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A Treatise on Economics

George Reisman

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Literature and Lectures by Edith Packer, George Reisman, and Others

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By George Reisman**

1. Introduction

The principles and theories presented in this book call for a society of laissez-faire capitalism. (For the sake of brevity, I often refer simply to a capitalist society. In such cases, it should be understood that laissez-faire capitalism is the only logically consistent form of a capitalist society.) If such a society is to be achieved, a political movement pursuing a long-range program will be necessary. My purpose in this concluding, epilogue chapter is to describe the nature of such a movement and to offer a basic outline of the long-range political program it would have to follow, including a description of how the most difficult steps in the program might actually be accomplished. As far as I know, my effort here is the first of its kind; as such, it will undoubtedly benefit greatly from the numerous additions and refinements that I hope others will be led to make.

The Importance of Capitalism as a Conscious Goal

The first thing that those in favor of capitalism must do is to make the conscious, explicit decision that they seriously want to achieve a fully capitalist society and are prepared to work for its achievement. We need to view ourselves as active agents of change, working toward a definite goal: laissez-faire capitalism.

The advocacy of laissez-faire capitalism, indeed, of capitalism in any explicit form, has not been present in the political spectrum. In the United States, the political controversies of the last several generations have been carried on between the "liberals," who stand for socialism, and the "conservatives," who stand for nothing except what other groups, including the liberals, have managed to establish as the country's tradition.

The success of the liberals/socialists in enacting their program shows that what we need is a group of educated and articulate individuals who adopt the achievement of capitalism as their goal. Such individuals, dedicated to maintaining constant progress toward capitalism, would constitute a de facto capitalist political party, even if the name of such a party never appeared on a ballot. By virtue of constantly offering their own definite program for political change, they would seize the political initiative. Instead of merely attacking the socialistic proposals of the "liberals" and then yielding to them and abandoning the fight once the proposals happened to be enacted, as is the almost invariable practice of the conservatives, they would always strive to move in the direction of capitalism. As an essential part of the process of doing so, they would never tire of assaulting intellectual targets as far behind enemy lines as possible--such as social security, antitrust legislation, and public education. Never would they accept the existing state of society as immutably given and deserving of preservation merely because it exists. Always they would seek to change the existing state of society until it represented laissez-faire capitalism.

Laissez-faire capitalism would represent their fixed star so to speak. To the extent that present conditions departed from it, they would be radical in seeking to change present conditions. To the extent that conditions in the past had approximated laissez-faire capitalism, they would be reactionary in seeking to reestablish such conditions. To the extent that present conditions were consistent with laissez-faire capitalism, they would be conservative in seeking to preserve those conditions.

The program such a party would have to follow is both political and educational in nature. It is political in that it centers on the offering of specific political proposals, which, if adopted, would move the country toward capitalism. It is educational in that it views the basic problem that we face as one of explaining to the people of the United States and other countries the value of a capitalist society and the value of the specific steps required to achieve it. What people do is determined by what they think. If we want to change the political practice, there is no other way but to change people's political philosophy and economic theories. Accordingly, every political proposal that I suggest is itself intended to serve as a vehicle for educating the public and for attracting talented individuals to our cause who in turn will become capable of educating still others to the value of our program.

Needless to say, the substance of such education is the spread of the ideas of Ludwig von Mises and Ayn Rand, reinforced by the ideas of other procapitalist economists and philosophers whom I mentioned in the Introduction and elsewhere in this book. It is principally owing to the great popular success of the writings of Ayn Rand and the growing influence of the works of Ludwig von Mises that there already exists a significant and growing number of potential recruits for the procapitalist political movement that I envision. The further spread of the ideas of these two historic figures is the only possible basis for the further growth and ultimate success of the procapitalist cause.

Along these lines, I wish to acknowledge once more how important are all philosophic ideas that determine people's conception of the position of the human individual in relation to the world in which he lives. For example, so long as man is viewed as fundamentally helpless, with his destiny controlled by forces beyond his power to change, it will be next to impossible to eliminate the welfare state. People will cling to it out of a sense of helplessness. Elimination of the welfare state and the establishment of a capitalist society presupposes a view of man as a self-responsible causal agent, capable of securing his well-being by means of intelligent action. Indeed, the entire program of reform outlined in this chapter must proceed alongside a renewal of all of the philosophical foundations of a division-of-labor, capitalist society that I described in the first chapter of this book. It is this above all which makes the dissemination of the ideas of Ayn Rand so important. As the leading advocate of reason in modern times, her writings alone hold out the possibility of the necessary fundamental philosophic changes taking place in our culture, without which efforts at the level of economic theory and political philosophy are doomed to failure.

* * *

In the pages that follow, I write of political campaigns over various issues. Please understand that I am not writing merely or even primarily of campaigns carried out in connection with elections. Rather, I am writing of campaigns carried on year in and year out, as part of a process of continuous education of the public. Each of these campaigns would necessarily have to be preceded and accompanied by the writing and dissemination of an appropriate literature, ranging from books and monographs on down to handbills--a literature dealing with the specific issues at hand, but always in relation to wider, abstract principles. Indeed, the dissemination of such literature and its articulation in speeches and debates would constitute the substance of what I call political campaigns.

Further, I think that to achieve capitalism it will ultimately be necessary for a formally organized capitalist party to come into existence, whose primary function will actually be to serve as an educational institution: it would have one or more book-publishing houses, theoretical journals, magazines devoted to current issues, and schools turning out intellectual leaders thoroughly versed in economic theory and political philosophy. All of these vehicles would be devoted at least as much to questions of political philosophy and economic theory as to political activity.

The political proposals I make are short- and intermediate-range, as well as long-range in nature. I believe that it will take several generations to achieve a fully capitalist society, mainly because of the time required for the educational process. It will not be enough just to present our long-range goals. It will be necessary to advocate a whole intervening series of short- and intermediate-range goals whose enactment will represent progress toward our long-range goals. The major political task in the years ahead will be continuously to formulate such short and intermediate range goals, and to keep the country moving in the direction of full capitalism by means of their successive achievement. The short- and intermediate-range goals I offer are intended to illustrate principles of strategy and tactics and thus to serve as a pattern.

In the light of the preceding, it should scarcely be necessary to say that at no time should the advocacy of sound principles be sacrificed to notions of political expediency, advanced under misguided ideas about what is "practical." The only practical course is to name and defend true principles and then seek to win over public opinion to the support of such principles. It is never to accept the untrue principles that guide public opinion at the moment and design and advocate programs that pander to the errors of the public. Such a procedure is to abandon the fight for any fundamental or significant change--namely, a change in people's ideas--and to reinforce the errors we want to combat.

It is definitely not impractical to explain to people that if they want to live and prosper, they must adopt capitalism. It would not be impractical to do so even if for a very long time most people simply refused to listen and went on supporting policies that are against their interests. In such a case, it would not be the advocates of capitalism who were impractical, for they would be pursuing the only course that is capable of working, namely, explaining to people what they must do if they are in fact to succeed. Rather it would be the mass of people--perhaps, indeed, the entire rest of the society--that would be impractical, pursuing as it did goals which are self-destructive and refusing to hear of constructive alternatives. If, to use an analogy from the world of engineering and business, someone knows how to build an airplane or a tractor that people could afford and greatly benefit from, but is not listened to, such a person is not at all impractical because others refuse to listen to his ideas that would greatly benefit them. Rather it is those others, whatever their number, who are impractical. In the political-economic realm, it is the current state of public opinion that is impractical: it expects that men can live in a modern economic system while destroying the foundations of that system--that, for example, they can have rising prosperity while destroying the incentives and the means of the businessmen and capitalists who are to provide the prosperity. The advocates of capitalism, who tell people that the opposite is true and that the opposite policy is necessary, are not impractical. They are eminently the advocates of practicality--of what is achievable in, and by the nature of, reality.

It is the grossest compounding of confusions to suggest that those who know truths that masses of impractical people refuse to hear, accept error as an unalterable given for the sake of which they must abandon or "bend" their knowledge of the truth. Nothing could be more impractical, elevating as it does, error above truth and making knowledge subordinate to ignorance. The essence of true political practicality consists of clearly naming and explaining the long-range political program that promotes human life and well being--i.e., capitalism--and then step by step moving toward the fullest and most consistent achievement of that goal. That the initial effect of naming the right goal and course may be to shock masses of unenlightened people and invoke their displeasure should be welcomed. That will be the first step in awakening them from their ignorance.

It should not be surprising that those who fear the effects of the open advocacy of capitalism are themselves highly deficient in their knowledge of capitalism. They fear to evoke the displeasure of the ignorant because they do not know enough about capitalism to know what to say in the face of such displeasure. Their ignorance on this score, I believe, is the result of an unwillingness to acquire a sufficient combination of knowledge of political philosophy and economic theory, above all, of economic theory. Remnants of the mind-body dichotomy in their thinking prevent them from fully grasping the intellectual--indeed, the profoundly philosophical--value of a subject as "materialistic" as economics. To be successful, the advocates of capitalism must immerse themselves in the study of economic theory.

The Capitalist Society and a Political Program for Achieving It

The capitalist society we want to achieve is a society in which individual rights are consistently and scrupulously respected--in which, as Ayn Rand put it, the initiation of physical force is barred from human relationships. We want a society in which the role of government is limited to the protection of individual rights, and in which, therefore, the government uses force only in defense and retaliation against the initiation of force. We want a society in which property rights are recognized as among the foremost human rights--a society in which no one is made to suffer for his success by being sacrificed to the envy of others, a society in which all land, natural resources, and other means of production are privately owned. In such a society, the size of government would be less than a tenth of what it now is in terms of government spending. Most of the government as it now exists would be swept away: virtually all of the alphabet agencies and all of the cabinet departments with the exceptions of defense, state, justice, and treasury. All that would remain is a radically reduced executive branch, and legislative and judicial branches with radically reduced powers. To the law-abiding citizen of such a society, the government would appear essentially as a "night watchman," dutifully and quietly going about its appointed rounds so that the citizenry could rest secure in the knowledge that their persons and property were free from aggression. Only in the lives of common criminals and foreign aggressor states would the presence of the government bulk large.

If these brief remarks can serve as a description of the capitalist society we want to achieve, let us now turn to a series of political proposals for its actual achievement. I group the proposals under seven headings: Privatization of Property, Freedom of Production and Trade, Abolition of the Welfare State, Abolition of the Income and Inheritance Taxes, Establishment of Gold as Money, Procapitalist Foreign Policy, and Separation of State from Education, Science, and Religion. Under each of these heads, I develop specific issues and programs each of which deserves to be fought for and which, in being fought for, would serve to promote the spread of our entire political-economic philosophy.


2. Privatization of Property: Importance of Fighting on Basis of Principles

The privatization of property is the most fundamental aspect of a procapitalist political program. In addition, its discussion is well suited to illustrate strategy and tactics applicable to the pursuit of all aspects of a procapitalist political program.

Privatization would ultimately require the sale of all government-owned lands and natural resources (with such limited exceptions as the sites of military bases, police stations, and courthouses), which presently include the greater part of the territory of many of the Western states and almost all of the territory of Alaska. It would entail the sale of TVA and all other public-power facilities, the sale of Amtrak and Conrail, the post office, the public schools, universities, and hospitals, the national parks, and the public highway system. It would also entail the establishment of the airwaves as private property and of private property rights under the sea and in outer space.

Those of us who work to establish capitalism must always be aware that the privatization of all of these things is part of our ultimate goal and we must be sure that all new adherents we gain fully understand and support the whole program of privatization, as well as all the other essential aspects of our program. No secret must ever be made of the full, long-range program and its goal of complete laissez-faire capitalism.

In the present situation, I believe that the most important aspect of privatization to concentrate on is that of the federal government's vast landholdings, in particular where oil, coal, and timber are concerned. Closely connected with this should be the urging of the extension of private ownership to undersea mining operations. These aspects would make it possible to link the campaign for privatization with an assault on the environmental movement, which has replaced socialism as the leading threat to material civilization. Such linkage would provide the opportunity to reestablish the rightful connection between capitalism, on the one side, and science, technology, economic progress, and the supreme value of human life on earth, on the other side. This connection has been concealed for many years because of socialism's usurpation of the mantle of progressivism. Linkage of the campaign for privatization with an assault on the environmental movement would be instrumental in reestablishing capitalism in the minds of the public as the system of progress and improvement advocated by men of reason, and the opposition to capitalism as the manifestation of ignorance, fear, and superstition. A further major aspect of the linkage should be a continual hammering away at the appalling state of contemporary education and the ignorance of its graduates, including almost all of today's politicians, government officials, and journalists. The environmentalist and socialist opposition to capitalism should be portrayed as exactly what it is--a movement to return the world to the Dark Ages and a system of feudal privilege. Privatization of education, of course, should be urged as an essential aspect of the rebirth of education.

Other, narrower campaigns for privatization that might profitably be conducted early on would be ones for the privatization of the post office, the airwaves, and the New York City subway system. Postal service and cellular-telephone channels are already private to varying degrees. In these two cases, privatization would merely be a matter of carrying forward something that already exists to an important extent.

The New York City subway system would be a good candidate for an early privatization campaign, because it should be relatively easy to explain how the establishment of private ownership would create an incentive for the subway's management to want to attract customers and thus to improve the cleanliness, safety, and efficiency of the system. Such a campaign would represent our going on the offensive in the country's leading bastion of collectivism and making large numbers of collectivists aware that the comfort of their daily lives depended on the acceptance of the principle of private ownership of the means of production.

Each of these individual campaigns would, of course, have to be focused on its own particular set of concretes. But if, at the same time, they were also based on the principle of the economic superiority and moral rightness of private ownership, the cumulative effect would be to tend to establish that principle as correct in the public's mind. Thus, provided they were conducted in the name of our basic principles and used as the opportunity for explaining those principles, success in such lesser projects would help in someday putting us in a position in which we could accomplish the objective of privatization completely.

We should certainly not expect that we would quickly win any of the campaigns for privatization, even the least among them. On the contrary, for a very long time we would almost certainly lose them all, over and over again. Indeed, we should expect for some time to be written off as cranks and even ridiculed for our views. Nevertheless, if we fight every concrete issue on the basis of correct abstract, general principles, our efforts will never be wasted. We will be successful even though we fail to win our particular objective of the moment. We will be successful because we will have propounded and helped to spread our principles. As a result, we will have gained new adherents, who will have been attracted to our principles. In addition, those who waged the campaign will have become more skilled in the defense of their principles. Thus, we will have gained the basis for conducting campaigns over the same issue, and over a wide variety of other issues, on a stronger foundation in the future. We will be embarked upon a policy of progress in intellectual influence analogous to the process of capital accumulation and economic progress.

If we are successful in making continual progress in our intellectual influence, we cannot fail ultimately to possess major intellectual influence and therefore correspondingly major political influence. To achieve the most rapid possible success, our objective should be to accomplish in terms of intellectual influence the kind of rate of progress achieved economically by Japan and other contemporary East Asian countries that began in the most humble material conditions. If we could succeed in that, then even though we may begin today in the most humble conditions in terms of size and influence, within a matter of decades we would become a major intellectual force.

As part of the same point, I want to stress that a major feature of every political activity we engage in is that it must provide easy opportunities for any new supporters it attracts to become exposed to our entire philosophy. The individual campaigns, such as the ones I have just described, must not only be waged on the basis of the appropriate abstract principles, but they must also provide ready exposure to the main books and publications of our philosophy. This does not mean that handing out copies of Human Action or Atlas Shrugged is the first or most prominent thing we do in such a campaign, but it does mean that we are very interested in making every receptive individual we meet aware of the existence of these books and in getting him to read them and the rest of our essential literature.

3. The Freedom of Production and Trade

The establishment of the freedom of production and trade implies the abolition of all government interference with production and trade. It implies, for example, the abolition of all labor legislation, licensing laws, the antitrust laws, and zoning laws. It implies the abolition of virtually all of the alphabet agencies. It also implies the freedom of international trade and migration.

An important principle that I think we should adopt in fighting for the freedom of production and trade is to show how its establishment would enable individuals to solve their own economic problems. For example, there are few more serious economic problems than mass unemployment. As we have seen, this problem is the result of the government restricting the freedom of individuals to offer and accept the lower wage rates that would make full employment possible. The restrictions are in the form of minimum-wage laws, prounion legislation, unemployment insurance, and welfare legislation. Abolishing such legislation and establishing the freedom of production and trade should be presented as the solution to this problem--as a solution that would enable the voluntary, self-interested actions of individuals to establish the terms on which everyone seeking employment could find it.

In the same vein, we must take the initiative in calling for a widening of economic freedom as the solution to the problems the United States is encountering in international trade. We must show that the inability of major American industries to compete with foreign goods is the result of government intervention, and that the remedy is not the imposition of further intervention, in the form of tariffs or quotas, but the repeal of existing intervention. For example, prounion legislation causes artificially high wage rates and holds down the productivity of labor, thereby causing an artificially high level of costs for American manufacturers. The tax system and inflation have prevented the introduction of more efficient machinery, and thus have also contributed to the artificially high costs of American manufacturers, as have numerous government regulations. Such intervention should be the target of campaigns for repeal. Obviously, this would be a fertile area for the writing of books and monographs demonstrating the general principle in terms of the specific conditions of individual industries.

Similarly, the freedom of production and trade should be presented as the means of sharply reducing the cost of housing, thus making it possible for many more people to afford decent housing. The abolition of prounion legislation, building codes, zoning laws, and government agencies that withdraw land from development (such as the California Coastal Commission) would all serve to reduce the cost of housing, as would the abolition of property taxes that support improper government activities. (As should be clear from previous discussion in Chapter 10, all of these points, of course, apply to the solution of the problem of homelessness, which is greatly exacerbated by the imposition of government requirements concerning minimum housing standards.)

The freedom of production and trade should also be explained as the means of sharply reducing the cost of medical care. As explained in Chapter 10, under present conditions the government restricts the supply of doctors and the number of hospitals through licensing. Its solution for the consequent inability of many people to afford medical care is then to pour more and more public money into subsidizing their medical bills. The effect of the government's spending programs is to bid the price of medical care ever higher, progressively substituting new, ever higher income victims for previous victims just below them who are added to the subsidy rolls--and, of course, to reduce the quality of medical care for all groups. The obvious real solution is to end government interference in medical care and thus to make possible the largest and most rapidly improving supply of medical care that free and motivated providers can offer.

In sum, our theme must be the opposite of the one people are accustomed to. Instead of it being what new programs the government must undertake to solve this or that problem, it must be what existing government programs and activities must be stopped, in order to allow individuals to be able to act in their own self-interest. Instead of the question being "What can the government do?," we must explain what it must stop doing that it now does, and that has caused the problem complained of.

We need to show how abolition of the antitrust laws would mean more competition, greater efficiency, and lower prices; how abolition of the Environmental Protection Agency would mean more efficient production and thus a greater ability of man to improve the external material conditions of his life, i.e., his personal environment; how abolition of the Food and Drug Administration would mean the introduction of more life-saving drugs; how abolition of medicare and medicaid, the National Institutes of Health, and all other government interference with medicine would lower the cost and improve the quality of medical care.

While fighting against all existing violations of the freedom of production and trade, a further important principle to seek to establish is the exemption of all new industries from violations of the freedom of production and trade. This, in fact, was one of the principal methods by which economic freedom was established historically in England: the significance of the restrictions imposed by the medieval guilds was steadily reduced by the exemption of new industries from those restrictions.

Appropriate Compromises

It should be realized that if the immediate, total abolition of a given policy of government intervention cannot obtain sufficient support to be carried out, it is proper to work for programs of partial liberalization as temporary compromises--provided it is done explicitly and openly, in the name of the right principles, and no secret is made of our ultimate goals, which one is always prepared to defend and whose achievement serves as the standard and purpose of any temporary compromises.

Thus, for example, while openly advocating the full freedom of the housing industry, including the ultimate abolition of all building codes, one might participate in, or even launch, a campaign for a much more limited objective. Such an objective might be that the government be required to reduce the financial impact of meeting code requirements by an average of, say, X thousand dollars per house, and that it be guided by the advice of private insurance companies, mortgage lenders, and construction contractors in deciding which code requirements to modify or abolish in order to achieve this goal. Such a step would be helpful in reducing the cost of housing. A campaign for it, properly conducted, would help to make people aware that it was government intervention that was responsible for the high cost of housing and high costs in general. If carried out under the terms mentioned, a major value even of campaigns to accomplish such limited objectives would be that government intervention, not private business, would be made the target of restriction. Government force, rather than the profit motive of business, would come to be established in the public's mind as the evil that must be controlled and progressively rolled back.

Similarly, if the immediate, full freedom of medicine cannot be achieved, then, as a temporary compromise--again, presented as such and in the name of the right principles--one might work to allow merely registered nurses and licensed pharmacists to begin practicing various aspects of medicine. Such liberalization would significantly mitigate the problem at hand and, at the same time, it would promote the essential principle that more freedom is the solution to economic problems. It would thus be an important step in the right direction.

The Case for the Immediate Sweeping Abolition of All Violations of the Freedom of Production and Trade

If the public possessed the necessary philosophic and economic understanding, the ideal procedure would be the immediate and simultaneous abolition of all interferences with the freedom of production and trade. This would be both on the principle of individual rights and on the principle that pressure-group warfare is inherently self-defeating. It is self-defeating in that whatever any one pressure group gains by violations of freedom made on its behalf, is reduced by what all other pressure groups gain by violations of freedom made on their behalf, and reduced by more. For example, what the workers in the automobile industry gain in higher wages resulting from the existence of an automobile workers' union, they lose back in higher prices that they must pay for the products not only of all the unionized industries (which by itself may be very considerable), but also for the products of all industries enjoying protective tariffs or receiving government subsidies, all of which is the result of the underlying principle of government intervention. And everyone loses by virtue of the unemployment and overall reduction in the productivity of labor that result, which simply cause less to be produced and sold in the economic system. In essence what is entailed in pressure-group warfare is mutual plunder. Under such an arrangement, not only does each victim lose an amount equal to what the predator gains, but the victims produce less, with the result that there is less to plunder. The process can be pushed to the point where virtually nothing is produced and thus very little can be plundered--much less than could be obtained by honest work in a free society. The pressure-group marauders have long since carried things to the point where the real wages of the average worker are far lower than they could be.

The simultaneous abolition of as much government interference as possible would help to diminish the losses experienced by any one such protected group when its privileges were removed, and would make possible correspondingly greater gains, both in the long run and in the short run, for everyone. Thus, for example, when the wheat farmers lost their subsidy, they would be compensated by the lower prices resulting from the abolition of others' subsidies as well, along with lower prices resulting from the abolition of protective tariffs, labor-union coercion, and minimum-wage legislation. The substantial increase in production that would result would operate further to compensate them, through a fall in prices greater than any fall in the average of incomes that might result.

The special importance of abolishing prounion legislation at the same time as minimum-wage legislation, should be obvious. This is necessary to prevent unemployed workers from having to crowd into a comparative handful of occupations at unnecessarily low wages, by opening all occupations to the freedom of competition.

* * *

It is important to understand that acceptance of the principle of laissez faire and the willingness to fight for that principle is the only safeguard of the public against the depredations of pressure groups. Each pressure group is in a position in which the comparatively small number of its members is able to have a potentially substantial gain. This gain comes at the expense of a relatively small loss on the part of each of the enormously larger number of people who constitute the rest of society. For example, if the members of a pressure group numbering, say, one hundred thousand people are to receive a subsidy of some kind, that subsidy may provide each of the recipients with $100,000 per year in additional income, while it costs each of the far greater number of taxpayers only a small fraction of that sum. In this case, the total cost of the subsidy is $10 billion (i.e., $100,000 x 100,000). If there are a hundred million taxpayers, the cost of the subsidy to the average taxpayer is just $100 per year (i.e., $10 billion divided by 100 million). The diffuse interest of the taxpayers in saving $100 per year each cannot remotely compare in strength with that of the highly concentrated interest of the pressure-group members who stand to gain $100,000 per year each. Accordingly, the pressure-group members are willing to make substantial financial contributions and to engage in intense lobbying efforts in order to get their way. Virtually no individual taxpayer, on the other hand, has a sufficient incentive to do anything to counter such assaults on the country's treasury.

The taxpayers can acquire an incentive to protect themselves only when they view the depredations of each pressure group as a matter of the violation of a supreme political principle--namely, that of laissez faire--a principle whose violation by any one pressure group opens the gates to its violation by scores of other pressure groups. Taxpayers who would view the matter in terms of principle would recognize that pressure group warfare already costs them many thousands of dollars per year each in higher taxes and higher prices, and that there is no limit to its potential cost short of total financial ruin. If they could be led to view matters in this light, I believe that they could then easily be organized to overcome the pressure groups. By taking on all the pressure groups at once, they would have not only a powerful individual financial incentive, but they would also be able to play up all the inherent conflicts among the various pressure groups themselves, and thus obtain substantial support from within the ranks of the pressure-group members, a growing number of whom are also more and more harmed, the more widespread becomes the system of pressure-group warfare.

* * *

An appropriate vehicle for the establishment of the freedom of production and trade, whether all at once or gradually, would be the establishment of one last regulatory-type agency: the Deregulation Agency. Its powers would supersede those of any regulatory agency, the acts of state and local legislatures, and the prior legislation of Congress. In sharpest contrast to all regulatory agencies, however, its powers would be limited to the repeal of existing regulations and laws, including the narrowing of their scope in conditions in which considerations of political expediency prevented their total repeal. It would have no power to enact any new or additional regulation.

The mandate of this agency would be to ferret out all regulations of any federal, state, or local government department or agency, and all federal, state, and local laws, that violated the freedom of production and trade. Ideally, the agency would possess the power to render any or all of them null and void. As a minimum, the enabling legislation for the agency should require it, within a fairly short period of time, such as three years, to reduce the cost of government interference in the economic system as a whole by a minimum of 50 percent. (This figure would not apply to spending for social security, welfare, and public education, which would follow the less-radical reduction schedules explained below.) Further reductions of at least 2 percent per year would be achieved thereafter, until the full freedom of production and trade was established. If, for Constitutional reasons, the agency could not be given the power to supersede federal legislation, its tasks would include the annual submission to Congress of the necessary legislative proposals for the repeal of existing federal laws.


4. Abolition of the Welfare State

Let me now present a program for accomplishing what many people believe to be simply impossible politically, namely, the abolition of the welfare state.

Elimination of Social Security/Medicare

The social security system, together with medicare, could be eliminated by means of the following steps. First, following a grace period of perhaps two or three years, to provide sufficient warning and time to adjust, there should be an immediate rise in the age at which individuals are eligible to receive social security and medicare benefits, from 65 to 70.

As compensation for the loss of these benefits, individuals in the age bracket 65 to 70 should be made exempt from the federal income tax on whatever earnings they derive from employment. The result would not only be an enormous reduction in government expenditures, but a substantial rise in government tax revenues as well. The rise in tax revenues would come about because the people in the 65-70 age bracket would now pay more in the form of sales, excise, and property taxes, as the result of their having and spending higher incomes. And they would pay more in the form of state and local income taxes as well.

If enacted today, this part of the proposal for abolishing social security and medicare would cut the costs of these programs on the order of a third.

But there is more. As part of the same legislation that quickly raises the social security retirement age to 70, the age at which people are eligible to receive social security and medicare benefits should be further increased, say, by an additional calendar quarter with the passage of each subsequent year. Under this arrangement, individuals who wished to retire at age 70, despite the progressive rise in the social security retirement age beyond 70, would have an additional year of notice in which they would have the opportunity to accumulate additional savings to take the place of the loss of each successive three months' social security/medicare benefits.

For example, those age 64 at the time the social security/medicare phase-out began, would have an additional year in which to compensate for the rise in their prospective social security retirement age to 70 [and] 1/4. Those age 63 at the time, would have two additional years in which to compensate for the prospective rise in their particular social security retirement age to 70 [and] 1/2, and so on. Possibly, the additional savings such individuals would need to make could be made tax-exempt, under an IRA-type arrangement. (Savings in the government's budget achieved by the initial rise in the retirement age to 70 would help to offset the revenue loss of making these savings tax exempt.)

All by itself, the progressive rise in the social security retirement age in this way would slowly operate to abolish the system. However, I do not believe the system's demise should be allowed to drag on indefinitely. I think that no later than twenty-five years after the initial rise in the social security retirement age to 70, the system should accept its last new beneficiaries, who would then be 76 [and] 1/4. By that time, everyone would have had in excess of 25 years to make provision for his own retirement at age 76 [and] 1/4.

It should be realized that the progressive elimination of the social security/medicare system would operate to promote savings and capital accumulation. The savings of individuals would steadily replace taxes as the source of provision for old age. The increased capital accumulation that this made possible would, of course, increase the demand for labor and the productivity of labor, which means that it would increase wage rates and the supply of goods, which latter would operate to reduce prices. Thus, real wages and the general standard of living would rise. The rise would be progressive insofar as the rate of capital accumulation was increased.

* * *

While the total abolition of social security and medicare must always be one of our long-run goals, an immediate way to begin reducing the cost of these programs would be for the government simply to make the kind of tax-exemption offer I described above, to everyone eligible to receive these programs' benefits. Namely, so long as anyone eligible to receive such benefits abstains from doing so and continues to work instead, his earnings from employment will be exempt from the federal income tax. Being enabled to keep almost all of one's earnings might make it worthwhile for many people to keep on working some years longer, rather than accept social security and medicare. Not only would the government's outlays be reduced as the result of this measure, but, as I noted before, its revenues would almost certainly increase. If enacted, this proposal would achieve some significant immediate good, and, in addition, help to prepare the ground for further reductions in the cost of social security and medicare.

It should also be noted here that the phaseout of the social security and medicare programs, or the undertaking of any other measure that would be accompanied by an increase in the number of people seeking employment, calls for an intensification of efforts to abolish or restrict as far as possible prounion and minimum-wage legislation. This is necessary in order to make it possible for the larger number of job seekers to find employment.

Elimination of Public Welfare

The public-welfare system, including food stamps and rent subsidies, could be substantially eliminated within a few years. What would need to be done is to begin reducing welfare payments for able-bodied adults and for minors above the age of fourteen by, say, 10 percent per year across the board, until those payments fell substantially below the wages of the lowest-paid workers. Aid to dependent children below the age of fourteen could be gradually abolished by a law declaring children born more than one year after its enactment to be ineligible for receipt of such aid. Henceforth, dependent children of welfare recipients would have to be supported out of the welfare payments of their parents, which would be steadily reduced. Thus within a few years, welfare for able-bodied adults would cease to be economically significant, because all such adults would be confronted with a situation in which they would be substantially better off taking even the lowest-paid jobs. Within fifteen years, aid to dependent children would cease entirely, whereupon the whole welfare program would be without economic significance.

As previously noted, at the same time that welfare benefits were being reduced, legislation limiting employment opportunities would also have to be abolished or at least progressively restricted, such as the minimum-wage laws and prounion legislation. In addition, restrictions on the employment of teenage juveniles would have to be eliminated in conformity with the immediate reductions in welfare allowances to teenage children. The abolition of these restrictions on employment opportunities are necessary to provide people presently receiving welfare benefits with a realistic alternative of living by working. Finally, the reduction in government expenditures for welfare could be earmarked for increasing the personal exemption from the income tax of people who are gainfully employed. This would further increase the economic advantages of working over being on welfare.

My reason for suggesting the gradual reduction in welfare benefits rather than their immediate or very rapid total elimination, is to allow time for large concentrations of people on welfare, such as in Harlem in New York City, to move to areas that offer better prospects for employment; and, at the same time, for new industry to move into areas such as Harlem, in response to the existence of large numbers of people willing to work for low wages. The gradual reduction in welfare benefits would also allow time for private charitable efforts to develop to deal with the cases of individual suffering not caused by the fault of the individuals themselves.

Once public welfare benefits were reduced to a level substantially below the wages of the lowest-paid workers, the problem, as I have said, would cease to have much economic significance. Almost everyone would be working who was able to work. The system could then be reduced further by totally denying benefits to any able-bodied person, or to anyone suffering as the result of his own irresponsibility, such as drug addicts and alcoholics. After some years, once the government had ceased to be regarded as offering anything but the most minimal relief from want, and private charity had been reestablished in the public's eyes as the place to which the indigent must turn, the remaining public welfare system could probably be totally abolished, practically without being missed.

A vital aspect of the campaign for the abolition of the welfare system must be the conversion of intellectual opinion among the groups most affected. They must understand that the system's demise is indispensable to the genuine assimilation of all groups into American society and essential to the opportunities of every person now on the welfare roles who would like to make something of his life, and to the opportunities available to his children.

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When I first wrote the above discussion of the elimination of the welfare system, I believed that the element of gradualism was necessary not only for the reasons stated but also if efforts to eliminate the system were to have any hope of gaining significant public support. On this score, it appears that I may have been wrong. For example, the state of Wisconsin now intends to remove people from the welfare rolls after two years if they turn down a job or job training, and Governor Weld of Massachusetts wants to compel welfare recipients to find work within sixty days or else lose their cash benefits or take state-provided community-service jobs. It remains to be seen whether such policies, which apparently give no thought to the need to abolish the obstacles presently standing in the way of employment, can not only be enacted but also be maintained in the face of the serious hardships that are likely to accompany them.

Elimination of Public Hospitals

Public hospitals and public clinics could also gradually be abolished. Their operation and the ownership of their assets could be turned over to recognized private charities, which would temporarily receive public funds to finance their operation. But the appropriation of public funds for such purposes would steadily fall, again, say, at a rate of 10 percent per year. These charity hospitals and clinics would be empowered to charge fees to their patients, at their discretion, to help compensate for the loss of government funds. It should be expected that the elimination of government control would be accompanied by major reductions in the costs of operating these hospitals and clinics. Medicaid could be phased out in step with the reduction in the public funds turned over to the now private charity hospitals and charity clinics. (Obviously, it would be extremely desirable if this process were accompanied by the most rapid possible liberalization of the licensing requirements for entry into the medical profession and for the ownership and operation of hospitals and clinics.)

Firing Government Employees and Ending Subsidies to Business

I believe that it is possible to fire government employees and abolish government subsidies to business with the support of the groups concerned. This can be accomplished by making the termination of employment or loss of subsidy to the immediate financial self-interest of the parties. What could be done is to offer very generous severance terms, in the form of the continued payment of the salary or subsidy for a limited time, during which the parties would be fully free to change over to any alternative private, unsubsidized activity they wished.

Thus, for example, a government employee presently receiving a salary of, say, $30,000 a year and whose job deserves to be eliminated might continue to receive that salary for a full year, while being free to do anything he wished in the way of private economic activity. He would be in a position to take a substantially lower-paying job in private industry and use his severance pay to tide him over until he had gained sufficient work experience to increase his earnings to a level comparable to what they had been before. Or he could go to school and in that way very comfortably learn the skills necessary to earn an income in private industry comparable to what he had earned as a government employee.

In comparison with the present situation, such an arrangement would be very much in the self-interest of the general, taxpaying public. The financial burden of the taxpayers would certainly be no greater than it is now, and it would, of course, be reduced as soon as the severance pay of the government employees came to an end. Moreover, to the extent that the government employees are presently engaged in carrying out policies of destructive interference in the lives of the citizens, the public would enjoy the immediate gain of the end of some part of such interference. It is a comparatively minor evil to pay a simple dead weight subsidy to former government employees now engaged in other activities, when the alternative is to continue to support them as destroyers. Of course, in order to prevent anyone from taking unjust advantage of such a plan, government employees who received its benefits, should thereafter be barred from government employment (other than elective office) for a protracted period of time, perhaps for life--unless they refunded the extraordinary severance pay they had received.

To the extent that the former government employees turned to seek jobs in private industry, their competition would cause the money wage rates of the average worker there to drop. This would be the case both insofar as they entered the labor market prior to the reduction in government payrolls and in taxes and insofar as, when it came, the reduction in government payrolls constituted a drop in the aggregate demand for labor. (This last would be the result to the extent that taxpayers spent the funds they no longer paid in taxes to meet government payrolls, in buying goods rather than in paying wages.) A tendency toward a drop in wage rates would, of course, also be present as the result of the phasing out of the welfare system and of social security, inasmuch as both would bring about an increase in the supply of labor relative to the demand for labor.

As the readers of this book should know by now, the effect in all these cases would be benevolent. For the necessary fall in wage rates would be accompanied by reductions in prices that would be still greater. This is because the employment of more workers means more production and thus lower prices caused by more supply, as well as the saving of taxes to support the unemployed or unproductively employed. The fall in prices relative to wage rates, moreover, would be a continuing one, because the effect of reduced government spending, reduced taxation, and reduced government interference in general is increased capital accumulation and thus a rising productivity of labor. Capital accumulation and the rise in the productivity of labor would be the result both of a greater relative production of capital goods and a higher productivity of capital goods. The greater relative production of capital goods would be made possible by reduced government spending and lower taxes and thus more saving and productive expenditure relative to consumption expenditure. The higher productivity of capital goods would be the result both of lower taxes and thus greater incentives to use capital goods efficiently, and of reduced government interference of other types that stands in the way of the efficient use of capital goods.

It follows, and deserves to be stressed, that the long-run effect of firing unnecessary government employees is to progressively increase the economic well-being of those employees, along with that of everyone else, and that this is true even in the absence of any severance pay. The former government employees also benefit from the additional capital accumulation and rising productivity of labor and real wages that are made possible. They too benefit from the fact that more people now contribute to production instead of having to be supported out of the production of others, and that production is no longer held down by their activities.

Essentially the same conclusion applies to welfare recipients. In the long run, they too would be economically better off living as self-supporting wage earners in a progressing economy than as welfare recipients. Their gain would come not only from the economic progress or more rapid economic progress that abolition of the welfare system would greatly contribute to, but also, and in many cases even more importantly, from having at long last to develop and actualize their innate human potential, which the welfare system has permitted them to avoid doing. Being compelled at last to work in order to live, many of them would accept that necessity and strive to do better at it, whereas at present they need strive for nothing and thus develop into nothing.

There is absolutely no kind of magic or "free lunch" assumed here. The source of the universal gains is an increase in production. Every individual's removal from an unproductive or destructive position in government employment or on the welfare rolls, to a positive, productive position in private employment, adds to the total of what is produced and contributes to the further increase in the total of what is produced, through making possible additional capital accumulation. It is because of this increase in total production that everyone is in a position to gain, with no one having to lose. It should actually be no more surprising that former government employees end up being economically better off without their government jobs than that blacksmiths and horse breeders end up being better off without their former jobs--and that they do so, even if they must settle for a relatively lower position on the economic scale. Indeed, it should be less surprising when one considers that the nature of so many government workers' jobs is precisely the stifling of innovation and improvement and that the loss of such jobs means precisely the opening of the way to progress and improvement. By the same token, the gain of former welfare recipients from the abolition of welfare should be no more surprising than the gain of someone needlessly confined to a hospital from his discharge and emergence into the world of life and action.

Every serious advocate of capitalism has always been able to understand such facts in connection with the so-called long run. The proposal I have made about generous severance pay for government employees makes it possible for a harmony of material self-interests to exist even in the very short run.

* * *

The principle of generous severance terms could be applied to the elimination of government subsidies to business, in the following way. As compensation for the abolition of a subsidy, the government would continue the payment of funds for a number of years equal to the profits and depreciation allowances that the subsidized enterprises would have earned had the subsidies been continued. Its payments could also cover the interest and other such contractual obligations the firms may be obliged to pay as the result of having reasonably entered into such arrangements in connection with the production of the subsidized item. Severance allowances would also probably have to be given for a time to the employees of those enterprises, equal to their wages or to a major portion of them. In addition, it would probably be necessary to some extent to provide such payments to the firms producing equipment or other supplies for the subsidized enterprises, and to their employees. For example, as compensation for the elimination of farm subsidies, not only farmers and their employees would have to receive severance allowances, but also the farm equipment industry and its employees. The total of the severance allowances in any given year, however, would not exceed what the government presently spends in buying the products concerned. The payments at each stage of production would not apply to the sales revenues received at that stage, but only to the much smaller figure of the net income earned by the various parties, plus depreciation allowances.

In this way, I believe that the businesses that are presently recipients of government subsidies, together with their employees and suppliers, could be given a powerful short-run interest in the abolition of their subsidies. They could be placed in a position in which the severance allowances they received would make the transition to producing for the free market virtually painless, indeed, even positively rewarding insofar as those allowances plus immediate earnings in the free market exceeded the income previously derived from the government.

Escaping from Rent Control With the Support of Tenants

The rental housing market, having suffered in places such as New York City from two full generations of rent control, and with no end to rent controls in sight, has devised a method of escaping from the destructive effects of rent controls, and of doing so with the support of the tenants involved. The method rests on the recognition by landlords that in point of fact the tenants have acquired a kind of squatter's rights to the apartments they occupy, "rights" which have acquired long-standing legal sanction that almost certainly will continue to be upheld by the government. Based on this recognition, the method of escape adopted by growing numbers of landlords is that of allowing the tenants to reap a substantial share of the financial gains resulting from an apartment house becoming converted to condominium or cooperative housing. This is the meaning of the fact that landlords offer their existing tenants substantially below-market "insider prices" on the purchase of the apartments they occupy, on condition that the tenants agree to the building's change from that of rental housing to condominium or cooperative status. The tenants are then free to turn around and sell their units or rights to their units for a substantial gain, which, of course, is what wins their cooperation.

This is a very sad situation insofar as it represents the fact that to an important extent a group of nonowners has managed to acquire the status and rights of property owners by means of a government-sanctioned--indeed, government-led--violent appropriation. It is the closest the United States has thus far come to a situation comparable to that of a successful feudal invasion, in which an earlier group of property owners is forcibly dispossessed by a subsequent group of property owners. Nevertheless, it is better that property rights of the appropriators finally be recognized than that property should remain indefinitely in a condition in which no one has the power to use it well. Under rent control, tenants can stay on as long as they like, and consume the capital invested in the buildings in which they live. They are succeeded by other such tenants. The result is simply the destruction of the stock of housing, inasmuch as the rent controls deprive the landlords of the incentive and, indeed, the ability, to maintain their housing. Compared with this alternative, the conversion of rental housing to a different status, free of rent controls, at least makes possible the maintenance of the stock of housing and its possible increase.

Apart from once and for all abolishing existing rent controls--however unlikely the prospect may be in many places at present--the contribution that the government could make to the process of the market's freeing itself from rent controls would be constitutionally to guarantee that once any property managed to escape from rent controls, it would never again, under any pretext, be subjected to them. This would eventually operate to reestablish an extensive market in rental housing. Such a market, of course, is vital for all those who cannot afford to buy their housing.

5. Abolition of Income and Inheritance Taxes

The total abolition of the personal and corporate income taxes and of the inheritance tax is an essential feature of a procapitalist political program. It is required by the individual's right to his own property. In addition, progress toward the abolition of these taxes helps to create the conditions required for economic progress, by increasing economic incentives and the ability to save, both of which serve to promote capital accumulation and thus a rising productivity of labor and rising real wages.

It must be stressed that the more rapidly economic progress can take place, thanks to reductions in the income and inheritance taxes, the more rapidly can the relative size of the government in the economic system be reduced. The consequence of this is that the degree to which people must experience the burden of the government's exactions is correspondingly diminished. If economic progress can take place at a rate of, say, 3 percent a year, then even if government activity were not reduced at all, the relative size of the government in the economic system would be cut in half in a single generation. For in that time economic progress at a 3 percent annual rate would have succeeded in doubling the size of the economic system. Thus, the burden experienced even from supporting a government of the same size would be felt much more lightly.

These facts imply two important principles pertaining to our political program. First, in reducing income tax rates, our primary emphasis should usually be on reducing the maximum rates, until there exists only a single proportional income tax rate. Reductions in the upper brackets have the greatest impact in strengthening economic incentives and saving, and thus do the most to bring about economic progress. We need to make the public aware of how everyone benefits from these tax reductions--of how they operate to raise the demand for labor and thus wages, and, at the same time, progressively to increase the productivity of labor and thus the supply of goods relative to the supply of labor, which steadily reduces prices relative to wages and thereby steadily raises real wages. Of course, once the so-called progressive aspects of the income and inheritance taxes have been eliminated, work should immediately commence on the steady reduction in what remains of those taxes, and should continue until they are totally eliminated.

Second, a closely related minimal short-run political demand we should make is that the level of real per capita government spending be immediately frozen, so that it does not exceed its current level. Such a demand would be a call not for the immediate abolition of the welfare state and improper government activity of all kinds, but a demand for an immediate cessation in their further growth. Its implementation would result in a continuing automatic shrinkage in the relative size of the government, so long as economic progress continued.

A possible way to start on the elimination of the income/inheritance tax right now would be to fight for the immediate adoption of a universal exemption of at least 51 percent of everyone's income from federal, state, and local income taxation under all circumstances. This would be in the name of the principle that the individual is the owner of his own income. The 51 percent exemption would constitute meaningful recognition of this principle. Over the years, we would work to increase the tax exempt portion of everyone's income while reducing the rates on the taxable portion, until the income tax was totally abolished. Given the drastic reductions in welfare-type spending I have proposed and the achievement of economic progress, it should be possible to phase out the income tax entirely over the course of a generation.

The same phase-out procedure should be applied to the corporate income tax. In addition, in the short-run, we should demand the elimination of the double taxation presently entailed in the corporate income tax. It represents double taxation for a corporation first to be taxed on its income, and then for the stockholders of that corporation to be taxed again on what they receive from their own corporation, which has already paid a substantial income tax. The principle of the 51 percent exemption and its progressive enlargement should be applied to the total of every individual's personal income plus his share of the profits of any corporation in which he owns stock.

However, the most important short-run goal that we should emphasize in connection with taxes is compelling the government to respect the ordinary civil rights of taxpayers. We should demand the abolition of criminal penalties for income-tax evasion, in the name of the principle that an individual cannot steal or fraudulently keep what is his own property to begin with. Also, just as in the case of government agencies seeking search warrants, we should demand that the Internal Revenue Service be compelled to obtain a prior court order authorizing any seizure of property or attachment of salaries and bank accounts it wishes to undertake. If it is not possible to obtain such elementary protection of individual rights, then a compromise that at least would be a move in the right direction would be the existence of automatic judicial review of all such IRS activities. And until criminal penalties for not paying taxes are eliminated, we should demand that the Fifth Amendment rights of individuals to remain silent in order not to incriminate themselves be applied to taxpayers, i.e., that no criminal penalties exist for failure to file an income tax return. In other words, we should demand that taxpayers, who are presently subject to criminal law, enjoy the full civil rights accorded to criminals. In answer to objections that the income tax cannot work without the violation of elementary civil rights, we should reply that if that is the case, then it is further proof of why the income tax must be abolished. So long as the supporters of the income tax wish to retain it, we must demand that they accept the burden of finding ways of harmonizing it with respect for such rights.

A further principle that I believe should be applied in connection with proposals for the reform of the income tax is that no reductions of any kind should ever be made in existing tax exemptions, shelters, or so-called loopholes. Our principle should be that no one's income taxes should ever be increased over what they would be under existing law. It is true that the various exemptions, such as for interest paid on home mortgages, have some economically distorting effects by artificially encouraging some types of economic activity at the expense of other types, but those distortions will become less and less significant with the reduction in the burden of the income tax, and will disappear altogether when it disappears. We should take the position that every reform of the income tax must serve to reduce the income taxes paid by some or all people, and not increase the income taxes paid by anyone.

Still a further principle that we must uphold concerning tax reform, and one whose necessity should be obvious on the basis of all the preceding discussions concerning the role of capital formation and the consequences of inflation, is that tax reductions must be accompanied by equivalent or even more than equivalent reductions in government spending--specifically, in nondefense spending primarily. In view of the highly destructive effects of budget deficits, it should be clear why tax cuts must be accompanied at least by equivalent reductions in government spending of one kind or another. Deficits, it should be recalled, deprive the economic system of the benefit of the portion of the supply of savings that must be used to finance the deficits. In the absence of a gold standard, they also lead to the rapid inflation of the money supply, which, of course, also undermines capital formation. Cutting taxes without cutting government spending, therefore, is no solution for reducing the government's assaults on the economic system.

The reason the reductions in government spending must be primarily at the expense specifically of nondefense spending is that defense is one of the few legitimate functions of government. Spending for defense should be cut only as it becomes genuinely safe to do so. It should be blatantly obvious that we should never advocate imperiling the defense of this country, which means, essentially, the defense of such freedom as exists in the world, in order to preserve any aspect of the welfare state. Indeed, our need for national defense exists for no other reason than to prevent the imposition of the underlying premise of the welfare state in a more extreme and more consistent form by outside military force. That premise, of course, is that some men have the right to enslave others for the satisfaction of their needs. Thus, not only must we never dream of sacrificing national defense to any aspect of the welfare state, but what we want national defense for is precisely to protect us from the logically consistent version of the welfare state that is represented by totalitarian socialism. Furthermore, what we should advocate in connection with national defense is overwhelming military superiority for the United States. That is our only real guarantee of avoiding war. If we have such superiority, we will not start a war, and it is unlikely that anyone else will dare to do so.


6. Establishment of Gold as Money

The establishment of gold as money is essential to the achievement of a capitalist society. (What is said concerning gold, of course, also applies to silver. Furthermore, for reasons explained in the last chapter, the gold or silver money I speak of should be understood as a 100- percent gold or silver money--i.e., a 100-percent-reserve system--in which, apart from subsidiary token coinage, all money either literally is gold or silver or is receipts for gold or silver that are fully backed by same.)

The establishment of gold as money on these terms is necessary in order to end inflation and all of its destructive consequences. It is necessary in order to take the power to inflate--that is, to create money virtually out of thin air--out of the hands both of the government and of the banking system operating with the sanction of the government. It is necessary in order thereby to subordinate the government to the financial power of the citizens and to make people aware of the cost of government spending, and to end the arbitrary redistribution of wealth and income, the undermining of capital accumulation, the possibility of utter economic devastation either through wage and price controls or the ultimate destruction of money, and deflation, depression, and mass unemployment. It is also necessary for making possible the rapid and radical dismantling of the welfare state, by removing the threat of depression as an accompaniment of that process.

Because I have thoroughly discussed the role of gold and the methods for achieving a gold standard in the last part of the previous chapter, I will say no more about this vital subject here. However, it had to be named here at least to this extent.

7. Procapitalist Foreign Policy

In the present-day world, a procapitalist foreign policy is indistinguishable from a pro-American foreign policy. The United States is the world's leading capitalist country. It is so on the basis of its fundamental laws--its Constitution and Bill of Rights. And, not surprisingly, it is hated for it. It is regarded by much of the rest of the world in the same way that within the United States the minority constituted by businessmen and capitalists--the "rich"--are regarded by much of the rest of the American citizenry. If the United States is to stand up for itself, it must learn to stand up for capitalism.

The most essential point which needs to be recognized is that to the extent that the United States is a capitalist country, its government is morally legitimate, because to that extent its government acts to defend individual rights, and the powers it exercises consist of nothing more than those of the individual's delegated right of self-defense. By the same token, governments which do not recognize the existence of individual rights, governments whose very existence is based on the premise of the forcible sacrifice of the individual to the collective, have no moral legitimacy. This means, above all, that the surviving Communist regimes, such as those of mainland China, North Korea, and Cuba, and many, if not most of the governments of the so-called third-world countries have no moral legitimacy.

The overthrow of these governments is earnestly to be desired on behalf not only of their own citizens, who are enslaved, but also on behalf of the people of the entire world, who are forcibly deprived of the benefits they could otherwise derive if these countries were free--benefits in the form of the free development of the talents of the citizens of those countries and the free development of their natural resources. A major principle here is that the violation of the rights of the individual anywhere is an attack on the well-being of people everywhere.

A foreign policy based on these principles would deal with such governments as bandits and outlaws, temporarily holding power by means of force and fear. This does not mean that it would be the obligation of the U.S. government to go to war with such countries if it were not itself attacked or directly threatened by them. But it certainly does mean, as a minimum, that the U.S. government should do nothing to promote the existence of such governments. It should certainly not aid them in any way, nor provide them with any kind of forum in which to defend their crimes, nor denounce those who prevent them from expanding their power or who prevent similar regimes from coming to power in the first place.

As examples from the recent past, the U.S. government should certainly not have provided Soviet Russia or Communist Poland with free food or loan guarantees. Instead, it should have allowed them to suffer the famines that socialism causes, while at the same time explaining to the world how socialism was the cause of the famines and thus how millions were forced into starvation because of the power-lust of the Communist rulers and their insistence on the preservation of the socialist system. It should have led world opinion in demanding that the Communist rulers step down and the socialist system they had imposed be abolished, so that the citizens of the Communist countries could become free to produce and live. Had the United States followed this policy, the collapse of communism would have occurred decades earlier.

Today, the United States should withdraw all official recognition from the remaining Communist-bloc countries and from totalitarian third-world countries, such as Iran, Iraq, and Libya, and expel their diplomats and alleged trade missions. It should end all so-called cultural exchanges with such regimes. If necessary, it should withdraw from the United Nations and expel that organization from U.S. territory. The only purpose served by the presence of these individuals and institutions is spying, terrorism, and subversion. If the governments of these countries wish to continue to be recognized, the prime condition must be their formal disavowal of socialism and the adoption of a genuine plan for the protection of individual rights and the establishment of capitalism in their countries.

It should be recalled that the very fact of the United States adopting a policy of laissez faire and respect for private property rights at home would itself go a long way toward undermining the power of today's leading terrorist governments, namely, those of the Middle East. At the same time, it would cut the ground from under the resurgence of religious fanaticism in the region, which, like the arms build-up by governments in the region, is financed by money derived from an artificially high price of oil. These results would follow because a leading consequence of the adoption of a policy of laissez faire and respect for private property rights by the United States would be a great increase in the supply of domestically produced oil and other sources of energy, which latter, as substitutes for oil, would cause a reduction in the demand for oil. In the face both of a substantial increase in the supply and reduction in the demand for oil, there would be a sharp decline in its price. Thus, the revenues that finance the terrorists and fanatics would sharply decline.

* * *

A major obstacle to the pursuit of a proper foreign policy by the U.S. government is the incredible corruption of thought which exists not only within the United States but, to a much greater degree, in the rest of the world. This corruption was blatantly evident in the fact that throughout the so-called cold war, the state of world opinion was such that the expulsion of Communist diplomats from the United States would have been regarded as an act of aggression on our part. A call for the Communist leaders to step down and end the enslavement of their citizens would have been regarded as a transgression against their allegedly God-given right to enslave--or, as it is customarily put, "an interference in the internal affairs of sovereign nations."

The ability of the United States to pursue a proper foreign policy and the ability of foreign countries themselves to move toward the achievement of a capitalist society depends on the spread of procapitalist ideas abroad. To say the same thing in different words, both our immediate national security and our long-run goal of the establishment of a fully capitalist society throughout the world, with worldwide free trade, freedom of investment, and freedom of migration, require that we be interested in the spread of proreason philosophy and procapitalist economic theory in foreign countries as well as in the United States.

A major task in the years ahead must be to bring about the translation of all of our main books into all of the world's major languages. Human Action, Socialism, Atlas Shrugged, and about fifty or more other titles, should be made available in Russian, Polish, and Chinese, as well as in Japanese, Korean, Arabic, and all the other leading languages. Efforts should be made to promote the circulation of these books everywhere. I do not agree for a moment with the notion that only people brought up in the United States or Canada can readily appreciate our literature. Our philosophy recognizes only one reality and one human nature. No matter what intellectual and psychological obstacles a particular culture may create in the thinking of people, there is always some significant number who are open to new ideas. Our commitment to our philosophy and our national and economic self-interest require that we try to reach these people. As an example of the importance of doing so, just imagine the effect on our national self-interest of a totalitarian regime's someday having to deal with people who have come to realize that each individual possesses reason and has an inalienable right to life, and that their reason and their lives are being sacrificed because of nothing more than the rulers' willful refusal to abandon an irrational dogma. Imagine the effect of the regime's being infiltrated by such people.

It should go without saying that all such intellectual efforts must be undertaken privately, not as an activity of the U.S. government.

As a further point in connection with what we should be working toward in the area of foreign policy, I would like to make a suggestion for another special campaign. This would be a campaign urging newspapers, magazines, and television stations which choose to maintain officially accredited reporters in Communist or other totalitarian countries to provide a warning label on all their reports from those countries which are obtained with government sanction. The label would identify the totalitarian nature of the country and state that no reason exists for regarding the report as anything but propaganda serving the interests of the government that originated it or sanctioned it.

Freedom of Immigration

We need to make a beginning toward the establishment of freedom of immigration. A logical place to begin would be in calling for free immigration from our immediate neighbors, Canada and Mexico. There is not the slightest reason for excluding Canadians. They are virtually indistinguishable from Americans, and had one or two battles gone the other way early in our history, would in fact be Americans. By the same token, had the Confederacy won the Civil War, then, with the prevalence of today's ideas, present-day New Yorkers would probably not be able to migrate to Texas, nor Texans to California. Such restrictions, based on mere accidents of history, simply have no logical foundation.

It should not be necessary to add that the free immigration of Canadians, Mexicans, or any other nationality should not be at the expense of the immigration allowed under existing law to the members of any other nationality. As in the case of tax reduction, no one should be made any worse off than he now is, because of an attempt to improve conditions for anyone else.

The reason we must seek to abolish restrictions on Mexican immigration at the earliest possible moment is because the attempt to restrict it is in danger of making us adopt some of the most obnoxious features of the former South African regime--namely, a virtual pass law, in which people of Latin origin will have to carry identity papers to show on demand to immigration police, who, if they do not find the appropriate "papers," will have the authority to destroy the lives of said individuals by uprooting them from their jobs and homes and deporting them. Already virtually Gestapo-like conditions exist in Southern California in connection with a notorious immigration checkpoint, where fleeing Mexicans of all ages and both sexes have often run into oncoming automobile traffic rather than be arrested by officers of the Immigration and Naturalization Service. This ignominy, I must note, has now been compounded by the recent passage of Proposition 187 in the state of California, which, if upheld in the courts, will actually impose the requirement of having an official identity card that must be shown on demand to the authorities.

Furthermore, the principle of private property rights implies that the Mexicans, and everyone else, have a perfect right to come here--to work for anyone who is willing to hire them and to live wherever anyone is willing to sell or rent to them. The violation of the rights the Mexicans or any other category of immigrant is a violation of the private property rights of employers and landlords--it is telling them that other people have the right to dictate whom they may or may not employ or to whom they may or may not sell or rent their property. It is a blatant manifestation of collectivism to believe that somehow the people of the United States as a whole have the right to tell the individual, private owners of property how they may use their property--that they must use it not as they, the private owners wish to use it, but as the nation collectively, or at least a majority of those voting, wish it to be used.

As I explained in Chapter 9, in a capitalist society free immigration does not deprive those already present of the opportunity of working and it does not reduce their standard of living. On the contrary, in the long run free immigration into a capitalist society from a semifeudal one, such as Mexico's, must operate to raise the general standard of living in the capitalist society, because it means that more human beings will now live under freedom and have the opportunity to develop their talents. There are Mexicans and the children of Mexicans who have the potential for making the same kind of economic contribution to the general standard of living as have immigrants from other countries before them.

The only legitimate argument against unrestricted Mexican immigration (or unrestricted immigration of any other ethnic group) is based on the existence of our welfare state. To the extent that Mexicans come here and go on welfare and medicaid, or use public hospitals and public schools, and place an increased burden on government-subsidized public transportation facilities and so forth, then, it is true, there is a genuine loss imposed on the people already here. The solution, however, is not to violate the right of the Mexicans to immigrate, but to start dismantling our welfare state.

Without immediately abolishing the totality of the welfare state, which would be politically impossible, we could simply change its terms and make all noncitizens ineligible for its programs. This, of course, is essentially what a portion of California's Proposition 187 seeks to do. However, that proposition also seeks to expel the immigrants and to deter further immigration through fear. Totally unlike Proposition 187, the mere exclusion of the immigrants from the welfare state would not impose any actual burden or disability on them. It would not be they who had to carry identity papers and prove why they should not be deported. There would be no question of that. On the contrary, it would only be the American citizens who sought the alleged benefits of the welfare state who would have to show papers and prove their citizenship.

While excluding the immigrants from the welfare state, we should simultaneously remove all government-imposed barriers to their being supplied privately with what they need. This would entail the removal of government licensing requirements in connection with meeting the medical, educational, transportation, and sanitation needs of the immigrants. As far as possible, this should be accompanied by privatization of such things as existing government-owned hospitals, schools, bus lines, and garbage-collection operations. An important result of privatization would be that the presence of the larger numbers of people resulting from immigration would be viewed as a source of more business, not more problems, as it is under the ineptitude of government ownership. In addition, in order to reduce the injustice that would exist in making immigrants pay taxes for the support of the welfare state for the native population, the immigrants should receive as nontaxable wages what would otherwise be their own and their employer's social security and medicare contributions made in connection with their employment. The ironic effect of all these liberalizing measures would be to give the immigrants more freedom than today's American citizens, and in that sense to make them truer Americans than today's American citizens. If, at the same time, the immigrants could be reached with procapitalist ideas, this might well serve as the foundation for their being developed into a major group opposed to the welfare state for anyone.

In the present circumstances, it is especially important to make every effort to exclude immigrants from the public education system. At one time, it is true, public elementary education succeeded in educating pupils of all different nationalities in the three R's. And even though its own existence represented a contradiction of the principle of individual rights, it instilled in pupils a basic respect and admiration for the United States. Today, public education teaches very little to anyone. It turns out masses of illiterates and students who have not the slightest idea of what the United States stands for. One of the last things we should want is today's public education system teaching masses of immigrants in their own language. One of the major subjects that would be taught would undoubtedly be revolutionary Marxist nationalism. Under such conditions, as far fetched as it may sound, large-scale Mexican immigration into the Southwest could well result, one or two generations later, in a widespread demand for the return of the Southwest to Mexico. Thus, an important part of any campaign for free immigration for Mexicans should be an attack on public education and its Marxist domination. It is vital that the immigrants be assimilated as English speakers who support capitalism.

It would be enormously valuable if it could be explained to the immigrants that only the philosophy of individualism and respect for private property rights made possible their immigration. It would be legitimate to require of all immigrants an oath swearing to uphold the system of private property rights and to educate their children in the English language.

It would be a very short step from freedom of immigration for Mexicans to freedom of immigration for everyone.

Friendly Relations With Japan and Western Europe

Because of their exceptional economic strength and thus their potential someday to constitute a serious military threat to the United States, a cardinal principal of American foreign policy must be the maintenance of friendly relations with Japan and the countries of Western Europe. To assure this, what is necessary on our part is a policy of free trade, freedom of investment, and freedom of immigration--in short, a policy of full capitalism with respect to these countries. If we were to follow this policy, we would eliminate any possible economic basis of aggression against us on the part of these countries. And for all of the reasons shown in this book, from an economic point of view we could only gain from such a policy--probably very substantially. As I have shown, we would gain even if we alone were to follow a policy of free trade while the others clung to various protectionist measures. In that case our position would be analogous to the situation of a territory in which inbound transportation costs were lower than outbound transportation costs.

If we followed such a policy toward these countries, we could reasonably ask them to undertake a larger share of the defense of the free world, in accordance with the increase in wealth and income they have experienced. We would not have to worry that in doing so, we were encouraging potential enemies to arm, as we should presently be concerned.

Of course, the policy of full capitalism with respect to foreign relations should be applied to all countries. However, for the reasons stated, it is especially important in these two cases.

8. Separation of State from Education, Science, and Religion

Finally, it is necessary to turn to the subject of separation of state from education, science, and religion.

Abolition of Public Education

The system of public education could be abolished over the course of a generation, in a way that need not impose financial hardship on the parents of any child alive at the time of the abolition's commencement. The method would be the enactment of state laws declaring that as of the end of the seventh school year following the enactment of the law, that state and its localities will no longer be responsible for the financing of the first-grade education of any student; that a year after that, they will no longer be responsible for the financing of the second-grade education of any student; and so on, through all the elementary, secondary, and college grades. This procedure would enable the parents of children alive at the time of the enactment of the phase-out legislation to go on using the public education system if they wished; it would give prospective new parents a year's notice that they would be responsible for the cost of their children's education.

The abolition of public education should be preceded by the recognition of the right of parents to educate their own children and by the abolition of educational licensing requirements. It would also be proper if the public schools were to be made to begin charging tuition fees to those who could afford them, which would be progressively increased, until they reflected the public school system's costs. The fee system would permit steadily increasing competition and growth on the part of private schools, which would then be in a position easily and totally to displace the public schools.

One of the most immediate points to fight for in connection with the abolition of public education is the abolition of the federal Department of Education and all federal aid to education. These measures would create an immediate improvement in education by eliminating a major layer of bureaucracy and by forcing the elimination of unnecessary courses and unsound educational methods that are fostered, if not mandated, by the availability of federal funds. They would thus bring about a renewed concentration on the three R's and other serious subjects.

In the struggle against public education, an important principle to stress is that the public education system is inherently unsuited to teach any subject about which there is controversy. This is because teaching such a subject necessarily entails forcing at least some taxpayers to violate their convictions, by providing funds for the dissemination of ideas which they consider to be false and possibly vicious. On the basis of this principle, the public schools should be barred from teaching not only religion, but also history, economics, civics, and biology. In the nature of things, only private schools, for whose services people have the choice of paying or not paying, can teach these subjects without violating the freedom of conscience. The fact that barring the public schools from teaching these subjects would leave them with very little to teach, and place them in a position in which they may as well not exist, simply confirms the fact that public education should be abolished.

Separation of Government and Science

The above principle concerning the government's violation of the freedom of conscience in supporting the promulgation of controversial ideas also constitutes an argument for the abolition of practically all government support of the arts and sciences. There is great controversy concerning the artistic merit of various schools of literature, painting, and sculpture. There is significant and growing controversy even over the various theories of natural science, such as the controversy between the supporters of the "Big-Bang" theory of the origin of the universe and the supporters of the steady-state theory of the universe, which holds that the universe did not have an origin. For the government to finance any artistic or scientific activity means to compel taxpayers who hold the activity to be artistically or scientifically worthless, and perhaps immoral as well, to finance it nonetheless.

More fundamentally, our opposition to government involvement in art and science--and in education--is based on Ayn Rand's principle that force and mind are opposites. Matters of truth and value can be determined only by the voluntary assent of the human mind. Yet government is essentially a policeman with a gun and club. It settles matters by means of force. This is directly contrary to the nature of knowledge. It has no place in the laboratory, the lecture hall, or the art gallery. The determination of what is true or false, or possessing or lacking in value, simply cannot properly be decided by government officials. Nor can it properly be decided by majorities in voting booths. Such a thing is further contrary to the nature of knowledge, which always begins as the discovery of just one mind, and which is as yet totally unknown to the entire rest of the human race. Governments and majorities must not be allowed to crush the isolated individual, who is the source of all new knowledge and improvement. Yet precisely this is the outcome of government support of science and art, which scoops up the limited funds available for the support of such activities and arbitrarily dictates how they are to be spent.

As to the tactics to be used to remove the government from these areas, the most important is the continuous demonstration of the contrary nature of government force, on the one side, and knowledge and value freely assented to, on the other.

* * *

An important step in reducing and ultimately eliminating government interference in science would be to require that all alleged scientific studies financed in any way by any government agency or department prominently state that fact. This might be required in the form of an amendment to the Freedom of Information Act. The requirement should extend to all press releases and public announcements made by the government or any of its employees concerning the study. In this way, the study could be easily identified as coming from the government or associated with the government. The requirement would serve, in effect, as a warning label. In addition, all information relevant to the study's being undertaken, including the initial application for a government grant, and all correspondence and internal government documents pertaining to the study, should be identified in an appendix to the study, and copies made readily available to any member of the public wishing to see them. The study should also be required to include an appendix providing an intelligible explanation of the methodology on which it was based. These requirements would make it possible to scrutinize and judge the scientific seriousness of such studies far more easily than is possible today, and thus to enable people much more readily to distinguish government propaganda from science.

An important first step in the eventual abolition of such agencies as the Food and Drug Administration (FDA) and the Environmental Protection Agency (EPA) would be a law severely limiting their powers to ban drugs and chemical substances. The law would nullify the power of the agency's adverse ruling in any case in which similar agencies in, say, two or more modern foreign countries, such as Canada, Switzerland, and Great Britain, have found no reason to ban a substance. In other words, it would subject these agencies to a form of liberalizing "peer review." In such cases, in order to ban a substance, the FDA and EPA would have to prove their case before a court of law. The principle that the FDA and EPA and their staffs are not endowed with any form of divine guidance could be progressively extended--to the point where any one private individual was free to act on his contrary opinion. (After all, why should the opinions of American citizens be viewed as inferior to those of foreign bureaucrats?)

Perhaps the best way ultimately to abolish the FDA and the EPA would be to demand their conversion to private agencies, having no powers of compulsion and supported exclusively by private funds. They would then operate as advisory agencies, in competition with other such private advisory agencies, free to pronounce whatever opinions they wished about any subject, but not free to have force used to back their opinions--except when they could go before a court of law, as any other private citizen, and prove the existence of a danger to the lives or property of parties not willing to take the risk of such danger.

Separation of State and Church

Our opposition to government involvement in religion is based on the same foundation as our opposition to government involvement in education and science. Indeed, government-sponsored religion represents the most n-a-k-e-d kind of use of force against the mind. Religion is based on faith. The use of force to impose it or its values is always the use of force in order to compel acceptance of what cannot be proved or denial of what can be proved.

The supporters of capitalism must take the lead in the battle against the current incursions of religion into politics and government. Nothing could be more vital to progress toward the establishment of a capitalist society. The old stereotypes of the advocates of socialism as enlightened liberals and the advocates of capitalism as religious conservatives need to be decisively broken. From now on, in accordance with the actual facts, the advocates of capitalism must be viewed as the representatives of enlightenment, and the socialists as the representatives of irrationalism and the Dark Ages.

In the 1930s and 1940s, to be sure, the seemingly enlightened Left was able to depict its opponents as virtual Ma and Pa Kettles, living on a farm somewhere, totally cut off from modern civilization, and projecting utter ignorance and contempt for science and technology. Exactly that image is what the New Left has chosen to wrap itself in, ever since it joined the ecology movement. We should be sure that the public eventually understands this fact and that it is with the New Left that those who place faith above reason belong.

Previous discussion in this book and in Ayn Rand's The New Left: The Anti-Industrial Revolution provide the essential basis for the transformation of the view of which side wears the mantle of Reason. They clearly show how the ecology movement, which is the last gasp of the Left, is thoroughly riddled with irrationalism and hostility to science and technology. Furthermore, the whole of this book and all of the writings of von Mises, of the other Austrian and classical economists, and of Ayn Rand, show beyond a shadow of a doubt that capitalism in no sense whatever depends on the acceptance of any form of faith or denial of reason. The case for capitalism is thoroughly rational.

In view of the fact that socialism has demonstrated its failure and that as a result its advocates have largely given up the banner of reason, means that the success of a rational, capitalist political program should be all the more rapid. By the admission of both sides, capitalism is the only system to which advocates of reason can turn.

Furthermore, the projection of a rational, capitalist political program, actually capable of solving major national and world problems, will stand as a major philosophic affirmation of the power of the human mind. Thus, it can be an important source of gaining recruits for all aspects of a rational philosophy. As previously shown in connection with the ecology movement, the cultural surge in blatant irrationality that has taken place in recent decades is due in no small measure to the demonstrated failure of socialism as a politico-economic system. Socialism is what most intellectuals have regarded as the system called for by logic and reason. As a result, its failure has served to shake their confidence in reason, and thus to open the floodgates to irrationalism. By the same token, a resurrection of respect for the potential of reason in the politico-economic realm will promote the case for reason everywhere.

* * *

The advocates of capitalism should take the lead in the defense of the freedoms of press and speech. At the same time that we seek to protect it for purveyors of "prurient" literature, we should seek to protect it for the writers of financial newsletters, whom the SEC wants to censor; for corporations, whom the Congress and the Federal Elections Commission want to censor by denying them the right to support political candidates of their choice; for unpopular speakers whom student thugs want to censor by denying them the ability to be heard by their audience; for ordinary citizens whom the Department of Housing and Urban Development wants to censor for speaking out against government-sponsored projects in their neighborhoods. We should demand the freedoms of speech and press for all advertisers, including cigarette advertisers.

We should place the establishment of full freedom of the press and of the more recent forms of communication, such as movies, radio, and television, in the forefront of our fight for a capitalist society. Long before the establishment of a fully capitalist society, we should seek the establishment of a fully free press and media as the pattern for all other industries later to follow. We should demand their exemption from all government regulation immediately--that is, we should demand that these industries, because of the intellectual nature of their products and services, be freed at once from the income tax, the antitrust laws, the labor laws, and every other form of government regulation and interference, so that they may advance their ideas totally without fear of punitive action of any kind being taken against them.

9. A General Campaign at the Local Level

The seven preceding sections have described various major aspects of the campaign for capitalism. Here it is appropriate to bring some of those aspects together in the form of a specific program that, over the course of less than a decade, would bring about the economic and cultural revival of America's leading city, New York. I choose to focus on New York not only because it is the country's leading city, but also because, of any major American city, it best represents the destructive economic and social consequences of contemporary American "liberalism," of which it is the intellectual home.

What would be required to restore New York to its former prosperity and greatness would be the combination of the elimination of public welfare, the abolition of rent controls, and the privatization of the city's transportation system.

The abolition of welfare, of course, would have to be preceded by the elimination of minimum-wage and prounion legislation and of restrictions on child labor over the age of fourteen. In the absence of the outright repeal of minimum-wage and prounion legislation at the national level, it would be necessary for the city to obtain a special congressional exemption from that legislation. These preliminary measures would be necessary so that, as I have said before, the present welfare recipients would have a realistic opportunity of finding employment. As I have also said before, the elimination of welfare would need to take place gradually, say, over a ten-year period. The elimination of public welfare and restrictions on employment would make possible a radical improvement in the lives of the poorest portion of the city's population, whose members would then live by working and recognize their responsibility for their own well-being, and who thus could advance to far higher economic levels than could ever be possible for them while on the welfare rolls. At the same time, and for much the same reasons, it would make an enormous contribution to the reduction in crime and thus to the improvement of the lives of the rest of the city's population, if large numbers of those who otherwise would have been out committing crimes--namely, unemployed, impoverished juveniles and the hardened criminals they grow up to become--were instead busy earning money by working.

The abolition of rent control, of course, would radically and progressively improve the city's housing stock. It would also bring about the return of the middle class to the city. Another important consequence of the repeal of rent control would be a great increase in the revenues of the city government that were derived from property taxes. Property tax collections would soar by virtue of bringing the value of all the housing and land in the city that is presently under rent controls, up to the free-market level. The great increase in property-tax revenues, combined with the elimination of expenditures for welfare, would make possible the elimination of much or even all of the city's income and sales taxes, which would further improve the quality of life in the city and promote the return of industry and commerce. As a result of the vast increase in the property-tax base, even the property-tax rate could probably eventually be reduced.

The privatization not only of the city's subway system but also of its bus lines, accompanied by the phasing out of restrictive taxicab licensing requirements, would achieve major improvement in the city's transportation system. This too would represent an important improvement in the daily life of the average New Yorker and serve to encourage the return of industry and commerce to the city.

No doubt, repeal of victimless crimes legislation and the consequent ability of the city's police department and judicial system to concentrate all of their resources on apprehending and punishing those guilty of crimes against the persons or property of others would be a further measure vital in restoring the life of the city.

Needless to say, success in enacting the above program in New York City would operate powerfully to promote the cause of capitalism in the entire country.

10. The Outlook for the Future

Every supporter of capitalism should take heart. All across the world, socialism is now in visible retreat and outright collapse. Its supporters are in a state of intellectual disintegration, turning en masse against science, technology, and reason, as they magnify the evidence of their own intellectual incompetence into a distrust of the human intellect as such. Having for generations pompously proclaimed the possibility of their rationally planning every detail of human life--at the point of a gun and at the price of everyone else's planning and self-interest--and somehow thereby achieving a utopia, they now begin to see the devastation they have caused, and, their dream in ruins, they sink to the level of superstitious primitives, living in fear of the intellect and of its products science and technology. In a word, they have become "environmentalists." Safety to them now appears to lie in whatever is not man-made--in whatever is "natural," viz., tested by millions of years of blind evolution.

In these circumstances, even though the world may appear to be continuing to rush on, irresistibly, to a new Dark Age, surprisingly little is needed to bring about the most radical reversal of the political currents. Just one or two victories won in the name of explicit procapitalist principle is all that is required. One or two such victories would prove that there were no irresistible currents of doom. They would serve to galvanize large numbers of people to further action, in the knowledge that rational efforts in the realm of political action actually work.

At the moment, a promising candidate for such a reversal of the currents is the defeat of efforts to establish socialized medicine in the United States, by means of showing that the actual solution for the problem of soaring medical costs is the elimination of government intervention into medicine and the corresponding widening of the zone of economic freedom in medicine. All of the necessary intellectual ammunition is present to do this--that is, all of the objective facts and logical arguments are on the side of the supporters of capitalism. At the same time, with the collapse of socialism across the world, the advocates of socialized medicine have completely lost their intellectual base. Objectively, they are men without logical arguments and without an intellectual home. They are riding on nothing but inertia. On the basis of the fundamentals of the situation, there is no doubt but that they can be stopped.

Perhaps the supporters of capitalism are still too few and for the most part still insufficiently prepared intellectually to win this battle. If so, there will be numerous future occasions on which they can turn the tide. They have only to learn how to articulate their case--that is, to become intellectuals who thoroughly understand economic theory and political philosophy, and enough of more fundamental philosophy to uphold the value of human reason. If enough of them do this, their cause will be irresistible. It will be as the waves of the ocean acting on a foundation made of sand. Inevitably and irresistibly the sand is washed away and the foundation undermined. "Sand" is all that remains of the intellectual foundations of socialism and the opposition to capitalism. Let the advocates of capitalism proceed in the knowledge not only that socialism is dead, but also that what the world still needs to learn is why capitalism deserves to live.


1. See above, pp. 19-21.

2. Along these lines, see also below, pp. 987-988.

3. On these last points, see above, pp. 286-290 and 316-317. See also above, p. 668.

4. On the nature of the process of capital accumulation and economic progress, see above, pp. 622-636, especially p. 627.

5. At the same time, of course, it should be explained how the fall in wage rates that the freedom of competition would cause in the face of unemployment, would tend not to lower but to raise real wage rates. On this point, see above, pp. 584-585.

6. See above, pp. 384-385, which explain why government intervention is a leading cause of homelessness. See also above, pp. 202-203.

7. For a full discussion of the government's responsibility for the crisis in medical care, and how a free market in medical care would solve all aspects of the problem, see George Reisman, The Real Right to Medical Care Versus Socialized Medicine (Laguna Hills, Calif.: The Jefferson School of Philosophy, Economics, and Psychology, 1994.)

8. For an example of an appropriate compromise concerning the Food and Drug Administration, see below, p. 987.

9. On this point, see above, pp. 655-660.

10. Strictly speaking, individuals are presently eligible to receive social security retirement benefits beginning at age 62. This should be eliminated with the rise in the minimum eligibility age to 70.

11. I estimate this to be the case on the basis of data available from the U.S. government. See, for example, U.S. Department of Health and Human Services, Social Security Administration, Social Security Bulletin Annual Statistical Supplement 1989, p. 163.

12. A number of states are already making efforts to deny additional aid to mothers who give birth to children while on the welfare rolls. See Los Angeles Times, April 30, 1994, p. A14.

13. It is implicit in previous analysis in this book that the abolition of prounion legislation along with minimum-wage legislation, would make possible the employment of unskilled workers with a lesser fall in wage rates than would be the case without the abolition of prounion legislation. On this point, see above, pp. 659-660.

14. See New York Times, national ed., January 14, 1994, p. A12.

15. A kindred policy is already being practiced to some extent by the federal government in the form of job "buyouts." Under this arrangement, the government pays an individual up to $25,000 to retire early. See Washington Post, October 28, 1993, p. A21; ibid., August 22, 1994, p. D2.

16. Under the present program of job buyouts, the period of disqualification for new government employment appears to be only two years. See ibid., October 28, 1993, p. A 21.

17. On the subject of taxes and the demand for labor, see above, pp. 648-650.

18. See above, pp. 584-585. See also above, pp. 648-650.

19. See above, pp. 634-636.

20. See above, pp. 622-642.

21. See above, pp. 308-310 and 622-642.

22. For elaboration of this point, see above, pp. 829-831.

23. Concerning the necessity of using silver as money, see above, pp. 958-959.

24. I am indebted to von Mises for this observation, which he made on occasion in his seminar.

25. Cf. Ayn Rand, "Collectivized Rights," in Ayn Rand, The Virtue of Selfishness (New York: New American Library, 1964) pp. 135-143. Cf. also, the U.S. Declaration of Independence.

26. See above, pp. 322-323 and 362-363.

27. See above, pp. 234-237.

28. On this subject, see above, pp. 362-363. See also above, pp. 634-636.

29. See above, pp. 322-323 and 351-354.

30. See above, the discussions of unilateral free trade on pp. 190-191 and 535-536.

31. Cf. Ayn Rand, Atlas Shrugged (New York: Random House, 1957) pp. 1023-1024.

32. See above, pp. 76-115 passim. See also Ayn Rand, The New Left: The Anti-Industrial Revolution (New York: New American Library, 1971.)

33. See above, pp. 99-101.

34. See above, pp. 977-978.

35. The abolition of rent control should take place all at once, as soon as possible. For the reasons, see above, pp. 252-254. See also pp. 250-252 and 182-183.

36. See above, p. 252.

37. On this subject, see above, pp. 78-80.

38. See above, pp. 148-150 and 378-380. See also George Reisman, The Real Right to Medical Care Versus Socialized Medicine.

*Ottawa, Illinois: Jameson Books, 1996. Copyright ? 1996 by George Reisman. All rights reserved. May not be reproduced in any form without written permission of the author, except by downloading onto a computer for personal, noncommercial use.

**George Reisman is Professor of Economics at Pepperdine University's Graziadio School of Business and Management.

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