05/27/2016 by Henry Hazlitt
From time to time over the last thirty years, after I have talked or written about some new restriction on human liberty in the economic field, some new attack on private enterprise, I have been asked in person or received a letter asking, “What can I do” — to fight the inflationist or socialist trend? Other writers or lecturers, I find, are often asked the same question.
The answer is seldom an easy one. For it depends on the circumstances and ability of the questioner — who may be a businessman, a housewife, a student, informed or not, intelligent or not, articulate or not. And the answer must vary with these presumed circumstances.
The general answer is easier than the particular answer. So here I want to write about the task now confronting all libertarians considered collectively.
This task has become tremendous, and seems to grow greater every day. A few nations that have already gone completely communist, like Soviet Russia and its satellites, try, as a result of sad experience, to draw back a little from complete centralization, and experiment with one or two quasi-capitalistic techniques; but the world’s prevailing drift — in more than 100 out of the 107 nations and mini-nations that are now members of the International Monetary Fund — is in the direction of increasing socialism and controls.
The task of the tiny minority that is trying to combat this socialistic drift seems nearly hopeless. The war must be fought on a thousand fronts, and the true libertarians are grossly outnumbered on practically all these fronts.
In a thousand fields the welfarists, statists, socialists, and interventionists are daily driving for more restrictions on individual liberty; and the libertarians must combat them. But few of us individually have the time, energy, and special knowledge to be able to do this in more than a handful of subjects.
One of our gravest problems is that we find ourselves confronting armies of bureaucrats already controlling us, and with a vested interest in keeping and expanding the controls they were hired to enforce.
A Growing Bureaucracy
Let me try to give you some idea of the size and extent of this bureaucracy in the United States. The Hoover Commission found in 1954 that the Federal government embraced no fewer than 2,133 different functioning agencies, bureaus, departments, and divisions. I do not know what the exact count would be today, but the known multiplicity of Great Society agencies would justify our rounding out that figure at least to 2,200.
We do know [in 1968] that the full-time permanent employees in the Federal government now number about 2,615,000.
And we know, to take a few specific examples, that of these bureaucrats 15,400 administer the programs of the Department of Housing and Urban Development, 100,000 the programs (including Social Security) of the Department of Health, Education, and Welfare, and 154,000 the programs of the Veterans Administration.
If we want to look at the rate at which parts of this bureaucracy have been growing, let us take the Department of Agriculture. In 1929, before the U. S. government started crop controls and price supports on an extensive scale, there were 24,000 employees in that Department. Today, counting part-time workers, there are 120,000, five times as many, all of them with a vital economic interest — to wit, their own jobs — in proving that the particular controls they were hired to formulate and enforce should be continued and expanded.
What chance does the individual businessman, the occasional disinterested professor of economics, or columnist or editorial writer, have in arguing against the policies and actions of this 120,000-man army, even if he has had time to learn the detailed facts of a particular issue? His criticisms are either ignored or drowned out in the organized counterstatements.
This is only one example out of scores. A few of us may suspect that there is much unjustified or foolish expenditure in the U. S. Social Security program, or that the unfunded liabilities already undertaken by the program (one authoritative estimate of these exceeds a trillion dollars) may prove to be unpayable without a gross monetary inflation. A handful of us may suspect that the whole principle of compulsory government old-age and survivor’s insurance is open to question. But there are nearly 100,000 full-time permanent employees in the Department of Health, Education, and Welfare to dismiss all such fears as foolish, and to insist that we are still not doing nearly enough for our older citizens, our sick, and our widows and orphans.
And then there are the millions of those who are already on the receiving end of these payments, who have come to consider them as an earned right, who of course find them inadequate, and who are outraged at the slightest suggestion of a critical reexamination of the subject. The political pressure for constant extension and increase of these benefits is almost irresistible.
And even if there weren’t whole armies of government economists, statisticians, and administrators to answer him, the lone disinterested critic, who hopes to have his criticism heard and respected by other disinterested and thoughtful people, finds himself compelled to keep up with appalling mountains of detail.
Too Many Cases to Follow
The National Labor Relations Board, for example, hands down hundreds of decisions every year in passing on “unfair” labor practices. In the fiscal year 1967 it passed on 803 cases “contested as to the law and the facts.” Most of these decisions are strongly biased in favor of the labor unions; many of them pervert the intention of the Taft-Hartley Act that they ostensibly enforce; and in some of them the board arrogates to itself powers that go far beyond those granted by the act. The texts of many of these decisions are very long in their statement of facts or alleged facts and of the Board’s conclusions. Yet how is the individual economist or editor to keep abreast of the decisions and to comment informedly and intelligently on those that involve an important principle or public interest?
Or take again such major agencies as the Federal Trade Commission, the Securities and Exchange Commission, the Internal Revenue Service, the Interstate Commerce Commission, the Food and Drug Administration, the Federal Communications Commission. All these agencies engage in quasi-legislative, quasi-judicial, and administrative functions. They issue rules and regulations, grant licenses, issue cease and-desist orders, award damages, and compel individuals and corporations to do or refrain from many things. They often combine the functions of legislators, prosecutors, judges, juries, and bureaucrats. Their decisions are not always based solely on existing law and yet when they inflict injury on corporations or individuals, or deprive them of constitutional liberties and legal rights, appeal to the courts is often difficult, costly, or impossible.
Once again, how can the individual economist, student of government, journalist, or anyone interested in defending or preserving liberty, hope to keep abreast of this Niagara of decisions, regulations, and administrative laws? He may sometimes consider himself lucky to be able to master in many months the facts concerning even one of these decisions.
Professor Sylvester Petro of New York University has written a full book on the Kohler strike and another full book on the Kingsport strike, and the public lessons to be learned from them. Professor Martin Anderson has specialized in the follies of urban renewal programs. But how many are there among us libertarians who are willing to — or have the time to — do this specialized and microscopic but indispensable research?
In July 1967, the Federal Communications Commission handed down an extremely harmful decision ordering the American Telephone & Telegraph Company to lower its interstate rates — which were already 20 percent lower than in 1940, though the general price level since that time had gone up 163 percent. In order to write a single editorial or column on this (and to feel confident he had his facts straight), a conscientious journalist had to study, among other material, the text of the decision. That decision consisted of 114 single spaced typewritten pages.
… and Schemes for Reform
We libertarians have our work cut out for us.
In order to indicate further the dimensions of this work, it is not merely the organized bureaucracy that the libertarian has to answer; it is the individual private zealots. A day never passes without some ardent reformer or group of reformers suggesting some new government intervention, some new statist scheme to fill some alleged “need” or relieve some alleged distress. They accompany their scheme by citing statistics that supposedly prove the need or the distress that they want the taxpayers to relieve. So it comes about that the reputed “experts” on relief, unemployment insurance, social security, medicare, subsidized housing, foreign aid, and the like are precisely the people who are advocating more relief, unemployment insurance, social security, medicare, subsidized housing, foreign aid, and all the rest.
Let us come to some of the lessons we must draw from all this.
Specialists for the Defense
We libertarians cannot content ourselves merely with repeating pious generalities about liberty, free enterprise, and limited government. To assert and repeat these general principles is absolutely necessary, of course, either as prologue or conclusion. But if we hope to be individually or collectively effective, we must individually master a great deal of detailed knowledge, and make ourselves specialists in one or two lines, so that we can show how our libertarian principles apply in special fields, and so that we can convincingly dispute the proponents of statist schemes for public housing, farm subsidies, increased relief, bigger social security benefits, bigger Medicare, guaranteed incomes, bigger government spending, bigger taxation, especially more progressive income taxation, higher tariffs or import quotas, restrictions or penalties on foreign investment and foreign travel, price controls, wage controls, rent controls, interest rate controls, more laws for so-called “consumer protection,” and still tighter regulations and restrictions on business everywhere.
This means, among other things, that libertarians must form and maintain organizations not only to promote their broad principles, but to promote these principles in special fields.
We need not fear that too many of these specialized organizations will be formed. The real danger is the opposite. The private libertarian organizations in the United States are probably outnumbered ten to one by communist, socialist, statist, and other left-wing organizations that have shown themselves to be only too effective.
And I am sorry to report that almost none of the old-line business associations that I am acquainted with are as effective as they could be. It is not merely that they have been timorous or silent where they should have spoken out, or even that they have unwisely compromised. Recently, for fear of being called ultraconservative or reactionary, they have been supporting measures harmful to the very interests they were formed to protect. Several of them, for example, have come out in favor of the Administration’s proposed tax increase on corporations, because they were afraid to say that the Administration ought rather to slash its profligate welfare spending.
The sad fact is that today most of the heads of big businesses in America have become so confused or intimidated that, so far from carrying the argument to the enemy, they fail to defend themselves adequately even when attacked. The pharmaceutical industry, subjected since 1962 to a discriminatory law that applies questionable and dangerous legal principles that the government has not yet dared to apply in other fields, has been too timid to state its own case effectively. And the automobile makers, attacked by a single zealot for turning out cars “Unsafe at Any Speed,” handled the matter with an incredible
combination of neglect and ineptitude that brought down on their heads legislation harmful not only to the industry but to the driving public.
The Timidity of Businessmen
It is impossible to tell today where the growing anti-business sentiment in Washington, plus the itch for more government control, is going to strike next. Only within the last few months Congress, with little debate, allowed itself to be stampeded into a dubious extension of Federal power over intrastate meat sales. When this article appears, or shortly after, Congress may have passed a Federal “truth-in-lending” law, forcing lenders to calculate and state interest rates the way Federal bureaucrats want them calculated and stated. There is also pending an Administration bill in which government bureaucrats are to prescribe “standards” telling just how surgical devices like bone pins and catheters and even artificial eyes are to be made.
And a few weeks ago the President suddenly announced that he was prohibiting American business from making further direct investments in Europe, that he was restricting them elsewhere, and that he would ask Congress to pass some law restricting Americans from traveling to Europe. Instead of raising a storm of protest against these unprecedented invasions of our liberties, most newspapers and businessmen deplored their “necessity” and hoped they would be only “temporary.”
The very existence of the business timidity that allows these things to happen is evidence that government controls and power are already excessive.
Why are the heads of big business in America so timid? That is a long story, but I will suggest a few reasons: (1) They may be entirely or largely dependent on government war contracts. (2) They never know when or on what grounds they will be held guilty of violating the antitrust laws. (3) They never know when or on what grounds the National Labor Relations Board will hold them guilty of unfair labor practices. (4) They never know when their personal income tax returns will be hostilely examined, and they are certainly not confident that such an examination, and its findings, will be entirely independent of whether they have been personally friendly or hostile to the Administration in power.
It will be noticed that the governmental actions or laws of which businessmen stand in fear are actions or laws that leave a great deal to administrative discretion. Discretionary administrative law should be reduced to a minimum; it breeds bribery and corruption, and is always potentially blackmail or blackjack law.
A Confusion of Interests
Libertarians are learning to their sorrow that big businessmen cannot necessarily be relied upon to be their allies in the battle against extension of governmental encroachments. The reasons are many. Sometimes businessmen will advocate tariffs, import quotas, subsidies, and restrictions of competition, because they think, rightly or wrongly, that these government interventions will be in their personal interest, or in the interest of their companies, and are not concerned whether or not they may be at the expense of the general public. More often, I think, businessmen advocate these interventions because they are honestly confused, because they just don’t realize what the actual consequences will be of the particular measures they propose, or perceive the cumulative debilitating effects of growing restrictions of human liberty.
Perhaps most often of all, however, businessmen today acquiesce in new government controls out of sheer timidity.
A generation ago, in his pessimistic book, Capitalism, Socialism and Democracy (1942), the late Joseph A. Schumpeter maintained the thesis that “in the capitalistic system there is a tendency toward self-destruction.” And as one evidence of this he cited the “cowardice” of big businessmen when facing direct attack:
They talk and plead — or hire people to do it for them; they snatch at every chance of compromise; they are ever ready to give in; they never put up a fight under the flag of their own ideals and interests — in this country there was no real resistance anywhere against the imposition of crushing financial burdens during the last decade or against labor legislation incompatible with the effective management of industry.
So much for the formidable problems facing dedicated libertarians. They find it extremely difficult to defend particular firms and industries from harassment or persecution when those industries will not adequately or competently defend themselves. Yet division of labor is both possible and desirable in the defense of liberty as it is in other fields. And many of us, who have neither the time nor the specialized knowledge to analyze particular industries or special complex problems, can be nonetheless effective in the libertarian cause by hammering incessantly on some single principle or point until it is driven home.
Basic Principles upon Which Libertarians May Rely
Is there any single principle or point on which libertarians could most effectively concentrate? Let us look, and we may end by finding several.
One simple truth that could be endlessly reiterated, and effectively applied to nine-tenths of the statist proposals now being put forward or enacted in such profusion, is that the government has nothing to give to anybody that it doesn’t first take from somebody else. In other words, all its relief and subsidy schemes are merely ways of robbing Peter to support Paul.
Thus, it can be pointed out that the modern welfare state is merely a complicated arrangement by which nobody pays for the education of his own children, but everybody pays for the education of everybody else’s children; by which nobody pays his own medical bills, but everybody pays everybody else’s medical bills; by which nobody provides for his own old-age security, but everybody pays for everybody else’s old-age security; and so on. Bastiat, with uncanny clairvoyance, exposed the illusive character of all these welfare schemes more than a century ago in his aphorism: “The State is the great fiction by which everybody tries to live at the expense of everybody else.”
Another way of showing what is wrong with all the state handout schemes is to keep pointing out that you can’t get a quart out of a pint jug. Or, as the state giveaway programs must all be paid for out of taxation, with each new scheme proposed the libertarian can ask, “Instead of what?33 Thus, if it is proposed to spend another $1 billion on getting a man to the moon or developing a supersonic commercial plane, it may be pointed out that this $1 billion, taken in taxation, will not then be able to meet a million personal needs or wants of the millions of taxpayers from whom it is to be taken.
Of course, some champions of ever-greater governmental power and spending recognize this very well, and like Professor J. K. Galbraith, for instance, they invent the theory that the taxpayers, left to themselves, spend the money they have earned very foolishly, on all sorts of trivialities and rubbish, and that only the bureaucrats, by first seizing it from them, will know how to spend it wisely.
Knowing the Consequences
Another very important principle to which the libertarian can constantly appeal is to ask the statists to consider the secondary and longrun consequences of their proposals as well as merely their intended direct and immediate consequences. The statists will sometimes admit quite freely, for example, that they have nothing to give to anybody that they must not first take from somebody else. They will admit that they must rob Peter to pay Paul. But their argument is that they are seizing only from rich Peter to support poor Paul. As President Johnson once put it quite frankly in a speech on January 15, 1964: “We are going to try to take all of the money that we think is unnecessarily being spent and take it from the ‘haves’ and give it to the ‘have nots’ that need it so much.”
Those who have the habit of considering long-run consequences will recognize that all these programs for sharing-the-wealth and guaranteeing incomes must reduce incentives at both ends of the economic scale. They must reduce the incentives both of those who are capable of earning a high income, but find it taken away from them, and those who are capable of earning at least a moderate income, but find themselves supplied with the necessities of life without working.
This vital consideration of incentives is almost systematically overlooked in the proposals of agitators for more and bigger government welfare schemes. We should all rightly be concerned with the plight of the poor and unfortunate. But the hard two-part question that any plan for relieving poverty must answer is: How can we mitigate the penalties of failure and misfortune without undermining the incentives to effort and success} Most of our would-be reformers and humanitarians simply ignore the second half of this problem. And when those of us who advocate freedom of enterprise are compelled to reject one of these specious “antipoverty” schemes after another on the ground that it will undermine these incentives and in the long run produce more evil than good, we are accused by the demagogues and the thoughtless of being “negative” and stony-hearted obstructionists. But the libertarian must have the strength not to be intimidated by this.
Finally, the libertarian who wishes to hammer in a few general principles can repeatedly appeal to the enormous advantages of liberty as compared with coercion. But he, too, will have influence and perform his duty properly only if he has arrived at his principles through careful study and thought. ‘The common people of England,” once wrote Adam Smith, “are very jealous of their liberty, but like the common people of most other countries have never rightly understood in what it consists.” To arrive at the proper concept and definition of liberty is difficult, not easy. But this is a subject too big to be developed further here.
Legal and Political Aspects
So far, I have talked as if the libertarian’s study, thought, and argument need be confined solely to the field of economics. But, of course, liberty cannot be enlarged or preserved unless its necessity is understood in many other fields—and most notably in law and in politics.
We have to ask, for example, whether liberty, economic progress, and political stability can be preserved if we continue to allow the people on relief — the people who are mainly or solely supported by the government and who live at the expense of the taxpayers — to exercise the franchise. The great liberals of the nineteenth and early twentieth centuries expressed the most serious misgivings on this point. John Stuart Mill, writing in his Representative Government in 1861, did not equivocate: “I regard it as required by first principles that the receipt of parish relief should be a preemptory disqualification for the franchise. He who cannot by his labor suffice for his own support has no claim to the privilege of helping himself to the money of others.” And A. V. Dicey, the eminent British jurist, writing in 1914, also raised the question whether it is wise to allow the recipients of poor relief to retain the right to join in the election of a member of Parliament.
An Honest Currency and an End to Inflation
This brings me, finally, to one more single issue on which all those libertarians who lack the time or background for specialized study can effectively concentrate. This is in demanding that the government provide an honest currency, and that it stop inflating. This issue has the inherent advantage that it can be made clear and simple because fundamentally it is clear and simple. All inflation is government-made. All inflation is the result of increasing the quantity of money and credit; and the cure is simply to halt the increase.
If libertarians lose on the inflation issue, they are threatened with the loss of every other issue. If libertarians could win the inflation issue, they could come close to winning everything else. If they could succeed in halting the increase in the quantity of money, it would be because they could halt the chronic deficits that force this increase. If they could halt these chronic deficits, it would be because they had halted the rapid increase in welfare spending and all the socialistic schemes that are dependent on welfare spending. If they could halt the constant increase in spending, they could halt the constant increase in government power.
The devaluation of the British pound a few months ago, though it may shake the whole world currency system to its foundations, may as an offset have the longer effect of helping the libertarian cause. It exposes as never before the bankruptcy of the Welfare State. It exposes the fragility and complete undependability of the paper-gold international monetary system under which the world has been operating for the last twenty years. There is hardly one of the hundred or more currencies in the International Monetary Fund, that has not been devalued at least once since the I.M.F. opened its doors for business. There is not a single currency unit that does not buy less today than when the Fund started.
The dollar, to which practically every other currency is tied in the present system, is now in the gravest peril. If liberty is to be preserved,the world must eventually get back to a full gold standard system in which each major country’s currency unit must be convertible into gold on demand, by anybody who holds it, without discrimination. I am aware that some technical defects can be pointed out in the gold standard, but it has one virtue that more than outweighs them all. It is not, like paper money, subject to the day-to-day whims of the politicians; it cannot be printed or otherwise manipulated by the politicians; it frees the individual holder from that form of swindling or expropriation by the politicians; it is an essential safeguard for the preservation, not only of the value of the currency unit itself, but of human liberty. Every libertarian should support it.
I have one last word. In whatever field he specializes, or on whatever principle or issue he elects to take his stand, the libertarian must take a stand. He cannot afford to do or say nothing. I have only to remind you of the eloquent call to battle on the final page of Ludwig von Mises’s great book on Socialism:
Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping toward destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the real historical struggle, the decisive battle into which our epoch has plunged us.
[Originally published in the March 1968 issue of The Freeman. Excerpted from The Wisdom of Henry Hazlitt]