ESTABLISHMENT OF LAISSEZ-FAIRE CAPITALISM
CHAPTER 20 OF
The principles and theories presented in this
book call for a society of laissez-faire capitalism. (For the sake of brevity, I often
refer simply to a capitalist society. In such cases, it should be understood that
laissez-faire capitalism is the only logically consistent form of a capitalist society.)
If such a society is to be achieved, a political movement pursuing a long-range program
will be necessary. My purpose in this concluding, epilogue chapter is to describe the
nature of such a movement and to offer a basic outline of the long-range political program
it would have to follow, including a description of how the most difficult steps in the
program might actually be accomplished. As far as I know, my effort here is the first of
its kind; as such, it will undoubtedly benefit greatly from the numerous additions and
refinements that I hope others will be led to make.
The Importance of
Capitalism as a Conscious Goal
The first thing that those in favor of capitalism must do is to make the conscious,
explicit decision that they seriously want to achieve a fully capitalist society and are
prepared to work for its achievement. We need to view ourselves as active agents of
change, working toward a definite goal: laissez-faire capitalism.
The advocacy of laissez-faire capitalism, indeed, of capitalism in any explicit form,
has not been present in the political spectrum. In the United States, the political
controversies of the last several generations have been carried on between the
"liberals," who stand for socialism, and the "conservatives," who
stand for nothing except what other groups, including the liberals, have managed to
establish as the country's tradition.
The success of the liberals/socialists in enacting their program shows that what we
need is a group of educated and articulate individuals who adopt the achievement of capitalism
as their goal. Such individuals, dedicated to maintaining constant progress toward
capitalism, would constitute a de facto capitalist political party, even if the name of
such a party never appeared on a ballot. By virtue of constantly offering their own
definite program for political change, they would seize the political initiative. Instead
of merely attacking the socialistic proposals of the "liberals" and then
yielding to them and abandoning the fight once the proposals happened to be enacted, as is
the almost invariable practice of the conservatives, they would always strive to move in
the direction of capitalism. As an essential part of the process of doing so, they would
never tire of assaulting intellectual targets as far behind enemy lines as possible--such
as social security, antitrust legislation, and public education. Never would they accept
the existing state of society as immutably given and deserving of preservation merely
because it exists. Always they would seek to change the existing state of society until it
represented laissez-faire capitalism.
Laissez-faire capitalism would represent their fixed star so to speak. To the extent
that present conditions departed from it, they would be radical in seeking to change
present conditions. To the extent that conditions in the past had approximated
laissez-faire capitalism, they would be reactionary in seeking to reestablish such
conditions. To the extent that present conditions were consistent with laissez-faire
capitalism, they would be conservative in seeking to preserve those conditions.
The program such a party would have to follow is both political and educational in
nature. It is political in that it centers on the offering of specific political
proposals, which, if adopted, would move the country toward capitalism. It is educational
in that it views the basic problem that we face as one of explaining to the people of the
United States and other countries the value of a capitalist society and the value of the
specific steps required to achieve it. What people do is determined by what they think. If
we want to change the political practice, there is no other way but to change people's
political philosophy and economic theories. Accordingly, every political proposal that I
suggest is itself intended to serve as a vehicle for educating the public and for
attracting talented individuals to our cause who in turn will become capable of educating
still others to the value of our program.
Needless to say, the substance of such education is the spread of the ideas of Ludwig
von Mises and Ayn Rand, reinforced by the ideas of other procapitalist economists and
philosophers whom I mentioned in the Introduction and elsewhere in this book. It is
principally owing to the great popular success of the writings of Ayn Rand and the growing
influence of the works of Ludwig von Mises that there already exists a significant and
growing number of potential recruits for the procapitalist political movement that I
envision. The further spread of the ideas of these two historic figures is the only
possible basis for the further growth and ultimate success of the procapitalist cause.
Along these lines, I wish to acknowledge once more how important are all philosophic
ideas that determine people's conception of the position of the human individual in
relation to the world in which he lives. For example, so long as man is viewed as
fundamentally helpless, with his destiny controlled by forces beyond his power to change,
it will be next to impossible to eliminate the welfare state. People will cling to it out
of a sense of helplessness. Elimination of the welfare state and the establishment of a
capitalist society presupposes a view of man as a self-responsible causal agent, capable
of securing his well-being by means of intelligent action. Indeed, the entire program of
reform outlined in this chapter must proceed alongside a renewal of all of the
philosophical foundations of a division-of-labor, capitalist society that I described in
the first chapter of this book. It is this above all which makes the dissemination of the
ideas of Ayn Rand so important. As the leading advocate of reason in modern times, her
writings alone hold out the possibility of the necessary fundamental philosophic changes
taking place in our culture, without which efforts at the level of economic theory and
political philosophy are doomed to failure.
* * *
In the pages that follow, I write of political campaigns over various issues. Please
understand that I am not writing merely or even primarily of campaigns carried out in
connection with elections. Rather, I am writing of campaigns carried on year in and year
out, as part of a process of continuous education of the public. Each of these campaigns
would necessarily have to be preceded and accompanied by the writing and dissemination of
an appropriate literature, ranging from books and monographs on down to handbills--a
literature dealing with the specific issues at hand, but always in relation to wider,
abstract principles. Indeed, the dissemination of such literature and its articulation in
speeches and debates would constitute the substance of what I call political campaigns.
Further, I think that to achieve capitalism it will ultimately be necessary for a
formally organized capitalist party to come into existence, whose primary function will
actually be to serve as an educational institution: it would have one or more
book-publishing houses, theoretical journals, magazines devoted to current issues, and
schools turning out intellectual leaders thoroughly versed in economic theory and
political philosophy. All of these vehicles would be devoted at least as much to questions
of political philosophy and economic theory as to political activity.
The political proposals I make are short- and intermediate-range, as well as long-range
in nature. I believe that it will take several generations to achieve a fully capitalist
society, mainly because of the time required for the educational process. It will not be
enough just to present our long-range goals. It will be necessary to advocate a whole
intervening series of short- and intermediate-range goals whose enactment will represent
progress toward our long-range goals. The major political task in the years ahead will be
continuously to formulate such short and intermediate range goals, and to keep the country
moving in the direction of full capitalism by means of their successive achievement. The
short- and intermediate-range goals I offer are intended to illustrate principles of
strategy and tactics and thus to serve as a pattern.
In the light of the preceding, it should scarcely be necessary to say that at no time
should the advocacy of sound principles be sacrificed to notions of political expediency,
advanced under misguided ideas about what is "practical." The only practical
course is to name and defend true principles and then seek to win over public opinion to
the support of such principles. It is never to accept the untrue principles that guide
public opinion at the moment and design and advocate programs that pander to the errors of
the public. Such a procedure is to abandon the fight for any fundamental or significant
change--namely, a change in people's ideas--and to reinforce the errors we want to combat.
It is definitely not impractical to explain to people that if they want to live and
prosper, they must adopt capitalism. It would not be impractical to do so even if for a
very long time most people simply refused to listen and went on supporting policies that
are against their interests. In such a case, it would not be the advocates of capitalism
who were impractical, for they would be pursuing the only course that is capable of
working, namely, explaining to people what they must do if they are in fact to succeed.
Rather it would be the mass of people--perhaps, indeed, the entire rest of the
society--that would be impractical, pursuing as it did goals which are self-destructive
and refusing to hear of constructive alternatives. If, to use an analogy from the world of
engineering and business, someone knows how to build an airplane or a tractor that people
could afford and greatly benefit from, but is not listened to, such a person is not at all
impractical because others refuse to listen to his ideas that would greatly benefit them.
Rather it is those others, whatever their number, who are impractical. In the
political-economic realm, it is the current state of public opinion that is impractical:
it expects that men can live in a modern economic system while destroying the foundations
of that system--that, for example, they can have rising prosperity while destroying the
incentives and the means of the businessmen and capitalists who are to provide the
prosperity. The advocates of capitalism, who tell people that the opposite is true and
that the opposite policy is necessary, are not impractical. They are eminently the
advocates of practicality--of what is achievable in, and by the nature of, reality.
It is the grossest compounding of confusions to suggest that those who know truths that
masses of impractical people refuse to hear, accept error as an unalterable given for the
sake of which they must abandon or "bend" their knowledge of the truth. Nothing
could be more impractical, elevating as it does, error above truth and making knowledge
subordinate to ignorance. The essence of true political practicality consists of clearly
naming and explaining the long-range political program that promotes human life and well
being--i.e., capitalism--and then step by step moving toward the fullest and most
consistent achievement of that goal. That the initial effect of naming the right goal and
course may be to shock masses of unenlightened people and invoke their displeasure should
be welcomed. That will be the first step in awakening them from their ignorance.
It should not be surprising that those who fear the effects of the open advocacy of
capitalism are themselves highly deficient in their knowledge of capitalism. They fear to
evoke the displeasure of the ignorant because they do not know enough about capitalism to
know what to say in the face of such displeasure. Their ignorance on this score, I
believe, is the result of an unwillingness to acquire a sufficient combination of
knowledge of political philosophy and economic theory, above all, of economic theory.
Remnants of the mind-body dichotomy in their thinking prevent them from fully grasping the
intellectual--indeed, the profoundly philosophical--value of a subject as
"materialistic" as economics. To be successful, the advocates of capitalism must
immerse themselves in the study of economic theory.
The Capitalist Society and a Political
Program for Achieving It
The capitalist society we want to achieve is a society in which individual rights are
consistently and scrupulously respected--in which, as Ayn Rand put it, the initiation of
physical force is barred from human relationships. We want a society in which the role of
government is limited to the protection of individual rights, and in which, therefore, the
government uses force only in defense and retaliation against the initiation of force. We
want a society in which property rights are recognized as among the foremost human
rights--a society in which no one is made to suffer for his success by being sacrificed to
the envy of others, a society in which all land, natural resources, and other means of
production are privately owned. In such a society, the size of government would be less
than a tenth of what it now is in terms of government spending. Most of the government as
it now exists would be swept away: virtually all of the alphabet agencies and all of the
cabinet departments with the exceptions of defense, state, justice, and treasury. All that
would remain is a radically reduced executive branch, and legislative and judicial
branches with radically reduced powers. To the law-abiding citizen of such a society, the
government would appear essentially as a "night watchman," dutifully and quietly
going about its appointed rounds so that the citizenry could rest secure in the knowledge
that their persons and property were free from aggression. Only in the lives of common
criminals and foreign aggressor states would the presence of the government bulk large.
If these brief remarks can serve as a description of the capitalist society we want to
achieve, let us now turn to a series of political proposals for its actual achievement. I
group the proposals under seven headings: Privatization of Property, Freedom of Production
and Trade, Abolition of the Welfare State, Abolition of the Income and Inheritance Taxes,
Establishment of Gold as Money, Procapitalist Foreign Policy, and Separation of State from
Education, Science, and Religion. Under each of these heads, I develop specific issues and
programs each of which deserves to be fought for and which, in being fought for, would
serve to promote the spread of our entire political-economic philosophy.
Privatization of Property: Importance of Fighting on Basis of Principles
The privatization of property is the most fundamental aspect of a procapitalist
political program. In addition, its discussion is well suited to illustrate strategy and
tactics applicable to the pursuit of all aspects of a procapitalist political
Privatization would ultimately require the sale of all government-owned lands and
natural resources (with such limited exceptions as the sites of military bases, police
stations, and courthouses), which presently include the greater part of the territory of
many of the Western states and almost all of the territory of Alaska. It would entail the
sale of TVA and all other public-power facilities, the sale of Amtrak and Conrail, the
post office, the public schools, universities, and hospitals, the national parks, and the
public highway system. It would also entail the establishment of the airwaves as private
property and of private property rights under the sea and in outer space.
Those of us who work to establish capitalism must always be aware that the
privatization of all of these things is part of our ultimate goal and we must be sure that
all new adherents we gain fully understand and support the whole program of privatization,
as well as all the other essential aspects of our program. No secret must ever be made of
the full, long-range program and its goal of complete laissez-faire capitalism.
In the present situation, I believe that the most important aspect of privatization to
concentrate on is that of the federal government's vast landholdings, in particular where
oil, coal, and timber are concerned. Closely connected with this should be the urging of
the extension of private ownership to undersea mining operations. These aspects would make
it possible to link the campaign for privatization with an assault on the environmental
movement, which has replaced socialism as the leading threat to material civilization.
Such linkage would provide the opportunity to reestablish the rightful connection between
capitalism, on the one side, and science, technology, economic progress, and the supreme
value of human life on earth, on the other side. This connection has been concealed for
many years because of socialism's usurpation of the mantle of progressivism. Linkage of
the campaign for privatization with an assault on the environmental movement would be
instrumental in reestablishing capitalism in the minds of the public as the system of
progress and improvement advocated by men of reason, and the opposition to capitalism as
the manifestation of ignorance, fear, and superstition. A further major aspect of the
linkage should be a continual hammering away at the appalling state of contemporary
education and the ignorance of its graduates, including almost all of today's politicians,
government officials, and journalists. The environmentalist and socialist opposition to
capitalism should be portrayed as exactly what it is--a movement to return the world to
the Dark Ages and a system of feudal privilege. Privatization of education, of course,
should be urged as an essential aspect of the rebirth of education.
Other, narrower campaigns for privatization that might profitably be conducted early on
would be ones for the privatization of the post office, the airwaves, and the New York
City subway system. Postal service and cellular-telephone channels are already private to
varying degrees. In these two cases, privatization would merely be a matter of carrying
forward something that already exists to an important extent.
The New York City subway system would be a good candidate for an early privatization
campaign, because it should be relatively easy to explain how the establishment of private
ownership would create an incentive for the subway's management to want to attract
customers and thus to improve the cleanliness, safety, and efficiency of the system. Such
a campaign would represent our going on the offensive in the country's leading bastion of
collectivism and making large numbers of collectivists aware that the comfort of their
daily lives depended on the acceptance of the principle of private ownership of the means
Each of these individual campaigns would, of course, have to be focused on its own
particular set of concretes. But if, at the same time, they were also based on the principle
of the economic superiority and moral rightness of private ownership, the cumulative
effect would be to tend to establish that principle as correct in the public's mind. Thus,
provided they were conducted in the name of our basic principles and used as the
opportunity for explaining those principles, success in such lesser projects would help in
someday putting us in a position in which we could accomplish the objective of
We should certainly not expect that we would quickly win any of the campaigns for
privatization, even the least among them. On the contrary, for a very long time we would
almost certainly lose them all, over and over again. Indeed, we should expect for some
time to be written off as cranks and even ridiculed for our views. Nevertheless, if we
fight every concrete issue on the basis of correct abstract, general principles, our
efforts will never be wasted. We will be successful even though we fail to win our
particular objective of the moment. We will be successful because we will have propounded
and helped to spread our principles. As a result, we will have gained new adherents, who
will have been attracted to our principles. In addition, those who waged the campaign will
have become more skilled in the defense of their principles. Thus, we will have gained the
basis for conducting campaigns over the same issue, and over a wide variety of other
issues, on a stronger foundation in the future. We will be embarked upon a policy of
progress in intellectual influence analogous to the process of capital accumulation and
If we are successful in making continual progress in our intellectual influence, we
cannot fail ultimately to possess major intellectual influence and therefore
correspondingly major political influence. To achieve the most rapid possible success, our
objective should be to accomplish in terms of intellectual influence the kind of rate of
progress achieved economically by Japan and other contemporary East Asian countries that
began in the most humble material conditions. If we could succeed in that, then even
though we may begin today in the most humble conditions in terms of size and influence,
within a matter of decades we would become a major intellectual force.
As part of the same point, I want to stress that a major feature of every political
activity we engage in is that it must provide easy opportunities for any new supporters it
attracts to become exposed to our entire philosophy. The individual campaigns, such as the
ones I have just described, must not only be waged on the basis of the appropriate
abstract principles, but they must also provide ready exposure to the main books and
publications of our philosophy. This does not mean that handing out copies of Human
Action or Atlas Shrugged is the first or most prominent thing we do in such a
campaign, but it does mean that we are very interested in making every receptive
individual we meet aware of the existence of these books and in getting him to read them
and the rest of our essential literature.
3. The Freedom of
Production and Trade
The establishment of the freedom of production and trade implies the abolition of all
government interference with production and trade. It implies, for example, the abolition
of all labor legislation, licensing laws, the antitrust laws, and zoning laws. It implies
the abolition of virtually all of the alphabet agencies. It also implies the freedom of
international trade and migration.
An important principle that I think we should adopt in fighting for the freedom of
production and trade is to show how its establishment would enable individuals to solve
their own economic problems. For example, there are few more serious economic problems
than mass unemployment. As we have seen, this problem is the result of the government
restricting the freedom of individuals to offer and accept the lower wage rates that would
make full employment possible. The restrictions are in the form of minimum-wage laws,
prounion legislation, unemployment insurance, and welfare legislation. Abolishing such
legislation and establishing the freedom of production and trade should be presented as
the solution to this problem--as a solution that would enable the voluntary,
self-interested actions of individuals to establish the terms on which everyone seeking
employment could find it.
In the same vein, we must take the initiative in calling for a widening of economic
freedom as the solution to the problems the United States is encountering in international
trade. We must show that the inability of major American industries to compete with
foreign goods is the result of government intervention, and that the remedy is not the
imposition of further intervention, in the form of tariffs or quotas, but the repeal of
existing intervention. For example, prounion legislation causes artificially high wage
rates and holds down the productivity of labor, thereby causing an artificially high level
of costs for American manufacturers. The tax system and inflation have prevented the
introduction of more efficient machinery, and thus have also contributed to the
artificially high costs of American manufacturers, as have numerous government
regulations. Such intervention should be the target of campaigns for repeal. Obviously,
this would be a fertile area for the writing of books and monographs demonstrating the
general principle in terms of the specific conditions of individual industries.
Similarly, the freedom of production and trade should be presented as the means of
sharply reducing the cost of housing, thus making it possible for many more people to
afford decent housing. The abolition of prounion legislation, building codes, zoning laws,
and government agencies that withdraw land from development (such as the California
Coastal Commission) would all serve to reduce the cost of housing, as would the abolition
of property taxes that support improper government activities. (As should be clear from
previous discussion in Chapter 10, all of these points, of course, apply to the solution
of the problem of homelessness, which is greatly exacerbated by the imposition of
government requirements concerning minimum housing standards.)
The freedom of production and trade should also be explained as the means of sharply
reducing the cost of medical care. As explained in Chapter 10, under present conditions
the government restricts the supply of doctors and the number of hospitals through
licensing. Its solution for the consequent inability of many people to afford medical care
is then to pour more and more public money into subsidizing their medical bills. The
effect of the government's spending programs is to bid the price of medical care ever
higher, progressively substituting new, ever higher income victims for previous victims
just below them who are added to the subsidy rolls--and, of course, to reduce the quality
of medical care for all groups. The obvious real solution is to end government
interference in medical care and thus to make possible the largest and most rapidly
improving supply of medical care that free and motivated providers can offer.
In sum, our theme must be the opposite of the one people are accustomed to. Instead of
it being what new programs the government must undertake to solve this or that problem, it
must be what existing government programs and activities must be stopped, in
order to allow individuals to be able to act in their own self-interest. Instead of the
question being "What can the government do?," we must explain what it must stop
doing that it now does, and that has caused the problem complained of.
We need to show how abolition of the antitrust laws would mean more competition,
greater efficiency, and lower prices; how abolition of the Environmental Protection Agency
would mean more efficient production and thus a greater ability of man to improve the
external material conditions of his life, i.e., his personal environment; how abolition of
the Food and Drug Administration would mean the introduction of more life-saving drugs;
how abolition of medicare and medicaid, the National Institutes of Health, and all other
government interference with medicine would lower the cost and improve the quality of
While fighting against all existing violations of the freedom of production and trade,
a further important principle to seek to establish is the exemption of all new
industries from violations of the freedom of production and trade. This, in fact, was
one of the principal methods by which economic freedom was established historically in
England: the significance of the restrictions imposed by the medieval guilds was steadily
reduced by the exemption of new industries from those restrictions.
It should be realized that if the immediate, total abolition of a given policy of
government intervention cannot obtain sufficient support to be carried out, it is proper
to work for programs of partial liberalization as temporary compromises--provided it is
done explicitly and openly, in the name of the right principles, and no secret is made of
our ultimate goals, which one is always prepared to defend and whose achievement serves as
the standard and purpose of any temporary compromises.
Thus, for example, while openly advocating the full freedom of the housing industry,
including the ultimate abolition of all building codes, one might participate in, or even
launch, a campaign for a much more limited objective. Such an objective might be that the
government be required to reduce the financial impact of meeting code requirements by an
average of, say, X thousand dollars per house, and that it be guided by the advice of
private insurance companies, mortgage lenders, and construction contractors in deciding
which code requirements to modify or abolish in order to achieve this goal. Such a step
would be helpful in reducing the cost of housing. A campaign for it, properly conducted,
would help to make people aware that it was government intervention that was responsible
for the high cost of housing and high costs in general. If carried out under the terms
mentioned, a major value even of campaigns to accomplish such limited objectives would be
that government intervention, not private business, would be made the target of
restriction. Government force, rather than the profit motive of business, would come to be
established in the public's mind as the evil that must be controlled and progressively
Similarly, if the immediate, full freedom of medicine cannot be achieved, then, as a
temporary compromise--again, presented as such and in the name of the right
principles--one might work to allow merely registered nurses and licensed pharmacists to
begin practicing various aspects of medicine. Such liberalization would significantly
mitigate the problem at hand and, at the same time, it would promote the essential
principle that more freedom is the solution to economic problems. It would thus be an
important step in the right direction.
The Case for
the Immediate Sweeping Abolition of All Violations of the Freedom of Production and Trade
If the public possessed the necessary philosophic and economic understanding,
the ideal procedure would be the immediate and simultaneous abolition of all interferences
with the freedom of production and trade. This would be both on the principle of
individual rights and on the principle that pressure-group warfare is inherently
self-defeating. It is self-defeating in that whatever any one pressure group gains by
violations of freedom made on its behalf, is reduced by what all other pressure groups
gain by violations of freedom made on their behalf, and reduced by more. For example, what
the workers in the automobile industry gain in higher wages resulting from the existence
of an automobile workers' union, they lose back in higher prices that they must pay for
the products not only of all the unionized industries (which by itself may be very
considerable), but also for the products of all industries enjoying protective tariffs or
receiving government subsidies, all of which is the result of the underlying principle of
government intervention. And everyone loses by virtue of the unemployment and overall
reduction in the productivity of labor that result, which simply cause less to be produced
and sold in the economic system. In essence what is entailed in pressure-group warfare is
mutual plunder. Under such an arrangement, not only does each victim lose an amount equal
to what the predator gains, but the victims produce less, with the result that there is
less to plunder. The process can be pushed to the point where virtually nothing is
produced and thus very little can be plundered--much less than could be obtained by honest
work in a free society. The pressure-group marauders have long since carried things to the
point where the real wages of the average worker are far lower than they could be.
The simultaneous abolition of as much government interference as possible would help to
diminish the losses experienced by any one such protected group when its privileges were
removed, and would make possible correspondingly greater gains, both in the long run and
in the short run, for everyone. Thus, for example, when the wheat farmers lost their
subsidy, they would be compensated by the lower prices resulting from the abolition of
others' subsidies as well, along with lower prices resulting from the abolition of
protective tariffs, labor-union coercion, and minimum-wage legislation. The substantial
increase in production that would result would operate further to compensate them, through
a fall in prices greater than any fall in the average of incomes that might result.
The special importance of abolishing prounion legislation at the same time as
minimum-wage legislation, should be obvious. This is necessary to prevent unemployed
workers from having to crowd into a comparative handful of occupations at unnecessarily
low wages, by opening all occupations to the freedom of competition.
* * *
It is important to understand that acceptance of the principle of laissez faire and the
willingness to fight for that principle is the only safeguard of the public against the
depredations of pressure groups. Each pressure group is in a position in which the
comparatively small number of its members is able to have a potentially substantial gain.
This gain comes at the expense of a relatively small loss on the part of each of the
enormously larger number of people who constitute the rest of society. For example, if the
members of a pressure group numbering, say, one hundred thousand people are to receive a
subsidy of some kind, that subsidy may provide each of the recipients with $100,000 per
year in additional income, while it costs each of the far greater number of taxpayers only
a small fraction of that sum. In this case, the total cost of the subsidy is $10 billion
(i.e., $100,000 x 100,000). If there are a hundred million taxpayers, the cost of the
subsidy to the average taxpayer is just $100 per year (i.e., $10 billion divided by 100
million). The diffuse interest of the taxpayers in saving $100 per year each cannot
remotely compare in strength with that of the highly concentrated interest of the
pressure-group members who stand to gain $100,000 per year each. Accordingly, the
pressure-group members are willing to make substantial financial contributions and to
engage in intense lobbying efforts in order to get their way. Virtually no individual
taxpayer, on the other hand, has a sufficient incentive to do anything to counter such
assaults on the country's treasury.
The taxpayers can acquire an incentive to protect themselves only when they view the
depredations of each pressure group as a matter of the violation of a supreme political
principle--namely, that of laissez faire--a principle whose violation by any one pressure
group opens the gates to its violation by scores of other pressure groups. Taxpayers who
would view the matter in terms of principle would recognize that pressure group warfare
already costs them many thousands of dollars per year each in higher taxes and higher
prices, and that there is no limit to its potential cost short of total financial ruin. If
they could be led to view matters in this light, I believe that they could then easily be
organized to overcome the pressure groups. By taking on all the pressure groups at once,
they would have not only a powerful individual financial incentive, but they would also be
able to play up all the inherent conflicts among the various pressure groups themselves,
and thus obtain substantial support from within the ranks of the pressure-group members, a
growing number of whom are also more and more harmed, the more widespread becomes the
system of pressure-group warfare.
* * *
An appropriate vehicle for the establishment of the freedom of production and trade,
whether all at once or gradually, would be the establishment of one last regulatory-type
agency: the Deregulation Agency. Its powers would supersede those of any regulatory
agency, the acts of state and local legislatures, and the prior legislation of Congress.
In sharpest contrast to all regulatory agencies, however, its powers would be limited to
the repeal of existing regulations and laws, including the narrowing of their scope
in conditions in which considerations of political expediency prevented their total
repeal. It would have no power to enact any new or additional regulation.
The mandate of this agency would be to ferret out all regulations of any federal,
state, or local government department or agency, and all federal, state, and local laws,
that violated the freedom of production and trade. Ideally, the agency would possess the
power to render any or all of them null and void. As a minimum, the enabling legislation
for the agency should require it, within a fairly short period of time, such as three
years, to reduce the cost of government interference in the economic system as a whole by
a minimum of 50 percent. (This figure would not apply to spending for social security,
welfare, and public education, which would follow the less-radical reduction schedules
explained below.) Further reductions of at least 2 percent per year would be achieved
thereafter, until the full freedom of production and trade was established. If, for
Constitutional reasons, the agency could not be given the power to supersede federal
legislation, its tasks would include the annual submission to Congress of the necessary
legislative proposals for the repeal of existing federal laws.
Abolition of the Welfare State
Let me now present a program for accomplishing what many people believe to be simply
impossible politically, namely, the abolition of the welfare state.
of Social Security/Medicare
The social security system, together with medicare, could be eliminated by means of the
following steps. First, following a grace period of perhaps two or three years, to provide
sufficient warning and time to adjust, there should be an immediate rise in the age at
which individuals are eligible to receive social security and medicare benefits, from 65
As compensation for the loss of these benefits, individuals in the age bracket 65 to 70
should be made exempt from the federal income tax on whatever earnings they derive from
employment. The result would not only be an enormous reduction in government expenditures,
but a substantial rise in government tax revenues as well. The rise in tax revenues would
come about because the people in the 65-70 age bracket would now pay more in the form of
sales, excise, and property taxes, as the result of their having and spending higher
incomes. And they would pay more in the form of state and local income taxes as well.
If enacted today, this part of the proposal for abolishing social security and medicare
would cut the costs of these programs on the order of a third.
But there is more. As part of the same legislation that quickly raises the social
security retirement age to 70, the age at which people are eligible to receive social
security and medicare benefits should be further increased, say, by an additional
calendar quarter with the passage of each subsequent year. Under this arrangement,
individuals who wished to retire at age 70, despite the progressive rise in the social
security retirement age beyond 70, would have an additional year of notice in which they
would have the opportunity to accumulate additional savings to take the place of the loss
of each successive three months' social security/medicare benefits.
For example, those age 64 at the time the social security/medicare phase-out began,
would have an additional year in which to compensate for the rise in their prospective
social security retirement age to 70 [and] 1/4. Those age 63 at the time, would have two
additional years in which to compensate for the prospective rise in their particular
social security retirement age to 70 [and] 1/2, and so on. Possibly, the additional
savings such individuals would need to make could be made tax-exempt, under an IRA-type
arrangement. (Savings in the government's budget achieved by the initial rise in the
retirement age to 70 would help to offset the revenue loss of making these savings tax
All by itself, the progressive rise in the social security retirement age in this way
would slowly operate to abolish the system. However, I do not believe the system's demise
should be allowed to drag on indefinitely. I think that no later than twenty-five years
after the initial rise in the social security retirement age to 70, the system should
accept its last new beneficiaries, who would then be 76 [and] 1/4. By that time, everyone
would have had in excess of 25 years to make provision for his own retirement at age 76
It should be realized that the progressive elimination of the social security/medicare
system would operate to promote savings and capital accumulation. The savings of
individuals would steadily replace taxes as the source of provision for old age. The
increased capital accumulation that this made possible would, of course, increase the
demand for labor and the productivity of labor, which means that it would increase wage
rates and the supply of goods, which latter would operate to reduce prices. Thus, real
wages and the general standard of living would rise. The rise would be progressive insofar
as the rate of capital accumulation was increased.
* * *
While the total abolition of social security and medicare must always be one of our
long-run goals, an immediate way to begin reducing the cost of these programs would be for
the government simply to make the kind of tax-exemption offer I described above, to
everyone eligible to receive these programs' benefits. Namely, so long as anyone eligible
to receive such benefits abstains from doing so and continues to work instead, his
earnings from employment will be exempt from the federal income tax. Being enabled to keep
almost all of one's earnings might make it worthwhile for many people to keep on working
some years longer, rather than accept social security and medicare. Not only would the
government's outlays be reduced as the result of this measure, but, as I noted before, its
revenues would almost certainly increase. If enacted, this proposal would achieve some
significant immediate good, and, in addition, help to prepare the ground for further
reductions in the cost of social security and medicare.
It should also be noted here that the phaseout of the social security and medicare
programs, or the undertaking of any other measure that would be accompanied by an increase
in the number of people seeking employment, calls for an intensification of efforts to
abolish or restrict as far as possible prounion and minimum-wage legislation. This is
necessary in order to make it possible for the larger number of job seekers to find
Elimination of Public Welfare
The public-welfare system, including food stamps and rent subsidies, could be
substantially eliminated within a few years. What would need to be done is to begin
reducing welfare payments for able-bodied adults and for minors above the age of fourteen
by, say, 10 percent per year across the board, until those payments fell substantially
below the wages of the lowest-paid workers. Aid to dependent children below the age of
fourteen could be gradually abolished by a law declaring children born more than one year
after its enactment to be ineligible for receipt of such aid. Henceforth, dependent
children of welfare recipients would have to be supported out of the welfare payments of
their parents, which would be steadily reduced. Thus within a few years, welfare for
able-bodied adults would cease to be economically significant, because all such adults
would be confronted with a situation in which they would be substantially better off
taking even the lowest-paid jobs. Within fifteen years, aid to dependent children would
cease entirely, whereupon the whole welfare program would be without economic
As previously noted, at the same time that welfare benefits were being reduced,
legislation limiting employment opportunities would also have to be abolished or at least
progressively restricted, such as the minimum-wage laws and prounion legislation. In
addition, restrictions on the employment of teenage juveniles would have to be eliminated
in conformity with the immediate reductions in welfare allowances to teenage children. The
abolition of these restrictions on employment opportunities are necessary to provide
people presently receiving welfare benefits with a realistic alternative of living by
working. Finally, the reduction in government expenditures for welfare could be earmarked
for increasing the personal exemption from the income tax of people who are gainfully
employed. This would further increase the economic advantages of working over being on
My reason for suggesting the gradual reduction in welfare benefits rather than their
immediate or very rapid total elimination, is to allow time for large concentrations of
people on welfare, such as in Harlem in New York City, to move to areas that offer better
prospects for employment; and, at the same time, for new industry to move into areas such
as Harlem, in response to the existence of large numbers of people willing to work for low
wages. The gradual reduction in welfare benefits would also allow time for private
charitable efforts to develop to deal with the cases of individual suffering not caused by
the fault of the individuals themselves.
Once public welfare benefits were reduced to a level substantially below the wages of
the lowest-paid workers, the problem, as I have said, would cease to have much economic
significance. Almost everyone would be working who was able to work. The system could then
be reduced further by totally denying benefits to any able-bodied person, or to anyone
suffering as the result of his own irresponsibility, such as drug addicts and alcoholics.
After some years, once the government had ceased to be regarded as offering anything but
the most minimal relief from want, and private charity had been reestablished in the
public's eyes as the place to which the indigent must turn, the remaining public welfare
system could probably be totally abolished, practically without being missed.
A vital aspect of the campaign for the abolition of the welfare system must be the
conversion of intellectual opinion among the groups most affected. They must understand
that the system's demise is indispensable to the genuine assimilation of all groups into
American society and essential to the opportunities of every person now on the welfare
roles who would like to make something of his life, and to the opportunities available to
* * *
When I first wrote the above discussion of the elimination of the welfare system, I
believed that the element of gradualism was necessary not only for the reasons stated but
also if efforts to eliminate the system were to have any hope of gaining significant
public support. On this score, it appears that I may have been wrong. For example, the
state of Wisconsin now intends to remove people from the welfare rolls after two years if
they turn down a job or job training, and Governor Weld of Massachusetts wants to compel
welfare recipients to find work within sixty days or else lose their cash benefits or take
state-provided community-service jobs. It remains to be seen whether such policies, which
apparently give no thought to the need to abolish the obstacles presently standing in the
way of employment, can not only be enacted but also be maintained in the face of the
serious hardships that are likely to accompany them.
Elimination of Public
Public hospitals and public clinics could also gradually be abolished. Their operation
and the ownership of their assets could be turned over to recognized private charities,
which would temporarily receive public funds to finance their operation. But the
appropriation of public funds for such purposes would steadily fall, again, say, at a rate
of 10 percent per year. These charity hospitals and clinics would be empowered to charge
fees to their patients, at their discretion, to help compensate for the loss of government
funds. It should be expected that the elimination of government control would be
accompanied by major reductions in the costs of operating these hospitals and clinics.
Medicaid could be phased out in step with the reduction in the public funds turned over to
the now private charity hospitals and charity clinics. (Obviously, it would be extremely
desirable if this process were accompanied by the most rapid possible liberalization of
the licensing requirements for entry into the medical profession and for the ownership and
operation of hospitals and clinics.)
Firing Government Employees
and Ending Subsidies to Business
I believe that it is possible to fire government employees and abolish government
subsidies to business with the support of the groups concerned. This can be accomplished
by making the termination of employment or loss of subsidy to the immediate financial
self-interest of the parties. What could be done is to offer very generous severance
terms, in the form of the continued payment of the salary or subsidy for a limited time,
during which the parties would be fully free to change over to any alternative private,
unsubsidized activity they wished.
Thus, for example, a government employee presently receiving a salary of, say, $30,000
a year and whose job deserves to be eliminated might continue to receive that salary for a
full year, while being free to do anything he wished in the way of private economic
activity. He would be in a position to take a substantially lower-paying job in private
industry and use his severance pay to tide him over until he had gained sufficient work
experience to increase his earnings to a level comparable to what they had been before. Or
he could go to school and in that way very comfortably learn the skills necessary to earn
an income in private industry comparable to what he had earned as a government employee.
In comparison with the present situation, such an arrangement would be very much in the
self-interest of the general, taxpaying public. The financial burden of the taxpayers
would certainly be no greater than it is now, and it would, of course, be reduced as soon
as the severance pay of the government employees came to an end. Moreover, to the extent
that the government employees are presently engaged in carrying out policies of
destructive interference in the lives of the citizens, the public would enjoy the
immediate gain of the end of some part of such interference. It is a comparatively minor
evil to pay a simple dead weight subsidy to former government employees now engaged in
other activities, when the alternative is to continue to support them as destroyers. Of
course, in order to prevent anyone from taking unjust advantage of such a plan, government
employees who received its benefits, should thereafter be barred from government
employment (other than elective office) for a protracted period of time, perhaps for
life--unless they refunded the extraordinary severance pay they had received.
To the extent that the former government employees turned to seek jobs in private
industry, their competition would cause the money wage rates of the average worker there
to drop. This would be the case both insofar as they entered the labor market prior to the
reduction in government payrolls and in taxes and insofar as, when it came, the reduction
in government payrolls constituted a drop in the aggregate demand for labor. (This last
would be the result to the extent that taxpayers spent the funds they no longer paid in
taxes to meet government payrolls, in buying goods rather than in paying wages.) A
tendency toward a drop in wage rates would, of course, also be present as the result of
the phasing out of the welfare system and of social security, inasmuch as both would bring
about an increase in the supply of labor relative to the demand for labor.
As the readers of this book should know by now, the effect in all these cases would be
benevolent. For the necessary fall in wage rates would be accompanied by reductions in
prices that would be still greater. This is because the employment of more workers means
more production and thus lower prices caused by more supply, as well as the saving of
taxes to support the unemployed or unproductively employed. The fall in prices relative to
wage rates, moreover, would be a continuing one, because the effect of reduced government
spending, reduced taxation, and reduced government interference in general is increased
capital accumulation and thus a rising productivity of labor. Capital accumulation and the
rise in the productivity of labor would be the result both of a greater relative
production of capital goods and a higher productivity of capital goods. The greater
relative production of capital goods would be made possible by reduced government spending
and lower taxes and thus more saving and productive expenditure relative to consumption
expenditure. The higher productivity of capital goods would be the result both of lower
taxes and thus greater incentives to use capital goods efficiently, and of reduced
government interference of other types that stands in the way of the efficient use of
It follows, and deserves to be stressed, that the long-run effect of firing unnecessary
government employees is to progressively increase the economic well-being of those
employees, along with that of everyone else, and that this is true even in the absence
of any severance pay. The former government employees also benefit from the additional
capital accumulation and rising productivity of labor and real wages that are made
possible. They too benefit from the fact that more people now contribute to production
instead of having to be supported out of the production of others, and that production is
no longer held down by their activities.
Essentially the same conclusion applies to welfare recipients. In the long run, they
too would be economically better off living as self-supporting wage earners in a
progressing economy than as welfare recipients. Their gain would come not only from the
economic progress or more rapid economic progress that abolition of the welfare system
would greatly contribute to, but also, and in many cases even more importantly, from
having at long last to develop and actualize their innate human potential, which the
welfare system has permitted them to avoid doing. Being compelled at last to work in order
to live, many of them would accept that necessity and strive to do better at it, whereas
at present they need strive for nothing and thus develop into nothing.
There is absolutely no kind of magic or "free lunch" assumed here. The source
of the universal gains is an increase in production. Every individual's removal from an
unproductive or destructive position in government employment or on the welfare rolls, to
a positive, productive position in private employment, adds to the total of what is
produced and contributes to the further increase in the total of what is produced, through
making possible additional capital accumulation. It is because of this increase in total
production that everyone is in a position to gain, with no one having to lose. It should
actually be no more surprising that former government employees end up being economically
better off without their government jobs than that blacksmiths and horse breeders end up
being better off without their former jobs--and that they do so, even if they must settle
for a relatively lower position on the economic scale. Indeed, it should be less
surprising when one considers that the nature of so many government workers' jobs is
precisely the stifling of innovation and improvement and that the loss of such jobs means
precisely the opening of the way to progress and improvement. By the same token, the gain
of former welfare recipients from the abolition of welfare should be no more surprising
than the gain of someone needlessly confined to a hospital from his discharge and
emergence into the world of life and action.
Every serious advocate of capitalism has always been able to understand such facts in
connection with the so-called long run. The proposal I have made about generous severance
pay for government employees makes it possible for a harmony of material self-interests to
exist even in the very short run.
* * *
The principle of generous severance terms could be applied to the elimination of
government subsidies to business, in the following way. As compensation for the abolition
of a subsidy, the government would continue the payment of funds for a number of years
equal to the profits and depreciation allowances that the subsidized enterprises would
have earned had the subsidies been continued. Its payments could also cover the interest
and other such contractual obligations the firms may be obliged to pay as the result of
having reasonably entered into such arrangements in connection with the production of the
subsidized item. Severance allowances would also probably have to be given for a time to
the employees of those enterprises, equal to their wages or to a major portion of them. In
addition, it would probably be necessary to some extent to provide such payments to the
firms producing equipment or other supplies for the subsidized enterprises, and to their
employees. For example, as compensation for the elimination of farm subsidies, not only
farmers and their employees would have to receive severance allowances, but also the farm
equipment industry and its employees. The total of the severance allowances in any given
year, however, would not exceed what the government presently spends in buying the
products concerned. The payments at each stage of production would not apply to the sales
revenues received at that stage, but only to the much smaller figure of the net income
earned by the various parties, plus depreciation allowances.
In this way, I believe that the businesses that are presently recipients of government
subsidies, together with their employees and suppliers, could be given a powerful
short-run interest in the abolition of their subsidies. They could be placed in a position
in which the severance allowances they received would make the transition to producing for
the free market virtually painless, indeed, even positively rewarding insofar as those
allowances plus immediate earnings in the free market exceeded the income previously
derived from the government.
Escaping from Rent Control
With the Support of Tenants
The rental housing market, having suffered in places such as New York City from two
full generations of rent control, and with no end to rent controls in sight, has devised a
method of escaping from the destructive effects of rent controls, and of doing so with the
support of the tenants involved. The method rests on the recognition by landlords that in
point of fact the tenants have acquired a kind of squatter's rights to the apartments they
occupy, "rights" which have acquired long-standing legal sanction that almost
certainly will continue to be upheld by the government. Based on this recognition, the
method of escape adopted by growing numbers of landlords is that of allowing the tenants
to reap a substantial share of the financial gains resulting from an apartment house
becoming converted to condominium or cooperative housing. This is the meaning of the fact
that landlords offer their existing tenants substantially below-market "insider
prices" on the purchase of the apartments they occupy, on condition that the tenants
agree to the building's change from that of rental housing to condominium or cooperative
status. The tenants are then free to turn around and sell their units or rights to their
units for a substantial gain, which, of course, is what wins their cooperation.
This is a very sad situation insofar as it represents the fact that to an important
extent a group of nonowners has managed to acquire the status and rights of property
owners by means of a government-sanctioned--indeed, government-led--violent appropriation.
It is the closest the United States has thus far come to a situation comparable to that of
a successful feudal invasion, in which an earlier group of property owners is forcibly
dispossessed by a subsequent group of property owners. Nevertheless, it is better that
property rights of the appropriators finally be recognized than that property should
remain indefinitely in a condition in which no one has the power to use it well. Under
rent control, tenants can stay on as long as they like, and consume the capital invested
in the buildings in which they live. They are succeeded by other such tenants. The result
is simply the destruction of the stock of housing, inasmuch as the rent controls deprive
the landlords of the incentive and, indeed, the ability, to maintain their housing.
Compared with this alternative, the conversion of rental housing to a different status,
free of rent controls, at least makes possible the maintenance of the stock of housing and
its possible increase.
Apart from once and for all abolishing existing rent controls--however unlikely the
prospect may be in many places at present--the contribution that the government could make
to the process of the market's freeing itself from rent controls would be constitutionally
to guarantee that once any property managed to escape from rent controls, it would never
again, under any pretext, be subjected to them. This would eventually operate to
reestablish an extensive market in rental housing. Such a market, of course, is vital for
all those who cannot afford to buy their housing.
5. Abolition of
Income and Inheritance Taxes
The total abolition of the personal and corporate income taxes and of the inheritance
tax is an essential feature of a procapitalist political program. It is required by the
individual's right to his own property. In addition, progress toward the abolition of
these taxes helps to create the conditions required for economic progress, by increasing
economic incentives and the ability to save, both of which serve to promote capital
accumulation and thus a rising productivity of labor and rising real wages.
It must be stressed that the more rapidly economic progress can take place, thanks to
reductions in the income and inheritance taxes, the more rapidly can the relative size of
the government in the economic system be reduced. The consequence of this is that the
degree to which people must experience the burden of the government's exactions is
correspondingly diminished. If economic progress can take place at a rate of, say, 3
percent a year, then even if government activity were not reduced at all, the relative
size of the government in the economic system would be cut in half in a single generation.
For in that time economic progress at a 3 percent annual rate would have succeeded in
doubling the size of the economic system. Thus, the burden experienced even from
supporting a government of the same size would be felt much more lightly.
These facts imply two important principles pertaining to our political program. First,
in reducing income tax rates, our primary emphasis should usually be on reducing the
maximum rates, until there exists only a single proportional income tax rate. Reductions
in the upper brackets have the greatest impact in strengthening economic incentives and
saving, and thus do the most to bring about economic progress. We need to make the public
aware of how everyone benefits from these tax reductions--of how they operate to raise the
demand for labor and thus wages, and, at the same time, progressively to increase the
productivity of labor and thus the supply of goods relative to the supply of labor, which
steadily reduces prices relative to wages and thereby steadily raises real wages. Of
course, once the so-called progressive aspects of the income and inheritance taxes have
been eliminated, work should immediately commence on the steady reduction in what remains
of those taxes, and should continue until they are totally eliminated.
Second, a closely related minimal short-run political demand we should make is that the
level of real per capita government spending be immediately frozen, so that it does not
exceed its current level. Such a demand would be a call not for the immediate abolition of
the welfare state and improper government activity of all kinds, but a demand for an
immediate cessation in their further growth. Its implementation would result in a
continuing automatic shrinkage in the relative size of the government, so long as economic
A possible way to start on the elimination of the income/inheritance tax right now
would be to fight for the immediate adoption of a universal exemption of at least 51
percent of everyone's income from federal, state, and local income taxation under all
circumstances. This would be in the name of the principle that the individual is the owner
of his own income. The 51 percent exemption would constitute meaningful recognition of
this principle. Over the years, we would work to increase the tax exempt portion of
everyone's income while reducing the rates on the taxable portion, until the income tax
was totally abolished. Given the drastic reductions in welfare-type spending I have
proposed and the achievement of economic progress, it should be possible to phase out the
income tax entirely over the course of a generation.
The same phase-out procedure should be applied to the corporate income tax. In
addition, in the short-run, we should demand the elimination of the double taxation
presently entailed in the corporate income tax. It represents double taxation for a
corporation first to be taxed on its income, and then for the stockholders of that
corporation to be taxed again on what they receive from their own corporation, which has
already paid a substantial income tax. The principle of the 51 percent exemption and its
progressive enlargement should be applied to the total of every individual's personal
income plus his share of the profits of any corporation in which he owns stock.
However, the most important short-run goal that we should emphasize in connection with
taxes is compelling the government to respect the ordinary civil rights of taxpayers. We
should demand the abolition of criminal penalties for income-tax evasion, in the name of
the principle that an individual cannot steal or fraudulently keep what is his own
property to begin with. Also, just as in the case of government agencies seeking search
warrants, we should demand that the Internal Revenue Service be compelled to obtain a
prior court order authorizing any seizure of property or attachment of salaries and bank
accounts it wishes to undertake. If it is not possible to obtain such elementary
protection of individual rights, then a compromise that at least would be a move in the
right direction would be the existence of automatic judicial review of all such IRS
activities. And until criminal penalties for not paying taxes are eliminated, we should
demand that the Fifth Amendment rights of individuals to remain silent in order not to
incriminate themselves be applied to taxpayers, i.e., that no criminal penalties exist for
failure to file an income tax return. In other words, we should demand that taxpayers, who
are presently subject to criminal law, enjoy the full civil rights accorded to criminals.
In answer to objections that the income tax cannot work without the violation of
elementary civil rights, we should reply that if that is the case, then it is further
proof of why the income tax must be abolished. So long as the supporters of the income tax
wish to retain it, we must demand that they accept the burden of finding ways of
harmonizing it with respect for such rights.
A further principle that I believe should be applied in connection with proposals for
the reform of the income tax is that no reductions of any kind should ever be made in
existing tax exemptions, shelters, or so-called loopholes. Our principle should be that no
one's income taxes should ever be increased over what they would be under existing law. It
is true that the various exemptions, such as for interest paid on home mortgages, have
some economically distorting effects by artificially encouraging some types of economic
activity at the expense of other types, but those distortions will become less and less
significant with the reduction in the burden of the income tax, and will disappear
altogether when it disappears. We should take the position that every reform of the income
tax must serve to reduce the income taxes paid by some or all people, and not increase the
income taxes paid by anyone.
Still a further principle that we must uphold concerning tax reform, and one whose
necessity should be obvious on the basis of all the preceding discussions concerning the
role of capital formation and the consequences of inflation, is that tax reductions must
be accompanied by equivalent or even more than equivalent reductions in government
spending--specifically, in nondefense spending primarily. In view of the highly
destructive effects of budget deficits, it should be clear why tax cuts must be
accompanied at least by equivalent reductions in government spending of one kind or
another. Deficits, it should be recalled, deprive the economic system of the benefit of
the portion of the supply of savings that must be used to finance the deficits. In the
absence of a gold standard, they also lead to the rapid inflation of the money supply,
which, of course, also undermines capital formation. Cutting taxes without cutting
government spending, therefore, is no solution for reducing the government's assaults on
the economic system.
The reason the reductions in government spending must be primarily at the expense
specifically of nondefense spending is that defense is one of the few legitimate functions
of government. Spending for defense should be cut only as it becomes genuinely safe to do
so. It should be blatantly obvious that we should never advocate imperiling the defense of
this country, which means, essentially, the defense of such freedom as exists in the
world, in order to preserve any aspect of the welfare state. Indeed, our need for national
defense exists for no other reason than to prevent the imposition of the underlying
premise of the welfare state in a more extreme and more consistent form by outside
military force. That premise, of course, is that some men have the right to enslave others
for the satisfaction of their needs. Thus, not only must we never dream of sacrificing
national defense to any aspect of the welfare state, but what we want national defense for
is precisely to protect us from the logically consistent version of the welfare state that
is represented by totalitarian socialism. Furthermore, what we should advocate in
connection with national defense is overwhelming military superiority for the
United States. That is our only real guarantee of avoiding war. If we have such
superiority, we will not start a war, and it is unlikely that anyone else will dare to do
Establishment of Gold as Money
The establishment of gold as money is essential to the achievement of a capitalist
society. (What is said concerning gold, of course, also applies to silver. Furthermore,
for reasons explained in the last chapter, the gold or silver money I speak of should be
understood as a 100- percent gold or silver money--i.e., a 100-percent-reserve system--in
which, apart from subsidiary token coinage, all money either literally is gold or
silver or is receipts for gold or silver that are fully backed by same.)
The establishment of gold as money on these terms is necessary in order to end
inflation and all of its destructive consequences. It is necessary in order to take the
power to inflate--that is, to create money virtually out of thin air--out of the hands
both of the government and of the banking system operating with the sanction of the
government. It is necessary in order thereby to subordinate the government to the
financial power of the citizens and to make people aware of the cost of government
spending, and to end the arbitrary redistribution of wealth and income, the undermining of
capital accumulation, the possibility of utter economic devastation either through wage
and price controls or the ultimate destruction of money, and deflation, depression, and
mass unemployment. It is also necessary for making possible the rapid and radical
dismantling of the welfare state, by removing the threat of depression as an accompaniment
of that process.
Because I have thoroughly discussed the role of gold and the methods for achieving a
gold standard in the last part of the previous chapter, I will say no more about this
vital subject here. However, it had to be named here at least to this extent.
Procapitalist Foreign Policy
In the present-day world, a procapitalist foreign policy is indistinguishable from a
pro-American foreign policy. The United States is the world's leading capitalist country.
It is so on the basis of its fundamental laws--its Constitution and Bill of Rights. And,
not surprisingly, it is hated for it. It is regarded by much of the rest of the world in
the same way that within the United States the minority constituted by businessmen and
capitalists--the "rich"--are regarded by much of the rest of the American
citizenry. If the United States is to stand up for itself, it must learn to stand up for
The most essential point which needs to be recognized is that to the extent that the
United States is a capitalist country, its government is morally legitimate, because to
that extent its government acts to defend individual rights, and the powers it exercises
consist of nothing more than those of the individual's delegated right of self-defense. By
the same token, governments which do not recognize the existence of individual rights,
governments whose very existence is based on the premise of the forcible sacrifice of the
individual to the collective, have no moral legitimacy. This means, above all, that the
surviving Communist regimes, such as those of mainland China, North Korea, and Cuba, and
many, if not most of the governments of the so-called third-world countries have no moral
The overthrow of these governments is earnestly to be desired on behalf not only of
their own citizens, who are enslaved, but also on behalf of the people of the entire
world, who are forcibly deprived of the benefits they could otherwise derive if these
countries were free--benefits in the form of the free development of the talents of the
citizens of those countries and the free development of their natural resources. A major
principle here is that the violation of the rights of the individual anywhere is an attack
on the well-being of people everywhere.
A foreign policy based on these principles would deal with such governments as bandits
and outlaws, temporarily holding power by means of force and fear. This does not mean that
it would be the obligation of the U.S. government to go to war with such countries if it
were not itself attacked or directly threatened by them. But it certainly does mean, as a
minimum, that the U.S. government should do nothing to promote the existence of such
governments. It should certainly not aid them in any way, nor provide them with any kind
of forum in which to defend their crimes, nor denounce those who prevent them from
expanding their power or who prevent similar regimes from coming to power in the first
As examples from the recent past, the U.S. government should certainly not have
provided Soviet Russia or Communist Poland with free food or loan guarantees. Instead, it
should have allowed them to suffer the famines that socialism causes, while at the same
time explaining to the world how socialism was the cause of the famines and thus how
millions were forced into starvation because of the power-lust of the Communist rulers and
their insistence on the preservation of the socialist system. It should have led world
opinion in demanding that the Communist rulers step down and the socialist system they had
imposed be abolished, so that the citizens of the Communist countries could become free to
produce and live. Had the United States followed this policy, the collapse of communism
would have occurred decades earlier.
Today, the United States should withdraw all official recognition from the remaining
Communist-bloc countries and from totalitarian third-world countries, such as Iran, Iraq,
and Libya, and expel their diplomats and alleged trade missions. It should end all
so-called cultural exchanges with such regimes. If necessary, it should withdraw from the
United Nations and expel that organization from U.S. territory. The only purpose served by
the presence of these individuals and institutions is spying, terrorism, and subversion.
If the governments of these countries wish to continue to be recognized, the prime
condition must be their formal disavowal of socialism and the adoption of a genuine plan
for the protection of individual rights and the establishment of capitalism in their
It should be recalled that the very fact of the United States adopting a policy of
laissez faire and respect for private property rights at home would itself go a long way
toward undermining the power of today's leading terrorist governments, namely, those of
the Middle East. At the same time, it would cut the ground from under the resurgence of
religious fanaticism in the region, which, like the arms build-up by governments in the
region, is financed by money derived from an artificially high price of oil. These results
would follow because a leading consequence of the adoption of a policy of laissez faire
and respect for private property rights by the United States would be a great increase in
the supply of domestically produced oil and other sources of energy, which latter, as
substitutes for oil, would cause a reduction in the demand for oil. In the face both of a
substantial increase in the supply and reduction in the demand for oil, there would be a
sharp decline in its price. Thus, the revenues that finance the terrorists and fanatics
would sharply decline.
* * *
A major obstacle to the pursuit of a proper foreign policy by the U.S. government is
the incredible corruption of thought which exists not only within the United States but,
to a much greater degree, in the rest of the world. This corruption was blatantly evident
in the fact that throughout the so-called cold war, the state of world opinion was such
that the expulsion of Communist diplomats from the United States would have been regarded
as an act of aggression on our part. A call for the Communist leaders to step down and end
the enslavement of their citizens would have been regarded as a transgression against
their allegedly God-given right to enslave--or, as it is customarily put, "an
interference in the internal affairs of sovereign nations."
The ability of the United States to pursue a proper foreign policy and the ability of
foreign countries themselves to move toward the achievement of a capitalist society
depends on the spread of procapitalist ideas abroad. To say the same thing in different
words, both our immediate national security and our long-run goal of the establishment of
a fully capitalist society throughout the world, with worldwide free trade, freedom of
investment, and freedom of migration, require that we be interested in the spread of
proreason philosophy and procapitalist economic theory in foreign countries as well as in
the United States.
A major task in the years ahead must be to bring about the translation of all of our
main books into all of the world's major languages. Human Action, Socialism,
Atlas Shrugged, and about fifty or more other titles, should be made available in
Russian, Polish, and Chinese, as well as in Japanese, Korean, Arabic, and all the other
leading languages. Efforts should be made to promote the circulation of these books
everywhere. I do not agree for a moment with the notion that only people brought up in the
United States or Canada can readily appreciate our literature. Our philosophy recognizes
only one reality and one human nature. No matter what intellectual and psychological
obstacles a particular culture may create in the thinking of people, there is always some
significant number who are open to new ideas. Our commitment to our philosophy and our
national and economic self-interest require that we try to reach these people. As an
example of the importance of doing so, just imagine the effect on our national
self-interest of a totalitarian regime's someday having to deal with people who have come
to realize that each individual possesses reason and has an inalienable right to life, and
that their reason and their lives are being sacrificed because of nothing more than the
rulers' willful refusal to abandon an irrational dogma. Imagine the effect of the regime's
being infiltrated by such people.
It should go without saying that all such intellectual efforts must be undertaken
privately, not as an activity of the U.S. government.
As a further point in connection with what we should be working toward in the area of
foreign policy, I would like to make a suggestion for another special campaign. This would
be a campaign urging newspapers, magazines, and television stations which choose to
maintain officially accredited reporters in Communist or other totalitarian countries to
provide a warning label on all their reports from those countries which are obtained with
government sanction. The label would identify the totalitarian nature of the country and
state that no reason exists for regarding the report as anything but propaganda serving
the interests of the government that originated it or sanctioned it.
Freedom of Immigration
We need to make a beginning toward the establishment of freedom of immigration. A
logical place to begin would be in calling for free immigration from our immediate
neighbors, Canada and Mexico. There is not the slightest reason for excluding Canadians.
They are virtually indistinguishable from Americans, and had one or two battles gone the
other way early in our history, would in fact be Americans. By the same token, had the
Confederacy won the Civil War, then, with the prevalence of today's ideas, present-day New
Yorkers would probably not be able to migrate to Texas, nor Texans to California. Such
restrictions, based on mere accidents of history, simply have no logical foundation.
It should not be necessary to add that the free immigration of Canadians, Mexicans, or
any other nationality should not be at the expense of the immigration allowed under
existing law to the members of any other nationality. As in the case of tax reduction, no
one should be made any worse off than he now is, because of an attempt to improve
conditions for anyone else.
The reason we must seek to abolish restrictions on Mexican immigration at the earliest
possible moment is because the attempt to restrict it is in danger of making us adopt some
of the most obnoxious features of the former South African regime--namely, a virtual pass
law, in which people of Latin origin will have to carry identity papers to show on demand
to immigration police, who, if they do not find the appropriate "papers," will
have the authority to destroy the lives of said individuals by uprooting them from their
jobs and homes and deporting them. Already virtually Gestapo-like conditions exist in
Southern California in connection with a notorious immigration checkpoint, where fleeing
Mexicans of all ages and both sexes have often run into oncoming automobile traffic rather
than be arrested by officers of the Immigration and Naturalization Service. This ignominy,
I must note, has now been compounded by the recent passage of Proposition 187 in the state
of California, which, if upheld in the courts, will actually impose the requirement of
having an official identity card that must be shown on demand to the authorities.
Furthermore, the principle of private property rights implies that the Mexicans, and
everyone else, have a perfect right to come here--to work for anyone who is willing to
hire them and to live wherever anyone is willing to sell or rent to them. The violation of
the rights the Mexicans or any other category of immigrant is a violation of the private
property rights of employers and landlords--it is telling them that other people have the
right to dictate whom they may or may not employ or to whom they may or may not sell or
rent their property. It is a blatant manifestation of collectivism to believe that somehow
the people of the United States as a whole have the right to tell the individual, private
owners of property how they may use their property--that they must use it not as they, the
private owners wish to use it, but as the nation collectively, or at least a majority of
those voting, wish it to be used.
As I explained in Chapter 9, in a capitalist society free immigration does not deprive
those already present of the opportunity of working and it does not reduce their standard
of living. On the contrary, in the long run free immigration into a capitalist society
from a semifeudal one, such as Mexico's, must operate to raise the general standard of
living in the capitalist society, because it means that more human beings will now live
under freedom and have the opportunity to develop their talents. There are Mexicans and
the children of Mexicans who have the potential for making the same kind of economic
contribution to the general standard of living as have immigrants from other countries
The only legitimate argument against unrestricted Mexican immigration (or unrestricted
immigration of any other ethnic group) is based on the existence of our welfare state. To
the extent that Mexicans come here and go on welfare and medicaid, or use public hospitals
and public schools, and place an increased burden on government-subsidized public
transportation facilities and so forth, then, it is true, there is a genuine loss imposed
on the people already here. The solution, however, is not to violate the right of the
Mexicans to immigrate, but to start dismantling our welfare state.
Without immediately abolishing the totality of the welfare state, which would be
politically impossible, we could simply change its terms and make all noncitizens
ineligible for its programs. This, of course, is essentially what a portion of
California's Proposition 187 seeks to do. However, that proposition also seeks to expel
the immigrants and to deter further immigration through fear. Totally unlike Proposition
187, the mere exclusion of the immigrants from the welfare state would not impose any
actual burden or disability on them. It would not be they who had to carry identity papers
and prove why they should not be deported. There would be no question of that. On the
contrary, it would only be the American citizens who sought the alleged benefits of the
welfare state who would have to show papers and prove their citizenship.
While excluding the immigrants from the welfare state, we should simultaneously remove
all government-imposed barriers to their being supplied privately with what they need.
This would entail the removal of government licensing requirements in connection with
meeting the medical, educational, transportation, and sanitation needs of the immigrants.
As far as possible, this should be accompanied by privatization of such things as existing
government-owned hospitals, schools, bus lines, and garbage-collection operations. An
important result of privatization would be that the presence of the larger numbers of
people resulting from immigration would be viewed as a source of more business, not more
problems, as it is under the ineptitude of government ownership. In addition, in order to
reduce the injustice that would exist in making immigrants pay taxes for the support of
the welfare state for the native population, the immigrants should receive as nontaxable
wages what would otherwise be their own and their employer's social security and medicare
contributions made in connection with their employment. The ironic effect of all these
liberalizing measures would be to give the immigrants more freedom than today's American
citizens, and in that sense to make them truer Americans than today's American citizens.
If, at the same time, the immigrants could be reached with procapitalist ideas, this might
well serve as the foundation for their being developed into a major group opposed to the
welfare state for anyone.
In the present circumstances, it is especially important to make every effort to
exclude immigrants from the public education system. At one time, it is true, public
elementary education succeeded in educating pupils of all different nationalities in the
three R's. And even though its own existence represented a contradiction of the principle
of individual rights, it instilled in pupils a basic respect and admiration for the United
States. Today, public education teaches very little to anyone. It turns out masses of
illiterates and students who have not the slightest idea of what the United States stands
for. One of the last things we should want is today's public education system teaching
masses of immigrants in their own language. One of the major subjects that would be taught
would undoubtedly be revolutionary Marxist nationalism. Under such conditions, as far
fetched as it may sound, large-scale Mexican immigration into the Southwest could well
result, one or two generations later, in a widespread demand for the return of the
Southwest to Mexico. Thus, an important part of any campaign for free immigration for
Mexicans should be an attack on public education and its Marxist domination. It is vital
that the immigrants be assimilated as English speakers who support capitalism.
It would be enormously valuable if it could be explained to the immigrants that only
the philosophy of individualism and respect for private property rights made possible
their immigration. It would be legitimate to require of all immigrants an oath swearing to
uphold the system of private property rights and to educate their children in the English
It would be a very short step from freedom of immigration for Mexicans to freedom of
immigration for everyone.
Friendly Relations With Japan
and Western Europe
Because of their exceptional economic strength and thus their potential someday to
constitute a serious military threat to the United States, a cardinal principal of
American foreign policy must be the maintenance of friendly relations with Japan and the
countries of Western Europe. To assure this, what is necessary on our part is a policy of
free trade, freedom of investment, and freedom of immigration--in short, a policy of full
capitalism with respect to these countries. If we were to follow this policy, we would
eliminate any possible economic basis of aggression against us on the part of these
countries. And for all of the reasons shown in this book, from an economic point of view
we could only gain from such a policy--probably very substantially. As I have shown, we
would gain even if we alone were to follow a policy of free trade while the others clung
to various protectionist measures. In that case our position would be analogous to the
situation of a territory in which inbound transportation costs were lower than outbound
If we followed such a policy toward these countries, we could reasonably ask them to
undertake a larger share of the defense of the free world, in accordance with the increase
in wealth and income they have experienced. We would not have to worry that in doing so,
we were encouraging potential enemies to arm, as we should presently be concerned.
Of course, the policy of full capitalism with respect to foreign relations should be
applied to all countries. However, for the reasons stated, it is especially important in
these two cases.
8. Separation of State from
Education, Science, and Religion
Finally, it is necessary to turn to the subject of separation of state from education,
science, and religion.
Abolition of Public Education
The system of public education could be abolished over the course of a generation, in a
way that need not impose financial hardship on the parents of any child alive at the time
of the abolition's commencement. The method would be the enactment of state laws declaring
that as of the end of the seventh school year following the enactment of the law, that
state and its localities will no longer be responsible for the financing of the
first-grade education of any student; that a year after that, they will no longer be
responsible for the financing of the second-grade education of any student; and so on,
through all the elementary, secondary, and college grades. This procedure would enable the
parents of children alive at the time of the enactment of the phase-out legislation to go
on using the public education system if they wished; it would give prospective new parents
a year's notice that they would be responsible for the cost of their children's education.
The abolition of public education should be preceded by the recognition of the right of
parents to educate their own children and by the abolition of educational licensing
requirements. It would also be proper if the public schools were to be made to begin
charging tuition fees to those who could afford them, which would be progressively
increased, until they reflected the public school system's costs. The fee system would
permit steadily increasing competition and growth on the part of private schools, which
would then be in a position easily and totally to displace the public schools.
One of the most immediate points to fight for in connection with the abolition of
public education is the abolition of the federal Department of Education and all federal
aid to education. These measures would create an immediate improvement in education by
eliminating a major layer of bureaucracy and by forcing the elimination of unnecessary
courses and unsound educational methods that are fostered, if not mandated, by the
availability of federal funds. They would thus bring about a renewed concentration on the
three R's and other serious subjects.
In the struggle against public education, an important principle to stress is that the
public education system is inherently unsuited to teach any subject about which there is
controversy. This is because teaching such a subject necessarily entails forcing at least
some taxpayers to violate their convictions, by providing funds for the dissemination of
ideas which they consider to be false and possibly vicious. On the basis of this
principle, the public schools should be barred from teaching not only religion, but also
history, economics, civics, and biology. In the nature of things, only private schools,
for whose services people have the choice of paying or not paying, can teach these
subjects without violating the freedom of conscience. The fact that barring the public
schools from teaching these subjects would leave them with very little to teach, and place
them in a position in which they may as well not exist, simply confirms the fact that
public education should be abolished.
Separation of Government and
The above principle concerning the government's violation of the freedom of conscience
in supporting the promulgation of controversial ideas also constitutes an argument for the
abolition of practically all government support of the arts and sciences. There is great
controversy concerning the artistic merit of various schools of literature, painting, and
sculpture. There is significant and growing controversy even over the various theories of
natural science, such as the controversy between the supporters of the
"Big-Bang" theory of the origin of the universe and the supporters of the
steady-state theory of the universe, which holds that the universe did not have an origin.
For the government to finance any artistic or scientific activity means to compel
taxpayers who hold the activity to be artistically or scientifically worthless, and
perhaps immoral as well, to finance it nonetheless.
More fundamentally, our opposition to government involvement in art and science--and in
education--is based on Ayn Rand's principle that force and mind are opposites. Matters of
truth and value can be determined only by the voluntary assent of the human mind. Yet
government is essentially a policeman with a gun and club. It settles matters by means of
force. This is directly contrary to the nature of knowledge. It has no place in the
laboratory, the lecture hall, or the art gallery. The determination of what is true or
false, or possessing or lacking in value, simply cannot properly be decided by government
officials. Nor can it properly be decided by majorities in voting booths. Such a thing is
further contrary to the nature of knowledge, which always begins as the discovery of just
one mind, and which is as yet totally unknown to the entire rest of the human race.
Governments and majorities must not be allowed to crush the isolated individual, who is
the source of all new knowledge and improvement. Yet precisely this is the outcome of
government support of science and art, which scoops up the limited funds available for the
support of such activities and arbitrarily dictates how they are to be spent.
As to the tactics to be used to remove the government from these areas, the most
important is the continuous demonstration of the contrary nature of government force, on
the one side, and knowledge and value freely assented to, on the other.
* * *
An important step in reducing and ultimately eliminating government interference in
science would be to require that all alleged scientific studies financed in any way by any
government agency or department prominently state that fact. This might be required in the
form of an amendment to the Freedom of Information Act. The requirement should extend to
all press releases and public announcements made by the government or any of its employees
concerning the study. In this way, the study could be easily identified as coming from the
government or associated with the government. The requirement would serve, in effect, as a
warning label. In addition, all information relevant to the study's being undertaken,
including the initial application for a government grant, and all correspondence and
internal government documents pertaining to the study, should be identified in an appendix
to the study, and copies made readily available to any member of the public wishing to see
them. The study should also be required to include an appendix providing an intelligible
explanation of the methodology on which it was based. These requirements would make it
possible to scrutinize and judge the scientific seriousness of such studies far more
easily than is possible today, and thus to enable people much more readily to distinguish
government propaganda from science.
An important first step in the eventual abolition of such agencies as the Food and Drug
Administration (FDA) and the Environmental Protection Agency (EPA) would be a law severely
limiting their powers to ban drugs and chemical substances. The law would nullify the
power of the agency's adverse ruling in any case in which similar agencies in, say, two or
more modern foreign countries, such as Canada, Switzerland, and Great Britain, have found
no reason to ban a substance. In other words, it would subject these agencies to a form of
liberalizing "peer review." In such cases, in order to ban a substance, the FDA
and EPA would have to prove their case before a court of law. The principle that the FDA
and EPA and their staffs are not endowed with any form of divine guidance could be
progressively extended--to the point where any one private individual was free to
act on his contrary opinion. (After all, why should the opinions of American citizens be
viewed as inferior to those of foreign bureaucrats?)
Perhaps the best way ultimately to abolish the FDA and the EPA would be to demand their
conversion to private agencies, having no powers of compulsion and supported exclusively
by private funds. They would then operate as advisory agencies, in competition with other
such private advisory agencies, free to pronounce whatever opinions they wished about any
subject, but not free to have force used to back their opinions--except when they could go
before a court of law, as any other private citizen, and prove the existence of a
danger to the lives or property of parties not willing to take the risk of such danger.
Separation of State and Church
Our opposition to government involvement in religion is based on the same foundation as
our opposition to government involvement in education and science. Indeed,
government-sponsored religion represents the most naked kind of use of force against the
mind. Religion is based on faith. The use of force to impose it or its values is always
the use of force in order to compel acceptance of what cannot be proved or denial of what
can be proved.
The supporters of capitalism must take the lead in the battle against the current
incursions of religion into politics and government. Nothing could be more vital to
progress toward the establishment of a capitalist society. The old stereotypes of the
advocates of socialism as enlightened liberals and the advocates of capitalism as
religious conservatives need to be decisively broken. From now on, in accordance with the
actual facts, the advocates of capitalism must be viewed as the representatives of
enlightenment, and the socialists as the representatives of irrationalism and the Dark
In the 1930s and 1940s, to be sure, the seemingly enlightened Left was able to depict
its opponents as virtual Ma and Pa Kettles, living on a farm somewhere, totally cut off
from modern civilization, and projecting utter ignorance and contempt for science and
technology. Exactly that image is what the New Left has chosen to wrap itself in, ever
since it joined the ecology movement. We should be sure that the public eventually
understands this fact and that it is with the New Left that those who place faith above
Previous discussion in this book and in Ayn Rand's The New Left: The Anti-Industrial
Revolution provide the essential basis for the transformation of the view of which
side wears the mantle of Reason. They clearly show how the ecology movement, which is the
last gasp of the Left, is thoroughly riddled with irrationalism and hostility to science
and technology. Furthermore, the whole of this book and all of the writings of von Mises,
of the other Austrian and classical economists, and of Ayn Rand, show beyond a shadow of a
doubt that capitalism in no sense whatever depends on the acceptance of any form of faith
or denial of reason. The case for capitalism is thoroughly rational.
In view of the fact that socialism has demonstrated its failure and that as a result
its advocates have largely given up the banner of reason, means that the success of a
rational, capitalist political program should be all the more rapid. By the admission of
both sides, capitalism is the only system to which advocates of reason can turn.
Furthermore, the projection of a rational, capitalist political program, actually
capable of solving major national and world problems, will stand as a major philosophic
affirmation of the power of the human mind. Thus, it can be an important source of gaining
recruits for all aspects of a rational philosophy. As previously shown in connection with
the ecology movement, the cultural surge in blatant irrationality that has taken place in
recent decades is due in no small measure to the demonstrated failure of socialism as a
politico-economic system. Socialism is what most intellectuals have regarded as the system
called for by logic and reason. As a result, its failure has served to shake their
confidence in reason, and thus to open the floodgates to irrationalism. By the same token,
a resurrection of respect for the potential of reason in the politico-economic realm will
promote the case for reason everywhere.
* * *
The advocates of capitalism should take the lead in the defense of the freedoms of
press and speech. At the same time that we seek to protect it for purveyors of
"prurient" literature, we should seek to protect it for the writers of financial
newsletters, whom the SEC wants to censor; for corporations, whom the Congress and the
Federal Elections Commission want to censor by denying them the right to support political
candidates of their choice; for unpopular speakers whom student thugs want to censor by
denying them the ability to be heard by their audience; for ordinary citizens whom the
Department of Housing and Urban Development wants to censor for speaking out against
government-sponsored projects in their neighborhoods. We should demand the freedoms of
speech and press for all advertisers, including cigarette advertisers.
We should place the establishment of full freedom of the press and of the more recent
forms of communication, such as movies, radio, and television, in the forefront of our
fight for a capitalist society. Long before the establishment of a fully capitalist
society, we should seek the establishment of a fully free press and media as the pattern
for all other industries later to follow. We should demand their exemption from all
government regulation immediately--that is, we should demand that these industries,
because of the intellectual nature of their products and services, be freed at once from
the income tax, the antitrust laws, the labor laws, and every other form of government
regulation and interference, so that they may advance their ideas totally without fear of
punitive action of any kind being taken against them.
9. A General
Campaign at the Local Level
The seven preceding sections have described various major aspects of the campaign for
capitalism. Here it is appropriate to bring some of those aspects together in the form of
a specific program that, over the course of less than a decade, would bring about the
economic and cultural revival of America's leading city, New York. I choose to focus on
New York not only because it is the country's leading city, but also because, of any major
American city, it best represents the destructive economic and social consequences of
contemporary American "liberalism," of which it is the intellectual home.
What would be required to restore New York to its former prosperity and greatness would
be the combination of the elimination of public welfare, the abolition of rent controls,
and the privatization of the city's transportation system.
The abolition of welfare, of course, would have to be preceded by the elimination of
minimum-wage and prounion legislation and of restrictions on child labor over the age of
fourteen. In the absence of the outright repeal of minimum-wage and prounion legislation
at the national level, it would be necessary for the city to obtain a special
congressional exemption from that legislation. These preliminary measures would be
necessary so that, as I have said before, the present welfare recipients would have a
realistic opportunity of finding employment. As I have also said before, the elimination
of welfare would need to take place gradually, say, over a ten-year period. The
elimination of public welfare and restrictions on employment would make possible a radical
improvement in the lives of the poorest portion of the city's population, whose members
would then live by working and recognize their responsibility for their own well-being,
and who thus could advance to far higher economic levels than could ever be possible for
them while on the welfare rolls. At the same time, and for much the same reasons, it would
make an enormous contribution to the reduction in crime and thus to the improvement of the
lives of the rest of the city's population, if large numbers of those who otherwise would
have been out committing crimes--namely, unemployed, impoverished juveniles and the
hardened criminals they grow up to become--were instead busy earning money by working.
The abolition of rent control, of course, would radically and progressively improve the
city's housing stock. It would also bring about the return of the middle class to the
city. Another important consequence of the repeal of rent control would be a great
increase in the revenues of the city government that were derived from property taxes.
Property tax collections would soar by virtue of bringing the value of all the housing and
land in the city that is presently under rent controls, up to the free-market level. The
great increase in property-tax revenues, combined with the elimination of expenditures for
welfare, would make possible the elimination of much or even all of the city's income and
sales taxes, which would further improve the quality of life in the city and promote the
return of industry and commerce. As a result of the vast increase in the property-tax
base, even the property-tax rate could probably eventually be reduced.
The privatization not only of the city's subway system but also of its bus lines,
accompanied by the phasing out of restrictive taxicab licensing requirements, would
achieve major improvement in the city's transportation system. This too would represent an
important improvement in the daily life of the average New Yorker and serve to encourage
the return of industry and commerce to the city.
No doubt, repeal of victimless crimes legislation and the consequent ability of the
city's police department and judicial system to concentrate all of their resources on
apprehending and punishing those guilty of crimes against the persons or property of
others would be a further measure vital in restoring the life of the city.
Needless to say, success in enacting the above program in New York City would operate
powerfully to promote the cause of capitalism in the entire country.
Outlook for the Future
Every supporter of capitalism should take heart. All across the world, socialism is now
in visible retreat and outright collapse. Its supporters are in a state of intellectual
disintegration, turning en masse against science, technology, and reason, as they magnify
the evidence of their own intellectual incompetence into a distrust of the human intellect
as such. Having for generations pompously proclaimed the possibility of their rationally
planning every detail of human life--at the point of a gun and at the price of everyone
else's planning and self-interest--and somehow thereby achieving a utopia, they now begin
to see the devastation they have caused, and, their dream in ruins, they sink to the level
of superstitious primitives, living in fear of the intellect and of its products science
and technology. In a word, they have become "environmentalists." Safety to them
now appears to lie in whatever is not man-made--in whatever is "natural," viz.,
tested by millions of years of blind evolution.
In these circumstances, even though the world may appear to be continuing to rush on,
irresistibly, to a new Dark Age, surprisingly little is needed to bring about the most
radical reversal of the political currents. Just one or two victories won in the name of
explicit procapitalist principle is all that is required. One or two such victories would
prove that there were no irresistible currents of doom. They would serve to galvanize
large numbers of people to further action, in the knowledge that rational efforts in the
realm of political action actually work.
At the moment, a promising candidate for such a reversal of the currents is the defeat
of efforts to establish socialized medicine in the United States, by means of showing that
the actual solution for the problem of soaring medical costs is the elimination of
government intervention into medicine and the corresponding widening of the zone of
economic freedom in medicine. All of the necessary intellectual ammunition is present to
do this--that is, all of the objective facts and logical arguments are on the side of the
supporters of capitalism. At the same time, with the collapse of socialism across the
world, the advocates of socialized medicine have completely lost their intellectual base.
Objectively, they are men without logical arguments and without an intellectual home. They
are riding on nothing but inertia. On the basis of the fundamentals of the situation,
there is no doubt but that they can be stopped.
Perhaps the supporters of capitalism are still too few and for the most part still
insufficiently prepared intellectually to win this battle. If so, there will be numerous
future occasions on which they can turn the tide. They have only to learn how to
articulate their case--that is, to become intellectuals who thoroughly understand economic
theory and political philosophy, and enough of more fundamental philosophy to uphold the
value of human reason. If enough of them do this, their cause will be irresistible. It
will be as the waves of the ocean acting on a foundation made of sand. Inevitably and
irresistibly the sand is washed away and the foundation undermined. "Sand" is
all that remains of the intellectual foundations of socialism and the opposition to
capitalism. Let the advocates of capitalism proceed in the knowledge not only that
socialism is dead, but also that what the world still needs to learn is why capitalism
deserves to live.
1. See above, pp. 19-21.
2. Along these lines, see also below, pp. 987-988.
3. On these last points, see above, pp. 286-290 and 316-317. See also above, p. 668.
4. On the nature of the process of capital accumulation and economic progress, see
above, pp. 622-636, especially p. 627.
5. At the same time, of course, it should be explained how the fall in wage rates that
the freedom of competition would cause in the face of unemployment, would tend not to
lower but to raise real wage rates. On this point, see above, pp. 584-585.
6. See above, pp. 384-385, which explain why government intervention is a leading cause
of homelessness. See also above, pp. 202-203.
7. For a full discussion of the government's responsibility for the crisis in medical
care, and how a free market in medical care would solve all aspects of the problem, see
George Reisman, The Real Right to Medical Care Versus Socialized Medicine (Laguna
Hills, Calif.: The Jefferson School of Philosophy, Economics, and Psychology, 1994.)
8. For an example of an appropriate compromise concerning the Food and Drug
Administration, see below, p. 987.
9. On this point, see above, pp. 655-660.
10. Strictly speaking, individuals are presently eligible to receive social security
retirement benefits beginning at age 62. This should be eliminated with the rise in the
minimum eligibility age to 70.
11. I estimate this to be the case on the basis of data available from the U.S.
government. See, for example, U.S. Department of Health and Human Services, Social
Security Administration, Social Security Bulletin Annual Statistical Supplement 1989,
12. A number of states are already making efforts to deny additional aid to mothers who
give birth to children while on the welfare rolls. See Los Angeles Times, April 30,
1994, p. A14.
13. It is implicit in previous analysis in this book that the abolition of prounion
legislation along with minimum-wage legislation, would make possible the employment of
unskilled workers with a lesser fall in wage rates than would be the case without the
abolition of prounion legislation. On this point, see above, pp. 659-660.
14. See New York Times, national ed., January 14, 1994, p. A12.
15. A kindred policy is already being practiced to some extent by the federal
government in the form of job "buyouts." Under this arrangement, the government
pays an individual up to $25,000 to retire early. See Washington Post, October 28,
1993, p. A21; ibid., August 22, 1994, p. D2.
16. Under the present program of job buyouts, the period of disqualification for new
government employment appears to be only two years. See ibid., October 28, 1993, p. A 21.
17. On the subject of taxes and the demand for labor, see above, pp. 648-650.
18. See above, pp. 584-585. See also above, pp. 648-650.
19. See above, pp. 634-636.
20. See above, pp. 622-642.
21. See above, pp. 308-310 and 622-642.
22. For elaboration of this point, see above, pp. 829-831.
23. Concerning the necessity of using silver as money, see above, pp. 958-959.
24. I am indebted to von Mises for this observation, which he made on occasion in his
25. Cf. Ayn Rand, "Collectivized Rights," in Ayn Rand, The Virtue of
Selfishness (New York: New American Library, 1964) pp. 135-143. Cf. also, the U.S.
Declaration of Independence.
26. See above, pp. 322-323 and 362-363.
27. See above, pp. 234-237.
28. On this subject, see above, pp. 362-363. See also above, pp. 634-636.
29. See above, pp. 322-323 and 351-354.
30. See above, the discussions of unilateral free trade on pp. 190-191 and 535-536.
31. Cf. Ayn Rand, Atlas Shrugged (New York: Random House, 1957) pp. 1023-1024.
32. See above, pp. 76-115 passim. See also Ayn Rand, The New Left: The
Anti-Industrial Revolution (New York: New American Library, 1971.)
33. See above, pp. 99-101.
34. See above, pp. 977-978.
35. The abolition of rent control should take place all at once, as soon as possible.
For the reasons, see above, pp. 252-254. See also pp. 250-252 and 182-183.
36. See above, p. 252.
37. On this subject, see above, pp. 78-80.
38. See above, pp. 148-150 and 378-380. See also George Reisman, The Real Right to
Medical Care Versus Socialized Medicine.
*Ottawa, Illinois: Jameson Books, 1996. Copyright ©
1996 by George Reisman. All rights reserved. May not be reproduced
in any form without written permission of the author, except by
downloading onto a computer for personal, noncommercial use.
Reisman is Professor of Economics at Pepperdine University's
Graziadio School of Business and Management.
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