II.America's Greatest Asset

II. AMERICA'S GREATEST ASSET Why must the United States guard her borders to keep out people who want to share our prosperity and our opportunities for good living? Certain other nations have to guard their borders to keep their people at home. With 7 per cent of the world's population and 6 per cent of the land area, the United States possesses 80 per cent of the world's automobiles, 50 per cent of the world's telephones, 33 per cent of the world's railway mileage, 30 per cent of the world's highways, 60 per cent of the world's life insurance policies. We consumed before the war 75 per cent of the world's silk, 50 per cent of the world's coffee, 60 per cent of the world's rubber. The American people had 1 radio for every 3 people as against 1 for 90 persons in Russia. New York City used 140 gallons of water per day, per person; Parisians used 47 and Londoners 43. And no one in his right senses believes that America's 60 richest families owned any large share of our 29,000,000 cars and radios, drank most of the coffee or wore most of the silk.

Why are Americans so prosperous? Why do we have the world's greatest navy and how do we produce more airplanes than all the rest of the world together? Other People Work Hard and Skillfully Is it because of our rich natural resources? Not entirely. Europe has as great resources as the United States. Yet our levels of production and income are far above those of European nations. The North American Indians had the same resources as we have today, but they did not build a great civilization. Do we work harder or more skillfully than other people ? People of many nations work as hard on the average as do we. Some work harder than we do. They show skill and ingenuity in using their equipment. Some of them (e.g., the Swiss, Germans and English) are highly inventive, and all nations have ready access to our scientific and engineering discoveries. Yet no other nation has achieved American levels of production and prosperity.

8 DO WE WANT FREE ENTERPRISE? Bases of National Greatness 1. Freedom of trade The United States has been one of the world's greatest free trade areas. One language, absence of customs barriers between states and towns, efficiency in transportation and suppression of monopoly and banditry made for free exchange of commodities and services over half a continent. This permitted more efficient use of our resources through specialization of production in different areas: cotton in the South, wheat and corn in the Middle West, flour in Minneapolis, automobiles in Detroit, movies in California, potatoes in Maine, and oranges in Florida and California. The people of Massachusetts used to produce their own wheat, flour, iron and many other things which they now buy mainly from other places. They have gained more from specializing in manufacturing, trade, finance, education, art and science than they could have done from trying to protect and preserve all the occupations necessary for self-sufficiency. The rest of the nation has likewise gained from this specialization and trade.

2. Equipment American workers are better equipped with tools and machinery than workers of any other nation. This makes their average output higher and makes their labor command a higher price than in the case of workers in other nations. From 1910 to 1930, for example, output per worker rose about 40 per cent in American agriculture and industry largely because of increased mechanization. This increased productivity enabled this nation to fight a costly war, make huge loans and gifts to foreign countries and yet by 1929 to raise the average buying power of our workers to 40 per cent above 1910 levels. Capital for this mechanization of industry has been supplied by the thrift of those who have saved and invested their money instead of spending it on goods for their personal consumption. Investors made this choice in hope of being free to reap the fruits of their thrift and foresight. 3. Planning, promotion and management United States leadership has specialized in the task of promoting mass prosperity.

On the other hand, Germany, more than any other nation, massed her national intelligence on military problems and built the world's most efficient army. In certain other nations the ablest men went into government service or the church and built efficient bureaucracies or churches.

AMERICA'S GREATEST ASSET 9 In the United States men of ability were most attracted by the opportunities in private enterprise. Consequently American business and industry have been noted throughout the world for efficiency of management. 4. Individual initiative American habits of self-reliance kept the duties and costs of government at a minimum. Taxes were low. Therefore, enterprising and inventive men and women could hope to reap most of the fruits of their efforts. They had corresponding incentive and opportunity for rapid development of industry through reinvested earnings. Producers were comparatively free from bureaucratic red tape, restriction and delay imposed by government. Private citizens were not, as in certain other nations, compelled in self-defense to spend a large share of their time and energies in political strife lest some person or party rob them of liberty, life or property. Instead, they could concentrate their energies on producing useful goods and services.

Why Enterprise Must Be Free Our great industrial system was not built by a few supermen. It was built, instead, by millions of men and women, each trying to do a job better, each learning from others and each building-on the work of others. This was because we tolerated enterprise, pioneering, prospecting, experimentation and speculation more than did other nations. Freedom from government restriction gave opportunity for initiative. Class barriers were less important in the United States than in most nations, so that there was a more "open road to talent." Judging each man on his own merit encouraged merit and gave it outlets for usefulness. The United States was less afflicted than most nations by restrictive private organizations of vested interests, such as cartels and restrictive labor unions. This meant greater opportunity for men and women with new ideas and better methods. (Our antitrust laws helped in this regard.) Mass industry requires mass intelligence to operate it as well as tc build it.

No human being can make all the decisions necessary for the daily operation of even one automobile factory.

10 DO WE WANT FREE ENTERPRISE? No small group of persons can make all the decisions necessary for running our complicated, modern economy. Efficient production by modern methods requires continual adjustment of millions of working parts to one another. The working parts of the American industrial machine include, besides many millions of machines, 60,000,000 workers and 130,000,000 consumers. Every one of the workers is different from every other and each is constantly changing in abilities and interests. The same is true of consumers. To maintain a good working adjustment among the working parts of this huge and complicated machine requires more intelligence and enterprise than is possessed by all the "experts" put together. Each worker must help by searching out the line of work which he can do best and by studying how to do his job well. Each consumer must help by budgeting his spending to get the most for his money.

Each saver and investor must help by selecting the best place for his savings. "Were we directed from Washington when to sow and when to reap, we should soon want bread," said Thomas Jefferson. Only where the masses of workers, consumers and investors are free to choose their jobs, make their own purchases and select their own investments can we get great industry and great prosperity. Discipline May Increase Freedom Freedom for enterprise, however, cannot include freedom for doing injury to others. Americans approve suppression of enterprise in peddling narcotics or obscenities. Piracy and slave trading are condemned. Only when a nation uses its resources productively can it remain prosperous, strong and free. Those who use up their opportunities in wasteful conflict or misdirected effort will not long have freedom. Sound policy restrains enterprise which clearly injures national efficiency and welfare.

Restraint of uneconomic activity is a result of discipline. Wisely disciplined groups expand at the expense of the undisciplined or poorly disciplined. Methods for securing discipline necessary for efficiency are: AMERICA'S GREATEST ASSET 11 A. law, which is discipline administered by government; B. morality, which is selfdiscipline. A. Law Is Enforced by Coercion In civilized societies government has a virtual monopoly of coercive authority, and most government action involves coercion or threat of coercion. The coercion by government consists in the method by which government obtains funds (taxation), as well as in the exercise of police powers to enforce decrees. Government uses persuasion instead of coercion insofar as it tries to win public support by political speeches, education and propaganda. But even in these cases the costs of the campaigns are often met by taxes, which are coercive.

Because its coercive power over the individual is so great, many people mistakenly regard government as all-powerful. In fact, however, the effectiveness of government control is limited in several ways. LIMITED EFFECTIVENESS OF COERCION 1. Coercion is useful in repressing and restraining undesirable activity, but it is comparatively ineffective in stimulating enterprise. That is because coercion means use of force and fear. Fear depresses the higher nerve centers and thought processes. When sufficiently great it paralyzes action. At most it induces short-lived bursts of muscular activity. Repeated doses have diminishing effects and eventually produce anger and rebellion. Fear is especially ineffective in developing persistence, initiative, inventiveness and ambition. That is why slave labor is too inefficient for operating a highly industrialized society, which requires a high degree of enterprise, ingenuity and responsibility in its members.

2. Continued exercise of coercive authority demoralizes those who wield it. It breeds intolerance and arrogance, which make rulers insensitive to the interests and needs of the governed. Trading ideas with subordinates is necessary to wise and efficient leadership. But coercive power provides opportunity and practice in disregarding the opinions and wishes of those subject to this authority. 3. Redtape, checks and balances, rules of evidence, bills of rights, periodic elections, representative assemblies and other safeguards 12 DO WE WANT FREE ENTERPRISE? on the use of political power slow down government processes. They unfit government to manage competitive enterprises because of the necessity for quick decisions. Yet these safeguards are necessary for democratic or representative governments. They reduce arbitrary use, or abuse, of government's coercive authority. They help counteract the tendency of coercionists to ignore the interests and sentiments of the people.* WHAT GOVERNMENT SHOULD DO 1. Suppress violence This is the first duty of government. When it is well done producers are protected in the enjoyment of the fruits of their effort.

Then private enterprise expands and the people prosper. 2. Repress forms of fraud and vice which are a. readily defined and detected; b. generally agreed to be undesirable, e.g., peddling narcotics. Under this heading comes government's work in setting standards of weights, measurement, sanitation and money. This requires coercion in suppressing competing standards. Conversely, governments, especially democratic governments, are ill-suited to deal with forms of fraud or vice which are not capable of precise definition, which are not easily detected, or which are not generally disapproved. Restraint of these types of undesirable conduct constitutes the realm of morality, good taste and reason. (See below.) 3. Manage enterprises requiring some degree of coercion, such as, a. operation of lighthouses, building roads and maintaining fire protection, which require coercion in collecting payments; b. public education, which requires coercion in financing it and in restricting opportunities for child labor; c. conservation measures looking to interests of future generations.

4. Provide for distressed citizens through tax funds that minimum of relief which cannot be provided by relatives, charity or any legitimate form of self help. If government-provided relief, however, is not to degenerate into a political tool for suppressing freedom it must be limited to the subsistence level and be administered by expert, nonpolitical agencies. •In war time, when speed and secrecy are relatively more important, many of the democratic safeguards must be waived. This is especially noticeable in the military forces.

AMERICA'S GREATEST ASSET 13 B. Morality Is SelfDiscipline The restraints of morality are selfdisciplines. They are the most efficient forms of discipline but the most difficult to achieve. They are developed by education, persuasion and example. They help prevent vices or wastes like petty frauds and lying, which government could not detect or could detect only by excessive restraints on useful activities of its citizens. They permit some degree of variation and selection in better ways of living. For example some dress fashions formerly considered immoral or in bad taste have proved to promote health and comfort. If they had been forbidden by law, as some of our Puritan ancestors might have wished, progress would have been more difficult. They are necessary for enforcement of law and order. Businessmen have a vital interest in helping to maintain and raise the nation's standards of morality.

1. The efficiency of labor is affected by standards of industriousness, honesty, sobriety. 2. Availability of capital is affected by standards of thrift. 3. Selling costs are affected by customer standards of honesty and fair dealing. 4. The character of business competition is affected by competitors' standards and by consumers' tastes. 5. National strength and security, which are essential for business, are in large part determined by these standards. Businessmen may help set standards by 1. personal influence and example, 2. trade association efforts and 3. influence over educational and religious institutions. Scope of Free Enterprise Outside the fields where coercion is necessary and beyond the restrictions imposed by moral standards lies the field for free enterprise. In a progressive society this field is constantly expanding in numberless directions as scientific advances, changing customs and changing tastes open new opportunities for enterprisers.

14 DO WE WANT FREE ENTERPRISE? It is also subject to growing restriction by government and morals as experience shows that certain activities and forms of consumption are detrimental to individual and group efficiency. For example, fire prevention is no longer left entirely to private enterprise as it once was. Increasing restrictions of law and morality have been thrown about enterprise in alcoholic liquors. AMERICA BECAME PROSPEROUS AND STRONG, NOT ONLY BECAUSE HER PEOPLE WERE FREE, BUT BECAUSE THEY USED THEIR FREEDOM WELL. Disciplined Freedom Within the field of free enterprise the individual is free to follow the dictates of self-interest as he sees them. This means that each individual is free to use his talents and resources in ways which he considers most advantageous. He may offer them to others on terms which seem satisfactory to him, whether others consider the bargain a good one or not.

Free enterprise is characterized, therefore, by: 1. individual enterprise and individual responsibility; 2. equality of opportunity; 3. competition; Competitive enterprise demands sportsmanship, which is a high type of moral standard, or selfdiscipline. The good sport, in business or play, welcomes strenuous competition. He keeps to the rules of the game even when he is losing and in process of being eliminated from the competition. The poor sport tries to restrict competition. When losing he tries to alter the rules or he reverts to lower forms of competition, e.g., to fraud or violence. Or he seeks to establish restrictions on winning competitors by monopolistic combinations or by government control. Raising standards of sportsmanship in business should be a chief activity of trade associations, schools, chambers of commerce and governments. Sometimes, however, these agencies fall under the control of the losers or poor sports, and are used to restrict the enterprise of more efficient producers.

4. free exchange, including: AMERICA'S GREATEST ASSET 15 a. freedom to bargain, b. prices and rates of pay determined by demand and supply, c. inequality of rewards for effort, d. profits: (i) as incentives, (ii) as sources of capital and credit, e. losses: as means of eliminating the inefficient. Definition of Free Enterprise Free enterprise means freedom for every individual to exert his utmost capacity in producing those commodities and services which he thinks other people want. It includes a. freedom and equal opportunity for every person to choose where he will work and what he will do without asking the permission of any bureaucrat or paying tribute to any organization ; b. rewards determined by voluntary agreements in competitive markets; c. protection by law and public opinion against predation, fraud and violence ; d. good sportsmanship on the part of participants, who will try to win by superior efficiency and service, not by racketeering, political favoritism, or monopolistic combinations.

Free enterprise is men and women working out their common destiny, not under the lash of coercive authority, but under the discipline of enlightened self-interest and moral responsibility.