Our Freedom and the Economics of It


By WALTER E. SPAHR, Professor of Economics, New York University

Delivered at the Braman Forum, Town Hall, September 16, 1942

Vital Speeches of the Day, Vol. VIII, pp. 742-746.

ON September 17, 1787, one hundred and fifty-five years ago, all but three delegates to the Constitutional Convention in Philadelphia agreed to, and signed, the new Constitution and transmitted it to the Congress of the Confederation with an explanatory letter and resolution indicating the way in which the proposed government should be put into operation.

This new Constitution provided that the ratification of the conventions of nine states should be sufficient for the establishment of the Constitution between the states ratifying it. The ninth state to ratify was New Hampshire, June 21, 1788.

The adoption of this Constitution ushered in not only a new era for the people of this country but it marked, roughly, the beginning of important economic and political changes in Europe as well.

The Industrial Revolution was getting well under way in England. We often date it from 1760. The French political revolution was being fought under the banner of liberty, equality, and fraternity.

The philosophies of liberty, equality, and fraternity, preached in Europe by Montesquieu, Voltaire, Diderot and Rousseau, were also preached in this country by the framers of our Declaration of Independence and Constitution, and by others, as were the economic doctrines advocated by such Physiocratic economists as Quesnay, Turgot, and Adam Smith.

Up to the beginning of the Industrial Revolution and the adoption of our Constitution, economic progress had been very slow. It was only after the world began to use machines and the capitalistic system that economic progress became rapid. More was accomplished in a decade than in a century in the period preceding the Industrial Revolution. And, as each decade passed, following the adoption of our Constitution, the rate of progress became increasingly rapid. The effects were cumulative.

In short, the 154 years following the adoption of our Constitution have been marked by the greatest economic progress that man has ever seen in any equal period of years in the history of the world. Our ancestors at the time of the American Revolution probably lived much more like men lived in the days of Julius Caesar than like we live today. Transportation in 1787 was little different from the days of Caesar. The sciences of medicine, chemistry, and physics took great leaps forward with the liberation of mankind hastened by the American and French political revolutions and the English Industrial Revolution.

Professor Carleton Hayes of Columbia put it as follows: "If some 'Rip Van Winkle' of the sixteenth century could have slept for two centuries to awake in 1750, he would have found far less to marvel at in common life of the people than would one of us."

Ignorance, hunger, famine, and pestilence stalked the lands of the earth before the introduction of machines and capitalistic methods made man more productive. With increased productivity came more leisure, which gave him more time for education and scientific pursuits. Thereafter, progress became much more rapid. The world tragedies of almost universal hunger, with surpluses and luxuries for only the very few, began to pass. The standard of living for the masses began to rise and to rise rapidly.

Our typical wage earner enjoys conveniences today not available to royalty prior to 1787. He has electricity, and automobile, bathrooms with hot and cold water operating under pressure, often automatic heat, the telephone, the radio, the movies, and so on and on.

The coming of machines, the greater use of capital and capitalistic methods, the rapid development and use of science, the enlarged freedom for the individual brought this great progress.

These developments came only when protection for rights of person and property was sufficient to awaken and reward ambition. Our Constitution attempted to give people such protection, and the results should be clear. As freedom for the individual has developed, and as political systems have cultivated and protected this freedom, the intellectual power of mankind has been released and economic progress has been rapid.

In the Middle Ages, people followed practices quite similar to those advocated by some of our leading social and community planners. They used land in common. The individual was under detailed regulation by authority. He bore oppressive taxes. His government debased his currency. The profit motive was crushed to the point of elimination. The result was economic stagnation, starvation, ignorance, disease, pestilence.

One of the remarkable and arresting things today is the amount of doubt expressed as to the value of what has been accomplished in this country since 1787.

The critics of our accomplishments might do well, first of all, to consider whether or not the great business depressions, which seem to have provided them with their principal indictments of our capitalistic system and their short-run view of human progress, have not been chiefly theresult of wars. If this should be the case, as I think it is in a great many cases, then it would be more to the point for them to join peace societies and to work for world peace than to attempt to overthrow the system of free enterprise.

The perspective of a large proportion of these critics of the capitalistic system, most of whom would perhaps fall in that group who like to call themselves planners or progressives, is in many respects vary bad. . They need to hold some of their so-called "progressive" ideas up to the mirror of history. Much of the current planning in this country is in essence a reversion to medievalism. And this sort of thinking reaches from our leading planners who pretend to know their history to those who are unable to profit from its lessons because of their unacquaintance with history.

We found, for example, during the depression of the 30's, much of the same hostility to the introduction of machines that existed during the early days of the Industrial Revolution. But, in the 30's, we had planners ready to make these objections effective through government regulation under N.R.A. One peculiar or unnoticed feature of this objection to machines, which many still assume deprive people of work, is that the objection is to new machines, not to the old. Furthermore, this objection usually shows itself in a depression, not in a period of prosperity.

If the lessons of history teach anything, it is that capital goods are the great creators for mankind. The lesson is crystal clear as we try to produce rapidly to win this tragic war.

But modern planners have attacked the savings and saving habits of people which make capital goods possible. They contended during the 1930's that there were too much saving and too much capital. They confused symptoms of a depression with basic causes. They misread some of the simplest lessons of history. Instead of advocating more machines per man in accordance with the teachings of history, they have advocated more men per machine. This is a reversion to medievalism.

One of the simplest lessons of economic history and one of the simplest principles of economics is that man produces most and best under the capitalistic system, and that the high standard of living in modern times depends on the ability of each worker to provide for many people who are in their separate ways also working for him. This means the more capitalistic we become, the better. And the capitalistic system works best when individual freedom and the profit motive have free and fair play and where government planning is minimized.

Mr. E. Parmalee Prentice put the matter well with respect to the current attempts to arrest the progress of capitalism when he said in his book, Hunger and History: "We cannot, indeed, expect that slavery of the white man will again return, but decreased human efficiency is possible and if such decreased efficiency come, it will bring with it not only a loss of comforts to which we are accustomed, but will involve also limitations of individual freedom that would so weigh upon our activities and mental life that it would seem an appreciable step backward toward the slavery of the ancient world."

He says further: "The world is developing the power of producing food and other supplies in great quantities, but by the irony of fate, the popular movement tends toward inefficient methods and in some countries, the use of agricultural machinery is restricted, so easily do men forget the past."

Still further he says: "When governmental restraints were removed, when the right to enjoy private property was established, and protection given from confiscation, from invasion of personal rights and from excessive taxation—all the rest came very quickly. Human history is not merely the tale of 2,300 years of pause and 139 years of activity. It was first and foremost the tale, on the one hand, of 2,300 years of various ways of living in which man was never fully his own master, and, on the other hand, 139 years of freedom.

"Medieval history, therefore, is an impressive demonstration that by wrong policies, governments can reduce mankind to want and can bring civilization to the verge of extinction. Policies which deprive the farmer of independence in the use of land, which restrict cultivation or destroy what is produced, are farming for famine, and the same can be said of debasing the currency in order to raise prices."

And finally: "If food and other necessaries of life are adequate in quantity and variety, and if men are free, there will be industry. If savings are secure from confiscation and debasement, there will be thrift; and an industrious, thrifty people make a prosperous, rich nation."

I think Mr. Prentice understands the lessons of economic history, and that these interpretations and applications are correct. If he is correct, then a large proportion of the so-called government planning and the consequent restrictions placed upon capitalistic enterprise in this country since 1932, along with the underlying philosophies, have been wrong and constitute a dangerous reversion toward medievalism.

During the last decade, the tide has been flowing backward. Capitalism has been under constant attack by so-called economic planners who have been pursuing the basic tenents of socialism. Using the short-run symptoms of the depression as excuses, or misunderstanding them, these planners, with remarkable unanimity, have preached the false socialist doctrine that business fluctuations, especially depressions, are due to oversaving and underconsumption. Under this theory, they led this nation into a series of programs that arrested the recovery which had started in July, 1932, and turned this nation in the direction of social retrogression and medievalism.

Despite the confusion and inconsistencies observable in the economic policies of our Federal government during the last decade, some of the basic tenets of socialism, especially the oversaving and underconsumption theories of business fluctuations, have revealed themselves in the early insistence that a handful of rich men, or the so-called "money changers" caused the business recession of 1929; in the subsequent persistent and indiscriminate hounding of wealthy and successful businessmen; in a large proportion of the spend programs of our government; in the repeated assertions that production could not increase unless there was a prior expansion of consumer purchasing power; in the various attempts made to place funds in the hands of consumers directly, in a large proportion of the arguments for currency inflation and devaluation; rather than by encouraging and aiding production; in the taxation of undistributed corporation surpluses; in tax and other proposals for the redistribution of wealth and income; in the attempts to raise wage rates regardless of the effects upon production and employment; in the readiness of the government to penalize or endanger savings and the earnings on the savings of our people, foundations, hospitals, educational and other great social institutions; in the fact that we have heard few good words uttered in behalf of the thrifty or of the virtues of thrift; in the extent to which our less thrifty people have been encouraged, and led, to rely upon government for support, both now and in the future; in the multitude of ways in which the supposedly virtuous characteristic of self-reliance has been undermined; in the cultivation, by various devices, of the notion that savers are with-holders of wealth and income from others, and are parasites resting upon the backs of the poor, the indigent, and the unfortunate.

The ramifications of these socialistic anti-saving, anti-capitalistic theories, and the government programs based upon them, are far-reaching and have become of tremendous importance to the American people.

They were of arresting importance during the 30's. They are increasing in importance now. This war provides the finest possible opportunity for our socialists to squeeze their programs into every nook and cranny of our social fabric, and it appears clear that this is being done—day and night.

At the very best, the exercise of war powers by a president in our republic endangers customary and normally-proper liberties and requires special solicitation on his part and that of Congress and our courts to see to it that these liberties are protected in so far as possible and returned fully and intact when the war ends. But if a government shows a contrary disposition, then the dangers to customary and constitutional liberties become very real indeed.

In a multitude of ways today the spirit of our Constitution is being violated. Many concerned observers have insisted that our highest court has been packed. Others have contended that our Congress is a weak branch of our government. Ground for this sort of criticism of Congress today is provided by such words as those inserted in the Congressional Record of August 31, p. 7250, by Representative Sabath. They read: "Congress would vote 'Yes' if F.D.R. insisted." Then we have the President's statement of September 7 in which he asked Congress to pass certain legislation by October 1 or he would accept the responsibility of acting himself. Despite this unhappy and arresting situation, the fact, nevertheless, is that Congress provides our people with their chief check on the current tide toward extreme centralization, socialism, and the social retrogression which awaits us if we continue in the direction we have been going.

On February 23, 1942, the President, in a radio address, listed four freedoms as parts of the broad principles of the kind of peace which the United Nations would seek. These were "freedom of speech, freedom of religion, freedom from want, and freedom from fear."

Since that time, we have heard and read much of these freedoms. The common assumption seems to be that they are basic with us or, perhaps, that they represent the freedoms which we in this country should have and are to have at the close of this war.

Whether we have any fundamental right to force any concept of human freedom that appeals to us, on any other nation which may have different views on the subject, is a matter into which I shall not enter. Nor shall I examine into whether any government has the power to guarantee its own people freedom from want and freedom from fear, much less the people of other nations.

What I do wish to comment upon is the apparent popular acceptance of these four freedoms as the ones which we wish to preserve for ourselves in this country.

If this is the common notion, then two important considerations should be pointed out regarding this enumeration of freedoms. One is that our Constitution, not the President nor any one else, specifies what our freedoms are and shall be until the Constitution is changed in the manner prescribed. The other is that these four freedoms omit all the rights or freedoms inherent in a capitalistic system— freedom to own private property, freedom of enterprise, freedom of exchange, and freedom of contract.

In short, these popularly-discussed four freedoms could be used to preclude capitalism after the war and to usher in a system of thorough-going socialism.

The freedoms supposedly guaranteed by our Constitution differ greatly from the President's famous four. Our Constitution does not guarantee people freedom from want and fear, and it guarantees them much more than freedom of speech and expression and freedom to worship as they please.

It is quite clear that the common current discussion of the four freedoms has been missing some essential considerations, and that it has not subjected these four freedoms to sufficiently careful analysis. Every respectable college text-book in economics would quickly make clear that these four freedoms omit entirely the freedoms which characterize the capitalistic system and are quite apart from them. Furthermore, the concepts of freedom from want and freedom from fear are stock doctrine of the socialists and communists, and, in any case, belong in the realm of the unattainable.

In the light of the current discussions of peace aims, the four freedoms, and postwar economic reconstruction, it would seem important that we have a rather clear idea about our concept of human freedom and of the economics of it.

If we are to discuss human freedom, not only in the abstract but in the light of the provisions for it in our Constitution, then we are thrown into an examination of what we think we know about the proper relation of government to business.

Students of government have bequeathed to us a body of organized information and of scholarly thought in which we may find those principles which appeal to intelligent people because they seem to represent the essence of the valuable lessons learned by mankind throughout the ages.

Such accumulated wisdom teaches us that there are dangers in any extreme form of government, whether it be of the laissez-faire school, or socialism, or any other exaggerated form of paternalism, and that the best government is found in some area lying between these extremes.

From those few instances in which there has been no government or very little government, we may conclude that government, and a considerable amount of government, is a necessity. Individually, man has been able to accomplish little. In fact, he is poorly equipped to dominate many of the lower animals. His accomplishments have been in consequence of his joining forces with his fellows. This has meant society, and society requires government. Societies with little government have experienced bitter lessons. The strong have oppressed the weak; the net results have been poverty, ignorance, disease, misery.

Similarly, history is replete with the evidence of human suffering caused by governments with autocratic or absolute powers. Indeed, it seems probable that more human suffering has resulted from too much government than from too little. Human history records the tragedies of mankind resulting from the oppression of governments; it tells of the continuous struggle of individuals to free themselves from such oppression and to devise a system of government which will provide an orderly society and at the same time give to the individual the widest possible freedom from his utmost self-development.

Neither socialism nor extreme "laissez faire" will accomplish these aims. Both theories of government have been demonstrated to be inimical to human welfare: both bring a degree of suffering and distress which people have learned that they may escape under a more moderate system.

Still speaking generally, it may be said that a fundamental principle of a good government is that its end or basic purpose is to accomplish the objects of organized society.

One prime objective is the greatest self-development of those individuals who compose society. Because society comprises an infinite variety of individuals seeking self-expression, social progress lies in the direction of finding ways to enable this great variety of individuals to function and develop freely without any individual trespassing upon the same rights of others. In other words, society must make the best possible use of all resources, including human good will and ingenuity, for the purpose of better satisfying human wants and of minimizing human suffering and distress.

In accomplishing its fundamental purposes, a beneficent government will follow certain aims and methods generally acknowledged to be sound. Because of limitation of time, these can only be enumerated, unsatisfactory though this be: (1) A good government endeavors to raise the average level of living of society. (2) It endeavors to enlarge the scope of individual liberty. (3) It fosters equality of competition and protects the weak against the strong. (4) It will recognize the fact that a society of free people is a cooperative enterprise, and that the smoother the competition, the more effective is the co-operation. (5) It will provide those agencies which ensure peace. (On this point it may be worth while to pause for a parenthetical observation: The two principal places in which agencies for peace are not provided, in so far as we are concerned, is in international relations and in dealing with labor problems. In both, we resort to the primitive methods of war. In international relations, we would not co-operate in an effort to establish a workable mechanism for peace—for instance, a League of Nations backed by an adequate international police force. Today we are paying a terrible penalty for that short-sightedness. In labor relations, our government is playing demagogic politics and toying with a social revolution. We may pay a terrible price for that short-sightedness also.) (6) A good government will exercise only those powers granted to it by the people being governed. Briefly stated, a good government is a constitutional government. (7) A good government will undertake no activities that can be performed as well or better by private individuals or associations. (8) It will recognize the natural limits to appropriate State action by recognizing that government is not an end, but a means; that it is not more important than the society which creates it and which it is designed to serve; and that when it assumes that society should serve it, rather than it society, it has stepped beyond the natural limits of its appropriate functions and action. (9) It will seek competent advice on intricate matters; and then take appropriate steps to inform the general public regarding them; it will not submit involved questions to the incompetent general public for vote on what the answers should be in an effort to obtain a vote that will maintain the party in power, even though this be at the expense of the national welfare.

The reliance of the American people upon laws to solve their various problems—whether of business or otherwise— has become a remarkable phenomenon. When difficulties arise, the first reaction of people, in general, is that a law should be passed. And there is an increasing tendency in this country to pass more and more laws with respect to more and more things. This has become strikingly true of the Federal government. At some sessions of Congress a thousand or more laws are passed. The accumulation of statutes, particularly during recent years, is one of the most amazing commentaries on modern times. Our present faith in the efficacy of lawmaking, especially in the value of thousands of laws that are neither read nor understood bya large proportion of our people, presents a problem for the social psychologist. We are being swamped with laws; we have so many on our statute books that we do not know what they are; the general public makes no pretense of reading them; we do not know when we are violating or obeying them, and yet there is a persistent clamor for more.

We are living in a period of frenzied legislation, the vague notion of superstition being that if only we can pass a law—its economic soundness often being not a paramount consideration—our problem or problems will be solved and we shall be saved from our troubles.

One may advance several plausible reasons for this childish faith in the virtues of statutes that are neither read nor understood generally. Among these reasons may be an undermined confidence in the virtues of competition and self-reliance, and a lack of understanding and perspective regarding the importance of World War I and of the unwise acts of governments in contributing to postwar and current economic and social maladjustments. Whatever the reason may be, we have become a nation of law worshipers.

At the same time, these laws are slowly breaking our backs. They have brought upon us greater costs; heavier taxation; an unprecedented and mounting public debt; more governmental supervision; a growth in bureaucracy; a pronounced trend toward personal government; a development of class consciousness, class strife, and class hatred; a startling spread of demagoguery in politics; a serious decline in objective statesmanship; an insidious attack upon the virtues of hard work, thrift, and self-reliance; a conspicuous disregard for economic principles; a growing and disturbing complexity in life and business; a loss of freedom; a spreading pessimism and fear regarding the future; and the consequent development of a great weight which is bearing down more heavily upon us each year, with real prospects that in the end it may crush all that is worth while and healthy in our economic, social, and political life. Indeed, the increasing burden of these laws, combined with the danger of impairing our public credit and with numerous other forces now undermining our national well-being, may prove to be the principal factor which will destroy our democratic form of government and bring this nation under the control, or heel, of "a man on horseback."

Now that we are at war, and regulations and orders are pouring out of Washington in a torrent, these evils in the trend of events in recent years are greatly accentuated. We seem to assume that orders and memoranda and typewriters will win this war. We would do well to ask ourselves whether this deluge of orders, this battle of the typewriters, this bedlam of plans, this field day for social workers, social reformers, poets, publicists, scenario writers, ivory tower economists, and so on, may not lose us this war abroad and cause one at home. There is too much similarity between this sort of business and the days of the Blum government in France to provide one with a feeling of confidence.

There appeared to be a vague notion among our people up to the time we entered this World War, that all these laws and related developments were symptomatic of progress. Often they were pointed to as a mark of growing liberalism in this country.

The fact seems to be that they were indicative, rather, of an insidious social disease which has been slowly undermining our general social health and well-being, and pointing toward some form of social retrogression. They clearlyindicate an increasing amount of coercion, much of which was and is undoubtedly of an undesirable sort.

Time and experience have made it amply clear that those things which do not raise the average plans of living, and which impair, rather than enlarge, the freedom of the individual, are reactionary in nature. Most unfortunately this spreading spirit of coercion and reactionism in recent years and today is frequently called "liberalism", and the advocates of this coercion and authoritarianism often call themselves "liberals." But this reversion to coercion is the antithesis of liberalism; it is reactionism and retrogression. The philosophy of these self-styled, but false, liberals is that the individual must be regimented for his own sake—a philosophy that has characterized tyrants, dictators, coercionists, and reactionaries throughout human history. True liberalism has been associated with that long, painful struggle of humanity to free itself from regimentation, coercion, and authoritarianism.

People today—in the United States as well as in Europe— have fallen under the spell of word. Label a thing "liberal", and the unthinking people will follow, advocate, or pursue it as though hypnotized. Label a thing "conservative", and they will mark it down as bad at once. The gullibility revealed is amazing; the faith in labels is tragic.

At present these modern Pied Pipers of Hamelin are rapidly leading our people back along the path of coercion and retrogression. What, if anything, will awaken enough people from their soporific lethargy to arrest this backward march is not at all apparent.

The battle in this country today, quite apart from fighting through this world war, is between the genuine liberals and the forces of coercion and retrogression; and the liberals are battling for some of the most vital things in life—for an improvement in our economic well-being, for constitutional and good government, and for a greater individual freedom and a wider recognition of the importance of the individual.