The Labor Policy of the Free Society
2. Freedom, Well-Being, and Security
. . . but the only unfailing and permanent source of improvement is liberty, since by it there are as many possible independent centres of improvement as there are individuals.
—John Stuart Mill
Well-being without personal freedom, security without well-being, and freedom in society without security—these are all meaningless concepts, both inherently contradictory and unrealizable in life. Freedom, well-being, and security are integral elements of a single reality: the goal of men in society. If men fail in the achievement of but one, they fail in all.
Freedom and Weil-Being
For any man, a state of well-being means a condition in which his own conception of what is desirable prevails. Well-being, if it is to be meaningful, therefore, signifies a situation of persons which accords with their own opinion of what they want and of what serves their wants. If a community should produce two hundred million tons of steel in a year, it has certainly produced a considerable amount of steel in terms of present conceptions. But if the community has done so only in obedience to the directive of central governmental authorities whose commands cannot be effectively disobeyed, and if in the process the desires of the individual members of the community have either been violated or given no opportunity of expression, no one may correctly say that the well-being of the community has been served by the considerable steel production—especially when there is evidence that, given a free choice, the community would have directed itself to greater production of shoes, radios, and beefsteaks.
Well-being thus appears to be a subjective matter; as such, its existence or nonexistence can be detected only in circumstances of prevailing personal freedom. The only way to be at all sure that a society is on the right path to well-being is to establish that all persons shall have a right to act largely as they wish: to think, work, buy, and sell in accordance with their own desires. With such rules in effect there is a secure basis for the belief that the activity of the society is in accordance with the wishes of its members. The universal interests in freedom and in material well-being will both have been served.
A society which organizes production on any basis other than the freely expressed and acted-upon demands of its members may, it is true, be engaged in a considerable amount of productive activity. That is to say, its members may be going through many motions, may be able to demonstrate a substantial physical product for their efforts; such a society may even spend most of its effort on the production of consumer goods. Still, unless production is responsive directly to the consumer, the material well-being of the people is not being served. The machine serves, instead, the conception of material well-being held by its monopolistic masters, whoever they may be—commissioners or commissars.
The best method known of insuring the responsiveness of production to the demand of the members of a society is that of permitting the people as a whole to reward responsive production and to penalize unresponsive production. In an advanced and well-run society the procedure of reward and penalty will be simple, direct, and accurate—as much so as possible in an imperfect world. Some nations have reached the ultimate through the process of the continuous economic vote of consumers. By their free purchases, the people in such nations engage daily in rewarding responsive production and penalizing the less responsive.
It goes without saying that rewards or penalties in accordance with service to the people cannot be satisfactorily distributed unless the people are in a position to make a real judgment of the performance in question. If there is only one shoemaker, and if the desire for protecting and adorning the feet can be satisfied only by dealing with that shoemaker, the fact that one has patronized him does not tell as much as it would if one had patronized him in spite of the existence of a number of other shoemakers. Where I have a choice among competing methods of satisfying the same desire, there is a much greater probability that the choice I actually make has been responsive to my individual desires than if there have been no competing methods.
But this does not mean that there must necessarily always be in existence at any given time competing alternative methods of satisfying the same desire. It will suffice if the opportunity is open for anyone to produce anything. When such opportunity exists, one may be sure that, if there is in fact only one producer of a given good, he is alone in the field because of universal agreement that he is under all the circumstances doing the best possible job of serving the consumers in that area. It being open to anyone to offer competition to that producer, the fact that no competition is forthcoming can have no other meaning.
On the other hand it equally frustrates the desires of all if, contrary to the freely expressed will of the people, certain persons are specially privileged to remain in the production effort even though their service is not satisfactory. Such a situation exists, for example, where a retail distributor is permitted by law to limit the freedom of his competitors. Discriminatory taxation of large-scale distributors, or general prohibition by law of selling at anything lower than fixed prices, as under the deceptively named “fair-trade” laws, are both measures inconsistent with the fundamental principles of the free society. In both cases the effect on the material well-being of all the people is harmful. Freedom and well-being are both impaired, for the special benefit of a few.
It thus seems evident that freedom and general personal well-being are indispensable to each other. No one should be surprised that bread and meat, as well as personal freedom, are scarce in Russia today. If the right to produce for general consumption is restricted to one man, to one integrated group of men, or to one agency, social well-being in the sense of the greatest possible satisfaction of individual desires is impossible. Social well-being in that sense is open to realization only when the opportunities available to all who wish to serve are equal and unlimited by the society. The liberty of the consumer to buy as he wishes is meaningful only when equal liberty is available to all who wish to try their hand at satisfying consumer demands under a free price and free production system.
The Anglo-American legal system and other great legal systems of the world incorporated this reasoning into their basic principles. They regarded as fundamental to civilized society the right of all people to buy and sell as they wished, to produce or not to produce as they wished. Departures from these principles by current societies provide a basis for evaluating the worth of those societies. It is not possible in every instance to prevent societies from modifying or qualifying these principles. Perhaps it is not even always desirable to do so. But when one is conscious of the intimate relationship of these principles to the concept of the good society, one is in a position more effectively to evaluate proposed modifications and qualifications of human freedom.
Security, Well-Being, and Freedom
The concept of security has been sinned against most grievously, and the transgressions have been of almost every conceivable kind. In many instances, perhaps in most, it is easy to forgive; for the concept itself is complicated and ambiguous in an elevated degree, and in such circumstances errors in good faith are to be expected. But in certain instances the transgressions seem to have been basely motivated.
The problem of eliminating human insecurity is as complicated as the sources and kinds of insecurity. There is the insecurity of the wilderness for even the best-equipped man; of the child’s first day in school; of the woman in childbirth; of one in a position, social or economic, which strains one’s capacities and experience; of a property-owner faced with the threat of expropriation by a thief or a government; of a man without means of support for himself and his family; of man before death and the other mysteries of his own being and of the universe.
To the fullest possible extent the good society must fulfill the human desires for security, well-being, and freedom; in order to do so, it must harmonize them. But to say that the enduring society must perform this function does not mean that it must use a single mechanism in approaching all the facets of insecurity, in striving to check all the various types of insecurity. We have already observed as a general proposition that the intelligently operated society will in all instances make use of the best available means of achieving its objectives, and that one of the primary considerations in settling upon the means will be the relationship of the means chosen to the other profound objectives of society. Means must be tailored to their objectives, and they must be rejected if they involve the sacrifice or destruction of other equally important objectives.
Society—the cooperation of persons to facilitate the achievement of common objectives—is itself the fundamental condition of a satisfactory approach to the elimination of the kinds of insecurity which confront men. Government, as commonly understood, must not be confused with society. Government is only one social institution; there are many others. And in original thinking upon the problem there is no reason to assume that the institution commonly thought of as government is necessarily best designed to deal with all phases of the problem of insecurity. Other social institutions have grown as naturally and organically from basic human desires as government has; and intelligent men are committed to only one choice in deciding upon the functions to be allocated to the various institutions already in being or to be created: the choice of the institution best adapted to the end in view, the one most harmonious with all other equally important ends.
The cooperative activity which we call society inherently involves the division of labor and the pooling of resources. Some men specialize in curing diseases and healing injuries, some in producing desired goods, some in clearing the wilderness, some in training and educating children, some in preventing and punishing violent expropriation, some in pursuing truth concerning man and nature. Each of these occupations is designed to serve one or another phase of the security and well-being of men. Each is indispensable to the freedom of men, as well. All, so far as history reveals, were natural products of the voluntary cooperation of men in society.
There is little point in rating these functions in any kind of order of importance; each is indispensable to the fullest realization of the others. Without efficient production of the basically desired goods—food, shelter, and clothing—the health of the body is prejudiced. Without health the production of desired goods is impaired. Without careful analysis of the facts concerning man and nature, and appropriate teaching, adequate health facilities are impossible, and the production of goods must also rest in a more primitive and inefficient state than it achieves in a society where research and education are more advanced. Without law and order, the means of settling disputes peaceably among members of the society and of deterring violent assaults and expropriations, the tranquility indispensable to the functioning of civilized society is severely threatened.
If good health is the objective, the peak performance of many phases of social cooperation is vital. All must be properly informed and habituated in regard to the techniques of healthful living; for superstition, ignorance, and slovenliness are enemies of health. The production machine must be working well; for food, shelter, clothing, expensive sanitation methods and facilities, and equally costly diagnostic, preventive, and therapeutic devices—all being indispensable to the general good health of a society—must be produced efficiently enough to be available in the greatest possible quantities at the lowest possible costs. Scientific and educational activities must be proceeding in the environment most suitable to their functioning and progress; for they must produce and disseminate the ideas, theories, and information without which men remain exposed to the insecurities of disease and ill health. The measures best designed to secure able medical practitioners in sufficient numbers must be adopted, and arbitrary controls upon the preparation of such practitioners or upon their freedom to evolve the most useful forms of medical practice must be eliminated.
The role which freedom has to play throughout the quest for security from health hazards is central and dominating. In regard to education and research the role is as obvious as it is dominant. In regard to the business of production and in regard to medical practice it is not less dominant, only less obvious. The production and distribution of the life-goods, of the costly facilities indispensable to this security-objective, in the greatest possible quantities at the lowest possible prices, require maximum freedom for the producers and distributors. Free competition among them, with the spur of rewards in the form of profits to the ablest and most efficient, is the best technique ever evolved by mankind for the steady reductions in costs which make these goods available in ever greater quantities to ever more persons.
Freedom is likewise central in regard to medical practice. We can be sure that medical practice is at its peak of performance only if the conditions of freedom prevail as regards entrance into the practice and the evolution of medical practice itself. The only control upon entrance to medical practice which society can permit is that of proper qualification—proper training and ability. All other controls are socially arbitrary and tend to weaken the security of persons against the hazards of ill health. They tend to limit unduly the number of practitioners: a limitation which both violates the interest in promoting the freedom of persons to become what they want to be and can be, and at the same time tends to raise the fees and other prices of medical practitioners.
Medical practitioners themselves are the ones in the best position to determine which methods of practice are most effective. Every qualified medical practitioner must have the freedom to decide this issue for himself. If some physicians find it more advantageous to practice on an individual basis, they must be free to act accordingly. On the other hand, if some physicians freely decide to practice as a group, carrying out the division of labor which works so well in most phases of human life, they too must have equal freedom to implement their decision. No other system is consistent with the social interests in freedom, well-being, and security. Proponents of individual practice may not be allowed to frustrate the freedom of proponents of group practice—any more than the latter may be allowed to frustrate the former. Group practice in the form of highly complicated partnerships has been a feature in the practice of law in America for many years. No one has ever contended that this form of organization in a profession having many points in common with medicine has impaired the practice of law or the freedom of lawyers.
If we are seriously concerned with achieving maximum security against health hazards, it must be evident by now that maximum freedom in the relevant institutions is necessary. We must make a check list and go over it carefully, to discover whether we enjoy conditions of maximum freedom in research, education, production, and the practice of medicine. If we are dissatisfied with the present conditions in any field, we must abandon freedom as the dominant principle of improvement only if we are sure that freedom has been given a chance and that it has failed. The same is true of all other security matters, except those involving violence and expropriation—areas in which, as will be seen, compulsion has proved to be necessary, at least in the current state of human and scientific development.
“Social Security,” Freedom, and Well-Being
The term “social security” would be inherently meaningful if it were used exclusively in reference to hazards which threaten a society, such as attempts at conquest by foreign powers or to individual conduct such as murdering, robbing, or cheating, which can, without stretching the truth at all, be characterized as essentially antisocial. As commonly used today, however, the term “social security” refers to the “security” of individual persons against the “hazards” of old age and unemployment.
The distinction between hazards which imperil a society as such and those concomitant to old age and unemployment is an important one. We shall deal with some phases of this matter at length in Chapter 6, where an attempt is made to demonstrate the undesirable consequences of failing to observe the distinction between voluntary action by individuals and the compulsory action of the state. At this point, however, it is desirable to elaborate the distinction between individual problems and the hazards which threaten a society, and to explicate some of the conclusions which follow naturally from a proper understanding of that distinction.
The person who will murder, rob, or cheat is quite literally an enemy of society. He refuses to abide by rules of conduct which any society needs to enforce if it is to survive as a society, as distinct from a mere aggregate of persons in an environment in which life is “nasty, brutish, and short.” But effective enforcement of these rules against persons who repudiate them is possible only if the people in favor of the rules unite their power in order to create a force stronger than any other force. In civilized society that force is called the state; the state may, indeed, be defined as the greatest power aggregate in any society and the only agency which may legally use force and compulsion. As we shall see later in more detail (Chapter 6), the state by its very composition is coextensive with the society of which it is the common agent; every member of that society is a member of the state and subject to its rules. And this is necessary if the society is to preserve itself, for it must have an instrument more powerful than any possible combination of the persons who would murder, rob, or cheat.
The fact that states at times cannot or choose not to restrain some persons or groups from using violence for private ends should not be allowed to confuse the analysis. For it remains true, nevertheless, that if a society is to survive, its members must create an instrument strong enough to prevent violence. If they are not willing to create and support such an agency, they are apparently not in favor of civilization. If they do create and support such an agency, but the persons operating the agency refuse to suppress violence when it arises, then the decent members of the society must band together to replace the unfaithful agents. If there is no peaceful method of removing faithless political agents, violence has to be used. But it is much better to have a peaceful method, and the enduring society does of course work out such a method, the method of periodical election, under which state officers may be voted out when they fail to perform their job of preserving internal tranquility.
The safeguarding of a community against foreign conquest yields more or less the same analysis. Foreign conquest is a hazard equally disastrous to all, even though the actual impact may vary from one person or group to another. As it is equally disastrous to all loyal citizens, the job of safeguarding against conquest falls naturally to the common agent of all: the political government. Of course, no people or government can effectively provide alone against conquest by a stronger enemy. But the situation is not completely hopeless. There are always alliances. The quality of a people may still often be judged by their success in maintaining their political integrity, even though it must be realized that sometimes the best efforts will fail, as where a nation is invaded by a larger, more powerful one.
The kinds of “insecurity” ordinarily associated in our day with the term “social security” are as a matter of fact essentially different from the hazards thus far discussed. Old age, for example, is not, properly speaking, either a hazard or a catastrophe, although, in certain cases, it may be both. It is, instead, simply inevitable; it is a condition of the life cycle. Old age may as well be thought of as a good, a precious allotment of years which does not fall to everyone.
Whether or not old age proves to be preponderantly a period of satisfaction depends upon a large number of factors, some of which are subject to personal and societal control, and some of which are not. Like infancy, youth, and maturity, old age poses certain problems which are related specifically to the psychic, intellectual, and physiological conditions of the particular time of life involved. Old age takes on the appearance of a catastrophe, for example, if a society does not permit its members to prepare themselves for it. Consider a society which does not recognize private property rights and thus does not permit individual accumulations of liquid funds and other properties. In such a society an old person no longer able to support himself by current income-producing activity is in a difficult position. He must depend on charity or the support of his family, or starve. If a society is genuinely interested in the security and well-being of its superannuated members, therefore, it will take action designed to encourage and to promote saving.
Viewed in this light, inflation of the monetary unit is a great enemy of the security of the elderly. If a society pursues deliberately a policy of inflation, and at the same time professes to be seriously preoccupied with the problems of its old members, one must doubt either the good sense or the honesty of that society. Inflation of the monetary unit destroys, to the extent of the inflation, the savings of persons who have tried to provide for their old age. It amounts to expropriating old persons, or destroying their property rights, with the consequence that its victims face catastrophe when they are no longer able to produce current income. Those who find “nothing dangerous” in a program of “mild inflation,” usually meaning an inflation of two to five per cent annually, surely are unconcerned with the problems of the old. If these same people protest that they are in favor of “social security,” one may be pardoned for questioning their judgment.
One can scarcely provide adequately for his old age in a society in which opportunities of employment at good wages during one’s youth are not available. The well-run society interested in its old people must therefore be concerned vitally in promoting the productivity of the economy. Only thus will job-opportunities be plentiful, the wages of workers high, and their ability to set apart some of current earnings toward future necessities be reasonably insured. Here again we meet in instructive form the reality of the unity of freedom, well-being, and security. For societies are most productive, and offer plentiful job-opportunities at good pay, where freedom prevails on every side to the greatest possible extent.
High productivity and plentiful job-opportunities at good pay are possible only in a society which has a great deal of capital in the form of productive plant and machinery. The more capital there is invested per man, the greater is the demand for labor and the higher the productivity of each working man and, therefore, his earnings. These are facts of economic life which no one disputes.
It is true that capital may be accumulated even in societies in which conditions of personal freedom do not obtain to the greatest possible extent. The administrators in a socialist economy are in a position to declare that a certain amount of current productive capacity is to be directed to the production of capital goods rather than consumption goods. Soviet Russia today is reported to be taking such action.
However, if the direction of the productive activity of a society is in the hands of its central political administration it becomes improper, as already noted, to speak of individual well-being as the driving force of that society. In such a society, the wishes and goals and ideas of the administrators are in control. These may or may not coincide with the wishes, goals, and ideas of the members of the society. There is no way of telling. One can be tolerably sure that individual desires are in control only if every man in society is free to try his hand at pleasing consumers. Such freedom presupposes that the basic resources of the nation are accessible to all who demonstrate skill in serving consumers. Where the basic resources of the nation—its wealth and capital—are commanded only by the political administrators, there is small scope for private initiative, and even less incentive. And where the conditions of maximum freedom do not prevail for private initiative it is futile to speak in terms of individual well-being.
Therefore, if one wishes to promote both freedom and well-being, as well as security for superannuated persons, he must think in terms of the operation of an individual-initiative, private-property (or “capitalist” or “private enterprise”) society. The problem then becomes one of selecting from the various feasible alternatives the ones best designed to promote capital formation and consequent higher productivity. Careful students of the operation of a free economy have provided the solution to this problem. It is a simple and elegant one. A society need only concentrate upon encouraging work, savings, investment, and the greatest possible activity of the most able and astute producers and investors.
The conditions fundamentally necessary to the realization of the desire for old-age security, it will be noticed, are the same ones necessary to the realization of the desire for security from the hazards of ill health. Freedom, well being, and security again appear to be one thing; properly understood, they are integrating phases of a single indivisible concept. Like the valves, pistons, connecting-rods, spark plugs, and crankshaft of an internal combustion engine, they must all work together; and if the operation of any of the elements is faulty, the entire power output is affected.
In the United States, as elsewhere in the world today, a tendency prevails to abandon freedom-principles and to adopt principles of compulsion in the so-called social-security area. Employers and employees are compelled by law to put aside certain amounts for old-age retirement benefits. Employers are compelled by law to put into unemployment compensation funds a certain percentage of payrolls and to take out insurance against injuries to workers in the course of their employment. There is a persistent movement to extend these compulsory payroll-deduction principles in order to provide for medical care for everyone.
In analyzing these tendencies one of the first things to recognize is that they do not deal with the fundamental aspects of the problems with which they are concerned. Real security against all the hazards in question is the product only of a free society working at its peak of efficiency. This is as true in regard to unemployment hazards as it is in regard to medical and old-age hazards; for the best insurance against unemployment is provided by a society so productive and dynamic that there is work for everyone who wants it, when he wants it. But the tendencies under discussion now are characteristically uncreative and unprogressive. They do not concern themselves with creating greater social productivity and its consequent increased wealth, increased medical facilities, and expanded job opportunities.
The second thing to recognize about these tendencies is that they have, on the whole, contrary effects. Each puts a burden on payrolls. This frequently reflects itself in lower wages to employees than would otherwise prevail; but it also frequently means that it costs an employer more to hire a worker than he would otherwise have to pay. Higher costs of production and higher prices of products and lower profits are likewise predictable consequences. And decreased effective demand for the products involved, with, accordingly, less demand for workers, are further consequences. Furthermore, payroll deductions which go to the government do not result in the formation of the new capital and the greater productivity which are promoted by private investment in the production machine. The plain fact is that all compulsory payroll contributions have a directly dampening effect on the productive activity of the economy as a whole. Instead of promoting productivity, the only real method of increasing the well-being and security of a people, these measures depress productivity. Needless to say, in view of the preceding discussion, these inroads upon personal freedom work out as inroads upon well-being and security, as well.
Just how serious these inroads are cannot be determined in any quantitative way. What one can accurately say is that limitations on personal freedom and social productivity are the necessary consequences of compulsory payroll contributions. There is no telling just how much productivity is affected; but the greater the compulsory payroll costs, the greater the dampening effect on productivity.
Most students of society, even those who are strong advocates of maximum freedom, do not take an unequivocal stand against so-called social-security measures. The latter insist, however, that such measures be recognized for what they are: inhibitors of both personal freedom and a progressive, expanding economy. And they, the real progressives, attempt to warn against the adoption of measures which tend to destroy the very things which the advocates of “social security” and all men of good will seek.
