A Reviewer's Notebook - 1976/5

To begin, we don’t have money any more; we have what Mr. Schiff calls unmoney. Neither the Treasury nor the Federal Reserve system recognizes a duty to redeem any note or government bond in anything more than successive issues of new I.O.U.’s. What the government chooses to call its national debt is bad enough; when Mr. Schiff was writing it came to some $540 billion (the June 30, 1975, figure). But this is just the tip of the iceberg. When you add

in the Social Security payments that the government is obligated to make good out of future income (it has already squandered the payments of the past forty years by its refusal to fund the debt in anything more than I.O.U.’s), some $2.1 trillion more must be raised, according to a government admission made in a footnote. (Does anyone really believe that we can tax at that rate even in annual increments without breaking the middle class as inflation adds more trillions to the $2.1 trillion as of 1975?)

Aside from Social Security, the government has other obligations reckoned in the trillions. There are annuities, student loan guarantees (an incredible $1.9 billion), crop guarantees, veterans’ benefits, and so on. The big figures and the little figures combine in a total debt (funded, unfunded and contingent) of $4.3 trillion. It will be $5 trillion, including the "regular" debt, as admitted by Congress and Jerry Ford, before the year has ended.

Especially brilliant is Mr. Schiff’s demolition of GNP, or the Gross National Product, which can with equal logic be called Gross National Cost. Mr. Schiff finds it ridiculous that all dollar payment figures to individuals and corporations should be accepted without question as "wealth." Suppose, he says, a tidal wave were to demolish the Florida coast from Miami to Boca Raton. Let’s say the cost of the destruction comes to $2 billion. It should be subtracted from the GNP, but it isn’t. On the other hand, the cost of cleaning up the debris — say it’s $300 million —would be added into GNP. Does it make sense that disasters such as tidal waves can be figured as wealth-creating when people step in to sort out useless junk, at the taxpayers’ expense?

The stupidities of GNP are endless. A healthy person adds nothing to GNP, but sick people do. The sicker the population is, the greater will be the percentage of GNP spent on medical treatment. The GNP of wheat at $2 a bushel can be less than the GNP at $3 a bushel. The more wheat we have, the poorer in GNP terms we are likely to be. Since food is real wealth, this makes no sense. Abundance has the tendency, says Mr. Schiff, to develop lower GNP figures than scarcity.

The unions and the politicians, with their insistence on a minimum wage law, have created a ghetto problem and a teen-age problem. Blacks without skills can’t get jobs, for if employers were to pay them the official hourly minimum marginal companies would soon go broke. The minimum wage makes it impossible for the U.S. to have a good apprentice system. We will pay dearly for this one fine day when we wake up to the fact that we have no young tool and die workers.

Strangely enough, Mr. Schiff remains an optimist. Does he really believe we will change our Social Security law to put it on a welfare test basis when Ronald Reagan can’t even talk about providing for alternative voluntary old-age insurance? As Milt Gross used to say, "Dun’t esk."

AMERICA’S EMERGING FASCIST ECONOMY by Charlotte Twight. (New Rochelle, N. Y.: Arlington House, 1975) , 314 pages, $12.95.

Totalitarian regimes, whether they are fascist or communist, entail an extreme centralization of power from which no individual can hide. Private property in production, which is the characteristic of a capitalist order, is replaced by public property that is managed by an omnipotent, omnipresent state. Communism and fascism are sister systems that spring from identical intellectual and moral roots, and apply similar methods and policies to achieve their objectives.

And yet, in spite of their closely related basic natures, the champions of both endeavor to emphasize the differences. "We are diametrically opposed to fascism," say the communists, and "We are the bulwark against communism," proclaim the fascists. In reality, as twins, they are jealous rivals who at every opportunity confront each other. Their wars are fratricidal wars waged without mercy or compassion.

Although in philosophy, morality, and in objectives they are identical twins, they differ in two characteristics that make them distinguishable. Communism seeks to poison the hearts and minds of all peoples and races. It aims to conquer the world with its poisonous potion. Fascism is a national disease that tends to infect national states. Italian Fascism was singularly Italian, German Nazism was basically German, as American Fascism is contagious to Americans only. This limitation in the base of fascism tends to make communism the more dangerous disease to which all of mankind may succumb.

The two also differ in the legal form in which they exert central control over the means of production. The communists assume outright ownership through law or constitution. The fascists content themselves with government controls over productive property. They do not legally expropriate the individual owners, believing that government controls are more efficient than direct bureaucratic management. Capitalism, the antithesis of both, is the private property order in which individual owners have the sole power to use their economic goods.

Charlotte Twight’s America’s Emerging Fascist Economy is a brilliant analysis of the economic policies that are turning the U.S. into a fascist state. As an attorney and a member of the Washington State Bar Association, Mrs. Twight presents a formidable indictment against numerous U.S. statutes and judicial decisions that are building a fascist foundation for the modern American system. Her analysis of government control over money and banking, for instance, is incisive and convincing as she reveals the objectives of such control as well as its many ominous consequences. The same can be said about her discussion of the American cartels, government control over product quality, the growth of the President’s economic power, government dominion over labor, agriculture, foreign trade, and the government takeover of the energy industry and many American railroads.

And yet, her admirable work is seriously flawed by her economic limitations that involve her in bad ambiguities and awkward conclusions. Her inability to distinguish between the economic and juristic concepts of property leads her to associate fascism and capitalism. She actually concludes that collectivism "may adopt socialism, communism, or capitalism as its nominal economic form." (p. 15) According to Twight, "Fascism is unique among collectivist systems in selecting capitalism as its nominal economic mate, but capitalism is turned inside out in this unlikely union." (p. 16) Or, "fascism espouses capitalism except whereits totalitarian political hierarchy dictates otherwise." (p. 17) And although she concludes that fascism embraces "a bogus capitalism" she defines, in a large-print section heading, fascism’s philosophic core as capitalistic collectivism.

Her eyes are glued on the legal concept of property and the legal title to property, which is totally irrelevant for the economic point of view. It matters only who has the power to use an economic good — the government or the individual. Fascism, like communism, gives government total control over the means of production. The fact that some people may hold on to a legal document, a deed, while they are hurrying to obey government owners, may be interesting psychologically, but does not change the economic consequences of government control.

Charlotte Twight’s "capitalistic collectivism" can be likened to such illogical concepts as "religious atheism," "evil morality," or "paternal motherhood." But while she succumbs to such ambiguities she does great harm to capitalism, her very own system. Today capitalism is accused of nearly every vice of which the human heart is capable — to exploit and gouge, rob and steal, impoverish and starve, deceive and prostitute, and on and on. And now comes Mrs. Twight telling us that capitalism can be mated to fascism. As attorney for the defense of capitalism, she is losing her case.

In a compilation of facts, figures, quotes and succinct statements, journalist Rus Walton has presented us with an excellent account of the religious dimension of the American Republic. He discusses such subjects as limitation of government, freedom, taxes, the family, education, abortion, the "Equal Rights" Amendment, economics, charity and inflation.

Mr. Walton argues that the United States was founded as a Republic, not a Democracy. He points out that if we would retain the freedom responsible for our great prosperity, we must return to the limited government philosophy of our Founders. And he adds, "Freedom is not simply a matter of rights, it is also a matter of responsibilities."

Mr. Walton correctly defines inflation as an increase in the supply of money and sets forth the correctives: limit government, cut spending, balance the budget.

Opposing the common humanistic thinking of today, Mr. Walton convincingly redirects us to Biblical and God-oriented solutions for today’s problems. He confronts us with a choice: "One nation under God or one superstate under Caesar." An excellent source of ammunition against Socialism, Communism, atheism and the Welfare State!

THE NEW AMERICAN IDEOLOGY by George C. Lodge (New York City: Alfred A. Knopf, 1975) 350 pp., $12.50.

Many libertarians insist that America’s "mixed economy" is an unstable hodgepodge, a sort of halfway house on the road to the Total State and the extinction of personal liberty. A number of politicians and corporate executives disagree, believing that the mixture of government intervention and private business brings the best of both worlds and provides immunity from further socialism. Unfortunately for proponents of the latter viewpoint, the mixed economy has tilted increasingly toward more government intervention, inviting the question: "Where will it all end and what’s in store for us?"

In this disturbing new book, Harvard Business School professor George C. Lodge obligingly supplies an answer, but libertarians won’t like it. He outlines an "ideology" for the brave new world that America is in the process of becoming. Although he carefully avoids categorizing the new system, it obviously has a thick cluster of socialist roots and borrows freely from collectivist thinkers, including sociologist Karl Mannheim. The form of the title and the tone of the book also recall Galbraith’s The New Industrial State, although the author parts company with Galbraith’s socialism on certain points.

Lodge, a member of the distinguished Boston family, argues that we are in a painful transition phase in our, social, political, and economic relationships. We are abandoning the traditional American ideology associated with John Locke, and developing a new one that has already taken root: individualism is giving way to a system called communitarianism; property rights are yielding to rights of community membership; competition to satisfy consumer desires is losing ground to "planning for community needs"; the idea of the limited state is being replaced by the state as the planner; and scientific specialization must be succeeded by a holistic organization of knowledge.

Lodge apparently believes that the Lockean notion of individualism was a wrong path even for eighteenth century America, let alone the present modern state. He calls it an aberration on at least two occasions and also a "blip." He is clearly more sympathetic toward Rousseau’s communitarian idea of the General Will, which would be accomplished by "bringing all particular wills into conformity with it" and with virtue being defined as "nothing more than this conformity of the particular wills with the General Will."

Lodge defines individualism as the atomistic notion that a community is no more than the sum of the individuals in it, with fulfillment an essentially lonely struggle in what amounts to a wilderness where the fit survive — and where, if you do not survive, you are somehow unfit. Individualism is related to equality, or "equal opportunity," and the idea of contract that ties individuals together as buyers and sellers. Individualism, he explains, has evolved into interest group pluralism as the preferred means of directing society (unions, trade associations, special interest groups, etc.).

Communitarianism, on the other hand, is a system that makes the community more than the sum of its individuals. People get their fulfillment through participating in communitarian activities, through identifying with their community; consensus, rather than contract, is the unifying element. Lodge claims that both corporations and unions have eroded the old idea of individualism and induced the new communitarianism though still clinging to the Lockean ideology. Lodge’s best example of a communitarian society is Japan; he carefully avoids comment on Great Britain.

But what if individuals do not want to find fulfillment in this communitarian wave of the future? Lodge’s answer seems to be that "we have to re-educate American youth to the fact that individual fulfillment comes about as the result of participating in an organic social process." Opponents, of course, would call this blatant indoctrination and would also note that there are vast differences between voluntary and compulsory communitarianism. Lodge evidently likes the compulsory kind, because he intends to have the communitarian way imposed on us by closing off other options. For example, community needs should take precedence over consumers’ desires as a means of allocating goods and services, property rights are to be further diluted in favor of group membership rights (and virtually eliminated in the case of the corporation), and the state is to become the national planner; indeed, the international planner if all goes well.

Why are we having such difficulty reaching Lodge’s earthly millennium? The hang-up, for Lodge, is John Locke and his archaic ideology. Almost everybody who is involved in American business and government suffers to some degree from the old Lockean ideas about individualism, property rights, the Protestant ethic, the danger of Big Government, and so on. Lodge believes that even union leaders and liberal politicians such as Senator George McGovern are handicapped by this "ideological schizophrenia."

The book is obviously addressed, however, to the executives and managers of America’s troubled corporations. Acting both as reporter and advocate, Lodge is telling them that the old order of their cherished beliefs is dying, and they can help bury it. The corporation, deriving its authority and legitimacy from the old Lockean ideology, is in limbo and now needs a new basis for its legitimacy. The message is clear: In order to make the transition to the new system as painless as possible, corporations should seek legitimacy in the new ideology by becoming willing handmaidens of the state, with the latter always as the senior partner. There is an implicit warning that terms for the corporation may become less favorable if it delays in seeking this new legitimation. Nor is there any way to avoid these conditions, since the new ideology is already in motion and cannot be reversed. The corporation can save itself —and some of its managers can save their jobs and salaries — by indenturing the organization to the new system and to the state as planner.

To his credit, Lodge describes with great accuracy the present difficulties of the large corporation and its powerlessness in coping with the pressures around it. It’s to his discredit, however, that he fails to identify the "mixed economy" syndrome as a likely cause of the corporation’s, and the nation’s woes. In addition, he completely ignores the role of the Lockean idea in advancing human freedom, human dignity, and, yes, human rights. Far from repudiating Locke, as he does, we should be studying our abandoned road and discovering where we took a wrong turning.

We should also give the professor a failing grade for his hopeless naivete in believing that his total state will not develop into the totalitarian state. Here and there, he admits of such dangers, but nowhere does he offer mechanisms and ideas that can effectively keep the state from becoming an oppressor. Least of all does he explain who the planners will be or say whose plans will prevail in the new super-state. If experience is any guide, the coercive power of the state will almost certainly be used arbitrarily once it has been consolidated by the new American ideology.

The book is reviewed for libertarian readers because it is, in effect, a statist manifesto that is likely to have considerable influence in the business community. Its appearance at this troubled time is another reminder, if we needed it, that the world is full of well-meaning and sometimes gifted individuals who always seem to know the best way to manage and control other people.