Ideas on Liberty

Freedom Promotes Integrity and Morality

BY BETTINA BIEN GREAVES

THROUGHOUT his many years of editing The Freeman, one of Paul Poirot’s underlying motifs was that freedom helps to bring out the good in people. On the other hand, government intervention, coercion, tends to bring out the bad. Was this mere ivory-tower idealism, born of decades of seclusion in the sylvan dales of suburban Irvington? No! Rather it is solid realism, born of an understanding of human nature and the market process. Given human nature, none of us will ever be perfect. There is good and bad in everyone. Every saint has in his makeup some flaw or human weakness, a little bit of the devil. Just as no one is perfect, however, so is no one 100 per cent evil either. No criminal is completely depraved, lost beyond all hope of redemption. Remember the maxim, honor among thieves. But most of us, Dr. Poirot maintained, will be better, more moral, if we live in a free society than if we live under collectivism.

A Free Society

A free society rests on the right to own property. As Dr. Poirot wrote some 35 years ago: “A man without property rights—without the right to the product of his own labor—is not a free man.”1 Only when man may own property and use it as he chooses is he free. If he is forced at gunpoint to devote his property to certain purposes, he is not free and deserves neither praise nor blame for the consequences. To be free a person must own property and dispose of it as he chooses.

In an article in The Freeman, Dr. Poirot pinpointed the clue to responsible human behavior and individual morality: “The personal freedom of choice that is liberty depends upon self-control and possession or ownership in the form of private property. And consistent with this concept of human dignity and private property is the right of the individual to make his own mistakes, if he so chooses, and to abide by the consequences.”2 Thus, responsible human behavior and individual morality both stem from the fact that under freedom the individual has “the right . . . to make his own mistakes” and the obligation “to abide by the consequences.” These two factors bring out the best in man and help to keep him on the straight and narrow.

A person learns by trial and error. Mistakes teach caution, self-control, responsibility. Having to face the consequences of mistakes fosters moral values—cooperation, honesty, generosity. Government coercion has an opposite effect.

Collectivism

In an oft-cited chapter of The Road to Serfdom, F. A. Hayek explains “why the worst get on top” under collectivism. But it is not only to the top that the “worst” are attracted. The “worst” elements of society come to the fore at every level.

Often the only idea that will unite the masses is a negative emotion—hatred or envy of a common enemy. To attract the support of many, however, the rallying cry must appear to aim at a “higher goal,” so hatred and envy are twisted to serve a “higher goal”—defense against a foreign foe, the preservation of racial purity, or the national economic welfare. This “higher goal” then comes to justify the means, any means. And the “plan” adopted to attain that goal must prevail, no matter its cost in money, forgone benefits, and human suffering.

Under collectivism, there is no morality except that prescribed by the collective. There is no loyalty except to the state. Traditional moral values are turned topsy-turvy. Children turn on their parents, brother on brother. An action is “good” or “bad” depending on whether or not it contributes to the “plan” or to the collective’s “higher goal.” Any means is justifiable, any lie permissible, if it contributes to the “plan” or the “higher goal.” Members of the collective may engage in violent and immoral actions not permitted to them as separate individuals.

According to traditional standards of justice and morality general types of action are prescribed, others are proscribed. Good and bad stem from certain principles. “To cheat or steal, to torture or betray a confidence, is held to be bad. . . . Though we may sometimes be forced to choose between different evils, they remain evils.”3 In a collectivist state, however, cheating and stealing, torture and betrayal of confidence are not only tolerated but actually prized, if they promote the collective’s “plan” or “higher goal.”

Modern Interventionism

The modern interventionist society also violates traditional standards of justice and morality, although not to the same extent as does the totalitarian state. “Cheating” and “stealing” for the sake of the poor, the handicapped, rent-controlled tenants, beneficiaries of low-cost government loans, municipal planners, producers of certain agricultural commodities, and the like, have been made legal. “[T]he power of government is invoked to plunder property, . . . . [which] is a denial of the right to own and control property.” This “is precisely how thieves operate: non-owners deciding how an owner may or may not use his property.”4

Owners, deprived of the use of their property, are no longer free men. Their incentive to work, to produce, to save, and to invest is reduced. They no longer have the same incentive to avoid mistakes or the same responsibility to face the consequences. In this way, the interventionist state weakens individual initiative and erodes the moral fiber of the people.

Most interventionist programs are enacted with the best of intentions. They aim to help those who are unable to help themselves, to provide a “safety net” for those who fall through the cracks. However, these programs have the opposite effect from that intended. They discourage initiative, effort, and responsibility. They encourage more people to ask for help to seek to qualify for “safety net” benefits. Special interest groups are organized to demand “their rights.” Welfare mothers clamor for more. To subsidize idleness is to shelter those subsidized from the consequences of earlier mistakes. It destroys the incentive of the less capable and less industrious. It also discourages their independence, fosters selfishness and the belief that the world owes them a living. Personal morality and family responsibility are eroded. Individual effort, initiative, and ambition are weakened. Moreover, the generosity of those who would have been willing to help is discouraged.

Standards of morality are also eroded when government tries to help businesses. If government engages in enterprises, grants credit, undertakes construction projects, contracts for services, offers aid to disaster victims, political favoritism is bound to play a role. Opportunities for bribery abound. Many fall for the “deep pockets” theory that no one will notice if government expense accounts are padded or bogus receipts issued for work that hasn’t been done. Everybody’s money is nobody’s money. No one really cares if the costs of a project mount. The department or division chief need only return to Congress with a carefully formulated explanation as to why more money is needed for the “public welfare.” Corruption runs rampant.

The Free Market

The daily newspapers are full of tales of crime, corruption, violence, and fraud. But most people are kind, generous, responsible, energetic, industrious, and productive. We learn very early in life that if we do something forbidden, we will be punished, but if we treat others well we will usually be rewarded. If we are kind, honest, and fair to family members, neighbors, associates, and even strangers with whom we have market dealings, they will usually show us similar respect in return. We can see widespread evidence of personal morality, integrity, and responsibility all around us. People often give assistance to those in need of help. They contribute generously of their time and money to many worthy causes—the homeless, needy, lame, halt, blind, hungry, and poverty-stricken. Insofar as actions and transactions are voluntary, society reflects the humane side of human nature and fosters friendly interpersonal relations. Honesty, fairness, cooperation, generosity are usually reciprocated, upgrading the general morality of the community.

Freedom in economic affairs takes the form of a free market. Like freedom in general, the free market allows participants the freedom to choose and, thus, the freedom to make mistakes. But the free market also imposes on market participants the obligation to face the consequences of their mistakes. Thus, like freedom in general, freedom in economic affairs encourages responsibility and morality. Personal integrity, reliability, and responsibility are reflected in countless market transactions every day.

Successful Entrepreneurs Are Responsible Entrepreneurs

The entrepreneur who succeeds on the free market must have first of all an idea. He must supply consumers with some good or service they want. More than that, if he is to stay in business, consumers must value his product enough to pay a price that will cover all his costs—production, research, transport, and merchandising. The product must compete successfully with other products on the market in price, quality, and/or service. Some entrepreneurs appeal to consumers on price, others on quality, still others on service, still others on all three. But to succeed over the long run, customers must be convinced that an entrepreneur’s good or service is as he represents it. Let’s look at a few entrepreneurs whose businesses started small and grew by demonstrating integrity and reliability.

J. C. Penney

When J. C. Penney started his chain of stores he called them “Golden Rule Stores,” and he tried to operate on that principle. His store managers became partners. “We were inspired,” Penney later wrote, “by the consciousness that we were a fellowship every member of which was dependent upon the energy, integrity, and loyalty of every other member for security and success. . . . We operated in small towns and villages, and as small-town men we understood our new neighbors as readily as they understood us. It wasn’t as if we had been a bunch of raiders swooping down upon them out of nowhere like the patent medicine and gold brick gentlemen who used to flash through that pioneering country for a quick cleanup and then disappear into nowhere . . . . We were among them to stay. We built upon their satisfaction and good will. If when they got their purchases home they were not fully satisfied, they knew they could always bring them back and receive their money, or a fair exchange, with courtesy and as a matter of course.”5 From a one-third interest in one small dry-goods store in Wyoming, Penney developed a chain of 1,600 stores with annual sales of more than $4 billion.

Henry Ford

By 1900, “horseless carriages” had been around for about fifty years but these early automobiles were expensive “toys” for the idle rich. Henry Ford worked as a young man for two automobile manufacturing companies that failed. Then he came up with the idea, considered crazy at the time, of producing an inexpensive car for the masses. He started his own business in 1903. His income soon exceeded his outgo. He plowed most of his earnings back into the business and expanded. Ford did not pretend that his car was as luxurious as the expensive autos of that day, but he offered reliability and integrity for the price. When his car was selling for $825, he boasted that “No car over $2,000 offers more except in trimmings,” and many believed and bought. He persisted in his dream of producing an inexpensive car. In 1915, his Model T’s sold for $440, and when his sales topped 300,000 he gave buyers a $50 refund. The price of a Ford continued to drop—to $290 in 1925—and its sales to increase. Ford’s market share declined when competitors offered low-priced cars but his Model T had gained a solid reputation for reliability. However, when Ford’s competitors began offering cars in various colors, and Ford stuck with black, he lost sales. But he learned from that mistake. The company researched other paints, retained its integrity and survived to earn profits again. The Edsel car, introduced in 1958, proved unpopular with car buyers, but the Ford Motor Company again bore the consequences of this mistake and recovered its reputation for producing reliable and desirable cars.

Sears, Roebuck and Co.

In 1886, Richard Sears was a railroad freight agent in North Redwood, Minnesota. A nearby jeweler refused a shipment of “yellow [gold-filled] watches,” which sold in local stores for $25.00 each. The shipper let Sears purchase them at $12.00 each. Sears discovered he had a knack for writing advertising copy and sold them easily. He bought more watches and sold them, too. People began to ask him to repair watches. He advertised for a watch repairman and Alvah C. Roebuck answered the ad. The two joined forces and expanded the watch business. Sears “was no more honest than the other ‘snake oil’ salesmen of his time. But he was a lot better at writing advertising copy.”6 However, market competition helped to tame even Sears and to teach him integrity. He guaranteed his customers satisfaction, a replacement, or money refunded.7 And “he always paid his bills promptly.”8

In 1893, Sears and Roebuck established the mail order firm that bears their name. Roebuck couldn’t stand Sears’ high pressure selling tactics and pulled out. Sears found other more conservative business partners and the company kept expanding. Sears understood that “if you gouged the customer one year, you would lose him the next. So, . . . Sears, Roebuck bargained for lower prices from suppliers in return for making volume purchases. Then the company passed on the savings to the farmer.” Sears’ policy of low prices and satisfaction guaranteed or your money back earned the firm a loyal market.

Freedom Breeds Integrity

Countless firms have succeeded in our relatively free market by acting responsibly and morally. Countless voluntary agreements are made everyday that depend on the reliability and integrity of the parties concerned. Complex arrangements for the divison of labor and specialization are carried out, vast fortunes are traded, stock market purchases are made, contracts are fulfilled, huge buildings and skyscrapers are constructed, extensive fields are cultivated, long power lines and oil pipelines are laid, scientific research is conducted, goods are manufactured from resources and parts from many lands, countless commodities are sold to consumers in retail shops, credit transactions are fulfilled according to agreement, and so on. Most such voluntary transactions are completed honestly and fairly without serious controversy or friction. Most sellers offer satisfaction or your money back. A producer’s label or trademark indicates his responsibility and willingness to stand behind the product.

Consumers are severe taskmasters. They want quality products at the lowest possible prices. They might be tricked into buying shoddy merchandise once but entrepreneurs who try that tactic soon realize that “honesty is the best policy.” The tradesman or producer who tries to cheat or deceive his customers will not be in business very long. The only path to long-term profits on the free market is by serving consumers well, honestly, and fairly.

A Harmony of Interests

Under freedom people are united, not by a negative emotion, as under collectivism, but by a harmony of interests. They discover that they can accomplish many things through cooperation they couldn’t do alone. People realize they can help themselves by being honest and fair with others. By conforming with the standards of justice and morality developed throughout the ages, everyone benefits.

Paul Poirot was correct when he wrote that freedom depends on self-control and private property, and that most of us have the potential for being better, more moral persons if we are free to own and to use our property as we choose, than if our use of property is restricted. The natural desire of people to be liked and to be successful creates pressures that bring out the salutary side of human nature. Freedom encourages individuals to treat one another with mutual respect and dignity, an attitude seldom encountered in the collectivist state. Out of the cooperation that develops among free men, an attitude of camaraderie emerges. Individuals recognize one another as unique human beings, with different ideas, talents, and interests, each of whom can make a contribution to society.

9. “Property Rights and Human Rights,” In Brief, Foundation for Economic Education, 1952, p. 7. (Reprinted in Essays on Liberty, II, 1954, pp. 79–89.)

10. “The War on Property,” in The Freeman, October 1967, p. 579.

11. F. A. Hayek, The Road to Serfdom, 1946, p. 146.

12. Poirot, op. cit., pp. 582.

13. J. C. Penney, The Man With a Thousand Partners: an Autobiography, 1931, as quoted in John Brooks, ed., The Autobiography of American Business, 1974, pp. 75–76.

14. Gordon L. Weil, Sears, Roebuck, U.S.A.: the Great American Catalog Store and How it Grew, 1977, p. 12.

15. Ibid., pp. 9–11.

16. Ibid., p. 8.

Bettina Bien Greaves is a member of the senior staff of The Foundation for Economic Education.

• 1. “Property Rights and Human Rights,” In Brief, Foundation for Economic Education, 1952, p. 7. (Reprinted in Essays on Liberty, II, 1954, pp. 79–89.)
• 2. “The War on Property,” in The Freeman, October 1967, p. 579.
• 3. F. A. Hayek, The Road to Serfdom, 1946, p. 146.
• 4. Poirot, op. cit., pp. 582.
• 5. J. C. Penney, The Man With a Thousand Partners: an Autobiography, 1931, as quoted in John Brooks, ed., The Autobiography of American Business, 1974, pp. 75–76.
• 6. Gordon L. Weil, Sears, Roebuck, U.S.A.: the Great American Catalog Store and How it Grew, 1977, p. 12.
• 7. Ibid., pp. 9–11.
• 8. Ibid., p. 8.
• 9A free society rests on the right to own property. As Dr. Poirot wrote some 35 years ago: “A man without property rights—without the right to the product of his own labor—is not a free man.” Only when man may own property and use it as he chooses is he free. If he is forced at gunpoint to devote his property to certain purposes, he is not free and deserves neither praise nor blame for the consequences. To be free a person must own property and dispose of it as he chooses.
• 10In an article in The Freeman, Dr. Poirot pinpointed the clue to responsible human behavior and individual morality: “The personal freedom of choice that is liberty depends upon self-control and possession or ownership in the form of private property. And consistent with this concept of human dignity and private property is the right of the individual to make his own mistakes, if he so chooses, and to abide by the consequences.” Thus, responsible human behavior and individual morality both stem from the fact that under freedom the individual has “the right . . . to make his own mistakes” and the obligation “to abide by the consequences.” These two factors bring out the best in man and help to keep him on the straight and narrow.
• 11According to traditional standards of justice and morality general types of action are prescribed, others are proscribed. Good and bad stem from certain principles. “To cheat or steal, to torture or betray a confidence, is held to be bad. . . . Though we may sometimes be forced to choose between different evils, they remain evils.” In a collectivist state, however, cheating and stealing, torture and betrayal of confidence are not only tolerated but actually prized, if they promote the collective’s “plan” or “higher goal.”
• 12The modern interventionist society also violates traditional standards of justice and morality, although not to the same extent as does the totalitarian state. “Cheating” and “stealing” for the sake of the poor, the handicapped, rent-controlled tenants, beneficiaries of low-cost government loans, municipal planners, producers of certain agricultural commodities, and the like, have been made legal. “[T]he power of government is invoked to plunder property, . . . . [which] is a denial of the right to own and control property.” This “is precisely how thieves operate: non-owners deciding how an owner may or may not use his property.”
• 13When J. C. Penney started his chain of stores he called them “Golden Rule Stores,” and he tried to operate on that principle. His store managers became partners. “We were inspired,” Penney later wrote, “by the consciousness that we were a fellowship every member of which was dependent upon the energy, integrity, and loyalty of every other member for security and success. . . . We operated in small towns and villages, and as small-town men we understood our new neighbors as readily as they understood us. It wasn’t as if we had been a bunch of raiders swooping down upon them out of nowhere like the patent medicine and gold brick gentlemen who used to flash through that pioneering country for a quick cleanup and then disappear into nowhere . . . . We were among them to stay. We built upon their satisfaction and good will. If when they got their purchases home they were not fully satisfied, they knew they could always bring them back and receive their money, or a fair exchange, with courtesy and as a matter of course.” From a one-third interest in one small dry-goods store in Wyoming, Penney developed a chain of 1,600 stores with annual sales of more than $4 billion.
• 14In 1886, Richard Sears was a railroad freight agent in North Redwood, Minnesota. A nearby jeweler refused a shipment of “yellow [gold-filled] watches,” which sold in local stores for $25.00 each. The shipper let Sears purchase them at $12.00 each. Sears discovered he had a knack for writing advertising copy and sold them easily. He bought more watches and sold them, too. People began to ask him to repair watches. He advertised for a watch repairman and Alvah C. Roebuck answered the ad. The two joined forces and expanded the watch business. Sears “was no more honest than the other ‘snake oil’ salesmen of his time. But he was a lot better at writing advertising copy.” However, market competition helped to tame even Sears and to teach him integrity. He guaranteed his customers satisfaction, a replacement, or money refunded. And “he always paid his bills promptly.”
• 15In 1886, Richard Sears was a railroad freight agent in North Redwood, Minnesota. A nearby jeweler refused a shipment of “yellow [gold-filled] watches,” which sold in local stores for $25.00 each. The shipper let Sears purchase them at $12.00 each. Sears discovered he had a knack for writing advertising copy and sold them easily. He bought more watches and sold them, too. People began to ask him to repair watches. He advertised for a watch repairman and Alvah C. Roebuck answered the ad. The two joined forces and expanded the watch business. Sears “was no more honest than the other ‘snake oil’ salesmen of his time. But he was a lot better at writing advertising copy.” However, market competition helped to tame even Sears and to teach him integrity. He guaranteed his customers satisfaction, a replacement, or money refunded. And “he always paid his bills promptly.”
• 16In 1886, Richard Sears was a railroad freight agent in North Redwood, Minnesota. A nearby jeweler refused a shipment of “yellow [gold-filled] watches,” which sold in local stores for $25.00 each. The shipper let Sears purchase them at $12.00 each. Sears discovered he had a knack for writing advertising copy and sold them easily. He bought more watches and sold them, too. People began to ask him to repair watches. He advertised for a watch repairman and Alvah C. Roebuck answered the ad. The two joined forces and expanded the watch business. Sears “was no more honest than the other ‘snake oil’ salesmen of his time. But he was a lot better at writing advertising copy.” However, market competition helped to tame even Sears and to teach him integrity. He guaranteed his customers satisfaction, a replacement, or money refunded. And “he always paid his bills promptly.”