The sheriff is patrolling his town one day when he walks between the general store and the window shop, across the street from each other, and sees that the latter is in shambles, while the former is thriving. This situation strikes him as quite unfair. Why, he asks himself, should the proprietors of these two stores, who (he presumes) spent comparable amounts of time and money in building their businesses, be separated by a large and growing disparity in their wealth and consequently their living conditions?

The sheriff decides he will take it upon himself to remedy the situation—to level the playing field—so he puts a brick through each of the general store’s windows. The window store is immediately flooded with business replacing all the general store’s damaged property. The sheriff is satisfied. He has succeeded in spurring the business of a struggling entrepreneur. His town is once again in harmony.

A month or so later the sheriff is walking the same beat. He notices that once again the general store, having recovered from the vandalism of the previous month, is maintaining a healthy business, while the window store is once again struggling. He decides to repeat his previous actions, once again tossing a brick through each of the former’s windows. And once again, the window store’s business surges as it is charged with replacing the damaged panes in the general store.

But the sheriff realizes that, left to its own devices, the general store will once again recover and resume its thriving business, while the window shop will again falter. So he decides to repeat his window-breaking routine every so often. By doing so, he reasons, he will be supporting an industry that would otherwise fail. He acknowledges the price that the general store will have to pay, but immediately dismisses this thought, realizing that such a thriving business certainly has the money to replace its windows every now and again.

Before this rampage of vandalism by the community’s civil servant, the owner of the general store had been contemplating ways in which to reinvest the revenue that his business was creating. He boiled the situation down to two options. On the one hand, he had been considering an expansion of his facilities. His business had been doing so well that he began to buy more products of more varieties, and, after a while, needed additional storage and shelf space. On the other hand, he thought, he owed much of his success to the hard work of his dedicated employees and felt they deserved a pay raise.

But before he could decide which of the alternatives suited him better, someone had begun to break the windows of his shop regularly. Although his business was not at risk, the costs associated with replacing the windows added up. He had to forgo his plans either for a physical expansion of his business or a bonus for his employees. (See Frédéric Bastiat’s discussion of the “broken-window fallacy.”)

After numerous occasions of vandalism at his shop, the owner of the general store goes to the sheriff and explains to him that the costs of replacing his shop’s windows are hampering his business and that he would like the sheriff to investigate. Much to the shopkeeper’s surprise, the sheriff admits that he, in fact, has been wreaking the destruction on the general store. The sheriff explains his logic, telling the owner that if those windows had not been broken, the business across the street would have gone belly up. As an officer of the law, the sheriff continues, he is charged with safeguarding the public—providing not just physical protection, but financial protection as well. He says that he cannot very well sit idly by and watch as members of the community who have entrusted their well-being to him are driven out of business and forced into poverty.

The general-store owner protests, but what can he do? Under threat of force (that is, of the law) he is told that he must endure the violation and destruction of his personal property for the benefit of the community. The sheriff continues to hurl bricks through the general-store window, and eventually the owner learns to live with this nuisance. Rather than expand his business—and the public service that it offers—or pay his employees more, he is forced to endure the oppression of the law for the sake of a business that could not survive on its own.

This is the crime of the state. Pragmatically, taxation is the enemy of innovation, the broken window in the general store. Philosophically, taxation is the moral—and universalized, or at least nationalized—equivalent of the sheriff’s vandalism. The state feels, in the service of the public, that it must violate the property of some for the benefit of others.

One need not advocate anarchism, however, to see the problems inherent in such a policy. Taxation arguably serves its purpose in providing public services. If the sheriff had restricted his duties to the physical protection of the community’s citizens, he would have been doing his job aptly. Likewise, the role of government must be restricted to the protection of the life, liberty, and property of its citizens. The state oversteps its bounds, however, when it violates one of those three rights—as the sheriff did, and as the federal government of the United States does—even for the benefit of others.

If the sheriff had not intervened, the owner of the window store may have realized that the community did not provide sufficient demand for his product for him to run a successful business. He could then have opened his own general store and competed with the one across the street. He could have vacated the building and rented it to the general-store owner, who needed additional space. But the sheriff’s violation of the right to property, actions that embody the spirit of welfarism and coercive equality espoused by so many in our own government, cannot be justified on any terms.

The United States is moving dangerously close to (and has maybe even arrived at) a system under which those charged with protecting and trusted to honor our rights regularly violate them in the name of mindless rhetorical utopianism and forceful egalitarian mediocrity.

Does America’s tax and subsidy system ignore the commandment, “Thou shalt not steal”?

During the 1930′s, certain American intellectuals spearheaded what might be called an ethical uprising in the social realm. They called for government intervention to benefit the less fortunate members of society, giving impoverished persons and groups the practical help of subsidies, price supports, and other monetary payments.

The idea, as everyone knows, proved immensely popular. Earnest political officials saw in it a chance to extend their sphere of usefulness: now government, instead of merely restraining evil-doing, actually could do good. Many social scientists and other kind-hearted citizens likewise approved, thinking: “What a fine thing it is that Washington is helping the needy!” And those who received the aid—farmers, the elderly, the unemployed, citizens of “poor” states, and so on—saw the tangible benefits to themselves.

Considering these pressures, the growth and persistence of the large-scale practice of distributing subsidies is quite understandable. But, I believe—despite the widespread acceptance of this system—that the entire practice would be opposed by tremendous numbers of our people, even by many now receiving substantial government payments, if they understood what is really going on, including secondary consequences. We have looked only at the immediate effects of a policy, or the effects on only a certain group, and failed to examine the long-term effects, not merely on one, but on all groups.

Of course, we see that various segments of the population have special economic needs. We also see that the federal government has, or can get into its possession, the vast funds which can meet those needs. But we stop there, when we should go on and ask: “Where does the government get this money?”

The Magic Money Machine

It’s quite possible that some citizens don’t know. But even those of us who do are tempted at times to look at our federal government and imagine we see a fabulous, gold-plated Magic Money Machine. We are tempted to believe, somehow, that if only our legislators will work hard enough turning the crank, this magic machine will produce all the wealth needed by every impoverished group in our society.

And a great many persons are busy encouraging us in this illusion. Our politicians promise ever-larger bounties from the magic machine: bigger dams, better roads, better schools, more federal housing projects, higher parity prices. Many of our professors tell us this is social progress and social justice. And many of our journalists inscribe headlines announcing every new proof of federal generosity.

It certainly would seem that the Magic Money Machine is the wonder of the age.

Yet, we can search Washington, D. C., from the subcellar of the White House to the top of the Capitol Dome, and we will not find a Magic Money Machine. It does not exist. Of course, the government can always print more money—it can always dilute the currency. But there is no federal-ly-owned gold mine in the nation’s capital. Neither the President nor the congressmen nor anyone else in Washington has any self-replenishing treasure house from which wealth can be taken and distributed to the people.

Where Does the Money Come From?

Where, then, does our federal government get the billions upon billions which it doles out in subsidies each year? It’s obvious enough. From the people, from taxing everyone actively engaged in producing wealth. Government has no wealth of its own which it could give to you or me or anyone else. Every time the government gives to one man, it has to take from another. Every time someone gets something for nothing, someone has to give something, and get nothing. Government can pay Paul only by first robbing Peter.

Now I have just used a strong word—“robbing.” I said, in effect, that our government is robbing one citizen in order to give to another. This is a well-considered conviction. And yet, it is perhaps too harsh an indictment.

For one thing, I believe most of those involved (the subsidy-seekers and the government officials) don’t know that they’re stealing. It’s not intentional theft. Also, it is apparent that the government practice of taking from some in order to give to others is perfectly legal. Even if it is unconstitutional, government passes the laws enabling it to do this taking; so, legally, it cannot be called stealing.

But the moral law and the man-made law are sometimes two entirely different things, and in the end, man-made law has wisdom and validity only to the extent that it coincides with moral law.

The Moral Law

So let us evaluate our practice of taxing-some-to-subsidize-others in terms of the moral law which says, “Thou shalt not steal.”

Now, most of us are used to thinking of stealing as occurring unexpectedly, and either secretly or by means of violence; and we ordinarily think of this stealing being done by an obviously unsavory character, and for an unmistakably selfish end—his own self-aggrandizement. But I think you will agree that we can eliminate every single one of those conditions, and still have stealing. The dictionaries agree that two elements—and only two elements—are always present in theft: the element of taking (that is, getting without permission) and the fact of ownership (that the thing taken belonged to someone else).

In terms of this basic definition, our government’s tax-and-subsidize program is stealing—if (and this is an important “if”)—if you actually own the fruits of your own labors, and if you do not want government to take them from you in order to give them to others. All we have to find out is whether you really own what you earn, and whether you would voluntarily let government take what you own and distribute it to other persons.

Do You Own What You Earn?

First, do you own what you earn? Do you own the fruits of your own labors? This is a big question, and I can only touch on it here. But I will take the time to say that this question is pretty close to the heart of the gigantic struggle of freedom versus slavery which is now engulfing the world.

On one side is the socialist, the communist, the totalitarian position. It says: “No, no man owns the fruits of his own labors. Society owns them, and it is the business of government to distribute them.”

In the center is the “moderate collectivist” or “middle-of-the road” position: “A man should be allowed to keep part of what he earns. The rest belongs to society, to be collected and distributed by government.” But this is only an evasion of the point. When you say, “A man can be allowed to keep part of his income,” you are virtually admitting that government owns all of it, and that government alone, by its own generous discretion, decides that some part of it may be kept.

On the other hand, the voice of freedom asserts, “Man inherently, under the divine or natural laws, does own the fruits of his labors.” This ownership hinges on the simple fact that man has a God-given right to life; and the right to life is meaningless unless there is the right to sustain and protect that life. If a man is denied the right to keep what he earns, to retain the fruit of his labor or his property, he loses control of the only means whereby he can sustain his human life!

This, incidentally, is a premise on which this country was founded. Throughout history, nations had been built on the assumption that the State was supreme, the people subordinate—and that the State had prior claims on every man’s income. But the American Revolution (which was primarily an ideological revolution) overthrew these tyrannical assumptions; and the Declaration of Independence and the Constitution implied that the individual is supreme, the State subordinate—and that the function of government is to protect a man’s life, liberty, and property, not to take them away.

What Would You Give Government?

Assuming that you should own what you earn, then the question arises: Would you voluntarily give to government any amount of your income that it wanted, even though you knew it was going to be used for the sole purpose of subsidizing others? This is not a question of charity—how charitable you want to be—but a question of whether you would voluntarily give up the right to determine how your income, above and beyond your immediate basic needs, is going to be spent. It is a question of whether you think you should relinquish that right to certain other persons called “government,” or whether you should determine the spending of your own earnings—how much for your family, how much for various benevolent purposes, and so on.

I am not asking whether you would be willing to pay for a basic protective service which government renders for you at your request. I am talking about an additional tax, on top of that, which is not for you at all, but for somebody else.

We might call one part of our present tax the basic tax; the additional part, a subsidy tax—a tax we pay in order to subsidize others. I say that even though we pay the basic tax reluctantly, most of us pay it pretty much voluntarily. That is, we know we ourselves want a certain service from government, and we know it has to be paid for. But I believe many of us—if asked—would not be willing to pay an additional tax for the sole purpose of transferring our wealth to someone else.

Suppose that only the basic minimum tax were compulsory in this country and that there were no subsidy tax. And let us say that the Governor of Tennessee had come to you and asked you to put up some money to help build the TVA dam. Not aloan—an outright gift.

You know, of course, that the dam is primarily for the benefit of the people of the Tennessee Valley. You also should know that if you give the Tennessee Governor money one year, he’ll be back for more the next; and he and his successors in office will keep on coming back till the day you die.

The Word Will Spread

Furthermore, if you give a single dime for the TVA dam, the word will spread like wildfire that you have subsidized something in Tennessee; and the governors of the other 47 states will be after you faster than you can say, “My poor aching wallet.” And so will you be approached by everyone else who thinks it might be nice to have a subsidy—to get something for nothing.

The wheat farmer, the corn farmer, the peanut farmer, the unemployed, the unemployable, the elderly, the veterans, all who want improved roads and hospitals and schools and dams and harbors and irrigation projects and the thou-sand-and-one other things that occupational and geographic groups in towns and cities and states can ask for—by the hundreds they’ll come—knocking at your door, writing you, phoning you. They’ll never let up. Their imagination and persistence will prove unlimited.

Knowing full well that this is the pattern—would you voluntarily, on your own initiative, help to subsidize the TVA dam, or any other project seeking government aid?

Before you say yes, let me state that the situation I have just portrayed is literally what did happen to our United States congressmen during the past 20 years. A few congressmen, urged on by certain pressures, put through a subsidy for one group, who promptly concluded it was something government owed them, and have literally demanded it ever since.

Other groups, seeing the pleasures of “something for nothing,” shouted, “Me too!” After all, they reasoned, “You are the government—you’ve got to be impartial! You gave to Tennessee—why not to me?” And the subsidy-seekers have been swarming around the nation’s capital ever since. Almost every year they take a bigger cut out of your and my earnings.

And who determines how the loot is divided? We like to imagine it is some cool deliberative body—“government” in the abstract, dispensing “economic justice” according to the dictates of impersonal science and impartial wisdom. But what is actually going on? Pressure groups are fighting like cats and dogs to see who can get the biggest shares of the something-for-nothing money. And congressmen are perpetually making deals with each other—“You vote for my subsidy and I’ll vote for yours.”

Now this is what we bargained for when we started this subsidy business. Increasingly, everybody is subsidizing everybody—and government, rather than the individual citizens, is determining how individual earnings are spent. The whole problem was implied the very first time we let government step in and take wealth from one in order to give to another. So I ask you, “Voluntarily, on your own initiative, if you were acting as government, would you have started this subsidy operation with a contribution from your own income?”

If you say, “No, I would not”—and if you have already agreed with me that you own the fruits of your own labors—then I think you are concurring with me that the subsidy program is virtually a form of stealing. Unintentional? Perhaps. Legal? Yes, though actually unconstitutional. But still it would seem to me, by the judgment of moral law, inherently an act of theft.

Government Camouflage

Why, then, is it not more commonly recognized as that? Largely, I think, because the mechanics of government tend to camouflage what is going on. Government processes are so automatic, so mechanical, so impersonal, that it is easy to lose sight of what is actually happening.

The whole picture would become startlingly clear if we would remove the mask of government procedures, and reduce the situation to its basic human elements. Let’s take the farmer who demands a subsidy. Ostensibly, he asks it of government; but actually, he requests it of his fellow citizens. He is virtually saying to them, “I insist that you pay me more than the free market price for what I raise. I demand that you pay me more than you would voluntarily.”

If the farmer said that to each of his customers in person, they’d just laugh at him. So the farmer asks government to provide a subsidy. Instead of collecting that subsidy through taxes, what if the government said to each farmer, “You go and collect this subsidy yourself. We will assign a policeman to each farmer, and you can go door to door all over the United States, and demand your price support in person. If anyone refuses to give you his share, the officer may arrest that person and take him to jail.”

Even if the government subsidized the farmer during this tedious collection process—and paid all his traveling expenses—how many farmers do you suppose would be willing to accept price supports under such conditions? Why, it would be too humiliating, too degrading to go about begging or bludgeoning one’s fellow citizens. Any normally self-respecting farmer would refuse to do it. He would see for himself that he was engaged in an act of theft, and would turn from it with loathing.

Morals and Economics

“All right,” someone says, “I’m beginning to see your point. Reduced to its basic moral and human elements, this subsidy business might be called stealing. But even though it is morally regrettable, is it not economically advisable? Don’t you agree that from the viewpoint of practical economics, it makes more wealth available?”

That’s a good question. But the answer is that the subsidy system is not economically advisable. There is a most interesting and significant correlation between morals and economics. What is morally sound tends to be economically sound, and vice versa; and this applies very pointedly to government subsidies. For the people as a whole, the subsidy system does not increase wealth, but only transfers it, and in the process greatly reduces it, and takes away precious freedoms.

How Can It Be Stopped?

If the subsidy system is wrong, then how can it be stopped? The answer is simple. We can solve this problem by recognizing that just one thing makes it possible: government intervention, the present misguided notion that government should dispense economic privilege. Left to their own devices, our people would never think of taking from one another in such fashion. Even if a neighbor offered to steal for him, no honest man would accept a gift of stolen goods. And if such wholesale thefts were attempted without State sanction, the police and courts would halt it faster than you can yell, “Stop, thief!”

We find the answer close to home—in the kind of political instrument conceived by our own Founding Fathers. We find it in the spirit of limited government crystallized in the Declaration and formalized in the Constitution. Under this system, the political mechanism has no power to bestow favors on any class or section—rich or poor, business or labor, city or farm, North or South. It has no authority to take from one to give to another, no authorization to interfere with the normal functioning of the free market. In this sort of society, charity is voluntary, and can be both individual and institutional; but theft in all forms is absolutely illegal. The commandment, “Thou shalt not steal,” is remembered and obeyed.

In the market we find persons trading the fruits of their special abilities with one another. Each does whatever economic task he can do best. He creates a surplus beyond his own needs. He then trades this with others who are in a similar position of surplus, having things he wants. So by trading rather than by working harder, both sides of the exchange greatly increase the satisfaction of their wants. Human differences can in this way be made to yield a more bounteous living for every participant. That was the theme of the previous article in this series.

Yet there is another important aspect of trading to be considered, too. It involves an aid to trade, without which our high and rising wages would not be possible.

Two men living in an isolated society of their own will find the trading of their specialties easy to arrange and to carry out. All they need do is meet and arrive at the terms of the trade, and then make the physical transfer of the goods. The magnet of mutual benefit draws them together for a deal.

From being a simple matter in this society of only two persons, the process of direct trading of goods for goods becomes increasingly difficult, if not impossible, when the number increases to three, then four, and eventually to two billion persons.

Let me illustrate. I enjoy tea. Yet I know not a single person who produces any. And even if I did know someone, perhaps he would not want what I have for sale. Most likely he has no appetite whatever for words from my pen, for instance. So the two of us cannot trade our products directly. The difference between what we produce and what each wants causes a sort of friction that precludes a trade. So our offerings will not move in trade until an alternative outlet—perhaps involving a sort of lubricant to remove this friction—can be found.

Now suppose a third party who has sugar for sale wants to buy some of my written words. And suppose the tea producer wants sugar. Now we have a sort of lubricant that will let all three products move in trade. The sugar man trades me his sugar for my words; then I trade the sugar with the tea producer for his tea. Everybody thus obtains what he wants, whereas previously we had been unable to do so.

Money Enters Trade

If the third man had entered the market with money instead of with sugar, the trade would have been even easier to arrange. With money acceptable to all, the man with the money could have traded with either of us initially, whichever was the most convenient for any reason. He could have bought my words; then, with the money, I could have bought the tea. Or he could have first bought the tea; then he and I could have traded tea for words.

This, in essence, is the function of money. It serves as a lubricant in exchange—a medium of exchange. Persons who do not want it for itself alone will accept it as an intermediate step to getting what they want in the trading process. Serving in a sense like a lubricant in a motor, money facilitates the movement Sf other things in exchange without itself being consumed or ever wanted for consumption. Money does not serve as the end product in the satisfaction of human wants—except perhaps for the miser who may hoard some and gloat over its possession as one would prize a picture or an antique. In which case, the miser holds some of it as a commodity rather than as money per se, and to that extent it is no longer money.

In the earlier illustration where the sugar man entered trade, the sugar itself served temporarily as money and thereafter reverted to a commodity. It came to rest with the tea man for purposes of being consumed. This illustrates how it is possible for a “money commodity” to serve either one or the other of these two functions, at different times and places.

Had I for any reason doubted that the sugar would be acceptable to someone who had tea for sale, the sugar could not have served to lubricate the trade. It was necessary for me to accept its acceptability by others whose products I wanted, else I would have refused it in trade for purposes of money. So for anything to be accepted and to serve as money, the decision is not restricted to the desire for it by only one person. It is unlike strawberries which one person may prize whether any other person likes them or not. For anything to serve as money, it must enjoy a multiple acceptance; otherwise it cannot perform the task of money. And the wider its acceptance, the better it will serve as a lubricant for trade.

A Great Invention

Money is perhaps the greatest economic invention of all time. It lubricates the vast economic mechanism of trade which could not operate without it. It allows a deal to be made between persons unknown to each other, because of distance or some other reason.

By using money, the two persons don’t need to find each other directly. Instead, every producer puts his goods and services into a vast stream of trade, getting money in return. Then he puts the money back into the market to get what he really wants.

The producer does not know—nor does he care, really—to whom his product goes for consumption. Neither does he know nor care who produced the item he consumes or uses. It is all done behind the curtain of money exchanges in a trading economy. The only person who need be contacted is the one person at the point of trading contact. And even this can be quite impersonal. Witness, for instance, the unknown sources of all the things in a department store, or in a mail order catalog.

That is why money is such a great invention. That is why it serves so efficiently as a lubricant for exchanging the specialties of production all over the world, between widely separated persons in remote locations. The Yukon fur draped over the shoulders of a Park Avenue lady, or a mahogany table in the home of a wheat farmer in some remote part of Canada, can be explained only as an accomplishment made possible by money.

A great advantage of money, so far as wage earners are concerned, is that it is a device that reduces all alternative offerings of employment to one common denominator of expression—the money wages of the various job offerings. Comparison is then much easier than if the pay offer were in one case a certain number of bushels of wheat, in another some shoes, and the like.

Different Moneys

The more people accept one money the world over, the better that money will lubricate trade. Ideally there would be but one money enjoying universal acceptance. Then all trade could pass through one medium. And in this way, goods and services produced in abundance as specialties all over the world could, so far as money is concerned, enjoy the widest possible access to those who want them.

All sorts of things have served as money in exchange—such as cattle, shells, silver, gold, copper, aluminum, paper. In Europe during World War II, nylon hose and cigarettes became important as money.

But it is not relevant to this discussion to wonder why different things have served as money. It is sufficient to note that separate and competing monies will continue until and unless the “ideal money” is found; until and unless something gains enough common acceptance and understanding so that nobody can adulterate its use and destroy its usefulness as money; until and unless neither politician nor any other person can gain the power to tamper with money for his personal gain.

Adulterating the Lubricant

For purposes of our present problem, we shall only observe that we operate with an imperfect money system. We do not now have an ideal money, nor are we even threatened with this blessing for the foreseeable future. And so it is important to note the effect on wages of an imperfect lubricant of exchange, which we now have.

When you accept money in trade, you are proceeding on faith in it as a sort of implied contract. The implied contract is this: When you trade something for money as an intermediate step to getting what you eventually want in exchange, you are operating on the assumption that the money will serve your intent rather than thwart it.

Let us say, for instance, that you accept money as an intermediate step between your bushel of wheat and the two bushels of corn you want. You might have traded direct, but you preferred to use money as a go-between. So you sell the wheat for two dollars in money; then you buy the corn for one dollar a bushel, or two dollars for the two bushels. While the money was in your possession, it was your expectation that nothing would be done to money to alter its worth in terms of the wheat or the corn. So far as the money is concerned, you expect it to retain worth in exchange equivalent to one bushel of wheat or two bushels of corn. That is the nature of the contract implied in one’s use of money as money. Your use of it is not for the purpose of speculating in the worth of money per se.

Yet the worth of a unit of our present money is subject to constant change. Under inflation it becomes worth less—prices rise unless there are offsetting influences to be ignored here.

In the illustration, if there is inflation the two dollars you received for your wheat would lose some of its worth while you held the money, and would then buy less than the full two bushels of corn that you had presumed to be its worth under the implied contract. You still have the two dollars, of course, but as a result of inflation the corn has risen above one dollar a bushel. Through no overt act of your own, you lose some of the worth of your property. So would everyone else who was then holding money or money claims.

Who would gain, if all these persons lose? The gains go to the diluters of the money—a counterfeiter, perhaps, or the government, either by a direct act of its own or by a grant of permit to someone. They gain by getting some money without producing anything in the usual sense; by getting something for nothing while the sufferers lose some worth of their money and money claims. Then as a consequence of inflation, various other persons gain or lose through effects that alter the essence of all sorts of contractual deals.

Inflation and Wages

Inflation affects wage earners directly in two principal ways: First, since the wage earner gets essentially all his income as a money income, his money then loses worth. His pay will lose worth while he keeps it as money or in the form of some money equivalent. Even while he holds his pay check it loses worth, though this is an insignificant amount of loss for those who spend their pay quickly. Only in a panic stage of inflation, like that of Germany in 1923 or of China in the mid-forties, can it be much of a factor while one holds a pay check for a day or two. In China, for instance, when money was said to lose half its worth every two weeks, the loss would be a few per cent by one who held his pay check one day.

Second, it affects the worth of his pension funds, his life insurance, his bonds, and other such forms of savings that are money contracts. Their loss of worth can be extremely serious, both in degree and in timing. It can become serious in degree because of the cumulative effect of continuing inflation. If a dollar loses 10 per cent of its worth each year as compared with the previous year, there will remain only twelve cents of its worth at the end of twenty years.

But more important than either of these, in a sense, is the illusion of welfare that inflation creates. This can lead to serious consequences. Whenever a person is less well off than he thinks he is, he is likely to be headed for considerable trouble.

For instance, a wage of eight dollars an hour, after the twenty years of inflation at the rate of 10 per cent each year, is no better than a dollar an hour without the inflation. If one is fooled by this and raises his level of living from one to eight, or to four, or even to a 1.01, he will be living beyond his means.

Inflation also seriously affects such things as wage contracts extending into the future. Insofar as inflation alters the implied contract assumed by those who hold money—namely, that it will continue of equal worth—its violation also becomes reflected in every monetary contract like a wage contract. As the worth of money is reduced by inflation, the burden of a contracted wage rate is also reduced. This violates, in a sense, the implication in the contract when it was negotiated. To protect against this, some wage contracts are being designed to include an increase to take care of assumed inflation. Inflation thus becomes a legally vested interest in contract form, throwing the weight of sentiment on the side of continuing the inflation. Can inflation ever be stopped that way?

The Clipped Dollars

Over a period of years, money wages in the United States have risen for two reasons—(1) increased production, in which wages have shared, and (2) inflation. The first adds buying power. But the second is an illusory gain because inflation merely adds more dollars of less buying power. And the extent of the inflation illusion has been great.

Suppose, for instance, that a man now due to retire at age 65 began work when he was 20. And suppose, to simplify our problem, he had never advanced in skills beyond swimming with the tide of the over-all increase in productivity, so that his wage went with the average for all private employment during the period. His money wage per hour now would be more than seven times what it was in 1910. Had there been no inflation, however, his wage would presumably have risen to a little less than three times what it was in 1910, not seven times.

Or if we compare his present wage with that of a quarter century ago, it is now two and one-half times as high as it was then. Considerably more than half of this rise has been an illusory wage increase of inflation, reducing the worth of the dollar.

So for nearly half a century now, inflation has put more dollars into the pay check than have come from increased productivity. Inflation is not real dollars in the sense of buying power, like the ones arising from increased productivity. They seem nice to have, and they look exactly like the other dollars. But these added dollars really buy nothing, as against having avoided inflation with its addition of worthless dollars that go into the pay check.

Inflation, then, does not raise real wages. It only creates the illusion of rising wages.

Though somewhat beyond the scope of this article, it should be observed that the government controls money. It is therefore government which inflates the money, or allows it to be inflated under controls such as the monetary standard, the reserve requirements, and interest rates. And so, in this sense, government must be held responsible for creating the illusory wage rate which accompanies inflation.

My final point is to suggest the disaster that would come upon us if, through inflation and deflation, the efficiency of the lubricant for exchange should be retarded, or the money system destroyed. What if violent changes should turn money from a lubricant into an object of speculation? For when persons hoard money in anticipation that it will gain worth, or avoid it because of anticipation that it will lose worth, this miraculous lubricant cannot do its work. Then catastrophe would be upon our highly geared economy. Then the usual progress which causes real wages to rise could no longer operate, until and unless a new lubricant were found and installed.

We are interested here in why wages rise, in a real sense rather than in an illusory sense. It behooves all of us who want continued progress, therefore, to become greatly concerned about this threat of inflation. This means searching out the underlying cause of why governments either want to inflate money or feel impelled to do so; then correcting the cause. []

***

Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.

Daniel Webster

$115 billion worth of foreign aid has produced neither friends nor a genuine European prosperity—while it has placed American weapons in hands which may someday aim them at us.

Last March 19, President Eisenhower formally asked Congress for $4,860,000,000 for the Mutual Security Program. This is a big figure, right on the face of it; but it looms even larger when you consider that this recommended foreign aid appropriation—virtually $5 billion—is almost twice the $2.7 billion for the current fiscal year.

If the President’s request is approved, it will bring the total of American foreign aid since World War II to the fantastic sum of almost $55 billion. But even this mountain of dollars is dwarfed by the total we have doled out to other nations since 1940—approximately $115 billion, averaging more than $2,000 per taxpaying family in the U. S.—money which these families otherwise might have used for better food, shelter, clothing, health, education, religion, savings, or anything else of their own free choice.

Nevertheless, this $115 billion sacrifice—or even two, three, or four times that much—might have been totally justified, had it been made voluntarily in the form of private gifts and investments and especially if the money spent had been successful in guaranteeing American security in a conflict-torn world.

Pleas for More Aid

Since our foreign aid program has been going full blast for almost ten years now, it is quite possible to analyze not only its motives and methods but also its objectives, and—very important—to what extent they have been achieved.

Taking first things first, what has been the motive of Uncle Sam’s giant give-away program? It is often portrayed as a Christian compassion for the “downtrodden” or “unfortunate” nations of the world—especially for our noble World War II allies. Such a portrayal appeals strongly to millions of kind-hearted Americans and has been voiced by many proponents of foreign aid, including Secretary Marshall. On May 13, 1947, he declared in an overseas broadcast: “There has been much of misunderstanding regarding our program of aid to Greece. There has been much of distortion and misrepresentation of our purpose. We are answering the call of a valiant ally who has suffered much . . . It is as simple as that.”

Inconsistent Pretense

But only two months before, on March 12, President Truman, in urging the Greek loan, had rested his appeal frankly on the argument that “the very existence of the Greek state” was being “threatened by the terrorist activities of several thousand armed men, led by communists.”

Thus, according to President Truman, the real objective was to “buy” allies in our struggle against Soviet communism. Explaining the purpose of our foreign aid in 1951, Assistant Secretary of State George C. McGhee frankly asserted his opinion that: “The United States cannot afford to allow the forces of neutralism and anti-Western sentiment to gain any further ground, nor to allow these forces to be captured and exploited by internal communism.” And the objective in 1951 is precisely the objective in 1956, as countless recent official acts and statements testify.

It should be plain by now that the primary motive is by no means a compassionate concern for other nations. It should likewise be clear that the ultimate objective is not the economic recovery of war-ravished Europe nor the industrialization of impoverished Asia—as is often alleged—but one thing only: the gaining of anticommunist allies.

A Test of U. S. Motives

Anyone who entertains a lingering doubt about this should ask himself: Why were U.S. officials so perturbed when Russia offered to pay for the monster dam at Aswan on the Upper Nile? Would not this have greatly helped the Egyptians, and saved millions of American dollars for other worthy foreign aid projects?

Or, why were State Department spokesmen so agitated this past winter when Khrushchev and Bulganin toured Asia with big promises of Russian aid? Surely, if concern for vitalizing the stagnant Asian economy had been uppermost, then our government should have said: “Wonderful! Now the Soviets are joining us in the great task of lifting the Asians out of poverty!” But no, Washington was frightened, and considered this Russian overture as reason number one for hiking our 1956 foreign aid appropriation to the staggering total of $5 billion dollars.

Having observed this technique for gaining allies, we must ask: Do we think it in keeping with the principles on which this country was founded to stoop to the crude stratagem of “buying” friends? Is there anything in all Judeo-Christian tradition which would even remotely sanction the attempt to gain friendship by crossing a palm with silver?

Bribery and Blackmail

The only principled way to win a friend—whether person or nation—is to take a sincere interest in his well-being, apart from any immediate gain for oneself. Attempting to “buy” national friends is, by definition, sheer bribery—a gift bestowed with the purpose of influencing action in favor of the donor. And it leads, almost inevitably, to blackmail. The bribed nation is tempted to say: “Give me more, or I’ll switch to the other side.” And whether or not a recipient country attempts blackmail, it is apt to feel a deep-seated suspicion and resentment.

Senator Mike Mansfield, back from an extensive trip in Southeast Asia, declared last February in the Senate:

The argument which is often made to the effect that we must outbid the Russians in offers of aid to Southeast Asia reflects very little credit on us or on the nations of that area . . . The decent, the self-respecting, the independent in Southeast Asia will resent the implication that they can be bought.

That this is no mere platitude is abundantly verified by current history—and it applies to Europe as well as Asia. Recent events point to the harsh and stunning fact that foreign aid simply has not worked! Again and again, the record indicates that American dollars have been singularly ineffective in winning friends for the competitive market system and for the people of the United States. Consider some instances:

France. Since the end of World War II, we have given approximately $12 billion in aid, economic and military, to France—more than to any other nation except England. But French resentment of the U.S. is unmistakable. So is the growing French response to communism—displayed in the recent National Elections when over five million Frenchmen voted communist, seating 150 communists in the French assembly.

This winter, when an American reporter asked 25 French citizens what they thought of the giveaway program, nearly all said it made no difference to them; they didn’t get any of it. Some remarked, “It made billionaires out of French millionaires.”

Greece. Henry Gemmill, reporting from Athens in the Wall Street Journal of January 26, 1956, wrote: “Today the sentiment of the populace toward the U.S. government ranges from mild exasperation to violent opposition . . . Politicians such as Progressive Party leader Spyridon Markenzinis are making speeches depicting the Greek government as a toy in the hands of ‘our great friends.’ University students have marched through the streets shouting, ‘Out with the Americans . . . . ‘”

This anti-American attitude revealed its intensity last February, when one out of every two Greek voters cast his ballot for the communist-backed “popular front.” That’s how much friendship the U. S. got for the $2.8 billion it had poured into Greece.

Italy. Even stanch advocates of foreign aid concede that communism remains a potent force in Italy. And this, despite American billions, teamed up with an utterly earnest, all-out fight for survival waged by the Catholic church in its home territory—a struggle in which priests delivered anti-communist talks from soap boxes, and even derobed and turned cloak-and-dagger men, joining Italian communist cells in order to undermine them.

Still the Red lure persists, and repeated reports—as for example, from southern Italy where huge sums have been spent for development—have shown more persons becoming communists than anticommunists.

Yugoslavia. Looking back a few years, we can remind ourselves that the Yugoslavian government exuded no noticeable gratitude in return for the millions of dollars of supplies poured into that country by UNRRA. More recently, since 1950, Yugoslavia has received from us some $500,000,000 in economic aid, and about the same in military aid. And yet Yugoslav officials openly declare they have no intention that our aid should help curtail their admittedly communistic regime.

Egypt. Since the start of our program in 1951, the United States has spent some $60,000,000 in economic and technical aid to the land of the Pharaohs. Yet relatively few Egyptians are aware of the American dollars circulating in their land. Meanwhile, Egypt has turned to the Soviet bloc to make cotton-for-arms barter deals, and Premier Nasser has fiercely opposed any Arab state’s joining a Western defense alliance.

England. Here is where we have doled out more billions than anywhere else. Yet from the start of our aid-to-Britain campaign, many there have viewed us as a scheming Shylock overeager for his pound of flesh. Typical was this observation from the dignified London Economist, after the special postwar British loan of $3,750,000,000: “If the purpose of the American Congress which decides American policy is, as it often seems to be, deliberately to wound and afflict the British people, it has certainly succeeded. It is aggravating to find that our reward for losing a quarter of our national wealth in the common cause is to pay tribute for half a century to those who have been enriched by the war.”

More examples could be cited. These should suffice. The record is abundant with proof: Dollars simply do not buy friends.

European Recovery

“But,” a proponent of foreign aid may argue, “our aid has brought European economic recovery, and now it will help build up the backward countries of Asia and the Middle East; and this is the surest way to stave off communism.”

While there is some question as to just how much Europe has recovered, and how much is due to dollar aid, this argument remains the big weapon in the arsenal of those favoring more foreign spending.

If the primary goal in Western Europe had been speeding her economic recovery, rather than wooing her with dollars, the first step might have been to analyze just why her postwar recuperation had been so slow. Henry Hazlitt makes such an analysis in Will Dollars Save the World? With clear reasoning and detailed documentation he shows that what Europe needed most was not capital but capitalism—more freedom from both internal and external interference with the market operation.

Why was it, at the start of the Marshall Plan, that European countries appeared to need U. S. dollars so urgently? Because, ordinarily, heavy sums were being spent on armaments, on subsidies to nationalized industries running a deficit, on food subsidies, and on increasing pensions, family allowances, and other forms of social security.

Inflationary Policies

Rather than cut back on some of these government expenditures, which fiscal soundness would have required, they issued more currency; and the volume of money in circulation rose enormously. At the same time, these governments tended to hold down interest rates, so they could borrow cheaper and encourage business borrowing

a policy which further increased pressure for higher prices. ‘ Yet, though these governments themselves had created the inflation, they refused to take the blame for the accompanying price rises, but instead charged it to “speculators” and “hoarders” and to the rapacity of producers and sellers.

Rather than check the inflation itself, they determined to hold prices under control by fixing ceiling prices on almost everything. This, in turn, threw their economies out of kilter. As is ordinarily the practice in price regulation, they put the severest controls on necessities—and cut the profit margin on such items down to the bone. Since manufacturers could make so little profit making necessities, more and more turned to production of luxuries, which were uncontrolled.

In turn, more and more workers were drawn from the necessity to the luxury industries. The result? An apparent labor shortage, and even worse, a scarcity of necessities—food, shelter, clothing. Without going any further, it is plain that such a situation spells Trouble.

Under such a circumstance, we could have done far more for these European countries by showing them the errors of their regulated economies, and instructing them in the merits of the free market, than by shoving American dollars into their pockets.

German Recovery.

During the first few years after the war, West German recovery was comparatively protracted. In 1947 millions of Germans were starving. As the late Dr. Walter Eucken, professor of economics at Freiburg University and heir to the German liberal tradition, observed in 1947:

Germany today is suffering acutely from an overdose of planning. The Nazis laid the basis for German economic planning—for armaments and warfare. To our surprise the Allies left things largely as they were . . . .

But Germany had come to the end of the socialist trail, and increasing numbers began to feel that at least a slight return toward capitalist incentives might increase production. Then the

Marxian-oriented Social Democratic Party was routed by a new political combine under Konrad Adenauer, which opposed the Fair Deal controls enforced by the American, British, and French military governments. Germany started to edge a little toward a free economy, gradually taking controls off more and more commodities. The result was startling. German productivity lunged forward.

Upsurge in Production

Even a small dose of Markwirtschaft (the market economy) had a pronounced effect. By 1953 West Germany’s industrial production, on a per capita basis, was above the level of 1938, when the economy was operating under a full head of steam in preparation for war.

Meanwhile, East Germany, by comparison, remains in pathetic poverty. What has caused the difference? It is true that West Germany did receive generous aid in U. S. dollars. But more than one competent observer has concluded that West Germany’s heartening resurgence has been due not so much to an influx of free U. S. commodities as to the Germans’ own hard work and a sounder policy—a noticeable movement toward Markwirtschaft. A more complete adoption of the free market would have produced even more abundance, and could have generated far more prosperity than the shot-in-the-arm dollar aid.

But, even though Germany still clings to a considerable measure of socialism, it enjoys more market freedom—and hence more productivity—than most other European nations.

What about Military Aid?

Still, foreign aid advocates may say, “You talk as if all our aid were economic, while much of it is military—arms shipped to our allies as a deterrent to Soviet aggression.”

True, much of our help has been military. And it is probable that substantial amounts designated for economic use actually have served to buttress foreign military establishments. Even if we did not ship a single gun or plane, but only money or food—and even if we specified that these gifts be used only for nonmilitary purposes—every American dollar spent for economic recovery simply frees the equivalent in local currency for some “marginal use,” such as building a military organization.

But inasmuch as our total economic-military aid program has been so ineffective in winning allies, what assurance have we that these guns won’t someday be pointed at us? The weapons themselves are neutral. If we have failed ideologically, failed to win friendship—and there are indications we have—then these weapons may eventually explode right in our own faces.

Three Conclusions

So, in evaluating almost ten years of U. S. aid to Europe, we find:

(1) It has not produced any noticeable goodwill or loyalty for America.

(2) European recovery is highly uneven, and is most marked in West Germany where a move toward a freer economy caused an outstanding upsurge in production.

(3) There is no guarantee that U. S. military aid will not be used against,-rather than for us.

Considering this record of dubious achievement, it is hard to understand the unrestrained enthusiasm some apparently well-informed Americans entertain for our foreign aid program—an enthusiasm which prompts them to say, in the spring of 1956: “U. S. dollars have done such a good job in Europe, now let’s really pour them into Asia!”

Aid for India

But I say, the vast U. S. tax-away-and-give-away program has flopped in Europe, and what reason have we to believe it will click in Asia and the Mid-East? After all, we are not newcomers in India, and what has our record been there? Since 1950 we have dumped some $500 million in India’s copious lap, only to see her sympathies turn more and more toward the Kremlin, while her newspapers either take American gifts for granted or ignore them altogether. Meanwhile, this past winter and spring Russia finally has come to India’s aid, offering actual business deals[]loans not gifts—and in the process is winning friends.

Some Indians are perceptive enough to urge their government not to accept any more U. S. dollars. This past winter, J. J. Singh, president of the India League of America, asked India to refuse further aid from the United States. He said: “This creates expectancies in the U. S. which India is rightly not willing to meet. That, in its turn, creates disappointment and bitterness in America, thus worsening relations.”

Before we brashly promise the Asians that our dollars will bring a vital productivity to lands steeped in centuries-old traditions which fight individual initiative and free enterprise, we should consider carefully the reasons for Asian poverty.

India seems destined to receive many American billions in coming years. Presumably proponents of dollar aid to India believe it needs American capital, and that this capital must be bestowed through the instrument of the U. S. government. But, according to Dr. Ludwig von Mises:

India lacks capital because it never adopted the pro-capitalist philosophy of the West and therefore did not remove the traditional institutional obstacles to free enterprise and big-scale capital accumulation. Capitalism came to India as an alien imported ideology that never took root in the minds of the people. Foreign, mostly British, capital built railroads and factories. The natives looked askance not only upon the activities of their alien capitalists but no less upon those of their countrymen who cooperated in the capitalist ventures.

Today the situation is this: Thanks to new methods of therapeutics, developed by the capitalist nations and imported to India by the British, the average length of life has been prolonged and the population is rapidly increasing. As the foreign capitalists have either already been virtually expropriated or have to face expropriation in the near future, there can no longer be any question of new investment of foreign capital. On the other hand the accumulation of domestic capital is prevented by the manifest hostility of the government apparatus and the ruling party.

This was true in 1952 when Dr. Mises wrote it, and even more so in 1956. Throughout these four years India has turned increasingly socialist—nationalizing industries, controlling private companies with an intricate maze of regulations, allowing the State to confiscate private property, and enacting labor laws which make it extremely difficult to fire anyone, no matter how incompetent.

All these restrictions discourage both native and foreign industry and investment, and create the very poverty which India seeks to eradicate. As long as India continues her ill-advised march toward socialism, no amount of American billions can bring her prosperity. Our dollars will only serve temporarily to camouflage her mistake, and delay the hour when India must awaken to the free market ideas which alone can eliminate her vast army of unemployed and greatly increase the productivity of individual Hindu and Moslem.

Why Not Try Voluntarism?

Why, then, extend further foreign aid? Additional billions will fail to accomplish their purpose. More than that, the whole concept the idea that one nation must tax its citizenry and pour the booty into the coffers of less prosperous countries—is statist and socialist, utterly contrary to the ideals of a free society.

No government—the United States or any other—should be allowed to take the property of individuals by force, and hand out such savings to the governments or the peoples of other nations. Such an action is dictatorial and authoritarian.

The individual alone should decide whether he wants to give or lend his property to other individuals in other countries. This voluntary system of international exchange proved potent when tried—it helped to build America and other great nations as well. At this day and hour, a return to the practice of voluntary individual giving, lending, and trading would not be retrogression, but dynamic and urgently-needed progress. []

Turning the Tables

Not long ago, Congressman Ralph W. Gwinn of New York appeared on a television round table program with M. Foure, the French Foreign Minister, and Congressman James G. Donovan of New York.

As one explanation of his opposition to foreign aid, Gwinn cited how the United States, over the past few years, had given billions to England for the express purpose of helping the British Conservative Party stay in power. Then he asked his listeners to use their imagination and conceive what their own reaction would be if the tables had been turned—if, for example, instead of the United States sending billions to Britain as a means of influencing the English political scene, Britain had been exporting equivalent sums in order to shape our own political destiny. Congressman Gwinn said:

“Imagine how mad we nearly all would be if Great Britain had for years sent $3 billion or $4 billion to help entrench Harry Truman and the New Deal Party in power, and keep the Republicans out. The Republicans would have been hopping mad and, while the New Deal Party would no doubt have taken the money and said nice things about Great Britain for foreign consumption, it would have been furious that Great Britain would presume to be able to buy New Deal friendship.”

I wish someone would offer a prize—not of a hundred francs but of a million, with crowns, medals, and ribbons—for a good, simple, intelligible definition of the term, The State.

What an immense service such a definition would render to society!

The State! What is it? Where is it? What does it do? What should it do? We only know that it is a mysterious being; and, it is certainly the most petitioned, the most harassed, the most bustling, the most advised, the most reproached, the most invoked, and the most challenged of any being in the world.

I have not the honor of knowing my reader, but I would stake ten to one that sometime in the last six months you have designed Utopias, and if so, that you are looking to The State for the realization of them.

But alas! That poor unfortunate being, like Figaro, knows not which plea to hear nor where to turn. The hundred thousand mouths of the press and of the platform cry out all at once

Organize work and the workmen.
Cover the country with railways.
Irrigate the plains. Reforest the hills.
Establish model farms. Colonize Algeria.
Educate the youth. Assist the aged.
Equalize the profits of all trades.
Lend money without interest to all who wish to borrow.
Emancipate Italy, Poland, and Hungary.
Encourage the arts, and train musicians and dancers for us.
Restrict commerce, and at the same time create a merchant marine.
Discover truth, and put a bit of sense into our heads.
The mission of The State is to enlighten, to develop, to ennoble, to strengthen, and to sanctify the soul of the people.

“Wait, Gentlemen! A little patience,” says The State beseechingly. “I will try to satisfy you, but for that I must have some resources. I have prepared plans for five or six entirely new taxes, the mildest in the world. You will see how gladly people will pay them.”

But then a great hue and cry arises: “No! No! A fine thing—doing something with resources! This is hardly worthy of The State! Instead of loading us with new taxes, we call upon you to repeal the old ones. Decrease the salt tax, the liquor tax, the stamp tax, custom-house duties, monopoly license fees, and tolls.”

In the midst of this tumult, the people have changed their government two or three times for failing to satisfy all their demands. To date, everything presenting itself under the name of The State is soon overthrown by the people, precisely because it fails to fulfill the somewhat contradictory features of its platform.

I fear we are, in this respect, the dupes of one of the strangest illusions which has ever taken possession of the human mind.

Man recoils from effort, from suffering. Yet, he is condemned by nature to the suffering of privation if he does not make the effort to work. He has only a choice then, between these two: privation, and work. How can he manage to avoid both? He always has and always will find, only one means: to enjoy the labor of others; to arrange it so that the effort and the satisfaction do not fall upon each in their natural proportion, but that some would bear all the effort while all the satisfaction would go to others. This is the origin of slavery and plunder, whatever form it takes—whether wars, impositions, violences, restrictions, frauds, etc., monstrous abuses, but in accord with the idea which has given them birth.

Slavery is subsiding, thank heaven, and our disposition to defend our property prevents direct and open plunder from being easy. However, there remains the unfortunate, primitive inclination in all men to divide the lot of life into two parts, throwing the trouble upon others and keeping the satisfaction for themselves. Let us examine a current manifestation of this sad tendency.

The oppressor no longer uses his own force directly upon his victim. No, our conscience has become too sensitive for that. There is still the tyrant and his victim, but between them is an intermediary which is The State—the Law itself. What could be better designed to silence our scruples and—more important—to overcome all resistance? Thus do all of us, by various claims and under one pretext or another, appeal to The State:

“I am dissatisfied with the ratio between my labor and my pleasures. In order to establish the desired balance, I should like to take part of the possessions of others. But that is a dangerous thing. Couldn’t you facilitate it for me? Couldn’t you give me a good post? Or restrain my competitors’ business? Or perhaps lend me some interest-free capital, which you will have taken from its rightful owners? Or bring up my children at the taxpayers’ expense? Or grant me a subsidy? Or assure me a pension when I reach my fiftieth year? By this means I shall achieve my goal with an easy conscience, for the law will have acted for me. Thus I shall have all the advantages of plunder, without the risk or the disgrace!”

All of us are petitioning The State in this manner, yet it has been proven that The State has no means of granting privileges to some without adding to the labor of others.

The State is the great fiction through which everybody endeavors to live at the expense of everybody.

Today, as in the past, nearly everyone would like to profit by the labor of others. No one dares admit such a feeling; he even hides it from himself. So what does he do? He imagines an intermediary; he appeals to The State, and every class in its turn comes and says to it” “You, who can do so justifiably and honestly, take from the public; and we will partake of the proceeds.”

Alas! The State is only too much disposed to follow this diabolical advice; for it is composed of ministers and officials—of men, in short—who, like all other men, desire in their hearts and eagerly seize every opportunity to increase their wealth and influence. The State quickly perceives the advantages it can derive from the role entrusted to it by the public. It will be the judge, the master of the destinies of all. It will take a lot: then much will remain for itself. It will multiply the number of its agents, and increase its functions, until it finally acquires crushing proportions.

But the most remarkable thing is the astonishing blindness of the public while all this takes place. In the past, when victorious soldiers reduced the vanquished to slavery they were barbarous, but they were not foolish. Their object, like ours, was to live at the expense of others; but they succeeded, where we fail. What are we to think of a people who never seem to realize that reciprocal plunder is no less plunder because it is reciprocal; that it is no less criminal, because it is carried out legally and peacefully; that it adds nothing to the public good, but rather diminishes it by the amount of the cost of that expensive intermediary we call The State?

And this great illusion we have placed, for the edification of the people as a frontispiece to the Constitution. Here are the first words of the preamble:

“France has constituted itself a Republic to . . . raise all the citizens to an ever-increasing degree of morality, enlightenment, and well-being.”

Thus it is France—an abstraction—which is to raise the French—or realities—to morality, well-being, and so on. Isn’t it our blind attachment to this strange delusion that leads us to expect everything from a power not our own? Isn’t it suggesting that there is, apart from the French people, a virtuous, enlightened, rich being who can and should bestow its favors upon them?

The Americans develop a different idea of the relationship of the citizens with The State, when they placed these simple words at the beginning of their Constitution:

“We, the people of the United States, in order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain . . .”

Here is no shadowy creation, no abstraction, from which the citizens may demand everything. They expect nothing except from themselves and their own energy.

I contend that the personification of The State has been in the past and will be in the future, a fertile source of calamities and revolutions. There is the public on one side, The State on the other, considered as two distinct beings; the latter obligated to bestow upon the former, the former having the right to claim from the latter a flood of human benefits. What must happen?

The State has two hands, one for receiving and the other for giving a rough hand and a smooth one. The activity of the second is necessarily subordinate to the activity of the first. Strictly speaking, The State can take and not give back. This can be seen and can be explained by the porous, absorbing nature of its hands, which always retain part and sometimes all of what it touches.

But that which is never seen, which never will be seen, and which cannot even be imagined, is that The State can return more to the people than it has taken from them.

Therefore it is ridiculous for us to appear before The State in the humble attitude of beggars. It is utterly impossible for it to confer a specific benefit upon some of the individuals who make up the community, without inflicting a greater injury upon the community as a whole.

Our demands, therefore, place The State in an obvious dilemma! If it refuses to grant the requested benefit, it is accused of weakness, ill-will, and incapacity. If it tries to grant their requests, it is obliged to load the people with increased taxes—to do more harm than good—and to bring upon itself general displeasure from another quarter.

So, the public has two hopes, and The State makes two promises: many benefits and no taxes—hopes and promises, which, being contradictory, can never be real ized.

Is not this the cause of all our revolutions? For between The State, which lavishly promises the impossible, and the public, whose hopes can never be realized, there come to interpose two types of men: the ambitious and the Utopians. The circumstances give them their cue. These office seekers need only cry out to the people: “The authorities are deceiving you. If we were in their place, we would load you with benefits and exempt you from taxes.”

And the people believe, and the people hope, and the people substitute a new government for the old.

No sooner are their friends in charge of things, than they are called upon to redeem their pledge. “Give us work, bread, assistance, credit, instruction, colonies,” say the people, “and meanwhile deliver us, as you promised, from the clutches of the tax gatherer.”

The new government is no less embarrassed than the former one, for it is easier to promise the impossible than to do it. It tries to gain time which it needs for maturing its vast projects. First it makes a few timid attempts: On one hand, it slightly expands primary education; on the other, it makes a small reduction in the liquor tax. But the contradiction always confronts the administration: If it would be philanthropic, it must attend to its treasury; if it neglects the treasury, it must give up being philanthropic.

These two promises are always and inevitably clashing with one another. To live upon credit, that is, to exhaust the future, is certainly a temporary method of reconciling them—an attempt to do a little good now, at the expense of a great deal of harm in the future. But this procedure calls forth the specter of bankruptcy, which puts an end to credit. What is to be done then? Why then, the new government defends itself boldly. It unites its forces to maintain itself: It smothers opinion, has recourse to arbitrary measures, ridicules its former slogans, declares that it is impossible to govern except at the risk of being unpopular; in short, it proclaims itself governmental.

And this is what other candidates for office are waiting for. They exploit the same illusion, follow the same course, obtain the same success, and are soon swallowed up in the same abyss.

The latest manifesto of the Montagnards, which they issued at the time of the presidential election, concludes with these words: —“The State ought to give a great deal to the people, cud take little from them.” It is always the same tactics, or rather, the same mistake. The State must:

Give free instruction and education to all the citizens.

Give a general and professional .education, as much as possible:adapted to the needs, talents, and .capacities of each citizen.

Teach every citizen his duty to God, to man, and to himself; develop his perceptions, his aptitudes, and his faculties; teach him, in short, the skill of his trade; make him understand his own interests, and give him a knowledge of his rights.

Place within the reach of all literature and the arts, the heritage of thought, the treasures of the mind, and all those intellectual possessions which elevate and strengthen the soul.

Give compensation for every disaster, fire, flood, etc., experienced by a citizen. (The et cetera means more than it says.)

Act as mediator in the relations between capital and labor, and become the regulator of credit.

Give substantial encouragement and effectual support to agriculture.

Purchase railroads, canals, and mines—and doubtless administer them with its characteristic industrial ability!

Encourage useful experiments, promote and assist them by every means likely to make them successful. As a regulator of credit, it will have extensive control over industrial and agricultural associations in order to assure their success.

The State must do all this, in addition to the services to which it is already pledged! For instance, it is always to maintain a menacing attitude towards foreigners. The signers of the manifesto say that: “Bound together by this holy union, and by the precedents of the French Republic, we carry our wishes and hopes beyond the barriers which despotism has raised between nations. The rights which we desire for ourselves, we desire for all those who are oppressed by the yoke of tyranny; we desire that our glorious army should, if necessary, again be the army of liberty.”

You see that the gentle hand of The State—that good hand which gives and distributes—will be very busy under the direction of these reformers. You think perhaps it will be the same with the rough hand—that hand which penetrates and takes from our pockets?

Do not deceive yourselves. The politicians would not know their trade, if they had not the art, when showing the gentle hand, to conceal the rough one. Their reign will assuredly be the jubilee of the taxpayers r

“It is luxuries, not necessaries,” they say, “which ought to be taxed.”

Won’t it be wonderful that the treasury, in overwhelming us with favors, will content itself with curtailing our luxuries!

This is not all. This party of reformers intends that “taxation shall lose its oppressive character, and be only an act of brotherhood.” Good heavens! I know it is the fashion to thrust brotherhood in everywhere, but I did not imagine it would ever be put into the proclamations of the tax gatherer.

Well, I ask the impartial reader, is this not childishness, and more than that, dangerous childishness? Is it not inevitable that we shall have revolution after revolution, if it is once decided never to stop till this contradiction is realized: “Give nothing to The State and receive much from it?”

Citizens! At all times, two political systems have been in existence, and each can justify itself with good reasons. According to one of them, The State should do a lot, but then it should take a lot. According to the other, this twofold activity ought to be limited. We have to choose between these two systems.

But the third system, which partakes of both the others, and consists in exacting everything from The State without giving it anything, is chimerical, absurd, childish, contradictory, and dangerous. Those who advocate such a system are only flattering and deceiving you, or at least are deceiving themselves.

As for us, we consider that The State is and ought to be nothing whatever but community force organized, not to be an instrument of oppression and mutual plunder among citizens, but, on the contrary, to guarantee to each his own, and to cause justice and security to reign.

Translated and condensed by Mallory Cross Johnson of the Foundation staff, from “L’État” in Sophismes Économiques, Volume I. Paris: Guillaumin. 1878.