the responsibility of individuals and of the church (not the government) voluntarily to feed the hungry and house the homeless. Just where could they preach that philosophy in Russia, Poland, and Cuba? All pulpits are owned in common in those common ownership countries. Will “the people” (government) turn those pulpits over to a group dedicated to the opposite philosophy? They may do it—if you’ll share your church equally with the devil worshippers.

Your church (whatever it may be) endorses private ownership and responsible stewardship. That religious philosophy cannot possibly be permitted unrestrained expression in any nation that endorses the concept of common ownership of property. If it were permitted to flourish, that subversive idea would quickly lead to revolution and the overthrow of government. In short, the public utterance of the free market philosophy could no more be tolerated as a religion than as an editorial policy in the controlled economy of common ownership.

The same reasoning holds true for speech, vote, and family life—as well as for every other human activity that involves differences of opinion. All the history I’ve yet read bears witness to that truism. And I can find no other answer in logic.

Nor can any constitution or bill of rights permanently stop the inevitable verdict. No legalities concerning freedom of press, speech, and religion have ever been able to stand permanently against the realities of an economy controlled by government. Obviously, the judicial branch of government can’t long be permitted to pursue a course in direct opposition to the legislative and administrative branches of government, even in the unlikely event it wanted to. In one way or another, there must necessarily be at least a rough balance of agreement among all branches of government; otherwise, there could be no government.

Free Unions in Poland?

Lech Walesa discovered that reality in Poland when he had to use a government building for his union headquarters. (Remember, you can’t buy, build, rent, or own a building in a “common- ownership” nation.) And when he wanted to print and distribute a pamphlet defending his union and denouncing the government’s union, he necessarily had to go to a government printing press and ask them to do it. That arrangement simply couldn’t last.

I spent five weeks in Poland during the build-up period that led to “Solidarity.” I was astonished that so many Polish people (along with the vast majority of the American people) believed that a free union could exist in a common-ownership country.

It’s possible to have a free and voluntary union in a market economy of private ownership. But there’s just no way (even mechanically) it can exist under common ownership. “Solidarity” or common ownership (one or the other) had to go. I was saddened (but in no way surprised) at which one lost. Incidentally, I watch with great interest the ongoing and far-from-settled conflict between church and government in Poland. In due course, one of them has to go; for obviously, a free church can’t exist under common ownership.

If the presses, auditoriums, and church buildings are owned or controlled by government, it is childish to imagine that there can be any freedom of press, speech, and religion. President Reagan saw this “press, speech, and assembly” reality when he was a presidential candidate in New Hampshire in 1980. Remember when he was scheduled to debate George Bush alone, and the sponsors of the debate wouldn’t let the other candidates onto the platform? Ronald Reagan picked up the microphone and (on national television) announced that he had paid the private owners for the use of it, and that he would say who could use it.

At home from my easy chair, I stood up and cheered. For that’s the essence of all freedoms. Someone owned the microphone, the podium, and the assembly hall—and rented them out at a profit. Freedom in a market economy works so automatically and smoothly that, if you were to thank the owner of that hall for his deep interest in preserving freedom of assembly, he wouldn’t even know what you were talking about. His sole interest was the possibility of profit. And that’s why you and I have freedom of assembly.

Farm Price Supports

Just as the government can’t control prices (but only people), just so is it absurd to imagine that the government can support prices. Without exception, the only thing that any government can ever do is (in one way or another) control people, i.e., to prevent us from doing what we want to do, or to compel us to do what we don’t want to do. Thus, it follows that the government’s price support program for agriculture necessarily deprives farmers of their freedom. And it most surely does just that.

Here is a harsh and little understood fact: Because of price supports, freedom of agriculture in the United States really doesn’t exist. That is, you can no longer grow what you wish to grow on your own land. If you have any doubt, try this experiment: On any land that will grow tobacco, plant a few acres of it (even for your own use instead of to sell) without getting permission from government. You’ll be fined or jailed (or both) for your antisocial and illegal action. Again, freedom follows the free market. When it’s not free, neither are you.

And so it is with tariffs, subsidies, aid to all kinds of dependent people, and other government interferences with freedom of exchange. In every case, peaceful persons are deprived of their freedom to exchange their goods and services on mutually agreeable terms. In every case, we are deprived of a bit more of our freedom of choice.

All of us have lost our hard-won freedom to join or not to join organizations of our own choosing. Currently some 20 million Americans must belong to labor unions, whether the individual member likes it or not. The fact that you, yourself, may not now belong to a union is purely academic and perhaps temporary; the essential principle of no freedom of choice in the matter has now been firmly established and written into the law of the land. It is legally enforced by strikes, threats, and even bloodshed against those who are still naive enough to imagine that employers and employees in the United States are still free and responsible persons.

Perhaps you’ll better understand the fearful danger we are in when you contemplate the implications of this fact: Compulsory unionism has long been broadcast to the world by our State Department’s “Voice of America” as the very essence of freedom itself. Actually, that’s what “Solidarity” in Poland was all about, i.e., it was a revolt against the compulsory unionism imposed by government on all employees. They objected, and tried to set up their own voluntary unions that no one had to join. That endeavor was no more successful in Poland, however, than it is in most states in our own country.

Let it be recorded that the card-carrying members of the Communist Party did not, and could not, do this to us, even though they surely wanted to. It was done primarily by our best people—our ministers, our teachers, our editors, our businessmen, and our most honest legislators. And it was inspired by the best of all reasons, i.e., the human desire to help one’s fellow man.

Control of People

Those good people forgot, however, that the only thing any government can ever do, even in its proper function of preserving the peace, is to control people—to compel us to do what we don’t want to do, or to prevent us from doing what we want to do. That procedure is, of course, the proper way to stop murderers and thieves and rapists; for clearly, the police powers of government should be used to prevent those antisocial people from imposing their desires upon others by violence. But when the same powers are used against peaceful persons in their peaceful activities, freedom is always and undeniably infringed.

For example, every American has lost his freedom to save or to spend his earnings as he pleases. Our government compels all of us to “save” (actually, it’s a tax) a portion of our wages and salaries—that is, the government taxes away a portion and promises to give it back (sometimes more, sometimes less) at some later date. This compulsory scheme is called Social Security, and. it is generally cited as the essence of true freedom for the people. Perhaps as many as 75 per cent of the American people are now in favor of this loss of personal choice (freedom) and would categorically oppose any suggestion to return to a situation in which each person is responsible for his own welfare in a market economy.

And so it goes—through hundreds and thousands of government prohibitions and compulsions in the peaceful economic affairs of men and women. Without exception, every one of them is a direct loss of freedom of choice and responsibility.

Again (remember, I promised to repeat this several times) the only control that any government can exercise is people control. Any attempt to control things must necessarily involve the control of people, and that is undeniably a loss of freedom.

Most of the editors in the United States scoff at my fears. “We will always preserve freedom of the press,” they say, as they advocate additional government compulsions and prohibitions in the market, including postal subsidies to themselves.

In their sermons, most of our ministers promise us that “our hard-won freedom to worship as we please will never be lost.” At the same time, they suggest that the police powers should be used to perform still another charitable service that was once believed to be the responsibility and pride of our churches.

And invariably, as the legislator demands still another interference in the market place, he thunders this familiar theme: “The people will never lose their right to vote as they please.”

And true enough, those four precious freedoms of press, speech, franchise, and religion appear to be strong in the United States today, even though freedom itself is in great danger. That seeming contradiction is explained by this fact: We still operate within the framework of a market economy. It still survives in spite of the increasing attacks upon it. In spite of the fact that government now taxes and spends more than one-third of the combined incomes of all persons, the market processes of competition, pricing, profit and loss still generally prevail. In spite of the fact that governmental controls over the economic affairs of all of us are steadily increasing, the long-established order of the market still prevails to a large extent. (Perhaps we should be thankful that the federal government doesn’t yet actively produce anything, except electricity in Tennessee and money in its mints.)