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G. C. WIEGAND, Individual Freedom and Economic Security - Ralph Raico, New Individualist Review [1961]

Edition used:

New Individualist Review, editor-in-chief Ralph Raico, introduction by Milton Friedman (Indianapolis: Liberty Fund, 1981).

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Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Individual Freedom and Economic Security

G. C. WIEGAND*

THE POPULAR slogan “freedom from want,” which links freedom and economic security, is either an anachronism or a semantic illusion which helps to becloud the socio-economic problems which face the free world.

There was a time when individual freedom and economic security went hand-in-hand. In a world of general insecurity—out at the fringe of the Frontier—the freedom of the individual to make the fullest possible use of his physical and mental resources was the only assurance he possessed that he would survive in a hostile world. Similarly, at the time of John Locke, the late 17th century English defender of the rising middle class, freedom from government oppression and repression enabled the individual to use his faculties in order to acquire property and thus gain economic security and social status. The economic well-being of the middle class was dependent upon freedom of enterprise, freedom of trade and protection of private property, all three of which had been previously hampered by absolutism and mercantilism. It was for that reason that Locke argued that “life, liberty and property,” are inherent rights of the individual which no government could, or should take from him.

This, however, is not the type of personal freedom and economic security which the advocates of the modern “freedom from want” slogan have in mind but, rather, a policy under which the individual surrenders much of his personal freedom as a producer and consumer in return for economic security provided by a more or less powerful and benevolent state.

This is obviously not a new idea. The same trend of thought regarding freedom and security prevailed during the troubled decades of the declining Roman Empire. The entrepreneurial middle class was increasingly subjected to rigid government controls; the acquisition of personal wealth was pictured by writers of the time, both Christian and pagan, as a useless, if not immoral occupation; and slaves and free peasants alike came under the “protection” of the large landowners. By the 5th century, the economic liberalism which had prevailed in Rome during its centuries of power, had given way to an economic system, characterized by those features which in the following centuries blossomed into feudalism and serfdom. No doubt the slaves and serfs of this period, if theirs was a good master, enjoyed a fairly high degree of economic security, considering the general low standard of living of the time. But good masters have a tendency of turning into tyrants, and who assures the people of today who rely on the benevolence of the welfare state, that it will remain benevolent?

More than any other industry, American agriculture has been the beneficiary of government aid for many years. But instead of solving the problems of agriculture, government aid has deepened and prolonged them. Here is what the President of the American Farm Bureau Association, one of the two large farm organizations in America, has to say about the effects of government interference: “America has been known as the land of opportunity, but opportunity depends upon freedom, and freedom means individual responsibility—not the rule of force by government. The government interventionist abandons freedom of choice because he is contemptuous of the ability of individuals to know what is best for them.” And Mahatma Gandhi, the great Indian philosopher and humanitarian warned: “While apparently doing good by minimizing exploitation, the state does the greatest harm to mankind by destroying individuality which is the root of all progress. . . . The state is a soulless machine; it can never be weaned from violence to which it owes its very existence.”

The rapid economic growth during the 19th century, the rising standard of living and the unprecedented expansion of personal freedom coincided with, and to a large extent were due to, the rise of the entrepreneurial middle class which followed the overthrow of 17th and 18th century collectivism through the Glorious Revolution of 1688 in England, the American Revolution of 1776, and the French Revolution of 1789. Only after political and economic power had passed from the aristocracy and its proliferating bureaucracy to the middle class, whose vitality and strength sprang from personal freedom and private initiative, did the western world achieve its greatest economic, social and political advance.

Yet today we are turning away from the ideals of 19th century liberalism, which during the past 150 years have turned the western world from “underdeveloped countries” plagued by poverty and hunger into the “affluent societies” of today. What is causing the declining faith in personal initiative and freedom and the widespread demand by the people for “freedom from want” on the one hand, and on the other, the promise of the government to provide the country with a “great living program of human renewal?” Technological, institutional, social, political and cultural conditions have changed rapidly during the past 50 years; and rapid changes make for insecurity, which is undoubtedly one of the reasons for the craving of the millions for security provided by the state.

IN A WORLD of handicraft and small shops, of small towns and small farms, man was able to make a living without too much dependence upon the rest of society. He produced—or at least could produce—the food he needed. Most of his clothing was homemade, his house was not filled with gadgets which only an expert could keep in repair, home remedies were used in times of illness, and the aged found a spare room in their children’s home. Life was, of course, neither idyllic nor comfortable, if measured by modern standards. There was little variety in food, houses were hot in summer and cold in winter, sanitary facilities were primitive, the infant birth rate was twice as high as it is today, and the chances of surviving a major illness were poor. But these material short-comings of the “good old days” were offset by two great advantages: man could and to a large extent did preserve his economic independence, at least in the United States, and whatever man created by his hand or his mind was an expression of his own spirit and his own personality—and his personal property.

Science and technology have wrought a radical change. They have taken from man’s shoulders many of the burdens he carried for thousands of years. They have flooded the western world with consumer goods, have raised the quality and quantity of our food and raiments, have put dozens of intricate gadgets into our homes which replace human labor, have produced sanitation and medical knowledge which have doubled man’s lifespan; but they have also deprived man of his economic independence and his individuality as producer and consumer.

URBANIZATION, like mass production, produces interdependence. A subsistence farmer can survive a depression; an unemployed industrial worker, living in a metropolis far removed from the soil, cannot survive by his own resources. A strike of elevator operators or tugboat crews can paralyze New York. By destroying a power line, a windstorm can deprive hundreds of people many miles away of heat, water, light and their ability to cook a meal. Having thus lost the economic basis of his independence, his ability to survive without the coordinated effort of society, modern man naturally seeks security, and only a strong and well organized state seemingly can assure the necessary order to prevent economic chaos and give the individual the security which he lost when he traded his hand-tools for a place at the assembly line, and his subsistence farm for an apartment in the big city. As the dependence of the individual upon nature in an agrarian society gradually shifted to increasing reliance of the people on government in an industrial society, man’s attitude toward government intervention changed.

But the changes in modern man’s mode of living do not tell the full story. Man’s outlook on life is no doubt influenced by his physical make-up, his environment, and his religious beliefs; but neither the flow of glandular secretions, nor subconscious influences of a Freudian nature, nor theological doctrines, and—contrary to Karl Marx—most certainly not man’s physical surrounding can deprive man from choosing one course or another. Being free to make decisions distinguishes man as a moral being from an electronic computer. The same holds true of nations. At the end of the war, England was partly destroyed and generally impoverished; devastation and poverty were infinitely worse in Germany. Nations were free to choose between welfare state socialism and free enterprise. England adopted the former, and under the rule of the Labor Government her economy skidded from one near-crisis to the next. Western Germany on the other hand, having learned from fifteen years of bitter experience the consequences of statism and economic interventionism, turned to free enterprise, and within less than a decade the world began to talk of the “German miracle.” Just as the British and the Germans were not forced by circumstances to adopt the policies which they chose, industrialization and mass production do not compel the American people to turn to welfare state socialism.

THERE ARE other and deeper reasons, however, which help to explain the politico-economic shifts of the recent decades. During the past 50 years western civilization has experienced a radical change in its concept of the individual and of the nature of society. For two hundred years, since the days of the Enlightenment, man had been regarded essentially as a rational being, able to judge what was best for him. Modern psychology no longer subscribes to this assumption. Freudian man is impelled by subconscious drives; his actions are supposedly often irrational; and with the population growing at an extremely rapid rate during the past 100 years and with the spread of mass-education, the masses have swamped the intellectual and cultural elite. One writer speaks of the “vertical barbarian invasion” of western civilization by the masses resulting in an overemphasis of material goods and a disregard of basic cultural values; the desire for security on the part of the Massemench which has overwhelmed the demands for personal freedom of the superior individual.

“Our people in a body are wise,” wrote Thomas Jefferson to Joseph Priestley, “because they are under the unrestrained and unperverted operation of their own understanding.” “I believe, as I believe in nothing else, in the average integrity and the average intelligence of the American people,” wrote President Wilson more than a hundred years later.1 This was not campaign oratory; Jefferson and Wilson believed in the rationality and goodness of man.

The spirit has changed in the past 30 years. “Without results we know that democracy means nothing and ceases to be alive in the minds and hearts of men,” warned the President’s Committee on Administrative Management in 1937.2 Government had come to look upon the people as being not primarily interested in abstract ideals—“freedom buys no milk for the baby” was a popular phrase during the depression years—but in material results, in security. As Lord Keynes put it: “In the long run we are all dead.” Instead of assuming that man is able to judge the nature and long-range effects of a government policy, which is the basic assumption upon which democracy rests, we have come to “tax and tax, and spend and spend, and elect and elect,” because, in the words of Harry Hopkins, one of the best-known exponents of New Deal philosophy, “the people are too damned dumb.”

Just as the concept of man has changed during the past few decades, so has our social philosophy.

THERE ARE two basic concepts of society, the atomistic and the organic. We can postulate that society consists of a large number of small independent atoms, namely human beings, who represent ultimate reality, while, the state is merely an agglomeration of individuals. This was the premise of 19th century economic and political liberalism. The state, having no independent existence of its own, was not expected to provide either welfare or economic security. In vetoing an appropriation of $25,000 to buy seed corn for drought-stricken farmers, President Cleveland wrote: “There is no warrant in the Constitution of the United States for taking the funds which are raised from taxes and giving them from one man to another . . . while the people support the government, the government does not support the people.”

On the other hand, we can picture society as an organism, somewhat like the human body. Human beings then become cells of the social organism, unable to exist by themselves. Society alone can provide the necessary security. The emphasis thus shifts from the individual to the group. The latter becomes ultimate reality and the individual and his wants are subordinated to the needs and wants of “society.” This was the philosophy which prevailed throughout the Middle Ages and down to the 18th century, and which was gradually replaced by the atomistic view. In our own days we seem to have returned to a large extent to the organic concept of society.

The growing dependence of the individual upon society, the declining faith in the rationality of man, and the growing emphasis upon society rather than the individual have resulted in the development of a new branch of economics, macro-economics, which today accounts for almost two-thirds of the typical college curriculum.

While nineteenth-century economics concerned itself primarily with the economic problems which confronted the individual and the firm, such as price and value and the distribution of income, twentieth-century economists are primarily interested in the problems which affect the nation as a whole: growth and stagnation, monetary and fiscal policies, welfare economics, and economic planning.

In the construction of their analytical models, nineteenth-century economists made two basic assumptions: (1) The mainsprings of economic activity were thought to be rational individuals who were intent on maximizing their income while minimizing their efforts; and (2) the economy was assumed to be governed by so called “economic laws,” conceived as somewhat similar to the causal laws of Newtonian physics, which, if not interfered with by man, would produce an economic equilibrium which most economists assumed would provide the greatest good for the greatest number. Twentieth-century economics has largely dropped both assumptions. The rationality of man and the profit motive are regarded as premises which are neither helpful nor realistic; and the notion that automatic forces, if not interfered with, would automatically promote the greatest general welfare has been replaced by the modern postulate that the economy is constantly in need of state intervention. The “perfect machine,” our social organism, which the Enlightenment thought had been created for the benefit of man by an all-wise and all-kind God, appears to the twentieth-century badly in need of repairs by economic planners.

While the term macro-economics is the creation of our time, and while the approach is new as far as the twentieth-century is concerned, modern macro-economics offers many parallels to the mercantilism of the absolutist age. There is, however, one striking difference. While economic planning in the totalitarian countries is directed almost exclusively toward the strengthening of the state, at the expense of the freedom and well-being of the people, just as it was under mercantilism 300 years ago, economic planning in the western world is directed primarily toward the improvement of the economic status of those members of society who seem unable to achieve by their own efforts the standard of living which the government regards as appropriate.

THE MOST significant move in this direction has been the Employment Act of 1946. Its basic philosophy was outlined by President Roosevelt in a message to Congress in 1944 and restated in the Democratic Platform of the same year. It calls for the federal government to provide “full employment for the unemployed and guarantee . . . a job for every man released from the armed forces and the war industries at fair pay and working conditions.” A year later, Secretary of Commerce Henry Wallace restated the principle that “the essential idea is that the federal government is ultimately responsible for full employment,” and the Employment Act itself provided that “it is the policy and the responsibility of the Federal Government to use all practical means . . . to promote maximum employment.”

The Employment Act of 1946 did not immediately impair the personal freedom of the American people and, since cause-and-effect relationships are often not clear to the untrained observer, the eventual loss of personal and economic freedom, which may well be the result of the job security created by the Employment Act, has not yet dawned upon the great mass of the American people.

Employment depends upon demand, demand upon prices, and prices, in turn upon the cost of production. As wages rise the cost of production increases, and as prices rise the demand declines, which results in a drop in employment. Under the Employment Act, however, the Federal Government is required to prevent unemployment and it can do so by creating additional demand through the expansion of credit and the creation of more money, which means inflation. While the labor unions need not worry any longer that an increase in wages might lead, via higher prices and declining demand, to unemployment, the price which the American people as a whole, including the workers, have paid for this type of job security has been high. The cost of living has increased steadily since the end of the war. The retail price index stood at less than 77 in 1945 and had almost reached 129 by the end of 1961. Since 1950, moreover, the United States has steadily suffered a deficit in her balance of payments. Since the “gold crisis” in the fall of 1960, the dollar has been dependent upon international support in order to prevent a run on the sharply reduced gold reserves of the nation. The weakening of America’s international monetary position has affected her political stature as well. While the totalitarian countries directed their economic planning toward the strengthening of the state, economic planning in the western nations has been aimed thus far primarily toward a higher standard of living for the people, even though, as we have come to realize today, this has resulted in a relative weakening of the American position in world affairs.

Obviously, this trend cannot continue indefinitely if we are to survive as a nation. The American people are confronted with a far-reaching choice. Will there be a turning away from the welfare state policies of the past decade and a return to greater reliance on private initiative, or shall we increase further the power of the state, as Rome did in its time of trouble?

When Diocletian came to power toward the end of the third century, after decades of civil wars, the weaknesses of the Roman Empire were far more pronounced than are the difficulties which face the United States today. Inflation had progressed much further and the Roman economy was stagnating, while the American economy of today is booming. But Rome had one advantage: while it had many border conflicts—the Koreas, Laos’s and Congos of those days—it was not challenged by a major power comparable to modern Russia.

Diocletian’s efforts to restore the strength of the Roman Empire followed methods which are quite similar to those which economic and political leaders suggest today. In order to stop inflation, he “fixed” prices and wages by law, with the death penalty for those who violated the ceilings; made local trade associations responsible for price maintenance and in some instances for production quotas; and froze workers, especially farm laborers, in their jobs. His “emergency” measures designed to restore economic stability at the beginning of the 4th century affected the freedom of the people of Europe for 1500 years. The trade associations, which Diocletian entrusted with price maintenance, set the pattern for the medieval guilds which regulated prices, production, working conditions, and entry into the trade. While these guilds could well have developed without Diocletian’s reforms, the latter helped to set the pattern. Farm workers, whom Diocletian froze in their jobs to assure the necessary food supplies, eventually became the medieval serfs.

Lord Beveridge, the father of the full employment philosophy, recognized at the outset that a full employment policy can easily produce chronic inflation and suggested that the government, if necessary, freeze wages and prices and regulate production and employment, i.e., tell the entrepreneur what and how much to produce, and the worker where he can work and at what wages. The attempt of the 1940’s to provide job security may thus very well lead, in the 1960’s, to federal wage and price regulations, and, when these fail, to more rigid regulations of production and employment.

TWO OTHER Congressional efforts to assure economic security—and one can, of course, list many more—illustrate the danger that man can easily lose in freedom as he gains in security. The National Labor Relations Act of 1936 was intended to protect the worker against oppression and exploitation by the employer, but an integral part of the same legislation was the creation of powerful unions and of the union shop provision—or its various equivalents—under which a worker has to pay union dues in order to retain his job. The courts have even held, that if a worker, during a national election, advocates a view opposed by his union, he can be expelled from the union even though this may automatically result in his discharge from his job and may prevent him from getting another job in the occupation for which he is trained.

The farm aid program is designed to provide the farmer with “parity” income by placing a floor under farm prices. Aside from the fact that the program has failed to provide a minimum of income security for the small farmer—the average subsidy for about 3.5 million small farmers amounts to less than $125 a year—the American farmer had to surrender a substantial portion of his personal and economic freedom in exchange for the security which the program was intended to provide.

In Wickard vs. Filburn3 and in a number of other decisions, the Supreme Court has ruled that Congress can not only regulate the flow of farm products in interstate commerce, but that it can also prescribe how much a farmer may raise on his own farm for his own consumption. Acreage allotments, production and marketing quotas—all of them restrictions on the freedom of the farmer to use his land and his ability to produce—are the logical concomitant of the attempt of the federal government to place a floor under farm prices, and thus provide “security” for the farmer.

IN THEIR search for “economic security” the American people are in danger of chasing a phantom. We live in a world of rapid technological and economic change which results in insecurity for the investor, the entrepreneur and the worker. Growth means change, and change means insecurity. Yet the same people who advocate maximum economic growth very often also clamor for maximum economic security.

Economic security is relative. Simpler societies of the past enjoyed a feeling of abundance and security, while we, despite our riches, are plagued by the frustrating sense of want and insecurity, because we have replaced the more or less stable requirements of necessities with spiraling desires for more goods and services. Nobody questions the need for “minimum security.” As St. Thomas wrote 700 years ago, “A minimum of comfort is necessary in life for the efficient practice of virtue.” The danger lies in the fact that the American people, and for that matter, western civilization as a whole, may succumb to the temptation of trading their individual freedom for the promise of economic security and an ever rising standard of living.

Mass production and urbanization, which impose upon us interdependence, make us security-minded, and the intellectual climate of our time seems to favor the same trend. We have gone a long way during the past 50 years toward trading away our personal freedom, and the 1960’s are not likely to bring a reversal of the trend. In fact, men like Professors Hansen and Galbraith assure us that henceforth the well-being of the American people as a whole will be advanced more by “social” rather than by “individual” consumption. Instead of permitting the individual to “fritter away” his income on tail-finned cars, martinis and hula-hoops, the government should channel, via increased taxation, an ever greater share of the national income into social consumption: schools and hospitals, recreational facilities and roads. After all, we are told, America spends almost three times as much on liquor, tobacco and cosmetics as on education; five times as much on dog food as on college textbooks. Perhaps our standard of values, as reflected in the buying pattern of the consumer, is basically unsound. But will it be changed for the better, if we transfer the responsibility for the allocation of the nation’s resources—together with the people’s freedom as producers and consumers—to government officials, politicians and “experts?” This is the fundamental question which faces the American people during the 1960’s.

New Individualist Review welcomes contributions for publication from its readers. Essays should not exceed 3,000 words, and should be type-written. All manuscripts will receive careful consideration.

[* ] G. C. Wiegand is Professor of Economics at Southern Illinois University and is the author of numerous articles on monetary theory and the history of economic thought.

[1 ] Woodrow Wilson, The New Freedom, (New York: Doubleday, 1913), pp. 64, 89.

[2 ]Report with Special Studies, (Washington, 1937).

[3 ] 317 U.S. 111 (1942).