How Free Will Our Economy Be?

November 8, 1948

The democratic victory will have a crucial effect on the future freedom of the American economy. True, neither of the Presidential candidates supported what any of us would have called a free economy twenty years ago. And Governor Dewey, during the course of the campaign, supported farm parity prices, higher minimum wage rates and, by implication, government cheap money policies. But President Truman has gone farther. After the election of 1946 he steadily drifted in the direction of demanding further government controls, especially price fixing.

In trying to guess whether our future economy is likely to be “free” or not, it may help to clarify our ideas if we ask ourselves just how free our present economy actually is. All the rest of the world refers to us as a free economy, but, this is only a comparative term. If we assume, for purposes of definition (and not necessarily for endorsement), that a free economy would be one with no economic legislation except that embodied more or less in the common law against force, coercion, theft, fraud, and the enforcement of contracts, plus anti-monopoly legislation, we would find that we are already a remarkably controlled economy. We might divide present regulations and restrictions into three chief groups depending on the time of origin: (1) pre-New Deal regulations; (2) New Deal regulations; and (3) wartime controls.

Under pre-New Deal restrictions the main item would be the protective tariff. Others would be the ICC regulation of railroad rates; local regulation of public-utility rates; Federal Reserve and local banking requirements, and immigration restrictions.

Under the still retained New Deal regulations we would include: The Wagner Act (as modified by the Taft-Hartley amendment) which restricts the employer’s right to hire, fire, promote, demote, bargain individually or collectively (but under the Taft-Hartley Act puts some corresponding obligations on unions). The Norris-LaGuardia Act, which prevents the employer from getting court injunctions in strikes (though this was passed in 1932). The Wage-Hour Act, which prescribes a minimum wage of 40 cents an hour and 50 percent overtime above 40 hours, thus in effect controlling nearly all wage earners. The elaborate set of rules and regulations by the Securities and Exchange Commission for publicity, for offering securities, etc. The laws breaking up public-utility-holding companies. The creation of TVA’s with their government-subsidized competition with private utilities. The “parity” payments and postwar price floors for agriculture products, together with the government loans and storage that these require. The social insurance laws with their accompanying taxes and record-keeping obligations; unemployment insurance; old-age and survivor’s insurance; old-age and disability assistance, etc. The Robinson-Patman Act. Federal mortgage financing of housing.

Present controls which are in the main a holdover from the war include: Rent control. Steeply progressive income taxes; heavy corporation taxes; the development of the withholding tax. Export or import controls, requiring special licenses. Government-imposed stock speculation margin requirements; government grain-market regulations. Consumer installment-credit regulations. “Fair-employment-practice” acts in New York and other states, which prevent the employer from discriminating in employment on grounds of race, sex, color, religion, etc. Direct government purchase of grain for the foreign-aid program. The ECA itself. “Voluntary” allocations of scarce products. Artificial low-interest rates, and the government-bond-support program.

This rather haphazard inventory of the regulations already imposed shows how far we have come from the “free economy” of which we still boast. And certainly neither the arguments of Mr. Truman in the campaign nor its overall outcome are such as to encourage the hope that the tendency in the next four years will be toward a return to a free economy. On the contrary, the drive is toward more statism.