But the shoe industry is doing its job with immeasurably greater competence than public education is doing its job.
To quote Isabel Paterson once more:
The most vindictive resentment may be expected from the pedagogic profession for any suggestion that they should be dislodged from their dictatorial position; it will be expressed mainly in epithets, such as “reactionary,” at the mildest. Nevertheless, the question to put
to any teacher moved to such indignation is: Do you think nobody would willingly entrust his children to you and pay you for teaching them? Why do you have to extort your fees and collect your pupils by compulsion?9
(JUNE 1963.)
INHERITED WEALTH
DOES INHERITED WEALTH GIVE SOME INDIVIDUALS AN UNFAIR ADVANTAGE IN A COMPETITIVE ECONOMY?
In considering the issue of inherited wealth, one must begin by recognizing that the crucial right involved is not that of the heir but of the original producer of the wealth. The right of property is the right of use and disposal; just as the man who produces wealth has the right to use it and dispose of it in his lifetime, so he has the right to choose who shall be its recipient after his death. No one else is entitled to make that choice. It is irrelevant, therefore, in this context, to consider the worthiness or unworthiness of any particular heir; his is not the basic right at stake; when people denounce inherited wealth, it is the right of the producer that they, in fact, are attacking.
It has been argued that, since the heir did not work to produce the wealth, he has no inherent right to it; that is true: the heir’s is a derived right; the only primary right is the producer’s. But if the future heir has no moral claim to the wealth, except by the producer’s choice, neither has anyone else—certainly not the government or “the public.”
In a free economy, inherited wealth is not an impediment or a threat to those who do not possess it. Wealth, it is necessary to remember, is not a static, limited quantity that can only be divided or looted; wealth is produced; its potential quantity is virtually unlimited.
If an heir is worthy of his money, i.e.; if he uses it productively, he brings more wealth into existence, he raises the general standard of living—and, to that extent, he makes the road to the top easier for any talented newcomer. The greater the amount of wealth, of industrial development, in existence, the higher the economic rewards (in wages and profits) and the wider the market for ability—for new ideas, products and services.
•Ibid., p. 274.
The less the wealth in existence, the longer and harder the struggle for everyone. In the beginning years of an industrial economy, wages are low; there is little market yet for unusual ability. But with every succeeding generation, as capital accumulation increases, the economic demand for men of ability rises. The existing industrial establishments desperately need such men; they have no choice but to bid ever higher wages for such men’s services—and thus to train their own future competitors—so that the time required for a talented newcomer to accumulate his own fortune and establish his own business grows continually shorter.
If the heir is not worthy of his money, the only person threatened by it is himself. A free, competitive economy is a constant process of improvement, innovation, progress; it does not tolerate stagnation. If an heir who lacks ability acquires a fortune and a great industrial establishment from his successful father, he will not be able to maintain it for long; he will not be equal to the competition. In a free economy, where bureaucrats and legislators would not have the power to sell or grant economic favors, all of the heir’s money would not be able to buy him protection for his incompetence; he would have to be good at his work or lose his customers to companies run by men of superior ability. There is nothing as vulnerable as a large, mismanaged company that competes with small, efficient ones.
The personal luxuries or drunken parties that the incompetent heir may enjoy on his father’s money, are of no economic significance. In business, he would not be able to stand in the way of talented competitors or serve as an impediment to men of ability. He would find no automatic security anywhere.
At the turn of the century, there was a popular phrase that is very eloquent with regard to the foregoing: “From shirtsleeves to shirtsleeves in three generations.” If a self-made man rose by ability and left his business to unworthy heirs, his grandson went back to the shirtsleeves of obscure employment. (He did not end up with the governorship of a state.)
It is a mixed economy—such as the semi-socialist or semi-fascist variety we have today—that protects the nonproductive rich by freezing a society on a given level of development, by freezing people into classes and castes and making it increasingly more difficult for men to rise or fall or move from one caste to another; so that whoever inherited a fortune before the freeze, can keep it with little fear of competition, like an heir in a feudal society.
It is significant how many heirs of great industrial fortunes, the second- and third-generation millionaires, are welfare statists, clamoring for more and more controls. The target and victims of these controls are the men of ability who, in a free economy, would displace these heirs; the men with whom the heirs would be unable to compete.
As Ludwig von Mises writes in Human Action:
Today taxes often absorb the greater part of the newcomer’s “excessive” profits. He cannot accumulate capital; he cannot expand his own business; he will never become big business and a match for the vested interests. The old firms do not need to fear his competition; they are sheltered by the tax collector. They may with impunity indulge in routine, … It is true, the income tax prevents them, too, from accumulating new capital. But what is more important for them is that it prevents the dangerous newcomer from accumulating any capital. They are virtually privileged by the tax system. In this sense progressive taxation checks economic progress and makes for rigidity….
The interventionists complain that big business is getting rigid and bureaucratic and that it is no longer possible for competent newcomers to challenge the vested interests of the old rich families. However, as far as their complaints are justified, they complain about things which are merely the result of their own policies.10
(JUNE 1963.)
a society has become more complex, merely means that more men live in the same geographical area and deal with one another, that they engage in a greater volume of trading, and in a greater number and diversity of productive activities. There is nothing in these facts which conceivably could justify the abandonment of economic freedom in favor of government “planning.”
On the contrary: the more “complex” an economy, the greater the number of choices and decisions that have to be made—and, therefore, the more blatantly impracticable it becomes for this process to be taken over by a central government authority. If there are degrees of irrationality, it would be more plausible to imagine that a primitive, pre-industrial economy could be managed, non-disastrously, by the state; but the notion of running a scientific, highly industrialized society with slave labor, is barbaric in the ignorance it reveals.
Observe that the same type of persons who espouse this doctrine, also declare that the under-developed nations of the world are not suited for economic freedom, that their primitive level of development makes socialism imperative. Thus, they simultaneously argue that a country should not be permitted freedom because it is too undeveloped economically— and that a country should not be permitted freedom because it is too highly developed economically.
Both positions are crude rationalizations on the part of statist mentalities who have never grasped what makes industrial civilization possible.
(NOVEMBER 1963.)
CAPITALISM’S PRACTICALITY
IS THERE ANY VALIDITY TO THE CLAIM THAT LAISSEZ-FAIRE CAPITALISM BECOMES LESS PRACTICABLE AS SOCIETY BECOMES MORE COMPLEX?
This claim is the sort of collectivist bromide that “liberals” repeat ritualistically, without any attempt to prove or substantiate it. To examine it, is to perceive its absurdity.
The same condition of freedom that is necessary in order to attain a high level of industrial development—a high level of “complexity”—is necessary in order to keep it. To say that
10 pp. 804-805.
6. GOLD AND ECONOMIC FREEDOM
BY ALAN GREENSPAN
An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense—perhap more clearly and subtly than many consistent defenders of laissez-faire—that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.
In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.