The Labor Policy of the Free Society
4. Operating Principles: Private Property and Freedom of Contract
Without a society in which life and property are to some extent secure, existence can continue only at the lowest levels—you cannot have a good life for those you love, nor can you devote your energies to activity on the higher level.
—Alfred North Whitehead
If personal freedom is the basic institution of the free society, then the principles of private property and freedom of contract must be the vital instruments of the free society; for personal freedom cannot even be conceived outside the environment provided by property and contract rights. And since all rights are meaningful only to the degree that they are secured against invasion, it follows that the role of the state, as the exclusive source of the legal sanctions which secure personal rights, is a critical one in the operation of the free society. We should no longer be surprised to find that freedom, well-being, and security are one: that the security of the rights necessary to freedom of action is essential to the personal well-being of all members of the community.
The founding fathers used to talk about the “security of our liberties.” They knew what they were talking about. And they knew what they were doing, too, when they took the “life, liberty, and pursuit of happiness” of the Declaration of Independence, and substituted for it, in the Constitution, the phrase “life, liberty, and property.”
The Indispensability of Property and Contract Rights
Freedom of action in the absence of property and contract rights is open only transiently to the physically strongest persons. Under such circumstances, there is no scope for the productive, the talented, the men able in the gentle arts of peace. For those talented in the productive pursuits are not necessarily talented in the arts of war; and even when they are, the social conditions prerequisite to concentration upon productive pursuits do not exist during the war of all against all. Alfred North Whitehead spoke with his customary percipience when he said: “Responsibility for a social system is the groundwork of civilization.” And he left no doubt as to what he meant by “social system” and “groundwork of civilization,” for he immediately added that: “Without a society in which life and property are to some extent secure, existence can continue only at the lowest levels—you cannot have a good life for those you love, nor can you devote your energies to activity on the higher level.”
The complicated and efficient production processes of a society characterized by a high degree of division of labor are a consequence, as we know them today, of the endurance of private property and contract rights in our society for an appreciable time. Take away private property and freedom of contract, and you may still have a division of labor; but you will no longer have a free society. For that, private property and freedom of contract are indispensable.
The Scope and Character of Property and Contract Rights
It is currently fashionable to pose a strong contrast between “human rights” and “property rights.” One also frequently hears it said that property and contract rights necessarily conflict with social goals. Such statements reflect a misunderstanding of the principles of private property and freedom of contract. It must be a misunderstanding, for these principles by their very nature relate to human, personal right; and as such they have no claim upon consideration except to the degree that they are useful to men in society.
Individual and social goals are, in fact, unified only by property and contract rights. This point is most readily apprehended by noting how individual and social goals are merely two ways of expressing a single concept. Thus the most drastic deprivation which any person can suffer is that of the freedom to utilize and enjoy the faculties which nature has given him and which his will and desire have developed. Keep a man from exercising his mind, his body, his faculties in the pursuit of his own wishes and delights, keep him from enjoying the fruits of his efforts—and you have done everything evil to him that you can. The greatest desire of each person, in short, is to be free to get the most he can out of life. There is no other way objectively to define social goals than to call them the sum of those individual goals which can be harmonized in society.
Far from frustrating these essential interests of men and of society, the principles of private property and freedom of contract integrate them in a manner which tends to produce a harmoniously operating, enduring society. These principles make for interpersonal compatibility. More important, they are the only working social principles which make for such compatibility in a society dedicated to the simultaneous achievement of maximum personal freedom, well-being, and security.
The best way to demonstrate the validity of these statements is to set forth the scope and character of private property and freedom of contract, and the place to start is with the person. A society which makes any pretensions to freedom must accept and securely guarantee individual autonomy. Each member of society (children and other legal incompetents excepted) must be in control of his own person. All must be afforded protection against attempts by others to invade the integrity of their person. A property right in this sense means that everyone has a legally protected interest in his person, the invasion of which is interdicted by society. And each must control the disposition of his person—his person as established by nature and as developed by himself.
Every man, to use an alternative formulation, must have a socially protected right to live his life in his own way, to do with himself and his abilities, or to refrain from doing with them, such things as he wishes. We may recall here John Stuart Mill’s statement: “The only freedom which deserves the name, is that of pursuing our own good in our own way.” Does this mean that a man must be accorded the freedom to do anything he wishes? The answer, of course, is No. And Mill, it will be remembered, completed his statement by adding, “so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.” For if a man were allowed to do anything, he might choose to kill or maim his fellow men. And he certainly may not be allowed to do that; if he does, he violates the basic rule itself: he invades the physical integrity of others. And what is secured for one must be secured to all in the great, free society—the society, as we have noted, which is essentially characterized by the fact that its basic rules apply equally to all its members.
If the property concept secures the person and the free disposition of the person, it must also secure each person in the possession and enjoyment of that which his efforts have gained. Men give away or sell voluntarily the things they have produced. But a man who has had taken from him arbitrarily the things he alone has produced, is justified in concluding that he does not have an unassailable right to his own personal integrity. The case is different if the man agrees, either before or after he has produced a thing, that it is to be conveyed to, or is to be the possession of, another. There, although he may regret parting with his production, he must concede that he has himself disposed of it. He has availed himself of his property right to contract freely.
But the man who has his production wrenched from him against his will is not a free man with an unassailable property right in his own person. He is a slave, a being whose person and therefore whose product are the possession of someone else. However loathesome it may be, the fact that the products—even the children—of slaves were considered to be the possession of the slave-owner, resulted from a consistent application of the property principle. One should be careful to note, however, that the private-property principle itself is not to blame for slavery. Quite the contrary. Pushed all the way, that principle makes each person autonomous—makes every person free. The fault under slavery, therefore, lies not in the principle of private property or in the free society but in their imperfect realization.
The principle of private property involves more than personal autonomy and the exclusive right to the enjoyment of the fruits of one’s personal efforts; it includes also the ultimate control of one’s productions. If a man is entitled, in the legal phrase, to the quiet enjoyment of a machine he has made, he is necessarily entitled to use the machine, to control it, to give it or sell it to someone, or merely to sit and worship it. We err, if this is not true, in stating that the right of private property is the right of personal autonomy and the right to the fruits of personal effort. For the phrase “the right to the fruit of personal effort,” if it be meaningful, means the right to use and control that which one has produced.
The fact that the right of private property inherently includes the right of control (the right, in other words, to contract freely in respect to the subjects of the property right) has created an enormous amount of trouble for students of society, including those unexcelled students of society, the common-law judges. Critics have continually asserted that the right of autonomous control is the feature which reveals the basically “antisocial” character of the principle of private property. As examples they cite cases in which judges have held that the “property rights” of one owner of land or a factory justified him in so using his land or factory as to impair considerably an adjacent landowner’s enjoyment of his property.
There are some such cases in the law books. Yet the fact that some judges, or even all judges, handed down such decisions, does not necessarily mean that they correctly applied the social principle of private property; it does not even mean that they were correct applications of the legal principle. The social and the legal principle of private property have in common the formula: sic utere tuo ut alienum non laedas or “so use your own as not to injure that of another.” Now this formula, like all legal formulae, does not solve disputes between persons automatically. It is a guide, a principle designed to provide orientation for the judge’s thinking. It tells him, for example, that he must decide the case, not on the basis of the social status of the disputants or their race or their sex, but in the manner best calculated to reconcile their equal property rights. Thus if the President of the United States should use his private land in a manner which tends to destroy the property right of an adjacent landowner, the President’s status should make no difference in the thinking of the judge.
As either a social or a legal principle, any person’s right of private property may properly extend only to the point at which it coexists harmoniously with the equal property rights of all other members of society. One who uses his possessions in a manner destructive of the rights of others is not protected by the right of private property. He has invaded the rights of others. The law reports are full of cases which demonstrate the reconciliation of intersecting property rights along the lines of the principle here stated.
At times the reconciliation of property rights effected in a particular case may not suit the tastes of independent observers; but that, of course, has no bearing one way or another on the adequacy or social utility of the private-property principle. The reconciliation must in each case turn on the particular facts. The proper job of the judicial system is to provide the procedural techniques most appropriate to the establishment of the operative facts and to clarify the legal issues raised by those facts. A good legal system is one which fills the bill in these respects. If its rules of evidence and procedure are in order, and if the method of selecting judges is the best one that can be put into effect under all the circumstances, the legal system has done its job. Questionable decisions may still be handed down from time to time, but there is not much that anyone can do about that beyond the process of patient criticism carried on continuously by legal scholars and the slow elaboration of sound and coherent subordinate principles. Deficiencies in the structure of legal procedures—condemnable on independent grounds—should not be made the basis of condemnation of the substantive principles of the law, for confusion is the only result.
In a proper analysis, the private-property principle must therefore be measured only in terms of its social utility as a principle. It may properly be characterized as “antisocial” only if it can be shown to be inherently in conflict with the concept of the good and free society. This, no one has ever done, a fact which will become apparent as we consider the principles of property and contract in action in Chapter 5.
The Enforceable Contract
Like the private-property principle, freedom of contract is inherently limited by the necessity of making it a property of every member of society. Contract rights may not be conceived in terms which would involve the cancellation of equal rights for every one. The right of freedom of contract of any person, in short, may extend only to that point at which it remains harmonious with the equivalent property and contract rights of all other persons.
On the most basic level, the principle of freedom of contract accords to each person the right to enter into any agreement suitable to himself and to the other contracting party concerning the disposition of any act or thing subject to their respective property rights. A contract to commit murder or any other expropriatory act logically falls within the same ban as the expropriatory act itself. No act that is illegitimate when performed by an individual becomes legitimate when done by a combination pursuant to a contract.
On an equally elemental level, the principle of freedom of contract implies that no one may be compelled by means of force, fraud, or coercive intimidation to enter into or to refrain from entering into an “agreement.” For the essence of the concept of contract lies in the element of assent; “contract” and “voluntary contract” mean the same thing. When one says he will do something because a gun has been held at his head, or because some other kind of equivalent human compulsion has been exerted, it is improper to describe his promise as contractual in nature. Similarly, a man who agrees to purchase an automobile on the basis of certain representations by the seller agrees only to purchase the machine as represented; he cannot properly be said to have agreed to purchase a car which does not meet the description.
Perhaps no problem in jurisprudence or in any of the other social sciences has been more difficult to solve than that posed by the lack of stability in the concepts of coercion and intimidation. We have just said that a promise exacted by coercive intimidation may not properly be viewed as an exercise of freedom of contract. Everyone agrees that a man who promises to pay a certain sum to one who threatens to kill him, or to abduct his wife or son, or to blow up his home, has not freely contracted and is therefore neither legally nor otherwise bound to pay as promised. But then consider the following case.
Fahed Haddad is in the middle of the Sahara Desert, suffering seriously from hunger and thirst. Just a few thousand feet away, over a low hill and out of sight, lies an oasis, the private property of one Izar Tabet who sells water and other refreshments there. Has Fahed been coerced in any, or some, or all of the following instances?
1. Yussef Shakir, related in no way to Izar Tabet, finds Fahed semiconscious and unable to move. He tells Fahed that food and everything else necessary to restore him are available nearby; that for a thousand dollars he will procure these things. Fahed agrees. Yussef scurries away, secures for ten dollars all the water and food necessary to save Fahed’s life, and returns in less than a half-hour. He turns these over on the understanding that he is to be paid the thousand dollars.
2. Fahed is in bad shape but could just about make it to the oasis after a little rest. Yussef, well-mounted, comes upon him, estimates the situation accurately, informs him that there is no food or water within thirty miles, a distance well beyond his capacity, and for a thousand dollars offers to get Fahed what he needs. Fahed accepts and promises to pay the money. Yussef then goes to the oasis, rests there for a good while, and then gets back with the food and water, again handing it over with the understanding that he is to receive the thousand dollars.
3. Fahed makes it to the oasis. Izar Tabet, who would have asked ten dollars of Yussef, will supply Fahed with adequate food and water only if he agrees to pay a thousand dollars.
Now there is no question in any of these instances about one thing: in the broad sense of the term, Fahed has been coerced in all three cases. But there is at least one distinction. In case one, he has been coerced by nature, inasmuch as his body by its very nature needs food and water if he is to survive and inasmuch as nature has been skimpy in the distribution of provender in the desert. In case two, while nature’s coercion was still at work, it was not sufficient to induce him to promise the thousand dollars. He would not have agreed to pay that sum except for the fact that Yussef misled him. Had the latter said or done nothing, Fahed would have made it to the oasis. Case three is really case one over again, with two parties involved instead of three.
Nature’s limitations and scarcities are always with us. Together with the fact that men have desires of various kinds, they are ultimate givens. Much can be done about natural scarcities and human desires; but they cannot be abolished. They form, in fact, the imperishable framework of human action. Since men act always within the structure of natural coercion and their own desires, it seems only confusing to regard freedom in society as either hampered or coerced when the source is merely one’s own desires or nature.
The conclusion to be drawn from this analysis is that the promise to pay a thousand dollars was coerced only in case two. For in that case alone did one of the “contracting” parties coerce the others. In that case nature’s coercion did not suffice to exact the promise to pay; Yussef created a coercive situation. In the other two cases, nature did the coercing. Yussef and Izar did not, properly speaking, coerce Fahed. Instead they performed a very important service for him. The value they attached to their service may seem exorbitant to some, but then it must be remembered that their service was an extraordinarily precious one to Fahed. It saved his life.
An extreme case has been chosen in order to illustrate sharply the most important point about coercion for an analysis such as this: only human coercion is significant in thinking about freedom in society. In the vast majority of cases which have caused trouble, the situation has not involved a matter of life or death at all. The cases which give trouble are usually those in which men complain because they are “compelled” to give more than they like to give in order to acquire from another the object or service of their desire. A worker complains that he does not receive high enough wages for his work. A tenant thinks he is “being forced” to pay more rent that he “should.” A borrower talks of the “coercion” which compels him to pay rates of interest which seem “too high” to him. Our purpose at this point is to provide an objective basis for evaluation of the contention that contracts for wages, rent, and interest are “coerced”—that they are not, properly speaking, exercises of freedom of contract.
The proper evaluation, of course, is that every contract is an exercise of freedom of contract so long as there is mutual assent; that is to say, so long as it was not secured through misrepresentation, human coercion, or force. If freedom of contract were held not to exist in cases in which one party was induced by natural scarcity and his own desires to make a promise, it would cover very few, if any, cases which are now thought of as involving a contractual arrangement. For in practically every case, each party to a contract enters into that contract because he wants—he desires, he “needs”—what the other contracting party has. Indeed, contract is one of the basic operating principles of the free society precisely because it is so serviceable a method of integrating human action in a peaceful way, to the end that everyone is better off as a result of the voluntary pursuit of self-interest. The fact that persons—workers, tenants, and debtors—may later regret the agreement which their own desires have led them to make, cannot be a valid ground for vitiating such contracts; for the inevitable effect would be to abandon the whole concept of contract; and this is true even though such persons may argue that they were “victims” of natural scarcity and the “prisoners” of their own desires in making the agreement which they seek to avoid.
Whatever opinions to the contrary may have been voiced upon the subject, the common law has sanctioned contracts only when it has been satisfied that real assent was present among the parties. Fraud, misrepresentation, duress, coercion, even mistake or misapprehension upon some material matter—all these have served common-law judges as grounds for avoiding “contracts” which might otherwise have met the formal legal requirements. Brief reference to any of the treatises on the law of contracts will bear out these affirmations.
Contracts Contrary to Public Policy
In the theory of the free society all real agreements are enforceable except those which negate the fundamental property and contract concepts themselves. Thus contracts to commit murder, to defraud, or, in general, to destroy the fundamental property rights of another are inconsistent with the theory of the free society and should, therefore, in societies which aim at freedom be declared unlawful or “contrary to public policy.”
Questions must therefore arise from time to time as to whether particular types of agreement are contrary to public policy. Thus, in the United States, “yellow-dog” contracts and closed-shop contracts have often been challenged; and in response to the frequent challenges, both types of agreements have at one time or another been held invalid by courts or declared positively unlawful by legislatures. Whether or not the courts and legislatures operated consistently with the goals and objectives of the free society in so ruling is a problem which can be satisfactorily solved only by a full understanding of the principles of the free society.
It takes a society a long time to unscramble considerations as complicated as the foregoing, and the United States is only now on the right track to an enduring solution. The “yellow-dog” contract is unlawful today, as a corollary of the principle of free employee choice, which, as we shall see in Chapter 8, has come to dominate the labor relations policy of the United States. But the law today also prohibits coercion of employees by unions; it is on the way to insisting that unions become law-abiding institutions; and the principle is now well established that employers may defend their businesses against irresponsible conduct by either employees or unions. In Part II of this book we shall deal at much greater length with the pattern of labor policy in the United States and may therefore postpone further analysis till then. At this point it is necessary to add only that while the prohibition of “yellow-dog” contracts might have amounted to a substantial impairment of freedom of contract not justifiable in principle at a time when the law did not protect employees and employers against union coercion, and when other antisocial activities of unions were not curbed, a different analysis and evaluation are appropriate at the present time: The way is largely clear now to getting our legal house in order; and with a coherent code of laws restraining antisocial conduct by unions there will be no justification, and therefore no occasion, for antiunion contracts. The intelligently operated free society can very often solve its problem in this way: by removing causes, through sensible and comprehensive adjustment of all the relevant property rights, rather than by arbitrary rules which expand the privileges of some at the expense of the rights of others.
Despite the support which unionists receive from politicians for their demand that the closed shop be permitted, it is difficult to take the demand seriously. It is in all ways so patently unjustified. Unionists say that they must have the closed shop if unions are to survive. But this is the same as saying that unless unions are permitted to coerce membership they will have no members—scarcely a very persuasive way to argue the case. And the contention is manifestly not accurate. Unions can and do secure members by uncoercive means. Unions can and do serve useful purposes, and they have only barely scratched the surface of their potential utility to employees. When they really get to work on the job of serving employees instead of making such bad names for themselves as they do in coercing and abusing employees, they will have much less difficulty than they presently have in securing and keeping new members. As matters now stand, union insistence upon the closed shop amounts to an admission that unions are really not performing their functions very well.
A consideration equally important but far more subtle is whether acts of associations are properly regarded as identical with the superficially similar acts of individual persons. A single employee is exercising a basic contract right when he insists that he will work only for an employer who hires exclusively union personnel. Yet it does not necessarily follow that compulsory-unionism conditions imposed by unions either involve the same kind of thing factually or should be viewed legally in the same way. This matter is considered further in Chapter 6, pages 81-83.
The principles of private property and freedom of contract stand out as the basic, indispensable, operating principles of the free society. Unless they are preserved intact, it is useless to think in terms of freedom, well-being, and security as the animating objectives of a society. But private property and freedom of contract are complex principles, and the equilibrium they establish in society is dynamic rather than static. The structure of the free society will always and everywhere be much the same, and the outlines of the principles of private property and freedom of contract must probably remain fixed in the free society for as long as men remain the kind of beings they are now. Yet specific exercises of property and contract rights must be subjected to the test of whether their consequences are consistent with the maintenance of the dynamic equilibrium of all property and contract rights.
