The Labor Policy of the Free Society
5. Property Rights, Human Rights, and the State
For I have reason to conclude that he who would get me into his power without my consent, would use me as he pleased when he had got me there, and destroy me too, when he had a fancy to it; for nobody can desire to have me in his absolute power unless it be to compel me by force to that which is against the right of my freedom, i.e., make me a slave.
—John Locke
Denigration of the right of private property usually begins with a sharp distinction between “human rights” and “property rights.” Those who habitually make this distinction normally go on to contend that society—and by society such persons usually mean government—may qualify property rights without seriously affecting the “essential human freedoms.” They argue, indeed, that the restrictions on property rights which they favor will in fact expand the “essential human freedoms.”
Property Rights, Interventionism, and Totalitarianism
Some objections to the right of private property are of a relatively superficial kind, easily cleared up by placing the right in its appropriate social context. The right of private property did not spring full-blown upon the world. Nor did the intimately related idea of the strictly enforceable contract have an easy time of it. Sir Henry Maine was of the opinion, indeed, that “the positive duty resulting from one man’s reliance on the word of another is among the slowest conquests of advancing civilization.” As defined in this book, property and contract rights are the end products of a long and fitful evolutionary process; they are understood and appreciated only by men in a relatively sophisticated stage of development.
The evolution to the final, symmetrical form was dictated by the necessities which presented themselves to our forebears who wished to live in free and productive societies. Private property in its broad form commended itself to those men because it worked. It offered both freedom and order. It set loose the constructive energies of men, and at the same time constituted a rational, social basis for the integration of the activities of all men. It was a great, central organizing principle that carried within itself the idea of the society which might be both free and harmonious. Private property in its comprehensive form is not merely indispensable to the free society; it is the free society itself. Once this is perceived, a good many of the objections disappear.
Yet there are still many who rebel against the comprehensive definition, who insist that the “good of society”—a concept which they never define—absolutely requires that the state be generally empowered at all times to expand or diminish or revise the right of private property. These are the people who see red when they hear the words “inalienable property rights,” no matter how carefully those words may be used. The idea of property rights secured to all persons against invasion by the state or anyone else, seems hopelessly “dated,” even “reactionary,” to them. Rejecting both “totalitarianism” and comprehensive property rights as the central principles of social organization, they call themselves “liberals,” “progressives,” or some other such modest name, and announce that they have found a “middle way.”
Beyond any question, application of the private-property principle does create difficult problems at times. Emotional and intellectual difficulties present themselves even when the general principle itself is rightly understood. The more complicated the society, moreover, the more frequently do difficulties of application arise. But this kind of thing is unavoidable. As a matter of fact, in the free society it really reflects the existence of a state of affairs which most find highly desirable. For property problems become the more complicated the more widely dispersed the property rights happen to be, and the more intensively human affairs are integrated. Restrict property rights narrowly, reduce personal autonomy to the minimum, and you will have a minimum of property problems. Take away private-property rights completely, destroy entirely the autonomy of the person, and you have no private-property problems at all. If no person legally owns or controls anything, including himself, the problem of control is solved quite simply by force. If all property rights are vested in the state (that is, in the strongest force in the community), problems of personal right likewise do not arise to complicate the social structure. A monolithic structure of this kind may appeal to some. But it is no way to achieve personal freedom, well-being, and security.
As to the so-called “middle way” in current usage, this is actually a misnomer. Personal private-property rights, in the sense of the common-law doctrines and old-fashioned liberal political theory, represent as meaningful a pursuit of the “middle way” between the political absolutes of anarchy and socialism as straight thinking has yet produced. One may, in short, make a respectable argument to the effect that the private-property way is the only meaningful “middle way,” since totalitarianism and anarchy are the only other pure forms of social organization which may be meaningfully conceived.
But the “middle way” as used in current debate is only a semantically attractive synonym for the interventionist state. It defines a condition in which the state is at all times authorized to modify personal property rights at will: the state may expand or contract the rights of persons as political exigency may seem to dictate to those in public office. The perpetual dynamic equilibrium of personal rights as here defined is anathema to the interventionists.
Many interventionists insist, it is true, upon respect for the rights of free speech, free thought, and free press. But they are apparently not aware of the unity of all personal rights. They do not see that all personal rights have a common core in the autonomy of the person, that the so-called “human rights” are merely one surface manifestation of the elemental right of private property.
The interventionist state is actually a state moving intermittently toward the complete destruction of all the personal freedom which it can reach. As such, in terms of formal analysis it must be defined as a totalitarian state, since its own proponents insist that the state is the source of all rights. In empirical terms it might be called a potential totalitarian state.
How long will freedom of the press endure, if interventionism finally triumphs? Freedom of the press is nothing more nor less than the condition which exists when publishers have their property rights intact. Even in the United States today, when interventionism is still struggling to substitute political exigency for private property rights, interventionists have unconsciously shown what they genuinely think of freedom of the press. The term “captive press” gets a great deal of use from trade unionists and from politicians who consider themselves “moderates.”
It is inaccurate to describe a press based on private property rights as “captive.” Publishers under such conditions are limited in what they print only by their own personal views or interests and by the libel laws—and those laws are themselves an expression of the property right in the integrity of one’s character. It is inaccurate also to say that the editorial policies of newspapers are determined by advertisers. Businessmen may be the greatest source of advertising revenue of one branch of the press, the dailies and the other periodicals. But advertising revenues rise and fall in accordance with the circulation of the particular newspaper or magazine, not with the secret or public ideology of the publisher.
The difference in advertising revenues of the New York City newspapers, the Times, the Daily News, and the Post, is determined by their readers, not by their varying political attitudes. The revenues of the Post, whether they be higher or lower than those of the others, are determined by the extent to which it has been successful in securing readers. And the political views of newspaper publishers apparently bear little relationship to the political attitudes of their readers, beyond, possibly, reflecting them. The newspapers with the largest circulation in the United States—the Chicago Tribune and the New York Daily News—are located in cities which are almost always carried by the political party which the News and the Tribune usually oppose. The contention that the press is the captive of its advertisers is absurd and ridiculous.
But the fact that a contention appears upon examination to be absurd and ridiculous has not always kept people from repeating it; moreover, it has not always succeeded in precluding widespread acceptance of the absurd contention as truth. Some of the things which demagogues repeat most frequently are pure fictions. When the repetition has been carried on long enough to induce some conviction, the demagogue stops talking. He begins to act. And the consequence of his action in every case is a more or less drastic revision of the right of private property, with the usual damage to personal freedom and the good society.
We in the United States compose a still largely free society, based on private property and freedom of contract. But, as a matter of history, the distortions of the principles of property and contract which mar our society trace to the demagoguery implicit in the characterization of our pioneering businessmen as “robber barons” and “malefactors of great wealth.”
Robber barons were those physically and militarily powerful persons in the Middle Ages who expropriated and enslaved others, depriving them by the use of force of all property and contract rights, even the most elemental. Their minions and allies were famine, sword, and fire. They were destroyers. They alone enjoyed the fruits of their activity. Their conduct, if we are to believe the worst said of them by historians, resulted in the reduction of social productivity and the destruction of personal freedom.
The American businessmen who have been characterized as “robber barons” bore no resemblance whatsoever to the robber barons of the Middle Ages; and whether or not they were “malefactors” depends upon our evaluation of their essential product: the form of our productive organization and the standard of living of the American. Our pioneer capitalists and entrepreneurs—representative examples are Astor, Carnegie, Ford, Morgan, and Rockefeller—operated in an era when the principles of private property and freedom of contract enjoyed a status which compares favorably with the one they occupy in our own era. Violent and coercive conduct was as unlawful then as it is now. In those days one might no more expropriate or defraud another, legally, than he may now. Personal freedom and opportunity were at least as broadly diffused as they are now—probably more so among all men, not merely Astor, Carnegie, et al. Furthermore, justice was dispensed about as even-handedly by the courts then as it is now. In short, the basic; human rights were the same, and they were at least equally vigorously enforced.
This being true, it is plain that the means used by the robber barons of the Middle Ages were not available to our early enterprisers. They might not then, as businessmen may not now, expropriate or enslave any one; they might not use force and violence, and they might not defraud. What they might do, and what they did do, was to work, save, and invest; and then as their investments proved profitable—as it appeared that they had invested in accordance with public demand for the products which their investments made possible—they invested more and more, increased the capital equipment of the nation fantastically, and thus raised to a point never before envisioned in human history, the productivity of their society.
Part II of this book is largely concerned with tracing the career of interventionism in one large area of public policy, the labor-relations field. As is demonstrated in detail there, interventionism does not destroy property rights, mainly because property rights cannot be destroyed; the control of persons and things must rest somewhere in any society or in any aggregate of human beings. The difference between interventionism and the free society lies in the mode of distributing property rights. The free society distributes property rights equally among all persons so as to secure interpersonal compatibility; and, thus distributed, the rights are secured to persons, are private-property rights guaranteed by law, and immune to tampering. The interventionist society establishes ultimate control of all property rights, including the control of persons, in the state; and then redistributes fragmentary portions of the property right among the various members and groups of the society, according to the discretion of those operating the machinery of the state and with political expediency largely constituting the standard of distribution.
Under the rule of private-property rights, the person is all and the state is neutral in disputes among persons; the judges, to the best of their ability, give equal justice in accordance with law. Under interventionism, a person as an individual unit does not count. He is only one vote. Classes and groups count, for they are potentially many votes, a rich prize for any politician who can think up or promote some measure which will capture them all.
If debtors are numerous, and if their greed has conquered their judgment, so that they have gone further into debt than their productive abilities warrant, then let there be a universal moratorium on debts. If manufacturers in a given area or in a given line of production are relatively inefficient, so that the consumers are served better by foreign producers, why then let foreign imports be blocked by a tariff wall. If tenants are more numerous than landlords and would prefer to pay less than market rents, then let there be maximum rent controls. If some retailers cannot meet the competition of others, let there be laws fixing minimum retail prices. If a markedly identifiable voting group such as the farmers shows dissatisfaction with its income under free-market conditions, let the group be subsidized to the point which satisfies the most vocal of its members.
For government personnel simply are not godlike. They are not omniscient, not omnipotent—and above all can never be objective. Keynes himself was an individualist, distrusting the state. Before he died he showed recognition on his part that the essential weakness of his own proposals lay in the unlimited discretion which they vested in the state. He began to see that one could not keep political interventionism from declining into the institutionalizing of special privileges for politically potent pressure groups. Were Keynes alive today, he would very probably endorse these observations. His enthusiastic approval of Friedrich Hayek’s The Road to Serfdom justifies this conjecture, for the central thesis of Hayek’s valuable work is that the interventionist state is a machine headed toward totalitarianism, with the complete destruction of the basic human rights, private property and freedom of contract, in the end.
Property Rights and “Bargaining Power”
We are in a position now to evaluate one of the chief deficiencies of those who rebel against the property and contract principles: they do not seem to be at all aware of the consequences of abandoning those principles as the basic methods of organizing both social and economic affairs. They irresponsibly—the word is not too strong, I think, considering the gravity of the subject—assume that ad hoc rearrangements of property and contract rights do not essentially impair the freedom or productivity of men in society. And they persist in this assumption notwithstanding that brief reflection must reveal that men cannot be free and productive in society unless property and contract rights are preserved largely intact.
History is full of the ruins of societies organized on the basis primarily of principles other than private property and freedom of contract. These relics of past societies are what Albert Schweitzer was thinking about when he said that “Society is something temporary and ephemeral; man, however, is always man.” The contemporary world, too, contains a number of examples of societies in which private property and freedom of contract do not exist, or exist in only more or less drastically modified form. We therefore do not lack historical and contemporary material with which to check our thinking concerning the role of property and contract in society.
Any society, any human aggregate characterized by the division of functions among its members, must have some method of allocating those functions. All the methods revealed by history or the imagination tend toward one or the other of two categories. One involves the allocation of productive functions by direction of some central human authority. The other operates by way of volitional offer and acceptance among the persons involved in those functions, the method of free contract.
Both methods may exist side by side in the same family, tribe, or larger social aggregate. Custom or a tribal council may determine which men are to be hunters, for example, while the hunters may voluntarily agree among themselves as to the allocation of particular hunting functions, according to the adjustment of their desires that suits their respective skills and convenience. Under the patria potestas known to ancient Roman law, the father of the family had literally life-and-death powers over his family and slaves—could, if he wished, lay down the most absolute and detailed rules for them—but there can be no doubt that at a certain point functions were allocated among the family upon the basis of voluntary cooperation. Beyond any question today in Russia, many functions are allocated in accordance with the orders of the ruling elite, while many other, perhaps more modest, functions are allocated in accordance with the mutual consent of the persons immediately involved.
The difference, the main difference, between a free and an unfree social grouping lies precisely in the degree to which mutual consent by the persons immediately involved determines the allocation of functions within the group. The more functions so allocated, the more does freedom prevail as the organizing principle of the society; and, consequently, the closer does that society approximate the conception of the free society.
According to this analysis, no society has ever been completely free; and no society, including today’s Russia, has ever been completely unfree. But this fact does not mean that one may restrict freedom of contract and private property with impunity; for the extent to which those principles prevail is precisely the determinant of the scope of individual and mutual consent as the basis of the allocation of social functions. Every restriction of those principles reduces accordingly the role of voluntary cooperation in the allocation of social functions. And it also amounts to a restriction upon human freedom, well-being, and security. Where it is understood that property and contract rights—the formal principles which declare men free in society—are not the unassailable possessions of all men, but may instead be adjusted at will by the state, it is improper to call the society a free society at all.
Not only is it improper to call the society free in a formal sense. Everything which history and science teach, suggests that in such a society, real, substantial, positive freedom will also be lacking. Neither reason nor actual experience supports the assertion that a society based on private-property and contract rights will inevitably produce expropriated masses who live and breathe and think only on sufferance of exploiting monopolists. To be sure, Karl Marx said that this would happen. But as in the case of a good many other things he said, there was no rational or experiential basis for this prediction; and history has shown his error.
The mistake made by the followers of Marx lies in assuming that the market society is one in which certain families are absolutely privileged to retain the fortunes which their productive ancestors made. But in the free society a person or family retains wealth and economic power only so long as they are astutely utilized in the continuous service of the consumers. The Du Ponts maintain their position by skillful investment policies—by policies, in other words, which serve the consumers. If the Du Ponts invest contrary to the wishes of the consumers, they, too, will find themselves broke, as has happened to other well-to-do families in America.
It is true that in the United States, perhaps the society which has come closest in history to the conception of the free society, there are numerous relatively large-scale business enterprises. It is also true that there are numerous relatively small-scale enterprises. Again, it is true that there are numerous relatively middle-scale enterprises. We have the one largest business enterprise in the United States, the two largest, the three largest, the three thousand largest, and, so far as I can tell, the three million largest enterprises. One may play this kind of game, too, I suppose, in terms of the material wealth of persons, saying that we have the one wealthiest person in the country, the two wealthiest, the three wealthiest, and so on.
The fact that politicians and other uninformed persons continue to warn us of the “ever-increasing concentration of economic power” must not be allowed to obscure the really important facts of life. In the last fifty years some firms have increased their proportion of the production of certain commodities, other firms have decreased their proportion; some have gone out of business entirely, and others have come into existence. Some of the largest enterprises now operating are producing things unknown fifty years ago. Whether these firms will exist fifty years from now will depend, if we remain a tolerably free society, exclusively upon whether or not they continue to serve consumers. Their relative status will depend on the character of their performance.
The fluidity of this economy is the more remarkable in view of the fact that it has had to contend against the rigidifying tendencies of interventionism. We have already seen, in Chapter 3, how steeply progressive taxation tends to put at a disadvantage the productive poor, thus favoring the already rich persons and the established enterprises. All other forms of interventionism have the same effect of discouraging competition.
That interventionism has failed to rigidify American society is owing in a way to the inherent futility of interventionism. But it is essentially a consequence of the toughness, the resiliency, the dynamic character of a society in which all persons have the freedom which the principles of private property and freedom of contract secure to them. Interventionism thus far in the United States has been of a merely random, experimental, superficial, and largely duplicitous character; for example, people have been able, in large degree, to avoid paying expropriatory taxes. The state has not yet slashed away in any determined, thoroughgoing way at essential property rights; it has only hampered them. While those rights remain largely intact, the fluidity and the productivity of the society are insured.
The contention that a free, market society inevitably produces terrible inequalities of bargaining power is as fallacious as the prediction that it must necessarily end in monopoly and expropriation of the masses. The fact is that “bargaining power” is a loose and misleading way of describing a phenomenon which becomes intelligible only when one considers it in terms of property rights.
Conditions in a private-property society are categorically different. Whereas inequality of bargaining power is an ineradicable feature of the socialist society, the natural tendency in the private-property society is always in the direction of equalizing bargaining power. Thus, if housing is relatively scarce and many persons are looking for shelter, those who provide housing are at first in a position to exact high prices; they are in a favorable bargaining position. But if they exploit this position and make profits which are high relative to profits elsewhere in the society, other men will, using their own property rights, engage in providing housing, until the preponderant bargaining power of the first builders will be reduced to the vanishing point. Tenants in a free society are always only temporarily at the mercy of landlords. But when the state intervenes to expropriate landlords, usually in the form of rent-fixing laws, tenants crouch permanently.
The same is true in the case of the butcher, the baker, and the automobile-maker. In the unhampered free society it is never very long before the sellers of goods are extending themselves, with all kinds of blandishments, to woo the consumers to their products. This proposition may be verified by the fair-minded simply by observing what goes on in the United States in spite of the many unwise, antisocial measures which interventionist pressure groups have induced us to accept to our grave detriment. In spite of such measures, our relatively free industries virtually embarrass us with their efforts to secure our patronage. It is a rank error to say that there is an inherent tendency in the free, private-property society to put consumers at any kind of a disadvantage relative to producers.
Error is equally egregious, though of a different kind, in the contention that workers are always at the mercy of employers in the private-property society. More accurately stated, workers and their employers share the same bargaining position vis à vis the consumers and other producers. Workers and their employer are usually on one side of the bargaining, the consumers on the other. When employers are making “high” profits, their workers are in a position to improve their own lot. When employers are working on thin margins or are incurring losses, their workers also must tighten their belts. These simple facts, properly understood, provide the key to understanding the really important aspects of the labor relations field.
A proper understanding of these basic facts suggests that workers interested in improving their position must focus their attention and effort primarily upon two things: first, improving their employer’s position in the market and, second, increasing the significance of their own contribution to the total product. These are the fundamental prerequisites to real improvement of the bargaining power of workers.
The operating principles of the free society are in no sense prejudiced or impaired by worker organizations as such. Quite the contrary. The right of free, voluntary association is a right which derives clearly and directly from those principles. More than that, the right of workers to organize has a sound basis only in a society based on private property and freedom of contract; a rational or natural basis for the right of self-organization does not exist in a society which rejects those principles. If the latter grants such a right it does so arbitrarily, and the right should then be called a “special privilege,” something which may be revoked at will without affecting the basic structural principles of the society. Only interventionists and other totalitarians may talk in terms of “abolishing labor unions.” The adherent to the principles of the free society cannot engage in such talk deliberately; if he does so, he is not what he thinks he is.
There is thus no basis of any kind for the contention that inequality of bargaining power as between employer and employee is an ingrained feature of the free society. Accurate understanding reveals that the worker and his employer share bargaining power as against consumers; that their common interests greatly outweigh the points of conflict between them. Finally, as regards the relatively few conflicting interests, the free society’s basic principles accord to workers the right to join together and to work in common as a means of inducing their employer to respect their position. No type of society, no structure of principle, could do more for the worker.
A great deal of unnecessary and unfortunate confusion has been created by the demands of some persons for special privileges for trade unions. Because free societies have sometimes been slow and reluctant to grant such special privileges, it has been contended that trade unions have been discriminated against. At this point in the discussion we need only repeat that the rights of private property and freedom of contract are exceeded when one person or group takes action which destroys the property and contract rights of other groups. To prohibit such action is not to discriminate against the person taking the action. Should the free society fail to protect against the destruction of property and contract rights it would be failing as a society in its fundamental objectives.
Most of the remainder of this book is devoted to a description of the sometimes fumbling, sometimes deceptive, sometimes courageous and straightforward efforts of the United States to apply the principles of the free society to the activities of trade unions. Adequate understanding and appraisal of the charge that the law has discriminated against unions are possible only after a great many other things are taken into consideration. We may conclude at this point with the observation that, whatever complaints trade unionists may address to the free society, their interest in preserving it is primary and absolute. They have no reason for being in any other kind of society. If they destroy the free society, they destroy themselves.
