Definition

Capitalism, according to the dictionaries, commonly means private ownership of the means of production.

Private ownership means that individuals control their own persons, their own energies, and the products of their energies. It prevails to the extent that individuals do not restrain or interfere with one another as they use, exchange (sell) or give away what they find unclaimed or abandoned, what they make, and what they get from other persons by gift or exchange (purchase).

Origins

Capitalism has its origins, therefore, in individual freedom and in all of the ideas, sentiments and modes of conduct that establish this freedom.

Freedom implies that individuals do not coerce, intimidate or cheat one another. This means that they do not use violence or fraud to injure one another or to deprive one another of possessions obtained by peaceful means, and that they do not threaten to injure one another in their persons or properties.

This freedom develops as individuals learn that, over a period of time, they gain more from cooperation motivated by hope of reward than they do from services performed under threat of violence. In other words, they gain more in the long run by production and exchange of goods and services than they can get by stealing, fraud, banditry or other forms of predation.

In short, capitalism arises as individuals (a) learn the advantages of division of labor and voluntary exchange, and (b) discover and live by the moral laws (rules of conduct) necessary for peaceful relations, one with another.

This progress requires growing understanding of the nature of man and the meaning of justice, together with appreciation for honor, truth, and goodwill toward more and more of their fellow humans.

The elements of moral law are set forth in what Judeo-Christians refer to as the "Ten Commandments" and the "Golden Rule." The negative form of the Golden Rule expresses the first principle: "Do not do unto others what you would not have them do unto you." This restrains and casts out forced sharing, which is a form of enslavement.

A later corollary and supplement of earlier statements—"Whatsoever ye would that men should do unto you, do ye also unto them" — arose out of recognition that we benefit, not merely by avoiding injury to others and the ensuing conflicts, but by voluntary exchange of services and by developing habits of mutual aid and neighborliness. (Cf., the neighborly barn raisings and other forms of mutual aid in pioneer days, and the parable of the Good Samaritan.)

Insofar as individuals cease to steal from one another, cease to cheat (lie), cease to coerce or intimidate one another, and keep their agreements (including those establishing the monogamous family), they gain freedom.

But this freedom develops only gradually with increasing understanding and self-restraint. No "man on a white horse," no dictator or government can give it to us. Individuals must learn to understand it, accept its responsibilities, and teach it to oncoming generations.

DYNAMICS

A. Production and Exchange

In such absence of coercion, more and more persons attain prosperity, which Frederic Le Play defined as a "multitude of good acts." They let one another keep or exchange or give away what each produces or gets by voluntary exchange or gift. They then produce more, accumulate more, trade more, and give more to others.

They give more to their customers and fellow workers in exchange for what they get; and they give more to their offspring, their friends, their neighbors, and victims of misfortune. (Note that the early Plymouth and Jamestown colonists were more charitable toward their neighbors, as well as more industrious, after they abandoned forced sharing.)

Free persons invent and adopt ways of mutual aid that are beyond the devising or imagination of slave masters and political planners. Therefore, they prosper.

B. Individuation — Competitive Cooperation — Large-Scale Organization

(1)         In freedom, humans show increasing variability in capacities and responses. Therefore, capitalistic (free) enterprises develop an increasingly great range of changing occupations, commodities, services, and opportunities for self-development and satisfaction of individual wants.

(2)        Because of the enormous -advantages of cooperation, more and more individual members of a capitalistic society show increasing regard for the interests, desires, tastes and opinions of other persons, increasing sensitivity, sympathy, and fellow-feeling (empathy), along with increasing individuation in ways of expressing these attitudes.

Some individuals go to extremes in trying to please everybody and consequently truly please nobody. ("The surest road to failure — try to please everybody.")

Others use or abuse their freedom by displaying (or pretending to display) an exaggerated indifference to prevailing (popular) customs, sentiments, and manners, and a lack of concern for the opinions of other persons.

In freedom, however, individuals cooperate more readily with such peaceable persons as have more or less similar standards in morals, manners, and tastes, but with complementary (rather than identical) interests and abilities in work. The word "complementary," or "supplemental," deserves emphasis, because many or most forms of cooperation arise out of differences in abilities and interests rather than out of similarities (e.g., farmers and manufacturers, merchants and bankers, truckers and mechanics).

(3)             The many similarities of abilities and tastes, however, make a free society highly competitive as well as cooperative. Competing individuals and competing groups offer similar (though seldom identical) services to consumers, and similar (but not identical) jobs to wage earners (e.g., coal miners and oil producers, savings banks and stock brokers, or manufacturers of different sizes and makes of cars).

Among free and peaceful persons (i.e., in a completely capitalistic, or free-market, voluntaristic society), this competition consists in trying to offer more satisfactions in order to induce cooperation rather than in threatening others with injury in order to compel submission and obedience.’

(4) In freedom — in the absence of coercion — individuals keep and control without coercive interference what they acquire in peaceful ways. That is, they may keep, control, consume, give away or trade what they find in nature, what they make or invent, what they get by gift (as from parents), and what they get by voluntary exchange, including the temporary uses of things for which they pay rent or interest.

The rights of private ownership are the rights to enjoy and use wealth and the services of free persons without physical interference or threat of interference from other persons. These are rights of adverse possession, that is, the rights of exclusive use and disposal (along with the responsibilities of control and care).

Therefore, capitalism (private ownership) is individualistic. That is, what one person owns, no one else may own. He has exclusive control of it. But he also has exclusive responsibility for it: to care for it, and to see to it that use of it does not interfere with the freedom (property rights) of other persons.’

The indescribably complex agreements as to property rights (protected by law, morals, customs and manners) constitute freedom. That is, freedom means agreements, implicit or explicit (i.e., tacitly accepted or formally stated) among members of a society, agreement that individuals shall have undisturbed control of their persons and the fruits of their energies, skills, thrift and enterprise in trade.

C. Equity vs. Equality

In freedom, there is equity (justice), not equality of rewards for effort. When individuals are free to choose with whom they trade and how much they offer in exchange, some individuals and groups acquire greater aggregations of wealth than do other individuals and groups. A particularly productive group of producers (e.g., a business firm), then, may become so industrious, inventive, cooperative and efficient that they supply most of certain commodities or services for a large proportion of a given community or nation. So concerns like Ford Motor Company grow to giant size; or a group of firms, like those making up the General Motors Corporation, cooperate in some respects (e.g., in obtaining capital) while competing in others (e.g., sales).

But, in appraising these giant concerns, we should keep in mind that:

(1) They get and hold their economic power only to the extent that they serve a correspondingly large number of their fellow humans. No company becomes great in free markets by catering to a few rich capitalists. They grow to giant size only as they help raise levels of living for thousands or millions of other producers and their dependents — unless they are favored by anti-capitalistic policies of government engaged in war, currency inflation or suppressing would-be competitors (as, for example, the United States Government suppresses competitors of the Post Office).

(2) Increasing abundance and diversity of goods make the demand and supply of every product more and more elastic. Buyers find a growing diversity of goods competing for their patronage. Wage earners find a growing number of employers with capital seeking to employ them. Capital owners are besieged by inventors and promoters seeking backing for new ways of satisfying wants or ways of satisfying wants of which consumers are as yet scarcely aware.

The most inelastic factor in a free society of responsible individuals is likely to be in the supply of wage earners (job seekers). Therefore, they benefit most from the competition of capital seeking investment, and they get an increasing share of the total product. Wages and wage rates tend to rise, therefore, while rates of interest fal1.³

D. Progress: Rising Levels of Understanding, Morality, Prosperity, Vision

Individuals in freedom prosper as they win the freely given cooperation of their fellows.

Therefore, their self-interest and family interests provide strong incentives to develop habits and concern for the qualities that other persons want in their coworkers and suppliers. These are such qualities as industriousness, courtesy, and sensitivity to the interests of other humans.

As a result, free persons tend to buy goods (commodities and services) which contribute to their efficiency as producers and enable them to discharge their countless responsibilities.

For this reason, the output of "industry" in freedom tends to become more wholesome; the health and vigor of the population improve; life expectancies tend to lengthen; and tastes in art, drama, music and literature rise. Accustomed to these rewards of progress, members of a free society tend more and more to expect and strive for improvement in the lives of their neighbors as well as in their immediate circle of family and friends.

At this point, a dangerous ideology may become fashionable. It has been well named, "the Utopian Heresy." Impatience with the real or fancied shortcomings of other persons may prompt efforts to hasten improvement by use of a little legal coercion — on a few at first, and on more and more of their supposedly backward fellows as time passes.

In this way, free and prosperous individuals may combine to infringe the freedom of their neighbors while intending only to do them good. And, as they set precedents by such coercive "reforms," others use the same arguments for more and more infringements for similar "good" ends. Thus, freedom declines.

This loss of freedom deprives individuals of opportunities and responsibilities. Therefore, it gives rise to worse conditions, which the confirmed ideologists attribute to what freedom remains. Long ago, a now-forgotten philosopher observed that "Mankind is a race which binds itself in chains — and calls each fresh link progress."

A wealthy society — prosperous because of a longer period of freedom — can afford more waste (idleness, paternalism, wars, parasitism and socialism) than a society that is poor because its people have had little freedom. But for any community or nation, a continuing decline of freedom must at last bring on a collapse in bankruptcy, chaos, revolution and/or subjection to political tyranny.

Prosperity has its perils, not least of which is the peril of forgetting how it was achieved.

This article is from a chapter of a new and revised edition of Free Markets or Famine —selected readings by various authors showing how freedom for private enterprise allows business to abolish famine and raise levels of living. This book, and a companion volume, Politics vs. Prosperity, showing the results of regulation and controls, are published by Pendell Publishing Company, P.O. Box 1666, Midland, Michigan 48640.

¹ Socialists confuse inducement or persuasion with coercion. They fail to see that freedom to cooperate exists only insofar as there is freedom not to cooperate, along with freedom to communicate without harassment.

² Socialists commonly confuse this exclusive control by property owners with the very different type of monopoly which may be obtained by restricting the freedom of would-be competitors in use of their own energies and properties. For example, the United States Post Office maintains its monopoly of distributing first-class mail by using the police powers of government to suppress competition. Coercive interventions by government or immoral and illegal private violence, or both, are necessary to maintain such monopolies. This is not freedom. It is not laissez-faire capitalism. It is curtailment of free enterprise. It is a negation of the rights of private owners.

³ The rise in interest rates during the past 60 years has been due to the anti-capitalistic policies of governments —wars, inflation of currencies, waste of resources, and forced redistribution of wealth and income.

The rise in certain land values has been aggravated by socialistic policies, which tend to concentrate populations in favored cities, thus retarding the development of less densely populated areas, whose small populations lack political power. Most of the world’s land area is still sparsely populated and is cultivated only by extensive methods.
 

“The End of the law is not to abolish or restrain but to preserve and enlarge freedom.  For in all the states of created beings capable of laws, where there is no law there is no freedom.  For liberty is to be free from restraint and violence from others; which cannot be where there is no law; and is not, as we are told, a liberty for every man to do what he lists (for who could be free when every man’s humour might domineer over him?), but a liberty to dispose, and order as he lists, his person, actions, possessions, and his whole property, within the allowance of those laws under which he is, and therein not to be the subject of the arbitrary will of another, but freely follow his own.”

-John Locke, Second Treatise on Government

The recent rise of militant nihilism¹ in the United States is reminding liberty lovers that there can be no liberty without law. Not only is there no freedom without restraint, but we gain freedom only as we discover and obey "The Law."

Unfortunately, however, "Law" has come to mean, more and more, the decrees and dictates of the State, or Government: traffic laws, tax laws, labor laws, civil rights laws, antitrust laws, school laws, and the orders of thousands of agencies employed to interpret and enforce these measures.

The "Law" may also mean the Enforcer: agencies and procedures for enforcement — the police, courts, and penal institutions.

But not all of these government fiats and enforcement agencies are necessary to preserve peace or enlarge freedom. In fact, the people of every nation could enlarge their freedom by repealing many laws on their statute books and by reducing the number of officials now trying to enforce these restraints.

Governments impose these restraints on liberty in order, supposedly, to check abuses of freedom. And, as the victims grow accustomed to their shackles, they are apt to shudder at the evils that they imagine might ensue if they and their fellows regained their freedom.²

In other words, it is hard for us to reconcile our desire for freedom with our knowledge that freedom is so often abused. Therefore, we give lip service to freedom; we say that we really believe in free enterprise, that we honestly want more freedom for everyone. Yet most of us tolerate flagrant political infringements of freedom and then demand still more laws to deal with evils which these infringements produce.

We should know that freedom in any activity is always misused sooner or later by someone. No one has the complete knowledge necessary to do always what is right, either in private or in relations with other persons. No one has the infinite wisdom or self-control necessary to avoid misusing the new opportunities which a progressive society is continually opening for its members. Doctors, nurses and teachers, as well as politicians, bankers, salesmen and artists, often abuse whatever freedom they have.

From this fact, the unthinking conclude that humans are unfit for freedom. They think of human progress, therefore, in terms of more and more use of government force to restrict freedom whenever or wherever anyone misuses it. Moreover, they often seek to abolish it where abuses are relatively few because it is politically easier to put restraints on the few than on the many.

Yet, it is from the actions of a few whom their fellows regard as foolish or dangerous, that we sometimes reap greatest benefit. "Freedom" to do only what someone else says is right is not freedom but slavery; and a society of free persons who know and choose to do only what is wise and good is a utopian dream.

What, then, is "The Law" which increases freedom as contrasted with the governmental edicts, which so often retard and restrict it? How do we discover "The Law" of a free society, and how do we enforce it without erecting a freedom crushing State, or Government?

Law as a Regularity vs. Law as a Norm

In science and philosophy, a law is a uniform order, or sequence, of events. In human conduct, it is a pattern of behavior, regularly repeated, and therefore predictable. These regularities, or laws, of human action may be psychological, economic, moral, or juristic, and perhaps aesthetic and political.

The laws of human action, however, differ from the laws of inanimate nature as humans differ from inanimate matter. Humans differ from inanimate objects in that human actions are purposive, as are the actions of all living creatures. They act from internal motive forces necessary to maintain life, rather than in direct response to outside physical forces. This makes their conduct variable and less predictable because the internal structures and life forces vary from one individual to another. This individual variation is greater for the higher, more complex organisms; and it is greatest for humans of every race, age and condition.

More significantly, humans differ from all other living creatures by being self-responsible. That is, they can learn to be consciously self-directing. Their actions result from choice rather than from instinct; and since humans choose to pursue an endless variety of self-determined purposes, any individual in a particular instance may depart from the behavior sequence which the praxeologist (scientist in the field of human action) sets forth as a "law," or regular mode of action.

The jurist, therefore, in common with other praxeologists, finds that the regularities, or laws, with which he deals are norms — normative rules, standards, expectations, probabilities, or "oughts" — rather than the (more nearly) invariable sequences which the physicist or the chemist may discover and call "laws."

Interpreted most broadly, therefore, "The Law" in human affairs means the norms or system of norms, for human behavior. A specialist in this field (a lawyer or jurist) may concern himself only with the rules and standards actually prevailing in the community to which his clients or other parties belong.

The Law in human relations, accordingly, consists of all of the rules, customs, and standards that affect the decisions of juries and judges. It includes not only written statutes and ordinances, rules of procedure in courts of law, and prior court decisions, but also pressures and prejudices which may influence a jury’s vote or a judge’s determination of the law in a particular case.

More narrowly, philosophers of law describe it as that entire complex body of rules, judicial decisions, and usages which prescribe the actions of individuals and groups toward one another and which are enforced by sanctions.

"Sanction," in this use of the term, means "detriment, loss of reward, or coercive intervention" to restrain, injure or inconvenience offenders. The sanctions for law may consist of counter-aggressive retaliatory force: seizure of property (fines), imprisonment, or physical injury (flogging, maiming, or execution).

Or, more often, these sanctions take the form of defensive actions, such as shunning the offender and using force merely to block attempted trespass or aggression. The defensive action may be cooperative, such as, for example, the exchange of information to alert one’s neighbors or the members of an association to the offender’s variation from the sanctioned norm.

Thus, a member of a credit association may report for the benefit of other members that a customer has failed to pay his bills. Or, the action may involve forming a voluntary association to block aggression by united action in erecting defenses, such as building walls and hiring watchmen.

Let us note at this point, moreover, that the defensive responses to trespass are far more frequent and more effective than the coercive reactions.

Origins of The Law

The Law — these sanctioned norms of human conduct — originate in the claims of individuals and in their actions to gain recognition and respect by other persons for these claims. As a dog whirls in a pile of hay or straw to make his sleeping place, so each individual makes for himself a place in nature and among his fellows as he acts to support his life and rear his offspring.

It does not follow, however, that these acts to support one’s life must be predatory or that the actions to establish necessary claims (as for example, a claim to living space) must be aggressive and injurious to others. Humans make a better living by division of labor and voluntary exchange of services than by stealing or by producing merely for their own consumption.

For this reason, those who practice and defend the ways of peaceful, voluntary cooperation tend to "possess the earth." These peaceful usages become customs and mores, and finally acquire the sanctions that make them Law.

When Law and Freedom Are Underdeveloped

Members of primitive societies, of course, have only a primitive (scanty, undeveloped) understanding of The Law in the ideal sense. Therefore, their laws are primitive. This makes their culture primitive and restricts their level of living to one which makes their lives brutish and short.

That is, primitive societies recognize few claims of individuals to exclusive use (ownership) of land and its products: they recognize few claims to individual ownership of capital goods (such as a boat or even a hut); and they acknowledge few claims to control (ownership) of the individual’s own energies and person. Still less do they acknowledge an individual’s claims to private enjoyment (ownership) of what he may gain from trade with outsiders; and not until a society reaches a comparatively advanced stage of culture do its members permit individual claims to rent or interest earned by loans of property (that is, claims to gains from sale of the uses of property).

Members of such societies use their energies and resources inefficiently. They carry on little agriculture, devise few tools or machines, do little trading, do little building, and have no landlords, bankers or capitalists. That is what we mean by saying that their culture is "primitive." Their economy is "backward," or "underdeveloped"; and the people are "poor" (lacking in capital, or wealth). The individuals lack freedom (rights of ownership) to use their energies or the products of their labor and enterprise to enrich themselves. For lack of law establishing these rights, they are in bondage to the collective. This bondage restricts development of individual talents. Consequently, their social relations remain unprogressive, and their lives remain relatively mean and poor.

We should not infer from this, however, that the members of primitive societies live in a state of perpetual war with one another or with members of their communities. Popular though the notion may be, it is a myth that "savages" live in a "dog-eat-dog" state of incessant warfare and turmoil because they lack the officials and procedures of modern governments.

The contrary seems to be nearer the truth. The social relations within tribes of primitive cultures often appear more tranquil than those prevailing within and between those of more complex cultures.

The reason for this apparent tranquility may be that the tribe members punish violators with such certainty and severity that few dare to challenge the mores, as one might, for example, by trying to keep for his exclusive use what others believe should be shared. (Similarly, the relations between master and slave may appear peaceful because of the threat of dire penalties if the slave disobeys the master’s orders; and relations within a trade union or between the unions and employers may appear peaceful because no employee or employer dares challenge its rule.)

The lack of recognition for individual property claims — in other words, the lack of property laws — means that, in a primitive group, any individual who keeps for himself the fruits of his labor may have sanctions applied to him much like those which an advanced community applies to a thief.

Yet, because ambition is stifled, members of a primitive society may appear to suffer less feeling of conflict with their fellows than members of more civilized and progressive societies; and they may share their meager fare generously with a passing stranger.

Claims — Strains — Progress

In more advanced and progressive societies, the growth of wealth and changes in ways of living produce ever more numerous changes in occupations and techniques. These changes continually give rise to new individual claims and conflicts, as, for example, claims to ownership of one’s signature and conflicts with would be trespassers (forgers). Out of these claims, pressed by the actions and arguments of interested individuals, come new usages, customs and laws — but not without stress and strain.

The stresses which arise from disputes over new claims may result in dangerous outbreaks of destructive violence unless there is a general, deep commitment to nonviolent methods of settling disputes. Insofar as this commitment to peaceable settlement of conflicting claims prevails, we find peace and progress.

This commitment to peaceful methods of settling disputes requires acceptance of the basic principles of The Law while discovering and learning to accept new applications of these principles.

Whence comes this commitment to nonviolence? Whence comes the rationale for non-interference and for individual rights that permits the development of property laws necessary for the growth of capital and for the human progress which increasing capital supports? In short, whence comes The Law which preserves the peace and frees the individual to prosper and progress?

The Way to Peace

On the one hand are those who profess to find that the fountain of law and justice is the tribal Chieftain, the King, the State, or the Government. In this view, the establishment of order, peace, and freedom must await the formation of a Government which claims and secures a monopoly of the law making process, and which aggressively applies whatever coercive, retaliatory sanctions may be necessary to frighten people into obedience to its decrees.

According to this view, too, peace between these governments will come only when a World Government acquires the overpowering military forces necessary to subject all competing Lawmakers and Enforcers to its authority.

Opposing this view are those philosophers of law who see in the monopolistic, retaliatory State a lawless organization which wins power by promising peace but which always sooner or later becomes the chief lawbreaker and warmonger. Worshipful reliance upon this political juggernaut, they warn, now threatens all mankind with enslavement and destruction.

The same unreason which approves retaliation and terroristic penalties for violations of the State’s decrees gives rise to the collectivistic tyranny of the war-making State and finally produces the mob violence and civil war which mark its own decline and demise. Human progress, these juridical philosophers contend, requires an end to retaliation by States no less than by individuals, "Vengeance is mine: I will repay, saith the Lord."

In this anti-statist view, The Law is not devised but discovered; and this discovery can be made only by the exploratory actions and "right reason" of free, self-governing individuals. The truly progressive lawmakers then, are all of the countless individuals who practice, defend, and expound the norms of peaceful action in support of human life.

Thus, men of peace who recognized and tried to practice self-responsibility developed the jus gentium ("law of nations") of Ancient Rome. Similarly, their moral successors discovered, lived by and taught the medieval and modern "Law Merchant" of the Western World and the "Common Law" of the English speaking nations.³

³ In the words of Cicero, "True law is right reason in agreement with nature; it is of universal application, immutable and eternal…. We are not allowed to alter this law, nor is it allowable to attempt to repeal any part of it, and it is impossible to abolish it entirely. We cannot be freed from its obligations by Senate or by people, and we need not look outside ourselves for an interpreter of it. There is not a different law for Rome and for Athens, or one for now and one for the future, but one eternal and unchangeable law valid for all nations and all times… Whoever is disobedient is fleeing from himself and denying his human nature." De re publica, III, 22, quoted by Louis Rougier, The Genius of the West (Nash Publishing Corporation, Los Angeles, California, 1971), p. 27.

Outlawing Retaliation

The sanctions for The Law, as it has developed in the most advanced societies, no longer include retaliatory action by "unauthorized" (private) persons. A private citizen may kill a trespasser or thief with impunity only when he has reason to believe that the trespasser menaces his own life and that of others on the property. He may not, legally, pursue and kill the thief or trespasser who is running away. The wronged husband or wife may not vengefully kill an errant spouse. That so-called "Unwritten Law" in such cases is being repealed.

Consistent with this development in recent generations would be withdrawal of authority for retaliation by any person or persons. Ideally, the sanctions of a peaceful, law-abiding, progressive society defend and preserve; they do not retaliate or destroy. We find in advanced societies therefore, growing sentiment for rehabilitation of offenders or, at most, precautionary confinement, instead of penalties intended to "make an example" of them or to make them suffer as these trespassers made their victims suffer.

To see that terroristic penalties may not be the most effective way to gain obedience to The Law of a free society we must recognize two important facts:

First, these penalties alone cannot secure compliance in an advanced society even now. To put this in another way, the police alone cannot stop crime in a modern, complex society.

Second, we must recognize the many non-political ways by which members of a comparatively free and progressive society, such as these United States of America, teach and enforce The Law necessary for voluntary cooperation.

Individual and private action must play the leading role in making the laws and in obtaining compliance. Government officials may assist the process, but often they distort and misdirect it; and it is easy to overrate what Government can or should do in law-making and law-enforcement.

Furthermore, coercion — whether defensive or retaliatory — merely assists law enforcement in a limited number of cases. As Dr. Bruno Leoni, late Professor of Legal Theory at the University of Pavia, Italy, well said:

“It is curious to note how many people are so highly impressed by the peculiar nature of coercion as a purportedly typical ingredient of legal norms that they tend to overlook completely the very marginal significance of coercion in any actual legal order as a whole.”⁴

Moreover, he continued, coercive sanctions apply only to some norms, not to all. The main norms, such as the constitutional ones, in each single nation, or the international ones concerning relationships between nations, often do not even mention sanctions or coercions, for the simple reason that no sanction or coercion could assist them in any effective way.

We should take care to note, however that Professor Leoni referred to coercive, retaliatory sanctions: for a practice that is subject to no sanctions whatever is not a law but merely a custom or usage.

Unfortunately, statist influences incline us to think of legal sanctions only in coercive, retaliatory terms (fines, imprisonment, and bodily injury), because in most cases the State must apply these or none at all.

Purely defensive sanctions, on the other hand, involve mechanisms and physical force only to block (prevent) aggression and withdraw from cooperation with the offender. These generally require the exercise of private initiative, which statism tends to discourage or suppress.

Yet, these noncoercive sanctions may be more effective and economical than retaliatory measures. This appears particularly obvious in the field of international relations. Few Americans today, probably, would favor efforts to collect a debt from a delinquent foreign government by a military expedition against it. Most would probably prefer purely defensive, noncoercive sanctions in such a case: withholding further loans until some agreement is made concerning the unpaid debts or until assurance is given that future contracts will be honored.

Many Americans would agree also that progress in obtaining compliance with The Law in domestic affairs might come more readily through greater reliance on nonretaliatory sanctions.

Juvenile delinquency, for example, has been increasing in recent decades mainly because Government has been discouraging or prohibiting use of certain defensive, noncoercive sanctions that were formerly applied. Teachers, parents, and employers once could and did withdraw their services and the opportunities of school, home, and workshop from mischievous or indolent youths.

Now, especially in the United States, school attendance laws deter public school teachers from expelling them. At the same time, child support laws, child labor laws, minimum-wage laws, and lawless actions of privileged trade unions discourage or prevent parents from requiring irresponsible juveniles to choose between accepting the disciplines of employment or leaving home. In addition, subsidies to the parents often weaken their incentive to impose the necessary sanctions.

Even more demoralizing, perhaps, has been the increase in statist control of the schools, control which deprives parents of both the means and the feeling of responsibility for educating their own offspring.

In short, Government has turned benevolent despot by subjecting youths to its own brand of maternalism and forced schooling, while it restricts their freedom to make themselves useful, reduces their parents’ financial ability to provide more suitable schooling and in other cases reduces the parents’ incentives to set an example of useful effort or to require such effort of their children.

Is it surprising, then, that juvenile victims of this irrational despotism turn, rebelliously, to mischief and crime to relieve their boredom or perhaps to supplement the unearned incomes of their subsidized families?

More freedom for the young to be useful, and more freedom for parents, employers and teachers to apply non-retaliatory sanctions, as well as to provide more productive outlets for youthful energies would be a more effective way to raise the moral level of juvenile conduct.

Progress in Private, Defensive Sanctions

Fortunately, private initiative still operates defensively in countless ways to maintain The Law: by home teaching and discipline, by locks on doors and windows, by watchdogs and burglar alarms, by private guards and watchmen, by safety deposit boxes and vaults, by cameras and recording devices, by lie detectors and reference requirements, by employment policies, by exchange of credit information, by organized or unorganized boycotts, and even by building walled cities for carefully selected residents.⁵

Criminality would quickly overwhelm the Government’s defenses for persons and property were it not for such private defensive actions. And, if private citizens become more aware of their responsibility and opportunities for self-defense, producers will quickly supply more effective devices and techniques for the purpose. This could do more to assure compliance with The Law than an increase in Government’s police powers.

Libertarians contend that we can promote the progress of The Law by various reductions in the size and scope of Government. How far we should go in this dismantling process, and to what extent private enterprise can progress in providing improved protection, will be matters for endless speculation and debate.

But in one essential undertaking we can go far. We can cooperate in promoting understanding of the vital role of private, individual enterprise in making — discovering, accepting, and enforcing — The Law of a free society.

Along with this private law-making and law-enforcement, members of a free society must know and appreciate that coercion of one’s fellow man — whether the coercion be legal or illegal — is not a short-cut to prosperity or welfare, but a barrier to progress for all mankind. Only by the example and freely given cooperation of our fellow humans can any of us prosper. Wrote Frederic LePlay, French engineer and sociologist, "Prosperity is a multitude of good acts." A prosperous society, then, is one consisting of individuals who love the ways of justice, freedom, and righteousness.

Self-reverence, self-knowledge, self-control,

These three alone lead life to sovereign power.

Yet, not for power, (power of herself

Would come uncall’d for) but to live by law,

Acting the law we live by without fear;

And, because right is right, to follow right

Were wisdom in the scorn of consequences.

-Aenone, Tennyson

¹According to Webster’s New World Dictionary (New York: The World Publishing Co., 1964), nihilism means: 1. in philosophy, a) the denial of the existence of any basis for knowledge or truth, b) the general rejection of customary beliefs in morality, religion, etc., also ethical nihilism. 2. in politics, a) the doctrine that all social, political, and economic institutions must be completely destroyed in order to make way for new institutions: specifically, b) N- a movement in Russia (c. 1860-1917) which advocated such revolutionary reform and attempted to carry it out through the use of some terrorism and assassination; hence, 3. loosely any violent revolutionary movement involving some use of terrorism.

²Cf. Robert M. Bleiberg, -"Government and Business: Federal Regulation Has Reached a Dead End," Barron’s, April 23, 1975, for recent examples.

³Ibid.

⁴ Lectures before the Rampart College Phrontistery, December 1-7, 1963. See also his published work, Freedom and The Law (New York: D. Van Nostrand Company, Inc., 1961).

5 As law-abiding citizens seek homes in "safe" communities — communities in which they are better protected against violence — they stimulate competition among politicians in performing this service for the citizens subject to their taxing authority. Unfortunately, increasing centralization of political power is restricting this wholesome competition.  

On non-election days, however, Americans show amazing confidence in business, even — or perhaps especially — in big business. They buy from the shops and stores, including the biggest, eagerly and happily; and they display great indignation if a purchase fails to perform according to the businessman’s promises, as though this were so unusual that the seller must "make it right" —as he usually does. Similarly, they apply for jobs and appear to be particularly pleased and proud when they get a job in a big concern. They entrust their savings to banks, insurance companies, and many other kinds of businesses; and in this, too, they appear to prefer to deal with the bigger concerns.

In short, most Americans — like the people of other countries with certain capitalistic traditions and large remnants of business freedom — know from experience that business enterprises help them get a large and essential part of what they want in life. They know it as humans knew, long before the apple fell on Isaac Newton’s head, about the effects of gravity.

Still lacking, however, is sufficient understanding of business operations in free markets to protect them from political witch doctors who cause worse maladies than they promise to cure.

What "Business" Means

We use the term "business" in many ways. It may mean any type of work, occupation, or profession. But when we speak of a business-course or business college, or refer to the business office of a factory or university, we use the word in a much narrower sense; and it is in this restricted sense that business is "controversial."

In this narrow meaning of the word, business means buying and selling — the marketing of commodities and services. In this sense of the term, little Sally engages in a business transaction when she gives her dime to the store clerk in exchange for a candy bar. When we say that the successful American farmer must be a good businessman as well as a good farmer, we mean that he must know his markets; he must watch his costs and prices as well as soils and fertilizers; and he must adapt his operations to changes in market conditions as he does to changes in weather or new invasions of bugs and bacteria.

As a specialized occupation distinct from farming or industry, education or politics, business carries on the marketing operations: advertising, selling, banking and credit management, speculation, and accounting.

The specialization is seldom, if ever, complete. A merchant, for example, may carry on the work of transportation by employing truckers and delivery men; and trucking companies must help market their services by advertising. Similarly, every mechanic, engineer, teacher and scientist must engage to some extent in business — in buying and selling.

Buying and selling, of course, are merely two ways of looking at the same transaction, and as we shift from one side to the other, we complete our exchanges of goods for goods. These exchanges are the aim, or purpose of all commerce, or business. A wage earner sells his services for money; then he uses the money somewhere else to buy commodities and services from grocers, shoe stores, dentists, or the teachers of his children. By using money we can split every exchange of goods into two stages, and we can complete the second stage (buying the goods we want for our work) in places far removed from the place of the first stage (selling our own services or products), and we can complete that second stage with many different producers or their commercial agents.

By using money, therefore, and learning to buy and sell, we increase enormously our opportunities for completing exchanges conveniently and economically.

Essential For Peace and Progress

In fact, without money and the "money-making" specialists we call "businessmen," the high costs of exchanges by barter, trading goods for goods, would make division of labor and exchange impossible except in very simple forms within a small group, such as a family or clan. For this reason, communities whose members do not learn to buy and sell for money remain small, isolated, and poor, holding lands which commercial groups do not want or grant them for a time for charitable reasons.

Conversely, as people learn to buy and sell, and to respect one another’s rights to conduct their business transactions free of molestation, they can obtain the apparently unlimited advantages of the division of labor.

Now, division of labor (specialization) and exchange of the products are two aspects of cooperation. They are as inseparable as two sides of a coin. We can’t have one without the other.

And cooperation is generally supposed to be the way of peace and progress.

Why, then, are the business specialists, who promote the exchanges necessary for cooperation so often held in less esteem than the farmers, engineers, industrialists, doctors, and politicians whom they serve?

Sometimes, it is true, requests for cooperation turn out to be proposals for someone to give or serve without return. Such a one-sided arrangement is an operation, not cooperation.

Cooperation means working together, a pooling of effort for mutual benefit. In this sense of the term, cooperation is necessary for human progress.

But if we are to cooperate, we must bring together and distribute our products and services. We should suppose, therefore, that those who specialize in promoting and arranging this pooling and distribution — the businessmen —would stand high in public esteem as promoters of human progress. Consider some of the leading activities of the business world:

1.       Market study. Businessmen study what buyers want, what they may want in the future, what may be useful to other persons, what producers can supply, and how producers may supply at the least cost what buyers most want.

2.       Promotion and investment. Businessmen persuade producers to exert effort; they persuade savers to supply capital; and they guarantee payments as inducements.

3.       Selling. They inform potential buyers (most of whom are producers in one way or another, or dependents of producers) as to what is available for purchase, and tell them how the goods may be enjoyable, useful, and beneficial.

4.       Accounting. They keep records of their operations in terms of money as a means of comparing costs and selling prices, and they use these records to help them plan their future operations.

In performing these operations, individuals find unlimited opportunities to use and develop any and every human talent — talents for research, invention, and discovery, talents for knowing and explaining, talents for speaking and writing, talents for understanding, appraising, and persuading other persons, talents for solving problems and making difficult decisions.

Honesty Pays in Free Markets

To win the cooperation of others, as business enterprisers must do, the first trait required is that of integrity: keeping one’s promises, punctuality, paying one’s debts, and speaking the truth. For cooperation continues only where there is mutual trust, and trust requires that individuals be trustworthy as well as trusting.

Business success also requires fairness, ability to do justice; and the greater the individual’s success in winning promotion or building his own business, the more important becomes this sense of justice and the strength of character necessary to act justly. This requires intelligence and understanding, for the just man must perceive the indirect and long-run effects of his decisions and acts, so that he will not give a favor to one person at the expense of less than justice to another.

Opportunities for success, of course, provide equal opportunities for failure; and individual failures to understand and take advantage of the opportunities and rewards for right conduct exist wherever we find human beings. Fraud, weakness, and injustice appear in business as they do in education, politics, family life, and church activities. But in freedom, the failures are penalized; weaklings and the unjust are held accountable as customers, creditors, suppliers, associates, and employees are free to withdraw their cooperation and form new business relationships with the more efficient, prudent, and wise.

Business enterprise in arranging, stimulating, and guiding cooperation through exchanges in free markets has been therefore, the foundation or wellspring of human progress in every conceivable way. Humans rise from animal levels, in character and ways of living, as they abandon violence as a means of getting what they want from their fellows and turn to the ways of peaceful, voluntary exchange. And these are the ways of business.

Why, then, should the specialized activities we call business be a principal target for attack by intellectuals and politicians in all eras and nations?

No one can supply the final defense for any social institution, however, necessary or useful it may be. Humans will continue to doubt and challenge because they seek to know, understand, and learn. Skepticism helps keep within tolerable limits the useless and uneconomic experiments of curious, fallible humans. Every human advance brings also new problems, new abuses of opportunities, and new deficiencies of understanding; and these problems, abuses, and gaps in our knowledge give rise to denunciations even of progress itself and the ways it comes about.

Business institutions and practices are no exception. They must always be subject to continuing study and criticism to correct abuses of new opportunities so that the way may be cleared for new advances.

Therefore, I shall list only a few of what appear to me to be the more dangerous and enduring misconceptions concerning business in general, and suggest answers that may warrant special attention.

(1) The Technological Concept and it’s Implications

Technicians with little understanding of economics and business tend to look upon the production and distribution of goods as a variety of mechanical techniques which experts can teach and direct in terms of hours of robot effort, types of machines, and processes for shaping and transporting specified numbers and kinds of commodities and services to specified users and consumers.

Knowing the technical advantages of certain materials, methods, and products, they may resent the restraints of business managers who must think in terms of costs and selling prices, and who know that a business must make a profit to survive and grow.

Thorstein Veblen expounded the technologist’s point of view in his little book, The Engineers and the Price System, written shortly after World War I. In this and in his earlier writings he argued that profit-seeking businessmen were holding back industrial progress in order to keep goods scarce and high-priced, and he tried to explain why engineers, not owners and investors, should control production and distribution.

His work helped to inspire the "Technocrats," an organization of engineers and others who campaigned for this idea in the 1930s. These, along with Stuart Chase and other anti-business writers have had much to do with the denigration of business in the past 40 years and more.

This technological concept of economic activities is essentially that of Karl Marx and other socialists. It is the view that Lenin, Stalin, and the Chinese Communists have tried to put in practice, with disastrous results.

In this view, the experts in physiology and psychology can even provide stronger incentives for the general run of producers than those of the price system. These experts can know better than the layman what work he can do best and with greatest satisfaction; and they know better than the average person what he needs in the way of food, clothing, shelter, and even entertainment to keep him healthy, happy, and industrious.

In an economy of trusting, cooperative producers, directed by scientists and expert technicians, there would be no need for wages, rents, interest rates, fees, profits, or other prices to guide and motivate producers. There would be no need for advertisers, salesmen, peddlers, promoters, brokers, speculators, merchants, or bankers. Producers would deliver everything consumers might need, either in the right proportions or in such abundance that no one would suffer from shortages.

The abundance would result from shifting to productive pursuits the useless workers who, in capitalism, are employed in commerce and finance. And, supposedly, any mistakes which experts might make would be less costly than the continuing costs of advertising and selling in free markets, the wastes of duplication of effort by competing firms, and the losses in output resulting from the desires of business owners to keep goods scarce and high-priced.

Why Experts Grow Less Competent to Dictate

As many scientists and technicians know, the socialist’s faith in the "expert" fails to take into account the countless differences between human beings in regard to their abilities, tastes, and interests.

These differences in human capacities and interests, moreover, become greater and more significant as humans progress in knowledge and control of their environment; and they increase, not in proportion to the progress of science and technologies, but far more than in proportion. These differences make more and more difficult the task of the specialist who tries to manipulate other persons without their active cooperation.

For this reason, if for no other, each individual must more and more learn to govern himself in a progressive society — to choose his vocations, to pursue self-selected goals, and to choose the means to achieve those goals. The further humans progress, the less competent the "experts" will become in deciding what others should or must do to develop their human qualities. In other words, slavery is profitable, if ever, only when the victims are reduced to a near-animal level of understanding. But a citizenry of such a character can build no "great society."

Attempts at central planning and direction, therefore, become more costly as the economy progresses, as individuals gain in knowledge and opportunity, as they engage in more varied and complicated activities, and as their exchanges of services become more numerous and roundabout.

Humans are worth little, if not actually a menace, to masters who try to treat them as sheep or cattle, as if their imaginations and ingenuity were of little importance. One person becomes useful in cooperating with others in proportion as he is eager to invent better ways of doing what they want done. Then he provides services which they did not know they wanted or needed, and which they could not possibly describe or order. What master could have told his slaves a century ago how to make an automobile or airplane, a radio or television set? Even today, no individual can tell others all of the steps necessary to make even such simple things as a pencil, pen, or pocketknife.”

Producers must make numberless adjustments every day in their work in order merely to maintain output, let alone increase it. These adjustments call for countless decisions. In freedom, these decisions and adjustments affect the supplies and kinds of goods offered in the markets; prices offered and asked respond to these changes in output but they respond also to changes in the humans themselves. Producers and consumers, sellers and buyers, in turn respond to the price changes and thereby react to the decisions of other members of the economy with little or no need to know or understand the numberless factors which entered into the making of those decisions.

Among their other activities, businessmen watch and anticipate these price changes, publicize them, and help to speed the adjustments. A rising price in free markets is a call to increase output or to find substitutes; a falling price has the opposite effect.

This economic organization of actions and reactions is now complex beyond any imagining, and it is neither mechanical nor automatic. The price system is not merely a computer, and it cannot be manipulated like a computer. It is a system only insofar as individuals choose to cooperate and respond to one another’s suggestions, inducements, and statements; and attempts to manipulate it by force or fraud are self-defeating and destructive.

Experience with central planning in Russia and Red China shows that market prices are essential for economic coordination, and the Communist planners get a modicum of economic cooperation only as they permit individuals to profit from their enterprise in adjusting their techniques to price changes that respond to changes in the informed choices of other producers and consumers.

(2) Intolerance For Other People’s Tastes

Similar to the socialist’s notion that technical experts should dictate to the general run of producers and consumers is the contention that freedom for profit-seeking businessmen wastes "society’s" resources by pandering to the vulgar tastes of the ignorant masses. The intellectual who likes to attend symphony concerts, or play chess, or read the writings of Plato, Kant, or Hegel, may scorn the tastes of baseball fans, bowlers, or movie goers. He may propose, therefore, that government take from them money which people use to gratify such low tastes and spend it for the intellectual’s better purposes.

Businessmen know that they do not have the power often attributed to them to compel consumers to spend their money in any particular way. Nor are all of them without scruple in their choices of goods which they offer for sale. And we may ask, with Professor Stigler, whether it is any more reasonable to blame businessmen for the tastes of their customers than to blame the waiter who serves a meal to an overweight customer.³

We should recognize, however, that free markets do actually provide incentives for business and industry to cater to tastes for wholesome rather than demoralizing products. Consequently, we find tastes rising in eras and nations notable for the people’s freedom to buy and sell for profit.

Profit-seeking enterprise in free markets tends to increase more rapidly the output of more wholesome goods because the more efficient and industrious producers in a capitalistic society are better customers, generally speaking, than the less efficient and less industrious. And these producers do not become more efficient and industrious by indulging tastes for what is base and demoralizing.

If we consider all lines of industry in the United States, for example, we find that by far the greater part of the business carried on in private markets with self-supporting producers is in commodities and services designed to maintain and improve the health, vigor, knowledge, and productivity of the more industrious and prudent persons and their families. Among such items are food, clothing, and shelter, tools, machinery, and equipment, textbooks, scientific works, the endless number of "how to" books, informative periodicals, newspapers, and services of doctors, dentists, and teachers.

When we find a disproportionate growth of occupations catering to less wholesome tastes, such as for gambling and excessive consumption of alcohol, we are likely to find that governmental policies are restricting freedom of enterprise in more productive directions by taxes, wage-hour laws, regulations, and government-protected monopolies, and that welfare-state policies are encouraging idleness. As the "bread and circuses" provided by the emperors of ancient Rome helped debase popular tastes for entertainment in that era, so governments in other ages debase tastes or retard improvement as they restrict individual freedom to invest, produce, and exchange services, and as they tax the productive and prudent to support the idle and improvident.

(3) Exaggeration of Business Costs and Profits

Surveys of opinion have often shown that most persons in all nations believe that business profits are several times as large as is actually the case.

First, they often confuse gross mark-up of a merchant’s goods with his net profit. The gross mark-up, of course, must cover the costs of operating his business. Net profit, however measured, is a much smaller figure.

Second, statistical estimates of the total expenditures on advertising, an activity most subject to attack by critics of business, generally involve double counting. For example, figures for total costs of advertising often include most of the costs of publishing newspapers and magazines, and the costs of maintaining the television and radio industries and providing the programs of information and entertainment. Similarly, the socialist’s estimates of the amount of duplicated effort among competing firms and of excess capacities greatly exaggerate the facts.

Third, the figures of the United States Treasury exaggerate the amount of business profits.

(a) Nearly half of the total profits reported for corporations consists of taxes paid to the United States Government, and another slice of considerable size is paid by dividend receivers as taxes on personal income.

(b) By requiring producers to use original cost rather than replacement cost in calculating the costs of replacing worn-out equipment, the Treasury forces business owners, in times of rising prices, to report as profits and pay in taxes receipts which are necessary to cover costs and which should not be counted as profits.

Fourth, from one-third to one-half of business profits remaining after taxes is reinvested in the business which earns them, and stockholders reinvest part of the remainder, which is paid to them as dividends.

When we allow for taxes and reinvested profits, we find that owners of corporations, which conduct most of the business done in this country, keep considerably less than one-third of their reported profits for personal consumption. If we may assume that they pay 20 per cent of their dividends in personal taxes, their incomes from their stocks has ranged between 2 and 3 per cent of the total national income during the past 20 years. Much of this they return to business by investing in new stock issues.

Yet demagogues can easily arouse covetousness and direct it toward suicidal attacks on business as long as people fail to understand the difference between business capital and wealth available for personal use, and as long as they fail to understand the difference between the way in which a businessman regards his profits and the manner in which wage earners and salaried workers generally look upon their own incomes.

(4) Misunderstanding of Capital

Business capital has value only to the extent that it produces goods for the market or can be used to produce such goods. Seldom is it in a form which the owner can use for personal enjoyment and consumption.

Furthermore, the capital has value only insofar as it can be used to produce goods at a profit.

Ignorant and unthinking persons, noting the stocks of merchandise and handsome buildings, may envy the supposed riches of the merchant who owns it. They may conclude, since most others in the community have little wealth, that the merchant has done little for his neighbors, or that he has somehow gained his supposedly great wealth at their expense. Such envy may be misdirected, and the suspicions are generally unjust. Some of the capital may be borrowed from creditors, perhaps from creditors who live in a foreign land. Another part of the capital may belong to partners or stockholders.

But a man may be the sole owner of an imposing establishment and be free of debt, yet have no more than his poorest neighbors if the business cannot operate at a profit. The equipment of a losing business may not be worth the cost of scrapping it, and the building not worth the cost of demolishing it, so that neither the equipment nor the building has a sales value.

In any case, business capital must serve mainly persons other than the owner if it is to have sales value; and it is a possible source of personal income to the owner only to the extent that it supplies other persons with goods worth more than the cost of producing them. When, for any of many possible reasons, it ceases to earn a profit, the owner is generally unable to use much of it for his own subsistence.

Inability to understand these facts about business capital is a principal barrier to the economic progress of the so-called "underprivileged," or "underdeveloped" nations. The successful merchant’s neighbors or the politicians think to enrich themselves by seizing his capital, only to find that it vanishes as they reach for it.

And they equally eat into capital as they tax profits. The misunderstanding of the peculiar nature and function of business earnings, which gives rise to discriminatory taxes universally levied upon them, is a principal obstacle to economic progress even in the most capitalistic countries.

(5) Misunderstanding of Profits

The notion that profits serve mainly as a personal incentive for business efficiency and enterprise not only supports uneconomic tax policies but is a handicap to any businessman who entertains it or whose partners, stockholders, or family persuade him to act upon it.

Consider the effect of this idea upon the thinking of a wage earner, clergyman, or school teacher who hears that the profits of a particular businessman or small group of stockholders amount to many millions of dollars per year. "No one needs so much income," the teacher or clergyman is likely to think, "to induce him to do his best in work such as that of business management."

As a result, politicians find widespread support as they take half or more of profits and dividends for "public" use, or when their tax policies compel business owners to make huge donations for non-business purpose ("philanthropies") so that their heirs may retain control of a going concern, or when unions stage a mass holdup to force a profitable company to pay more than free market rates for labor.

The individual businessman who uses his profits as most employees use their wages, mainly to buy goods for the personal use of himself and his family, achieves little business success. His business does not grow, his profits remain modest or small, and his enterprise is likely to exist but for a brief time in a progressive economy.

The flourishing and enduring businesses are those whose owners make use of their profits primarily as a measure of business efficiency, a guide for business policy, and a source of the equity capital necessary for growth and stability.

Profits are the earnings which remain after deducting the owners’ salaries for their own managerial efforts, costs of replacing worn-out equipment, payments into reserve funds to pay for probable losses, and such interest as their capital might earn in risk-free investments, or loans.

Most businesses actually return little to the owners beyond salaries for their personal services and a modest rate of interest on their investment. In fact, many owners continue in business only by taking out of it for their personal use less than they could earn as salaried employees in some other firm, and they get no return for interest on their invested capital. These businesses operate at a loss, and the owners make up the deficits out of their own wages and other income.

These are the kinds of businesses that are typical of poor countries. Governments of these so-called backward countries permit few really profitable businesses to exist. By taxes, costly regulations, license restrictions, or outright confiscation, they prevent businessmen from earning or reinvesting profits, and thereby prevent the growth of business capital. This is why these countries remain "underdeveloped."

Businesses grow only as the invested capital grows. The owner’s capital is sometimes called "equity capital" to distinguish it from the "loan capital" which he may borrow from non-owners by selling bonds or notes.

Growth of the owner’s equity is necessary for business expansion, not merely in the form of new buildings and equipment, but to guarantee payments to the growing numbers of employees and suppliers with whom he contracts to pay fixed wages and prices before he sells the products. He needs equity capital also to guarantee repayment of borrowed funds in case the investments financed in this way prove to be unprofitable.

In freedom, such as the people of the United States enjoyed prior to the great increase in tax burdens after 1930, business capital grew at unprecedented rates. As a result, the wages and other incomes in this country rose more rapidly than in any other country.

How Business Grows

This rapid growth of capital came about mainly in the form of reinvested profits⁴. The Ford Motor Company, for example, reinvested profits at the rate of nearly 70 per cent, compounded annually, in its first 20 years. In this way the original capital of $28,000 increased to approximately $1 billion. If the founder had paid out in dividends to himself and other stockholders one-half of these profits each year as they were earned, and invested only the remaining 35 per cent, his total capital from this source at the end of 20 years would have been only a little over one per cent as great — approximately $11,000,000 instead of $1 billion. For the 20-year period the total dividends also would have been approximately $11,000,000, only a small fraction of the several hundreds of millions of dollars now paid in dividends to Ford Company stockholders every year. And, of course, the Company could have produced little more than one per cent as many cars.

If present tax rates had prevailed from the beginning, they would have cut off nearly 99 per cent of the Company’s growth. Yet the total tax receipts from the Company for the 20-year period would have been only $11,000,000, instead of the hundreds of millions (more than $600,000,000 in 1965) which the Government now rakes in every year from this one concern.

When we examine the history of other leading businesses in this country, we find that they were similarly built mainly out of profits reinvested by management as they were earned or by stockholders who used part of their dividends to buy new issues of stocks.

Anyone who looks for these reinvested profits finds only a small part in the form of currency in vaults or bank deposits. As forms of wealth, he would find them mainly in the buildings, machinery, and equipment, materials in process of production, and research laboratories — capital goods used to produce commodities and services for persons other than the owners.

True, owners of successful businesses and their heirs generally use part of their incomes for personal consumption: mansions, yachts, costly cars, travel, and entertainment. But their expenditures for such purposes have been generally but a small fraction of their profits. Often the amounts were no greater than the salaries they might have earned as managers for other employers. In other cases they spent part of the interest on their investments. Those who spent for personal consumption total sums comparable to the reinvested profits generally had to surrender control of the business.

Successful businessmen are no more motivated by desire for profits than skillful surgeons by desire for fees. Men like Henry Ford, Andrew Carnegie, John D. Rockefeller, James J. Hill, Wanamaker, Filene, as well as the lesser business leaders, had the motives of great achievers in art, music, religion, and education — the motives of the builder, the architect, the organizer, the mountain climber. They used the profits as indexes of the wants, tastes, interests, and capacities of customers, associates, investors, employees, and suppliers. They used them as measures of efficiency in their efforts to maximize value at least cost. And as they managed more efficiently, their rising profits provided increased means for further increases in productive capacity and business security.

Therefore, policies which compel distribution of business profits to consumers — whether to wage earners, to the families of stockholders, or to governments — may have little effect in reducing the intensity of effort put forth by business leaders, but they do reduce their capacity to do their job.

(6) Statism vs. Business

Every increase in the size and cost of government relative to private enterprise increases the temptation for officials and politicians to foster anti-business sentiment among the people at large.

The cause of the rise in scope and costs of government may be war or threat of war. A natural disaster may cause some mechanical or economic breakdown and provide an opportunity for government to expand its powers and functions. An organized clique may gain office and grant themselves political privileges — governmental subsidies or restraints on competitors — before taxpayers know or understand what is going on.

Whatever the cause may be, every rise in government costs prompts politicians to impose new taxes on places where money is easiest to find. These places are likely to be where individual streams of money converge: the centers of buying and selling, the places of business.

To win popular support for these new raids on business income, politicians pose as heroic Robin Hoods seeking only to restore to the poor the ill-gotten gains of the rich. To produce in the public mind the appropriate images of themselves and of those whom they propose to tax, they hire speech writers and pay subsidies to publicists and pedants.

As the special privileges or wars and rising taxes increase business costs and prices, trade declines. Producers learn to make things for themselves or to do without. As they lose the advantages of specialization and trade, their output declines, unemployment rises, and pauperism spreads.

Tax receipts fall, but the greater the decline, the more strenuously a powerful government may strive to maintain its income by new taxes and higher tax rates. At the same time, it intensifies its efforts to make business enterprise the scapegoat for the mischief wrought by its own policies.

During the past half-century, these anti-business policies have produced famine and every other form of human misery in Soviet Russia arid Red China. The same results, to a somewhat lesser degree, followed similar policies enforced with less determination in Egypt, Algeria, Bolivia, Cuba, socialist India, and other countries.

But for a far longer period, we now have authenticated, detailed records of the retreat toward savagery which followed similar conquests by statists and paternalistic despots during the 2,000 years preceding the modern era. In par titular, we should know of the long period of economic disintegration recurring famines and plagues, and brutalized tastes and manners that over much of the western world followed the long war against business from the time of Plato to the rise of new, business-oriented, city-states at the beginning of the modern era.

¹ New York: Viking Press, 1921.

2 Cf. Leonard E. Read, Anything That’s Peaceful (Irvington, New York: The Foundation for Economic Education, 1964), ch. 11. "Only God Can Make a Tree — Or a Pencil."

^³ George J. Stigler, "The Intellectual and the Market Place," Selected Papers, No. 3 (Graduate School of Business, University of Chicago, 1965).

⁴ Cf. Carl Snyder, Capitalism the Creator (N. Y.: Macmillan, 1940). 

Man is not a creature of instinct. In that regard, he differs in a revolutionary way from every other living creature. He is not born with instincts, like those of the birds and bees, which fit him for survival, to say nothing of gaining lasting satisfactions or happiness.

Therefore, he must learn from the accumulated wisdom of his fellows most of the ways of acting that enable him to survive, and he must get much of this knowledge and numberless skills and habits in infancy and childhood.

Yet, all his life, he needs the help of his fellows in learning how to cope with his ever-changing world. As the saying goes, "Fools learn by experience, wise men learn by the experience of others." Or, "Experience keeps a dear [costly] school, but fools will learn in no other."

In short, man is not "naturally good." Each new individual must learn good conduct. It is not inborn or given to us by others.

Like all living things, normal humans have an urge to survive and multiply. Humans have also an urge to live better — more abundantly, more wisely, securely, with less pain and discomfort, and enjoying more satisfactions of in-increasing variety.

Therefore, man finds some conduct "good," depending on whether it brings him more satisfactions than dissatisfactions; and he has an inborn desire to do that which he believes will give him the greatest net total of satisfactions. In this sense, he is "naturally good." That is, life gives to him a desire to live better.

But desire for satisfactions is very different from knowledge and ability to get them. I repeat, good conduct, whether knowledge or practice of it, is never given to humans at birth, and we cannot get it by gift after birth.

Therefore, man must LEARN good conduct. And he must learn it in a lifetime that he will find is all too short for learning all he wants and needs for a good life.

Learning Is Hard Work

Now this learning process takes hard work on the part of both learners and mentors — parents, playmates, co-workers, employers, friends, hired teachers, and even casual acquaintances. It is work because the effort must continue far beyond the point of immediate enjoyment. In other words, it cannot remain on the level of play —that is, activity indulged in for its own sake or for immediate pleasures.

Because such work is irksome, learning involves stress, strain, pressures. These give rise to tedium, discomfort, fatigue — eyestrain, backaches, headaches, stomach aches, giving up parties and other entertainments and forms of escapism.

These discomforts, in turn, give rise to complaints and protests, and search for escape, especially on the part of the immature who have most to learn (including immature parents, teachers, employers, and others who seek to instruct). For it is too often forgotten that good manners, good morals, and even good mental hygiene often require great restraint in expressions of displeasure and reactions to discomfort—Sigmund Freud and his disciples to the contrary, notwithstanding.

Student Protests Will Never Cease

It should not surprise us, therefore, that earliest writings record the complaints, even the despair, of parents, teachers, and philosophers about the bad manners, laziness, uncouth dress, and general worthlessness of the youth of their times. And sometimes the subsequent history of the state or nation showed that there was more than usual justification for these complaints, as, perhaps, in the time of Socrates and Plato.

We know little about the feelings of the young of past eras —their aspirations, their complaints about the shortcomings of parents and teachers, and their protests against the pressures for conformity to the standards set by their elders. They could rarely afford, as young people now can afford, the means of recording their opinions.

But we do have enough evidence in the words of the writers in the past to be assured that not all of the young accepted correction and study assignments with due meekness. Some, no doubt, were quite docile (a word that means "teachable"); others were drop-outs; and in between these extremes we would find every degree of docility or intractability, of industry or sloth.

And often, then as now, protests probably brought about changes, both good and bad, in the methods and courses of instruction. (In the third and fourth centuries, the State-supported schools in Imperial Rome degenerated in ways now to be observed in tax-supported schools and universities in the United States and other countries.)

This "generation gap," therefore, has always been and must always be. It is the gap between, on the one hand, those with more experience and wisdom, and on the other hand, the as-yet untutored, who are more or less able and willing to learn. Even in the animal world we find evidence of an uncomfortable generation gap when a mother bear or lion cuffs a heedless, slow, reckless, or too obstreperous cub.

In humans, because the gap is so very great and getting ever wider, it takes strenuous effort, I repeat, to close this ever-present "generation gap" in every home, school, club, gang, golf links, bridge party, bowling alley, tennis court, football field, and workshop. And the effort must be a strenuous one on both sides of the gap, as individuals strive to close it.

Learning Requires Good Manners — and So Does Teaching

Efforts to close the gaps in learning then, take patience, persistence, willingness to forgive and forget blunders, effort to understand one another’s words, aims, and problems.

The work also requires good manners, which are means of showing consideration for others, interest in their feelings and opinions, gratitude, appreciation, and desire for cooperation.

Finally, learning requires improving morals, which include good manners and much more —honesty and honor, dependability, truthfulness with courtesy and with relevance, frankness without malice, industry in countless lines of activity, and continuing concern for the long-run, indirect results of one’s words and deeds.

Good manners, of course, shade into good morals. Why this is so, and why knowing, mature persons show so much sensitivity and concern in regard to what we may think of as "mere" manners become clearer when we realize what "good manners" are. In essence, they are ways of letting other people know that we care about them.

They are ways of showing consideration for their feelings, interests, and opinions, ways of showing friendliness and a desire for cooperation.

We demonstrate them in appropriate facial expressions, such as a friendly smile of greeting or a look of concern when a friend tells of his misfortune. Good manners may be a tone of voice showing warmth, interest, sympathy, and friendliness. They appear in our choice of words and gestures; in personal cleanliness and sanitary habits; in dress and hair styles which are distinctive in ways which other people consider to be "in good taste"; and in forms of conduct too numerous to mention, from holding open a door for another person to stopping a car at crosswalks for pedestrians.

Good manners also include self-restraint in all of these respects — avoiding flat, complaining tones of voice; avoiding words and gestures that annoy, insult, depress, or denigrate others; avoiding public displays of strong emotions; and avoiding actions which other persons consider annoying (e.g., noisy parties) or obscene.

Progress in Manners and Morals

Some "good manners" are tribal or national customs, rather than universal: for example, kinds of eating utensils and ways of using them, ways of eating or drinking, dress and hair styles, and modes of greeting.

Yet it is nonetheless necessary for members of these tribes and nations, and for their guests, to learn and follow these local customs if they wish to show respect for the residents’ opinions and to win the friendliness and cooperation they need to survive and to avoid unpleasantness among those groups.

Many young people today, having discovered that what is considered good manners differs greatly from place to place, have unwisely concluded that good manners may become largely matters of individual choice. They may even think that they help to bring about this freer and happier day by flouting local conventions and customs.

This is another factor aggravating the "generation gap," one that English tutors recognized centuries ago in preparing their students for foreign travel by warning them, "When in Rome, do as the Romans do."

True, manners and customs are changing everywhere — we hope for the better. There is evidence, I believe, that certain elements in good manners are going to become more universally accepted and necessary for coping with life’s problems — for example, higher levels of personal cleanliness and neatness, a pleasant smile, a friendly greeting, a warm voice, avoiding excesses in public displays of emotion, refraining from littering streets and public places, avoiding air pollution with tobacco smoke (some airplanes now segregate smokers), temperance and sobriety in all things, due attention to fashion and "style," and expressions of gratitude for favors and kindnesses.

A Never-Ending Struggle for Self-Improvement

Similarly, certain forms of conduct which we call "moral" because they are even more important for long-run welfare — or are believed to be so — will remain valid as long as humans want something they don’t have or something better than they now have and gain the wisdom necessary to achieve their goals.

For, in order to get more or in some way to better ourselves, we must have more honesty, more dependability, more truthfulness, more regard for the feelings and aspirations of other persons, and more willingness to invest time and energy for long-run gains. And we must have this moral progress everywhere if we are to have continuing progress anywhere — in Soviet Russia and mainland China, for example, as well as in the United States and Canada.

These gains will not come merely by wishing or hoping for them. They will come only as more and more individuals, everywhere, learn to look further ahead, understand more fully the results of their conduct, and show more patient determination in their struggles for self-improvement and in discharge of the obligations necessary to win and keep the needed cooperation of their fellows.

This involves widening the "generation gap" between adult and infant or child, between mentor and student, as well as the gap between mature and immature adults. To close this widening gap, as individuals in each generation must do, we must release the instructional procedures from the cramping confines of bureaucratic control.

And perhaps even before this release may take place, we must somehow gain far more general recognition and acceptance of the responsibility of each individual of every age and occupation for dedicated effort in life-long education in the broadest sense of that much-abused word.

A Retreat from Learning

Unfortunately, age does not always bring wisdom. Neither do academic degrees and titles. A teacher schooled in ancient myths may be a blind leader of the blind. The historian who is ignorant of economics, for example, is likely to be a poor guide to an understanding of history; an economist who knows little history may endorse policies which repeated trials in the past have proven disastrous. A teacher of philosophy may so enjoy baiting his students by playing the role of "devil’s advocate" that he promotes confusion and distrust of reason rather than a desire for truth or love of wisdom.

Teachers lacking in courage and scruples often pander to their student’s prejudices, indolence, and desire to escape the burdens of responsibility. Demagogy is as rife in many classrooms as in political assemblies.

In particular, the modern established schools are doing to education what established churches do to religion. The Founding Fathers of this country sought to outlaw "established" (religion, that is, the use of tax funds to support religious efforts. They had found by experience — what experience has demonstrated again and again in other lands — that tax support sapped the clergy of enthusiasm, initiative, and responsibility, so that the American people had lost much of their former interest and faith in religion.

State-Established Schools

Now schools and universities supported by taxes and populated by conscripted students are displaying the same defects, for the same reasons, that were evident in the established churches. Instead of helping to close the perennial generation gap, tax-supported educators and their graduates too often operate to widen it. Because they believe that parents and students cannot be individually responsible for education, they develop a chronic skepticism of freedom and individual responsibility in every field of human endeavor.

Therefore, they fail to develop in their students a sense of personal responsibility. Instead, they teach that "society," or "government," of "the establishment" is responsible for both the individual’s problems and the solutions. They inculcate distrust and scorn for the achievements of free men and inspire a nihilistic urge to sabotage and destroy what free men have achieved. Thus, too often, they make the immaturity of their students a chronic condition.

Truly, as many observers are now pointing out, this creates a gap, not so much between generations, as between the builders and the destroyers of civilization.

This teaching of irresponsibility and subversion of free institutions is a betrayal of trust by those who profess superior knowledge and wisdom. It is not new in world history, but we have been experiencing in recent decades a virulent recrudescence of this "treason of the intellectuals," worldwide. We must recognize and expose this retreat from learning for what it is if human progress is to continue.

***

Artificial Distinctions

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society — the farmers, mechanics, and laborers — who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.

From ANDREW JACKSON’S Veto of the Charter of the Bank of the United States, July ¹0, ¹832. 

Capitalistic industry today stands before Judge Public Opinion charged with various high crimes and misdemeanors. Among the charges are (1) that it makes those who take part in it materialistic in tastes, interests, and ways of living; (2) that it standardizes people — turns them into robots, kills individualism; (3) that it concentrates "power" in the hands of a few who use this power with little regard for the welfare of others.

Those making the charges demand increasing government action to punish and prevent these alleged offenses against the common weal. Unfortunately, all too many Americans are ready to cast their ballots for the prosecution when they enter the polling booths on election days.

Yet, nearly all Americans show by their daily conduct that they really like what modern industry — big and little — does; and the vast majority of mankind look to the most industrialized, free-enterprise nation—the United States — as a Mecca which they would like most of all to visit and if possible make their permanent home.

Most people, worldwide, for example, like what modern industry produces. From chewing gum to cameras, from aspirin to automobiles, they buy machine-made goods. Moreover, they buy, often and abundantly, the products of the free-enterprise elite, that is, the products of the industrial giants; and they generally buy with confidence that they will get a fair deal. Similarly, where they can, millions of housewives go to the super-markets, chain stores, and big department stores for the necessaries of life, as well as for thousands of comforts, gadgets, and sundries from toothpaste to tissues, from soap to stockings, and from vitamins to vacuum cleaners. And when shoppers go to small stores, or dealers, they usually buy goods that big companies, in some way or other, have helped to make.

Millions of these customers also earn their wages and salaries in the employ of the biggest manufacturing, commercial, and financial firms where free-enterprise industrialism is supposedly doing most to turn them into dehumanized robots. Fully one-fourth of the working force of the United States prefer the wages, working conditions, and "fringe benefits" of the big employers; and I never met any of these who seemed ashamed of his employer. On the contrary, they generally appear proud to be associated with one of these outstanding enterprises.

More millions of Americans, including millions of employees and customers, also invest their savings in the stocks and bonds of these big companies. Or they put their money in banks, insurance companies, and other agencies which buy the securities of big companies in the belief that these are likely to be especially safe and profitable ways to invest the funds entrusted to them.

Big Businesses Foster Small Businesses

Millions of small businesses buy, sell, and service the products of the biggest industrial companies; and hundreds of thousands of small producers act as suppliers for the "big boys." For example, the United States Steel Co. buys from 50,000 small and medium-size concerns and sells to 100,000 more.

Thus, small and medium-size establishments do most of the business in the United States, the world’s most industrialized country. A firm with less than 500 employees is a small or medium-size business by U.S. standards. Such firms, together with farmers and the self-employed, account for two-thirds or more of the total work force outside of government service.

The fact is that big business gives rise to smaller businesses. So the "Big Four" in the automobile industry create opportunities for many thousands of dealers in cars and accessories, car "laundries," and garages, and the big oil producers and refineries create opportunities for more thousands of service stations. Furthermore, the growth of big business provides the jobs, income, and materials necessary for new enterprises to develop and market new products. Some of these may rise from a basement or garage to skyscraper status; but they all start small, and most of them remain small.

Without large-scale industrialism and big business, in fact, America would be still in the horse-and buggy age, and so too would be the rest of the world. The industrial giants — railroad companies, producers of steel, aluminum and copper, auto manufacturers, producers of farm machinery and chemicals — these built the foundations of our modern economy, and they are still maintaining our unprecedented affluence.

We should remember, too, that mass merchandising is essential for large-scale industry. The great selling organizations — mail-order houses, department stores, chain stores, and supermarkets — have brought down the costs of trade as the great industrial organizations have reduced costs of extraction, transportation, and processing. These "distributors" are as truly productive and as necessary for economic progress as the mines and factories. The same may be said for finance. Without large-scale banking, investment, insurance, and brokerage there would be neither large-scale merchandising nor large-scale output of goods to market.

But is this affluence provided by modern industry too costly in terms of the human spirit and individual dignity? Does mass production turn human beings into materialistic, standardized robots?

Mass Production Means Mass Prosperity

True, "mass production" means standardization of products and methods, and this mass production implies a mass market. It is production for "the masses." At first thought — without looking at the facts — this seems to mean standardization of people — turning them into faceless non-persons. Yet, this mass production by way of standardization is precisely what the communist rulers of Russia and China want for their subjects because it means mass prosperity.

What big concerns arise in freedom to serve only a wealthy few? In freedom, big business must produce mainly for factory workers, farmers, stenographers, school teachers, bookkeepers, sales clerks, mechanics, waiters, government employees, carpenters, and plumbers, along with other modestly paid producers and their dependents. These buy most of the products of industry because they get most of the total income of this nation.

And let us not forget that the pensioners and "reliefers" also have radios, TV sets, and drip-dry shirts, along with the necessaries of life. If any American goes barefoot, it is from choice, not necessity, for our mass production has made shoes so abundant that Americans commonly give away or throw into the trash cans better shoes than the shoddy new footwear the victims of Communist "planning" can buy in their dingy shops.

But besides an abundance of the necessaries and comforts of life, and besides the great variety of recreations and entertainments, free-enterprise industry and business provide the high purchasing power and leisure necessary for cultivation of the arts and literature, for schooling and research, for books and free lectures on every conceivable subject. They provide these on a scale never known before the advent of modern industrialism, and have made them available even to the poorest of our population.

The victims of communist rule covet these fruits of free-enterprise capitalism; and their rulers try hard to establish the same great industries and marketing organizations that we have in the United States. And they do get a certain bigness and large-scale industry. But their industries, big and little, lack efficiency; and lacking efficiency, they progress only at a painfully slow rate — and I do mean painfully. Consequently, communist countries lag behind the U.S., economically, as far as they did 30 or 40 years ago.

But we come back to the question: does mass production and mass prosperity produce a mechanized, standardized, collectivized, materialistic people?

Industry Fosters Personality

In the answer to this question we find a strange paradox. In freedom, mass production actually personalizes — individualizes — both consumer goods and the uses we make of them. It continually creates a greater variety of occupations and greater opportunity for individuals to choose the kind of work and working conditions which best fit their particular interests and abilities. It provides increasing opportunities for intellectual and artistic pursuits, for extending each person’s circle of friends, for increasing awareness and sensitivity, that is, for the development of personality. In short, modern free-enterprise industrialism reduces the amount of drudgery, the long hours of monotonous, mind-dulling toil, and the subsistence levels of poverty which held the vast majority of mankind at a near-animal level of mind and spirit for untold a eons of the past. It enables humans to become persons.

Furthermore, it is the opportunity for individuals to satisfy a vast variety of tastes and pursue countless individual interests — intellectual, artistic, literary and social, as well as recreational — that provides the drive and enterprise which in freedom gives rise to rapid economic progress, with its mass production and giant business organizations.

Look in on any typical American assemblage — a roomful of students, a concert audience, a crowd of diners — what do you see? Outside the ranks of the few militant revolutionaries, it is hard to find two persons dressed in any way alike. Similarly, if you ask Americans about their life experiences and expectations, their work and their leisure pursuits, you will find individual variations too numerous to list.

Where else but in highly industrialized America, the land where most of the giant businesses arose and flourish, will you find the variety of consumers’ goods offered for sale, the variety of jobs, the variety of leisure pursuits, the proportion of the population in colleges and universities, the amount and variety of scientific research, the wide circles of friends possessed by everyone who wants them, the amount of travel, and the widespread awareness of human problems and opportunities?

And, insofar as other nations permit freedom for private enterprise, they correspondingly provide opportunity for development of more humane and individualized personalities.

Communism Standardizes and Dehumanizes

This points to a seldom-noted paradox: When they gain power, as in Soviet Russia and Red China, socialist authorities impose on their people, by force, the very same mass production methods which they say make robots of workers in capitalistic countries. In fact, they often carry the standardization much further than in capitalistic countries and in more burdensome fashion, as, for example, in use of the manual labor of women street sweepers and construction workers. But despite thefts, loans and subsidies from capitalistic countries, and despite ruthless coercion to get labor and capital from their subjects, they fail to achieve the prosperity necessary for individualized living —except for a small minority of privileged bureaucrats and their favorites of the moment (ballet dancers, mistresses, champion athletes or chess players, and a few scientists).

The reason for the continued deprivations and standardized ways of living for the masses in communist countries should be obvious. Centralized planning, imposed by legal force, suppresses individual experimentation, reduces individual incentive, and denies individual responsibility. Indeed, suppressing individual freedom to experiment is precisely what socialists mean by "planned production."

Communists regard people as no more than complex machines to be manipulated by physical means as are inanimate tools. Or they look on the proletarian masses as rather dull-witted creatures to be fed, stalled and herded about as domesticated animals. Therefore, although communist governments impose on their subjects much standardization and some mechanization, they so dehumanize their people that they lose the individual enterprise necessary for mass prosperity and general economic progress. They have achieved a measure of technical ("material") progress; but they provide less opportunity for developing individual talent, personality, character, and intellect than prevailed three generations ago under czarist rule.

Despite the standardization of machines, materials, and gadgets, free-enterprise industrialism provides increasing opportunities for "the masses" to develop, individually, the highest human qualities. This freedom for individuation in these United States is precisely why we have so much big industry, big business, mass production, mass prosperity, and mass opportunity. It releases human energies and imagination which are the driving and directing factors in progress.

Why Communist Economies Are Backward

Under socialism and communism, on the other hand, the "planners" dictatorially restrict individuation of products and personal pursuits. As a result, they fail to develop the mass production and universal affluence which they so much covet and try to produce without regard for human life and human dignity. It is under socialism, or communism, therefore, that we find the actual concentration of power and rampant abuses of power. Only under socialism or communism can the few force the rise of great industries to serve their whims about what standardized goods their subjects should have, including the weapons for imperialism, war, and their own enslavement.

For these reasons, the victims of this concentrated power remain poor — drably dressed, badly housed, misinformed, restricted, standardized, materialistic and collectivized. As a consequence, their masters must maintain mine fields, great walls, and millions of armed guards to keep their people at home.

If we can understand these facts and the reasons for them, perhaps we can enlarge the freedom for enterprise which this and other "capitalistic" nations have so well demonstrated is necessary for all truly human ("humane") progress.

Freedom Depends on Understanding

I say we can "enlarge freedom" advisedly; and I mean that we can enlarge it everywhere that humans congregate.

Complete freedom is as unattainable as complete understanding. In fact, we gain in freedom —freedom from trespass, freedom from infringement of individual rights — only as we progress in understanding of human nature, human conduct, individual rights and individual responsibilities.

How many Americans, for example, understand that minimum-wage laws restrict the freedom of our young people and the less skilled adults? And how much thought do we give to the demoralizing effects of this tragic denial of opportunity to bear and discharge self-responsibility?

We know that "unemployment" — useless or destructive dissipation of human energies — demoralizes its victims. But how often do we hear or read of anyone relating the sudden rise in teen-age unemployment, especially among black teenagers, to the hikes in minimum-wage rates in the past 20 years in this country?

Yet, that relation is clear and obvious; and time and time again, research has verified it as well as any cause-and-effect relationship can be demonstrated in human affairs.

We hear and read that "welfare" is demoralizing millions of our fellow citizens. But how often do we stop to think that the confiscation of some two-thirds or more of business profits by taxes is restricting the freedom of every competent employer to offer jobs to unemployed job-seekers?

I repeat: in freedom, industrialism provides increasing opportunity for humans to develop morally, intellectually, physically, and esthetically; and this freedom is far from complete in these United States or anywhere else on earth. But although it is an unattainable ideal, it is imperative that man pursue it. For that pursuit requires of us the pursuit of understanding that is the very wellspring of all human progress.

Wisdom is the principal thing; therefore get wisdom; and with all thy getting get understanding.

And ye shall know the truth, and the truth shall make you free. 

What I have to say about the "Northwood Idea" is not original with me. I have tried to do little but put together what I have gleaned from discussions with many persons at Northwood — trustees, administrators, faculty and students; but perhaps this summary may be useful and it may be that my concluding point deserves a little more emphasis than we usually give it.

At the outset, we should note that the Northwood philosophy is based on what, for want of a better phrase, we may call the Judeo-Christian Ethic.

Next, I shall refer to our emphasis on work and thrift, not merely as economic virtues to produce so-called "material welfare," but as spiritual therapy; that is, as necessary means for "spiritual development" — welfare in its nonmaterial aspects.

Finally, I shall remind you of the necessity for business, that is, for commerce and finance, including advertising and selling, bookkeeping, accumulation of cash reserves, banking, and the dickering of free markets. Business in this sense of the term is an essential aspect of every great civilization, and I believe it is necessary for the development of truly human and humane character and personality. That concluding idea, I expect, is the most distinguishing feature of what I have to say.

I. THE JUDEO-CHRISTIAN ETHIC

As to the Judeo-Christian Ethic, I’ve been tempted to use instead the "Bourgeois Ethic," the ethic of the tradesman; but Karl Marx and others have given that phrase so nasty a connotation that I know I would have two strikes against me at the outset if I called our moral code the "Bourgeois Ethic." Yet, whatever we call it, the moral basis for our Northwood philosophy is the ethic which is necessary for a good life as a trader or financier.

The Idea of Individual Responsibility

It begins with the idea of individual responsibility. This is the psychological basis for the Judeo-Christian Ethic.

The Ten Commandments and the moral injunctions of both the Old and the New Testaments were always directed to the individual: "Thou shalt have no other gods before me"; "Thou shalt not make unto thee any graven image"; "Honor thy father and thy mother: that thy days may be long upon the land which the Lord thy God giveth thee."

These commandments were directed to one person, the individual, who is thereby charged with responsibility for his choices.

In other words, humans must choose — that’s what I mean by individual responsibility and self-determination. Ideas and acquired values determine our specific actions, and they may prompt us to ignore various influences in the outside environment. We can direct our own actions to prolong and enrich our lives, or we can choose suicidal paths as people choose to smoke when they have abundant evidence that it shortens life. We can choose to jump off cliffs, we can choose to play Russian roulette; or we can choose ways of life, ways of health and welfare.

The Idea of Moral Law

Of equal importance in the Judeo-Christian Ethic is recognition of the enduring nature of Moral Law. The essence of this moral law is summed up in the "Golden Rule," and it derives from the fact that humans need one another.

Without other human beings, we cannot be born, cannot be reared, cannot prosper; and to have the cooperation of other humans—to avoid the conflicts which would be suicidal for humans —we must follow the "Golden Rule." When we apply it in practice, we find it is the unifying principle of those commandments that refer to the relations between the individual and his fellows: "Thou shalt not steal," "Thou shalt not kill," and "Thou shalt not bear false witness."

Now, it should be clear that obedience to Moral Law means voluntary cooperation and freedom. If we don’t steal, we leave other persons free to use their talents in peaceful cooperative ways to produce goods for their own use, for exchange, or for gifts to others, such as gifts to one’s family or heirs.

Therefore, we have a state of individual freedom if we live by the "Ten Commandments." We have private property and numberless associations for voluntary cooperation. And humans develop as humans and make progress only in this condition of individual freedom and voluntary association established by adherence to these moral principles. Therefore, these moral principles are antecedent to and take precedence over all manmade laws and customs.

Respect for Property

In other words, these enduring moral principles require of us respect for the property rights of other people — that is, respect for their rights to control their own persons and for their rights to control those things which they obtain in voluntary cooperation, whether by gift, by voluntary exchange, or by the productive use of these things. Living by these principles requires that we fulfill our contracts, that we speak the truth, and that we revere the laws of Life and Nature. The human need for this reverence appears in the first four of the "Ten Commandments."

We should note, incidentally, that this voluntary cooperation and exchange is doubly productive of benefits in contrast to the one-sided gain that anyone may get by coercion, as for example, by burglary, by slavery, or by taxation. In voluntary cooperation, all participants must benefit if the cooperation is to continue, for if it is voluntary, anyone may withdraw when he feels he is not benefiting, when he feels that the gains are distributed unjustly or going entirely to one person or group at the expense of the time and energy of others.

We should note also that living by the Golden Rule involves respect for privacy — the right to be let alone and the right to choose one’s associates. Coercion — the attempt to compel people to associate with others — leads to conflict rather than to the attitudes and actions which are mutually beneficial. Freedom established by the Moral Law of the Golden Rule and the Ten Commandments includes the moral right to withdraw from an unwelcome contact with other persons, as well as the right freely to cooperate in mutually beneficial ways.

As Paul wrote in his "Second Letter to the Corinthians" 2000 years ago, "Be ye not unequally yoked with unbelievers; for what fellowship hath righteousness with unrighteousness and what communion hath light with darkness?… Wherefore come out from among them and be separate saith the Lord… and I will receive you." (II Cor. 6: 14-17)

Conditions of Sale

I mention this because it is sometimes said that, by our rules at Northwood prohibiting the use of liquor and marijuana and requiring the women students to return to the dormitories at a certain time, we are coercing the students. This is not true. We are thereby merely exercising our moral rights and duties in selecting those student associates who are to use the facilities provided by the college founders and supporters. We use no coercion to en, force these rules. To say that choosing our associates is coercion is a misuse of the term coercion. We choose only to disassociate ourselves from those who are not willing to abide by our rules.

Our rules are conditions for continued use of Northwood’s facilities. We must have such rules, or standards, and we must separate ourselves from anyone not willing to accept them, if the Northwood Idea is to have meaning and effect.

II. EMPHASIS ON WORK AND THRIFT

Next, I wish to call attention to Northwood’s emphasis on work and thrift as marks and means of human progress. It is fashionable in some circles nowadays to disparage both of these. But, work is merely persistent, purposeful effort, and investment of human time and energy for long-range, indirect benefits.

Long-range benefits are those that occur in the future. Indirect benefits are those that may first benefit another person, but bring a return benefit of some sort later.

Such planned, purposeful effort for a long-range or indirect benefit is surely necessary for human survival and progress; and the traits of character and personality developed by such effort we regard as virtues.

Thrift is the postponement of present consumption in order to obtain greater satisfactions in the future. Like work, it requires the highest human qualities of understanding and imagination to foresee the future and to hold it in mind in order to gain the necessary self-restraint. In short, work and thrift require understanding, self-control. They are means, not only of self-development but of service to others.

Without Savings and Tools, We’d Still Live in Caves

Where would we be today had it not been for the thrift and work involved in the creation of our buildings, and the production of the myriad of tools, or capital goods, that we use? The answer is we would still be living in caves, eking out a short-lived, hand-to-mouth existence derived from the roots and grubs we could dig up, the small animals we could catch in our hands, and the berries we could get in season.

Everything that we call the material aspects of civilization, and the moral and spiritual ones as well, our understanding that enables us to live longer, to live better and to cooperate — all of this comes from the thrift and work, the accumulations of thousands of years of human effort, inventiveness, planning, thrift and self-discipline.

This Puritan Ethic — this system of values, this way of life —is essential to human living, not only economically but for developing the qualities that are most distinctively human, the qualities that make us humane. It is mental, moral, and spiritual "therapy," to use a modern cliché.

III. THE IMPORTANCE OF BUSINESS

Finally, if we are to have cooperation, we must exchange services; and as the cooperation gets more and more complicated we need specialists to work out the terms and procedures of the multitudinous exchanges. Therefore, we must use money and credit; and we must have traders and financiers, advertisers, brokers and salesmen, accountants and collection agencies to complete the exchanges, including those exchanges which are made over a period of time and which therefore require credit and finance.

Finance is the monetary aspect of credit. Credit is merely a delayed exchange, an incomplete exchange. In every civilized society, most exchanges take time to complete because they are indirect, three-cornered or four-cornered exchanges, taking place over a distance and involving roundabout (capitalistic) methods of production. In all such time-consuming transactions, we must have credit (trust and waiting). Therefore, money, credit and financial experts are as necessary for civilized life and progress as tools and machines, mechanics and engineers.

Business, then, means those aspects of voluntary cooperation which we call commerce and finance, and the function of the businessman is to promote, inspire, and guide cooperation. He organizes and teaches competitive cooperation — cooperation to provide better opportunities for life and for a more abundant life. These business activities — organizing, inspiring, leading and teaching cooperation — promote development of the highest qualities of mind, character, and personality.

Now, from time immemorial —from the first introduction of money and the specialists who traded and promoted trades — business has been widely regarded with suspicion and looked down upon as a degrading occupation. In primitive societies, the view prevails that a merchant or money lender profits only at the expense of producers. This belief helps explain why such societies remain backward, or "under-developed."

Of course, this belief is an entire misjudgment as to what most of a businessman’s wealth consists of and what he contributes to the value of other producers’ services and incomes. Most of his wealth consists of the means for serving his customers, and he contributes some of the most essential ingredients of human progress.

Wherever this disparaging attitude toward business becomes general, you’ll find that business is harassed, regulated, plundered, and repressed; and under such persecution, the character and wisdom of businessmen tends to be low. Where opinion-makers teach that business is a dishonest racket, then those that are willing to be racketeers or cheats will monopolize business, while achievers who value the good opinion of their fellows will choose other occupations, such as politics and the military. Then we find the kind of government the Pharaohs had in ancient Egypt, or that prevailed as the Roman Republic gave way to the Empire. Under such oppressive governments, a businessman must be something of a trickster to survive.

Spreading Hostility

As hostility to businessmen grows, politicians tax them more heavily, while debasing and inflating the currency to maintain an illusion of prosperity. Then, when these policies cause rising price levels, a deluded populace demands price controls, which ambitious politicians are all too ready to impose.

The resulting shortages and "black markets" provide further excuses for more government action to combat these supposed evidences of private "greed."

This cancerous growth of government produces political "leaders" who promise peace and plenty even while they squander the fruits of industry in pauperizing the poor and waging "perpetual war for perpetual peace."

The result must be, sooner or later, a spreading decline in the quality of life despite (or because of) the increasing largess to "the poor" and the privileged, the rise of great new public works, and the display of awe-inspiring armaments.

Civilization progresses when business is widely regarded as Horatio Alger represented it in his stories 75 or more years ago. In those once-popular tales, work and thrift in honest business service were the high road to personal success in the broadest sense of that word. That view of business helped attract able, enterprising youths into business careers. It prevailed in this country long before Alger wrote and helps explain the astounding economic and cultural progress of the United States during the past two centuries.

On the other hand, insofar as we lose the Horatio Alger understanding and spirit, we succumb to increasing paternalism and despotism, collectivism and war, which demoralize and belittle the individual and produce a widespread cultural decline. This has happened time and time again in history, and if we don’t learn the lesson from this history, we shall be doomed to repeat it.

Every nation has developed and flowered — with art, music and the other ornaments and means of civilization — only on the basis of flourishing business, trade and commerce. This was true of the Phoenicians, Ancient Greece, and Ancient Egypt, the Chinese civilization, the Byzantine Empire, Venice, Florence, Spain, England, France, Germany and the United States. Go through the history of each and you’ll find in its origins this period in which commerce and finance were highly regarded and relatively free in a developing civilization.

Again and again, however, these eras of progress have ended as the intelligentsia became worshippers of the Almighty State. Then these intellectuals — scribes and priests — became more and more scornful of businessmen; and business lost its vision because it lost its men of vision. Men of talent and imagination, instead, accepted the faith of the state-employed intellectuals that a well-schooled elite must make more and more choices for the general run of the population and compel the inferior masses to accept this planning and direction of their lives.

Submerging the Individual

With this elitist excuse for tyranny, governments organize militaristic and imperialistic gangs to substitute forms of slavery for the voluntary cooperation of free individuals. Then, as in Communist China and Russia today, even the ablest of the ruling bureaucracies find that any individual is expendable — trapped and exploited or liquidated — as millions of humans are sacrificed on the altars of Planned Perfection. The Moral Law of the Golden Rule and of the Ten Commandments may be violated, but not with impunity. He who harms others, harms himself; he who deceives another, cheats himself.

This faith in Moral Law, I find, permeates the thinking of our Northwood administration and faculty. Along with it goes insistence on the fact of individual responsibility and a broad, long-range view of personal success. A businessman’s moral responsibility is no less than that of a teacher, physician, minister, artist or writer.

Essential to the Northwood Idea, then, is appreciation of the unlimited opportunities for character development in voluntary business enterprise.

Temptations correspond to the opportunities, and each occupation has its own peculiar temptations as it has its own peculiar opportunities. As few find the "strait gate" and "narrow way" of righteousness in other walks of life, likewise few businessmen will claim that they have always followed the right path in their own work. Only those who look for business profits in life-supporting efforts that are mutually beneficial can achieve success in the true meaning of that word.

This, I believe, may be the most distinctive feature of the Northwood Idea — the view that our graduates should look on business not merely as an easier way to attain ease and affluence, but as an opportunity for utilizing their highest human qualities and attaining lasting satisfaction in a life well spent.  

***

Courtesy: A Saving Grace

To be disagreeable is high treason against your role in civilization. Examples of this crime are: to say some sickening thing offhandedly and make the victim writhe, or to provoke others into breach of good manners, or to indulge in crude behaviour or language. There is no possible excuse for vulgarity.

The Royal Rank of Canada Monthly Letter, September, ¹972 

Abe Lincoln never went to high school or college. In fact, he spent very little time in any kind of "educational institution."

But was he uneducated? On the contrary, he ranks high among the well-educated men of all centuries, including our own.

When Benjamin Franklin first went to Paris as envoy from the newly formed Confederacy of American States, crowds lined the street to see him ride to and from his lodgings. This was not because he represented an upstart little na­tion fighting for its independence. Instead, it was because he was al­ready world famous as a scholar, scientist, and philosopher. Of formal schooling he had almost none; but even by today’s stand­ards, he was a highly educated man.

Does this mean that the great complex of "educational institu­tions" in this country represents only wasted effort and wealth?

Not altogether, of course. No doubt a Ben Franklin could profit greatly from an opportunity to use the equipment of a modern labora­tory, and a teacher might save him from electrocuting himself and shorten his learning time by dem­onstrating the use of the equip­ment.

But one excuse often heard for the vast expenditures on compul­sory, institutionalized schooling I should like to question. It is said that few young people have the thirst for learning or the genius of a Franklin or Lincoln, and that because of this we need schools and school teachers to make learn­ing easier and even to compel the "average" individual to travel part way on the road to an education.

Too often, however, I believe that institutionalized schooling has precisely the opposite effect. In­stead of starting students on the road to education, it tends to rob parents and young people of their sense of responsibility for devel­oping the individual’s powers of self-development.

How Schools Cripple Students

A conversation with a young graduate from a high-prestige eastern college illustrates this point. He was enrolled in the train­ing program of a large grocery chain and was currently working as an assistant manager of one of the branch stores. I asked him how he liked his work.

"I don’t," he said.

"Then why don’t you quit and try something else?" I asked.

"Well," he admitted, "I really would like to get into advertising."

"What’s keeping you from it?"

His reply points to a fatal flaw in our modern craze for institu­tionalizing the educational process. Sadly he said, "I never had a course in advertising."

Sixteen years of "the best schools" in the country had given this young man a sense of depend­ency that would cripple him for life if he did not somehow discover the secret of Ben Franklin’s schol­arship or of Abe Lincoln’s high level of literacy and breadth of learning: an individual becomes truly educated only as he learns to educate himself.

Schools and colleges cannot cram education into the heads of passive pupils as we pour water into an empty pitcher.

Too often, the young victims of mass schooling get the habit of depending on their teachers to pre­digest the assigned readings, cor­rect their bad guesses on tests, and pass them on to the next grade at the end of the school year with little or no regard to the students’ progress in knowledge, skills, or habits of work. This is not an edu­cational process.

By moderately attentive listen­ing in class, with perhaps a hasty skimming of a prepared digest of the readings, the average student in many of our "educational insti­tutions" can get a high school cer­tificate or even a college diploma with little or no serious mental effort.

When a college does what it should—as some do—it serves as a correctional institution rather than a diploma mill. It seeks to de­velop healthy attitudes toward work and responsibility rather than to cram the students’ minds with facts.

The easy road to a diploma or degree does not develop the ability or habits of study, and, as Douglas Woodruff says, "a college degree is a poor substitute for an edu­cation."

Education requires effort on the part of the student, and the quality of his education is directly propor­tional to the effort he puts forth. Ability and willingness to study, to work hard at acquiring new knowledge and new skills, are es­sential for the life-long, self propelling educational process that makes human life meaningful and worthwhile.

It is easy to understand that some learning ability may be nec­essary to hold a job in this age of rapid technological change; and it may help to improve one’s place and status in industry or social life.

Education, a Life-long Process

But why, one may ask, is con­tinued learning necessary to give value and meaning to life apart from its occupational or social usefulness?

The answer, I think, is a simple one. The habit and skills of learn­ing give the individual hope that his future may be better than the present, and "it is hope alone that makes us willing to live."

For man, the pursuit of happi­ness means the pursuit of life-promoting goals that keep advanc­ing even as we near them.

The theory that education should always be "fun," "interest­ing," "enjoyable" may be useful in devising ways to keep young peo­ple in school longer, but it bars the way to an education for anyone who holds it.

The notion that sweat and strain have no necessary place in a good life, that responsibilities cause only ulcers and high blood pres­sure, is producing youthful drop­outs from school and adult drop­outs from the continuing, organ­ized effort necessary to maintain a humane existence. It condemns its victims to the hell of boredom, self-doubt, and pursuit of life-de­stroying dissipations.

Enduring interests develop as we exert effort to learn, to under­stand, and to acquire new skills so that we may solve new problems and accomplish more difficult tasks.

Appreciation of the worth of hard work is one necessary ele­ment in true education. Developing the habits of strenuous effort is the other side of the coin of good living. Both come to our young people only as they find human ex­amples of such living and as they come to understand its meaning and worth.

A school or college worthy of the name, therefore, must choose its teachers for character and wis­dom, as well as for their fund of knowledge as attested by degrees or length of service.

Someone has well said, "Educa­tion is what you retain after you have forgotten everything you learned." In other words, educa­tion is not a fund of facts so much as habits, attitudes, and principles that we call character, personality, and wisdom that should develop as the years advance.

PROSPERITY

Life is purposeful and creative action by individual creatures showing infinitely great ranges of variations in structures and ca­pacities. The basic purpose of living action seems to be that of achieving greater awareness and understanding of the environment and increased power to organize it so as to make it more favorable to the preservation of higher forms of life. In such achievement we find the meaning of "welfare," "prosperity," and "progress" for every living thing including man.

For man, as for all forms of life, therefore, progress requires indi­viduals to exert effort and to take the risks inherent in experiment and invention.

It follows that human welfare, prosperity, and progress do not consist in escape from stress and strain, nor in mere abundance of the means of subsistence or enter­tainment. Instead, welfare, pros­perity, and progress correspond to the level of creative activity and the rate of achievement in dis­covering and developing new abili­ties and instruments for making the environment more hospitable to higher levels of living. Prosper­ity is pursuit of a flying goal. It is pursuit of abundance that es­capes our grasp because human aspirations and capacities for achievements appear to know no bounds.

RESPONSIBILITY

In man, however, creative action has reached a new stage of evolu­tion. In the human being the life force has become self-conscious, self-controlling, and self-directing.

The creature, man, can now help control and direct creation and humans progress only insofar as individuals become aware of this unique opportunity and take ad­vantage of it. In other words, hu­mans prosper and progress only as they become aware of their powers of choice, self-control, and self-direction, and as they learn to exercise these powers creatively.

This is what we mean by saying that the human individual must accept responsibility for his own acts. He must learn that he is re­sponsible as the primary cause for what he does, and to survive and progress he must gain wisdom and take charge of the process of ac­quiring those habits we call "char­acter," "virtue," "morality," and "personality."

PRIVATE PROPERTY

The first condition for this learning process and development is private property, or, more sim­ply, property, for all true property is private. Individual appropria­tion of standing room and of the means of subsistence is necessary for mere existence, and individual appropriation of land and tools is equally necessary for anything more than mere existence, that is, for any degree of prosperity and progress. The prosperity and progress of every human society correspond to its members’ respect for the right of the individual to own, control, and use land and the fruits of his labor, thrift, and enterprise in production and ex­change.

This individual appropriation and responsibility for finding, de­vising, and employing the "means of production" (land, natural re­sources, tools, machines, and other forms of capital) is capitalism. It follows from freedom from vio­lence and intimidation (threat of violence). Where such freedom, or peace, exists, individuals have property in what they find, pro­duce, or obtain by voluntary gift or exchange.

COOPERATION

Equally essential for human prosperity and progress is coopera­tion. Humans need one another. None is sufficient unto himself. One of the most critical problems of human progress, therefore, is to maintain and improve coopera­tion while individuals exercise and develop their powers of self-direc­tion and invention. These powers are the most important of all qualities distinguishing humans from animals or beasts. They are the qualities which also make a human — at least potentially — far more useful than any domesticated animal or inanimate machine.

But the risks of depending on the cooperation of free persons correspond to the opportunities for progress. Fear of these risks — knowledge that our welfare and even our very lives depend on the work and service of other persons — tempts us to resort to violence or threat of violence to assure con­tinued cooperation or to increase it or improve it. The result of such coercion, however, is increasing antagonism and conflict or irre­sponsibility and apathy, which re­duce cooperation. We cannot get true cooperation by force or threat of force because humans are self-controlling and will exert their peculiarly human powers (e.g., initiative and inventiveness) only in pursuit of self-selected pur­poses.

In perfect freedom, or pure capitalism, an individual would try to get the help of his fellows only by offering in return an induce­ment — something which other persons want and which they do not have or do not have in suffi­cient abundance. This inducement might be merely expressions of gratitude. But since man does not live by gratitude or praise alone, inducements in capitalistic (free) societies include offers of rela­tively scarce and desirable services and commodities — economic goods. This is the Golden Rule as it applies in the business of mak­ing a living.

MARKETS

But how can an individual know what goods to produce in order to get what he wants from others who may be distant from him in space or tastes?

The answer is to be found in the operation of the market place. Exchange values — wages, interest rates, rents, profits, and losses — act as signals and incentives to producers. A relatively high price is more than a "trumpet call to production." It provides also an increased opportunity to those getting it to increase the supply of the relatively scarce service or commodity.

MONEY

For efficient marketing, or ex­change, both money and credit are essential. Money is necessary as a measure of values and a medium of exchange. Credit is necessary whenever it takes time to complete an exchange.

In contrast with economic goods, money is useful only when scarce. Air and water are still useful even when they are so abundant that no one will pay anything to get more, but money becomes useless when everyone has all he wants of it. Gold would still have a use for filling teeth or for plating a man­made satellite if we had all we wanted of it, but it would no longer have use as money, because no one would give anything in ex­change for it.

CREDIT

Credit and money are often con­fused with one another, but they are actually as different as day and night. Money is a means of payment, credit is only a promise to pay. It arises in connection with an incomplete exchange.

Except in the case of simple barter, it is seldom possible or economical to make a simultaneous and complete exchange of services between two persons or to complete payment at the same instant each unit of services is performed. Most exchanges in all societies except the most primitive take time to complete, and while incomplete, credit is given and received.

From the lender’s standpoint, credit involves trust that the bor­rower (the person who gets goods or money on credit) will complete the exchange (pay later). From the borrower’s standpoint, credit involves a promise to pay — a promise to complete the exchange at some future time by giving value in exchange for the goods or money presently received.

To repeat, credit arises in an incomplete exchange.

CREDIT CURRENCY

The borrower may give the creditor a written promise to pay, but such records, or credit instru­ments, are not credit, and the number or face value of such in­struments has only a loose and indirect relation to the volume of credit in actual use.

Neither are such instruments money even though they pass from one person to another in settle­ment of obligations. Circulating credit instruments, such as private bank notes or bank checks, are a form of currency, but they are promises to pay money rather than money itself. Their usefulness as a medium of exchange, or cur­rency, depends on creditors’ con­fidence in the maker’s ability and willingness to pay the money promised when due or to deliver claims of equal value against other credit-worthy producers or prop­erty owners.

GOLD STANDARD

When a debtor promises to pay in gold or some other commodity, he accepts the value of this com­modity as the standard (measure) of value for his payment. He does not always or necessarily deliver the standard money (e.g., gold) in payment, but to avoid doing so and yet satisfy his creditors he must deliver goods or claims on goods which the creditor prefers to gold. This means that the debt­or must price his goods (or those assets he liquidates in order to get the wherewithal to pay his debt) low enough so that buyers will prefer them to gold and give him gold or its equivalent for them.

In this way, a standard money, such as gold, exerts constant pres­sure on individuals to use credit productively and to keep their prices in line with the value of the standard. If the standard com­modity, e.g., gold, becomes abun­dant and cheap, sellers may cor­respondingly raise their prices. But gold has become the generally accepted standard in free markets precisely because—although widely distributed in nature — it has not come on the market faster than the demand for it has in­creased, except for comparatively brief periods.

BANKING

The specialists in credit (e.g., bankers, savings institutions, in­surance and investment com­panies) record the values ad­vanced as loans, or "credits," act as producers’ agents in making ad­vances and collections, and serve as clearing-houses for drafts, or­ders, and other forms of credit currency used as evidences of loans and payments, exchanges, and repayments.

Since a borrower commonly uses a credit from one producer (or from the financial agent of a producer, such as a bank) to make full and satisfactory payment to another producer, it is easy to con­fuse credit (especially bank credit) or the evidences of this credit (currency) with money, and to believe that the demand for goods and the supply of credit de­pends on the amount of borrow­ing and the spending of borrowed funds. In this limited view, the borrower is a public benefactor merely because he borrows, buys, and consumes. When this limited and fallacious view of credit and of credit currency dominates polit­ical policy, it leads to waste of productive resources and to stat­ism (governmental restriction of freedom).

In freedom, the borrower is ex­pected to repay the loan, and lenders who fail to collect payment suffer losses and find themselves correspondingly deprived of their credit and lending power. To repay the loan, however, the borrower must either reduce his later spend­ing by the amount of the loan (in which case there is no net increase in demand or spending for goods), or he must produce and sell more goods to get the means of pay­ment. Since lenders usually charge interest for their loans, thus re­quiring repayment of more than was originally loaned, borrowers have a corresponding incentive to use their borrowings to maintain their earning power or to increase it. Hence, in freedom, borrowers and lenders tend to use credit eco­nomically and productively.

We should note, too, that cred­itors and sellers of goods in free markets tend to reject or discount inferior currencies, i.e., currencies that are inferior in convenience and intrinsic worth. Consequently, in freedom, good money drives out bad money. Or, more precisely, among private currencies in free markets, more trustworthy and convenient forms of currency tend to replace inferior currencies.¹

FIAT MONEY

Governments, and only govern­ments, may declare certain credit instruments (usually government IOU’s or the IOU’s of banks con­trolled by government) to be full legal tender. This means that cred­itors can legally demand nothing better or more valuable in payment of debts owed to them. This legal tender act by government trans­forms the credit instruments into "fiat money," or "paper money." The purpose of this act is com­monly to increase the means for paying debts (including the gov­ernment’s own debts) and thus make them easier to pay. It there­by aids debtors at the expense of creditors.

It is to such legal tender money that Gresham’s Law applies. Gov­ernments compel creditors to ac­cept all legal tender money at face value. Yet they sometimes issue new kinds of money having less in­trinsic worth than coins of the same stated legal tender value still in circulation. This was the case when the Tudor monarchs were de­basing the coinage during the life­time of Sir Thomas Gresham, Lon­don merchant and government financier. Gresham then noted (as Oresme and Copernicus had before him) that "bad money drives out good money." That is, debtors and buyers of goods make their pay­ments in the money of less intrin­sic worth, while they hoard, melt down or ship abroad the coins hav­ing greater intrinsic worth.²

DEFICIT SPENDING

When the fallacious view that borrowing per se is a public ser­vice prevails in politics, the gov­ernment is likely to manufacture "lawful money" (legal-tender paper, or fiat money) to permit the borrower to avoid a cut in his fu­ture spending as he pays his debt. It may then issue paper money to lend or give to "needy," or "de­serving," spenders, or to buy the products of favored producers re­gardless of the economic value or usefulness of these goods. Such policies waste labor and capital which might otherwise increase the supply of goods (and of credit) in the free markets, and they encourage unproductive bor­rowing and consumption of goods.

Furthermore, when government gets the authority to print legal-tender money, it is likely to use this easy method for increasing its own spending for political pur­poses, as, for example, for molding public opinion to support its ex­pansion of power, for hiring police, spies, soldiers, and tax col­lectors to enforce its multiplying rules and levies, or for buying votes, wholesale or retail.

But as government thus expands its activities beyond those neces­sary to establish freedom (i.e., to suppress private coercion, such as banditry, assault, and stealing), it takes from individuals a corres­ponding amount of freedom to use their energies and capital accord­ing to their own best judgment. It thereby restricts their opportunity to develop their most important powers — those powers which most of all distinguish humans from animals; and so it restricts human progress. This encroachment of government on individual freedom is commonly called "statism."

Political constitutions are sys­tems of rules by which freedom-seeking humans have tried to re­strict government activities to those believed necessary for wel­fare. In this sense, the state and Federal constitutions of these United States were originally the most restrictive constitutions of which we have record, and until about 1898 they served as effective barriers to the advance of statism in this country.

—FOOTNOTES—

^¹ Since, so far as I know, this law is my own discovery, stated in my classes and public lectures nearly 20 years ago, friends have named it "Watts’ Law of Money." Long study of banking and mon­etary history, as well as economic analy­sis, convinces me that it is a valid ob­servation of an economic uniformity, or law. Therefore I am willing to accept re­sponsibility for putting the statement of it into circulation.

2 We have seen this verified in the United States for two years or more as paper dollars replaced silver dollars and half dollars in circulation, as wartime nickels of higher silver content disap­peared from circulation, and now as the new "sandwich" quarters and dimes re­place coins of much higher silver content.

***

Opportunities to "Do Good"

Too many of us get it into our heads that to "do good" we must go far outside our daily routine interests.

Glenn Frank once said: "The rich man’s greatest oppor­tunity for public service lies inside his private business. That is to say, statesmanship in business is of greater so­cial value than philanthropy outside business."

A man with the genius for successfully running a busi­ness is right where he belongs; the opportunities to "do good" are greater in business than outside business.

WILLIAM FEATHER, in The William Feather Magazine, July, 1965

Northwood Institute, a private, two-year college with campuses at Midland and Alma, Michigan, is dedicated to the philosophy and practice of the American free enterprise system. In all of its ac­tivities, Northwood seeks to provide in­tellectual stimulation, encourage person­ality development, and promote growth in moral understanding and character. Its aim is to aid students to become voca­tionally proficient, economically literate, and morally responsible, and to inspire an appreciation of our American heritage and the determination to preserve and enrich it.

"As a Man Thinks…." serves as Dr. Watts’ introduction to Philosophy 110: Survey of American Life and Business, designed to develop understanding of pri­vate enterprise and to inspire a resolve to develop the personality, character, and skills necessary for individual success in voluntary cooperation.

As we think, so do we act. We act in ways which we believe will give us what we think we need or what we imagine we will enjoy: particular foods, kinds of clothing, types of shelter, forms of romance, popularity with certain persons, leisure, security, or adventure. "A human being always acts and feels and performs in accordance with what he imagines to be true about himself and his environment."¹

In this respect animals differ from humans. A beaver fells trees and builds a dam by instinct. In­herited instinct directs birds to build nests, badgers to burrow, and bees to make honey. We humans have no such built-in directives. We would quickly perish if we tried to rely for guidance on our few inherited urges or ill-defined in­stincts. For better or worse, hu­mans live only by virtue of what each individual learns during his own lifetime.

For this learning process, man has nature’s most highly developed nervous system. Still more impor­tant, this nervous system is sub­ject to the control by faculties of a forebrain that puts man, so scien­tists tell us, as far beyond the high­est ape as the ape is above the amoeba.

This forebrain records impres­sions. From these it forms and stores the ideas which ultimately govern human conduct, and it ap­pears to have virtually unlimited storage capacity for every sort of information brought to it by the senses.

But it is much more than a re­corder or storehouse. It possesses also the faculty of mind, which uses and directs the brain and nervous system. This mind, or conscious­ness, has the unique power to select from the recorded impressions and ideas those which it will permit to stimulate the nervous system and activate our muscles.

This power to select the control­ling ideas is what we mean by "free will," or "freedom of choice," which only humans, so far as we know, possess. Because of it, hu­mans have the power of self-con­trol, or self-government. It makes man responsible for his acts in that he can choose to act or to re­frain from acting as instinct-guid­ed animals cannot do.

Your Ideas Control You

As students of cybernetics put it, the human nervous system op­erates as a "servo-mechanism" to achieve goals set for it by the mind. These goals are mental images which our minds create by use of imagination.

Your nervous system cannot tell the difference between an imagined experience and a ‘real’ experience. In either case, it reacts automatically to information which you give to it from your forebrain. Your nervous system reacts appropriately to what ‘you’ think or imagine to be true.²

This means that humans can con­trol their own learning process as animals cannot. They can learn what they choose to learn. By se­lecting their own goals they can learn to direct their own "educa­tion."

Increasingly, moreover, individ­uals must acquire this ability if they are to hold their relative posi­tions in a progressive society. For, as humans progress in cooperation, they make their social environ­ments more complex and more sub­ject to a rapid change. Schools can­not supervise the details of educa­tion and re-education necessary to keep pace with changes in the oc­cupational requirements and non-occupational opportunities in pro­gressive societies. Hence, members of such societies must develop in­itiative and skill in the techniques of teaching themselves. The aim of the schooling process, says Pro­fessor Jacques Maritain, should be, therefore, "to guide man in the evolving dynamism through which he shapes himself as a human per­son—armed with knowledge, strength of judgment, and moral virtues—while at the same time conveying to him the spiritual heri­tage of the nation and the civilization in which he is involved, and preserving in this way the century-old achievements of generations."3

Aims of Education

A sketchy list of what we should look for in education, therefore, includes:

1. Skills

a.   Manual skills, e.g., sucking, eating, walking, talking, read­ing, occupational techniques, sports, artistic proficiencies.

b.  Personality skills necessary for winning approval and co­operation of fellow humans, e.g., skills in expressing plea­sure, gratitude, disapproval, concern for the feelings and interests of others.

2. Moral Traits: habits of indus­try, thrift, initiative, fidelity, honor and honesty, courage, self-reliance, regard for interests and feelings of others.

3. Wisdom and Foresight: under­standing of cause-and-effect re­lationship in the animate and inanimate realms, including the realm of one’s own physiology and psychology as well as that of social relationships.

4. Learning Ability: adaptability, ability to gain and use new knowledge and to acquire new skills; resourcefulness.

Humans have progressed so far in developing these skills, it is said, that every individual must acquire in his own lifetime more knowl­edge and skill in living than all other creatures have acquired in the form of instinct during the two billion or more years of plant and animal evolution before the most primitive form of man ap­peared on the scene one or two million years ago.

Moreover, humans can never, apparently, stop learning. They make for themselves an environ­ment that is vastly more dynamic than that to which animals must learn to adapt, for this human en­vironment includes the actions of their fellows and the dynamic realm of intellectual and nervous change within each individual. This means that humans must acquire the ability to teach them­selves so that they can maintain their equilibrium in these two ever-changing worlds. They must learn how to learn, and they must acquire the ability to direct their own learning. They must plan to continue developing and exercis­ing this skill, moreover, long after their physical powers have begun to decline.

This learning process can in­crease until "cerebral accidents" seriously impair the functioning of the brain. That is, a man of sixty or seventy who knows three or four key foreign languages should learn a new language faster than a youth of 18 who knows only his native tongue. A 60-year­old economist should be able to master the intricacies of the ac­counting profession faster than a 20-year-old undergraduate, other things (e.g., original I. Q.) being equal.

In this connection, teachers should ponder this paradoxical statement by Jaques Maritain: "In order to reach self-determination, for which he is made, he [man] needs discipline and tradition, which will both weigh heavily on him and strengthen him so as to enable him to struggle against them—which will enrich that very tradition—and the enriched tradition will make possible new struggles…." 4

Passion for Objectivity

What shall we say, then, of the notion that the teacher should not take sides on "controversial" ques­tions—and what questions in the "social sciences" are not contro­versial today? Should the teacher merely collect and present all pos­sible opinions on these topics, with complete objectivity and with no attempts to help the student make a good choice between the conflict­ing views?

In what has been called the "modern, mad passion for objec­tivity" many teachers and schools recoil from a religious, poetical, or moral approach in pedagogy and scholarship. They propose to appeal only to the intellect lest they arouse emotions that, so they fear, may inhibit understanding and misdirect the mind.

But psychologists tell us that the mind cannot function without emotion, and that understanding, consequently, cannot exist without appraisal, or evaluation. Emotions are necessary to stimulate mental activity and the flow of ideas. Ideas, in turn, arouse and alter emotions. All action, including mental activity, is prompted by desire, ambition, purposes, pref­erences, likes, and dislikes which are evidences of emotion. Objec­tive observation and thought are not unemotional. Instead, they yield significant results only to the extent that emotions inspire the individual to make the effort of concentration necessary to get a clear view of the relevant facts. The emotions to be ruled out, or suppressed, are those which pre­vent this concentration and accu­rate interpretation. But the strength of the emotions which prompt the concentrated effort to observe and understand must cor­respond to the intensity of the concentration and other effort, mental or muscular.

And, because ideas play so large a role in determining human be­havior, humans must learn to dis­tinguish the true from the false, the useful from the useless or harmful, the good from the evil, the beautiful from the ugly. They must acquire the habit of choosing the one and spurning the other. They are needlessly handicapped in this learning and retarded in acquiring wisdom if teachers mere­ly present conflicting opinions and profess their own inability or re­luctance to choose between them.

Here is the way one writer deals with this doctrine that edu­cators should "present both sides" so evenly weighted that the stu­dent may easily decide that either or neither is valid:

That concept is endorsed by the overwhelming majority of persons who arrange the education and in­formation programs for colleges, ser­vice clubs, discussion groups, busi­ness organizations, and others. They believe in presenting the case for so­cialism along with the case for the free market. Challenge them and they will reply: "Objectivity and fairness demand that we present the argu­ments for government ownership even though we ourselves don’t be­lieve in it."

Do objectivity and fairness demand that they present the case for coin clipping? They say no. Then why do they arrange for speakers and teach­ers who endorse the monetization of debt? After all, the device of mone­tizing debt is merely a modern ar­rangement of the old idea of clipping coins.

Objectivity and fairness aren’t the real reasons a person arranges for the presentation of both sides. The primary reason is this: The person hasn’t made up his own mind! He doesn’t arrange for a defense of coin clipping. He arranges to have the case for monetization of debt pre­sented because he himself hasn’t yet repudiated that method of financing government.

When a person voluntarily ar­ranges for the presentation of social­istic ideas along with free market ideas, you may be sure of this: He hasn’t completely repudiated social­ism; he hasn’t completely accepted the ideas of the market and of gov­ernment restricted to the equal pro­tection of the life, liberty, and hon­estly acquired property of everyone.

Here is a truism: If the evidence clearly indicates that an idea or policy is untrue or evil, no fair and objective person will voluntarily ar­range to have it presented as valid.5

The Myth of Neutrality

Because it is a physical impos­sibility to depict all facts and opinions in any book, class, or course, every educational effort must be selective. No historian could record everything that hap­pened in any period of time, however short. Insofar as the author of a history has only the educa­tional value of his work in mind, he selects for presentation those facts and supposed relationships which he believes will be espe­cially significant for certain read­ers and students. The teacher, simi­larly, insofar as he has only the educational usefulness of his work in mind, will select for recom­mended or "required" reading by his students, not all available books and articles on the period, but those few which he considers likely to be most effective in pro­ducing certain student reactions. The same holds true for authors and teachers in other fields.

In practice, of course, authors of textbooks seldom consider only educational values as they decide what facts and interpretations to present or ignore. Instead, they commonly select facts to support opinions held by the publishers’ editorial advisers, school boards, politicians, teachers, and others who help select textbooks. By the same token, they omit from their accounts any mention of facts and relationships which might support opposing views. Teachers, too, in selecting readings and in their class discussions of the readings must consider the opinions of school boards, superintendents, principals, parents, deans, presi­dents, and trustees.

We should recognize also that both authors and teachers are prone to economize time and effort by following tradition and to con­tinue presenting facts and opin­ions long after these have ceased to be significant for new genera­tions of students or accepted as valid by leading authorities in the fields.

Probably no teacher can pre­sent "both sides" of a controversy without bias unless he believes either that the controversy is un­important or that he cannot or dares not "take sides." But if he believes that the controversy is unimportant, he can scarcely arouse the interest of his students in it; and if he shows that he cannot or dares not differentiate between the true or false, he fails to inspire in his students the atti­tudes and qualities necessary for human progress.

Northwood Trains for Voluntary Enterprise

One of the primary duties of a teacher is that of inculcating, by precept and example, the convic­tion that there is right and wrong, truth and error, beauty and ugli­ness, and that it is a matter of life and death for students to learn to choose between them. He should in­spire faith that there is truth, goodness, and beauty, that it is worth-while to seek them, and that it is possible to find them. To qual­ify as an effective teacher, there­fore, the individual himself must possess and display, to an excep­tional degree, this high regard for truth, virtue, and beauty.

Northwood Institute has been established to train students to function efficiently in private busi­ness, or "free enterprise." We should assume that those who founded it, who send their chil­dren to it, and who contribute funds for its support believe that employment in private business is a good way to make a living; they believe that the typical operations of banking, finance, advertising, retailing, and the like do not re­quire lying, cheating, stealing, or maiming one’s fellow men. They expect Northwood courses to teach how such operations are carried on. More than this, the thoughtful liberal must surely recognize and teach that only in the voluntary association for the exchange of services—that is, only in volun­tary activities of free-enterprise industry, finance, commerce, and the professions—do humans de­velop those qualities which most distinguish them from animals.

We know, however, that a host of industrious and widely respect­ed authors and professional schol­ars teach that private business operations—the operations of buy­ing and selling in free markets—are dishonest, predatory, and de­moralizing to all who take part in them. They teach that, in free markets, the rich get rich at the expense of the poor, so that the rich get richer while the poor be­come more wretched and numer­ous. They teach that employers underpay their employees and that overproduction and unemployment result from the workers’ inabil­ity to buy the products of their own labor. Merchants regularly and necessarily cheat their cus­tomers in free markets, according to these anticapitalist scholars, and most consumers are so stupid that competition among profes­sional merchants regularly gives greater rewards to the sellers of shoddy goods, poisons, narcotics, and obscene literature than to pro­ducers of better-quality articles, nutritious foods, and wholesome publications. These supposed schol­ars contend that the poor and the common wage earners, consumers, and small producers can get econ­omic justice only if men like them­selves acquire and use the coercive power of the state to regulate pro­duction and to set the terms of exchange.

Effects of Anti-Business Propaganda

These illiberal ideas have gained increasing acceptance during the past century, and they have had consequences in the return to reactionary policies and political in­stitutions, together with growing disrespect for morality and "The Law." The parallel between an­cient and modern civilizations in regard to individual freedom and the rise of empire is too striking to escape notice by thoughtful his­torians.

Degenerative influences are al­ways present in every society, and moral philosophers have called at­tention to them, generation after generation. Sometimes these Cas­sandra-like warnings may have helped to reverse the trend, so that constructive ideas and actions overcame the demoralizing forces. Humans progress only as they learn to recognize and avoid the mistakes of their forebears. The American scholar or teacher wor­thy of the title, I believe, must share some of the sentiments and experiences of prophets in other times and places.

It is not without significance that the "modern era" dates from the centuries during which schol­ars and pedants in the Western world won a measure of release from support and control by em­perors, princes, and other political functionaries. Nor is it mere coin­cidence that reactionary political trends have set in with the revival of political control over teachers, textbook writers, radio, televi­sion, and scientific research, a con­trol that takes many forms: pub­lic schools, state universities, gov­ernmental subsidies for research, and governmental controls over the broadcasting industries.

Means Mistaken for Ends

Scholars, teachers, parents, and politicians have increasingly mis­taken certain useful tools and tech­niques—books, scientific instru­ments, school buildings, and class meetings—for education. They have come to believe that, given enough of these tools and tech­niques, education of the young must necessarily follow. Then, in the belief that the end justified any means, they have proposed and instituted increasing coercion—legal but effective—to finance the printing of books, the purchase of scientific equipment, the build­ing of schools, and the hiring of teachers. At the same time they have resorted to increasing coer­cion to exclude the young from productive enterprise and to herd them into the costly buildings and classrooms by means of child labor laws, wage-hour laws, restrictions on tasks young persons may per­form, and truancy laws. As a re­sult, the young are getting more schooling but less and less educa­tion.

Moreover, if free enterprise cannot supply the services of edu­cation, why should we count on it to supply adequately the services we want from our fellow men in transportation, agriculture, indus­try, or commerce? Scholars who mistrust the good sense and initia­tive of their fellow men in educat­ing the young are likely to expect little but folly and bovine inertia from "the masses" in their other activities. They find it easy to be­lieve, therefore, that the same le­gal coercion that they advocate in schooling the young is necessary to assure right conduct on the part of their elders in the produc­tion and distribution of other goods.

Scholars and pedagogues who work in intellectual and financial partnership with politicians in education and research tend to join in movements to increase political intervention in every field of human endeavor. In fact, poli­ticians demand this political sup­port in return for the tax sub­sidies paid to writers and teachers in public schools and universities. As Henry Adams said, "All State education is a sort of dynamo machine for polarizing the popular mind: for turning and holding its lines of force in the direction supposed to be most effective for State purposes."6

As a further result of these statist tendencies in thought and action, we find a spreading tenden­cy among scholars in state institu­tions to belittle or deny the facts of individual responsibility for hu­man action.

Faulty Rationale

For this denial of mankind’s powers—the powers of reason and self-direction—the statist schol­ars supply more than one ration­ale. Proponents of the Marxian rationale (materialistic determin­ism) reject the Freudian rationale (the libido and the subconscious) in Soviet culture even as they make use of it in their efforts to subvert and dominate thought and morality outside the borders of their own empire.

The pseudo-liberals of Ameri­can politics often reject the idea of individual responsibility, it ap­pears, merely for the purpose of arguing for the particular nos­trum which their favorite politi­cians happen to propose at the moment. When their political lead­ers are campaigning for Federal aid to education, they proclaim lack of schooling to be the condi­tion that holds the downtrodden masses in poverty and immorality. This lack they attribute, of course, to the greed or indifference of pri­vate enterprise, which has failed to supply the necessary school fa­cilities. When the politicians make slum clearance the political issue, the statist intellectuals find lack of proper housing to be the cause of crime, poverty, ill-health, and ignorance. But always in this view, it is some "social condition" that determines individual con­duct, not individual choice and ac­tion that make the social condi­tions.

No single idea, I believe, is more demoralizing, more discouraging to human effort, than this notion that the individual is not respon­sible for his acts, that he cannot be responsible for them, and that he should not, therefore, be held accountable for them. Springing from this dehumanizing satanism is the general mistrust of individ­ual freedom to be found in the arguments for political nostrums advocated as remedies for the supposed evils or short-comings of voluntary enterprise.

Humans Are Responsible

It may be that the faculty for self-control is itself "merely" an idea or complex of ideas, together with the corresponding develop­ment of the autonomic nervous sys­tem. But it can transform a life, and as it is associated with under­standing of oneself and other hu­mans, as well as of inanimate na­ture, it has increasing survival value for the individual and for all whom he cherishes.

The demoralizing notion of "so­cial responsibility" and expositions of the "failures of free enter­prise," however, permeate the text­books which public schools and state universities adopt and use in economics, history, and other so­cial studies. Therefore, the institu­tion which seeks to inculcate un­derstanding of private business and enthusiastic dedication to the ideals and virtues necessary for efficiency in voluntary enterprise cannot use such textbooks except as collateral reading assigned as "horrible examples" of political in­terference with thought and schol­arship.

Yet, we must recognize that choice among nonstatist textbooks is limited and those which are available may be inadequate in various ways. What to do?

In my opinion, we should regard this lack of suitable textbooks as a challenge and an opportunity. In fact, we can recognize the inade­quacy of the statist books or of the alternatives only as we become aware of the need and opportunity for something better. That recog­nition is itself the beginning of wisdom which must make us more effective teachers. But more than this, it should inspire us to take the lead in providing textbooks and using classroom techniques neces­sary to achieve the success in edu­cation which every true teacher covets.

Foot Notes

¹ Maxwell Malz, Psycho-Cybernetics (New York, Prentice-Hall, Inc., 1960).)

^² Psycho-Cybernetics; p. 29.

³ Education at the Crossroads, p. 10, (emphasis added).

⁴ Education at the Crossroads, p. 2.

⁵ Clichés of Socialism, No. 22 (Irving­ton, N. Y.: The Foundation for Economic Education, 1962).

⁶ The Education of Henry Adams, Modern Library edition, p. 78.