Preserving the Private Enterprise System!


By J. HOWARD PEW, Vice-President, National Association of Manufacturers and President, Sun Oil Company

Delivered at the National Association of Manufacturers 45th Annual Congress of American Industry, New York,December 12, 1940

Vital Speeches of the Day, Vol. VII, pp. 244-247.

JUST when this country is struggling with a serious economic depression, we have forced upon us a program of national defense; and so it is a time for straight thinking and courageous action. We must not permit ourselves to be influenced by incompetent leadership.

Fakirs and quacks surround us. We find them in every phase of human activity, but the economic quacks outnumber all the rest. These quack economists would have us believe that they could cure all of our business ills in no time at all They are like the quack doctor who was asked to sit in

consultation with a group of real doctors. After the patient had been put through his examination, one of the doctors announced that the patient was convalescing. "Ah," spoke up the quack doctor, "that isn't serious. I've often cured thatin 24 hours."

These quack economists would have us believe that the Government ought to plan everything for us and control all our activities. They believe that if we would only produce less, all of us would be better provided for. This happy theory so impressed Ogden Nash that he wrote a little poem, "One From One Leaves Two." Let me try to repeat it. It runs:

Higgledy piggledy, my black hen,
She lays eggs for gentlemen,
Gentlemen come every day
To count what my black hen doth lay.
If perchance she lays too many,
They fine my hen a pretty penny;
If perchance she fails to lay
The gentleman a bonus pay.

Mumbledy pumbledy, my red cow,
She's cooperating now.
At first she didn't understand
That milk production must be planned;
She didn't understand at first
She either had to plan or burst;
But now, the Government reports,
She's giving pints instead of quarts.

Fiddle-de-dee, my next-door neighbors,
They are giggling at their labors.
First they plant the tiny seed,
Then they water, then they weed,
Then they hoe and prune and lop,
Then they raise a record crop,
Then they laugh their sides asunder,
And plow the whole kaboodle under.

Abracadabra, thus we learn
The more you create, the less you earn,
The less you earn, the more you're given,
The less you lead, the more you're driven.
The more destroyed, the more they feed,
The more you pay, the more they need,
The more you earn, the less you keep,
And now I lay me down to sleep.

Our American system of free enterprise is far more than just a way of doing business. It is a system which at its best comprehends good sportsmanship; gives free play to the laws of supply and demand and of competition; produces an ever-improving standard of living; develops initiative, character, and discipline; and in many ways goes far toward improving the morale and bettering the lives of our people. When I speak of free enterprise at its best, I mean when it is free of monopoly, private or governmental; free of government control or intimidation; free of trade agreements that would control prices and production, after the manner of the European cartel system, and after the manner too, if you please, of the late and unlamented N.R.A. For a democratic government to destroy free enterprise, is for that government to destroy itself.

Planning as applied to the other fellow has always been tolerated; in fact, among those groups who do the planning for the other fellow, planning has been downright popular. There are many different kinds of planning: individual planning, group planning and governmental planning. In individual planning one can defend himself with his fists, a club or any other handy weapon; but when one opposes governmental planning one must combat the entire armed forces of the nation. There is no surer way of ruining a man than for some one else to plan out his life. There is no surer way of ruining a nation than for the government to plan for the lives and the activities of its people, for a nation can be no greater than are its people. Let me cite a few instances of how ancient governmental economic planning worked.

A Chinese writer on Confucius describes price-fixing and manipulation of supply and demand as early as the fifth century B.C. In the city where he lived a superintendent was appointed for each shop, and prices were rigidly fixed. For every 20 shops there was a master of merchants, who fixed the prices. It was decreed that even when there was crop failure and famine, grain should be sold at the same prices that normally prevailed. The scheme necessitated an army of officials, inspectors, overseers and other functionaries—just as economic planning has multiplied our Government officials. An auditor of price was required to see that the merchants adhered to the prices which the Government had fixed; but the Government attempted to control supplies by raising and lowering prices. A central bank was set up similar to some of our own financial agencies, to buy up crop surpluses and hold them until they could be fed out at the Government-fixed prices. Because of the impossibility of administering such a program, the police soon became an important part of the marketing plan. The gate to the market place was guarded by two policemen with whips and halberds. Every two shops had a policeman on guard; for every ten shops there was a captain of police; and finally, a detective was assigned to every five shops, to spy on all the others I The story of the resultant riots, suffering and disaster is too long to recount; anyhow, whether as a means to obtain reasonable prices or to build up a huge political machine, the entire scheme was a miserable failure.

The story of that Egyptian Pharaoh whom Joseph served as Prime Minister, as told in the Book of Genesis, might well be referred to here, in the light of our own country's recent experiments. Joseph knew through divine inspiration that there were to be seven fat years, followed by seven lean years. So he stored up the surpluses during the fat years, and when the lean years came was prepared to feed the people. But Pharaoh, like governments generally, could not resist the temptation to seize this opportunity for his own aggrandizement. He fed the people, but he took from them in exchange for his food, first all of their money—just as our economic planners several years ago gathered in all of our gold. Then he took their cattle, and when their cattle were gone he took their land. Next he removed the people from the land and herded them into the cities—a resettlement program. Finally he sent the people back to the land as his tenants, distributed seed to them, and set them at work again—exacting from them one-fifth of all their produce as rent. Now, that may seem a bit steep, but it is really quite moderate as compared with our own country's cost of Government, which according to the latest figures amounts to 30 per cent of the national income or one-half more than Pharaoh exacted. Altogether the parallel is impressive. Pharaoh took the produce, money, cattle and land of the people—just as our Government has been busily engaged taking over the agriculture, industry, enterprise, business and finances of this country. The Egyptian people were impoverished and became "servants unto Pharaoh"; and considering how far our Government has gone in taking control of the substance, the activities and the liberties of our people, we realize that we, too, are well on our way to become "servants unto Pharaoh".

Now the truth is that great inventions and new ideas for the advancement of the human race have always had toovercome popular prejudice and even organized opposition. Those who possess real inventive genius have invariably been regarded as queer chaps, to be viewed with suspicion and carefully watched. All history teaches us that only through the operation of an economy of free enterprise has it been possible to effectuate the release of man's genius. Let me skip over a little matter of some four thousand years and cite an example of how a great medical advance was accomplished when a man of genius insisted, in the face of popular hostility, on following a course which led to a really great contribution to the human welfare.

One hundred and thirty years ago Ephraim McDowell was a practicing physician at Danville, Kentucky, then a small hamlet out in the wilderness. A few days before Christmas he was summoned to come sixty miles to see a patient, a Mrs. Crawford. The local doctor had told her that she was pregnant, but after ten or eleven months had passed her condition became so alarming that Dr. McDowell was called in consultation. He diagnosed the case as ovarian tumor. No surgeon had ever dared operate in such a case, because it was popularly believed that any contact of the outside atmosphere with the interior of the abdominal cavity meant certain death.

But Dr. McDowell had long believed such an operation possible, and induced Mrs. Crawford to let him do it. The operation had to be performed at his home, where he had his surgical appliances; and so Mrs. Crawford accompanied him on horseback the sixty miles back to Danville, suffering excruciating agony at every step. When the village learned that this unheard of operation was to be performed, feeling ran high against Dr. McDowell. The people believed the operation should be stopped, either by law or by a mob, if necessary. But Dr. McDowell was undaunted. Even though he knew that the operation might result in the death of his patient, and certain death to him if the patient died, because he would be regarded as a murderer, nevertheless he was prepared to take the risk.

The operation was performed on Christmas morning, and after the services at the local church the angry people gathered in front of the doctor's house and, with a rope over a tree limb, were prepared to hang him just as soon as the patient died. Finally, becoming impatient, they tried to break into the house, but were restrained by the sheriff.

This was before the development of anesthesia, and legend has it that Mrs, Crawford sang hymns to drown out the pain while the doctor worked. Anyhow, despite the screaming of his patient on the inside and the howling of the mob outside, Dr. McDowell performed the first abdominal operation of its kind in the history of surgery. Mrs. Crawford not only survived, but lived to be over eighty years of age.

If the socialization of medicine had been in force at that time, what do you suppose would have been the attitude of the Medical Economic Planning Board toward such an operation? And if throughout the world Medical Planning Boards had been in authority during these last 130 years, what do you suppose would have been the status of medicine today? I suspect it would have been just what it was before Dr. McDowell performed this amazing operation. You may think that statement a bit rash, but I submit that there was little or no progress during all those centuries when the peoples of the world lived under various schemes of government controls and economic planning.

The program of government planning and control invariably leads to dictatorship, and we have already gone half way down that road. A recent analysis described our Federal Government as a maze of 10 departments, 133 bureaus, divisions, authorities and agencies, and 68 independent establishments; altogether employing over a million persons. These agencies assume authority to make rules and orders which have the force of law. Let me cite one illustration. It is from a recent book, "The Dead Hand of Bureaucracy", by Lawrence Sullivan. He tells this incident.

A country grocer, Bill Miller, of Cheltenham, Maryland, sold sugar in quantities of 100 pounds or more. Some months later an agent from the Bureau of Internal Revenue notified him that he had violated a regulation which required that sales of sugar of 100 pounds or more must be reported to the Revenue Bureau. Miller was duly arrested and on trial said he had never heard of such a law or regulation. He had asked his Congressman about it, and been assured that there was no such law. The Congressman had asked the Legislative Reference Bureau at the Library of Congress, and had been assured that there was no such law.

But when the case went to the jury the Court instructed that there was a regulation which required such a report, and the Judge firmly stated that ignorance of the law was no excuse. It took the jury just five minutes to find Miller guilty, and he was sentenced to six months in jail.

This incident illustrates that nobody knows nowadays what the law is, because boards and commissions are consistently grinding out thousands of new rules and orders which have the effect of law. The road to dictatorship is paved with just such decrees. Congress no longer makes the laws. It has delegated its authority to a horde of little bureaucrats who now rule the American people.

We cannot but view with concern the tendency of Government to control more and more of industry, and so continually to narrow the field left open to free enterprise. The railroads with their rates, wages and finances under Government control; the other public utilities; the banks, insurance companies and other investment concerns; and now the coal industry and the merchant marine—these are all practically closed to free enterprise and the operation of natural economic law. And finally, consider the most elemental and least integrated of all industries, agriculture. Here we see that the cold, deadly hand of Government, experimenting this year with one nostrum, and the next year with another, has produced all the symptoms of creeping paralysis.

This persistent effort to bring industry, enterprise and business under Government domination is a flat denial of all the lessons of the 150 years of the industrial age. Within that brief period the institutions of representative political democracy and economic freedom have grown up side by side. They have lived together and flourished together; and their epoch has been marked by the emancipation of the common man and by humanity's most impressive advances in the arts and sciences. Within this brief period human slavery, an institution as old as human society, has been abolished because it could not survive in an age when discovery, invention, science and enterprise demanded the most and the best that free men could give. The men who harnessed nature's energies to the mechanical devices of the machine age were the real emancipators. Religious liberty, universal education, freedom of thought and freedom to express one's opinions, all came as part of the great emancipation; and at last man came to understand that his Government is subject to his will and not he to his Governments' caprices.

Before I close may I be permitted just a word about my own Company's attitude toward the problems which confront every business operating under a system of free enterprise and open competition. I refer to it because I believe it is the attitude of practically all such American business today. We have never assumed a divine right to a share and a place in our industry. If some one else could serve the

public better in quality or price, he was entitled to the business. That is still our attitude. It is the attitude of the whole industry. Every one recognizes that his right to continue in business depends upon his ability to give the public what it wants at prices which it is both willing and able to pay. To live up to that formula has kept us all scratching. It is a case of "root hog or die", and my agricultural friends tell me that the most vigorous rooter is usually the healthiest hog.

It is my conviction that your great association has nohigher duty than that of inculcating in the public mind an understanding of what the American competitive system of free enterprise is and what it means to the American people. When that understanding is firmly planted, the system will be safe. Men who occupy places of high responsibility in the administration of this system must always bear in mind that it has not come as a divine right. Their service is essentially that of trustees, and their trusteeship will continue only so long as they are able to make a good accounting of their stewardship.