The Freeman | Ideas On Liberty » Jack D. Douglas

Freedom of Education Will Solve Our Education Crisis

Jack D. Douglas — Mon, 01 Jun 1992 08:00:00 +0000

Jack D. Douglas, Professor Emeritus of Sociology at the University of California at San Diego, is the author of The Myth of The Welfare State, and is working on several books, including Rebuilding a Freer America This article first appeared as Cato Institute Policy Analysis No, 155.

Most Americans have always been passionately devoted to education. The current national panic over our plummeting learning scores is only the latest sign of this devotion and is remarkably similar to the panics over purported education crises that have occurred throughout U.S. history.

Unfortunately, almost all of the politicians and so-called expert educationalists rushing forward to solve this latest education crisis seem to have forgotten the simplest facts about the early history of American education, which enabled this country to produce far more than its share of the world’s most creative thinkers. This ignorant panic is inspiring a headlong rush into the central planning and bureaucratization of education that have been increasingly destroying the effectiveness of U.S. education for over 40 years.

The founders of the new American colonies were completely convinced that individual learning was the way to self-improvement of all forms. That faith in individual learning was most intense among the Puritans of New England and was a direct result of their passionate religious faith. The Puritans knew from their experience that control of education was the foundation of the church bureaucracy’s tyranny over individual hearts and minds. They believed that each individual must be able to read the Bible in his native language so that the bureaucratic experts of the church could not assert themselves as the powerful intermediaries between Christians and their omnipotent God as revealed in ancient tongues read only by the bureaucrats. They knew that real learning—individual knowledge and thought free of the church’s control—was the first prerequisite of freedom from the tyranny of bureaucracy.

As soon as they had overcome their immediate anxieties about starvation and disease, those devotees of individual education :founded what is now Harvard College (in 1636) to ensure a steady supply of educated young men for their growing colony. By the time of the Revolution, that devotion to education had supplied the American people with a remarkable community of scholars and scientists who led them in creating “The First New Nation.” The Founding Fathers of our constitutional democracy were probably the most brilliant, creative, and knowledgeable group of leaders in human history. They certainly vastly surpassed the politicians who now press upon us a miasma of bureaucratic solutions to our education crisis. individual Education

The great accomplishments of American scholarship and science in the nation’s first three centuries were not the result of great wealth, huge government expenditures, massive centers of formal education, or expert theories of learning. Learning was overwhelmingly a simple, difficult, but excitingly challenging task of self-help and local community action. Families commonly taught their young the rudiments of the three R’s. Some went on to the now-famous one-room schools where a local teacher worked one-on-one with individual students in the ancient ways of the tutor, the apprentice’s master, and the novice’s mentor. Some of the better-off and more dedicated students also had individual tutors, and they went on to the tiny colleges for more individual tutoring and small-group instruction.

The entire nonsystem of individual education was based on tutoring and apprenticeship—learning by directly doing and teaching, observing and doing, and self-help. The few tutors and teachers in any community worked for what today would be seen as slave wages, but they got far more self-fulfillment and self-education out of teaching than they would have from pieces of gold. Local help and self-education led to the great accomplish ments of Franklin, Jefferson, Hamilton, Lincoln, Edison, and a multitude of other American scholars, scientists, inventors, and leaders.

The colonial and later state governments became increasingly, but sporadically, involved in passing laws mandating some vague, general standards of minimal educational achievement for everyone. But they had few powers of enforcement, since they had almost no bureaucracies to carry out their proclamations of anxiety for the state of general education. Most education seems to have been carried out by families, with intermittent help of a highly individual nature from paid tutors, unpaid tutors who were friends and neighbors, and the local schools.

These same basic forms of individual education have always been the foundation of learning for the most creative scholars and scientists of all Western societies since ancient times. From the gardens of the peripatetic philosophers of ancient Greece to the patent offices of modern Einsteins and the garages of personal computer whizzes, self-education and tutorial education have been the path to the most creative and productive learning.

Even in the famous large universities of Europe, such as Oxford and Cambridge, self-education and the help of the individual tutor have been the very heart of the highest formal education. The open secret of the success of Western formal education is that in fact it hasalways been highly informal—highly individualized and unbureaucratic. The formal aspect consisted largely of setting public standards of achievement that, in effect, gave individuals an official stamp of approval as educated people that was much desired for status purposes.

Franklin and Jefferson

Benjamin Franklin, who was certainly the greatest technologist-inventor-scientist of his day, and one of the era’s greatest businessmen, writers, and political leaders, was almost entirely self-educated. He learned to read very early, helped no doubt by any member of the family and any neighbor who was willing. He spent one year in a local grammar school, became a dropout, studied one year with a private tutor, and ended all formal education at the age of 10.

Although books at the time were rare treasures compared to today, Franklin taught himself well enough to work on the frontiers of science and become one of the most creative inventors and scientists. He learned the highly skilled craft of printing in the age-old apprenticeship way, by directly observing and doing. Mastery of that craft gave him a lifelong sense of fulfillment and pride that no formal certification can give an honest person who knows that such a degree is merely a symbol, not the reality, of knowledge and ability.

Thomas Jefferson is hailed to this day as the founder of America’s whole tradition of public education. But his formal schooling is actually an extreme example of the creative power of tutorial learning by observing and doing, dialogue, and above all of self-education (autodidacticism). Virginians of his time were predominantly frontiers-men who learned few if any reading and writing skills because they did not need them and were fully engaged from dawn to dusk earning a living. But almost all of those who got ahead enough to have some leisure time quickly learned the rudiments and encouraged their children to learn far more.

Being the son of a well-off planter, Tom Jefferson spent several years in typical one-room local grammar and classical schools. His first schoolteacher, William Douglas, actually did little to help him learn, but his second, the Reverend James Maury, made a lasting impression on him. As was common at the time, Jefferson boarded with Maury’s family, so his education was one of total immersion. His class at the one-room school included four other boys, so learning was by the ancient tutorial. He proceeded entirely at his own pace, a torrid one indeed since he learned to read classical Greek and Latin works in the original in only about two years.

History books today routinely refer to Jefferson’s education at the College of William and Mary, thereby summoning up modern images of large lecture halls and dozens of professors who did not even know his name. Actually, his foray into formal education was largely one prolonged tutorial and discussion between him and William Small, the only teacher there who had any significant effect on him.

William and Mary was in chaos at the time. The students were rowdy and in a state of near rebellion. The president admitted being drunk most of the time. Almost all of the professors were Anglican clergymen and were dismissed while Jefferson was there. The school was hardly a picture of centrally planned bureaucratic rationality. Dumas Malone noted in Jefferson the Virginian that:

Jefferson said that [Small] gave to his studies enlightened and affectionate guidance and was like a father to him. Actually . . . [Small] made a daily companion of young Jefferson, and taught him no less through informal talk than by his memorable lectures . . . . [if] his college course can be described separately it is best summed up by saying that he continued to be taught privately, and that his tutor was William Small. The same sort of statement can be made about the five years after that, when he studied law under George Wythe. He gained clear title to fame in later years as a prophet and architect of public education, but his Own training was preeminently personal and private.

Self-imposed, rather than external, discipline shaped his education from his youth onward.^[1]

When Jefferson left William and Mary, he entered the law office of George Wythe and learned the practice of law by the ancient practice of self-study (that is, reading the law), tutoring, and apprenticeship by observing and doing. The many practices of the ancient forms of informal, individual mentoring and tutoring were the foundation of the education of the great philosophers, scientists, and leaders in our civilization until the advent of the age of bureaucratic education in this century.

(Mentoring and tutoring probably have been the primary modes of education in all civilizations during their creative periods, being replaced by bureaucratic education only in their final periods of stagnation and decay. However, I know of no study comparing civilizations in such terms.)

Although Jefferson’s experience at William and Mary has often been presented—mistakenly—as evidence of his college education, there is no such distortion in the case of our appreciation of Abraham Lincoln’s educational experience. Americans have long been thrilled by the texts, stories, and movies depicting Abe Lincoln walking miles to get a scarce book so he could read by the firelight after his day’s work was done. And they learn in early childhood that this master of the English language never learned English from a Dick and Jane reader nor spent endless hours cutting up beautiful prose into lifeless words.

Does Science Require Formal Education?

It has often been claimed that although reading and writing skills can be learned by individual means, the highly technical fields of modern technology and science demand the formal education of specialized professionals—bureaucratically certified experts—using classrooms and laboratories full of expensive equipment that can be paid for only by millions of taxpayer dollars.

However, if there is any difference between the two cultures of learning—the humanities and sci-ence-in this context, it is probably the opposite. The basics of reading and writing are completely formalized—they are preordained symbolic forms that must be mastered before one can go on to creative enterprises. Formal education is better suited to the learning of such totally formalized symbolic activities than to any other kind of intellectual activity. The costs of such bureaucratized modes of teaching the basics of reading and writing are more long run, thus hidden.

If students are willing to have the basics pounded into their heads by such routinization, they can learn even if they have little enthusiasm and little individualized tutoring. But it kills their motivation and teaches them to take a generally submissive, dependent approach to learning, rather than the aggressive, independent initiative found in self-education. Formalized education of this sort can teach the rudiments to millions, but it kills the spirit of learning—the passionately curious rage to know that is the beginning of all creative education and enterprise.^[2]

In technology and science, the short-run costs and the long-run costs of bureaucratic formalization are all much higher. Science and especially technology are only partially subject to formalization. The basics of mathematics can be learned as the alphabet can (one, two, three, two plus two, etc.), but as soon as one tries to apply mathematics to real-world problems, the element of uncertainty—“art”—must be considered in unroutinizable ways.

The creative struggle with the uncertainties of reality is inherent in all real science and technology, just as it is inherent in all free-enterprise business. Anyone who learns science by rote is actually unlearning the very heart of real science and will never be a good—creative—scientist until he or she unlearns the rote learning.

The best way to learn to be a creative scientist, technologist, or entrepreneur is to wrestle individually with all of the uncertainties from the beginning. An individual who has already been through this heroic struggle with the primordial uncertainties of life can help by serving as a model and as a mentor and tutor who encourages and allows learning by observing and doing. But a tutor cannot produce creativity by presenting formalized, textbook-based, bureaucratized knowledge in the rote forms of formalized education.

No American scientist or technologist, not even Benjamin Franklin, has had a more creative impact on the world than Thomas Edison. Edison had even less formal schooling than Franklin. Whereas Franklin lasted one year in the local one-room school, Edison lasted only three months. Rather than being allowed the graceful exit of becoming a 7-year-old dropout, he was expelled for being “retarded.” His mother then taught him the basics for three years by the universal methods of tutoring. As he later said, “She instilled in me the love and the purpose of learning.”^[3]

When Edison was an overly tender 10 years old, his mother introduced him to an elementary book on physical science, and that marked the beginning of his lifelong effort to teach himself. He set up his own chemistry laboratory in the basement. Since he was crushed by the overwhelming disadvantage of poverty and had no welfare net to save him, he went to work at the age of 12, and he became self-supporting while continuing to educate himself and carry on his own experiments that eventually helped to revolutionize the world.

Many years later, having built the first world-famous scientific laboratory, he was asked about the bureaucratic rules by which he ran the organization. As he said emphatically, “Organization! Hell! I’m the organization! . . . Hell! There ain’t no rules around here! We are trying to accomplish some’pn’.”^[4]

It is almost always claimed by the expert educationalists that modern science cannot be learned or done by such informal methods. They claim that so-called Big Science is now done by huge bureaucracies because that is the most creative way or even the only way that creative advances can be made. Their claim, though, is the opposite of the truth, and the most creative scientists of our time generally realize that Big Science is a danger to all scientific creativity.

None of the great discoveries of modern science, such as the recent discovery, of superconductivity at relatively high temperatures, has been made by scientists in our vastly expensive university or other government bureaucracies. As Robert Root-Bernstein argues in his recent book Discovering, the important discoveries are made with remarkably cheap equipment in small, unheard-of laboratories, or in even cheaper garages.^[5]

Physicist Richard Feynman worked in the niches of our scientific bureaucracies, but he lived his science by the rule of always thinking about it in concrete, real-world terms and did it himself in the simplest, most commonsensical way possible. After NASA lost the space shuttle Challenger and its crew in 1986, an official commission was set up to determine how a project costing so many tens of billions of dollars could have failed. The many experts who testified showed that, with all their expensive research, they could not determine whether the shuttle’s O-rings might have become brittle and failed, thereby causing the fatal accident, because of the cold weather at Cape Canaveral on the morning of the flight.

As the conflicting public testimony swirled around him, Feynman placed a piece of an O-ring in a glass of the ice water set out for the commissioners to drink and showed that it quickly became brittle. This bit of very little science took only a few minutes to perform and cost a few pennies. Feynman wrote that “I never pay any attention to anything by experts . . . . I calculate everything myself.”^[6] Earlier in his career, teaching a class in Brazil, he had found that he could not convince the students to think of how the “principles” in the textbooks really work in the everyday world they observed and lived in. Latin American students were—and still are—taught by the bureaucratic methods and experts of the church and state against which the early American colonists revolted.

Root-Bernstein argues that other creative scientists agree overwhelmingly with Feynman. The two basic principles of creative science in this respect are “Do as large a proportion as possible of your experiments with your own hands” and accept something “Only when I have convinced myself.”^[7] As Root-Bernstein says, “This means, in effect, you must train yourself—be an autodidact, learn your subject your way.”^[8]

Root-Bernstein takes note of “the surprising fact that many discoveries are made by young scientists just moving into a field and by older scientists with little or no formal training in that particular science. Pasteur and his invention of the germ theory of disease is a prime example.”^[9] James Watson and Francis Crick’s revolutionary discovery of the double-helix structure of DNA is another prime example, since they worked on even less than a shoestring and without grants, and one of them had just earned a doctoral degree but was unemployed and the other was just a graduate student.

All really creative scientists are contrarians. They perform acts of creative deviance, going against the paradigms that are used as the formalized founts of wisdom for the least-common-denominator education of the students who will never become creative after their indoctrination into the accepted knowledge of their expert professions. Root-Bernstein’s principles of scientific creativity sound like the nonrules of contrarian’s I Ching: “Challenge expectation”; “Find a contradiction between theory and data”; and “Play contradictions.”^[10]

The Creativity of Dropouts

In an age in which the mass media of least-common-denominator doctrines keep dinning into us the horror stories about dropouts who can never earn a living without a certificate of formal education, it may be surprising to find how many people drop out anyway to create new worlds. George Gilder notes in The Spirit of Enterprise that Bill Gates dropped out of Harvard University to create Microsoft, which has been the most successful software firm in the age of computers. He also notes the general fact about the creators in these new high- technology enterprises:

In all the history of enterprise, most of the protagonists of major new products and companies began their education—and discovered the secrets of their later breakthroughs—not in the classroom, where the old ways are taught, but in the factories and labs, where new ways are wrought. Among all the legions of lawyers, financiers, bureaucrats, and masters of business administration strutting into the American economy from the nation’s leading schools, nothing has been so rare in recent years as an Ivy League graduate who has made a significant innovation in American enterprise.^[11]

Although he does not mention it in his book, Gilder himself is a fine example of the dropout creators. Just like Gates, Gilder found that the educational atmosphere at Harvard tends to suffocate creative deviance. He too dropped out and went on to become one of America’s most creative social thinkers.

Of come, some Ivy League graduates do go on to become creative. There is actually a large minority of students in all these bureaucratic status mills who quietly deviate from the enshrined dogmas and retain their creativity. They wind up giving the public the false impression that such formal education produces creative thinkers. Their creativity occurs in spite of the bureaucratic controls, not because of them.

Many bright and creative young people choose to go to large and prestigious universities for various reasons: they do not know that such places can stifle creativity, they need the money, they Crave discussions with other bright students that encourage creativity, they want the status that assuages the personal insecurities so common in creative people, or they know of one of the minority of faculty members who also encourage creativity. Correlations—such as that between formal education and creative thinking—an be totally deceiving when the relationships are not looked at over time to see which come first.

The brightest and most creative students at all levels who do not formally drop out of our leviathans of education generally find it easy to make high grades and, in their own parlance, beat the system, tune out the bureaucratese, and turn on to their own more serious and more creative interests. I had a very large group of friends and acquaintances who did that at Harvard even back in the less bureaucratized 1950s. Most of them also engaged in individual study and took graduate seminars. A small number of us even graduated in three years to escape it all.

Although the number was much smaller in high school, those same people were commonly far more tuned out in high school and spent most of their time doing their own work. At Miami Jackson High School, a small group of us were able to make nearly perfect grades to go on to college without spending much time at it, so we spent our time educating ourselves and each other in many different realms. The bureaucracy could be bothersome, as it was when the principal and dean of boys berated me for being a “Marxist nonconformist” because I read Russian literature and Marx and was a democratic socialist at the tune. (That was in the early 1950s, the era of McCarthy-ism.) But for the most part we could avoid the whole system and get on with our serious work. There were no social workers investigating our families, no psychological counselors trying to force us to conform in the name of science, and no omnipresent national testing system forcing the teachers and us into one great mold.

Bureaucracy and the Ordinary Student

Educationalists, who are not totally unmindful of such obvious facts of life in our schools, generally insist that self-education, mutual self-help, tutorials, and other forms of informal education are all fine for the brightest and most creative, but that they are totally unavailable or useless for the ordinary (mean or least- common-denominator) students. That is the opposite of the truth. All of our schools at all levels and in all communities are pervaded by a plethora of informal, local, individualized learning groups studying and teaching themselves and each other how to repair motorcycles and cars, how to build radios or computers, how to surf every good surfing area in the world, how to dive in the ocean or soar in the sky, and how to do millions of other things.

Most of those autodidacts, tutors, and mentors rely largely on direct learning experience and word-of-mouth traditions, just as the members of all human cultures always have. And in our literate society, almost all of them also make extensive use of the written word, such as the magazines and instruction manuals on everything from surfing and diving to fixing the most exotic sports cars. High school students who go completely “dumb” when faced with a bureaucratically mandated science text or literature quiz may well be whizzes at reading auto manuals that are all Greek to the math whizzes and Shakespeare “nerds.”

The obvious fact is that the education bureaucracies are far more destructive of the motivation and learning of the less symbolic students than of the symbolically brightest students. The bureaucratic teachers do not understand them or sympathize with them because they rely far more on direct learning by observing and doing and by word of mouth than on the textbooks the teachers use. They can be brilliant at doing marine biology when their fishing or diving motivations are fully engaged, and they can directly observe a master at work; wading through a textbook mandated by a teacher or central planner, however, may turn them off completely. (As I am a highly symbolic type, textbooks were easy for me from the earliest years. A cousin, who was a whiz his whole life at personnel management but hated texts, dropped out of high school and completed it through painful correspondence courses. To reduce the pain, he bribed me to do his course on auto mechanics. I passed it quickly with flying colors, without knowing how to find the carburetor on a real car. If a real car needs repairs, I recommend my cousin, not me. I’ve written many books since then, but i have never fixed a car.)

Bureaucratic education has had little negative effect on the symbolically brightest and most creative. People like the late Richard Feynman still manage to survive the formal processing of their minds, largely by tuning out and going their own ways in spite of the bureaucratic tentacles. But the ever greater bureaucratization of U.S. education at all levels has had a devastating effect on the less symbolic and more least-common-denominator students. As the bureaucracy has grown, those students have come more and more to loathe the schools and almost any form of text-based learning associated with the schools.

Science has been the worst victim of this trend because the students are first introduced to science in the schools by the rote methods of bureaucracy and because creative science demands more freedom, more curiosity, more individualized learning, and more contrarianism than most other realms of knowledge, in a 1990 survey of U.S. science education, Newsweek summed up the situation nicely: “Unfortunately, few American students ever get to taste real science, for few of the nation’s schools teach it. All parties now seem to agree that American science education serves not to nurture children’s natural curiosity but to extinguish it with catalogs of dreary facts and terms.”^[12] What could be more dismal—and enraging—to already rebellious teenagers than to have authoritarian bureaucrats order them to learn everything in a dreary textbook—r else!

There is a direct and remarkably high correlation between the growth of the educational bureaucracies and the growth of rage and rebellion against education on the part of less-symbolic students. The bureaucratization came first and directly caused the rage. Now some of our schools tryingto educate such alienated students are literally being patrolled by police, but even they cannot stem the tide of revolution. Teachers dream of returning to the good old days of Blackboard Jungle, way back in the 1940s and 1950s when schools were neighborly and informal and before students hit, raped, and murdered teachers. In view of what has been happening in the centrally planned, bureaucratic states around the world, is this really so surprising?

Community leaders and the parents of the less-symbolic students are now revolting against the whole bureaucratic system. They know their children are not inherently dumb and really want to learn what they themselves value and what they can see from direct experience will help the children to develop in the world. They are seizing control of their local schools through decentralization movements that may return the schools to the traditional American form of local schools, self-education, tutoring, neighborly help, and individual initiative everywhere.

The educational bureaucrats are furiously resisting this reactionary movement, in spite of the violent revolution on their hands, and they contend that ignorant parents will only make a mess of it. They forget that motivation is the beginning of all real learning and that the complexity of individual motivation and learning is precisely the reason that radical decentralization—individualization is the only nonsystem that works in edu cation. Where the bureaucrats have incentives to preserve and expand the system, the parents and their children have all the incentives to learn, discover, and pursue the ways of learning that work for them in the real world they live in.

Big Schools and Big Government

The worst enemies of this return to the glorious past of real education in the United States are the bureaucratically educated elites that staff our universities, mass media, churches, foundations, government agencies, and most other big bureaucratic institutions. Even the best of our big bureaucratic schools at all levels not only focus the minds of the young on the past, as Gilder notes, but focus their minds on those parts of the past that embody and justify the bureaucratic mind-set that is now the foundation of all such schools, as well as our big government, big businesses, and big foundations—and of much of the rest of our conflict-ridden society.

This situation is easy to demonstrate by application of a few commonsensical tests of the culture items learned by the students at the prestigious universities. Take any random sample of students from Harvard, Stanford, the University of Wisconsin, the University of California, or any other educational leviathan. Ask them whether they’ve read Adam Smith (or Edmund Burke) and Karl Marx. Result? Who now reads the ingenious analyses of Adam Smith? Who does not get subjected to the enraged hate-mongering of Karl Marx?

Go to your local college bookstore and look for the books on Smith and those on Marx. Look up the number of references to Smith and Marx in the indexes of the faculties’ publications. Even more revealing, do the same culture-item test for Friedrich Hayek and John Kenneth Galbraith. Try to find even an economist at your local prestigious school who has read Hayek or any other real free-market economist.

The average ignorance quotient about the entire literature of freedom—Locke, Smith, Hume, Burke, the Federalist Papers, and on and on—is astounding. Average students from the best of the prestigious universities have a sure grasp of Marxism, socialism, and many other brands of collectivist-bureaucratic thinking, but they have never read any classical liberal thought and do not even know the names of the great thinkers about freedom in our own century.

It is not the least bit surprising that the most successful of our students from our big bureaucratic schools assume that big government, big science, and all forms of bureaucratic rationality are the embodiment and fount of all rationality—hence of creativity, productivity, and everything else good. They have succeeded in learning what they were taught explicitly and, far more important, implicitly over and over again—relentlessly and with the sincere, passionate convictions felt by their bureaucratic teachers. (Such students, of course, are not the creative students, the Richard Feynmans, who tuned out the texts. They are the bureaucratic successes who fit into the mold, generally without knowing it was a mold.) Did they not learn in minute detail in their sociology courses that Max Weber “proved” by his definition of bureaucracy that it is the most rationally organized form of human activity? Did they not learn from John Kenneth Galbraith that big business is good because it can rationally (bureaucratically) plan its own sales, even of the Edsel? Did they not learn in their Keynesian economics courses that the only thing better than big business or big education is immensely bigger government, which is what is needed to make all the lesser goods really good?

The Bureaucratic Closing of Young Minds

Bureaucratic rationalism closes off possible new lines of action in direct proportion to its success. It is based overwhelmingly on the assumptions that there is no inherent uncertainty in the world and that the organizational rules developed to fit the past situation will work in the future because they worked in the past. (Bureaucrats assume the parameters remain basically the same, so the bureaucratic forms only have to be adjusted slightly as the world changes.) Bureaucratic, formalized, rule-bound education makes the same assumptions and takes the further step of assuming that there are no inherent uncertainties in the motivations and ways of learning of individuals. It assumes that all the peas and all their pods are basically the same and, therefore, that the more the methods of education are the same (that is, the more equal everything is), the more effective teaching and learning will be.

All the basic assumptions of the bureaucratic system lead rationally to the conclusion that the closing of minds is exactly the way to be creative and productive in anything. Thus, the closing of minds so well described by Allan Bloom^[13] is the rational outcome of the standard bureaucratic operating procedures of the central planning of our education system. The bureaucratically mind-closing ideas of the teachers and professors are the only ones consistent with the basic assumptions on which the entire system is built. The teachers are not the ultimate causes, they are only intermediate products—the people chosen to teach the students to have closed minds because they are the teachers who fit the assumptions of the political choosers.

Perform another simple culture-item test: Find a single president of a prestigious university, which is supposed to be dedicated to creativity, who now does anything creative. Once you despair in that quest for the holy grail of university education, try to find a single president of such a prestige school who even says something different from what all the other university presidents say. There actually are a few such deviants at small, liberal arts schools, but you will probably never find them because they are so drowned out in the mass media by the big talks of standard bureaucratese.

In The Troubled Crusade, which is probably the most influential book written on U.S. education in many years, Diane Ravitch notes that from 1945 to the present, the Jefferson-proclaimed crusade against ignorance has become a crusade for equal education.^[14] During these 45 years, Americans have striven relentlessly to close out differences in the forms of education, to reduce all of education to the same basic rational formula administered in the most rational way possible—by a centralized bureaucracy of education experts. The result has been perceived as a growing crisis in education worse than any earlier ones. Over the decades, Americans have become more and more panicky over the obviously declining learning of students; government expenditures for education have soared steadily, increasing over 30 percent in real terms in the 1980s, and average real learning has plummeted steadily. (Test scores have stabilized because vastly more school effort now goes into teaching students how to take the tests.) How does this situation differ from what has happened in the highly planned, centrally bureaucratized economies?

If giant bureaucracies could centrally plan creative education, the Soviets long ago would have outdistanced all of us, instead of immiserating their entire society. In fact, if mandarin education experts could produce creativity, instead of causing all minds to stagnate, the massive, centralized, equal bureaucratic education system of the Chinese mandarins would have produced a great blossoming of Chinese civilization centuries ago, instead of the awful decay of that once-vibrant civilization.

Rising Costs, Declining Achievements

In the past 30 years the United States has steadily increased its spending on gigantic education bureaucracies, so that today we spend more per student per year than any other major nation. (The education bureaucrats try desperately to deny this fact by comparing percentages of GNP spent on lower education, excluding college costs, which are so much higher in the United States, and so on. We do actually spend more of our GNP on education than most other industrialized countries; but, more important, because we have a higher GNP per capita, our spending per student is much higher.) A higher percentage of our young people attend college than is the case in any other major nation. But by all significant measures, the educational attainments of our average young people (not the creative ones who tune out the system and learn the test items on their own) has steadily declined, so that today they rank near the bottom among major nations.

Japan, the nation that has rapidly improved in all categories of development and now frightens the entire world with its stunning productivity and creativity, spends almost nothing on research in gigantic university bureaucracies. It invests two to three times as much as the United States does in such research, but that research is undertaken by private businesses, not by gigantic government bureaucracies comparable to the University of California, the University of Wisconsin, or our hundreds of other leviathans of bureaucratic education.

The nation that rivals Japan, Germany, has not even a single university research leviathan that is comparable to the hundreds in the’ United States. The Germans rely far more on much less-expensive forms of direct learning by observing and doing—that is, by apprenticeship, on-the-job education, part-time education, industrial research, and so on.

It is obvious from the entire history of learning that all real education, and especially all creative education, is the result of complex individual motivations and of ways of learning by observing and doing, tutoring, and mentoring. Any central planning or bureaucratization of this inherently individual activity will reduce the paths to learning to equal forms that close off almost all new ways of thinking and doing, and will turn them into the deadly rote education we have seen in all the once-great societies that have succumbed to government bureaucratization of education.

The present crusade that is carrying our society toward Federal testing standards for education is based explicitly on the assumption that there is a set, predetermined, closed body of culture-items that constitute worthwhile learning. If the crusade to make all our children learn this closed set of items succeeds, what will become of creativity—that openness to and production of new, unplannable, unforeseen items?

Teachers around the country are already focusing more and more student attention on learning those predetermined items, so that they themselves can get higher ratings and salaries tied to the test scores. And students have less and less time left to pursue their own unplanned, unbureaucratized interests.

The worst calamity will come if the bureaucrats succeed in attaining their goals. Fortunately, they probably cannot do all of what they are crusading to do because of the inherent ineffectiveness of bureaucracy. Unfortunately, with their greatly increasing resources and police powers, they are already succeeding at an accelerating rate in unintentionally murdering the curiosity and other motives to learn of ever more students and robbing them of the free time to learn what they really want to learn in the ways they can learn.

Conclusion

The goal of all people sincerely committed to real, creative education should be to decentralize, deregulate, decontrol, depoliticize, and de-bureaucratize, and to increase incentives for direct, individual, and local education of all forms. Some individuals will find that they learn best entirely on their own. Some will find they need more group support, stimulation, and discipline. Almost all will find that the ancient forms of individual tutoring and mentoring will help immensely in any learning situation. The more freedom they have to decide how to learn, what to learn, how to fit learning to their long-run goals and opportunities, and how to continually change all of that to meet emerging motives and situations, the more effective their education will be—and the more effective and happy our entire society will be.

As long as most Americans and most of our officials continue to build leviathans of bureaucratic education, we can confidently predict more of what bureaucratization has been producing for many decades—less and less real learning, less and less creativity, more and more stagnation, more and more decline in our position around the world, and ever more anxiety and panic among a people who remain passionately committed to real education but have forgotten their own gloriously creative past. However, if we can return to the freedom of education that Americans enjoyed when they were astounding the world with their creative energies, then the vast new learning resources that technology makes available to individual learners will enable them to be more creative and productive than was ever before possible. Think of what self-reliant autodidacts such as Benjamin Franklin, Thomas Jefferson, or Thomas Edison would be able to do with the computer technology that will soon place the entire world at our fingertips.

1. Dumas Malone, Jefferson the Virginian (Boston: Little, Brown, 1948), pp. 54-55.

2. Page Smith has entitled his brilliant historical indictment of American higher education Killing the Spirit (New York: Viking, 1990). Lower education is an even worse killing field.

3. “Thomas Alva Edison,” in The New Encyclopaedia Britannica (Chicago: University of Chicago Press. 1983), vol. 6, Macropaedia, p. 308.

4. Wyn Wachhorst. Thomas Alva Edison (Cambridge: Mir Press, 1981), pp. 180-83.

5. Robert Scott Root-Bernstein, Discovering (Cambridge: Harvard University Press, 1989).

6. Richard Feynman, Surely You’re Joking, Mr. Feynman! (New York: Norton, 1985), quoted in Root-Bernstein, p. 418.

7. Root-Bernstein, p. 418.

8. Ibid.

9. Ibid., p. 417.

10. Ibid., pp. 412-13.

11. George Gilder, The Spirit of Enterprise (New York: Simon and Schuster, 1984), pp. 246-47.

12. Newsweek, April 19,1990.

13. Allan Bloom, The Closing of the American Mind (New York: Simon and Schuster, 1987).

14. Diane Ravitch. The Troubled Crusade (New York: Basic Books, 1983).

Democratic Freedoms vs. Collectivist Newspeak

Jack D. Douglas — Tue, 01 Mar 1983 08:00:00 +0000

Jack Douglas is Professor of Sociology at the University of California in San Diego. He has written and edited twenty-five books and numerous articles on various aspects of the social sciences.

This article is excerpted by permission from a longer essay to be published by The Reason Foundation as part of a collection, Defending a Free Society.

“The System of Liberty” which formed the fundamental ideas of the American constitution and government was built on one idea above all others: Freedom works! Individual freedom does more than anything else can ever do to advance the interests and happiness of all individuals, including producing as much equality and security as is possible for human beings. Any abridgment of individual liberty intended to produce greater collective welfare (the “common welfare”) inevitably winds up producing less. That is the one great message American libertarians and others in Britain and Europe created and announced to the world.

Individual liberty and constitutional democracy, the institutional expression and guarantee of individual liberty, are the most sacred social values and institution of the vast majority of people throughout the world today, both where they exist and where they are only dreams of the repressed peoples of the collectivist societies. Individual liberty and democracy are the sacred founts of all political legitimacy today. The voice of the individual and of the people have now replaced the word of God and the sacred rights he supposedly granted as the foundations for all rulers. So powerful is the appeal of liberty and constitutional democracy everywhere that no government leader anywhere dares to oppose them.

In our free Western societies in which these hallowed and ancient ideals were given rebirth they have now been so completely dominant for so long that they are taken for granted by almost everyone and, thus, only rarely do we consciously consider what a treasure they are. Just as a healthy young person takes the delights of life for granted, and focuses his attention on its inevitable minor pains, so do we too easily take the delights of liberty and democracy for granted and focus our attention on our inevitable failures to live up to their ideals completely. And in this way we blind ourselves both to the threats to our sacred ideals and to our greatest potential source of strength in defeating those threats.

Sons of Liberty

The Revolution of Liberty and Democracy was launched by the American sons of liberty in 1776. The success of the great American experiment in liberty inspired vast hope everywhere and ignited The Age of the Democratic Revolution, as R. R. Palmer has called it. In the succeeding twenty-five years democratic revolutions erupted across Europe. Some succeeded; more were put down by aristocratic reactions. A few, most notably the vast explosion against the corrupt, repressive collectivism of the French monarchy, were quickly seduced by even more repressive forms of collectivism. After his defeat, Napoleon revealed his own total cynicism about liberty and the Revolution when he said, “Vanity made the revolution, liberty was merely a pretext.” But during his reign he used the powerful rhetoric of liberty to inspire democrats throughout Europe to embrace what they only later discovered to be a new tyranny complete with a new and generally more repressive monarchy and aristocracy.

But the seeds of hope for a new and better world of individual liberty had been loosed upon the world. These hopes have since been increasingly inflamed by the vast and totally unprecedented growth of science, technology and wealth created by the individual enterprise and creativity unleashed by individual liberty. These values of liberty and democracy and the hopes they inspire have now spread to the entire world and become more powerful—more sacred—than ever. The Age of the Democratic Revolution sweeps on, overturning one collectivist tyranny after another in the sacred name of liberty.

It is a terrible tragedy of our age that almost all of these revolutions inspired by the hope for liberty and its fruits are now either launched by cynical Bonapartists manipulating these sacred symbols to win totalitarian power or soon fall victims to totalitarians out of self-deception. All of the most terrible totalitarian collectivists of our age are completely aware of the power of the sacred symbols of liberty and constitutional democracy. Today, the more totalitarian a regime is, or intends to become, the more its leaders brandish the sacred symbols of liberty and democracy. The totalitarians use these sacred symbols as myths to mystify the people and thereby try to hide the brutal realities of their regimes. As Friedrich Hayek noted forty years ago, “. . . wherever liberty as we understand it has been destroyed, this has almost always been done in the name of some new freedom promised to the people.”

Totalitarian Tactics

In the nations where the mass of people are ignorant of the ancient meanings of our Western ideas of liberty and democracy the totalitarians merely superimpose the sacred symbols on their brand of collectivism and then use massive censorship and propaganda to try to prevent the people from ever learning the difference. But the more knowledgeable the people are about our ancient ideals, the more mythical deceit the totalitarians must use in their desperate efforts to maintain some shreds of legitimacy to cover their use of police terror to build their power. They do this by using all the forms of Hitler’s Big Lie and all the powers of statist mass education and the mass media. Above all, they must fabricate plausible rationalizations to present the foundations of their totalitarian collectivism—government planning, regulation, and control of everything from money to literature and science—as the one and only true “new freedom.”

As Peter Drucker has said, “. . . the less freedom there is, the more there is talk of the ‘new freedom.’ Yet this new freedom is a mere word which covers the exact contradiction of all that Europe ever understood by freedom . . .” This New Think and New Talk about liberty and democ racy have obviously been most necessary in the West itself, especially among our intellectuals, to seduce people into abandoning the very foundations of all they have held sacred. But everywhere that educated people have been important these new forms of double-talk have been vital in legitimizing the new and ancient forms of totalitarianism.

Since most totalitarians today have come to power where most of the people were largely ignorant of Western civilization, but where the educated people have known the rudiments of our liberty and democracy and have been too important to neglect, the traditional names and outer forms of liberty and democracy have been retained for the masses and have been combined with “new freedoms” rhetoric aimed especially at intellectuals.

While our Western leaders today rarely even mention liberty or democracy, and almost as rarely name the new forms of totalitarian slavery what they are, all totalitarians freely brandish these sacred symbols as the shibboleths of their regimes and never name themselves what they are. Every dictator is a self-proclaimed “President” or “Premier” of “The People’s Republic”; every modern Genghis Khan flies the bright banners of “wars of liberation” and denounces true liberators as “Imperialists”; every imperialistic Russian totalitarian who has murdered soviets and other socialists proudly declares himself the humble servant of “The Union of Soviet Socialist Republics.”

The Deceit of Tyrants

The deceit of tyrants and totalitarians has always had great seductive powers. That is a basic reason why liberty and democracy have been so rare. But rarely have they been as successful as our modern totalitarians in carrying out their counterrevolutions in the very name of liberty and democracy. It is absolutely vital that all free people—and aspirants of freedom—today understand how they have deceived people, why they have so often succeeded, what their moral weaknesses are and how this tide of reactionary rhetoric can be turned back on its propagators.

The first crucial thing that must be done about this drift into the absurdities of collectivist Newspeak is for people everywhere to speak the truth in truthful language. The Russian rulers, the Chinese rulers, the Castros, and all totalitarian collectivists are the tyrants of Terrorist Slave States. This is a precise, technical historical usage of the terms.

The slaves of Russia, Cuba, China and many other nations have far fewer freedoms than the slaves of Ancient Rome or the ante-bellum South. Earlier slaves could generally be freed within the state and by law. Only desperately dangerous flight can free the slaves of Russia, China, Cuba and so on. Earlier slaves were normally encouraged to mate, but in China today the Party decides who can marry and who can have a child (rarely more than one). The Romans crucified thousands of slaves who revolted, but Russian communists have murdered tens of millions, routinely brutalize many thousands in the living-crucifixion of the Gulags, and systematically terrorize the entire nation for merely saying—or potentially saying—things against the regime.

Our leaders must speak the obvious about these Terrorist Slave States. Even more importantly, intellectuals, especially journalists, must end their Great Betrayal and proclaim the truth. Out of blindness and their own envious lust for power, the intellectuals of Russia, China, Eastern Europe, Cuba and all the other tortured lands led their deceived people into the death camps and torture chambers of the Terrorist Slave States.

Afraid to Speak Out

The intellectuals and journalists are the Judases leading the people into slavery. Some do so knowingly. Far more do so because they refuse to look into the bright glare of truth streaming from every nation that has followed this Marxist path. many more “go along” with, or merely re main silent when their colleagues preach the Marxist faith from our campus pulpits, our church pulpits and our media pulpits. They know the lies, misinformation and agitprop when they see it, but prefer ease and repose rather than face the wrath of the activists. They are terrorized by the mere thought of being branded “Right Wing Extremists”—or even “Conservative.” It is almost unseen by those outside, but there is a continuing Marxist revolution going on in our humanities, social sciences, churches and journalism throughout the Western world. The intellectuals are building the “Road to Serfdom.”

No freedom-loving person can ever invoke official controls or censorship against these lies and this far more ominous silence. We can only assert our own freedom of speech. But that is all we need. Freedom and truth work. They need only to be exercised-strenuously, consistently, courageously.

But this truth and freedom of speech against the Terrorist Slave States is needed even more in entertainment and the daily news media than in our college classrooms and intellectual forums. One gripping movie like “Missing” can insinuate more doubts about American businessmen and political leaders than dozens of intellectual journals or hundreds of lectures can undo by the most meticulous analysis of facts. Our news media are awash with the best of intentions, but the most extreme ignorance and prejudice about simple economic matters. This ignorant and prejudicial economic moralism of the journalists is a powerful wedge which opens the way for the more openly Marxist phalanx.

The Need for Privately Financed Educational Institutions

We do not need—and must sternly oppose—any forms of censorship or agitprop. Nor do we need any form of government interference in behalf of truth and freedom. Our government’ obviously has enough problems trying to be truthful about itself and to get that truth across. What is needed is that these threats be recognized by our intellectuals and other influential people. Here I believe William Simon’s proposals in A Time For Truth are the most effective.

What we need is privately financed organizations for ferreting out and spreading the truth. CIA- type clandestine purveyors of the supposed truth will always be suspect—or worse—of political self-seeking even by us. Even openly government financed institutions are not very effective or needed.

American businesses, foundations and individuals committed to the system of liberty give billions every year to colleges and groups which gladly, if generally unknowingly, disburse much of that money to collectivist sympathizers. They would do much better for their own cause by financing gripping movies about the decent and loving heroes who fight against slavery in Siberian Gulags, broadcasts to Cuba from Miami’s Cuban exiles, free market newspapers that compete effectively against The Washington Post and The New York Times, and magazines that expose the effects of massive government powers.

Detailed tactics are not my concern here, but just consider what an impact war films from the peasants of Afghanistan could have in exposing the Russian pose as the Land of the “New Freedom.” Since our journalists find the task too daunting (and it certainly would not be like living at the Saigon Hilton and sallying forth for a few rice paddy shots before cocktails), why not finance the training of a few dozen bright Afghan correspondents and arm them with super-8 cameras? That is precisely the sort of thing the real practitioners of freedom can do far more effectively than any government. Self-reliance—individual initiative—in truth seeking and truth broadcasting is the most effective weapon in all strategies for exposing and counterattacking Collectivist Newspeak.

A Rebirth of Economic Freedom: The De-Bureaucratization of American Business

Jack D. Douglas — Mon, 01 Nov 1982 08:00:00 +0000

Dr. Douglas is Professor of Sociology at the University of California in San Diego, though his studies of human action range beyond the usual professional or academic bounds of any one discipline, He has written and edited twenty-five books on various aspects of the social sciences and his articles have appeared in many professional journals and other publications.

We Americans have always cherished our economic freedom as a vital pillar in the foundation of our “natural system of liberty.” As in Britain before us, we have always cherished the spirit of the independent yeoman or freeholder as the embodiment of this value. As the typical American would put it today, “! don’t like taking orders from anyone. I want to be my own boss.”

The independent farmer (“freeholder”) was both the ideal and the overwhelming economic reality in American life until late in the nineteenth century. (After the invention of the cotton gin in 1793 much of the land of the South became large plantations worked by slaves. But Southerners were far outnumbered by Northern freeholders.) These independent farmers were the backbone of the Jeffersonian-Jacksonian “empire of liberty.” Being dependent on no one for their livelihood, as Jefferson argued, they could be counted on to assert their real interests and, thus, to maintain the republican freedoms enshrined in the Bill of Rights.

Jefferson and his successors feared that this republic could not long endure if the freeholder vanished and workers became dependent on others. The corporate concentrations of capital and employment that developed over the century, fueled largely by changes in government laws, especially the introduction of high tariffs after the 1830s, limited liability for corporations and huge land grants to the railroads, and partly by new capital-intensive technologies demanding many workers (as in steel), was a severe challenge to this entire “natural system of liberty.”

It looked to an increasing number of Americans as if the economic freedom of a few Big Businessmen was destroying the economic freedom of the many, turning them from independent freeholders into dependent wage earners, thus threatening liberty in general. While few Amer icans heeded the prophecies of people like Marx, who believed monopoly and its exploitation of workers would be the inevitable outcome of capitalism, ever more of them turned against business because of this Bigness. They turned to government and unions to protect them by con trolling Big Business.

Antibusiness Sentiment

By the early part of this century social thinkers, especially those influenced by the “institutional economists” of Germany, began to see business in general in the form of Big Corporate Bureaucratic Business. Progressives, including such diverse thinkers as the young Walter Lippmann and Herbert Hoover, called for more and more restraint on business and more and more planning by government. In the 1930s the great upsurge in anti-business sentiment triggered by the Great Depression combined with the argument of some economists that Big Business was now thoroughly bureaucratized and divorced from ownership to convince ever more people that government bureaucracies could just as well own and manage them efficiently.

Joseph Schumpeter, originally a member of the extremely free-market oriented Austrian School of Economics (of which Ludwig von Mises and Friedrich Hayek are the best known members), argued in his famous book on Capitalism, Socialism and Democracy that Big Business was successful because it minimized risks (especially those from recessions) and its success through bureaucratization was preparing the way for government bureaucracies to take them over. Big Business, then, had prepared the way for Socialism.

This kind of argument was most successful in the 1930s in Britain, Sweden, Fascist Italy, and Nazi Germany. In Britain the government started intentionally encouraging the so-called “Rationalization” of business, that is, concentration into Big Bureaucracies. In the 1940s government then started nationalizing Big Business, completing the Schumpeter scenario.

By the 1960s, and continuing up to today, our college students, including many of our graduate students of business administration being groomed for Big Business, were looking at business through the socialist-tinted spectacles of John Kenneth Galbraith, who proclaimed in The New Industrial State that Big Bureaucratic Planning was inevitable. “By all but the pathologically romantic, it is now recognized that this is not the age of the small man.” Given his personal preconceptions and wishes, and living in the first great period of corporate conglomeration of the 1960s, Galbraith failed completely to see that the Age of Big Business was already dying.

Revolution of Littleness

The “Revolution of Littleness” had already begun in business around the world, but especially in the United States. This Revolution was first clearly sighted and proclaimed in 1976 by Norman Macrae in The Economist. But its realities are still largely unnoticed. The early realities of even the most sweeping revolutions are normally unseen. Even the scientific and Industrial Revolutions were a hundred years old or more before many people began to realize that something of profound significance was happening. Our traditional preconceptions and our situationally limited views of the broader developments in society conspire to hide the newness and scope of such changes until they are so advanced that they become suddenly obvious.

Our Revolution of Littleness has gone unnoticed by most people both for these usual reasons and because our headlines and network stories paint the opposite picture. Most experts and politicians providing these stories are too versed in and rewarded for the traditional ideas about the Age of Big Business to see how rapidly the tide is now running against Bigness. So are many of our Big Businessmen, but they learn very quickly when the tide starts sweeping them away.

Mega-Mergers versus Little Realities

The great increase in mergers in the last few years has been the most misleading appearance. Businesses last year put up approximately $80 billion for mergers. Many of these were very Big Mergers indeed in which very Big Businesses bought up much smaller ones. U.S. Steel’s $6 billion take-over of Marathon Oil was the Big Headline of business news for weeks. On the surface this certainly shows Big Steel getting much bigger. But look beneath the surface. This move itself shows that, just as the United Steelworkers have claimed angrily, U.S. Steel is trying desperately to diversify away from the steel industry.

The really big story in the steel industry, as Jeff Blyskal shows in Forbes (January 4, 1982), is diversification away from steel and the rapid rise in profitability and growth of the smaller steel companies. The most efficient and rapidly growing steel producers in the U.S. (and in some other countries, like Italy) are generally small and slim-and-trim, with low debt-to-equity ratios and small, highly skilled, highly productive and non-unionized work forces. Over the last five years U.S. Steel has ranked 18th in growth and 21st in return on equity in the American steel industry. Once-huge Kaiser is quitting steel entirely. Some governments, notably Mexico, are pouring billions into huge, centralized steel mills. But these mills will almost certainly be uncompetitive White Elephants kept alive, if at all, by vast subsidies.

This might still mean that, even if steel is getting littler—decentralizing, U.S. Steel will get bigger. But that is not even the plan. U.S. Steel hopes Marathon, with its vast oil reserves, will provide 51% of its corporate sales and 83% of profits. Marathon, they hope, will make up for their overall shrinkage in steel sales. Those of us who believe the market forces unleashed by the deregulation of oil and natural gas will destroy OPEC’s monopolistic pricing suspect this merger will prove as disastrous as most mergers do.

Of course, we must be careful about generalizing from steel to our whole economy. Those still mesmerized by Bigness might insist that steel, tires, and autos are “dying” because of foreign competition, so they are symptoms of the “de-industrialization” of America. Actually, there is no “de-industrialization” going on, not even in the steel industry. There is only change, above all a shift to smaller, more specialized producers and to mills processing the vast quantities of scrap steel. Even basic steel production may eventually resume growth.

Prospects for Growth

Once inflation is wrung out of the economy and interest rates come down, the new tax incentives (decreased marginal rates, more rapid depreciation, and investment credit) will probably lead to investment in new production technologies. But this investment will very likely be in the smaller and newer firms, using much automation and small, nonunionized—thus flexible and productive—work forces. (Even without the new incentives, industries like textiles and watches went through this process in the 1960s and 1970s.)

But the skeptics have a serious point. So let’s look at the other extreme, that of the very new, high technology world of computers. Here there is indeed a giant to fixate the glare of the believers in Bigness. IBM remains huge and formidably creative, efficient and profitable. It is probably the best example one could find in the world today to support—by appearances—the nineteenth-century argument that the economies of scale (of Bigness) give the Big an inherent advantage over the little and doom a free economy to ever greater concentration.

But even IBM is partially a mirage of Bigness power. Though it ranks third in return on equity, probably because of its great backlog of successes, it ranks only ninth in growth over the last five years in the U.S. computer industry. Even in huge and very fast computers, where Bigness gives its greatest advantages because of the vast capitalization and many specialties demanded, companies like Amdahl (7th in growth) have been very successful competitors. A.T. & T., trying desperately to shed organizational fat through divestiture, may soon become a formidable competitor. And so far IBM has been badly bested in the most rapidly growing new realms of computers, such as personal computers, by total upstarts like Apple. Apple was created by two whiz-kids with a bright idea and no bureaucratic planning and budget-allocation committees.

The Big Picture of the Little Trend Is Clear

Because of the long-standing obsession with Bigness, conglomeration and the take-overs of little companics by Big ones get the headlines and airwaves. But deconglomeration and divestiture (selling off parts of a company) go unnoticed by almost everyone except investment bankers. Who noticed when Bendix sold its forest products subsidiary for $425 million? Or its holdings in Asarco for $340 million? Or Skagit? Or United Geophysical Corporation? Almost certainly not Teddy Kennedy or John Chancellor.

Partly because of this lack of concern, and even more because most decentralization (relittling) of business is not reported outside of the companies, we don’t know exactly how much is going on. But we do know a great deal about the trends.

Very importantly, the recent “mega-acquisitions” are not the result of any economies of scale that doom us to more Bigness. As economists like Dan Orr of Virginia Polytechnic Institute have long argued, the conglomeration and general growth of Big Corporations has been due very largely to our tax laws, unions and massive regulations in some segments of the economy (rail road, trucking, air lines) which have severely penalized new and small firms. One of these many incentives, the double-taxation of corporate dividends (first as corporate income and then as individual income), has been very important as an incentive for individuals to let corporations reinvest profits within the company, even when higher rates of return could be gotten elsewhere (say in money funds). This way only corporate taxes are paid until much later (perhaps after retirement). When the individual does receive the dividends or sells the stock he pays the lower tax on capita] gains. Even some of the Reagan economic renewal tax changes compound this government incentive to Bigness. Worst of all, the leaseback provision subsidizes the dying dinosaurs.

High Inflation Encourages Merger Activity

The recent surge in mergers is predominantly a result of high inflation and other investment uncertainties that make it less risky (or make it seem less risky to those who believe inflation, OPEC, and so forth, will continue) to buy already established businesses (or proven reserves) than start new ones or expand old ones. Royal Little, who as Chairman in the 1950s made Textron the first of the famous modern conglomerates, and is now part owner of a venture capital firm helping companies to deconglomerate, has noted, “This [upsurge in mergers] is one of the results of double-digit inflation, which makes it so costly today to go out and buy something new.”

But note that, in spite of these government generated incentives to Bigness, even today outright deconglomeration and divestiture are probably not too far behind the mergers in money terms. The fact is, as Peter Drucker has argued, most mergers do not make good economic sense and are far more the result of vanity than profit motives. Even with the government generated incentives, most mergers fail and are followed by outright divestitures, by partial spin-offs, by radical restructuring which decentralizes decision making, or by bankruptcy.

In an unusual study of the outcomes of mergers, Arthur Lewis (Fortune, May 3, 1982) found that the ten largest mergers among Fortune 500’s largest corporations in 1971 were overwhelmingly failures over ten years: “Most of the acquisitions produced appallingly low re turns during 1981. In three cases . . . the estimated return on investment was less than 5%. In three more cases . . . the return was between 5% and 10% . . . and none of them matched the 13.8% median return for all the companies in this year’s Fortune 500. If we go beyond the statistics and consider the paths of some of these corporate marriages, the case for conglomeration looks even bleaker . . . [Our study] strongly supports the notion that investing in unfamiliar businesses is unduly perilous—just as the critics maintain. Most of the acquirers evidently were lured into buying unstable companies, or into committing foolish mistakes that harmed stable ones. Only two mergers remained trouble-free from beginning to end of the decade.”

The trend to littleness is equally clear even in companies that are growing in the shares of their markets. The old stereotypic view of Big Business as a monolith run by rigidly centralized, top- down command the way an army is thought to be run (but actually is only by the losers) has never been true for many. The dominant form has been the General Motors model of decentralization of most decisions, with centralization only of those (such as auditing and financing) required to keep control. Contrary to some of the popular soul searching going on in the aftermath of the Japanese challenge, a high degree of decentralization and its concomitant of individual decision making has probably always been the dominant form of management in American business, but the degree has varied vastly from one segment to another and over time.

The Revolution Triumphant

This variation in decentralized decision making has probably been due mostly to differences in technology and markets. In general, the more complex and changing a technology, and the more competitive and changing a market, the more the incentives are for littleness, and, thus, the more decentralized the decision making.

American industries, faced with little European or Japanese competition, dominated their markets until the 1960s or, in some cases (like autos), the 1970s. In addition, in some industries, notably steel and autos, technology changed little. When the technology did change in steel man ufacturing, dominance in the domestic market was partially maintained by the union wage at the big firms and then by protectionism—both the result of government. These conditions combined with the government generated inducements to bigness to produce growing Bigness in some segments, especially in autos and steel.

But even in that period competition was so great and technological development so rapid that in general there was no increase in concentration in our overall industry (regardless of the conglomeration headlines and the pronouncements of anti-business ideologues). At the same time autos and some other segments got more concentrated, the more technical and competitive segments, like electronics and cameras, fragmented—littleness was rampant. And within companies like IBM and Polaroid the growing proportion of technical specialists were increasingly free to create their own jobs and work in small teams—and were thus more efficient at creating new products and keeping down costs.

Today, even with those government generated incentives, all really Big corporations are severely threatened by the more slim- and-trim ones, especially the new ones. Even General Motors, which a few years ago seemed a secure Goliath, is severely threatened by the much smaller, highly decentralized and automated automakers of Japan—approximately ten of them, not one. Without the government’s “orderly trade agreements” with Japan, who would bet on this Goliath surviving David’s onslaught?

Meeting the Challenge

The Big Businesses that are meeting the challenge are doing so by systematic decentralization, partial spin-offs, and sub-contracting to small teams both within and outside the company. One of the most efficient and rapidly growing companies, 3M, continually decentralizes even its manufacturing plants (to keep employees down to a few hundred at each plant) and increases its incentives for individual initiative and creativity. Gordon Engdahl, 3M’s vice president for human resources, summed up their view for The Wall Street Journal (Feb. 5, 1982): “We are keenly aware of the disadvantages of large size. We make a conscious effort to keep our units as small as possible because we think it helps keep them flexible and vital. When one gets too large we break it apart. We like to say that our success in recent years is due to multiplication by division.”

In his study of Digital Equipment (Fortune, May 3, 1982), Geoffrey Colvin noted the general principle of diminishing returns—and eventual death—from growing size: “In business, as in nature, there seems to be a law that things slow down as they grow toward the elephantine.” How has Digital maintained its dazzling growth rate this long? First, note that it’s still only 137th on the list of 500, is still reasonably young and a pioneer in the most rapidly growing major segment of the world economy. Beyond those factors, the systematic pursuit of littleness—decentralized decision making—is crucial. They’ve never acquired any company. The corporation is broken down into 18 largely autonomous units. Says security analyst Stephen Dube with Dean Witter Reynolds, “It’s not one big business—it’s 18 small ones.” The heart of any high technology firm is its engineers. Digital keeps them efficient and creative by decentralizing its 5000 into quality teams of about 30, by avoiding almost all bureaucratic rules and forms, and by keeping them in direct contact with the equipment in use and with customers.

Sub-contracting to outsiders is not only the now-famous “secret” of much of the success of Japanese auto makers, but is also growing rapidly in businesses around the world. Much of the programming for computers, especially the new personal ones, is being created by Lone Ranger entrepreneurs in their home studies, and then marketed by the computer firms or retail outlets. Even once arrogant IBM has moved more to use these outsiders and make its products compatible with those of other firms. Today almost all office work could be done at home—or anywhere in the world where a computer console can be plugged into the Worldwide Electronic Net—and thus sub-contracted out to the most efficient.

The Electronic Revolution

The Electronic Revolution is now rapidly transforming business in all economically advanced societies, and most rapidly in the United States. Computers wed to robots are rapidly making it possible for mini-factories to efficiently manufacture products with far greater flexibility than has been possible, thus allowing a far greater variety in the end products. It is also more efficient now for companies that once needed to be centralized because of their specialized products to decentralize. The Electronic Revolution makes decentralization even more efficient and this will quickly eliminate our ancient bureaucratic dinosaurs. This is one major reason why companies have been moving from more expensive cities like New York to less expensive smaller ones, especially in the South and West, and even to non-urban areas.

For years Harcourt, Brace, Jovanovich, a major publisher, has been decentralizing its corporate headquarters from New York City to San Diego, Orlando, Paris, Canada and elsewhere. By 1982 only 2,000 of its 8,300 employees were still in New York. In February of that year William Jovanovich, the chairman and chief executive officer, announced that almost all the remaining 2,000 would leave the City, thus saving an estimated $20 million a year just by moving all publishing functions to San Diego: “The notion that we have to be in New York City to conduct business is a shibboleth. With the modern electronic techniques of instant communication by video terminals, satellite communications and conference calls, it is no longer necessary to be in one place and not another.”

These sub-contractors of bigger businesses are predominantly service workers, by far the most rapidly growing segment of our economy. The Secretariat of the General Agreement on Tariffs and Trade found that “Between 1970 and 1980 there was a net increase of 19 million jobs in the U.S. (24%).” Roughly 87% of these were service jobs and the great majority of these were in small firms—some of one person. One study of data on 5.6 million firms by an MIT group found that, between 1969 and 1976, 66% of new jobs in the U.S. were in firms with fewer than 20 employees.

New Jobs with Small Firms

Since the underground economy has been growing extremely rapidly, and since almost all of these consist of one or only a few individuals, far more than two-thirds of all new jobs are in very small firms. By contrast, the U.S. Census Bureau’s “County Business Patterns” surveys show that the proportion of Americans working for companies with over 500 employees was 27.6% in 1967 and shrank to 22.4% in 1979—a decrease of one-fifth in a mere 12 years. In the 1970s the number of employees at U.S. Steel shrank by one-fourth, from 531,000 to 399,000.

The same thing is happening in the other industrialized nations. In Japan one Japanese worker out of six has his own business and some of these are one-man robot-run factories. Even in the big companies the emphasis is strongly against top-down, bureaucratic decision making and very much on individual and team decision making. As Harvard’s Ezra Vogel notes, “The essential building block of a Japanese company is not a man with a particular role assignment and his secretary and assistants, as might be the case in an American company. The essential building block of the organization is the section. A section might have perhaps eight or ten people. Within the section there is not as sharp a division of labor as in an American company. To some extent, each person in the same section shares the same overall responsibility.”

Vogel errs only in failing to realize that the most creative, efficient, profitable and growing American companies in high technology and with highly competitive markets have been doing this for decades. Thomas Edison, who created the first modern research lab early in this century, ran it entirely on the principles of team spirit and individual initiative. He is continually quoted for his apocalyptic, anti-bureaucratic pronouncements: “Organization! Hell! I’m the organization! . . . Hell! There ain’t no rules around here! We are tryin’ to accomplish somep’n’.” They did and later high technology firms like IBM followed in their path. The Japanese borrowed these ideas and sometimes improved on them. Big Bureaucratized Business in America was al ways partly a figment of the imaginations of socialistic critics and the rest was overwhelmingly due to government mandates on union powers, taxes, regulation and even direct procurement policies by the Defense Department.

In a recent update on his earlier prophecy (The Economist, April 17, 1982), Norman Macrae finds that the Revolution is rapidly gaining momentum. In addition to the accelerating rate of decline of the Big and creation of the little, he finds the remaining Big are seeing the handwriting on the wall and are rapidly introducing “intrapreneurial practices”: that is, more and more firms are breaking themselves up into largely autonomous teams that compete with each other in bidding for company projects.

The New Message

The general point is to internalize losses and profits into the smallest idea-creation and product-manufacturing team possible—bring the market incentives to each individual as directly and immediately as possible, while at the same time optimizing all the powerful motivating forces of team work (“fellow feeling”). As Macrae is well aware, this idea has long been used by very successful American companies like Arthur D. Little. But what is new is the rapid spread of the practices and—even shocking—the spread of the message. There are now consultants in Sweden and the U.S. (such as Mr. Bob Schwartz’s Tarrytown School for Entrepreneurs outside New York) and even professors (such as Reg Revans at Manchester College of Science and Technology) who are propagating the message. And even Prophet Macrae is being honored in his own day, having been invited to give talks on the Revolution of littleness in twenty nations.

As technology and competition increase, what is now an early but powerful trend will become a tidal rush. If the government ever stops mandating inflation and punishing small business, the Revolution of Littleness will sweep all before it. And the Age of Little Business will be an age of greater economic freedom, thus of ever greater creativity, efficiency and growth for all of us.

Totalitarian Collectivism in America

Jack D. Douglas — Fri, 01 Aug 1980 08:00:00 +0000

Dr. DougIas is Professor of Sociology at the University of California at San Diego, though his studies of human action range beyond the usual professional or academic bounds of any one discipline. He has written and edited twenty-five books on various aspects of the social sciences and his articles have appeared In many professional Journals and other publications.
This article Is from the preface of his book, The Myth of the Welfare State, forthcoming.

“Nothing is more striking to a European traveller in the United States than the absence of what we term . . . government.” So wrote Alexis de Tocqueville of American society in the 1830s. What American in 1980 could possibly think of our society as one characterized by an “absence of government”?

Government at all levels now directly controls nearly forty percent of our wealth through direct taxation, yet anyone with a smattering of economic knowledge knows that the indirect taxation mandated by government regulation is also huge. American society today is a government-controlled society, a society in which all of us are controlled in innumerable ways by a vast number of proliferating government bureaucracies, agencies, committees, police powers, legislative bodies, judicial decisions.

Tocqueville recognized that government powers might someday grow in America into the huge bureaucratic administration of life that had earlier characterized the mercantilist monarchies of Europe. He realized that the welfare of any nation necessitated the legislation of general principles for the whole society by the central government. But he had forebodings that the American government would go far beyond that and turn mass democracy into democratic tyranny. If the central power, he argued, “after having established the general principles of government . . . descended to the details of their application; and if, having regulated the great interests of the country, it could descend to the circle of individual interests, freedom would soon be banished from the New World.” Any educated American in 1980 knows that our huge government bureaucracies now dictate minute details of our everyday lives and enforce their dictates with vast police powers.

America Today an Imperial Bureaucracy

America today is ruled by an Imperial State Bureaucracy headed by an Imperial President. Certainly there are significant differences in the forms of our imperial government; but any historian of the ancient imperial states or of those of the sixteenth-century mercantilist monarchies will easily recognize that the differences are only surface phenomena, while the basic realities of power and its administration are very much the same.

It is only political rhetoric and the ignorance of history now almost universal even among our so-called educated people that makes it possible for people to pretend that “America is still the land of liberty.” Certainly America is still more free by far than those nations now ruled over by the terrible socialist state bureaucracies. Indeed, we are still significantly more free than the cowed peoples of the democratic socialist nations of Scandinavia, once-Great Britain and elsewhere. But anyone who has studied the trends of recent decades knows that we are closing the political gap between ourselves and their state tyrannies at a terrifying rate.

We scholars who several years ago hoped selfishly that we might at least be spared in our lifetime the terrors of pseudo-democratic state tyrannies must now recognize that our hopes are fading rapidly. We social scientists know that in the past few years alone the federal bureaucracy has moved relentlessly to establish committees at all our universities to review our research and, thereby, to control what we can know and say about our society. What greater power can any government possibly wield than the power to determine what can be known and how it can or cannot be known?

And yet there has been no great outcry, no widespread screams of outrage or anguish from our people. The reason for that is that they are firmly in the grip of the myth of the welfare state, the myth that their individual welfare depends upon and is served by the ineluctable ratchet-up in state powers. They believe this myth for many irrational non- reasons. The politicians are paying them off with their own tax-monies and erstwhile liberties: the politicians use police powers to take from them their wealth and their individual liberties to determine how they will live, and then return part of this to them under government constraints—but only on the proviso that they support the politicians who use police powers to take away their wealth and their liberties. It is not too difficult to see how our peoples, in the grip of the great temptation of greed and mystified by the pseudo- science theories that tell them it is all necessary to surrender their liberties in order to have liberties, can be so easily deceived.

Even more ominous than the relative lack of outcry from our people has been the lack of serious outcry from our intellectuals and scientists. Most ominous of all, it is they who have been clamoring the loudest for ever greater imperial state controls. It is even the academics who administer the thought control programs of the federal bureaucracies now trying to dictate how we shall do research. Those who remember that it was the intellectuals and social scientists in Germany who clamored for more state power over German life, and they who repressed any opposition to Nazi thought controls once they came to power, will recognize that the seeds of mass-democratic tyranny are already firmly planted in our society.

The most effective tyranny, and thus the most terrible tyranny, is always imposed by the people upon themselves, at least in the beginning, and they have almost always done such an irrational thing only when their intellectual leaders have convinced them that such tyranny is necessary and good—that it will serve the greatest welfare of the people themselves.

Political Deceptions

Mass democratic tyranny will probably always be built upon the two great political deceptions of mass equality and mass welfare. Those deceptions will take many specific forms, always conforming to the particular political rhetoric already widely shared in a particular society, but the general message will be the same and so will the result.

In a mass democracy that has triumphed over all traditional values there is no truth, no justice, no social welfare beyond that of the voice of the people. The people determine what is just and good they determine everything by their votes. One man, one vote. One vote, one unit of truth and morality. Majority rules. More votes, more truth, more morality. As our “liberal” intellectuals today would say, what could be more conducive to the general welfare than for all individuals to have an equal voice (vote) in deciding what is to their welfare? Even when they do not say so, most of our intellectuals have now so completely absorbed this tenet of mass democracy that they have nothing but contempt for those who try to remind them of the ancient truth that direct rule by collective ignorance—by mobocracy—always leads in time to tyranny, first to the tyranny of the majority and then to the tyranny of the few when the ignorance of the majority has produced its inevitable social catastrophes.

In America today the same nuclear physicist who would laugh uproariously at the thought that the average businessman should have a vote on whether to allow physicists to study the atom would immediately turn around and insist that he as a citizen and nothing more should have the right to vote on whether the owners of Texas gas wells should have the right to set their own prices for their gas, whether the Federal Reserve should increase the money supply at a faster rate, or whether the federal government should “stimulate” the international economy by running budget deficits and “talking down” the dollar in exchange markets.

The same sociologist who asserts with contempt that the average politician knows nothing about the realities of drug use and their effects would assert with aplomb, and without thinking to consult a single study or learning economic theory, that the government should “solve” the problem of inflation by imposing wage and price controls upon all those businessmen who “set their prices to rip-off obscene profits.”

And the average citizen voter, who can barely read at the so-called tenth grade level, asserts blandly that his votes justify the politicians’ use of police powers to dictate to doctors the standards of medical care and the maximum charges they can ask for their services.

Confusing the Issue

Why? Why does the physicist think he should have a vote to determine what price Texas gas owners can ask for their gas, whereas it is ludicrous for the Texan to vote on whether the physicist be allowed to investigate the atom? Because, says the physicist, the price of gas is a “political question” that affects us all, not a question of scientific fact. But our physicists have forgotten that there are few things in a world of interdependent markets that do not affect almost everything else in some way. What could be more important in determining the future—or lack of future—of all human beings than nuclear re search? By our physicist’s own standards, what, then, could be more “political,” and thus more subject to decision by mass vote, than nuclear physics?

And, if our sociologist can use his vote to dictate the asking price for gas in Texas, why cannot the gas owner use his vote to dictate the grading standards of the sociologist, or his hiring standards, or his subject of research?

And is it not totally logical for the same politician who dictates medical standards and prices of doctors to dictate for our Mr. and Mrs. Every person the standards of their work, the prices of their labor, and ultimately the standards of their most intimate acts and thoughts?

The logic of totalitarian collectivism is simple, brutal and entirely consistent. Once a people has decided, whether actively or more commonly, by default, to allow politicians to decide by legislation, and without severe constraints of custom or law, what is right and wrong in a basic realm of life like property rights, then there can be no logical constraint upon their exercise of power in other realms of life.

As John Locke saw, even in the vastly more simple and self-contained society of the seventeenth century, without property rights no other rights can long be sustained. The government that controls all of my property controls my right to the pursuit of happiness, my right to free speech and to the publication of that speech, my right to take a spouse or have children, my right to life itself for all things of life are totally dependent upon the material goods and the subjective controls of those goods we call property and property rights. The government that has the right to legislate gas prices in Texas, or income distribution nationwide, has every logical right to dictate research standards in physics, hiring standards in sociology, wage rates for black teenagers in New York, parental care standards for all parents, and—everything else in life.

Totalitarian Logic

When the American people used the power of their votes to give the politicians the power to legislate away our ancient economic rights they unknowingly gave them power to legislate away all our ancient rights. The American Imperial State Bureaucracy is now pursuing that relentless logic of totalitarian collectivism at an astounding rate. Once our people had accepted that totalitarian logic, there was nothing left to protect us but our isolated individual sense of outrage and our underground resistance movements. Each sector of the economy, each corporation, each besieged individual is now left alone to fight his rearguard resistance against the unconstrained might of the Common Welfare, the Welfare State.

The welfare state is built on the totalitarian logic: when the goal of the state becomes that of pursuing, without basic constraints of custom or law, the common welfare of all, then the welfare of any individual or sub-group becomes irrelevant. Thus we eventually arrive at the logical conclusion of the Egalitarian Welfare State, the conclusion Rousseau reached two centuries ago: the equal welfare of all demands that the individual welfares of everyone be totally sacrificed. And so the modern juggernaut of the Welfare State trundles onward, crushing beneath its bureaucratic powers the ancient freedoms of one group after another—to serve the Welfare of All, of course. Today the businessmen, the gas producers and the steel makers; tomorrow the doctors; then the parents; and someday the Whole World.

The opposite of the logic of totalitarian collectivism is, of course, the logic of individualist freedom. The logic of collectivism computes the individual welfare, if at all, in terms of the collective welfare, that is, in terms of “aggregates” like gross national welfare, income distributions, and distributive justice. The logic of individualist freedom does the opposite, that is, it computes the social welfare, if at all, in terms of the individuals’ welfares as defined and experienced by the individuals.

The American Constitution was built upon the logic of individualist freedom. The American government was founded to promote the common welfare, but to the eighteenth-century liberal minds of our constitutionalists that meant the exact opposite of what it means to the average American today.

Because they assumed that welfare could only be defined individually, the American constitutionalists intended the government to promote the common welfare by remaining as small and weak as it could while serving the one and only collective form of welfare, that of the common defense against foreign powers which wanted to impose Big and Powerful Government on Americans. Thus it is that they discovered that revolutionary American idea of individual freedom: minimizing the power of government will maximize the welfare of all. Thus it is that when Tocqueville visited America in the 1830s he found a remarkable “absence” of government and an equally remarkable high level of individual welfare—a land of freedom and of peace and plenty.

Unhappy Nation

The government-dominated America of 1980 is a deeply unhappy nation, a nation torn by deep dissension as never before since the civil war. Each American today is fighting his own desperate guerrilla warfare against the relentless growth of government power. Worst of all, the massive use of government power to tax and control each of us “for the common welfare,” has logically turned each of us into the enemy of all the others.

Our collectivist Marxists tell us that the free market capitalism of Tocqueville’s era was evil because it turned each man against his neighbor in economic competition. But the truth is the exact opposite. America under the free market was a land of pervasive friendliness and cooperation, of neighborly feeling and public interest politics, of self- sacrificing parents and children and charitable citizens. Now that we are all fighting desperately against each other for our shrinking piece of the welfare-state pie, we have become a surly and terribly conflictive society, a society dominated by selfish pressure- group politics, a society of sniveling self-pity in which each person blames “the society” or, more appropriately, “the Government” for all of his problems and demands that the Government solve his problems for him, a society in which parents have little control over their children and parents are deserted to the cold treatment of the state-financed nursing home, a society in which charity has been taxed away, a society in which love itself is poisoned by the political conflict for a collectivist “Equality.”

Self-reliance was once the iron string to which all American hearts beat, but it was a self-reliance buttressed by all the strength of family love and cooperation, by neighborly cooperation, and by a spirit of public interest. The hearts of Welfare-state Americans beat to the totalitarian tunes of bureaucratic regulations and state-dependency. A free America was a land in which the average man and woman believed that their nation was like a shining city on a hill toward which all human beings could look longingly and hopefully. Welfare-state America is a land without pride, a nation in which the best have replaced a sense of public interest with a sense of public shame.

The Welfare State As a Zero-sum Game

Jack D. Douglas — Tue, 01 Jul 1980 08:00:00 +0000

Dr. Douglas Is Professor of Sociology at the University of California st San Diego, though his studies of human action range beyond the usual professional or academic hounds of any one discipline. He has written and edited twenty-five books on various aspects of the social sciences and his articles have appeared In many professional Journals and other publications.

All educated Americans are aware that the eighteenth century was an era of intense international conflict, if for no other reason than the fact that the French and Indian War and the American Revolution were minor parts of the great international conflicts raging from England to India. Fewer of them are aware that the Americans were able to win their war against the far more powerful British precisely because theirs was a minor war, almost a side-show, in the bigger struggle which kept the British pinned down around the world. Almost none of them know that this century of wasteful warfare (which I think should be called the First World War and our most recent one the Third) and its culmination in the catastrophe of the French Revolution and Bonapartism was highly “rational” from the standpoint of the political economic theories dominant among European rulers.

But how could such a vast waste of human life, of accumulated wealth cast into guns and shot instead of industrial investment, and of human creativity be “rational”? It’s frighteningly simple when you understand the fundamental premises of Mercantilism, the political economic theory which dominated the thinking of rulers and most “practical” men.

Mercantilist theory took the common-sense view of wealth and applied it to the national level. The key idea is that the precious metals, gold and silver, constitute the real wealth of a nation, so the nation should maximize its possession of gold and silver. The mercantilists also assumed that the primary way by which this could be done (in all nations without gold and silver mines) was by maximizing exports and minimizing imports. They would thus receive more payments of precious metals than were paid out. And, fatefully, they also assumed that the most efficient means of doing this is by controlling the foreign markets which buy one’s exports. These assumptions led them to the logical conclusions that they should maximize their political (military) power to control colonies abroad (or, at least, markets) and, most fatefully, that they could only become more wealthy by decreasing the wealth of other nations by using such power.

One’s Gain, Another’s Loss

The mercantilist ideas thus led the rulers to look at their relations with other nations in a “beggar thy neighbor” way, or what economists call a zero-sum game: if you gain, I necessarily lose; if I gain, you necessarily lose. The only rational thing to do, if you wanted to be richer, or simply avoid getting poorer, was to seize foreign markets and precious metals. Since everyone looked at it the same way—War.

All of those assumptions were wrong, as all economic history since then has shown, yet almost all of the brightest people, from goatherds to prime ministers and kings, believed those things implicitly. The genius of classical economics, especially of David Hume’s theories of money and international trade, of Adam Smith’s theory of economic growth or wealth, and of Ricardo’s theory of comparative costs, consisted in showing how they were wrong and how all nations could get richer at the same time and at vastly accelerated rates by an international system of cooperative competition.

In vastly oversimplified terms, they showed that money is merely an aggregate symbolic representation of the exchange value of real goods, so that an increase in the quantity of money of any form will in time only produce higher prices (unless the real goods have increased); that this works internationally as well as within a nation; that all increases in real wealth come only from increased efficiency and investment; and, fatefully, that two of the major ingredients of efficiency are (1) task specialization, which allows those most skilled to produce goods at lowest cost and, thus, price, and (2) competition, which not only spurs people to greater effort to be efficient, but also allows the natural selection of the most efficient and the subsequent redirection of the casualties into more efficient production.

The general implications were exactly the opposite of Mercantilism. A nation that only increases its money only increases its prices. (This is what Spain did by seizing the gold and silver of the Aztecs and Incas. The resulting inflation prevented the rise of industrial production because it was cheaper to buy from abroad, due to long time lags in the spread of the inflation, and produced a basic movement away from efficient investment. The most successful of all mercantilists was the biggest disaster.)

Free Trade

A nation that directs its wealth to the military destruction of wealth decreases its wealth. A nation that insists on buying its own goods when it could import them more cheaply because foreign task specialists are more efficient in those goods gets poorer, not richer. The general implication was that all nations should stop wasting wealth in war, concentrate on saving and investing and becoming more efficient, and compete peacefully (cooperatively) with complete freedom of economic competition among and within the nations.

These classic ideas of classic liberalism (the opposite of American “liberalism” today) became the dominant ideas of the ruling elite in the first three quarters of the nineteenth century. Laissez faire ideas in international trade and politics were never completely applied even in England, but on balance they were distinctly dominant. This was an era of almost unbroken peace in Europe, a rare thing in European history, an era of exploding wealth, and an era without major internal economic civil war (class warfare).

That era began to end in 1870 with the Franco-Prussian war. That war owed much to the old bitterness between the two nations, especially the Prussian resentment of the de feat by Napoleon. But it is also very important that the German political economists had turned strongly toward a form of neo-Mercantilism embodied in the ideas eventually of the institutional economists, List and Sombart. (Germany never really accepted the liberal theories very much. The so-called classicists held sway until the institutional theorists entered the scene.)

The institutional economists argued strongly, even bitterly, that institutions, especially political ones, are the ultimate determinant of wealth. Most ominously of all, they argued that international free trade was rigged in favor of the rich and already efficient and, thus, was against the interest of unindustrialized Germany. They insisted on protective tariffs to protect their industries from “unfair foreign competition.” The defeat of France led to an immediate flip-flop of the French social analysts (especially the lions of Paris, Renan and Taine) from internationalism to nationalism.

A great, decade-long economic depression hit the West in 1873. Nations everywhere began building tariff walls to protect their industries from bankruptcy. The political voices of neo-Mercantilism became dominant even in England in the great new surge of imperialism in the late nineteenth century. The zero-sum game returned with vigor as nations tried to build their exports and minimize the costs of imports by controlling colonies. The armies grew, the navies grew. By the early twentieth century Europe was a “tinder-box” armed to the teeth, living breathlessly through one military-political incident after another, lulled by the century of peace and wealth produced by ideas now rejected as absurd, waiting unknowingly for the random match of Sarajevo. Zero-sum thinking produced the inevitable conflict.

The Growth of Socialism

The imperialist and protectionist theories were joined in the late nineteenth century by a far more rhetorically powerful zero-sum theory—the melange of ideas known as Socialism. Socialism rejected all the ideas of the liberals and reinstated in somewhat different (and certainly in a hidden or “cleaned up” form) the ideas of the Mercantilists. Above all, they insisted that one man could only get wealthy at the expense of another: if one man hired another and got money from his efforts, then the hired man was “exploited,” or lost, even though they both got richer by the transaction. Only complete equality, an end to the competition that gave the more efficient an advantage over the less efficient, and an end to the interest advantage of saving could lead to wealth for everyone. Otherwise, the zero-sum process would inevitably lead to greater concentration of wealth in fewer hands and the deprivation of more and more. The conclusion: class warfare within and across nations is inevitable and glorious—War!

All Western history has proven the socialist myth false. But myths are created and accepted because they appeal to deep feelings, especially those like envy, resentment, fear and aggression. These particular zero-sum myths could not be accepted by many educated people because they were so clearly wrong. But their emotional appeal led inventive people to find a new way—the Keynesian revolution.

Keynes himself did not agree with many of the ideas of the socialist zero-sum game, though he was emotionally committed to the working class cause before he developed his theory.

“Oversaving”

The high unemployment rates of Britain during the 1920s (as much as 10 per cent) can be explained by classical economists as due to the deflation caused by Britain’s return to the gold standard (at parity value) in the 1920s; higher taxes forcing capital abroad; an inefficient (thus more costly) work force at home, because of union monopoly powers granted politically in 1906, leading to the same capital flight; the growing taxes used to pay for the new unemployment benefits causing further flight; and the increasing incentives of the unemployment benefits to avoid work to be unemployed.

Keynes decided, without considering this kind of argument, that there was an inevitable tendency of a sort even Marx had not seen—an “inevitable” tendency of advanced capitalist societies to “oversave,” or save relatively more than they invested, so you inevitably get unemployment. The remedy was to have the government intervene by using its borrowing and taxation powers to “give” money to consumers and, thus, increase demand, which would then increase incentives to invest, and eventually decrease unemployment.

The Keynesian Revolution consisted not only of this idea, but its combination with the old ideas of the socialist zero-sum theory. This started in Britain as early as the 1890s, became dominant there in the 1930s, and became dominant in the United States only in the 1960s. It now dominates the thinking of the great mass of our Western rulers and educated people. Everyone knows the ideas. Equality is the only way to maximize real wealth for everyone. Competition is the source of poverty, not wealth. Efficiency is repression. And, according to Keynes, we should emphasize consumption and decrease saving (oversaving).

Most fatefully of all, the instrument of all of this is the central power of government: government is to use its physically enforced powers of taxation to increase equality through redistribution of income and, most especially, by providing “services” to the “disadvantaged.” (The implicit assumption, of course, is that under the laissez faire system the higher incomes of the few was due to their being unfairly “advantaged” by the system, not due to their greater efficiency in saving and investment and work—because it is always the case that one man’s loss is another man’s gain and vice versa—life is a zero- sum game!) This melange of Keynesian ideas and neo-socialist zero-sum ideas is what we know as the Welfare State theory.

The Redistributive State

The theory itself teaches, even insists bitterly, that life is a zero-sum game. In order for the less well off to get better off, something must be taken away from others. (Soci ologists who share these views, which is most of them by far, call this a “conflict theory.” Fateful name.) But, even if the state and the intellectuals did not teach people this, they would probably understand it or believe it. (The zero-sum game is really the most ancient way of thinking, found in all primitive societies and highly exaggerated in peasant mentality.) In any event, they all come to act in accord with the theory in the Welfare State dominated by that theory. That is, they all act as if they know and believe with all their hearts that someone else getting more means they are going to get less, and that the crucial thing is to get more than someone else—maximize your intake of government services, money and rights, and minimize your outflow of taxes and duties. The conclu sion is now apparent to those with memories and eyes—War!

In our pluralistic societies of pressure group politics, in which there are many massive groups and in which political decisions are made by coalitions of these groups, the warfare is primarily between massive groups; but it also becomes more and more individual, as the individual comes more and more to play the same zero-sum game against the members of his own group. The overall effect is to pit each big group, and then individuals, against the others in an increasingly bitter struggle for the distribution of the pie—the rights, services, benefits, monies of the body politic—the spoils of victory.

In the societies that are relatively homogeneous, like Japan and Sweden, the war of all against all produced by the zero-sum assumptions of the welfare state comes much later and at a higher level of redistribution than in the highly pluralistic societies. The United States is unique among the Western nations (and very like Russia) in having a massive number of pressure groups and no dominant group. These groups, especially the ethnic and racial groups, already envied and resented each other, precisely as the nations of Europe did over the centuries. By greatly amplifying the zero-sum warfare games in our nation, the Welfare State Revolution has pushed us far along the road toward Hobbes’ state of nature, that nasty and brutal war of all against all.

A nation that had little sense of historical community, and was pasted together with shallow patriotism and deep shared self-interest in making the whole nation richer by the pursuit of capitalistic growth for all, has been ripped and torn in every seam of its national life. Everything has become politicized—work, sex, parent and child relations, life itself. The most ignorant mugger in the big cities now mouths the zero-sum theories of our “liberal” (socialist) politicians. But we have only begun down the road to that great calamity of civil war, the war of all against all.

The zero-sum game of internal war will inevitably slow our economic growth to zero and possibly begin the final stages of deprivation—disinvestment of the British sort. When the pie becomes stagnant (the glorious goal of zero growth, at last!) these human beings turned into wolves will hurl themselves on each other in all their fury, unless their fury is directed against a common foe in the time-honored way of tyrants—foreign war! Or unless we use the solution the Russian socialist zero-summers know so well—tyranny.