Reality. Captured in user friendly symbols and processed for understanding. The Idea Channel. What I want to talk about is really an issue which is very much related to the whole problem of human freedom. It has to do with the question of whether capitalism is humane and what you mean by that. I am sure many of you have heard the old story about the two Poles who met one another and one Pole said to the other: “Tell me, do you know the difference between capitalism and socialism?” And the other Pole said, “No, I don’t know the difference.” Then the first Pole said, “Well, you know, under capitalism man exploits man.” The other fellow shook his head. “Well under socialism,” he said, “it’s vice versa.” Well now that, as a matter of fact, in the present intellectual atmosphere of the world is a relatively favorable evaluation of capitalism. The interesting thing to me about this is that the arguments, the issues, in this debate which has been going on for so long about the form of government have changed. The argument used to be strictly about the form of economic organization: should we have government control of production and distribution, or should we have market control? And the argument used to be made in terms of the supposedly greater efficiency of centralized government and of centralized control. Nobody makes that argument anymore. There is hardly a person in the world who will claim that nationalized industry, or socialism as a method of economic organization, is an efficient way to organize things. The examples of Great Britain, the examples of Russia, the examples of some of the other states around the world that have adopted these measures plus the domestic-grown examples of the Post Office and its fellows have put an end to that kind of talk. But the interesting thing is that nonetheless there is widespread opposition to capitalism as a system of organization and there is widespread support for some vague system labeled socialism. The most dramatic example of the change in the character of the argument and the paradox that I am really bringing out is Germany. Here was Germany which experienced all the horrors of the Nazi totalitarian state in the 1930’s, here is Germany which after the war under the Erhard policy of Sozial Marktwirtschaft, social market economy, had an economic miracle with an enormous rise in total income and an enormous rise in the well-being of the German people, of the ordinary people. And yet in Germany despite the demonstration of the horrors, on ‘the one side, of a totalitarian state and, on the other, of the benefits of a relatively free market, here in Germany you will find that a very large fraction of all intellectuals remain–not only remain, have become–more strongly anti-capitalist, have become proponents of collectivism of one form or another. Only a small number have gone into the more extreme versions that you have been reading about in the papers of the terrorists. But a very large fraction of the intellectuals, those who write for the newspapers, those who are on television, and so on, are fundamentally anti-capitalist in their mentality. And the question is, why? What is it that has produced this shift–not this shift, but what is it that produces this consistent attitude of anti-capitalism on the one hand and pro something called collectivism on the other among intellectuals? One of the most interesting analyses of these problems I know is by a Russian dissident mathematician named Shafarevich. His essay, which has never been published–needlless to say–in Russia, appears in English translation in a book called From Under the Rubble which has been edited by Alexander Solzhenitsyn, and I strongly recommend that particular paper to you. In it he discusses the appeal of socialism over the ages–he goes back a thousand or two thousand years–and he comes out with the conclusion that, just as Freud pointed to the death wish in individuals as a fundamental psychological propensity, the appeal of socialism is really a fundamental sign of a death wish for society on the part of intellectuals. It’s a very intriguing, strange, and, at first sight, highly improbable kind of interpretation. Yet I urge you all to read that essay because you will find that it is very disturbing by having a great deal more sense to it than you would suppose such a position could possibly have. I’m not going to take that line. Maybe he is right, but I think there is a very much simpler reason for this. And that simpler reason is a combination of a supposed emphasis on moral values and ignorance and misunderstanding about the relationship between moral values and economic systems. I may say the emphasis on moral values is almost always on the part of people who do not have economic problems; it is not on the part of the masses. But the problem with this approach, the problem of trying to interpret and analyze a system either pro or con in terms of such concepts as the morality of the system or the humanity of the system–whether capitalism is humane or socialism is humane, or moral or immoral–the problem with that is that moral values are individual; they are not collective. Moral values have to do with what each of us separately believes and holds to be true–what our own individual values are. Capitalism, socialism, central planning are means not ends. They in and of themselves are neither moral nor immoral, humane nor inhumane. We have to ask what are their results. We have to look at what are the consequences of adopting one or another system of organization, and from that point of view the crucial thing is to look beneath the surface. Don’t look at what the proponents of one system or another say are their intentions, but look at what the actual results are. Socialism, which means government ownership and operation of means of production, has appealed to high-minded fine people, to people of idealistic views, because of the supposed objectives of socialism, especially because of the supposed objectives of equality and social justice. Those are fine objectives and it is a tribute to the people of good will that those objectives should appeal to them. But you have to ask the question, does the system–no matter what its proponents say–produce those results? And once you look at the results it is crystal clear that they do not. Where are social injustices greatest? Social injustices are clearly greatest where you have central control. The degree of social injustice, torture, and incarceration in a place like Russia is of a different order of magnitude than it is in those Western countries where most of us have grown up and in which we have been accustomed to regarding freedom as our natural heritage; social injustice in a country like Yugoslavia, which is a much more benign communist state than Russia, and yet you ask Djilas who languishes in prison for having written a book, you ask the people at the University of Belgrade who have been sent to prison, or many others who have been ejected from the country; social injustice in China where you have had thousands of people murdered because of their opposition to the government. Again, look at the question of inequality, of equality. Where do you have the greatest degree of inequality? In the socialist states of the world. I remember about 15 years ago my wife and I were in Russia for a couple of weeks. We were in Moscow with our tourist guide and I happened to see some of the fancy Russian limousines, the Zivs, that were sort of a takeoff on the 1938 American Packard. I asked our tourist guide out of amusement, how much do those sell for? “Oh,” she said, “those aren’t for sale. Those are only for the members of the Politburo.” You have in a country like the Soviet Union an enormous inequality in the immediate literal sense in that there is a small select group that has all of the services and amenities of life, and very large masses that have a very low standard of living. Indeed, in a more direct way, if you take the wage rate of foremen versus the wage rate of ordinary workers in the Soviet Union, the ratio is much greater than it is in the United States. I seem somehow to be referring to Poland, but on this same trip that we took to Russia we stopped in Poland, in Warsaw, for a while and met there a marvellous man, a man by the name of Edward Lupinski, who was in this country a year ago at the age of 83 or 84 and I believe was arrested when he got back to Poland because he had been one of those who had authored and signed a declaration against the suppression of freedom of thought and speech in Poland. But at the time we met Edward Lupinski he seemed to be fairly free. He was a man who had been a socialist all his life, he was then in his seventies I may say when we saw him, and he was retired. It is a very hard thing for a man to go back on all of his lifelong beliefs, and so he said as follows to us: “You know, I used to believe in socialism. I still do, but socialism is an ideal. We can’t have it in the real world,” he said, “until we’re rich enough to be able to afford it.” And he said socialism will be practical when every man in Poland has a house and two servants. And I said to him, “Including the servants?” And he said, “Yes.” Capitalism, on the other hand, is a system of organization that relies on private property and voluntary exchange. It has repelled people, it has driven them away from supporting it, because they have thought it emphasized self-interest in a narrow way, because they are repelled by the idea of people pursuing their own interests rather than some broader interests. Yet if you look at the results, it is clear that the results go the other way around. Only where capitalism has prevailed over long periods have you had both freedom and prosperity. If you look at the Western countries where freedom prevails, it doesn’t prevail perfectly–we all have our defects–but by and large few would deny that in the United States, in Great Britain, in France, in Germany, in Western Europe, we have a greater degree of freedom on an individual and personal level than you do in most other places around the world; in Australia, in Japan to a considerable extent today, though not 200 years ago. If you look you will find that freedom has prevailed where you have had capitalism and that simultaneously so has the well-being and the prosperity of the ordinary man. There has been more social justice and less inequality. Now the question is that you have to ask, and you have to ask the proponents of these two systems, has socialism failed because its good qualities were perverted by evil men who got in charge–was it simply because Stalin took over from Lenin that communism went the way it did? Has capitalism succeeded despite the immoral values that pervade it? I think the answer to both questions is in the negative. The results have arisen because each system has been true to its own values–or rather a system does not have values, I don’t mean that–has been true to the values it encourages, supports, and develops in the people who live under that system. What we are concerned with in discussing moral values here are those that have to do with the relations between people. It is important to distinguish between two sets of moral considerations: the morality that is relevant to each of us in our private life, how we each conduct ourselves, behave; and then what is relevant to systems of government and organization, to the relations between people. In judging relations between people, I do not believe that the fundamental value is to do good to others whether they want you to or not. The fundamental value is not to do good to others as you see their good. It is not to force them to do good. As I see it, the fundamental value in relations among people is to respect the dignity and the individuality of fellowmen, to treat your fellowman not as an object to be manipulated for your purpose but to treat him as a person with his own values and his own rights, a person to be persuaded not coerced, not forced, not bulldozed, not brainwashed. That seems to me to be a fundamental value in social relations. In all systems, whether you call them socialism, capitalism, or anything else, people act from self-interest. The citizens of Russia act from self-interest the same way as the citizens of the United States do. The difference between the two countries is in what determines self-interest. The man in the United States who is serving as a foreman in a factory–his self-interest leads him to worry about not getting fired. The man in Russia who is acting as foreman in a factory–his self-interest leads him to worry about not being fired at. Both are pursuing their own self-interest but the sanctions, what makes it in their self-interest, is different in the one case than in the other. But self-interest should not be interpreted as narrow selfishness. I quote a man who speaks much more eloquently than I can. This is Thoreau and I quote him from Walden. Here’s what Thoreau said about unselfishness as a moral virtue. He said: There is no odor so bad as that which arises from goodness tainted… If I knew for a certainty that a man was coming to my house with the conscious design of doing me good, I should run for my life. Philanthropy is almost the only virtue which is sufficiently appreciated by mankind. Nay, it is greatly overrated and it is our selfishness which overrates it… If anything all a man so that he does not perform his functions, if he have a pain in his bowels even– for that is the seat of sympathy–he forthwith sets about reforming–the world. Being a microcosm himself, he discovers–and it is a true discovery and he is the man to make it– that the world has been eating green apples; to his eyes, in fact, the globe itself is a great green apple, which there is danger awful to think of that the children of men will nibble before it is ripe, and straightaway his drastic philanthropy seeks out the Esquimaux and the Patagonian, and embraces the populous Indian and Chinese villages. That’s Thoreau on unselfishness as a moral value. More important and more fundamentally, whenever we depart from voluntary cooperation and try to do good by using force, the bad moral value of force triumphs over good intentions. And you realize this is highly relevant to what I am saying, because the essential notion of a capitalist society, which I’ll come back to, is voluntary cooperation, voluntary exchange. The essential notion of a socialist society is fundamentally force. If the government is the master, if society is to be run from the center, what are you doing? You ultimately have to order people what to do. What is your ultimate sanction? Go back a ways, take it on a milder level. Whenever you try to do good with somebody else’s money, you are committed to using force. How can you do good with somebody else’s money unless you first take it away from him? The only way you can take it away from him is by the threat of force. You have a policeman, a tax collector, who comes and takes it from him. This is carried much farther if you really have a socialist society. If you have an organization from the center, if you have government bureaucrats running things, that can only ultimately rest on force. But whenever you resort to force, even to try to do good, You must not question people’s motives. Maybe they are evil sometimes, but look at the results of what they do. Give them the benefit of the doubt. Assume their motives are good. You know, there’s an old saying about the road to hell being paved with good intentions. You have to look at the outcome, and whenever you use force, the bad moral value of force triumphs over good intentions. The reason is not only that famous aphorism of Lord Acton. You all know it, you’ve all heard it: “absolute power corrupts absolutely.” That’s the whole aphorism. That is one reason why trying to do good with methods that involve force lead to bad results, because the people who set out with good intentions are themselves corrupted. And I may add, if they are not corrupted they are replaced by people with bad intentions who are more efficient at getting control of the use of force. The fundamental reason is more profound: the most harm of all is done when power is in the hands of people who are absolutely persuaded of the purity of their instincts and of the purity of their intentions. Thoreau says that philanthropy is a much overrated virtue; sincerity is also a much overrated virtue. Heaven preserve us from the sincere reformer who knows what’s good for you and by heaven is going to make you do it whether you like it or not. That’s when you get the greatest harm done. I have no reason to doubt that Lenin was a man whose intentions were good. Maybe they weren’t. But he was completely persuaded that he was right and he was willing to use any methods at all for the ultimate good. Again, it is interesting to contrast the experience of Hitler versus Mussolini. Mussolini was much less of a danger to human rights because he was a hypocrite, because he didn’t really believe what he was saying; he was just in there for the game. He started out as a socialist, he turned into a fascist, he was willing to be bribed by whoever would bribe him the most. As a result there was at least some protection against his arbitrary rule. But Hitler was a sincere fanatic; he believed in what he was doing and he did far greater harm. Or if I may take you on to a minor key, in which you may not join me I realize, Ralph Nader is a modern example of the same thing. I have no doubt that Ralph is sincere. I have no doubt that he means what he says, but that’s why he is so dangerous a man who is threatening our freedom. In the past few decades there has been a great decline in the moral climate. There are few people who doubt the decline in the moral climate. We see evidences of it here. The lack of civility in discussions among people, the resort to chants instead of arguments–these are all evidences on one level of a decline in moral climate. But we see it also in the rising crime statistics, in the lack of respect for property, in the kind of rioting that broke out in New York after the blackout, in the problems of maintaining discipline in elementary schools. Why? Why have we had such a decline in moral climate? I submit to you that a major factor has been because of a change in the philosophy which has been prominent in society, from a belief in individual responsibility to a supposed belief in social responsibility, from a tendency to get away from the individual, from his responsibility for his own life and his own behavior–if he doesn’t behave properly, that’s his responsibility and he’s to be charged with it–to a belief that after all it’s society that is responsible. If you adopt the view that everything belongs to society, then it belongs to nobody. Why should I have any respect for property if it belongs to everybody? If you adopt the view that no man is responsible for his own behavior, because somehow or other society is responsible, well then, why should he seek to make his behavior good? Don’t misunderstand me, on a scientific level it’s true that what we are is affected a great deal by the society in which we live and grow up. Of course, all of us are different than we would have been if we had grown up in a different society. So I’m not denying in the slightest the effect on all of us of the social institutions within which we operate both on our values and on our opportunities. But I am only saying that a set of social institutions which stresses individual responsibility, which stresses the responsibility of the individual–given the kind of person he is, the kind of society in which he operates–to be responsible for himself, is the kind of society which is likely to have a much higher and more responsible moral climate than the kind of society in which you stress the lack of responsibility of the individual for what happens to him. Note the schizophrenia in the talk about social responsibility. There is always a tendency to excuse the people who are harmed by what happens or the people who are regarded as the victims; there is always the tendency to excuse them from any responsibility. They didn’t riot in Harlem because they had no control over their emotion, because they were bad people or because they were irresponsible people–no. They rioted because of what society did to them. That’s the argument, but nobody ever turns it around and argues the other way. If the people who rioted are innocent of guilt because of the society that did it to them, then aren’t the people who are singled out as the oppressors also free of guilt? Do you hear these same people say, “Oh, no, we mustn’t blame those bad people who trampled the poor under their feet because they’re not doing it out of their own individual will. Society is forcing them to do it.” If you are going to use the doctrine of social responsibility, you ought to be even-handed both ways. It excuses both the victim and the person who is–I can’t say responsible because that would be inconsistent–the person who is alleged to be responsible for the victimization. And similarly, you must be even-handed on both sides. We must all of us be individually responsible for what we do to our fellowmen, whether that be harm or good. There is an additional reason why you have had a decline in the moral climate. You’ll pardon me for returning to my discipline of economics, but there is a fundamental economic law which has never been contradicted to the best of my knowledge and that is, if you pay more for something there will tend to be more of that something available. If the amount you are willing to pay for anything goes up, somehow or other somebody will supply more of that thing. We have made immoral behavior far more profitable. We have, in the course of the changes in our society, been establishing greater and greater incentives for people to behave in ways that most of us regard as immoral. On each of us separately, we’ve all been doing it. One of the examples that has always appealed to me along these lines is the example of Great Britain, not now but in the nineteenth century and eighteenth century. You know, in the eighteenth century Britain was regarded as a nation of smugglers, of law avoiders, of people who broke the law. In the nineteenth and early twentieth century, Britain got the reputation for being the most law-abiding country in the world. An incorruptible civil service: everybody knew about the fact that you couldn’t bribe a civil servant in Britain the way you could one in, say, Italy or New York. How did that come about? How did a nation of smugglers, with no respect for the law, get converted into a nation of people obedient to the law? Very simply, by the laissez-faire policy adopted in the nineteenth century which eliminated laws to break. If you had complete free trade, as you did after the abolition of the Corn Laws, there was no more smuggling. It was a meaningless term. You were free to bring anything into the country you wanted. You couldn’t be a smuggler; it was impossible. If you didn’t need a license to establish a business, you didn’t need a license to open up a factory, what was there to bribe a civil servant for? The civil servants became incorruptible because there was nothing to bribe them for. Of course, there is a cultural lag as you have all learned in your anthropology courses, and these patterns, once they develop, last for a while. But what has been happening in Britain in the last 30 or 40 years as Britain has been moving away from essentially laissez-faire and toward a much more controlled and centralized economy? This reputation for law obedience is disappearing. You have had repeated scandals about ministers of the government, about members of Parliament, about civil servants who have been bribed, about the rise in gang warfare, and the rest. Why? Because you are establishing an incentive; you’ve got more laws to break now. It’s also much more fundamental. When the only laws are those laws which everybody regards as right and valid, they have great moral force. When you make laws that people separately do not regard as right and valid, they lose their moral force. Is there anybody in here who has a moral compunction to speeding? I am not saying you may not have a prudential objection to speeding: you may be afraid you’ll get caught. But does it seem to you immoral to speed? Maybe. If so, you are a small minority. I have never yet found anybody who regarded it as immoral to violate the foreign exchange regulations of a foreign country. Here are people, who would never dream for a moment of stealing a nickel from their neighbor, who have no hesitancy on manipulating their income tax returns so as to reduce their taxes by thousands. Why? Because the one set of laws have a moral value that people recognize independent of the government having passed these laws; the other set do not appeal to people’s moral instincts. Let me give you some more examples from the United States. Prohibition of liquor, which was attempted as you know, had disastrous effects on the climate of law obedience and morality. Something which had been legal to buy and drink, some alcoholic beverages, became illegal and you converted law-abiding citizens into bootleggers. I heard over the “60 Minutes” program last Sunday night a great story on “buttlegging.” This had to do with the fact that the New York State tax on cigarettes is very much higher than the tax on cigarettes in the state of South Carolina. So you have people going down to South Carolina, buying the South Carolina low-taxed cigarettes, smuggling them into New York State, forging New York State tax stamps on them, and then selling them publicly. A large fraction of all cigarettes sold in New York State are buttlegged. Now there you have provided an incentive for people to break the law, so they break the law. It’s like Prohibition in a different form. The obvious answer is for New York State to lower its taxes and you will eliminate buttlegging overnight and be able to take whatever may be the number of policemen who are devoted to enforcing that kind of thing, you will be able to take them and turn them to useful work. I go back, however, to the essence of capitalism and its relevance to the question of humanity. As I say, the essence of a capitalist system in its pure form is that it is a system of cooperation without compulsion, of voluntary exchange, of free enterprise. Now I hasten to add, no actual system conforms to that notion. In the actual world you are always dealing with approximations, with more or less. In the actual world you always have impediments and interferences to voluntary exchange. But the essential character of a capitalist system is that it relies on voluntary exchange, on your agreeing with me that you will buy something from me if I will pay you a certain amount for it. The essential notion is that both parties to the exchange must benefit. This was a great vision of Adam Smith in his Wealth of Nations that individuals each separately pursuing their own self-interest could promote the social interest because you could get exchange between people on the basis of mutual benefit. I want to emphasize to you here, for this purpose, that this notion extends far beyond economic matters narrowly conceived. That’s really the main point I want to get across here, and I want to give you some very different kinds of examples. Consider the development of the English language. There was never any central government that dictated the English language and set up some rules for it. There was no planning board that determined what words should be nouns and what words adjectives. Language grew through the free market, through voluntary cooperation. I used a word, you used a word; if it was mutually advantageous to us to keep on using that word, we would keep on using it. Language grows, it develops, it expands, it contracts through the free market. Consider the body of common law, not legislative law which is a very different thing, but the body of common law. People voluntarily chose to go to a court and allow the court to adjudicate their dispute. In the process there arose and developed the body of common law. Again, no central plan, no central coordination. You are here in an academic institution. How did scientific knowledge and understanding arise? How do we get the development of science? Is there somehow or other a government agency that decides what are the most important problems to be studied, that prevents cooperation? Unfortunately there are developing such agencies, but in the history of science that isn’t the way science developed. Science developed out of free-market exchange. It developed on occasion with the patronage of an authority, but voluntary cooperation among the scientists. I read voluntarily the work that is done by economists in other lands; they read my work, they take the parts of it they like, they discard the parts they don’t, and in the process you build a more and more complicated system through free voluntary exchange based on the principle of mutual benefit. Similarly to a free market in ideas. Again, that is a free market of exactly the same kind as the economic market and no different. The two are very closely interrelated. Is it a violation of the free market in goods or the free market in ideas if a country, as Great Britain did immediately after the war, has exchange controls under which no citizen of Britain may buy a foreign book unless he got authorization from the Bank of England to acquire the foreign currency? Is that a restriction on economic freedom, or is it a restriction on the free market in ideas? I want to give you a final example which goes back to the fundamental question we have been discussing, and that is voluntary charitable activity. I want to ask you a question. Go back to the nineteenth century in the United States. It was a period when you had about the closest approximation to a capitalist society you can imagine, in which the Federal government was spending an amount equal to roughly 3 percent of the national income, almost entirely on the army and navy; state and local governments were spending about 6 or 7 percent of the national income, mostly on schooling. Very little of what has come to be regarded as welfare activities. Yet the nineteenth century was a period of the greatest burst of voluntary charitable activity that we have seen in this country or any other country at any other time. When was Cornell established? How? It was established by the voluntary benefaction of the man who gave you your name sometime in–what was it?–the 1860’s. That period of the nineteenth century saw the emergence of a host of private colleges and universities throughout the country. My own University of Chicago was established in 1890 by voluntary eleemosynary activity. It was also the period which saw the growth and development of the nonprofit charitable hospital. It saw the establishment of foreign missions, of the Society for the Prevention of Cruelty to Animals, of the Boy Scouts. You name it, there is hardly a voluntary activity–the Carnegie Libraries, the free public libraries. Why was it that voluntary activity flourished? Because again the free market, voluntary cooperation among people–cooperating to pursue their common interest–is a far more effective and efficient way of producing charitable results than any other known to man. I ask you, what is the common element in all of these cases I have mentioned–language, common law, scientific knowledge, ideas, charitable activities? The development of an elaborate and complex structure without any central planning and without coercion. No central planning in language, in common law, in scientific knowledge, in ideas, in voluntary activity, and yet you developed complex mechanisms, complex structures, with order, with structures which after the event you can analyze in logical terms. Without coercion, you have progress through harmony rather than the attempt to impose progress through coercion. Capitalism is often reproached as being materialistic. It is often reproached as erecting money as a chief motive, but yet again, look at the facts. I may say, you know, money is not a very noble motive but it’s cleaner than most. But look at the facts. Who has produced the great achievements of mankind? Can you name me a great play that has been written by a government committee? Can you name me an invention that was produced by a government bureau? The great works that are the great achievements of mankind have all been the achievements of individuals–of a Shakespeare or a George Bernard Shaw. George Bernard Shaw is a beautiful example because, of course, as you know he wrote the famous book The Intelligent Woman’s Guide to Socialism. He regarded himself as a socialist but his career and his performance is a striking demonstration of the virtues of the capitalist system he opposed. Again, in science it’s Einstein, Copernicus, Galileo who are the great contributors of scientific ideas not through government central organization but mostly in spite of it. In Galileo’s case, as you know, despite persecution by the centralized authorities of his time. Again, in the area of charity, Florence Nightingale was not a government civil servant. She was a private individual, human being, who was seeking to achieve the objectives she held dear; she was pursuing her self-interest. The plain fact is that in any society, whatever may be its form of organization, the people who are not interested in material values are a small minority. There are no societies in the world today that are more materialistic than the collectivist societies. It is the Russian society, it is the Chinese society, it is the Yugoslav society that put all their stress on materialism, on achieving economic goals and five-year plans, that destroy the non-materialistic achievements of mankind. Why? Because they are in a position to suppress minorities. What we need for a society that is at once humane and gives opportunity for great human achievements is a society in which that small minority of people who do not have materialistic objectives, who are interested in some of these other achievements, have the greatest degree of freedom. And the only society that anybody has ever invented, that anybody has ever discovered, that comes close to doing that is a capitalist society. When you hear people objecting to the market or to capitalism and you examine their objection, you will find that most of those objections are objections to freedom itself. What most people are objecting to is that the market gives people what the people want instead of what the person talking thinks the people ought to want. This is true whether you are talking of the objections of a Galbraith to the market, whether you are talking of the objections of a Nader to the market, whether you are talking of the objections of a Marx or an Engels or a Lenin to the market. The problem is that in a market society, in a society in which people are free to do their own thing, in which people make voluntary deals, it’s hard to do good. You’ve got to persuade people and there’s nothing in this world harder. But the important thing is that in that kind of society it’s also hard to do harm. It’s true that if you had concentrated power in the hands of an angel he might be able to do a lot of good, as he viewed it, but one man’s good is another man’s bad. And the great virtue of a market capitalist society is that, by preventing a concentration of power, it prevents people from doing the kind of harm which really concentrated power can do. So that I conclude that capitalism per se is not humane or inhumane; socialism is not humane or inhumane. But capitalism tends to give free rein, much freer rein, to the more humane values of human beings. It tends to develop a climate which is more favorable to the development on the one hand of a higher moral atmosphere of responsibility and on the other to greater achievements in every realm of human understanding. Thank you. First, you talked about the injustices which prevailed in the so-called communist countries and then the free societies which exist in the capitalist countries in the West that have been created there, but you restrict your arguments to the Western European countries, to the United States and Japan. What you fail to point out is that most of the countries in the world are capitalists, that is, the means of production are owned privately or the accumulation of wealth is privately accumulated. Most of these countries have severely repressive governments and most of them suffer from huge unemployment rates, hunger, and poverty. If we look at India as compared to China, which has twice as many people, and under its system, the Chinese has been able to achieve things for the masses of people which India could not even consider. Would you come to your question, please? Alright. There are two more points because I’d like to–excuse me, I would like a little bit of free speech myself. That’s okay. We don’t want to deny you free speech; we just want to handle as many people as possible. Thank you very much. I agree with you, so let me finish. The problem with a lot of us still is first that you did not mention, in terms of the countries you were pinpointing, such barbarous countries as South Africa and Zimbabwe. In terms of giving your appraisal of the riches that have been accumulated in the Western so-called capitalist democracies, I would like you to give us an honest evaluation of just how these countries got so rich so quick and the direct relationship of that to the fact that there were slaves that worked as free labor and the wealth that was created in this society being a direct product of that relationship, and also if the colonial relationships of the Western European countries and the wealth which they bled out of people in their colonial domain. I’ll be glad to answer those questions. First of all, there is a sense in which every country in the world is capitalist. The Soviet Union is capitalist. Every country in the world has large capital under control and the real question is: of course, the organization whereby the capital is controlled. In the Soviet Union it is controlled by the state or by officials of the state. In the second place, I have been talking for an hour–I would like to talk to you for ten hours. In a full discussion I would certainly agree with you that capitalism is not a sufficient condition for freedom. It’s a necessary condition for freedom. I never said that wherever you had capitalism you had freedom. I never said that; I never made that statement. I made the opposite statement: wherever you had freedom, you had capitalism. Capitalism is a necessary condition for freedom but not a sufficient condition for freedom. In addition, you need relatively broad access to capital in a relatively free market. Again relatively, you need competition. I usually refer to it as competitive capitalism to distinguish it from certain kinds of systems which have been capitalist and have all of the bad qualities that you describe. In the second place–because I don’t want to take too much time–to go to your final point, it is simply not true that the enormous increase in the well-being of the free countries of the West arose out of slavery. Slavery was a blot on our escutcheon, there is no question, and of course it was a disgrace to this country to have had slavery as long as it did. But if you take Britain which did not have slavery. It had colonies. I’m going to go to the colonies. That’s the next point. I’m trying to take one point at a time. The gentleman made two separate points. One had to do with slavery and one had to do with colonies. Britain did not have slaves. Japan did not have slaves in the hundred years since the Meiji Restoration. Hong Kong today does not have slaves. You ask yourself, if you want to know how ordinary people feel about different systems, you ask how they vote with their feet. Now you ask whether it’s Hong Kong that has to put up police to keep people from Hong Kong going into China, or it’s China that has to put up police to keep people from China going into Hong Kong. So look at the way people vote with their feet before you judge which society gives them better conditions. But in any event, let me go to the final point of colonies. In the first place it’s not true that the wealth or the benefits of the West derived from exploiting the colonies. The facts are against you. The reason why you say that is because it is so hard for people to get out of the notion that life is a zero sum game. They think if one man benefits, another must lose, but in a free market both people can benefit. If you take the case of Africa, the wheel had not been invented in parts of Africa by the end of the nineteenth century. The number of people in Africa and their average conditions of life in Africa have grown enormously as a result of their contacts with the West. You don’t know your history, sir. Well, I would say you don’t know your facts, sir. In the case of India, which is a very famous case, if you look again at the facts, all the studies have shown that it cost Britain more to maintain India. These were some famous studies by Jacob Viner which went into the details of it in great detail. Colonialism has always cost the mother country more than it ever got in any direct or indirect economic benefits. So as far as India was concerned, the history of India is divided into three periods: the period of British rule in the nineteenth and early twentieth century when there was very real progress in the standard of life of the people of India; the period of the twenties and the thirties when there was a great struggle against Britain and for independence, when there was essentially stagnation in India and there was no growth; the period since the creation of independence in 1948 when we have had a highly centralized government, when unfortunately it was Harold Laski and not Adam Smith who was the most respected intellectual figure in India, when the Indian people have lost not improved, when the average amount of food and so on has been going down not up. The people of India have been worse off under independent non-colonial government than they had been before. First of all, where is it that you do have colonialism today? You have the classic colonialism behind the Iron Curtain. You have Russia, which is the master country–I mean not the Union of Soviet Socialist Republics but Russia, with a great colony around it, within the Soviet Union, in Poland, in Czechoslovakia, in Hungary. That’s the great example today of your classic kind of colonialism. The United States, with trivial exceptions, has never been a colonial country. It had the Philippines for a while. Cuba was not a colony of the United States. In any event, you need a sense of proportion. In the period between the Revolution in 1776 and 18 98, the U.S. had no colonies and yet the US, that was the period of the greatest growth and the greatest economic development of the United States. I see society as more and more tending toward the usurping of my individual rights and freedoms as time goes by. What do you see as the ultimate end of this, i.e., either in democracy or socialism, and why do you think the individuals within the society are letting this happen to them? Well, the last part of your question is the hardest one to answer. If we continue along the road we’ve been going on, of giving more and more power to governmental officials to control our lives, I see only one end, and that’s a loss of anything that has any meaning as democracy, a loss of human freedom, and a prison state. That’s the end. Why are people letting this happen to them? That’s a much more difficult question to answer. I think it is largely because of ignorance about where they are going, a lack of recognition. I don’t believe they want to go this road, but I believe they are unwittingly letting themselves go down this road because on each issue that comes up people look at their separate special interests instead of the broader interests in governmental activity. Everybody wants to cut down government, provided that those things he has an interest in are maintained. I remember very well the Summit Conference in Washington on Inflation that President Ford had about two or three years ago in which one representative after another got up and said: “In order to stop inflation we have to cut the government budget. The way to cut the government budget is to spend more on my interest.” That’s how each separate group does it. So I think we are being driven down this road fundamentally by a defect in our political structure, a defect which allows each of these separate elements of government to be voted on separately and never gets the citizen to look at the totality of it and see what the whole adds up to. What’s the solution? The solution is for people like you and me to talk to ourselves and to our fellowmen and to try to persuade our fellowmen to be of like mind, to change the climate of opinion in these respects, to try to correct the political structure. I’ve been recently working on one particular proposal along those lines which is to have constitutional amendments setting a maximum limit to the amount that governments may spend. I won’t go into the details of that. But I think fundamentally we are getting what the public at large is asking for, and the public is asking for it, I believe, because they do not understand where it’s going to lead them, because they are misinformed. And they are being led that way by the intellectual community which has gone down the wrong road in my opinion. Now I don’t believe the case is hopeless; I believe there are many signs of change. There are many more people who recognize the problems with this road now than did twenty or thirty years ago. Experience is a wonderful teacher. So I think you and I just have to keep on doing our little thing, trying to persuade our fellowmen to be of like mind. I think you’ve done an excellent job tonight of defending capitalism. Capitalism has treated you well, in general it has treated the people in this audience well, and, as you say, people respond to things based on their self-interest. So I think they have responded well to you. What I would like to get to now is the question of the relationship between morality and economic policy which you talked about before in terms of the quotes from Thoreau. You said that the worst sort of person is the person who’s going to try to be charitable and is going to try to be . No…. Well, you said that it is unwise for a person to be charitable or to be sincere. What did you say then? Let me repeat Thoreau’s words. Thoreau’s words were: “If I knew for certain that a man was coming to my…” I think we heard that…. “…was coming to my house with the conscious design of doing me good, I should run for my life.” That’s not the same thing as being charitable. Okay, fine, I’ll accept that distinction. Take what Thoreau just said and you’ve echoed and apply it to American business, and I think what you’re basically saying is… Apply it to whom? American business, a corporation… To business men. You are the head of a corporation with… Oh, you’re pointing to me as the head of a corporation? Can I ask you the question, please? Sure. Now it seems to me that the implication is that that corporation should not try to do anyone else good, because then the people would run away. What they should do is pursue their own self-interests…. Right. That means, profit. And what I’d like to talk about is the implications of that in terms of three concrete examples. I believe that a couple of years ago, when there was a major flood in Pennsylvania, you came out as opposed to aid for those disaster victims based on the rationale that they had bought the land at lower prices because the risk was known and they shouldn’t be given any aid. I’d like people to consider the implications of that. Secondly,… That isn’t what I came out against. I came out against the government providing flood insurance at low cost in advance. I did not come out against private individuals giving charity to the people who were hurt by the flood. . What about disaster aid by the government? What about government insurance for nuclear power plants? Well, it’s the same thing. The nuclear power plants ought to be required to pay for full insurance themselves and that ought to be incorporated in their charges. I’m not in favor of government subsidization of nuclear power plant insurance. Look, don’t attribute to me your conventional views of what “a conservative” believes, because I’m not a conservative. I’m a believer in freedom. Well then, I’d like to talk about that using an example, freedom. In Ohio an old man failed to pay his electric bill–you may be familiar with the case–and the electric company turned off the electricity and he died. The reason they turned it off was because it wouldn’t have been profitable for them to keep it on because he didn’t pay his bill. Do you believe that was right? I don’t know the details of that case at all. In many of these cases you hear stories which when you find out the details are very different from those that are presented. But let’s suppose it were true, which was what I was going to say. You know, tell me, why do you assume I’m always going to give the wrong answer? Let’s assume the facts were true. The result is tragic. Who is responsible? For a moment let’s suppose the electric company were to follow the practice of never turning off anybody’s electricity. Let’s just for a moment take that other extreme, and this wouldn’t have happened. Who would pay the costs?… Are these the only alternatives? Well, we can come to other alternatives, but I just want to show you the logic of the case, because I want… [Comment or question inaudible] No, no, it’s not an absurdity because I want to show you that what you have to ask about are the costs imposed on different individuals. The electric company is meaningless. The electric company is a nonhuman institution. What you must talk about are either the stockholders of the electric company, the employees of the electric company, or the customers of the electric company; those are the people involved. Now if you go to the other extreme and adopt a policy that the electric company will never turn anything off, then you effectively institute a system under which the only people who will pay for the electricity will be those who pay for it voluntarily. Now the numbers… Are those the only two alternatives? No, you’ve gone to one extreme, I’m going to the other extreme and show you where the responsibility really lies for the kind of thing you are describing. The responsibility really lies not on the electric company for turning it off, but on those of this man’s neighbors and friends and associates who are not charitable enough to enable him as an individual to meet the electric bill. You are blaming the wrong person for what happened. Okay. Well, I think people understand that example. I have just one more. This has to do with the Ford Pinto. I’m not sure if you are aware of the recent revelations that have come out about the production of that car. Ford produced it knowing full well that in any rear-end collision the gas tank would blow up because they had failed to install a thirteen dollar plastic block in front of the gas tank, and Ford estimated in an internal memo that that would cost about 200 lives a year. They estimated further that the cost of each life would be $200,000. They multiplied and they found that the cost of installing those blocks in each of the cars would be more than the cost of saving those 200 lives. Over the past seven years the car has been produced and over a thousand lives have been lost. It seems to me that Ford did what would be the right thing, according to your policy, and yet that seems to me to be very wrong. Well, let me ask you, let’s suppose it would have cost a billion dollars per person. Should Ford have put them in nonetheless? [response inaudible] We know that you’re really only arguing about price. You’re not arguing about principle. Yes he is. No, no, no! Nobody can accept the principle that an infinitive value should be put on an individual life because in order to get the money involved, in order to get the resources involved–it’s not money, they have to come from somewhere, and you want the policy which maximizes the situation over all. You cannot accept a situation that a million people should starve in order to provide one person with a car that is completely safe. That’s absolutely right… But you’re not arguing anything about principle. You’re just arguing whether Ford used $200,000 as the right number or not. No I’m not arguing that… Suppose it was $40 million… No, no, no! Suppose it were $200 million. What should Ford have done? Two-hundred million dollars for what? Suppose it would have cost $200 million per life saved. Should Ford still have spent that $200 million? That’s not really the question. Yes, it is the question. That’s the principle of the question. That’s the only principle involved. I don’t know whether Ford did the right thing or not. That’s a question of whether these numbers are valid numbers for the relevant costs of different things. You’re not arguing about a principle if you once agree with me that the cost per life saved should have been $200 million. You would not argue–look, let me go back for a moment. Can I say something in response to that? If Ford had not been able to market those cars in the same kind of economic bracket because of the price of installing this one plastic block, that would be a different question. Maybe Ford could have considered redesigning the whole car so as to make it cheaper. But what we’re talking about is balancing advantages and balancing principles… Of course, and that’s why you’re only talking about. Just a minute. I’m a supporter of abortion, therefore I don’t believe that every single human life is sacred. I believe that principles have to be balanced, and yet I don’t see Ford spending thirteen dollars less on each car at the cost of 200 lives a year as being a principled position to take and… Suppose it had been one fewer life a year, so at the thirteen dollars per car so that that one life instead of being 200 times–what’s 200 times $200,000? It’s 40 million. Suppose it had been one life a year so that it cost $40 million. Would it then have been okay for Ford not to have put in that block? You can’t predict that one life is going to be lost because of a physical defect in the car. This was a clear… I know, I know, I know. You are evading the question of principle. No I’m not. I’m saying that they knew before they put the car out that there was a mechanical defect in it… No, excuse me. You know when you buy a car, you know that your chance of being killed in a Pinto is greater than your chance of being killed in a Mack truck. No I didn’t. I didn’t know that the gas tank would rupture. Of course it is a question. Every one of us separately in this room could at a cost reduce his risk of dying tomorrow. You don’t have to walk across the street. Of course, the question is, is he willing to pay for it? And the question here he should be raising, if he wants to raise the question of principle, is whether Ford wasn’t required to attach to this car the statement, “We have made this car thirteen dollars cheaper and therefore it is, whatever the percent is–i percent, more risky for you to buy it.” Then we would be arguing a real question of principle. . Why should they do that? Doesn’t that interfere with the free enterprise system that you are touting? No, no… Why not? …because the consumer should be free to decide what risk he wants to bear. If you want to pay thirteen dollars less and accept the higher risk, you should be free to do so. If you don’t want to pay thirteen dollars… Then the government does have the right to require information of corporations, is that right? No, the government has the right to provide courts of law in which corporations that deliberately conceal material that is relevant can be sued for fraud and made to pay very heavy expenses. And that is a desirable part of the market, of course. What I’m trying to say to you is that these things are really a little bit more subtle and sophisticated than you are at first led to believe. You can’t get easy answers along this line because your way of putting it doesn’t really get at the fundamental principles involved. The real fundamental principle is that people individually should be free to decide how much they are willing to pay for reducing the chances of their death. Now people mostly aren’t willing to pay very much. I personally regard this as very, very illogical. I see people on all sides of me smoking. There is no doubt, nobody denies that that increases their chance of death. I’m not saying they shouldn’t be free to smoke, don’t misunderstand me. I just think they’re fools to do it. And I know they’re fools because I quit on the basis of the evidence eighteen years ago. But that’s the real issue and if you want to berate Ford, you ought to berate them on those terms, not on the ground that you don’t think they used the right numbers. I don’t think we can keep on going. I’m afraid we’re going to run out of tape and I’m afraid I’m going to run out of voice, so I think I’ll call it to a day. close. Thank you.