Free To Choose: A Personal Statement – Charter 9 : The Cure for Inflation (10)

IMPORTANCE OF INTELLECTUAL CLIMATE OF OPINION

The example of India and Japan, discussed in Chapter 2, exem- plifies the importance of the intellectual climate of opinion, which determines the unthinking preconceptions of most people and their leaders, their conditioned reflexes to one course of action or another.

The Meiji leaders who took charge of Japan in 1867 were dedicated primarily to strengthening the power and glory of their country. They attached no special value to individual freedom or political liberty. They believed in aristocracy and political con- trol by an elite. Yet they adopted a liberal economic policy that led to the widening of opportunities for the masses and, during the early decades, greater personal liberty. The men who took charge in India, on the other hand, were ardently devoted to po- litical freedom, personal liberty, and democracy. Their aim was not only national power but also improvement in the economic conditions of the masses. Yet they adopted a collectivist economic policy that hamstrings their people with restrictions and continues to undermine the large measure of individual freedom and po- litical liberty encouraged by the British.

The difference in policies reflects faithfully the different intel- lectual climates of the two eras. In the mid-nineteenth century it was taken for granted that a modern economy should be organized through free trade and private enterprise. It probably never oc- curred to the Japanese leaders to follow any other course. In the mid-twentieth century, it was taken for granted that a modern economy should be organized through centralized control and five-year plans. It probably never occurred to the Indian leaders to follow any other course. It is an interesting sidelight that both views came from Great Britain. The Japanese adopted the policies of Adam Smith. The Indians adopted the policies of Harold Laski.

Our own history is equally strong evidence of the importance of the climate of opinion. It shaped the work of the remarkable group of men who gathered in Independence Hall in Philadelphia 286 in 1787 to write a constitution for the new nation they had helped to create. They were steeped in history and were greatly influenced by the current of opinion in Britain—the same current that was later to affect Japanese policy. They regarded concentration of power, especially in the hands of government, as the great dan- ger to freedom. They drafted the Constitution with that in mind.

It was a document intended to limit government power, to keep power decentralized, to reserve to individuals control over their own lives. This thrust is even clearer in the Bill of Rights, the first ten amendments to the Constitution, than in the basic text: “Congress shall make no law respecting an establishment of re- ligion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press”; “the right of the people to keep and bear arms shall not be infringed”; “the enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people”; “the powers not dele- gated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people” (from Amendments I, II, IX, and X).

Late in the nineteenth century and on into the early decades of the twentieth, the intellectual climate of opinion in the United States—largely under the influence of the same views from Britain that later affected Indian policy—started to change. It moved away from a belief in individual responsibility and reliance on the market toward a belief in social responsibility and reliance on the government. By the 1920s a strong minority, if not an actual majority, of college and university professors actively concerned with public affairs held socialist views. The New Republic and the Nation were the leading intellectual journals of opinion. The Socialist party of the United States, led by Norman Thomas, had broader roots, but much of its strength was in colleges and universities.

In our opinion the Socialist party was the most influential po- litical party in the United States in the first decades of the twenti- eth century. Because it had no hope of electoral success on a national level (it did elect a few local officials, notably in Mil- waukee, Wisconsin), it could afford to be a party of principle.

The Democrats and Republicans could not. They had to be parties of expediency and compromise, in order to hold together widely The Tide ls Turning 287 disparate factions and interests. They had to avoid “extremism,” keep to the middle ground. They were not exactly Tweedledum and Tweedledee—but close to it. Nonetheless, in the course of time both major parties adopted the position of the Socialist party.

The Socialist party never received more than 6 percent of the popular vote for President (in 1912 for Eugene Debs). It got less than 1 percent in 1928 and only 2 percent in 1932 (for Norman Thomas). Yet almost every economic plank in its 1928 presiden- tial platform has by now been enacted into law. The relevant planks are reproduced in Appendix A.

Once the change in the climate of opinion had spread to a wider public, as it did after the Great Depression, the Constitution shaped by a very different climate of opinion proved at most a source of delay to the growth of government power, not an ob- stacle.

In Mr. Dooley’s words, “No matter whether th’ constitution follows th’ flag or not, th’ supreme court follows th’ iliction re- turns.” The words of the Constitution were reinterpreted and given new meaning. What had been intended to be barriers to the extension of government power were rendered ineffective. As Raoul Berger writes in his authoritative examination of the Court’s interpretation of one amendment,

The Fourteenth Amendment is the case study par excellence of what Justice Harlan described as the Supreme Court’s “exercise of the amending power,” its continuing revision of the Constitution under the guise of interpretation. . . .

The Court, it is safe to say, has flouted the will of the framers and substituted an interpretation in flat contradiction of the original de- sign. . . .

Such conduct impels one to conclude that the Justices are become a law unto themselves. i OPINION AND POPULAR BEHAVIOR

Evidence that the tide toward Fabian socialism and New Deal liberalism has crested comes not only from the writing of intel- lectuals, not only from the sentiments that politicians express on the hustings, but also from the way people behave. Their behavior is no doubt influenced by opinion. In its turn, popular behavior 288 both reinforces that opinion and plays a major role in translating it into policy.

As A. V. Dicey, with remarkable prescience, wrote more than sixty years ago, “If the progress of socialistic legislation be ar- rested, the check will be due, not so much to the influence of any thinker as to some patent fact which shall command public atten- tion; such, for instance, as that increase in the weight of taxation which is apparently the usual, if not the invariable, concomitant 2 of a socialist policy.” Inflation, high taxes, and the patent ineffi- ciency, bureaucracy, and excessive regulation stemming from big government are having the effects Dicey predicted. They are lead- ing people to take matters into their own hands, to try to find ways around government obstacles.

Pat Brennan became something of a celebrity in 1978 because she and her husband went into competition with the U.S. Post Office. They set up business in a basement in Rochester, New York, guaranteeing delivery the same day of parcels and letters in downtown Rochester at a lower cost than the Post Office charged. Soon their business was thriving.

There is no doubt that they were breaking the law. The Post Office took them to court, and they lost after a legal battle that went all the way to the Supreme Court. Local businessmen pro- vided financial backing.

Said Pat Brennan,

I think there’s going to be a quiet revolt and perhaps we’re the be- ginning of it. . . . You see people bucking the bureaucrats, when years ago you wouldn’t dream of doing that because you’d he squashed. . . . People are deciding that their fates are their own and not up to somebody in Washington who has no interest in them whatsoever. So it’s not a question of anarchy, but it’s a question of people rethinking the power of the bureaucrats and rejecting it. . . .

The question of freedom comes up in any kind of a business— whether you have the right to pursue it and the right to decide what you’re going to do. There is also the question of the freedom of the consumers to utilize a service that they find is inexpensive and far superior, and according to the federal government and the body of laws called the Private Express Statutes, I don’t have the freedom to start a business and the consumer does not have the freedom to use it—which seems very strange in a country like this that the entire context of the country is based on freedom and free enterprise.

The Tide ls Turning 289 Pat Brennan is expressing a natural human response to the attempt by other people to control her life when she thinks it’s none of their business. The first reaction is resentment; the second is to attempt to get around obstacles by legal means; finally, there comes a decline in respect for law in general. This final conse- quence is deplorable but inevitable.

A striking example is what has happened in Great Britain in reaction to confiscatory taxes. Says a British authority, Graham Turner:

I think that it’s perfectly fair to say that we have become in the course of the last ten or fifteen years a nation of fiddlers.

How do they do it? They do it in a colossal variety of ways. Let’s take it right at the lowest level. Take a small grocer in a country area, . . . how does he make money? He finds out that by buying through regular wholesalers he’s always got to use invoices, but if he goes to the Cash and Carry and buys his goods from there, . . . the profit margin on those goods can be untaxed because the tax in- spectors simply don’t know that he’s had those goods. That’s the way he does it.

Then if you take it at the top end—if you take a company director well, there are all kinds of ways that they can do it. They buy their food through the company, they have their holidays on the company, they put their wives as company directors even though they never visit the factory. They build their houses on the company by a very si mple device of building a factory at the same time as a house.

It goes absolutely right through the range, from the ordinary work- ing-class person doing quite menial jobs, right to the top end—busi- nessmen, senior politicians, members of the Cabinet, members of the Shadow Cabinet–they all do it.

I think almost everybody now feels that the tax system is basically unfair, and everybody who can, tries to find a way round that tax system. Now once there’s a consensus that a tax system is unfair, the country in effect becomes a kind of conspiracy each other to fiddle.

and everybody helps You’ve no difficulty fiddling in this country because other people actually want to help you. Now fifteen years ago that would have been quite different. People would have said, hey, this is not quite as it should be.

Or consider this, from an article in the Wall Street Journal by Melvyn B. Krauss on “The Swedish Tax Revolt” (February 1, 1979, p. 18) : 290

The Swedish revolution against the highest taxes in the West is based on individual initiative. Instead of relying on politicians, ordi- nary Swedes have taken matters into their own hands and simply refuse to pay. This can he done in several ways, many of them legal. . . .

One way a Swede refuses to pay taxes is by working less. . . .

Swedes sailing in Stockholm’s beautiful archipelago vividly illustrate the country’s quiet tax revolution.

The Swedes escape tax by doing-it-themselves. . . .

Barter is another way Swedes resist high taxes. To entice a Swedish dentist off the tennis court and into his office is no easy matter. But a lawyer with a toothache has a chance. The lawyer can offer legal services in return for dental services. Bartering saves the dentist two taxes: his own income tax plus the tax on the lawyer’s fees. Though barter is supposed to be a sign of a primitive economy, high Swedish taxes have made it a popular way of doing business in the welfare state, particularly in the professions. . . .

The tax revolution in Sweden is not a rich man’s revolution. It is taking place at all income levels. . . .

The Swedish welfare state is in a dilemma. Its ideology pushes for more and more government spending. . . . But its citizens reach a saturation point after which further tax increases are resisted. . . .

the only ways Swedes can resist the higher taxes is by acting in ways detrimental to the economy. Rising public expenditures thereby un- dercut the economic base upon which the welfare economy depends.