CHAPTER LVI

CONSTRUCTIVE LIBERALISM

What the liberalist believes. A liberalist in economics is one who believes in the freedom of the individual rather than in compulsion, either by the mass or by a despot. He relies mainly but not exclusively upon individual initiative. He believes that individuals will, without compulsion and under freedom of contract, do whatever is necessary to provide for the needs of the community. He believes that it is not necessary continually to impose upon the individual the authority either of a benevolent despot or of a well-meaning majority. In somewhat extreme cases, such as can be covered by the criminal law, laws for the enforcement of contracts and other obligations, and laws for the standardization of various aspects of business, compulsion is necessary and helpful. He believes that the interests of the public are expressed quite as accurately on the market and through the price lists as through the ballot box and the statute books. He believes even that poverty and most of the social ills can be eliminated under the system of voluntary agreement-freedom to accumulate, to own, and to operate private property-and without subjecting individuals to the necessity of becoming government employees.

Freedom versus compulsion. There are only two ways of getting men to do what is necessary for their own maintenance and that of the public: one is to induce them by the offer of a reward, either of a material or of an immaterial kind; the other is to compel them by authority. For example, an army can be recruited and men led to fight for their country either by the volunteer system or by conscription. The one is the method of freedom; the other is compulsory so far as the individual is concerned, whether the government be despotic or democratic.

In the case of despotism a despot exercises compulsion over the individual; in the case of a democracy it is the mass which exercises the compulsion. On general grounds popular government is very much better than despotism, but so far as the conscripted individual is concerned he has no more choice as to whether he will fight or not in one case than in the other.

Industries may likewise be recruited under the volunteer system or by conscription. Men may be induced to work on the farms and in the factories and mines by the offer of wages, profits, etc. or they may be directed by authority to do so.

If no one were allowed to accumulate capital or to own a farm or a factory or a mine we should have much less freedom to choose our own occupations and to direct ourselves than we have under a system of free private enterprise and voluntary agreement. Even in an army the higher officers are not conscripted, though there is a story of a man who went into hiding, there to remain until the government should begin to draft captains. Under a régime of complete government ownership and operation men would have to be chosen by authority for the higher as well as for the lower positions in the industrial system.

Opposed to socialism. That there would be less freedom under universal government ownership than under private ownership will be clear to anyone who will stop dreaming long enough to think about it. No one could begin farming on his own initiative under that system, but would have to be placed in charge of a farm or told to work under a boss, according as those in authority should decide. Under a liberalistic system anyone who can handle a farm successfully can become a farm manager and ultimately a farm-owner, as thousands have already done. By serving an apprenticeship as a farm hand under a free contract with another free man, if the farm hand is a success he can always, after a few years of experience, become a share renter. Again, by making a contract with another free man, if he can make a success of this he can in a few more years become a cash renter. Again, if he is successful he can become a mortgaged owner and, finally, an unmortgaged owner.

Every stage of this advancement is conditioned upon his making a success of the next lower stage. If he can, according to the philosophy of liberalism it is economical of the human resources, as well as of the farms, that he should be advanced until he finds his level. If he cannot make a success in any one of these stages it is a sign that he has reached or passed his level, that he has risen as far as, or farther than, it is economical that he should rise. It would be a waste of both human and material resources to advance him farther. If, for example, he can succeed as a farm manager it would be wasting a good manager to leave him in the position of a farm hand. In the interests of the community he should advance. But if he would make a poor manager it would be wasting other labor, as well as material equipment, to have them placed under his management. Under the system of free contract each man tends to find the place in the industrial system in which he can best fit. This is the method of trial and error. Each individual tries himself out and does not have to wait for the consent of someone else. Under the system of universal government operation the would-be farmer would have no better chance to test himself, or to advance on his own initiative, than he now has in the army or in the civil service.

The liberalist believes that, in general, the volunteer plan is better than the compulsory one. There are, of course, occasions when compulsion becomes necessary. These are usually occasions of acute and instant necessity, when there is not time for the market to adjust itself and to organize a volunteer system.

In time of war compulsion takes the place of freedom. Socialists are in the habit of saying that in time of war nations turn to socialism. It is true that in time of war compulsion is generally, or at least to a considerable degree, substituted for freedom; but the whole business of war is compulsion. Our dealing with foreign enemies is necessarily on a compulsory rather than on a voluntary and contractual basis, and the whole organization of society may have to be changed from freedom to

compulsion in order to carry on the compulsory business of war. There are a multitude of minor forms of compulsion besides war itself. Taxation is a compulsory payment of money to the government. Conscription is compulsory military service. Forced loans are compulsory in a high degree. The censorship of the press is merely compulsory regulation of the business of selling talk for private profit. It may be necessary, in order to prosecute a war successfully, to resort to compulsion in recruiting munition factories and even farms. Rationing the population in time of food scarcity may be necessary.

In a régime of universal compulsion some must necessarily be treated better than others. Even though conscription be carried out without personal favor, the result works to the disadvantage of those drawn by conscription as compared with those not drawn. Those on whom the lot falls act as shock absorbers for the rest of the community. There is nothing particularly democratic about this, though it may be the best possible way of meeting a national crisis. Under such conditions, when the life of a nation is at stake, it does not stop for the niceties of social justice. Necessity knows no law. It is probable, however, that as a result of several years of this compulsion there will be so much dissatisfaction and sense of unfairness as to provoke a strong reaction against compulsion and in favor of the volunteer system, not only in the work of fighting but in business and industrial pursuits as well. We may consider ourselves fortunate if this reaction does not carry us too far in the direction of license and impatience with all restraint.

Dangers of freedom. Freedom of trade-freedom to buy and sell, to offer and accept rewards-is a part of the program of liberalism. There are, however, some very serious results which accompany freedom of bargaining. We saw in Chapter L that the advantage in bargaining is always on the side of those who are trying to sell something which is undersupplied or of those who are trying to buy something which is oversupplied. Conversely, the disadvantage is, of course, on the side of those trying to sell something which is oversupplied and of

those trying to buy something which is undersupplied. When there is a long-continued oversupply of certain commodities or of certain kinds of labor, those who are under the disadvantage of trying to sell them feel, naturally enough, that the advantages of free contract are not so very great, since they are playing a losing game. They are frequently willing to take their chances under some form of compulsion, feeling that they could not be much worse off than they are under the system of free contract.

The situation of those trying to sell something that is oversupplied, especially if it happens to be labor, is summarized in the statement that "liberty is frequently the liberty to starve." It must be confessed that liberty is dangerous, even though it is very precious. Severe conditions are imposed on free men. Liberty to be on the street may mean liberty to get run over by an automobile. Liberty to go swimming may mean liberty to drown. Liberty to sail the seas may mean liberty to get shipwrecked. Children who are restrained in their liberty and are forbidden to be on the street are in less danger of being run over, and those who are prevented from going in swimming are in less danger of being drowned. Liberty is a terrible thing, but at the same time it is, for grown men, beyond price. Liberty to buy and sell may mean liberty to become bankrupt. The individual who has a guardian to forbid him to do any bargaining whatsoever may be saved from bankruptcy.

Advantages and disadvantages of freedom of contract. We saw in Chapter L that when farm products are oversupplied, as they were in the early nineties of the last century, the farmer is at a disadvantage in bargaining. When he was compelled to take low prices for his products, in many cases he was impoverished. There are only two possible ways out of such a difficulty: the first way is to restore the equilibrium between the demand and the supply, so that the prices of products shall rise to a remunerative level and the farmer be enabled to bargain advantageously; the second is for the government to exercise its power of compulsion in favor of the farmer and against