AGAINST THE NEOCONSERVATIVES MYTHOLOGIES OF A SIMON-PURE CONSERVATIVE
Tyler, Gus
A not-so-simple Simon says that now is A Time for Truth, the "truth" as a present-day conservative sees it. In this facile, freeswinging book (published by McGraw-Hill in 1978), William Simon,...
...His next move was to conceptualize his program in his famous Report on Manufactures that John Garraty characterizes in The American Nation as "a bold call for economic planning...
...Yet still the debt went on growing...
...minorities and women wanted defenses against discrimination...
...The conservative ideal assumes that capitalists (who are also people) will not conspire, that they will not beat down wages and push up prices, that they will not pollute the air and water, that they will not corrupt legislators and judges, that they will not cheat consumers, that they will not 192 indulge in fake advertising...
...This assumes, for instance, that when an oil company makes a big profit, it will reinvest that handsome return in producing and refining oil...
...For Adam Smith liberation meant freedom from the state...
...workers wanted safeguards against industrial poisons...
...In a compassionate democracy, unemployment insurance and social security are decent and dignified ways whereby the members of the working-class family—call them "middle-class" if you must—care for other members of their family without putting brother or sister, parents or grandparents to the shame of a means test...
...And if the money is unduly concentrated at the top, the lesser who make up 80 percent of the consumers do not have the buying power to maintain a mass market...
...what he gains is civil liberty and the proprietorship of all he possesses...
...True liberty, continued Rousseau, comes with the surrender of "natural liberty," based on club and claw, in favor of "civil liberty," based on law: What man loses by the social contract is his natural liberty and an unlimited right to everything he tries to get and succeeds in getting...
...If Simon is shocked by an increase of a mere 92 percent in the federal debt during that decade, he ought to be stupefied by this rise of about twice as much in the corporate debt...
...Viewed technically, unemployment insurance and social security are "transfer" payments, since the money is transferred by the government to recipients out of publicly held funds...
...In 1929, the year the Depression began, the GNP was at $103 billion...
...In sum, the capitalist can be trusted to be a nice guy who won't abuse his potential power and won't twist the "invisible hand" into a visible claw...
...He wrote: Whenever the legislature attempts to regulate the differences between masters and their workmen, its counsellors are always the masters...
...And the economy has seen a bourgeoisie rise to power...
...By the standards of Aristotle, Deuteronomy, or St...
...As a consequence, liberalism has changed...
...Indeed, such a strategy could also bring in additional revenue to the government by enlarging sales and production through expanded private and public buying...
...Indeed, argue both Simon and the anarchists, the source of trouble is government: get rid of it and you get rid of evil...
...they demanded suppression of strikes...
...Frederick Townsend Martin, a New York banker, said it plainly about a century ago when describing his associates' view of politics: We are the rich [he proclaimed...
...To a degree, the present working generation carries its temporarily unemployed comrades and its fathers and grandfathers...
...Simon's intellectual gurus are Adam Smith and the Founding Fathers, coeval revolutionaries whom he enrolls in his conservative crusade with little understanding that these spokesmen for an earlier "liberalism" have far more in common with the present-day left than the modern right...
...What Simon and the neoconservatives have done is to resurrect the discredited "trickle down" theory, to give it a new life by equating corporate profits with capital formation and with national prosperity...
...But the worst is still to come as our liberal concepts push the state toward socialism and, inevitably, communism...
...193...
...In 1974, the chairman of the Federal Trade Commission under Nixon and Ford, Lewis B. Engman, told the Financial Analysts Federation: Most regulated industries have become Federal protectorates, living in a world of cost-plus, safely protected from the ugly specters of competition, efficiency and innovation...
...Indeed, many have been taken over by those who were supposed to be regulated...
...Colonial leaders had had a bellyful of states quarreling with states, of economic wars, of crazy currencies...
...So the Fathers reached out for a "more perfect union" that would "regulate commerce" and maintain "domestic tranquillity" and do all those other things to make certain everybody understood they did not have an inalienable "freedom from the state...
...Clearly, the fiction is one of those fabrications invented by corporate mandarins who wish to justify lower wages, higher prices, more tax loopholes for the wealthy, and continuing concentration of income and wealth at the top...
...they are "everything" companies, "conglomerates" who use their funds to go into any area of the economy, here and abroad, that promises the best return...
...And this was a monopoly...
...In this pollyanna view of human nature, right-wing laissez-fairists are at one with leftwing anarchists: remove the state and let people do their thing and all will turn out well because people are innately good...
...What liberals and radicals seek is a Rousseauan "social contract" in the economic realm, the establishment of "civil liberty" to protect all, including the weakest, against the "natural" rapacity of the mightiest and meanest...
...This notion was brilliantly popularized by Mobil Oil in a series of sophisticated ads in which the company argued that higher prices would (could) mean lower prices as enlarged profits allowed for greater supply through exploration and expansion...
...6. The contradictory myths that we are the least regulated and the most regulated nation in the Western world...
...But whoever imagines, upon this account, that masters rarely combine is as ignorant of the world as of the subject...
...Simon could also note the single largest expenditure of the federal government that goes under the almost self-contradictory rubric of "tax expenditures...
...But, in the midst of this campaign, it became public knowledge that Mobil was about to allocate a big chunk of its profits to acquiring a huge chain store...
...He is not opposed to charity for the truly needy...
...What incentive is there for a person to produce if the idle inherit the product...
...What Simon and his fellow conservatives preach is "natural liberty" in an economic jungle where order and justice will allegedly be imposed by the mythical "invisible hand...
...The projection is that by 1985, more than one-half the equity and "a major portion—perhaps 40 percent—of the debt capital (bonds, debentures, and notes) of the American economy" will be held by worker funds...
...Only in one narrow sense is Simon correct...
...As a percentage of the GNP, our federal debt since 1946 has been cut in half and then almost cut in half again...
...Not all the regulatory agencies have lived up to their expectations...
...Although the old and new liberalism appear to be opposites, they have a common parentage: opposition to tyranny, whether economic or political...
...In his provocative book The Unseen Revolution, Peter Drucker writes: "Through their pension funds employees of American business today own at least 25 percent of its equity capital...
...What right does the slothful have to appropriate the property of those who labor in the sweat of their brow...
...3. The myth that the federal government was not used by special interests until FDR perverted the Constitution...
...they won government subsidies...
...Now just who are these "nonproductive" classes, according to Simon...
...They asked for giveaways...
...Thus in Politics, he wrote: The most hated sort [of ways to gather wealth], and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural object of it...
...In his bland references to the thousands of producers and refiners, he conveniently neglects to note how much of the market is controlled by how many...
...Conservatives, however, would consider such a move to be antisocial since they believe that the whole system would come to a halt if the rich could not continue to multiply their riches...
...He is opposed to taking money from the "productive" classes and giving it to the "nonproductive...
...When Simon and the conservative clan insist that the "nonproductive" should not be living on the labors of the "productive," however, they are making a point that is both economically and ethically valid...
...When they find that putting too much oil or gas on the market at any one time threatens profits, 187 they place their funds in companies totally unrelated to petroleum—such as printing houses, bra factories, kosher-food empires, or chain stores...
...He notes the trend of "businessmen who have run to government in search of regulatory favors, protective tariffs, and subsidies, as well as those monopolistic powers which only the state can grant...
...Unabashed, Mobil continued to dig: in 1978, the `oil" company purchased all the outstanding shares of the W. F. Hall Printing Company, for the sum of $50.5 million...
...Jerome, the modern capitalist is a usurer, practicing a forbidden trade, since the word "capitalist" refers to someone who makes "capital" available, in the form of money and credit (financiers) or in the form of a plant with equipment (employers...
...While the case was in court, Ryan's fortune grew and grew and grew as his body was moldering in the grave...
...This basic tenet—the central economic character of politics—is nowhere explained more clearly and candidly than by James Madison, the true architect of the Constitution, in his Federalist Paper No...
...Masters too sometimes enter into particular combinations to sink the wages of labor even below this rate...
...When masters combine together in order to reduce the wages of their workmen, they commonly enter into a private bond or agreement, not to give more than a certain wage under a certain penalty...
...Smith warned against a state in which monopolies were handed out by royalty...
...they petitioned for legal monopolies...
...When the vagaries of the economy or the relentless advance of age push these "middleclass" people out of the job market, they collect benefits from a fund to which they have contributed...
...The departed soul 189 continued to accumulate riches drawn from the labors of hard-working people of brain and brawn...
...To counter Simon's case, the American left will have to reformulate its ideas so that they seem reasonable and relevant to a generation that sees the New Deal as a dead past and dreams of a debureaucratized society as an alluring future...
...But, if he applied the same measure of "lethality" to the private sector, he would have to abandon all faith in the "free enterprise" system...
...Were the workmen to enter into a contrary combination of the same kind, not to accept of a certain wage under a certain penalty, the law would punish them very severely...
...He says the same about the $25 billion given to the blind, crippled, and handicapped...
...From this dictum, Marx drew his revolutionary conclusion: if labor is the source of all value, then all value should go to labor...
...For the Fathers, a strong central government was necessary to ward off both anarchy and tyranny...
...But no civilization worth the name allows its momentarily jobless or its older folk to perish because they are not making an immediate contribution to the national economy...
...We get irate about welfare fraud, but our complex systems of hidden regulatory subsidies make welfare look like petty larceny...
...Government agencies make the distinction clear when they list wages and salaries as "earned" income and list money drawn from clipping coupons or selling shares as "unearned" income...
...Labour," he writes in The Wealth of Nations, "is the real measure of the exchangeable value of all commodities...
...Obviously, Simon has not yet made up his mind whether we are the least or the most government-regulated economy in the West...
...All this and more is spelled out in John M. Blair's The Control of Oil...
...In such a state of "natural liberty," reasoned Rousseau, man may feel that he enjoys unfettered freedom but he is really deluding himself: without social organizations, man can not survive physically, and without a body of law derived from a social contract, each man is at the mercy of whoever has the power to impose tribute, slavery, or even death...
...It thus becomes a sort of barrier between the railroad corporations and the people and a sort of protection against hasty or crude legislation hostile to railroad interests...
...we got it, God knows how, but we intend to keep it if we can by throwing all the tremendous weight of our support, our influence, our money, our political connections, our purchased senators, our hungry congressmen, our public-speaking demagogues into the scale against any legislature, any political platform, any presidential campaign that threatens our estate...
...In 1946 the federal debt was 132.8 percent of national production...
...A century after Macauley, England found itself in trouble, not because of its debt but because its capitalists had for half a century been bleeding England by drawing profits from its economy and then exporting those profits to other lands for a quick buck...
...The "liberty" to which Simon dedicates his book is no liberty at all, except perhaps for a self-selected few who wish to be "free" to lord it over the many...
...But, standing by itself, this means nothing, because the burden of the debt can only be measured in terms of the size of the nation and its economy...
...The relevant question is: how big is the debt in relation to the gross national product...
...The danger that the lords of industry would become a new "aristocracy" was voiced by Tocqueville, another of Simon's favorites whom he obviously has not read in depth...
...7. The ultimate utopian myth that men and women, especially the capitalists, left to their own passions, will not try to exploit their fellows...
...For this bad reasoning there is a good reason: the desire to propagate a faith that all would be well with the world if the capitalists were only fully free to pursue their profits without interference...
...We own America...
...Long ago, Jean Jacques Rousseau addressed himself to this primitive yearning to be free of all social restraint...
...Savings that workers put in banks or premiums that workers pay to insurance companies are also massive reservoirs of capital formation, as are investments in mutual funds or even in the open market by workers...
...When Smith set out to liberate the nascent bourgeoisie from royal dictates, he appealed—in the revolutionary tradition—to a higher authority: a mystical force he called the "invisible hand," which was supposed to assure economic equity...
...It may now be affirmed without fear of contradiction that we find it as easy to pay the interest of eight hundred millions as our ancestors found it, a century ago, to pay an interest of eighty millions...
...They simply fail to acknowledge the "tyranny" inherent in concentrated economic power that is "free" to pursue its conspiratorial impulses...
...No one has put this elementary concept more delightfully than Thomas Macauley in The History of England (Chapter XIX...
...The former document eliminated an old government...
...190 All these ways of subsidizing the rich with billions from the people's treasury contribute, of course, to budget deficits...
...Indeed, the people who were called upon to ratify this threatening document refused to do so unless a Bill of Rights was attached to the main body to make certain that the citizenry did not, in losing its "freedom from the state," lose all its other freedoms as well...
...Simon makes no mention of the GNP...
...We must clearly distinguish natural liberty, which is bounded only by the strength of the individual, from civil liberty, which is limited by the general will...
...The real question is: who are the nonproductive classes...
...Indeed, the only serious check on corporate monopoly and antisocial practices are the regulatory agencies, inadequate as they are...
...If he had put this elementary question, he would have discovered that "nearly all (93.6%) of the nation's reserves of crude oil are held by twenty major oil companies" and that "nearly two-thirds of the reserves are held by the eight largest firms...
...In this country, men of money were out there "cornering the market" long before "regulation...
...Consumers wanted the state to check up on the food and drugs that were being peddled to the people...
...almost all have a TV set...
...More than two centuries ago, Adam Smith divined the inherent compulsion of businessmen to "conspire" with or without governmental aid...
...Wherefore of all modes of getting wealth this is the most unnatural...
...5. The myth that a growing federal debt will bankrupt the nation, although the debt is a shrinking portion of our national income...
...Simon notes correctly that the national debt increased by 92 percent in one decade...
...investors wanted an agency to oversee the stock market to prevent the bilking of the ordinary stockholder...
...Those who hold and those who are without property have ever formed distinct interests in society...
...But invective does not bother him: he wears the pejorative labels as badges of honor...
...In the next century, businessmen used the state in every way they could to possess, 185 plunder, and profit from this land and its resources, and to exploit working men and women...
...Unless there was a government that mediated among these warring elements, the social fabric would be torn apart, and out of the disorder would arise a dictator...
...People of the same trade," he wrote, "seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices...
...Both sought liberation from the caprices of the Crown...
...the latter established a new government...
...No matter how much capital the supercapitalists may have in their hands, they will not invest that money unless there is a market for their commodity or service...
...Discussing the "combines" of employers vis-a-vis their employees, Smith wrote: We rarely hear of the combination of masters [employers], though frequently of those of workmen...
...Those who are creditors and those who are debtors fall under a like discrimination...
...By such acts, record the respected historians who wrote The National Experience (John M. Blum, et al...
...The truth is that "oil" companies are not just oil companies, not even just energy companies...
...Aristotle insisted that men who derived income from "interest" were not adding to the world's stock of goods but were practicing a "mode by which men gain from one another...
...Simon—like all conservatives—is, of course, opposed to the use of government for redistributional purposes...
...As a percentage of GNP, our total debt shrank from 46 percent to 37 percent...
...He thinks it's time for true libertarians to speak out against a modern liberalism that has infected both the Democratic and Republican parties...
...Corporate debt should be measured only as a percentage of corporate assets: if the companies are big and strong enough to carry the load then there is nothing to worry about...
...Indeed, it is their stock in trade to denounce utopians who construct dreamy societies built out of perfectable people...
...But, Simon rushes to proclaim, this "flood of wealth emerges from the lack of any direction of the economic process, from the lack of government control, , from the lack of state-imposed or 'national' purposes and goals" (p...
...Our economy grew far more rapidly than our total indebtedness...
...This is made clear by the subsequent passage that states that "unto a stranger thou mayest lend upon usury...
...Total Federal debt has increased from $329.5 billion at the end of fiscal year 1976—a rise of 92 percent in only ten years' time...
...The history of corporate regulation testifies to the agility of business at seducing the public by seducing its chaperones...
...Farmers, however, were only the first...
...He feels that the $8.3 billion given to those on "welfare" is a negligible sum that, despite mishandling, is justifiable...
...We see something eerily similar to the fiscal pattern of New York City...
...In one form or another— by personal support, by charity, or by institution—the strong help the weak, especially when they come from the same family...
...As a young street-corner agitator, my favorite example of economic and social injustice was built around the death of a millionaire nonproducer, Thomas Fortune Ryan...
...As a former secretary of the treasury, Simon could submit truly dramatic instances of how the nonproductive elite in our land lives at the expense of the rest of the nation...
...The ultimate impact of the capital formation caper as conceived and carried through by corporate America is redistributionalmoving money to the top...
...Estate taxes for instance are rigged for the rich: stocks held until death are not taxed until they are sold and then they are taxed only on the gains realized between the time of inheritance and the time of sale...
...The title of the book—A Time for Truth— is, of course, the summary myth...
...It satisfies the popular clamor for a government supervision of railroads, at the same time that such supervision is almost entirely nominal...
...unions wanted protection against yellow-dog contracts, injunctions, spies, company goons, and sheriffs...
...They are primarily those who are drawing unemployment insurance or social security payments...
...Here Aristotle was restating the Biblical injunction: "Thou shalt not lend upon usury to thy brother...
...We see an abyss of government debt piled on debt...
...the Fathers warned against a state where a monarch ruled the colonies...
...10: The most common and durable source of factions has been the various and unequal distribution of property...
...This is monopoly...
...environmentalists wanted safeguards against pollution and depletion of natural resources...
...But what he really objects to is that "most federal dollars" allocated to social programs "are benefiting the middle class...
...As Senator Henry Jackson put it: "They dug and dug and they finally struck Montgomery Ward...
...As a practicing moral philosopher, Adam Smith understood the impulse of businessmen to "conspire" against both workers and consumers and use the state to further the conspiracy...
...the federal government "created a group of wealthy investors or, to use a less attractive word, profiteers...
...By law, people are not entitled to draw jobless or social security benefits unless they have earned—literally, earned—that right by having proven their productive worth in the society...
...All beneficiaries (or their dependents) must have been employed personally...
...Simon's myth that the oil industry is competitive is reinforced by a companion myth that if profits rise for producers "they will pay for their own expansion out of their own profits" and will, thereby, provide a greater supply of whatever it is they produce...
...Both liberalisms are democratic in their ethic, demanding a voice for the people in the economy as well as in government...
...half the families have at least one car...
...we feed ourselves and feed half the world...
...and the word "brother" meant any member of the tribe...
...Proposals to reduce or eliminate taxes on capital gains, to extend tax privileges to corporations and to large estates, to deregulate the price of oil and gas, to up the profits of public utilities—all these moves to concentrate income and wealth in the hands of an elite are explained as necessary efforts to speed capital formation, to enrich everyone by enriching the rich...
...But viewed economically or ethically, these benefits are not transfer payments at all: workers are collecting from funds built up by worker contributions...
...competitive industries take the contributions out of the worker's hide...
...To prove that free enterprise makes for our greatness, he says we are the least regulated...
...Capital can be—and is— generated primarily outside corporations, mainly from workers...
...We see the tax burden growing steadily to finance the redistribution process [says Simon...
...One of the reasons, perhaps, that Simon sees monopoly arising only on a governmental foundation is that he does not see those monopolies he does not choose to see...
...Milton Friedman, oft-quoted by Simon, adds: "There is hardly a major 186 monopoly in the United States that doesn't derive its power from government grants...
...Capital formation does not depend solely, nor mainly, on accumulation of profits in corporate coffers...
...Simon is not unaware of the way in which America—by and large—has grown...
...The failure of the British economy to grow created an imbalance between debt and assets...
...Just as the Declaration was a demand for disorder, so the Constitution was a design for order...
...But after all the mud is slung, Simon makes a valid point when he writes: "I was constantly shocked by many journalists' failure to understand that I was not simply a malignant symbol to be hissed at in ritual hate, but a representative of a serious economic and constitutional position...
...they sought all this and they got it...
...The same top eight are responsible for 55 percent of retail sales and they control almost 60 percent of refining capacity...
...Actually, if Uncle Sam were to close the loopholes for the affluent we could balance the budget, could ease the tax on working people, and still have enough left over to do whatever has to be done...
...Most of the money," says Simon, "goes to the middle class, which often has other pension systems as well, and to richer people, who do not need it...
...What was true of Ryan then is true of capitalists today: they were and are parasites...
...He is unabashedly for laissez faire: the New Deal was bad, and its extensions under all subsequent presidents—Republicans and Democrats—worse...
...But even if Mobil—or any other corporation— reinvested its profits exclusively in oil, there would still be no reason to encourage corporate superprofits to finance expansion...
...Tocqueville's fears soon became fact...
...The genius behind these carefully conceived moves to use the new government in order to enrich the rich was Alexander Hamilton, of course...
...And this term interest, which means the birth of money from money, is applied to the breeding of money because the offspring resembles the parent...
...Despite this clear evidence that capital formation depends very heavily—indeed, primarily—on the wages and fringes of workers, the myth persists that high corporate profits are the sine qua non of economic growth...
...This fact does not altogether escape Simon's attention...
...As I write, the federal government is suing oil companies for a billiondollar overcharge...
...and possession which is merely the effect of force or the right of the first occupier, from property, which can be founded only on a positive title...
...The former produce a product or render a service...
...Years before Karl Marx said that the state was the "executive committee of the ruling class," Smith pointed out that employers were always able to use government as their tool...
...Throughout the last century," he writes, "the attachment of businessmen to free enterprise has weakened dramatically as they discovered they could demand and receive short-term advantage from the state...
...But even as he did so, he was fearful that his newly liberated entrepreneurs would turn into economic royalists, forming power blocs to influence, inhibit, even invalidate the "invisible hand," to enable the new masters to grow rich at the expense of both employees and consumers...
...The paradox of deficit—the larger, the lighter—can only be understood in terms of growth...
...treasury funds of unions are still another...
...We see a commitment to a vast network of lifelong pensions to government employees and others in the middle-class populace...
...In his assault on the "lethal" implications of a mounting debt, Simon restricts himself to the public sector...
...It is true that both Smith and the Fathers were antistatist, but at a time when the state was vastly different from what it is today...
...it meant any charge...
...The natural tendency of liberals and radicals will be to dismiss this book as trash, the detritus of a political Neanderthal, a man without compassion...
...Our airlines, our truckers, our railroads, our electronic media and countless others are living on the dole...
...183 In the two centuries since, both government and economy have changed...
...A nation can carry an enlarged debt with relative ease if the gross national product expands...
...and any payment to the working class—even if it comes out of funds contributed by the working class—is bad...
...In the years from 1966 to 1976 the net corporate debt rose from $506.6 billion to $1,414.7 billion—an increase of about 175 percent...
...A longer-range view reveals that what happened in the years from 1966 to 1976 is not an isolated example...
...He concludes his two chapters on the parallel between New York City and the nation with the prognosis that "unless the lethal pattern is changed, this nation will be destroyed...
...When he died, his estate was contested...
...The capitalist is paid for the wealth that he owns and not for any work he does...
...Then, FDR began to spur the economy by public spending with the result that by 1939 the GNP was up to $90 billion, and by 1941 to $124 billion...
...His choice is freedom...
...Here the word "usury" did not mean exorbitant charges...
...If "freedom from the state" had been the Fathers' guiding definition of "freedom," they could have done very nicely with the Articles of Confederation, that is, without a 184 federal government empowered to override the will of the separate states and their citizens...
...Through rote, rhetoric, and seemingly sophisticated rationales, they have turned a fiction into a fact to make it a widely accepted premise of national policy...
...But it is a monopoly that Simon refuses to see because he wants the oil industry totally deregulated to let the princes of petroleum, whom Simon depicts as myriad competing companies, "rip with the profit motive as a guide...
...Hence, all gifts from Uncle Sam to the "investing" class are good...
...They erroneously imagined that there was an exact analogy between the case of an individual who is in debt to another individual and the case of a society which is in debt to a part of itself...
...This notion that it is government— especially recent administrations, and not the private sector—that is the cause of monopoly is, of course, a handy invention of the modern conservatives who want to return to a laissez faire that never existed...
...union-industry health and welfare funds are another...
...In fact, Drucker understates the degree to which capital formation is based on worker income...
...Simon's interpretation of the Founding Fathers is no more sophisticated than his reading of Adam Smith...
...Hence, the Fathers did not—quite contrary to a central thesis of Simon and the neoconservatives—seek to sever politics from economics...
...Pension funds are only one source...
...This sly stratagem costs Uncle Sam some $20 billion a year, about three times the cost of aid to families of dependent children (AFDC...
...Instead, they deplore the expenditures for unemployment insurance and for social security...
...But, whether or not worker funding of corporations is "socialism," there is no doubt that such "proletarian financing" is the largest source of capital formation in modern American capitalism...
...His vigorous little volume deserves the serious attention of liberals and radicals, less for what it is in itself than for what it represents as a popular summary of American conservatism today...
...by 1976 it was 37 percent...
...Reserves are not great enough in either the unemployment or social security funds to carry all present beneficiaries without the presently employed making their steady contributions...
...Our present oligopolies in aluminum, autos, chemicals, steel, agribusiness, oil do not depend on "regulation" for their existence...
...to Marx it is made up mainly of capitalists...
...Now just how lethal is the pattern...
...To clinch his point on this, Simon quotes himself from a statement he submitted to the Senate Committee on the Budget in 1976: "Deficits accumulate over time," he notes ominously...
...The tiller of the soil—the traditional free enterpriser in America—demanded government regulation of callous corporations...
...Madison's pre-Marxian preachment about the economic essence of politics found confirmation in Washington's first term...
...Quite the reverse: they saw the "regulation" of these "interfering [economic] interests" as the "principal task of government...
...Amid this plutocracy—government by the rich and for the rich—there stirred the spirit of American democracy, the root of our liberalism and radicalism...
...Because this understanding is missing from the calculations of Simon and modern conservatives, their analysis of the "free enterprise" system is fatally flawed...
...The regulation of these various and interfering interests forms the principal task of modern legislation, and involves the spirit of party and faction in the necessary and ordinary operations of the government...
...by 1933, the year Roosevelt came into office, the GNP had fallen to $55 billion...
...They represent a hidden "transfer" payment from the working classes—"middle class" to Simon—to the people who live on "unearned income...
...They saw that the debt grew, but they forgot that other things grew as well as the debt...
...Inclusion of "pension funds of the public employees, and of school and college teachers" would show a decisive onethird of the equity capital derived from worker funds...
...From these data, Drucker concludes that America is a socialist society, a finding that would be more valid if workers or their representatives actually controlled their "funds...
...These "tax expenditures"—so-called because they are truly expenditures out of the public coffers, although they are not officially listed as such in the budget—run to more than $100 billion a year...
...Indeed, he boasts of our greatness: almost every home has a phone...
...These are the loopholes, preferences, and exemptions made available to people of great income to allow them to escape their proper share of contribution to the national treasury...
...To Simon, the alternative is clear: free enterprise (capitalism) or dictatorship (communism...
...usury of money, usury of victuals, usury of anything that is lent upon usury...
...191...
...Actually, the two great statements are so unlike each other that some historians have seriously suggested that while the Declaration was the mark of a revolution, the Constitution was the mark of a counterrevolution...
...Constitution, as if they were a single document conceived in the same spirit...
...The early Christians—with their concept of universal brotherhood—outlawed usury totally...
...Yet, the conservative concept of a better world arising from the unchecked, unregulated, unleashed pursuit of profits is a typically utopian fantasy woven out of a naive notion of human nature...
...Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages above their actual rate...
...Worthless "continentals," issued by the colonies to finance the war and picked up by speculators for pennies, were redeemed at full face value by the new federal government...
...Even employer contributions can be seen as coming from workers: monopoly industries pass on the cost to consumers, most of whom are workers...
...The state has been democratized so that the people now have access to powers that were once exclusively in the hands of royalty...
...Hence, Simon is opposed to this transfer of funds from the "productive" to the "nonproductive...
...A landed interest, a manufacturing interest, a mercantile interest, a moneyed interest, with many lesser interests grow up of necessity in civilized nations, and divide them into different classes actuated by different sentiments and views...
...In sum, less than one quarter of 1 percent of the companies hold just about all the crude reserves, and less than 0.04 percent control more than half the retail sales, and about 5 percent control about 60 percent of refining...
...Over the years, a vast body of legislation has been enacted and dozens of agencies were established to limit the ability of the powerful to use their private economic power in order to exploit the weak...
...But the Marxian conclusion was, of course, a proletarian precursor of Simon's tenet that it is wrong for the nonproductive to live on the back of the productive...
...For money was intended to be used in exchange, but not to increase at interest...
...Simon appeals to our love for liberty, the natural yearning of all Americans and especially the young: "Political freedom means only one thing: freedom from the state...
...I am of the opinion," wrote the French observer in 1835, "that the manufacturing aristocracy which is growing up under our eyes is one of the harshest that ever existed in the world...
...they landed fat contracts...
...But Simon and the conservatives prefer to ignore the "tax expenditures" for the rich...
...And today, with all that public spending by all those Democrats and Republicans whom Simon rejects, the GNP is moving up to the two-trillion mark, with the consequence that the public debt in relation to GNP is at the lowest point since the end of World War II...
...they were also quite fearful that the revolutionary spirit might run too long, as in Shay's Rebellion and the Whiskey Insurrection...
...If ever a permanent inequality of conditions and aristocracy again penetrate into the world, it may be predicted that this is the gate by which they will enter...
...for modern liberalism, the state is an instrument to curb the caprices of the capitalist or—in its more radical form—to get rid of the capitalist altogether...
...In a brief four years, laws were passed to impose protective tariffs, to fund a national bank that would be run by private bankers backed heavily with public money...
...To begin with, he fuses the Declaration of Independence with the U.S...
...to prove that our Administrations have, since FDR, been wrecking the economy, he says we are the most regulated...
...Adam Smith had a relevant word on this subject, too...
...No doubt, Simon would have his answer— and a proper answer, too...
...The Simon book is really a sort of modernized Golden Bough, a collection of the Seven Major Myths that make up the current conservative faith: I. The myth that the only possible tyranny is the tyranny of the state and that, liberated from statist intervention, capitalists will not conspire to set up their own economic tyranny...
...It expressed itself most forcibly in the political movements of farmers, for whom the state was the only effective instrument for curbing the rapacity of the railroads and banks...
...utility users wanted controls over prices...
...He hands out his own contumely: liberals are "intellectual basket cases," Leonard Silk of the New York Times is charged with "ideological malice," and top people in the press are indicted for their "sheer ignorance...
...But, after announcing that there is little "government control" and that we owe none of our prosperity to Roosevelt or any of his imitators right down to Nixon, Simon goes on to declare our producers are under "almost lethal pressure" because they (the American producers) "are subjected to more arbitrary regulation than any other Western country" (p...
...He is opposed to the "welfare state" and its practice of "chopping down those who produce wealth and the transfer of that wealth from those who have earned it to those who have not...
...In their classic view, they saw societies torn by conflict—especially economic conflict...
...by 1962 it was 55 percent, by 1965 only 48 percent...
...When the Interstate Commerce Commission first was set up, President Cleveland's Attorney General Richard Olney advised a railroad president not to lose his cool: The Commission, as its functions have now been limited by the courts, is, or can be made, of great use to the railroads...
...That Simon should view jobless and retired workers as members of an "unproductive" middle class is rather a shocker...
...The "redistribution" to which he objects, however, is not the .upward movement of money to those at the top but the downward movement of funds to those 188 below...
...He says one or the other, depending on the point he is making at the moment...
...Directly or indirectly, working people contribute to the unemployment and social security funds...
...Smith feared similar capitalist combinations against the consumer...
...The contrary conclusions of Marx and Simon are drawn from contrary definitions: to Simon, the nonproductive class is made up mainly of unemployed and retired workers...
...This malignant myth not only serves to enrich the already rich at everyone else's expense but also creates a top-heavy economy that must eventually topple...
...Simon's reference to the thousands of service stations as proof of a nonmonopoly is the equivalent of arguing that there is no monopoly in aluminum production in the United States because hundreds of thousands of stores sell aluminum pots and pans...
...He might have added that he represents a conservative movement that, at the moment, has seized both the intellectual and legislative initiative in America...
...The part of wisdom is not to destroy the Commission but to use it...
...4. The myth that the great productive class is that of the capitalists, and that jobless, retired, or poorly paid workers are the unproductive class...
...In this facile, freeswinging book (published by McGraw-Hill in 1978), William Simon, former secretary of the treasury under Nixon and Ford, lets loose a blast that spares no one, including his two famous employers...
...If he did, he would have to record that in the years 1966-76 our total output rose from $753 billion to $1,736 billion, an increase of 115 percent...
...and still bankruptcy and ruin were as far as ever...
...That $20 billion is a transfer payment from the American people to nonproducers, whose only genius is their ability to outlive their fathers or grandfathers...
...the latter live on the produce of the former...
...These prophets of the profit motive do not, of course, think of themselves as preachers of a faith but as hard-nosed realists relating the truth...
...2. The myth that the Founding Fathers set up a federal government to give citizens "freedom from the state...
...As of 1976, there were 8,000 different oil and gas producers, 130 refiners and 16,000 wholesale marketers—to say nothing of 186,000 service stations, the vast majority of which were run by independent businessmen...
...Further, the older such a commission gets to be the more inclined it will be found to take the business and railroad view of things...
...The nation—in the hands of the free entrepreneurs—was going to ruin...
...More than a century and a half ago, he described191 with considerable amusement—the emptyheadedness of all those who were daily predicting the end of the realm because of the growing national debt: At every stage in the growth of that debt it has been seriously asserted by wise men that bankruptcy and ruin were at hand...
...For instance, he insists that those who allege there is a monopoly in the oil industry have "no rational base...
...In the United States, one of the great—if not the greatest—stimulants to the growth of the economy has been government expenditure...
...A six-month-old infant cannot carry a ten-pound load, but a boy of sixteen can...
Vol. 26 • April 1979 • No. 2
