Part II
Natural Rights and
Unnatural Wrongs
Source of Rights
This article comes from chapter three of The Income Tax: Root of All Evil. It is reprinted here as it appeared in a small pamphlet published by the Foundation for Economic Education.
The axiom of what is often called “individualism” is that every person has certain inalienable rights. For example, individualism holds that property as such obviously has no rights; there is only the inherent right of a person to his honestly acquired property …
The axiom of socialism is that the individual has no inherent rights. The privileges and prerogatives that the individual enjoys are grants from society, acting through its management committee, the government. That is the condition the individual must accept for the benefit of being a member of society. Hence, the socialists (including many who do not so name themselves) reject the statement of rights in the Declaration of Independence, calling it a fiction of the eighteenth century.
In support of his denial of natural rights, the socialist points out that there is no positive proof in favor of that doctrine. Where is the documentary evidence? Did God hand man a signed statement endowing him with the rights he claims for himself, but denies to the birds and beasts who also inhabit the earth? If in answer to these questions you bring in the soul idea, you are right back to where you were in the beginning: How can you prove that man has a soul?
Those who accept the axiom of natural rights are backed against the wall by that kind of reasoning, until they examine the opposite axiom, that all rights are grants or loans from government. Where did government get the rights which it dispenses? If it is said that its fund of rights is collected from individuals, as the condition for their membership in society, the question arises, where did the individual get the rights which he gave up? He cannot give up what he never had in the first place, which is what the socialist maintains.
WHAT IS GOVERNMENT?
What is this thing called government, which can grant and take away rights? There are all sorts of answers to that question, but all the answers will agree on one point, that government is a social instrument enjoying a monopoly of coercion. The socialist says that the monopoly of coercion is vested in the government in order that it may bring about an ideal social and economic order; others say that the government must have a monopoly of coercion in order to prevent individuals from using coercion on one another. In short, the essential characteristic of government is power. If, then, we say that our rights stem from government, on a loan basis, we admit that whoever gets control of the power vested in government is the author of rights. And simply because he has the power to enforce his will. Thus, the basic axiom of socialism, in all its forms, is that might is right.
And that means that power is all there is to morality. If I am bigger and stronger than you and you have no way of defending yourself, then it is right if I thrash you; the fact that I did thrash you is proof that I had the right to do so. On the other hand, if you can intimidate me with a gun, then right returns to your side. All of which comes to mere nonsense. And a social order based on the socialistic axiom—which makes the government the final judge of all morality—is a nonsensical society. It is a society in which the highest value is the acquisition of power— as exemplified in a Hitler or a Stalin—and the fate of those who cannot acquire it is subservience as a condition of existence.
The senselessness of the socialistic axiom is shown by the fact that there would be no society, and therefore no government, if there were no individuals. The human being is the unit of all social institutions; without a man there cannot be a crowd. Hence, we are compelled to look to the individual to find an axiom on which to build a nonsocialistic moral code. What does he tell us about himself?
DESIRE TO LIVE
In the first place, he tells us that above all things he wants to live. He tells us this even when he first comes into the world and lets out a yell. Because of that primordial desire, he maintains, he has a right to live. Certainly, nobody else can establish a valid claim to his life, and for that reason he traces his own title to an authority mat transcends all men, to God. That title makes sense.
When the individual says he has a valid title to life, he means that all that is he, is his own: his body, his mind, his faculties. Maybe there is something else in life, such as a soul, but without going into that realm, he is willing to settle on what he knows about himself—his consciousness. All that is “I” is “mine.” That implies, of course, that all that is “you” is “yours”—for every “you” is an “I.” Rights work both ways. But, while just wanting to live gives the individual a title to life, it is an empty title unless he can acquire the things that make life livable, beginning with food, raiment, and shelter. These things do not come to you because you want them; they come as the result of putting labor to raw materials. You have to give something of yourself—your brawn or your brain—to make the necessary things available. Even wild berries have to be picked before they can be eaten. But the energy you put out to make the necessary things is part of you; it is you. Therefore, when you cause these things to exist, your tide to yourself, your labor, is extended to the things. You have a right to them simply because you have a right to life.
SOURCE OF GOVERNMENT
That is the moral basis of the right of property. “I own it because I made it” is a title that proves itself. The recognition of that title is implied in the statement that “I make so many dollars a week.” That is literally true.
But what do you mean when you say you own the thing you produced? Say it is a bushel of wheat. You produced it to satisfy your desire for bread. You can grind the wheat into flour, bake the loaf of bread, eat it, or share it with your family or a friend. Or you can give part of the wheat to the miller in payment for his labor; the part you give him, in the form of wages, is his because he gave you labor in exchange. Or you sell half the bushel of wheat for money, which you exchange for butter to go with the bread. Or you put the money in the bank so that you can have something else later on, when you want it.
In other words, your ownership entitles you to use your judgment as to what you will do with the product of your labor—consume it, give it away, sell it, save it. Freedom of disposition is the substance of property rights.
FREEDOM OF DISPOSITION
Interference with this freedom of disposition is, in the final analysis, interference with your right to life. At least, that is your reaction to such interference, for you describe such interference with a word that expresses a deep emotion: You call it “robbery.” What's more, if you find that this robbery persists, if you are regularly deprived of the fruits of your labor, you lose interest in laboring. The only reason you work is to satisfy your desires; and if experience shows that despite your efforts your desires go unsatisfied, you become stingy about laboring. You become a “poor” producer.
Suppose the freedom of disposition is taken away from you entirely. That is, you become a slave; you have no right of property. Whatever you produce is taken by somebody else; and though a good part of it is returned to you, in the way of sustenance, medical care, housing, you cannot under the law dispose of your output; if you try to, you become the legal “robber.” Your concern in production wanes and you develop an attitude toward laboring that is called a slave psychology. “Your interest in yourself also drops because you sense that without the right of property you are not much different from the other living things in the barn. The clergyman may tell you you are a man, with a soul; but you sense that without the right of property you are somewhat less of a man than the one who can dispose of your production as he wills. If you are a human, how human are you?
It is silly, then, to prate of human rights being superior to property rights, because the right of ownership is traceable to the right to life, which is certainly inherent in the human being. Property rights are in fact human rights.
A society built around the denial of this fact is, or must become, a slave society—although the socialists describe it differently. It is a society in which some produce and others dispose of their output. The laborer is stimulated not by the prospect of satisfying his desires but by fear of punishment. When his ownership is not interfered with, when he works for himself, he is inclined to develop his faculties of production because he has unlimited desires. He works for food, as a matter of necessity; but when he has a sufficiency of food, he begins to think of fancy dishes, a tablecloth, and music with his meals. There is no end of desires the human being can conjure up, and will work for, provided he feels reasonably sure that his labor will not be in vain. Contrariwise, when the law deprives him of the incentive of enjoyment, he will work only as necessity compels him. What use is there in putting out more effort?
Therefore, the general production of a socialistic society must decline to the point of mere subsistence.
DECLINE OF SOCIETY
The economic decline of a society without property rights is followed by the loss of other values. It is only when we have a sufficiency of necessaries that we give thought to nonmaterial things, to what is called culture. On the other hand, we find we can do without books, or even moving pictures, when existence is at stake. Even more than that, we who have no right to own certainly have no right to give, and charity becomes an empty word; in a socialistic order, no one need give thought to an unfortunate neighbor because it is the duty of the government, the only property owner, to take care of him; it might even become a crime to give a “bum” a dime. When the denial of the right of the individual is negated through the denial of ownership, the sense of personal pride, which distinguishes man from beast, must decay from disuse …
Whatever else socialism is, or is claimed to be, its first tenet is the denial of private property. All brands of socialism, and there are many, are agreed that property rights must be vested in the political establishment. None of the schemes identified with this ideology, such as the nationalization of industry, or socialized medicine, or the abolition of free choice, or the planned economy, can become operative if the individual's claim to his property is recognized by the government.
Economics Versus Politics
This article comes from The Rise and Fall of Society.
It may be that wary beasts of the forest come around to accepting the hunter's trap as a necessary concomitant of foraging for food. At any rate, the presumably rational human animal has become so inured to political interventions that he cannot think of the making of a living without them; in all his economic calculations his first consideration is, what is the law in the matter? Or, more likely, how can I make use of the law to improve my lot in life? This may be described as a conditioned reflex. It hardly occurs to us that we might do better operating under our own steam, within the limits put upon us by nature, and without political restraints, controls, or subventions. It never enters our minds that these interventionary measures are placed in our path, like the trap, for purposes diametrically opposed to our search for a better living. We automatically accept them as necessary to that purpose.
And so it has come to pass that those who write about economics begin with the assumption that it is a branch of political science. Our current textbooks, almost without exception, approach the subject from a legal standpoint: How do men make a living under the prevailing laws? It follows, and some of the books admit it, that if the laws change, economics must follow suit. It is for that reason that our college curricula are loaded down with a number of courses in economics, each paying homage to the laws governing different human activities; thus we have the economics of merchandising, the economics of real-estate operations, the economics of banking, agricultural economics, and so on. That there is a science of economics which covers basic principles that operate in all our occupations, and that have nothing to do with legislation, is hardly considered. From this point of view it would be appropriate, if the law sanctioned the practice, for the curricula to include a course on the economics of slavery.
Economics is not politics. One is a science, concerned with the immutable and constant laws of nature that determine the production and distribution of wealth; the other is the art of ruling. One is amoral, the other is moral. Economic laws are self-operating and carry their own sanctions, as do all natural laws, while politics deals with man-made and man-manipulated conventions. As a science, economics seeks understanding of invariable principles; politics is ephemeral, its subject matter being the day-to-day relations of associated men. Economics, like chemistry, has nothing to do with politics.
The intrusion of politics into the field of economics is simply an evidence of human ignorance or arrogance, and is as fatuous as an attempt to control the rise and fall of tides. Since the beginning of political institutions, there have been attempts to fix wages, control prices, and create capital, all resulting in failure. Such undertakings must fail because the only competence of politics is in compelling men to do what they do not want to do or to refrain from doing what they are inclined to do, and the laws of economics do not come within that scope. They are impervious to coercion. Wages and prices and capital accumulations have laws of their own, laws which are beyond the purview of the policeman.
The assumption that economics is subservient to politics stems from a logical fallacy. Since the state (the machinery of politics) can and does control human behavior, and since men are always engaged in the making of a living, in which the laws of economics operate, it seems to follow that in controlling men the state can also bend these laws to its will. The reasoning is erroneous because it overlooks consequences. It is an invariable principle that men labor in order to satisfy their desires, or that the motive power of production is the prospect of consumption; in fact, a thing is not produced until it reaches the consumer. Hence, when the state intervenes in the economy, which it always does by way of confiscation, it hinders consumption and therefore production. The output of the producer is in proportion to his intake. It is not willfulness that brings about this result; it is the working of an immutable natural law. The slave does not consciously “lay down on the job”; he is a poor producer because he is a poor consumer.
The evidence is that economics influences the character of politics, instead of the other way around. A communist state (which undertakes to disregard the laws of economics, as if they did not exist) is characterized by its preoccupation with force; it is a fear state. The aristocratic Greek city-state took its shape from the institution of slavery. In the nineteenth century, when the state, for purposes of its own, entered into partnership with the rising industrial class, we had the mercantilist or merchant state. The welfare state is in fact an oligarchy of bureaucrats who, in return for the perquisites and prestige of office, undertake to confiscate and redistribute production according to formulas of their own imagination, with utter disregard of the principle that production must fall in the amount of the confiscation. It is interesting to note that all welfarism starts with a program of distribution—control of the marketplace with its price technique—and ends up with attempts to manage production; that is because, contrary to the expectations of welfarism, the laws of economics are not suspended by its political interference, prices do not respond to its dicta, and in an effort to make its preconceived notions work, welfarism applies itself to production, and there too it fails.
The imperviousness of economic law to political law is shown in this historic fact: in the long run every state collapses, frequently disappears altogether and becomes an archaeological curio. Every collapse of which we have sufficient evidence was preceded by the same course of events. The state, in its insatiable lust for power, increasingly intensified its encroachments on the economy of the nation, causing a consequent decline of interest in production, until at long last the subsistence level was reached and not enough above that was produced to maintain the state in the condition to which it had been accustomed. It was not economically able to meet the strain of some immediate circumstance, like war, and succumbed. Preceding that event, the economy of society, on which state power rests, had deteriorated, and with that deterioration came a letdown in moral and cultural values; men “did not care.” That is, society collapsed and drew the state down with it. There is no way for the state to avoid this consequence—except, of course, to abandon its interventions in the economic life of the people it controls, which its inherent avarice for power will not let it do. There is no way for politics to protect itself from politics.
The story of the American state is instructive. Its birth was most auspicious, being midwifed by a coterie of men unusually wise in the history of political institutions and committed to the safeguarding of the infant from the mistakes of its predecessors. Apparently, none of the blemishes of tradition marked the new state. It was not burdened with the inheritance of a feudal or a caste system. It did not have to live down the doctrine of “divine right,” nor was it marked with the scars of conquest that had made the childhood of other states difficult. It was fed on strong stuff: Rousseau's doctrine that government derived its powers from the consent of the governed, Voltaire's freedom of speech and thought, Locke's justification of revolution, and, above all, the doctrine of inherent rights. There was no regime of status to stunt its growth. In fact, everything was de novo.
Every precautionary measure known to political science was taken to prevent the new American state from acquiring the self-destructive habit of every state known to history, that of interfering with man's pursuit of happiness. The people were to be left alone, to work out their individual destinies with whatever capacities nature had endowed them. Toward that end, the state was surrounded with a number of ingenious prohibitions and limitations. Not only were its functions clearly defined, but any inclination to go beyond bounds was presumably restrained by a tripartite division of authority, while most of the interventionary powers which the state employs were reserved for the authorities closer to the governed and therefore more amenable to their will; by the divisive principle of imperium in imperio it was forever, presumably, deprived of the monopoly position necessary to a state on the rampage. Better yet, it was condemned to get along on a meager purse; its powers of taxation were neatly circumscribed. It did not seem possible, in 1789, for the American state to do much in the way of interfering with the economy of the nation; it was constitutionally weak and off balance.
The ink was hardly dry on the Constitution before its authors, now in position of authority, began to rewrite it by interpretation, to the end that its bonds would loosen. The yeast of power that is imbedded in the state was in fermentation. The process of judicial interpretation, continued to the present day, was later supplemented by amendment; the effect of nearly all the amendments, since the first ten (which were written into the Constitution by social pressure), was to weaken the position of the several state governments and to extend the power of the central government. Since state power can grow only at the expense of social power, the centralization which has been going on since 1789 has pushed American society into that condition of subservience which the Constitution was intended to prevent.
In 1913 came the amendment that completely unshackled the American state, for with the revenues derived from unlimited income taxation it could henceforth make unlimited forays into the economy of the people. The Sixteenth Amendment not only violated the right of the individual to the product of his efforts, the essential ingredient of freedom, but also gave the American state the means to become the nation's biggest consumer, employer, banker, manufacturer, and owner of capital. There is now no phase of economic life in which the state is not a factor, there is no enterprise or occupation free of its intervention.
The metamorphosis of the American state from an apparently harmless establishment to an interventionary machine as powerful as that of Rome at its height took place within a century and a half; the historians estimate that the gestation of the greatest state of antiquity covered four centuries; we travel faster these days. When the grandeur of Rome was at its grandest, the principal preoccupation of the state was the confiscation of the wealth produced by its citizens and subjects; the confiscation was legally formalized, as it is today, and even though it was not sugarcoated with moralisms or ideologically rationalized, some features of modern welfarism were put into practice. Rome had its make-work programs, its gratuities to the unemployed, and its subsidies to industry. These things are necessary to make confiscation palatable and possible.
To the Romans of the times, this order of things probably seemed as normal and proper as it does today. The living are condemned to live in the present, under the prevailing conditions, and their preoccupation with those conditions makes any assessment of the historic trend both difficult and academic. The Romans hardly knew or cared about the “decline” in which they were living and certainly did not worry about the “fall” to which their world was riding. It is only from the vantage point of history, when it is possible to sift the evidence and find a cause-and-effect relationship, that a meaningful estimate of what was happening can be made. We know now that despite the arrogance of the state the economic forces that bear upon social trends were on the job. The production of wealth, the things men live by, declined in proportion to the state's exactions and interferences; the general concern with mere existence submerged any latent interest in cultural and moral values, and the character of society gradually changed to that of a herd. The mills of the gods grind slowly but surely; within a couple of centuries the deterioration of Roman society was followed by the disintegration of the state, so that it had neither the means nor the will to withstand the winds of historic change. It should be noted that society, which flourishes only under a condition of freedom, collapsed first; there was no disposition to resist the invading hordes.
The analogy suggests a prophecy and a jeremiad. But that is not within the scope of this essay, the hypothesis of which is that society, government, and the state are basically economic phenomena, that a profitable understanding of these institutions will be found in economics, not in politics. This is not to say that economics can explain all the facets of these institutions, any more than the study of his anatomy will reveal all the secrets of the human being; but, as there cannot be a human being without a skeleton, so any inquiry into the mechanism of social integrations cannot bypass economic law.
From God or the Sword?
This article comes from The Rise and Fall of Society.
Is the state ordered in the nature of things? The classical theorists in political science were so persuaded. Observing that every agglomeration of humans known to history was attended with a political institution of some kind, and convinced that in all human affairs the hand of God played a part, they concluded that the political organization of men enjoyed divine sanction. They had a syllogism to support their assumption: God made man; man made the state; therefore, God made the state. The state acquired divinity vicariously. The reasoning was bolstered by an analogy; it is a certainty that the family organization, with its head, is in the natural order of things, and it follows that a group of families, with the state acting as overall father, is likewise a natural phenomenon. If deficiencies in the family occur, it is because of the ignorance or wickedness of the father; and if the social order suffers distress or disharmony it is because the state has lost sight of the ways of God. In either case, the paterfamilias needs instruction in moral principles. That is, the state, which is inevitable and necessary, might be improved upon but cannot be abolished.
Accepting a priori the naturalness of the state, they sought for the taproot of the institution in the nature of man. Surely, the state appears only when men get together, and that fact would indicate that its origin is lodged in the complexity of the human being; animals have no state. This line of inquiry led to contradictions and uncertainties, as it had to because the evidence as to man's nature lies in his moral behavior and this is far from uniform. Two men will respond differently to the same exigency, and even one man will not follow a constant pattern of behavior under all circumstances. The problem which the political scientists with the theological turn of mind set for themselves was to find out whether the state owed its origin to the fact that man is inherently “good” or “bad,” and on this point there is no positive evidence. Hence the contradictions in their findings.
The three thinkers along these lines with whom we are most familiar, although they had their forerunners, are Thomas Hobbes, John Locke, and Jean Jacques Rousseau. As a starting point for their speculations, the three of them made use of the same hypothesis, that mere was a time when men were not politically organized and lived under conditions called a “state of nature.” It was pure assumption, of course, since if men ever roamed the face of the earth as thoroughgoing isolationists, having no contact with one another except at the end of a club, they never would have left any evidence of it. There must always have been at least a family organization or we would not be here to talk about a state of nature.
At any rate, Hobbes maintained that in this prepolitical state man was “brutish” and “nasty,” ever poised at the property and person of his neighbor. His predatory inclination was motivated by an overweening passion for material plenty. But, says Hobbes, man was from the beginning endowed with the gift of reason, and at some point in his “natural” state his reason told him that he could do better for himself by cooperating with his fellow “natural” man. At that point he entered into a “social contract” with him, by the terms of which each agreed to abide by an authority that would restrain him from doing what his “nature” inclined him to do. Thus came the state.
Locke, on the other hand, is rather neutral in his moral findings; to him the question of whether man is good or bad is secondary to the fact that he is a creature of reason and desire. In fact, says Locke, even when he lived in his natural state, man's principal concern was his property, the fruit of his labor. His reason told him that he would be more secure in the possession and enjoyment of it if he submitted himself to a protective agency. He therefore entered into a social contract and organized the state. Locke makes the first business of the state the protection of property, and asserts that when a particular state is derelict in that duty it is morally correct for the people to replace it, even by force, with another.
Looking into the state of nature, Rousseau finds it to be an idyllic Eden, in which man was perfectly free and therefore morally perfect. There was only one flaw in this otherwise good life: the making of a living was difficult. It was to overcome the hardships of natural existence that he gave up some of his freedom and accepted the social contract. As to the character of the contract, it is a blending of the will of each individual with that of every other signatory into what Rousseau calls the general will.
Thus, while the three speculators were in some disagreement as to the nature of man, where the seed of the state was to be found, they nevertheless agreed that the state flowered from it. It should be pointed out that this attempt to find an origin of the state was not their prime purpose, that each of them was interested in a political system of his own, and that each deemed it necessary to establish an origin that would fit in with his system. It would not serve our present purpose to discuss their political philosophies, but it is interesting to note that each was fashioned to fit the exigencies of the times, giving rise to the suspicion that their theories as to origin were similarly influenced. Their common prepossession was that the state is in the natural order of things, and Hobbes gives it divine sanction. In that respect they followed tradition; early Christian speculation on the state referred to its ideal as the “City of God,” and Plato spoke of his state as something “of which a pattern is made in heaven.”
Modern political science passes up the question of origin, accepts the state as a going concern, and makes recommendations for its operational improvement. The metaphysicians of old laid the deficiencies of a particular state to ignornance or disobedience of the laws of God. The moderns also have their ideal, or each political scientist has his own, and each has his prescription for achieving it; the ingredients of the prescription are a series of laws plus an enforcement machinery. The function of the state, it is generally assumed, is to bring about the good society—there being no question as to its ability to do so—and the good society is whatever the political scientist has in mind.
In recent times a few investigators have turned to history for evidence as to the origin of the state and have evolved what is sometimes called the theory of the sociological state.
The records show, they observe, that all primitive peoples made their living in one of two ways, agriculture or livestock raising; hunting and fishing seem to have been sidelines in both economies. The requirements of these two occupations developed clearly defined and different habits and skills. The business of roaming around in search of grazing land and water called for a well-knit organization of venturesome men, while the fixed routine of fanning needed no organization and little enterprise. The phlegmatic docility of scattered land workers made them easy prey for the daring herdsmen of the hills. Covetousness suggested attack.
At first, the historians report, the object of pilferage was women, since incest was taboo long before the scientists found reason to condemn the practice. The stealing of women was followed by the stealing of portable goods, and both jobs were accompanied by the wholesale slaughter of males and unwanted females. Somewhere along the line the marauders hit upon the economic fact that dead men produce nothing, and from that observation came the institution of slavery; the herdsmen improved their business by taking along captives and assigning menial chores to them. This master-slave economy, the theory holds, is the earliest manifestation of the state. Thus, the premise of the state is the exploitation of producers by the use of power.
Eventually, hit-and-run pilferage was replaced by the idea of security—or the continuing exaction of tribute from people held in bondage. Sometimes the investing tribe would take charge of a trading center and place levies on transactions, sometimes they would take control of the highways and waterways leading to the villages and collect tolls from caravans and merchants. At any rate, they soon learned that loot is part of production and that it is plentiful when production is plentiful; to encourage production, therefore, they undertook to patrol it and to maintain “law and order.” They not only policed the conquered people but also protected them from other marauding tribes; in fact, it was not uncommon for a harassed community to invite a warlike tribe to come in and stand guard, for a price. Conquerors came not only from the hills, for there were also “herdsmen of the sea,” tribes whose hazardous occupation made them particularly daring on the attack.
The investing people held themselves aloof from the conquered, enjoying what later became known as extraterritoriality. They maintained cultural and political ties with their homeland, they retained their own language, religion, and customs, and in most cases did not disturb the mores of their subjects as long as tribute was forthcoming. In time, for such is the way of propinquity, the ideational barriers between conquered and conquerors melted away and a process of amalgamation set in. The process was sometimes hastened by a severing of the ties with the homeland, as when the local chieftain felt strong enough in his new environment to challenge his overlord and to cease dividing the loot with him, or when successful insurrection at home cut him off from it. Closer contact with the conquered resulted in a blending of languages, religions, and customs. Even though intermarriage was frowned upon, for economic and social reasons, sexual attraction could not be put off by dictum, and a new generation, often smeared with the bar sinister, bridged the chasm with blood ties. Military ventures, as in defense of the now common homeland, helped the amalgam.
The blending of the two cultures gave rise to a new one, not the least important feature of which was a set of customs and laws regularizing the accommodation of the dues-paying class to their masters. Necessarily, these conventions were formulated by the latter, with the intent of freezing their economic advantage into a legacy for their offspring. The dominated people, who at first had resisted the exactions, had long ago been worn out by the unequal struggle and had resigned themselves to a system of taxes, rents, tolls, and other forms of tribute. This adjustment was facilitated by the inclusion of some of the “lower classes” into the scheme, as foremen, bailiffs, and menial servitors, and military service under the masters made for mutual admiration if not respect. Also, the codifying of the exactions eventually obliterated from memory the arbitrariness with which they had been introduced and covered them with an aura of correctness. The laws fixed limits on the exactions, made excesses irregular and punishable, and thus established “rights” for the exploited class. The exploiters wisely guarded these rights against trespass by their own more avaricious members, while the exploited, having made a comfortable adjustment to the system of exactions, from which some of them often profited, achieved a sense of security and self-esteem in this doctrine of rights. Thus, through psychological and legal processes that stratification of society became fixed. The state is that class which enjoys economic preference through its control of the machinery of enforcement.
The sociological theory of the state rests not only on the evidence of history but also on the fact that there are two ways by which men can acquire economic goods: production and predation. The first involves the application of labor to raw materials, the other the use of force. Pillaging, slavery, and conquest are the primitive forms of predation, but the economic effect is the same when political coercion is used to deprive the producer of his product, or even when he accedes to the transfer of ownership as the price for permission to live. Nor is predation changed to something else when it is done in the name of charity—the Robin Hood formula. In any case, one enjoys what another has produced, and to the extent of the predation the producer's desires must go unsatisfied, his labor unrequited. It will be seen that in its moral aspect the sociological theory leans on the doctrine of private property, the inalienable right of the individual to the product of his effort, and holds that any kind of coercion, exercised for any purpose whatsoever, does not alienate that right. We shall take up that point later.
Incidentally, at first glance this theory seems to bear a resemblance to the dictum of Karl Marx that the state is the managing committee for the capitalistic class. But the resemblance is in the words, not in the ideas. The Marxian theory maintains that the state in other hands—the “dictatorship of the proletariat”— could abolish exploitation. But the sociological theory of the state (or the conquest theory) insists that the state itself, regardless of its composition, is an exploitative institution and cannot be anything else; whether it takes over the property of the owner of wages or the property of the owner of capital, the ethical principle is the same. If the state takes from the capitalist to give to the worker, or from the mechanic to give to the farmer, or from all to better itself, force has been used to deprive someone of his rightful property, and in that respect it is carrying on in the spirit, if not the manner, of original conquest.
Therefore, if the chronology of any given state does not begin with conquest, it nevertheless follows the same pattern because its institutions and practices continue in the tradition of those states that have gone through the historic process. The American state did not begin with conquest; the Indians had no property that could be lifted and, being hunters by profession, they were too intractable to be enslaved. But the colonists were themselves the product of an exploitative economy, had become inured to it in their respective homelands, had imported and incorporated it in their new organization. Many of them came to their new land bearing the yoke of bondage. All had come from institutional environments that had emerged from conquest; they knew nothing else, and when they set up institutions of their own they simply transplanted these environments. They brought the predatory state with them.
Any profitable inquiry into the character of the American state must therefore take into account the distinction between making a living by production and gaining a living by predation; that is, between economics and politics.
Government Contra State
This piece first appeared in analysis (February 1946).
This necessarily brief summary of the distinction between these political institutions will serve, it is hoped, to interest the reader in further investigation. The distinction is based on historical evidence and is supported by the principles of political economy. The best argument for this distinction is in Our Enemy the State, by Albert Jay Nock. The interested reader will also find the following helpful: The State, by Franz Oppenheimer; The Man Versus the State, by Herbert Spencer; The Perplexed Philosopher, by Henry George.
Over his fireplace, even before there were vigilantes or sheriffs, the frontiersman kept a ready musket. It was standard equipment for the protection of life and property. It was his government.
That is to say, government arises from the innate sense of the right to life and the related right to property. The right to life is an indisputable axiom; it inheres in the individual by the necessity of existence. But the right to life is a meaningless abstraction until it is translated into the possession and enjoyment of things which make life possible, beginning with food, raiment, and shelter. The undisturbed possession and enjoyment of things which give existence substance and reality are called the right of property.
When I say that I have a right to life I mean that all the elements which center in my person—body, soul, faculties and acquired characteristics—are an integral to which no other person can show a natural title. When I labor to produce anything, I contribute part of “me” to the thing produced; it came into being because of “me.” The sense of attachment to that thing may arise from the necessity of existence; I feel that it is mine not only because I made it but because I need it. At any rate, the relationship between things and persons which we call property rights is rooted in the indisputable right of the person in himself.
Labor, therefore, is the moral basis of property rights. Labor, however, involves exertion, and exertion brings on a feeling of weariness and irksomeness. We seek to avoid it; we try to satisfy our desires with the least expenditure of labor. We are not interested in working per se; we are interested in enjoyment. Therefore, the getting of something “for free “—that is, without giving up any labor in return—is appealing to our instinct. This conflict between desire and the aversion to labor goes on in all of us; in that sense there is a thief in every one of us. That is why the frontiersman keeps a government—a musket—over his fireplace.
However, the more time the frontiersman puts into protecting his life and property, the less time he has for enjoying life and producing property. Protection is a necessary nuisance. His neighbors are of like mind, and as soon as there are enough of them to make it possible they hire a policeman, a specialist with the musket, to relieve them of the nuisance end of their business. They vest in him the authority necessary to maintain that peace and tranquillity which are conducive to the production of property.
There is a threat to life and property also in the hazard of fire; to ward against this danger a volunteer fire department arises. And again, as this business of putting out fires interferes with the prime business of producing goods and services, a specialist in firefighting is hired by the group. Other overall jobs come up as the community grows, jobs which would be done on a volunteer basis by each of the producers where the population is sparse. Every one of these overall, community jobs arises from the concern of the individual in his life and property, and is a job well done to the extent that his private enterprise is thereby promoted.
Government, then, is a specialized service arising out of community life. It owes its existence to the individual's interest in himself. Its specific job is to maintain the peace necessary to productive enterprise. Its related job is that of providing such services as may enable each of the specialists in the community to carry on more efficiently. And that's all. It is a negative specialty, operating only as occasion for its services arises. Whether as policeman, judge or street cleaner, government adds nothing to the general fund of wealth directly. It is negative and neutral; it is an agent, not a principal; it is a servant, not a master.
The distinctive characteristic of government is that in performing its functions it may have recourse to the use of coercive authority. Its particular attribute is power, vested in it by the producing specialists for the specific purpose of maintaining a condition necessary to their production. But that very protective measure is a danger to all the producing specialists, because it can be used against them. The firearm which the frontiersman turns over to the constable may be used to rob him of his property. When it is so used, when the government becomes predatory rather than protective, it ceases to be a service; it is the state.
Going back a bit, the moral basis of political authority is the right of life and the related right of property. But when that political authority is so exercised as to deny these basic rights, it divests itself of all ethical validity; and that is so even if those who so exercise the political authority surround themselves with law, custom, and a desire to do good. Just as a surgeon's scalpel becomes in fact a dagger when it is used with the intent to kill, so when the exercise of political authority deprives the individual of his rights it ceases to be a service and becomes a disservice.
The state—those in whom the political authority is vested and who use it for other than protective purposes—justifies its action by invoking a “higher law.” That is, it substitutes for the rights of the individual the rights of the clan, the community, the nation. But whence come the rights of these collective fictions? We are told that God made man, but nowhere is it asserted He also fathered an empire, or a village. That which we call “soul” is a private affair and no way of transferring it to another person or group of persons has been discovered. Hence the idea that a number of people, acting together, have a right which supersedes the rights of the individual is pure fantasy, and one which, as experience shows, has been invented to no good purpose.
This is not to say that those who advance this idea are inherently wicked, or are more wicked than the rest of us. They may be motivated by the noblest of intentions, their hearts overflowing with the milk of human kindness. Nevertheless, when they speak of “my country, right or wrong,” or “Deutschland über alles,” or the abolition of private property for the furtherance of the general good, they advance the false notion of a “personal” state. There is no such thing; only individuals exist. And the idea is decidedly at variance with the concept of rights, for it assumes that the individual is subservient to the collectivity, as to both life and property.
Far from being a person, the state is a group of persons who have acquired the power vested in government and make use of it in such a manner as to deprive the individual of his right to life and property. The state is historically grounded in conquest. The purpose of conquest is exploitation. Exploitation is any means of getting goods and services without rendering an equivalent in exchange—that is, any method of “getting something for nothing.” The state by virtue of the power of government which it acquires, perpetuates the purpose of conquest; by legal methods it regularizes the exploitation of the producer, in favor of the nonproducer, and by an elaborate system of education it obfuscates the immoral relationship and even covers the exploiters with an aura of respectability.
The state is divided into two groups, those who wield political power and those who benefit by it. That is what we mean by the phrase “the state within the state.” The keystone of this predatory structure is the power of taxation. Taxation is the regularized method of extracting property from producers for the benefit of the political arm of the state; the revenue enables it to maintain its administrative and executive machinery, particularly the military, and to induce acquiescence through its system of indoctrination. The more it taxes the stronger it becomes and, as a consequence, the weaker the power of resistance that may be brought to bear against it.
The beneficiaries of state power are the privileged classes. The greatest privilege which the state can confer is that of collecting rent from users of the earth. As all production consists of the application of labor to land, the owners of mines, franchises, and other choice spots are in a position to demand a permission-to-live price. Since nobody would of his own free will pay this price, which is in reality akin to tribute, force must underlie its payment; this the state supplies. Although this fact has been lost in the limbo of land laws, it shows up clearly when we trace title deeds to their source: force or fraud. Nobody can put to property in land the moral title test of “I made it.”
Whenever necessary to maintain or strengthen its position, the political arm of the state will hand out other privileges, and each group which thus secures for itself a means of enjoyment without labor becomes a supporter of its benefactor. In recent times we have seen how the state will shore itself up by handing out the dole privilege to the “underprivileged” who have been taxed and rack-rented out of the opportunity of earning a living for themselves. As political power is incapable of producing a thing, the privileges handed out amount to the taking of production from some and giving it to others; this is the essence of exploitation, the object of conquest.
The distinction between government and state, then, is in the use to which political coercion is put. When it is used negatively, for the protection of life and property, with which must be included the adjudicating of disputes among citizens, it is a service; when it is used positively, in the interests of one group of citizens, including politicians, against the interests of other groups, it is a disservice. In the one case it makes for harmony, in the other it is the cause of discord.
Civilization or Caveman
Economy?
Chodorov gave this talk to the Kiwanis Club in New York City, and it was broadcast over WMCA. It first appeared in The Freeman (May 1940).
I have been asked to talk about international trade. I shall begin by talking about civilization, that thing which, we are being told, is on the brink of destruction. For I believe that there is a definite relationship between the processes of civilization and the mode of exchange called international trade.
What is civilization? There have been many definitions of this concept, ranging from those that are purely material to those that are exclusively cultural. To define this word properly, let us examine how we use it. In a general way, we think of civilization as the customs, education, political methods, religion, technical knowledge, and so forth, prevailing at any given period of history, or on some part of the inhabited globe. Perhaps all of these characteristics can be grouped under the term “mores.”
We speak of Greek civilization and have a concept of a certain development in arts or the philosophical contributions of the early Greeks. We speak of Egyptian civilization and conjure up an idea of pyramids and angular forms, magnificent courts and corresponding slavery. Japanese civilization of the eighteenth century connotes something different from Japanese civilization of the twentieth century.
Yet there must be something indigenous to all civilizations, and the only way we can isolate this common denominator is by a process of elimination, by imagining a complete absence of civilization.
Let us assume that our pre-civilization ancestor, the caveman, provided all of his satisfactions by his own efforts; that is, he caught the fish he ate, he hunted so that he could have meat and raiment for himself, he alone provided the cave dwelling which he shared with no one except his mate; and if he had any idea of entertainment, it was necessary for him to entertain himself. The very first impulse of man is to seek those satisfactions which enable him to live; and since our caveman shared none of his products with his fellow man, it was only by his own labor that he could live.
This caveman's satisfactions must have been quite simple. He could not have satisfactions which required a complexity of effort. In other words, he was a “jack-of-all-trades and master of none.”
In due time it must have occurred to him that if he concentrated upon one of these trades, let us say fishing, while his neighboring caveman concentrated upon the making of such clothes as they both wore, both could be more proficient—each would produce more. But in order for such specialization to be possible, it was necessary for these two cavemen to arrange for some method of exchange. In all probability, it occurred to these original men that they must trust each other. The fishing caveman who brought his excess fish to his tailoring neighbor must have agreed to give fish on the promise of the other that when the latter finished the desired loincloth he would deliver it to the fisherman.
We see, then, that both markets and credit are necessary for specialization. We cannot possibly have division of productive labor unless the specializations can be exchanged; for if one man who makes shoes finds that there is no way to dispose of his shoes, he would starve to death unless he quit concentrating upon shoemaking and went to work on food production.
Civilization at bottom is merely a mode of living together. The reason for men living together in a community is that each one, trying to satisfy his desires with the least effort, finds that in a community not only is there greater production through division of labor, but, even more important, the community is itself a market for the exchanges.
Gregariousness may have a psychological interpretation, but economically it is merely the expression of the individual's desire to find satisfactions. The more people there are in a community, the larger the market, the easier trade becomes, and, therefore, the greater is the number of specialized arts.
For instance, it is only in a large city that an operatic star finds a market for her services. So highly developed an entertainment machine as the Yankee baseball club could not be developed in, let us say, Broken Bow, Oklahoma. There could not be an automobile factory making a thousand machines a day unless there were one thousand buyers a day. We find that where specializations have been most highly developed, there are the greatest number of people, and, consequently, the most facile market.
I think we can fairly state, then, that civilization started when the art of trade was discovered. At first the specializations are necessarily confined to immediate necessities, such as food, raiment, and shelter. But with his immediate desires satisfied, man seeks higher gratifications, and soon the system of the market enables some people to become priests, troubadours, traveling entertainers, healers.
Thus, the exchange of goods with which civilization starts develops into an exchange of services and ideas. Without a market the doctor could not develop and trade his skill for the necessities of life. Without a market, there would be no lawyers, no actors, no professors; we would all have to be as self-sustaining as the caveman.
Every increase in trade facilities aids in the spreading of cultural values; and, contrariwise, every interference with trade results in a corresponding retardation of cultural progess. In other words, the freer the trade, the greater the advance in civilization, and the more restrictions there are on trade, the surer will be the retrogression of civilization.
We have never had free trade, and I use that word in the sense not only of trade between peoples of various countries, but also of trade between peoples of the same country. We have never permitted the absolutely free exchange of productive specializations, free of political regulations, free of taxes, free of privilege. Therefore, we have never been completely civilized.
And since trade has never been absolutely free, production has never been free. For interference with the market is interference with production. When a market is restricted by government control, by government levies, or by monopoly, the result on exchanges is the same. When I go to market with my bushel of onions and am waylaid on the road by a tax collector who takes from me a portion of my onions, and then by someone else who because of a legal privilege deprives me of more of my onions, I cannot expect to get as many potatoes from you in exchange for my depleted stock. You do not have compassion upon me and give me the same number of potatoes even though I give you less onions; I simply haven't the goods to pay for your potatoes and I go home with less than I started out with.
And since you have not sold me all your potatoes, you take your surplus stock home, and you don't grow so many next season; that is, you are out of a job. Interference with the market, by regulation or by privilege, therefore has the tendency to cut down production, or employment.
Any difficulties placed in the way of production have an effect on those cultural values which are the marks of advanced civilizations. For it must be remembered that it is not until material needs are satisfied that these cultural values make their appearance. When man is struggling merely to live, he does not develop an appreciation for art. And as this struggle becomes more intense and more general, interest in thought diminishes in proportion. Thus we see that handicaps on production as well as on exchange retard the progress of civilization.
War is a complete denial of freedom of the market. In the first place, warriors do not produce. Their specialty is destruction. The goods they destroy are produced by workers who get nothing in exchange except a promise to pay, some time in the future. This repayment may be made to their children and children's children, by production in the future. For all debts are liquidated ultimately with goods or services. Now, then, if warriors destroy production wihout bringing to market something in exchange, it is obvious that the producers have less for themselves, and the processes of a free market are therefore denied. Whenever—by any technique—I am deprived of my production, my power to trade is to that extent limited.
Embargoes, blockades, quotas, inflation, sinking of ships, all of the methods of war, have for their purpose the interference with the exchange of goods for goods. They are avowedly a denial of trade, and trade is synonymous with civilization.
More important, from the ultimate point of view of mankind, than even the destructive activities of war are the tendencies to isolate peoples completely from one another mentally and spiritually. The technique of modern warfare is complete isolation before as well as during the war.
It is the business of the government which prepares you for war to teach you to hate. It is the business of the government which prepares you for war to teach you not to trade with certain peoples because they have bad “ideologies.” It is the business of the government which prepares you for war to prevent information coming to you which might predispose you kindly toward the people whom you will be called upon to kill. It is the business of war to break down that free exchange of goods, services, and ideas which is indigenous to all civilizations at all times.
You have no doubt observed that in dealing with the interrelated questions of trade and civilization, I have not distinguished between international trade and internal trade. There is none. What difference is there, essentially, in the exchange of goods between a New Yorker and a Vermonter and the exchange of goods between a New Worker and a Canadian? Does a political frontier inherently make a man a bad customer? When Detroit sells an automobile to Minnesota, the debt is eventually liquidated by a shipment of flour; and if the automobile is sold to Brazil, the sale is completed with a shipment of coffee. Nationality, color, race, and religion are of no consideration in any of these exchanges. These characteristics become of importance only where the war technique has become an integral part of our political system.
Trade, internal or international, is the harbinger of goodwill among men, and peace on earth. The opposite of trade is isolation, and isolation is a mark of decadence, of a return to a caveman economy. If it is good for America to isolate itself from other countries, economically and culturally, it is good for New York to isolate itself from Connecticut, for Manhattan to isolate itself from the Bronx, for every man to isolate himself from his neighbor. Just as individuals specialize in occupations, so do nations, and usually the specializations are determined by superior natural resources or the development of special skills. It is no reflection on the United States that Australian wool has been a staple longer than that grown on American sheep. But it is a reflection on American intelligence that America makes it difficult for us to get this better wool, just as it is a reflection on the intelligence of Australians that they impose on themselves difficulties in the getting of our superior automobiles.
Isolation and self-sufficiency are war techniques. Both ideas derive from the stupid concept of war as the reason for and goal of national existence. Both, therefore, are tendencies toward decivilization. And in the final analysis, the isolation and self-sufficiency idea is merely national caveman economy.
In closing I want to point out to you businessmen that it is your duty to emphasize the dignity and importance of trade in our national life. In the early days of the science of political economy it was taught that trade is a necessary evil—that it is not productive. This erroneous theory, first enunciated by the French physiocrats and later developed by the Marxists to the point where they pontifically declared all exchange occupations to be parasitical, is not yet quite deleted from all of our books on economics; lately our political thinking has evidenced some traces of it.
One of the contributions to economic thought developed by the foremost American economist, Henry George, was that exchange is part of production—that the salesman and the banker have as much to do with production as the man at the machine. For, said George, the object of production is consumption, and a thing is not produced until it reaches the consumer. Therefore, any specialist who aids in the distribution of things is a producer of things. As the number of our specializations increases, a larger army of distributors is necessary. The market becomes more important, and the jobber, retailer, advertiser, and common carrier become greater and greater factors in our productive machinery.
And the size and the freedom of the market are the measuring sticks of civilization.
Free Will and the
Marketplace
This article is an adaptation from an address Chodorov gave before an American Farm Bureau conference in Madison, Wisconsin, in October 1958. It was originally printed in The Freeman (January 1959).
Free will is the starting point of all ethical thinking and it plays an equally important part in the business of making a living. If man were not endowed with this capacity for making choices, he could not be held accountable for his behavior, any more than could a fish or a fowl—an amoral being, a thing without a sense of morals. So, if man were devoid of this capacity, his economics would be confined to grubbing along on whatever he found in nature. It is because man is capable of taking thought, of making evaluations and decisions in favor of this or that course, that we have a discipline called economics.
In making his ethical choices, man is guided by a code believed to have the sanction of God; and experience has shown that the good life to which his instinct impels him can be achieved only if he makes his decisions accordingly. The Ten Commandments have been called the Word of God; they can also be described as natural law, and natural law has been described as nature's way of applying means to ends. Thus, we say that nature in her inscrutable ways has determined that water shall always run downhill, never up; that is a natural law, we say, because it is without exception, inevitable, and self-enforcing. Therefore, when we decide to build ourselves a house, we set it at the bottom of the hill so as to avail ourselves of a supply of water. If we put the house at the top of the hill, nature will not cooperate in our obstinacy and we shall not have any water in the house; unless, of course, we discover and make use of some other natural law to overcome the force of gravity.
That is to say, nature is boss and we had better heed her teaching when we make decisions or we shall not achieve the ends we desire. But, her teaching is not freely given; we must apply ourselves diligently to a study of her ways to find out what they are. The prerequisite for a successful investigation is to admit that nature has the secret we are trying to uncover; if we begin by saying that in this or that field nature has no laws, that humans make their own way without reference to nature, we shall end up knowing nothing.
If, for instance, we discard the Ten Commandments, declaring them to be mere man-made conventions changeable at will, we end in chaos and disorder—evidence that we are on the wrong track. Likewise, if we declare that God in His infinite wisdom chose to disregard economics, that in ordering the world he overlooked the ways and means for man's making a living, that in this particular field man has to work out his own formulas, we will end up with a poor living.
“ECONOMICS” WITHOUT PRINCIPLES
And that is exactly what has happened in the study of economics; many experts in this field are of the opinion that nature can tell us nothing about the business of making a living; it is all a matter of human manipulation. That is why economics is so often a meaningless hodgepodge of expediencies, leading us to no understanding and no good end. I might add that the incongruities of ethical life, such as divorce, juvenile delinquency, international friction, and so on, are largely the result of the current conceit that there is no warrant for ethics in nature, no positive laws for moral behavior; but that is another subject.
I shall try to present some evidence that nature has her own rules and regulations in the field of economics, indicating that we had better apply ourselves to learning about them if we would avoid the obviously unsatisfactory results from relying on man's ingenuity. Come with me into the laboratory of experience, which is the source of much understanding.
THE FIRST PIONEER
Let us cast our mind's eye back to the time when there was no Madison, Wisconsin, or any other city west of the Alleghenies, when only the seed of a later social integration was planted here—when a lone frontiersman decided to settle on this spot of earth. The primary consideration which influenced his decision was the possibility of making a living here. He selected what later became Madison because the land was fertile, water was plentiful, the forests abounded with wood for his comfort, meat for his sustenance, and hides for his raiment. This was the workshop from which he could expect good wages for his efforts. Without benefit of economic textbooks, he hit upon a couple of economic laws: (1) production, or wealth, consists of useful things resulting from the application of human labor to natural resources; (2) wages come from production.
These laws, these precepts of nature, are still in force and always will be despite the efforts of some “experts” to rescind them. Often the yearning for manna from heaven obscures the fact that only by the application of labor to raw materials can economic goods appear, but the yearning is so strong that men ask government to play God and reproduce the miracle of the wilderness
Government, of course, can produce nothing, let alone a miracle; and when it presumes to drop manna on its chosen people, it simply takes what some produce and hands it over to others; its largess is never a free gift. And as for wages, they still come from production, even though there are sectarians who maintain that wages come from the safety vaults of a soulless boss. The consequences of disregarding these two dictates of nature are too well known to call for discussion.
Returning to our first pioneer, his initial wages are meager. That is because he is compelled by the condition of his existence to be a jack-of-all-trades, proficient in none. He produces little and therefore has little. But he is not satisfied with his lot for, unlike the beasts in the forest or the fish in the sea, man is not content merely to exist.
And here we hit upon a natural law which plays a prime role in man's economic life: he is the insatiable animal, always dreaming of ways and means for improving his circumstances and widening his horizon. The cabin built by the pioneer to protect himself from the elements was castle enough in the beginning; but soon he begins to think of a floor covering, of pictures on the wall, of a lean-to, of a clavichord to brighten his evenings at home, and, at long last, of hot-and cold-running water to relieve him of the laborious pumping. Were it not for man's insatiability, there would be no such study as economics.
A NEIGHBOR ARRIVES
But the things the pioneer dreams about are unattainable as long as he is compelled to go it alone. Along comes a second pioneer, and his choice of a place to work is based on the same consideration that influenced his predecessor. What wages can he get out of the land? However, as between this location and others of equal natural quality, this one is more desirable because of the presence of a neighbor. This fact alone assures a greater income, because there are jobs that two men can perform more easily than can one man alone, and some jobs that one man simply cannot do. Their wages are mutually improved by cooperation. Each has more satisfactions.
Others come, and every accretion to the population raises the wage level of the community. In the building of homes, in fighting fires and other hazards, in satisfying the need of entertainment or in the search for spiritual solace, a dozen people working together can accomplish more than twelve times what each one, working alone, can do. Still, the wage level of the community is rather low, for it is limited by the fact that all the workers are engaged in the primary business of existence on a self-sustaining, jack-of-all-trades basis.
At some point in the development of the community it occurs to one of the pioneers that he has an aptitude for blacksmithing; and if all the others would turn over to him their chores in this line, he could become very proficient at it, far better than any of his neighbors. In order for him to ply this trade the others must agree to supply him with his needs. Since their skill at blacksmithing is deficient, and since the time and effort they put into it is at the expense of something they can do better, an agreement is not hard to reach. Thus comes the tailor, the carpenter, the teacher, and a number of other specialists, each relieving the fanners of jobs that interfere with their farming. Specialization increases the productivity of each; and where there was scarcity, there is now abundance.
The first condition necessary for specialization is population. The larger the population the greater the possibility of the specialization which makes for a rising wage level in the community. There is, however, another important condition necessary for this division of labor, and that is the presence of capital. The pioneers have in their barns and pantries more than they need for their immediate sustenance, and are quite willing to invest this superfluity in other satisfactions. Their savings enable them to employ the services of specialists; and the more they make use of these services the more they can produce and save, thus to employ more specialists.
This matter of savings, or capital, may be defined as that part of production not immediately consumed, which is employed in aiding further production, so that more consumable goods may become available. In man's search for a more abundant life he has learned that he can improve his circumstances by producing more than he can presently consume and putting this excess into the production of greater satisfactions.
RESPECT FOR PROPERTY
Man has alway been a capitalist. In the beginning, he produced a wheel, something he could not eat or wear, but something that made his labors easier and more fruitful. His judgment told him what to do, and of his own free will he chose to do it. That makes him a capitalist, a maker and user of capital. The wheel, after many centuries, became a wagon, an automobile, a train, and an airplane—all aids in man's search for a better living. If man were not a capitalist, if he had chosen not to produce beyond requirements for immediate consumption—well, there would never have been what we call civilization.
However, a prerequisite for the appearance of capital is the assurance that the producer can retain for himself all he produces in the way of savings. If this excess of production over consumption is regularly taken from him, by robbers or tax collectors or the elements, the tendency is to produce no more than can be consumed immediately. In that case, capital tends to disappear; and with the disappearance of capital, production declines, and so does man's standard of living.
From this fact we can deduce another law of nature: that security in the possession and enjoyment of the fruit of one's labor is a necessary condition for capital accumulation. Putting it another way, where private property is abolished, capital tends to disappear and production comes tumbling after. This law explains why slaves are poor producers and why a society in which slavery is practiced is a poor society. It also gives the lie to the promise of socialism in all its forms; where private property is denied, there you will find austerity rather than a functioning exchange economy.
THE TRADING INSTINCT
The possibility of specialization as population increases is enhanced by another peculiarly human characteristic—the trading instinct. A trade is the giving up of something one has in order to acquire something one wants. The trader puts less worth on what he possesses than on what he desires. This is what we call evaluation.
It is not necessary here to go into the theory, or theories, of value except to point out that evaluation is a psychological process. It springs from the human capacity to judge the intensity of various desires. The fisherman has more fish than he cares to eat but would like to add potatoes to his menu; he puts a lower value on fish than on potatoes. The farmer is in the opposite position, his barn being full of potatoes and his plate devoid of fish. If an exchange can be effected both will profit, both will acquire an added satisfaction. In every trade—provided neither force nor fraud is involved—seller and buyer both profit.
Only man is a trader. No other creature is capable of estimating the intensity of its desires and of giving up what it has in order to get something it wants. Man alone has the gift of free will. To be sure, he may go wrong in his estimates and may make a trade that is to his disadvantage. In his moral life too he may err. But, when he makes the wrong moral choice, we hold that he should suffer the consequences, and hope that he will learn from the unpleasant experience.
So it must be in his search for a more abundant life. If in his search for a good life the human must be allowed to make use of his free will, why should he not be accorded the same right in the search for a more abundant life? Many of the persons who would abolish free choice in the marketplace logically conclude that man is not endowed with free will, that free will is a fiction, that man is merely a product of his environment. This premise ineluctably leads them to the denial of the soul and, of course, the denial of God.
Those who rail against the marketplace as if it were a den of iniquity, or against its techniques as being founded in man's inhumanity, overlook the function of the marketplace in bringing people into closer contact with one another. Remember, the marketplace makes specialization possible, but specialization makes men interdependent. The first pioneer somehow or other made his entire cabin; but his son, having accustomed himself to hiring a professional carpenter, can hardly put up a single shelf in a cabin. And today, if some catastrophe should cut off Madison from the surrounding farms, the citizens of the city would starve. If the marketplace were abolished, people would still pass the time of day or exchange recipes or bits of news; but they would no longer be dependent on one another, and their self-sufficiency would tend to break down their society. For that reason we can say that society and the marketplace are two sides of the same coin. If God intended man to be a social animal, he intended him to have a marketplace.
TRADERS SERVE ONE ANOTHER
But, let us return to our imaginary experiment. We found that as the pioneer colony grew in numbers, a tendency toward specialization arose. It was found that by this division of labor more could be produced. But this profusion from specialization would serve no purpose unless some way were found to distribute it. The way is to trade. The shoemaker, for instance, makes a lot of shoes of various sizes, but he is not interested in shoes per se; after all, he can wear but one pair and of one particular size. He makes the other shoes because other people want them and will give him in exchange the things he wants: bread, raiment, books, whatnot—the things in which his interests naturally lie. He makes shoes in order to serve himself, but in order to serve himself he has to serve others. He has to render a social service in order to pursue his own search for a more abundant life.
In our lexicon we refer to a business undertaking by the government as a social service; but this is a misnomer, because we can never be certain that the service rendered by the government business is acceptable to society. Society is compelled to accept these services, or to pay for them even if unwanted. The element of force is never absent from a government-managed business. On the other hand, the private entrepreneur cannot exist unless society voluntarily accepts what he has to offer; he must render a social service or go out of business.
Let us suppose that this shoemaker is especially efficient, that many people in the community like his service and therefore trade with him. He acquires what we call a profit. Has he done so at the expense of his customers? Do they lose because he has a profit? Or, do they not gain in proportion to the profit he makes? They patronize him because the shoes he offers are better than they could make themselves or could get elsewhere, and for that reason they are quite willing to trade with him. They want what they get more than they want what they give up and therefore profit even as he profits.
If he goes wrong in his estimate of their requirements, if he makes the wrong sizes, or styles that are not wanted, or uses inferior materials, people will not patronize him and he will suffer a loss. He will have no wage return for the labor he puts in and no return for the capital—the hides and machinery— which he uses in making his unwanted product. The best he can do under the circumstances, in order to recoup some of his investment, is to hold a bargain-basement sale. That is the correlative of profits—losses.
No entrepreneur is wise enough to predetermine the exact needs or desires of the community he hopes to serve and his errors of judgment always come home to plague him. But, the point to keep in mind is that when an entrepreneur profits, he does so because he has served his community well; and when he loses, the community does not gain. A business that fails does not prosper society.
The marketplace not only facilitates the distribution of abundances—including the abundances that nature has spread all over the globe, like the coal of Pennsylvania for the citrus fruit of Florida, or the oil of Iran for the coffee of Brazil—but it also directs the energies of all the specialists who made up society. This it does through the instrumentality of its price indicator. On this instrument are recorded in unmistakable terms just what the various members of society want, and how much they want it. If the hand on this indicator goes up, if higher prices are bid for a certain commodity, the producers are advised that there is a demand for this commodity in excess of the supply, and they then know how best to invest their labors for their own profit and for the profit of society. A lower price, on the other hand, tells them that there is a superfluity of a certain commodity, and they know that to make more of it would entail a loss because society has a sufficiency.
The price indicator is an automatic device for recording the freely expressed wishes of the community members, the tally of their dollar ballots for this or that satisfaction, the spontaneous and noncoercive regulator of productive effort. One who chooses to tamper with this delicate instrument does so at the risk of producing a scarcity of the things wanted or an overabundance of unwanted things; for he disturbs the natural order.
BENEFICIARIES OF COMPETITION
One more social function of the marketplace needs mentioning. It is the determinant of productive efficiency, provided, of course, it is permitted to operate according to the unimpeded motive power of free will. In the primitive economy we have been examining, one shoemaker can take care of the shoe needs of the community. Under those conditions, the efficiency of that server is determined by his skill, his industry, and his whim. He alone can fix the standard of the service he renders his customers, or the prices he charges. Assuming that they can go nowhere else for shoes, their only recourse if they do not like his services or his prices is either to go without or to make their own footwear.
As the community grows in size, another shoe specialist will show up to share the trade with the first one. With the appearance of a second shoemaker the standard of efficiency is no longer determined by one producer. It is determined by the rivalry between them for the trade of the community. One offers to fix shoes “while you wait,” the other lowers his prices, and the first one comes back with a larger assortment of sizes or styles. This is competition.
Now the beneficiaries of the improved services resulting from competition are the members of society. The more competition and the keener the competition, the greater the fund of satisfactions in the marketplace. Oddly enough, the competitors do not suffer because the abundance resulting from their improved efficiency attracts more shoe customers; “competition,” the adage holds, “is good for business.”
If, perchance, one of the competitors cannot keep up with the improving standard of performance, he may find himself out of business; but the increased productive activity resulting from the competition means that there are more productive jobs to be filled, and in all likelihood he can earn more as a foreman for one of the competitors than he could as an entrepreneur. Even those physically unable to care for themselves and dependent on others are benefited by competition; when there is an abundance in the marketplace, charity can be more liberal.
IMMUTABLE LAWS PREVAIL
I am not attempting here a complete course in economics. What I have tried to show is that in economics, as in other disciplines, there are inflexible principles, inevitable consequences, immutable laws written into the nature of things. Exercising his free will, man can attempt to defy the law of gravitation by jumping off a high place; but the law operates without regard for his conceit, and he ends up with a broken neck.
So, if the first pioneer had set up with force of arms a claim to everything produced in the Madison area, other pioneers would not have come near, and the community known as Madison would never have been born. Or, if he could have collected tribute, also by force of arms, from every producer in the area, he would have driven prospective specialists to places where private property was respected. If the first shoemaker had established himself, with the help of law, as a monopolist, barring competition, the shoes that Madisonians wore would have been of poor quality, scarce, and costly; the same result would have followed any legal scheme to subsidize his inefficiency at the expense of taxpayers. If early Madisonians had decreed to abolish the marketplace with its price indicator, specialization and exchange would have been thwarted and the economy of Madison would have been characterized by scarcity.
The laws of economics, like other natural laws, are self-enforcing and carry built-in sanctions. If these laws are either unknown or not heeded, the inevitable eventual penalty will be an economy of scarcity, a poor and uncoordinated society. Why? Because the laws of nature are expressions of the will of God. You cannot monkey with them without suffering the consequences.
One Worldism
“One Worldism” originally appeared in analysis (December 1950) and was subsequently excerpted in The Freeman.
Five years ago the organization of the United Nations was ushered into the world as the guarantor of peace. It has failed. Despite that obvious fact, there are many whose faith in some sort of a superstate as an instrument of peace is unshaken, and who lay the failure of the UN to the limitations put upon it by the autonomy of its members. That is to say, they believe in peace through authoritarianism; the more authoritarian, the more peace.
History cannot give this faith the slightest support. The glory that was Rome did not prevent its parts from coming into conflict with one another, or from rising up against the central authority. Even our American coalition of commonwealths came near breaking up in war, and uprisings have all but disintegrated the British Empire. Centralization of power has never been a guarantor of peace. On the contrary, every such centralization has been accomplished by war and its career has been one long preoccupation with war.
The best that can be said of any coalition of states is that it can keep smoldering fires from breaking out only so long as none of its members can exercise control over the others. It can maintain an armed truce. The UN has not done even that, simply because no one state has shown sufficient strength to take control. The two most powerful members have been in contention since its beginning and are now poised for a test of arms to determine the issue. Nothing else is more certain than that the rivalry of these two powers will shortly reach the breaking point, that the UN shall collapse or shall be succeeded by another coalition in which one or the other will be on top.
The UN—it is moonshine to think otherwise—consists of two hostile camps, one held together by the American dollar, the other by fear of the Soviet army. Neither law, morality, nor ideology is a cementing influence. If the American dollar is withdrawn the West will break up, its members entering into new alignments dictated by expediency; if the Soviet power shows weakness, Titoism will splinter the Red empire.
In short, it is evident now—even as it was to any one with some familiarity with the history of alliances—that the high moral purpose written into the charter of the UN charter is but a fairy tale. World peace is not to be achieved through this monstrosity. Like the League of Nations which it succeeded, or the Holy Roman Empire, or any of the political coalitions in the history of the world, the UN is incapable of giving the world peace simply because it rests on the unsound assumption that peace is a function of politics. The fact is that peace and politics are antithetical.
When we look into the nature and substance of peace, and make comparison with the business of politics, we see how silly is this faith in the superstate. It is as irrational as the religions of totemism, animism, or fetishism. It is another magic religion, in which the hope of man for a better life rests on the mystic powers of an inscrutable authority, which must be propitiated into seeing things as man sees them. Just as primitive man sought the answers to all his questions in the totem pole, so does modern man look to political power to solve the problems of life. In both cases we have the same flight from self-reliance, the same escape from individual responsibility, the same mother complex. That is the only way one can explain this blind faith in the efficacy of political power. The superstate idea is the most advanced form of this religion. The psychological identity of primitivism and statism is only obscured by the ritualism of charters, constitutions, and protocol.
SOCIETY IS PEOPLE
Peace is the business of society. Society is a cooperative effort, springing spontaneously from man's urge to improve on his circumstances. It is voluntary, completely free of force. It comes because man has learned that the task of life is easier of accomplishment through the exchange of goods, services, and ideas. The greater the volume and the fluidity of such exchanges, the richer and fuller the life of every member of society. That is the law of association; it is also the law of peace.
It is in the marketplace that man's peaceful ways are expressed. Here the individual voluntarily gives up possession of what he has in abundance to gain possession of what he lacks. It is in the marketplace that society flourishes, because it is in the marketplace that the individual flourishes. Not only does he find here the satisfactions for which he craves, but he also learns of the desires of his fellow man so that he might the better serve him. More than that, he learns of and swaps ideas, hopes, and dreams, and comes away with values of greater worth to him than even those congealed in material things.
Society has no geographical limits; it is as big as its marketplace, its area of exchanges. The Malayan and the American are automatically enrolled in the same society by the exchange of rubber for a jukebox, and even the difficulties of language are overcome when a New Yorker confronts a Chinese menu. South American music became the idiom of the North American dance floor because automobiles are swapped for coffee and bananas. Society is the organization of people who do business with one another.
The law of association—the supreme law of society—is self-operating; it needs no enforcement agency. Its motor force is in the nature of man. His insatiable appetite for material, cultural, and spiritual desires drives him to join up. The compulsion is so strong that he makes an automobile out of an oxcart, a telephone system out of a drum, so as to overcome the handicaps of time and space; contact is of the essence in the marketplace technique. Society grows because the seed of it is in the human being; it is made of man, but not by men.
The only condition necessary for the growth of society into one worldism is the absence of force in the marketplace; which is another way of saying that politics is a hindrance, and not an aid, to peace. Any intervention in the sphere of voluntary exchanges stunts the growth of society and tends to its disorganization. It is significant that in war, which is the ultimate of politics, every strategic move is aimed at the disorganization of the enemy's means of production and exchange—the disruption of his marketplace. Likewise, when the state intervenes in the business of society, which is production and exchange, a condition of war exists, even though open conflict is prevented by the superior physical force the state is able to employ. Politics in the marketplace is like a bull in the china shop.
POLITICS IS FRICTION
The essential characteristic of the state is force; it originates in force and exists by it. The rationale of the state is that conflict is inherent in the nature of man and he must be coerced into behaving, for his own good. That is a debatable doctrine, but even if we accept it the fact remains that the coercion must be exercised by men who are, by definition, as “bad” as those upon whom the coercion is exercised. The state is men. To cover up that disturbing fact, the doctrine of the superpersonal state is invented; it is more than human, it exists distinct from the people who staff it. That fiction is given plausibility by clothing it with constitutions, laws, and litanies, like “my country right or wrong.” A religion of authoritarianism is built up around an idol.
But, ritual does not give divinity to a golden calf. The hard fact remains that the priesthood of the state is just men, and the coercion it employs reflects its human capacities and frailties. The “priests” cannot get away from those limitations. Whatever “badness” is in them will show up in their use of force. They are not made “good” by the power to impose their will on other men.
Getting down to the facts of experience, political power never has been used for the “general good,” as advertised, but always has been used to further the interests of those in power or those who can support them in this purpose. To do so it must intervene in the marketplace. The advantages that political power confers upon its priests and their cohorts consist of what that power skims from the abundance created by society. Since it cannot make a single good, it lives and thrives by what it takes. What it takes deprives producers of the fruits of their labors, impoverishes them, and this causes a feeling of hurt. Intervention in the marketplace can do nothing else, then, than to create friction. Friction is incipient war.
Now, if the business of the state is to cause friction within any given segment of society, any one country, by what logic can it be shown that a world-state will prevent friction? If a small state is an evil, as the one-worlders insist, why should a big state be a good? Can an institution that is essentially antisocial be made prosocial by enlargement? No matter how high the totem pole it is not God.
Reason and fact are at great disadvantage in confronting blind faith, and those who worship at the shrine of authoritarianism will not be shaken by argument. Yet, one cannot help asking how the superstate will employ its army; the worshippers admit that an army is necessary to its proper functioning. The army will certainly be used to suppress something, to stop some people from doing something that to them seems good. For instance, there are many people in the world who practice polygamy, some who practice polyandry, and a few who go in for monogamy. Will the omniscient priesthood of the superstate use its army to enforce a uniform conjugal practice? In that case, of course, friction will result.
Or, if it is decided that the world has too much oil—the “overproduction” theory—will the army be sent to Texas or to Iran to shut down the “excess” wells? When such frictional situations are brought up, the devotees of authoritarianism answer that everything will be resolved by the “democratic” process—a process that has never stopped war.
ONE WORLD—ONE MARKETPLACE
One worldism is not an impossible ideal; but, it is not attainable through the medium of political power. On the contrary, the organization of the world into a single society—which is what the one-worlders really want—can be accomplished only if people can rid themselves of the fetish of authoritarianism. If men could come to a belief in themselves, if they could lose faith in the golden calf of politics, if they could once reach the maturity of manhood, the law of association would do the rest. It is not necessary to plan or build a world society; it is only necessary to remove the obstructions to its growth, all of which are political and all of which stem from faith in authoritarianism.
Our own country furnishes an illustration. In the beginning, before Americans had been completely converted to this political paganism, it was stipulated that their marketplace should be as large as the country; the erection of trade barriers between the component commonwealths was prohibited. As the frontiers of the country were extended the marketplace grew apace and, in time, goods, men, and ideas moved without hindrance from the Atlantic to the Pacific, from Mexico to Canada. Therefore, an American society grew up. It was not planned; it grew. Several times the little separate political establishments set up blocks to trade at their respective borders, causing friction, but on the whole their efforts were frustrated by the spirit of free trade. (It might be well to mention, in passing, that the prime cause of the Civil War was protectionism, which is a dogma of authoritarianism.)
Let us look at a contrary example. Europe, which, outside of Russia, compares in size with the United States, is cross-checked with tariff barriers, and Europe has been a battlefield for centuries. Political particularism has prevented the flowering of a European society. It is impossible for such a thing to get going in an area darkened by passports and customs regulations. Time and again the doctors of political science have prescribed some sort of political union for the ills of Europe, on the assumption that such a union will be followed by a customs union. Quite the contrary; the borders between countries lose all meaning if the peoples can “do business” with one another; which is another way of saying, if the states get out of the way of society. No political union can set up a society in Europe; that can only come from uninhibited “higgling and haggling” in a common marketplace.
If their senses were not dulled by their idolatry, the one-worlders could draw a sound conclusion from these two examples; namely, that the only way to a world society is through free trade. This does not mean that free trade alone would guarantee world peace, for there are other political institutions that make for frictions; but, it would go a long way. After all, if the customer is always right, how could he be an enemy?
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