Competitive Enterprise Versus Planned Economy


By H. W. PRENTIS, JR., President, Armstrong Cork Company, Lancaster, Pa.

Delivered at the 50th Anniversary Celebration of the National Association of Manufacturers, Cincinnati, Ohio, January 24, 1945

Vital Speeches of the Day, Vol. XI, pp. 411-414.

LIKE the other speakers this evening, I am glad to have the honor of participating in this joint celebration of the 50th Anniversary of the founding of the National Association of Manufacturers. For me, however, it is a special privilege because two years of my early life were spent on this campus. And when I remember what was here forty years ago and see what is here now, I feel that Competitive Enterprise, recalling Sir Christopher Wren in the crypt of St Paul's, might well rouse itself from the catacombs of oblivion to which the proponents of Planned Economy have consigned it, and give voice to his famous epitaph, "Si monumentum requiris, circumspice." Yes, if you seek a monument to Competitive Enterprise, look about you at this great University—not the product of a system of national planned economy in education, but a fine and fair example of the American competitive spirit of local responsibility for local affairs. No group of bureaucrats in Washington tell this educational enterprise what it can or must do. The income from private endowments, coupled with public funds from local sources, is here administered by local citizens to serve the educational needs of this particular community as its own people see and define those requirements. Can anyone envisage the creation by local enterprise of such an institution as this in any dictator-ridden city of the planned economies of Germany, Italy or Russia? Why the difference? One does not have to seek far to find it.

The Urge of Individualism

In 1840 Henry Reeves, an Englishman, was translating a book by a young Frenchman, Count de Tocqueville, who had just returned from America where he had been studying how "liberty was regulated and reconciled with the social order" In this book, "De La Democracie en Amerique" Reeves found a word that was new to him: Individualism. After duly pondering how he should translate it, he wrote: "I adopt the expression of the original, However strange it may sound to the English ear, for I know no English word exactly equivalent to the expression." To quote De Tocqueville himself: "Individualism is a novel expression to which a novel idea has given birth. . . . Individualists acquire the habit of always considering themselves as standing alone, and they are apt to imagine that their whole destiny is in their own hands. Individualism is of democratic origin."

Individualism, in fact, was the priceless ingredient of the political, personal and economic freedom for which our forefathers fought and died at Bunker Hill, Valley Forge and Yorktown, Under its urge the epic of America has been written. The creation of our unparalleled national wealth has been accompanied by the most sweeping advances in education and philanthropy, the highest standards of living for the common man, the nearest approximation—though still a long way from the ideal—of the Christian concept of human brotherhood, that the world has ever seen. Its philosophical foundation is recognition of the infinite worth of every human soul in the eyes of a Sovereign God.

Freedom the Spark of Our Progress

Why has individualism produced such notable results in America? The men who settled this country were not extraordinary people. They had a vast continent to develop, yet its natural resources were no greater than those of Asia. They had little capital to start with; in fact, they had to seek it abroad. They were not, as a rule, as skilled artisans as the workers in European industries. They believed in education but such facilities were not generally available. How then did they differ from their contemporaries in the old world: They were free. They set up a government that was legally estopped from interfering with their legitimate personal activities. They enjoyed what Justice. Brandeis says is the right most highly prized by civilized men—"the right to be let alone." They had known what tyranny was in actual practice. They had been insecure so long under despots—insecure spiritually, intellectually, politically and economically—that when they found they could have freedom in the new world, they did not worry about security. They gladly took a chance on that, for they valued a free mind and a free soul more than a full stomach. The spirit of competitive enterprise possessed them and the results of its driving power are around us on every hand. The industrial machine which it brought into being is now sealing the doom of Hitler and Hirohito. Russia's industrial planned economy is merely a struggling imitation of the production techniques that competitive enterprise long ago developed in America.

Economic Benefits of Competitive Enterprise

Those of us who have never been abroad do not realize how much we Americans owe to our competitive enterprise system. A year or so before the war broke out the National Association of Manufacturers sent an economist to Europe to find out how much the earnings of the average American factory worker would buy in comparison with the earnings of workers abroad. Certain articles were selected that are used by practically all civilized peoples. In each country theeconomist visited, he showed the store clerks his American articles and asked for similar ones. If there were no goods of comparable quality available, as was frequently the case, he bought the nearest equivalent. He ascertained from the best available official sources the average wages paid factory workers. For his food comparison, he used as his measuring stick a basket containing a selection of twenty-four different foods in ordinary use. The average American family of two adults and three children uses four of these baskets, or the equivalent, every day. To earn these four baskets of food the investigator found that the average American worker had to work about 1.6 hours; the British or French worker 3.2 hours; the Belgian, 3.6 hours; the German 3.9 hours; the Italian 6.2 hours and the Russian 10 hours.

The radio that an American factory worker could earn with 59 hours of work cost the German 134 hours; the Swede 262 hours; the Italian 333 hours. Thus it is not hard to see why there was one radio receiving set for every 2.3 persons in the United States against one to 5.2 persons in Great Britain; one to 7.5 persons in Germany and one to 45.2 persons in Russia. While the United States had one automobile in use for every four persons, the proportion was one to eight persons in France; one to 29 in Sweden; one to 252 in Russia and one to 1344 in Bulgaria.

Under our competitive enterprise system in America, a provident worker does not have to spend every cent he earns to support his standard of living. This is evidenced by the amount of life insurance in force. In the United States life insurance averaged $842 for every man, woman and child in the country at the time this survey was made. In England the average was $353; in Germany $117 and in Italy $36. Never has any country had so many mechanical slaves at its disposal. To be specific, American industry used 2.1 horsepower in 1899 for each worker; in 1939, 6.5 horsepower. Along with our industrial progress has come a remarkable expansion of general social welfare. Our hospitals, museums, libraries and schools are the envy of the civilized world.

There is no need for me to bombard you with further statistics. With all its shortcomings—and there are many because it is operated by fallible human beings—competitive enterprise in America has undoubtedly brought more blessings to the average man than any economic system the human race has yet devised. The men of our far-flung military forces are discovering that with their own eyes. Just a few weeks ago a young soldier friend of mine in France, who had probably never before been more than a hundred miles from his birthplace in Lancaster, Pennsylvania, wrote me that after seeing the way people lived in Europe he thanked God that he had a country like America to come home to. As a matter of fact, he never will come home because he lies tonight in some lonely grave on the German front where he was killed in action in November.

Do We Want the "Isms" of Foreign Nations?

Thousands like him are pouring out their blood to prevent National Socialism, Fascism and absolutism in any form from overrunning the earth and tyrannizing over the bodies, minds and souls of mankind. And yet even as they fight these evils, many misguided Americans here at home are advocating—paradoxically enough—the self-same economic principles on which the governmental systems of our enemies are based. This seems incomprehensible until one discovers that today only three in ten Americans understand the difference between state socialism and our republican form of government, and that only one in four knows what the Bill of Rights is! A still smaller fraction realize that competitive enterprise, civil and religious freedom, and political freedom are inseparably bound up together and that when any one of the three is undermined, all the liberty they now so smugly enjoy will soon be devoured in the maw of dictatorship. Yet the danger is imminent and real. As Professor Hayek says in his recent book, "The Road to Serfdom": "We have progressively abandoned that freedom in economic affairs without which personal and political freedom has never existed in the past."

The phrase "planned economy" is very alluring. We have all been taught since childhood to plan ahead, to anticipate the vicissitudes of illness, unemployment and old age. to plan for the education of our children, and the future of our businesses and social institutions. Such individual and voluntary group planning is highly desirable and should be encouraged in every possible fashion. However, over-all planning and control by government is quite a different thing, As Peter Drucker said in one of his recent books, planning in the sense in which it is now employed "is not a preparation for future events and contingencies. It is the abolition of all limitations on governmental power." Yet many short-sighted people seek to impose just that type of planning on America today.

Pitfalls of National Economic Planning

National economic planning in time of war is comparatively simple because military requirements are relatively standardized and uniform. Despite that fact, we can see right now how enormously difficult it is even to plan intelligently for war production. Yet the problems of planning to meet the demands of a free economy in times of peace would be infinitely more complicated, since peacetime demands are subject to consumer preference, personal tastes, the whims of style and the dynamics of advancing technology. They are literally unpredictable. There were 8,000 automobiles in America in 1900. It took 80,000 barrels of gasoline a year to operate them—enough to keep the cars that we had on the road in 1942 running an hour and a half. Can one imagine any government planning board having the vision and temerity to do what the petroleum industry did at the risk of billions of dollars of private capital; namely, to provide sufficient gasoline for 36,000,000 cars in that same year, 1942?

As a matter of fact, there are not enough brains and vision in any group of men in government or elsewhere, to plan and provide—from a central point—a progressively rising standard of living for a great nation like the United States. Just consider for a moment what a national planning board would be expected to do in times of peace. It would have to know what and how much of everything everybody would want, when they would buy, and the approximate prices they would be willing to pay for all sorts of goods and services. Without such information the objectives of a planned economy could not be attained; namely, to keep everybody employed at satisfactory wages, and to eliminate waste by producing neither more nor less than was actually required. The national planning board would also be expected constantly to increase production and develop all sorts of new and improved articles at lower and lower prices so as to raise the standard of living and give everybody more leisure for recreation. Simultaneously the labor unions would be bargaining for higher wages and shorter hours, and naturally, the individual citizen would not relish any interference with his freedom to work or not to work when or where he pleased. The investment of all capital would have to be completely controlled by the planners because otherwise the whole national productive and distributive machine would soon get out of kelter.

The planners themselves would thus have to be supermen—all-wise and utterly beneficent. The advocates of planned economy gloss over that fact. Even though the members of the planning board knew that a change in the complexion of Congress every two years would completely disrupt their long-range economic plans, they would, of course, never, never seek to maintain themselves in power by political alliances, or concessions to friendly pressure groups, or withdrawal of favors from hostile critics, or use of public resources for propaganda purposes. They would always, of course, be models of magnanimity! They would never dream of retaliating even if they did see their cherished dreams—all for the good of the people—vanishing under criticism.

Planked Economy Means Doom of Personal and Political Liberty

The proponents of planned economy claim, of course, that the press would not be muzzled, even though the planning board did control absolutely the production and allocation of paper and presses; that the producer of motion pictures would also feel free to oppose such portions of the national planning program as the motion picture industry might consider unwise, even though the producers' film supplies were at the mercy of the Board. As for radio stations—well, the limited licensing system already has them pretty well in hand. As for businessmen in general, what the fear of the tax collector, the factory inspector, the labor board investigator, the wage and hour auditor, the SEC inquisitor, the OPA checker, the Department of Justice tile searcher, et al., have not already accomplished in curtailing their willingness to speak out in opposition to unwise governmental policies, would be finally and completely achieved under the throttling power of an economic planning board. Ways and means of inducing teachers and preachers to fall in line or keep silent would not be lacking. Germany, Italy and Russia all devised effective methods of dealing with intellectual and spiritual recalcitrants in their government planned economies long before the war broke out. The power of labor unions would simply evaporate. The Federalist Papers, 155 years ago, summed it all up in one terse sentence: "Power over a man's support is power over his will"Gustav Cassel—the great Swedish economist—who died a week or so ago, said: "Planned economy will always tend to develop into dictatorship. . . . Once authoritative control has been established it will not always be possible to limit- it to the economic domain. . . , Without people ever realizing what is actually going on, such fundamental values as personal liberty, freedom of thought and speech and independence of science are exposed to imminent danger." Professor Jacob Viner—a proponent of planning—admits in a recent book: "It is unfortunately . . . difficult to see how . . . central economic planning . . . can withstand the activities of a freely elected, freely legislating Congress." Sidney and Beatrice Webb—the British socialists—writing about the Russian system, concede that "Whilst the work is in progress any public expression of doubt is an act of disloyalty and even treachery."

Compromise Course Unworkable

From past experience a middle-of-the-road course in respect to planned economy is out of the question. Competitive enterprise can be subjected to regulation—as it should be—and survive, but it cannot be combined with government control and still function as competitive enterprise. At the end of the first World War, Walter Rathenau, a conservative leader in Germany, wrote: "From the ruins will arise neither a communistic state nor a system allowing free play to the economic forces." The present holocaust tells how effectively that compromise policy worked out in Germany. It led directly to the destruction of both political and personal freedom. Over-all planning in small doses simply cannot produce results. As Professor Hayek observes: "Planning and competition can be combined only by planning for competition but not by planning against competition."

It is often claimed that a planned economy in the United States would be different from that of Germany, Italy or Russia because here the planning would be done by men who were not actuated by the desire to oppress their fellow citizens. Unfortunately they would simply have to have power to do the job assigned them, and as Lord Acton said: "Power tends to corrupt, and absolute power corrupts absolutely." Without power to enforce their decrees, economic planners would find their efforts nullified at every turn. Even a truly democratic statesman planning a nation's economic life would have either to assume dictatorial powers or abandon his program. And as dictator he would soon have to choose between disregard of ordinary humanitarian morals or failure. That is why unscrupulous men are always likely to be most successful as dictators. Sixty years ago in his famous essay, "Man Versus the State," Herbert Spencer said: "The machinery of communism (planned economy) like existing social machinery, has to be framed out of existing human nature and the defects of existing human nature will generate in the one the same evils as in the other. . . . There is no political alchemy by which you can get golden conduct out of leaden instincts." Those who would substitute governmental control in the economic field for the power exercised by private individuals under competitive enterprise should never forget that they are substituting power from which there is no escape for power which is always limited.

Dangers to Freedom Disguised

If we ever do lose our freedom in America, I predict that it will be due to planned economy coming as a wolf in sheep's clothing. Sad to relate, we are far closer to it than most of us realize. The shape of things to come over here is often anticipated by what happens in Great Britain. Every thinking American should read the British White Paper entitled "Employment Policy," which was issued last year, and ponder the program there outlined with real concern. For only a short time ago—with little or no publicity in our newspapers in the United States—the policy advocated in that document was enacted into law by the British Parliament under the frank title of "Planned Economy for Great Britain."

National Job Budget Should Be Studied

The first repercussion in Washington apparently is the bill for a so-called National Job Budget which has the backing of the radical farm and labor groups. This proposal would compel the federal government to guarantee a job to every able-bodied citizen at all times. Despite its protestations in favor of private enterprise, it would soon make planned economy and state socialism an accomplished fact in the United States. For do not forget that Lenin pointed out years ago that the surest way to destroy our type of self-government would be to lead the people to believe that public authority could permanently supply them with jobs, for in that event, he said, the demands of the populace would become so insatiable that no free government could possibly withstand them financially. This National Job Budgetmeasure, which is proposed by Senator Murray, should be studied by every citizen. It appears to be the opening gun in an over-all program which is allegedly shaping up in Washington under which:

1. There will be established a National Production Council which would control our entire economy, working in conjunction with committees for each industry composed of representatives of labor, management and government.

2. The volume of production would be set by these bodies and a quota given to each producer, the total being fixed at a level that would ensure so-called full employment

3. The government would guarantee to protect producers against loss by buying any surplus that could not be sold through the regular channels of trade.

4. No new producer could enter any field without the approval of the industry committee concerned.

5. Prices and wages would be fixed and permanently controlled by the planning agency.

This, in essence, is the economic system that was in operation in Germany, Italy and Russia long before the war broke out. It seems well-nigh unbelievable that after we have seen what has happened to civil and religious freedom and political liberty in those countries, we should even contemplate adopting the economic principles of the absolutism we are now fighting to destroy.

A man named Adolf Hitler said this eight or ten years ago about his planned economy: "We shall banish want; we shall banish fear. The essence of National Socialism is human welfare. . . . National Socialism is the revolution of the common man. Rooted in a fuller life for every German from childhood to old age, National Socialism means a new day of abundance at home and a better world order abroad." I repeat: Those were Adolf Hitler's beguiling assurances to the German people. I am confident no thinking American would want to follow the economic principles of the Pied Piper of Berchtesgaden! Nevertheless, strangely similar utterances are now falling from the lips of highly placed crusaders for a planned economy in the United States.

Americans Must Accept the Challenge

Competitive Enterprise versus Planned Economy—the American system versus the Hitlerian system. America stands at the crossroads. Which shall it be? Competitive enterprise with freedom of speech and the press, freedom of worship and assemblage, freedom to choose who shall rule over us; the state the servant of the people? Or, planned economy with the ultimate loss of every freedom our forefathers held dear; the people the servants of the state? Pray God we may have the wisdom and courage to keep faith with those who are giving their lives tonight to preserve the tripod of American freedom—political liberty, civil and religious liberty and competitive enterprise. They stand or fall together.