Why Give Up Self-Reliance?

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1 ~ Why Give Up Self-Reliance? if man of 81 asks our young people a question BY Waddill Catchings SOCIAliST - labor COllECTION

2 Why Give Up Self-Reliance? A Program for Regaining Self-Reliance and Restoring the American Way of Life.

3 Why Give Up Self-Reliance? A T THE OUTSET, young people, let me tell you why I ask my question, and why I ask it of you. The reasons are three: 1) We are a free society only to the extent that we have self-reliance; 2) For almost 100 years we have progressively given up our selfreliance bit by bit; and 3) Only youth has the initiative, the realism, and the determination to reverse the direction of the strong current now flowing away from self-reliance and toward more and more dependence upon the State for material well-being. As I see it, winning the cold war with Russia depends upon the extent of our self-reliance. This fundamental quality gives the base for the initiative, the resourcefulness and the capacity for accomplishment which have enabled the American people to become the world's most powerful nation. To survive as a free people we must have at least enough self-reliance to develop the armed power to prevent World War III, and to provide at the same time an output of civilian goods and services big enough to [ 1 ]

4 impress the world with the latent strength of the American way of life. However, since about 1870 we have been setting up a so-called "mixed economy" in which dependence upon the State takes the place of personal responsibility. The ultimate purpose is for the State to have over-all planning and supervision of production. We are gradually submitting to coercive direction of economic life by Government officials. If you are startled by this statement and do not realize its truth, take a realistic look at what has been occurring ever since we decided to obtain material welfare by political action, and started the "mixedeconomy." You will see that during the entire period of nearly 100 years we have enacted law after law giving back more and more of the authority we took from the State when the United States was formed. Each statute chips away something from self-reliance. In our way of Government this "mixed-economy" is bringing about an ever-growing mass of pressuregroup legislation. At every session of national and local legislatures there are increasingly successful efforts to obtain something at "Government expense." Farmers, labor unions, business groups of one sort or another, Veterans' organiaztions, and many others are always getting favors - subsidies, tax exemptions, tariffs and other protection from competition, rights to fix prices, and powers to collect dues and assesments. The current away from self-reliance steadily gathers speed as lawmakers seek votes and financial [ 2 ]

5 contributions, and as bureaucrats pour forth floods of persuasive statements about the support which the State provides for individuals, and make loud promises of more and bigger payments at "Government expense." What I urge you to do is start this current flowing in the opposite direction. How this can be done is plain to see, and in itself is simple to accomplish. But there are great difficulties to be overcome before you succeed - difficulties which will be discussed after presenting the Program for Regaining Self-reliance, and noting the inherent ease of its accomplishment. Two methods of directing economic life This Program proceeds from the obvious and well-known fact that there are two methods of directing the course of economic life: compulsion by the State, and incentive guidance by the use of money. We are now using and have done so for almost a hundred years, the method of compulsion. The method of incentive guidance, however, has never been used except to make compulsion more effective - a combination commonly known as the "stick and the carrot." Incentive guidance by means of a system of incentive taxation can be developed as a method, and I believe the only method, to plan prosperity in a free society. This method 'llouid use persuasion instead of compulsion, and would replace dependence upon Government with self-reliance and personal responsibility. [ 3 ]

6 Such a system of incentive taxation is the fundamental feature of the following Program and is presented in the belief that there is no other means of regaining self-reliance and of restoring the American way of life. The required system of taxation can be devised only by professional economists, and by them only with knowledge which must be obtained in a factual science of economics. The first step in the Program, therefore, is to start the creation of this realistic SCIence. The reason, no doubt, why we have never used incentive guidance as the means of piloting our economic life is that we do not have, and never have had, a science of economics based upon the realities of the actual world in which we live. Consequently, we have been unable to construct the effective system of incentive taxation which we need for such guidance. The Program consists of three sections. These, in brief, are: 1. Adopt a fundamental policy to retain all individual freedom consistent with national well-being; and strictly to define and limit the functions of the State to those activities which the people as individuals cannot conduct with equal efficiency. 2. Have the American people themselves set the main objectives of their national econommic life. Establish these from time to time by direct vote or by Act of Congress. [ 4 ]

7 Form an Economic Council to submit to the people proposed objectives for their consideration. The Council to be made up of some important Cabinet members, several representatives of Congress, several businessmen of wide experience, some representatives of labor and agriculture and several professional economists who thoroughly understand the money-and-profit system of American business. 3. Have professional economists plan the incentive taxation and other action required to reach the objectives set by the people. Only these experts have the training, the aptitude and the intellectual environment to study and analyze the complicated and conflicting factors and forces in modern economic life. Only they can create the factual science of economics needed for developing the system of incentive taxation, and for planning the other action to be taken. In short, the people will declare where we are going, and the economists will tell us how to get there. How the program will operate Take a look now at the Program as itwill operate. Let us assume that the people have set the following as three main objectives of life: [ 5 ]

8 1. Develop the armed power to prevent World War III, and at the same time to have a big output of civilian goods and services. 2. Provide security of the job by having steady, expanding production. 3. Become a good neighbor in the world, esteemed and respected by other peoples. It will be part of the function of the Economic Council to see that plans for reaching these objectives are prepared by professional economists and are submitted to Congress for consideration and action. The creation of a factual science of economics will start at the beginning of the Program and by the time the people would adopt the above objectives, many economists, no doubt, would have all the knowledge needed for the almost immediate accomplishment of all three objectives. This statement may be made in full confidence because the factual science would begin by taking account of facts of common observation, and there are five of these obvious realities that provide the know-how to reach the three objectives - the knowhow to have the armament and the goods and services vve seek, to gain security of the job by steadily expanding production, and to become a good neighbor among nations. These five fundamental realities of our life are: 1. In the United States, under prevailing conditions there is practically no limit to the quan- [ 6 ]

9 tity of goods and services we can produce, with a little time to get ready. Look at what we did in World War II: Executives selected and developed in the processes of free enterprise, met the full requirements of ourselves and our Allies for arms, equipment and food, and still were able to provide for ourselves a standard of living as high as we had ever had. Precision methods of manufacture were rapidly applied to a large variety of new products, available metals were substituted for those which could not be acquired, vast supplies of scarce materials were obtained by synthetic processes, and unskilled workers were quickly trained in the use of special purpose automatic tools and power-driven machinery. There poured forth a prodigious industrial and agricultural output. So far as the United States is concerned, the teachers of economics are fundamentally wrong when at the very outset of their classroom courses they base their instruction upon what they call a Law of Scarcity. They declare that when there is full employment we must choose between "guns and butter," as they put it. If we have more guns, they say, we must necessarily have less butter. They ignore the reality that in our life of synthetic materials and automatic power machinery, there is, for all intents and purposes, no such thing as a Law of Scarcity. [ 7]

10 Money and demand 2. The spending of money is the effiective demand which determines what we produce. This is the force which generates production. Even in "do-it-yourself" the use ofsome money is essential. In fact, it is strictly true that in the world of today, there is no production without the use of money. This money may come from any and all sources. The idea of the early economists that production creates demand was not in accord with fact except to the extent that money used in production furnishes buyers to some extent with the means of making purchases. Actually, our output of goods and services is limited not by our facilities of production but by the availability of money for our use as an instrument of production. 3. For a steady, expanding rate of production, we require at all times an adequate but not excessive supply of money. Monetary management which alternates between "easy money" and "tight money" makes available a large supply of money at one time, and a small supply at another, and thereby causes ups and downs in business activity. 4. In a profit economy where prices are determined in a free open market, self-reliance thrives. The opportunities that exist for capital gain and for increased income stimulate [ 8 ]

11 initiative, resourcefulness and persistant effort. Profits - prospective and actual - guide our productive activities. Economists, however, in common with the rest of the intellectual world, have always looked askance upon profit-making. They have not understood, however, the relation between self-reliance and profit. In the factl,lal science of -economics, they will see at once that there are many ways of making a profit, and that all kinds of profits are not beneficial to society. They will soon find that there is much opportunity by taxation to improve the operation of the profit system in the interest of the people as a whole. 5. Taxation is the effective means of influencing individual action in a free society. A system of incentive taxation will induce the use of money in ways for the common good and by punitive taxes restrain its harmful use. And best of all, such a system will promote selfreliance and encourage creative effort. Our tax methods today are those proposed by Karl Marx in the Communist Manifesto as a means of destroying a free society, and may truly be described as incentive taxation in reverse. In taking account of these five well-known realities of productive life, economists will see immediately that: [ 9 ]

12 A. Mass production with synthetic materials and automatic power machinery can provide for us a practically unlimited output. B. Availability of money sets the limit to the goods and services we actually produce. Wise management 0/ money and incentive taxation These two fundamental facts make clear that plans to reach the above three objectives involve merely wise management of money, and effective incentive taxation. With these two basic accomplishments and with other knowledge which the factual science will readily provide, the economists without delay can tell us how to have the full ouptut we desire, to have security of the job and to become a good neighbor among nations. The program manifestly makes no change in our economic objectives or in our policy of seeking material well-being by political action. The Employment Act of 1946, which we enacted with the hearty approval of both Democrats and Republicans and which makes economic welfare the direct responsibility of the State, would still be in full force and effect. The only difference would be that in carrying out our plans we would use incentive taxation instead of Government compulsion. Actually there are to be only two basic changes: we re-establish self- [ 10]

13 reliance and we create a factual science of economics. That will be enough to regain self-reliance and restore the American way of life. To adopt the Program requires but two things: I) Convincing the American people that winning the war with Russia depends upon our regaining self-reliance, and 2) convincing some professional economists that our survival as a free people depends upon their creating a factual science of economics. From this statement it would appear that the undertaking would be easy. On the contrary, there are tremendous difficulties in the way of success. In setting up the "mixed-economy" we have established vested interests and vested ideas which will be hard to overcome. The opposition of bureaucrats-millions of them - will be strong and vigorous, and that of the pressure-groups, violent and well-financed. The teachers of the "mixed-economy" will make a great outcry in support of the vested ideas upon which their livelihood depends. That is why I said at the beginning that safeguarding our free society depends upon our youth. They and only they and the young in spirit, have the initiative, the realism and the determination to succeed in a struggle that looks easy but is actually, most difficult. And now in conclusion, young people, if you hesitate to act, let me ask you another question: Do you believe by pressure-group politics we can win our war with Russia? [ 11 ]

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