Mises Daily by Bruce Winton Knight | Posted on 9/23/2009 12:00:00 AM
[From The Freeman, January 1952. An MP3 audio file of this article, read by Floy Lilley, is available for download.]
Now that our country is expected to be the foremost champion of the “free world” (for how long and at what cost nobody knows), it has become more important than ever for Americans to think clearly about American freedom. It should be quite obvious to us that our freedom is indivisible.
Since most of us must devote much of our fleeting lives to “getting and spending,” it ought to be abundantly clear that economic freedom is an integral part of our personal liberty. And yet, like Benjamin Jowett, accused of asserting that “what I don’t know isn’t knowledge,” we are actually behaving as if economic freedom either is not freedom at all or else is so trivial that we need not give it serious thought. A review of the most rudimentary facts about the nature of economic freedom and what is happening to it in the United States will show that this is the case.
Like any form of personal liberty, economic freedom means freedom to choose. Of course it is limited. Practically, we can choose only between real alternatives — and perfection is never one of the alternatives.
Morally, we are bound by the very old principle that a man is his brother’s keeper. For the consequences of our choices we are responsible not only to ourselves and our families but to our fellow men in general. Individual freedom would be social nonsense if the strong did not protect the weak from invasion of their liberty, and if the fortunate did not help the unlucky.
Economic freedom, then, lies in the area where real and responsible economic choices are made. Why should we want this area to be large rather than small? Partly because free choice can regulate an economy far more efficiently than any conceivable set of officials.
But the case for freedom goes much deeper than that. Adam Smith, so often scorned and so seldom read nowadays, properly emphasized the fact that without personal freedom and responsibility we cannot be mature human beings. The New Testament had made a similar observation long before.
Responsible freedom means self-reliance, self-discipline, self-denial. Only a nation which prizes these qualities is to be taken seriously as a defender of world freedom. Only a government which encourages them is fit to preside over a free nation. Nevertheless, our government has become the most formidable agency for restricting the area of our economic freedom.
Consider freedom to choose between consuming and saving. Since the family is our most cherished social institution, it seems reasonable that we should not be hampered in saving for our children and our own old age.
Yet for all practical purposes our government treats saving as an offense punishable by heavy fine. First it increases the difficulty of saving by burdening us with more and more onerous taxes to support its grandiose spending. Next, it decreases the money income from our savings by arbitrarily holding down the interest rate, that is, by official falsehood about the value of savings to producers. Then it employs inflation to reduce the buying power of whatever dollars we succeed in saving.
By acting like a vast counterfeiting establishment it has already cut down by more than two-fifths the actual value of any savings which we have held in the form of its own money and its own bonds since 1939. Despite all of which our president tells us that, “If inflation gets away from us and wrecks our savings…it would be the easiest victory the Kremlin could hope for.” If! And finally, having undermined our ability to save, this same government offers us “social security” — the false security of dollars which are to be whittled down by still more inflation.
Consider freedom to choose between different products. It seems reasonable that we should generally decide for ourselves what uses of our incomes give us the most satisfaction, and that producers should have to behave accordingly. Yet our government frustrates us with more official falsehoods in the form of artificial price “ceilings” and “floors.” Both common sense and centuries of history should tell us what to expect from such Gothic devices.
Ceilings, including rent ceilings, cause scarcities by increasing demand and decreasing supply. Floors, including supports for farm prices, cause gluts by increasing supply and decreasing demand.
And “social justice”? As for peacetime rent ceilings, public officials will not ration housing according to need. They dodge the unpopular task of deciding who shall give up some of his space, and how much, and who shall move in. Consequently the supply is distributed by chance and favoritism. Practically the last chance goes to the workingman with children, since his job denies him time to look for quarters and his children make him an “undesirable tenant.”
As for farm price supports, how is justice served by helping landowners more than tenants, enriching prosperous landowners more than others and increasing the cost of food to the poor? The essential meaning of these controls is that we shall not be free to choose goods according to what they are worth to us, and that production shall not be guided by our free choices.
Consider freedom to choose between different means of making a living. It seems reasonable that one who wishes to take chances on profits or losses should be free to enter a small business or buy stock in a large one, and that he should also have choices between different branches of business or self-employment. It seems reasonable that one who prefers to play it safe should be free to work for contractual wages, and that he should also have choices between different trades and different employers.
Yet our government, directly or indirectly, keeps narrowing down this area of choice. Directly, it is shutting men out of enterprises by entering more and more fields itself. Our “progress” here is toward complete socialism, under which the government would be the only enterpriser and therefore the only employer. Indirectly, it encourages labor unions which keep men out of “their” occupations by various expedients, the simplest of which is demanding such high wages that employers must either limit their labor forces or go broke.
These are merely a few examples of our government’s many and growing restrictions on our fundamental economic freedom. Why, in this “sweet land of liberty,” do we let it happen? And how, since liberalism refers to personal liberty, do we manage the astonishing feat of hailing it in the name of “liberalism”?
No doubt private enterprise is partly to blame, since sometimes the same men who have preached “free” enterprise have sought private monopoly. Again, the terror inspired by the great depression of 20 years ago — a depression caused mainly by government’s failure to discharge its primary obligation of regulating the value of money — has led us to seek security at the expense of freedom.
Part of the trouble comes from the desire to chop down those who outshine us and to get something for nothing in the process. Part of it stems from a yearning to escape from the responsibilities of freedom. But most of it seems to spring from poor thinking — visceral, astral or negligible. To deal with all the confusions of thought would seem like wrestling with a fog, or putting the devil out through the door only to have him come back through all the windows. Nevertheless, the most popular ways of confusing freedom with its direct opposite are too serious to be ignored.
Economic freedom is assailed on the almost incredible ground that it has been violated in England and America. As an exploit in logic, this is on a level with the scolding which the preacher gave the people in church because so many were absent. Yet critics imagine they are exposing liberalism when they point out the grave economic abuses which existed under the system that they carelessly call “19th-century liberalism.” The fault lay not in liberalism, but in shirking responsibilities, such as the protection of children and the poor, which are of the very essence of liberalism.
Similarly, economic freedom is charged with being a system under which the business “class” domineers over the laboring “class.” Even if this were so, which it is not, it would be a weird objection to freedom, since domination by any organized class whatever is a violation of freedom. Personal freedom is so confused with public benevolence that one who confesses dislike for the “Welfare State” is accused of hostility to the underdog. This is like arguing that if you don’t like Jones’s pills you are in favor of disease.
The history of benevolent despotisms should warn us that benevolence is not necessarily liberal. It certainly is not liberal when liberty is traded for it and “authorities” decide what is benevolent. Last winter one of our leading economists used the literal form of the “Golden Rule” to illustrate this point. For example, if you relish pie while your neighbor prefers chow mein, it would be a poor rule which said you must give him pie, thus treating him as you wish to be treated. The really golden rule — even the State Department would do well to observe it — is to treat others as they wish to be treated, provided they live up to their social responsibilities.
Freedom is confused with economic equality. It is widely supposed that anything which reduces inequality must be “liberal.” And yet, if it is a bad thing to reward equal merits unequally, it is surely no better to give equal rewards for unequal merits. As Ebenezer Elliott observed over a century ago:
What is a Communist? One who hath yearnings
For equal division of unequal earnings.
Much longer ago it was the teaching of the New Testament that the man who buries his talent should not expect reward. The slogan “Liberty, Equality and Fraternity” is a vicious contradiction when used to defend indiscriminate leveling. When we start “equalizing” unequal men we destroy liberty and establish about the sort of fraternal relations which existed between Cain and Abel.
Freedom and democracy are so generally confused that the two terms are used almost interchangeably. Yet a majority can be very despotic toward the people who happen to be outvoted. In ancient Athens democracy developed such a keen appetite for plundering those who had more money than usual that the desperate victims were finally driven to collaborate with the outside enemies of the state. As Lord Acton pointed out, democratic tyranny is worse than the autocratic brand, because an autocrat is restrained by the fear of popular resentment whereas there is no escape from a despotic majority except by flight or treason.
The chief test of a people’s fitness for self-rule is the extent of protection given to minorities. The most ominous minority problem in the United States is not the mistreatment of racial and religious groups but the subjection which is being increasingly imposed by the majority on individuals, families and voluntary associations.
British socialism, whether benevolent or not, was democratic tyranny against roughly half of the British families. In its “mixed economy” the Labour government, instead of confining itself to prescribing and enforcing general rules, branched out farther and farther into the detailed management of production and personal distribution. It dictated the forms in which the poor should receive additions to their incomes. It claimed and used the power to freeze laborers to particular occupations. Even for the majority of adults, being free once every election day to choose economic authorities is a pitiful substitute for constant freedom of economic choice.
Finally, state paternalists confuse themselves with Jehovah. Where men deserve a better economic deal, a genuine belief in freedom would generally require us to increase their money incomes and let them spend the money as they choose. But the paternalist insists that they must take the particular housing, medical care and the like which he thinks is best for them.
Why will he not trust them to choose? Because, he says, they do not know how to choose wisely. But how can they learn to choose if they are not permitted to choose? Here his real answer, however he may veil it, is that they are congenitally incapable of learning. It should be clear where such an attitude logically leads.
The farther a “Welfare State” goes — the greater the restrictions which it imposes on freedom of choice and the more people it restricts — the closer we come to the destruction of democracy itself. For the inherent philosophy of paternalism is that the “people” are children, while only the “authorities” are adults. And certainly children who were unfit to make the most elementary economic choices for themselves could not be fit to choose authorities for the endlessly complicated tasks of a centrally planned economy.
No, the authorities must choose themselves. Thus “democratic socialism” of the British type is at bottom a contradiction of terms. The socialism in it is necessarily hostile not only to economic freedom but to political freedom as well. The many weapons which its authorities may use to eliminate the nuisance of democracy need not be considered in detail.
What we must think about, if we deserve to be free, is that sooner or later, as a result of its very nature, either its socialism or its democracy will have to yield. And what we are now witnessing is the encroachment of this system, this philosophy, on our own country, which we are told must be the foremost champion of the “free world.”
Bruce WInton Knight was a professor of economics at Dartmouth College. The author of How to Run a War and Economic Principles in Practice. See Bruce Winton Knight’s article archives. Comment on the blog.
This article was originally published as “Freedom Is Indivisible” in The Freeman, January 1952. An MP3 audio file of this article, read by Floy Lilley, is available for download.
