Mises Daily Articles
The Ethic of the Peddler ClassTags BiographiesThe EntrepreneurPhilosophy and Methodology
I was born on the lower East Side of New York and brought up on the lower West Side. (I bring in these facts as introduction to some ideas that may be of general interest, not as autobiography.) Of my earliest experiences I remember practically nothing.
But, one incident does come to mind. My father, an immigrant who, like many others, took to peddling as a means of making a living, brought me a toy of some sort from one of his trips; maybe the fact that this was the only toy I ever had, if memory serves me right, made an indelible impression on me. In those days, and under the circumstances, a toy was a rarity in the life of a youngster.
As a vocation, peddling has long since gone out of style in this country, and the image of the peddler that has remained is not a glamorous one. Yet, the peddler must be given credit for helping to build the great American economy. He began his enterprise by bringing to the hinterland a modest pack on his back, as much as he had capital for, selling the contents and returning to his distributing point as soon as possible. He lived frugally, saved much of the proceeds of his sales, and invested his savings in a larger pack. He continued this process until he had saved enough to buy a horse and wagon, which enabled him to go more deeply into the sparsely settled areas and distribute more merchandise.
After a few of these trips he found a burgeoning community that gave promise of supporting a permanent or resident peddler, that is, a merchant. He built a shack in this town and filled it up with things folks wanted, and made his residence in the back of the store. In due time, he brought a wife to help him with the chores and to share with him his meager quarters. As the town grew so did his store. He built another room to hold more wares, and then an upper story, meanwhile moving his wife and children to a more commodious house. And when he died he left his heirs a department store.
This is the story of most of the department stores, the merchandise marts, that dot the American landscape today; they began with a pack on some peddler's back. Indeed, it is the story in broad outline of many of the industries that make up the American economy, from steel to automobile; some pioneer, beginning in a small way, exercised industry and thrift and plowed back his savings into his business to serve the needs of the community. He might have, as conditions warranted, borrowed the savings of others to expand his enterprise, but until he had demonstrated his ability to render service, and the need for it, his capital consisted mainly of his own savings.
That practice has gone by the boards these days for one reason: the income tax absorbs the savings of the entrepreneur before he can lay his hands on it. The tax-collector gets the accumulations that might have been plowed back into the business, and growth from modest beginnings is therefore impossible. This has the tendency to discourage enterprise, to freeze the proletarian into his class regardless of his ambition or ability. The imaginative entrepreneur of today must begin on a relatively large scale, by borrowing from the government against a government contract or some enterprise undertaken on a government grant or guarantee. The "little man" must remain little.
Now, the peddler, using the term figuratively, was the backbone of the American economic and social system. He was the middle class man who prided himself on his initiative, self-reliance, independence and, above all, his integrity. He might be shrewd and even grasping, but he never asked for favors and certainly did not expect society to take care of him.
In fact, if he thought of society at all, he thought of it as a collection of individuals, like himself, each of whom contributed to it, and that without them society simply did not exist. To keep his standing in the society of which he was an integral part, he paid his debts and taxes regularly, went to church as a matter of course, voted as his conscience dictated, contributed to local charities and took part in civic affairs. To be "good" a society had to consist of "good" men, and therefore the ethos of his community was his own. He was society.
And he was middle class. But, the term, in the context of the early part of the century, carried certain connotations that have been lost. In popular usage the term "middle class" designates those whose incomes provide them with more than the mere necessities, who enjoy some of the luxuries, who have saved up something for future contingencies, and who are neither "rich" nor "poor." That is, we think of the middle class in terms of income.
In that context, we might include in the present middle class many who in former times would have been classified as proletarian; for the income of many who work for wages today is sufficient to provide them with satisfactions that would have been luxuries to the old middle class. The merchant or the banker of that era did not dream of an automobile or of a Florida vacation, nor did he enjoy any of the home conveniences that are now considered necessities by most of those who have nothing to sell but their labor. Thus, in economic terms, the middle class is much larger and much more affluent than it was in the past.
The middle class, of the earlier period, was identified by something besides economic status; one thinks of them as a people motivated by certain values, among which integrity was uppermost. The middle class man was meticulous in fulfilling his contractual obligations, even though these were supported only by his pledged word; there were few papers that changed hands, fewer laws covering contracts, and the only enforcement agency was public opinion. In the circumstances, personal integrity in the middle class community was taken for granted; anyone who did not live up to his obligations was well advertised and lost his credit standing. Bankruptcy carried with it a stigma that no law could obliterate and therefore was seldom resorted to.
The life of the old middle class man was, by present standards, rather prosaic, even humdrum, being enlivened only by plans for expanding his business. If he had dreams, these were concerned with getting ahead by means of serving his community better, of widening the scope of his enterprise. But, his personal life was quite orderly and quite free of eroticisms; rarely was it disturbed by divorce or scandal. His sense of self-reliance imposed on him a code of conduct that precluded psychopathic adventures and gave him stability. Orderliness in his personal life was necessary to his main purpose, which was to produce more goods or render more services for the market; that burned up all the surplus energy he had at his disposal.
It never occurred to this middle class man that society owed him a living, or that he might apply to the government for help in the solution of his problems. The farmer is a particular class in point; the present day agriculturist, who must be included in our present day middle class in terms of income, holds it quite proper to demand of government, that is, the rest of society, a regularized subsidy, even a subsidy for not producing; the farmer of the early part of the century would hardly have thought of that.
The merchant or manufacturer located in the area served by the Tennessee Valley Authority has no hesitation in accepting electricity at rates that are subsidized by the rest of the country, and even demands more of that handout, without any hurt to his self-esteem. The pride of the peddler, the entrepreneur, has left the industrialist who now grovels before legislatures and bureaucrats in search of government contracts, while the independence that characterized the early banker has been replaced by a haughty obsequiousness of the modern financier in his dealings with government.
Indeed, it has become a "right" to demand a special privilege from the authorities—as, for instance, the urgency of professional athletic organizations for publicly financed stadia in which to display their wares; and the man who secures such a privilege does not feel humiliated by its acceptance, but rather holds his head as high as did the earlier entrepreneur who made his way on his own steam.
Among the modern middle-class men, in terms of income and the station in life they have attained, there are two categories that deserve special attention: the bureaucrats and the managers of the great corporations. In earlier days, the government employee was held to be a man who could not have made his way in the business world and was therefore tolerated with condescension; he had little to do and his remuneration was correspondingly small. Even the few entrepreneurs who entered the public service did so mainly under draft, as a necessary though unwanted duty, to be got out of as soon as possible.
Today, the government agent holds his head higher than do those who furnish him his keep—he is the government while they are only the people—and is held in esteem by the very ones he dominates. He is, of course, a non-producer, but in the present ethos that circumstance does not degrade him, either in his own eyes or that of society; indeed, the producer holds an inferior position in life than does the government official. The government official is the law.
The managers, of corporations owned by stockholders, have largely taken the place of the old peddler class. But, while the latter were characterized by self-reliance and a willingness to assume responsibility for their choices, the managerial class, taking them by and large, hide their personalities in committee decisions. To be sure, the corporations must abide by the decision of the market (except where its principal customer is the government), but its operations are bound by rules, conventions and rituals behind which the management can well hide. Risk is something nobody takes, if he can avoid it, and where he must make a decision he is sure to have an excuse or scapegoat in case he decides wrongly. "Passing the buck" is considered de rigueur by even the supervisory help.
And, above all, security has become a fetish among all classes of society, from the lowliest wage-earner to the president of the corporation. To be sure, security against the exigencies of life has always been a human aim. But, while in the last century man made provision against disaster, in insurance, in paying off the mortgage on the old homestead, in savings, the tendency during the latter half of the twentieth century is to put the burden of one's security on society. The young man entering the business world is not concerned with the chances of advancement that are open to industry and skill, but rather with the pension system provided by the company; and the candidate for president of the corporation is concerned with his retirement even as he takes on the duties of the presidency. This change of attitude from personal responsibility to collectivized security is probably the result of the income tax; it would be difficult to trace it to any alteration in human nature or any deterioration of character.
It is most difficult to find a cause and effect relationship to explain changes in the ethic of a people, as, for instance, the transmogrification of the freedom-loving (and therefore self-reliant) American of times past into one leaning on society. Undoubtedly, ideas have consequences, and the current urgency to turn to government for assistance in solving life's problems might be traced to the socialistic and populist ideas promulgated during the last part of the 19th century.
But, ideas must be institutionalized before the mass of people can accept, or even comprehend, them; a religious concept has no meaning until it is ritualized, given material form in a church and reduced to a catechism. So with political ideas. The socialists and the populists might have ranted on and on ad infinitum and without effect, had not the politicians, in their own interests, taken hold of these ideas and institutionalized them.
The first of these ideas to attract the attention of the politicians was the income tax; the socialists and populists advocated this as a "soak the rich" measure, purely out of the covetousness which is in all men's hearts, but the politicians took to it because more taxation means more power. And getting and exercising power is the principal business of the politician.
Changing values do not indicate a change in the nature of man. In all likelihood, the American of 1900 was as equally inclined toward getting something-for-nothing as was the American of the 1960s. The land-grabbing schemes and the tariff-mongering of the 19th century indicate an inclination to improve oneself at the expense of neighbors, while the "robber barons" were likewise out for all the traffic would bear. The one facet of human nature which, because of its invariability and constancy, we can put down as a natural law is: man always seeks to satisfy his desires with the least effort.
It is because of this inner compulsion that man invents labor-saving devices, and it is also because of this inner compulsion that man sometimes turns to exploiting his neighbor, which is a form of robbery. But, robbery is attended with the use of force, which might be met with a contrary and defeating force, and is therefore risky; however, when the government, which has a monopoly of coercion, exercises its power so as to favor one individual or set of individuals to the disadvantage of others, there is nothing to do but to comply with its edicts.
And, because its edicts are regularized by law, mental adjustment to the exploitation takes place, while the recipients of the advantages thus gained learn to look upon their loot as a "right." The urgency for something-for-nothing is endemic to the human being; therefore, when the government exploits one group in favor of another, the cry goes up by other groups, in the name of "justice," for some of the same. Thus, a new ethic, a new complex of beliefs and conventions, takes hold of the people; all of them expect society, through the agency of government, to take care of them.
The ethic of the 19th century (sometimes called the Protestant ethic) held that man was endowed with free will and therefore was a responsible being, responsible for himself, responsible to his fellow man and to his God. The origins can be traced to the Industrial Revolution, with its emphasis on individual initiative; or perhaps to the introduction of the capitalistic system, with its emphasis on contract rather than on status, which prevailed during the feudalistic eras. The emergence of the idea that "a man was a man for a' that," that freedom from restraint was his due, not only gave him a sense of individual dignity but also put upon him the necessity of making choices and of suffering the consequences. This called for industry, thrift, and self-reliance. Society could do nothing for the individual which he could not better do for himself; in fact, society could do nothing for the individual.
This ethic held, in this country, because it was institutionalized. There was the institution of the Declaration of Independence, and the institution of the Constitution, with its inhibitions on the power of the government. A particularly inhibitory influence was the limitation on its taxing powers; the government could do little in the way of interfering with private affairs because it did not have the wherewithal necessary to effect interference. What it could get by way of excise taxes and tariff duties was just about enough to make it a going concern; its power of exploitation, inherent in all governments, was sharply delimited. Washington was a village on the Potomac where some legislators met for a few months in the year, to pass a few laws which little affected the welfare of the people, except when the laws had something to do with war. Debates in Congress were interesting to read about or to talk about, but the issues involved did not concern the making of a living or the manner in which one got by in this world. Newspapers sent reporters, not correspondents, to Washington.
The ethic was further institutionalized in the manners and habits of the people, in the books that were written and the plays that were produced. For instance, the moral concepts of Hawthorne's stories, the peccadilloes of Mark Twain's characters, the simple tragedies in the lives of Louisa Alcott's Little Women all emphasized the worth of the individual, while the popular plays dealt with individual heroics, rather than social trends. The school books, too, stressed the virtues of independence and personal responsibility. Charity was a personal matter, both for the donor and the donee; somebody gave to somebody, as a duty and not by way of law. Young folks took care of their parents, with love, not as they do now through the medium of taxation.
This Protestant ethic has been largely supplanted now by what has been called the Freudian ethic,1 which is based on a peculiar notion of the nature of man. Sigmund Freud came up during the latter part of the 19th century with the queer notion that man is indeed a complex of emotional impulses, the principal one being sex. He comes into this world without the biological equipment with which to meet its demands. What kind of world would best suit the needs of the babe Freud does not say, although it seems it should be one most like the warmth and comfort of the womb. At any rate, his entry into the world is accompanied by a traumatic experience, the first in a series that complicate for man his way through life. Society is to blame for all these neuroticisms. The best the individual can do to make his way through this vale of gloom is to make adjustment as best he can to the demands of society, until death at long last releases him from the uncongenial climate of existence.
There is no empirical knowledge to support this concept, nor are there any demonstrable facts underlying any of Freud's fanciful psychological ideas. Nevertheless, his notion that society is at fault whenever the individual cannot or will not meet its demands appealed to the socialists and other do-gooders—it gave them something "scientific" on which to base their urgency—and they promoted it as incontrovertible truth. Psychologists, educators, jurists, criminologists, social workers and, of course, politicians, took to Freudianism as a fish does to water, so that, during the second half of this century, it is generally taken for granted that the ills of the individual are all socially made, and that there is nothing to do but to change society. The old idea that man is a free willing, responsible and self-reliant individual was swept aside by the new ethic, and in its place we have a neurotic who must be ever coddled, provided for, adjusted and generally managed.
Whether or not Freudianism is the cause of this change in attitude, it is difficult to say. Other ideational vogues have had their sway without getting beyond the realm of fanaticism, and have died away; as, for instance, the bimetallism of William Jennings Bryan, or the end-of-the-world enthusiasms of earlier times. To get hold of the people an idea must be institutionalized, must be fixed in custom or validated by law; then only does it become part of that complex of beliefs which motivates men.
Now, associated with the rising vogue of Freudianism was the rise of statism; the politicians, who knew nothing about Freud, but who are very astute in evaluating any vote-getting device, instituted the Welfare State, and this fitted in very nicely with the Freudian notion. The Welfare State does indeed relieve the individual of self-responsibility, and does indeed undertake to remodel society; therefore, the Welfare State seemed to validate all that Freud claimed as to the nature of man.
And so it has come to pass, during the second half of the 20th century, that the ethic of the peddler class has been replaced by the ethic of mendicancy. I am inclined to the thought that the change indicates a deterioration of the American character; but, then, I am loyal to my youth, as is every older man, and may be prejudiced.
It may well be that social security is an advance over self-reliance, that the individual prospers better under the ministrations of the bureaucrat, that juvenile delinquency is a social rather than individual malady, that individual proficiency is a social curse, that freedom is indeed the right to feed at the public trough. The young people, those who were born or got their rearing during the New Deal era, do not question that concept of freedom, and the professors of economics, psychology, jurisprudence, sociology and anthropology write learned books in support of it. Therefore, it must be so.
Any attempt to revive the old concept of freedom—that it is merely the absence of restraint—would be a fatuous undertaking; it would be like trying to "turn back the clock."
Yet, one cannot help speculating on the future. When the present generation, well inured to the Welfare State, shall have grown old, will it not also write books on the "good old days," even as this book speaks lovingly of the ethic of the peddler class? And what new ethic—every generation has its own—will these books decry? Maybe it will be the ethic of the totalitarian state. Who knows?
This article is excerpted from the first chapter of Out of Step: The Autobiography of an Individualist, published in 1962.
- 1. This whole subject has been discussed at length in a recommended book, The Freudian Ethic, by Richard LaPiere (Duell, Sloan and Pearce).