The Market for Liberty
Linda & Morris Tannehill
[Online Editor: Despite falling in love with this book, I wound up with various points of contention with the Tannehills, and as such, choose to spell out these points of disagreements by placing Post-it notes on various pages. What you find below chapter five of this fantastic work; but also you will find, in pale yellow, my comments, clarifications, and disagreements therewith.]
Chapter 5.
A Free and Healthy Economy
Imagine a feudal serf, legally bound to the land he was born on and to the social position he was born into, toiling from dawn to dusk with primitive tools for a bare subsistence which he must share with the lord of his manor, his mental processes enmeshed with fears and superstitions. Imagine trying to tell this serf about the social structure of the Twentieth Century America. You would probably have a hard time convincing him that such a social structure could exist at all, because he would view everything you described from the context of his own knowledge of society. He would inform you, no doubt with a trace of smug superiority, that unless each individual born into the community had a specific and permanently fixed social place, society would speedily deteriorate into chaos.
In a similar way, telling a Twentieth Century man that government is evil and, therefore, unnecessary, and that we would have a far better society if we had no government at all, is likely to elicit polite skepticism . . . especially if the man is not used to thinking independently. It is always difficult to picture the workings of society different from our own, and particulary [sic] a more advanced society. This is because we are so used to our own social structure that we tend to automatically consider each facet of the more advanced society in the context of our own, thus distorting the picture into meaninglessness.
Many undesirable conditions which people take for granted today would be different in a society totally free of government. Most of these differences would spring from a market liberated from the dead hand of government control—both fascist and socialist—and thus able to produce a healthy economy and a vastly higher standard of living for everyone.
In any society, unemployment is the product of government intervention in the market. A society free of government would have no unemployment problem. Labor, being scarcer than resources, would be in demand, and everyone who wanted a job could have one. When faced with a demand for labor produced by new prosperity and soaring sales, industry would be eager to hire minority group members, institute on-the-job training for the uneducated, set up plant nurseries for mothers of small children, hire the handicapped, etc., to tap every source of competent labor. Wages would be high because businesses could keep what bureaucrats call their “excess profits” and invest them in machinery to increase the productivity of their labor (and wages are determined by productivity).
There will always be large differences in the amount of income earned by different people, but in a free-market society there would be no class of jobless, hopeless poor as we have today. Instead of being abandoned to starve in a government-less society, the poor would at last be given all the opportunity and help they needed to raise themselves out of their poverty.
Of course, there will always be people temporarily or permanently unable to support themselves due to extreme mental or physical handicaps, financial bad fortune, or other causes. Such people would be helped by private charities, as there would be no government dole. Gathering enough money to help them would present no problem—we have never suffered from a lack of people willing to go into the business of collecting and dispensing charitable funds, and the people of this semi-free nation, even with over a third of their income looted by taxation, have been wealthly [sic] enough to be generous to scores of charities each year. Private charity is vastly more economical and efficient than government welfare, since it is in a much better position to distinguish those deserving of help from phonies who just want a free ride, and to dispense its funds accordingly. This practical superiority derives from the moral fact that private charity is based on voluntary contributions while government welfare payments come out of monies confiscated at the point of a legal gun from productive taxpayers.
Many people feel that charity would break down, however, when faced with the task of educating children without government schools. They believe that there could never be enough charity to take care of all the children whose parents neglected or were unable to send to school. Such an opinion is the result of failing to consider the context of a free society.
It has already been shown that poverty is a result of government interference in the economy, and that a modern industrial society need have no poverty as we understand it. This means that, while lower income people would certainly have to do without other desirable goods in order to educate their children, they would not be in the position of having no money at all to spare for schooling. Furthermore, when parents knew that there was no government to pick up the tab for them, they would be likely to think twice before taking on the responsibility of having a greater number of children than they could adequately care for and educate. With birth control devices free of hampering prescription laws and their manufacturers free to advertise in the mass media, family size among the poorly educated lower income groups could be expected to drop sharply. When freed of the economic burden of large families, lower income parents could not only afford a better standard of living, they could also afford a better education for the children they did have so that the next generation could raise itself to a better socio-economic position.
Of course, education itself would be vastly improved if placed on the free market. At present, most students waste a considerable amount of each school day. This is chiefly due to two factors: first, “democratic” insistence on forcing everyone through the same educational mill regardless of ability or previous upbringing, and second, the rigidity of a socialized system which has no competition and can thus tolerate a large measure of stagnation. Free-market educational institutions in competition with each other would take quick advantage of every new advance in educational methods and materials and would undoubtedly do a far better job in a shorter time and for much less money. It is probable that this free-market application of new educational techniques would enable all but the slowest students to finish school anywhere from months to years earlier than they now do, providing a tremendous saving of the young person’s time and his parents’ money, as well as increasing his years of productivity (and everyone’s standard of living).
A laissez-faire system of competing, free-market education would provide a tremendous variety of schools to meet the needs of people with various interests, aptitudes, beliefs, and life-styles.’ Devout christians [sic] could send their children to religious schools which held prayer before every class without infringing on the right of atheists to have their children educated by the use of reason exclusively.’ Black Panthers could send their children to all-black schools, white segregationists to all-white schools, and integrationists of all races could patronize integrated schools (forced integration is as bad as forced segregation).’ There would be schools for exceptionally bright youngsters, for those with special educational problems, and for those with great aptitudes in various fields (music, mathematics, writing, etc.).’ These various schools would charge different amounts of tuition and operate under varying conditions and educational methods.’ Some would be strict, some permissive.’ Some might have a 12-month school year, some a 6-month year.’ Virtually every kind of education which consumers wanted would be offered, and selection of a school would be strictly on the basis of individual free choice.’ No longer would every child be forced through the same educational machine, a machine geared for the great “average” majority and, therefore, harmful to minorities of all kinds.
Children must be free to secede from authoritarian parents. “My house, my rules” is only logical and just if a person is free to pursue the alternative.
Although the schools in a free economy would be paid for by tuition rather than by the theft of taxation, it is not necessarily the case that parents would have to stand the entire expense of their children’s education, especially in high school and college. Even today, scores of companies in search of well-trained and competent mathematicians, engineers, chemists, etc., offer generous, no-strings-attached scholarships to any talented student in hopes of luring him to work for them when he graduates. In the healthy economy of a totally free-market society, companies would be looking for even more employees (and, also, for independent sub-contractors) in an even greater variety of skilled fields. Not only would such companies put promising students through college, they might very well even pay their high school tuition. And many of them might also offer free high school curriculums [sic] to any ambitious student of average competence in return for his contractual guarantee to learn some skill useful to the company and work for them exclusively for a stated period of time.
Many firms are already manifesting a great and speedily growing interest in education, in spite of its rigidly socialized condition. They are particularly interested in research in better teaching methods, including the use of computers and other mechanical aids to improve the speed and quality of instruction. It is difficult to imagine the extent of the beneficial influence such businesses would have on the field of education if it were free of the rigor mortis of government control.
Of course, education doesn’t necessarily have to take place in a classroom. One of the least expensive and most promising of educational tools is television. At present, most educational TV is undeniably poor in quality and interest level. This is largely due to lack of competition resulting from the stultifying regulations imposed by the Federal Communications Commission, which has virtual dictatorial control over who may enter the field and what kind of programs they may telecast. In a laissez-faire society, anyone who could find an unused channel could go into the business of telecasting, and he could air any type of material he wished. If his programs were offensive to his audience, he would, of course, soon go out of business for lack of viewers. Competition, as always, would impel toward excellence.
With television freed from governmental meddling, many groups would go into the business of educational TV. Educational broadcasters could offer their programs free and still make profits by charging for texts and tests (a charge which would be small, with student-viewers numbering in tens of thousands). Or, texts and tests could be furnished free, with support coming from commercials, just as it now does with entertainment TV. Sponsoring companies might advertise not only for customers but for employees with the knowledge and skills taught in their TV courses. This would have the happy effect of providing both a pool of potential employees for the company and readily accessible job opportunities for the student-viewers. Also, with stiff competition for student-viewers, educational broadcasters would develop the most efficient and “fun” ways of learning possible in order to capture and hold their audiences.
In spite of lower cost, more efficient and higher quality education, the role of industry in providing scholarships, and educational TV, it is probable that some children would get very little education, and a few might go through life as illiterates. These would be children who lacked either the capacity or the desire for learning, since children who had both ability and desire would tend to attract help even if their parents did neglect them. Before calling for a government to educate these unschooled and illiterate few, however, one should consider the shockingly high rate of illiterates graduated from government high schools. Sitting in a school room for a period of years is not equivalent to receiving an education. In fact, children who are forced to sit through years of schooling which they find painfully boring are far more likely to rebel against their imprisonment and “society” in general than to develop a love of knowledge. No one can be taught unless he has a genuine desire to learn, and forcing schooling on a child against his will is hardly likely to increase this desire.
Competing educational systems would offer the consumer a free choice in his purchase of education for himself and/or his children. This would end forever squabbles over curriculum (more athletics? more academics? Black Studies programs?), student body (segregated or integrated?—shall we bus to integrate?), control of education (should it be in the hands of parents, teachers, voters, the school board, or the colleges?), and all the other insoluble questions which plague government’s coercive control of education. If each consumer were free to choose among competing schools the type of education he valued most, all these problems would be solved automatically to the satisfaction of everyone. Competition in education would protect students and parents from exploitation by a coercive governmental monopoly.
In a similar manner, competition would protect the consumer in every other field. If any firm tried to exploit its customers or employees, it would be signalling other firms to enter into competition with it in order to reap some of the profits it was enjoying. But this competition would quickly bid prices down, quality up, or wages up, as the case might be, and eliminate the exploitation.
In a free market, consumers always Lave alternatives. Only force or fraud can compel a man to act against his judgment, but a firm which initiated force or used fraud in a free market would drive away its customers. Coercive monopolies are the product of government and can’t, exist without government support. In a laissez-faire society, the economy would be free of exploitation, both by government and by business seeking to establish and maintain market control by force or fraud.
Various cell phone providers offer different features, prices, specials, terms, etc. If I don’t like the features and terms of my cell phone, I don’t have to email my Senator, look for others with the same complaint, sign petitions, vote for Joe Blow, wait months or years to see change exacted—all I have to do is go with a different provider. Quick, easy, painless.
If I don’t believe I need a cell phone, I don’t have to have one—nor must I pay for one via taxes.
It has been objected that a very large firm could afford to use force and fraud to at least a limited extent, because the breadth of its market would prevent the news of its aggressive actions from reaching enough of its customers and competitors to do it serious damage. This is to overlook the role of the news media in a laissez-faire society.
As a test, take the front page of any metropolitan daily and count the headlines which have nothing at all to do with any government—national, state, or local. Unless there has just been some natural disaster, you will probably find no more than two or three, sometimes none. Newsmen must write about something, since that’s how they make their living. If there were no government, they would have to shift their emphasis to the doings of outstanding individuals, business, and industry. Not only inventions and medical and scientific discoveries would be news, so would any aggression or fraud, especially when committed by large and well-known companies. Its very hard to hide things from hotly competing newspapermen looking for a “scoop,” not to mention the representatives of radio, television, movies, magazines, and the wire services. In a laissez-faire society, where there was no government to claim the lion’s share of the spotlight, it would be considerably more difficult to keep any departure from integrity hidden.
Of course, stiff competition between businesses is the consumer’s best guarantee of getting a good product at a reasonable price—dishonest competitors are swiftly “voted” out of business by consumers. But, in addition to competition, the market would evolve means of safeguarding the consumer which would be vastly superior to the contradictory, confusing, and harassing weight of governmental regulations with which the bureaucrats claim to protect us today. One such market protection would be consumer rating services which would test and rate various products according to safety, effectiveness, cost, etc. Since the whole existence of these rating services would depend on their being right in their product evaluations, they would be extremely thorough in their tests, scrupulously honest in their reports, and nearly impossible to bribe (which is not always true of government officials!).
Businesses whose products were potentially dangerous to consumers would be especially dependent on a good reputation. Drug manufacturers, for example, would know that if their products caused any illness or death through poor quality, insufficient research and preparation, or inadequate warnings on the labels they would lose customers by the thousands. The good reputation of a manufacturer’s brand name would be its most precious asset, an asset which no firm would knowingly risk. Besides this, drug stores would strive for a reputation of stocking only products which were high quality, safe when properly used, and adequately labeled. In place of the present inflexible, cumbersome, and expensive prescription system, they might employ pharmacists for the sole purpose of advising customers who wanted to know which medicines to take (and not to take) and whether their ailments were serious enough to require the attention of a physician (a practice which would take a great load of minor complaints off the shoulders of overworked doctors and sharply reduce the cost of medical service).
A good reputation would also be important to doctors in the absence of government-required licensing. Of course, any man would be free to hang out a shingle and call himself a doctor, but a man whose “treatments” harmed his patients couldn’t stay in business long. Besides, reputable physicians would probably form medical organizations which would only sanction competent doctors, thereby providing consumers with a guide. Insurance companies, who have a vested interest in keeping their policyholders alive and healthy, would provide another safeguard in the field of drugs and medical care. Insurance companies might well charge lower rates on life and health insurance to policyholders who contracted to use only those medicines and to patronize only those doctors sanctioned by a reputable medical association. This free-market system of consumer protection would end the doctor shortage and drastically reduce the cost of most medical care, since anyone could practice medicine in any area in which he was competent, regardless of the number of years he’d spend in college (or not spent in college, as the case might be). A brain surgeon might require 12 years of formal training, while a doctor who treated colds, flu, and ingrown toenails might need only 2—or none. The free-market system wouldn’t commit the absurdity of requiring the same basic training for the colds-and-ingrown-toenails man as for the brain surgeon, thereby putting their fees on nearly the same level.
The efficiency of these free-market safeguards contrasts sharply with the way the Food and Drug Administration “protects” us. The FDA doesn’t want anyone to be killed by drugs (that would look bad for the FDA’s record). But they don’t care how many people die of diseases because governmental restrictions prevented the development and sale of curative drugs . . . those deaths can’t be blamed on the FDA, effectively (yet). Insurance companies, on the other hand, are deeply concerned with keeping their policyholders from dying for any reason at all. They would, therefore, not only discourage the use of harmful medications, but they would also encourage the discovery and development and sale of helpful ones. The free-market way of doing things is always superior to the only method government can use—coercion, as freedom is always superior to slavery.
When government sets out to protect the consumer, it does so by formulating a series of standards and attempting to enforce them. These standards must be artificial, since the decision as to how high to set them depends on nothing more than a bureaucrat’s whim. But even if the standards fit the situation to begin with, they seldom stay appropriate for long. Conditions on the market change with research, the introduction of new products, and changes in consumer demand; but the bureaucrat’s rules remain rigid and become outdated. For these reasons, governmental “consumer protection” can only result in the prevention of real consumer protection made available in a competitive, free market. It is an observable fact that government regulations reduce consumer safety by setting standards lower than the unhampered market would have set (or by enforcing standards which are inapplicable to the product). Many businessmen accept these low standards because doing so relieves them of further responsibility. Consumers accept them because they feel secure in the belief that a wise government is protecting them from the predations of greedy businessmen (which they learned in government schools). Actually, consumers are served well by the actions of profit-seeking businessmen; they are only taxed, regulated, and harrassed [sic] by power-seeking politicians.
The area in which the consumer is probably most in need of protection, and in which government most endangers him, is in maintaining the value of his money. Money is the lifeblood of any industrial economy—if the money loses its value, the entire economy must collapse.
Money is the commodity which, because of its high marketability, is used as a medium of exchange. In order to become money, a commodity must have high marketability—that is, people must be eager to accept it for its own value. This means that the money commodity must have a high value as a commodity, in addition to its exchange value, in order to become and remain money.
Over the centuries, two commodities have become prominent as money throughout the civilized world—gold and silver. They have high marketability because of their value for ornamental and industrial uses, and because of their relative rarity. They are homogeneous, divisible into equal units, non-spoilable, and fairly easy to transport. For these reasons they have gained a wider acceptance for exchange than any other commodities.
Money, then, is at present gold and silver. It is not, and cannot be, merely pieces of paper, because paper doesn’t have enough value to be highly marketable. Pieces of paper can be money substitutes if, and only if, there is a stock of gold and/or silver for which they can be freely exchanged at any time.
Governments can’t give any value to pieces of paper, and pieces of paper have no value except as they have a gold/silver backing and any holder of such paper notes may exchange them for gold and/or silver at any time. A government which uses paper for money without holding a freely accessible gold and/or silver reserve is forcing its economy to live on borrowed time. When some crisis causes its monetary fraud to become apparent, the value of its worthless paper money will sink to zero and the economy will collapse into ruin and starvation. This is what happened to Germany in 1923, when it took a basketful of paper Mark notes to buy a loaf of bread (which was one of the main factors in Hitler's rise to power). It is also what must happen to America if the politicians continue their present course.
In a laissez-faire society, only gold would be accepted as the standard of monetary value—there can be only one standard (and the free market has established gold as the commodity which is the standard of value). There would be no government to issue paper “fiat” notes, call them “money,” and pass laws prohibiting people from using any other media of exchange. Since it is most convenient to use gold when it is minted into coins of a known weight and fineness, private enterprise minting companies would arise. They would mint coins, stamp them with their trademark, and guarantee their value. The companies whose value-guarantees were most reliable and whose minting services were most satisfactory would acquire a majority of the coin business. (Counterfeiting—which is a form of fraud—would be dealt with in the same manner as any other initiated aggressive action. See Chapters 9 and 10.)
Some critics of the free market have contended that private coinage would lead to a confusion of brands and values of coin, all exchanging at different ratios, making trade impossibly cumbersome. But the market always moves toward the greatest consumer satisfaction. If consumers found the varying coin values cumbersome to deal with, they would soon stop accepting coins of “oddball” value, thus forcing merchants to standardize.
Governments have always made a practice of debasing their legally enforced media of exchange in order to divert extra wealth into the national treasury. In earlier times, the sovereign would call in all coins and clip their edges, keeping the gold thus obtained and returning the smaller coins to the people. In our modern and enlightened era, the same goal is accomplished through inflation, which enables the government to spend more “printing press money” and so debase the value of the currency already in the economy.
Because a government has a legal monopoly over the media of exchange in its country, it can make a practice of gradually reducing monetary value with very little to stop the process until the eventual and inevitable financial catastrophe. No free-market minting company could get away with such a fraud. If it issued devalued coins, people would simply refuse to accept them (Gresham’s Law in reverse—good money drives out bad). Then the dishonest company would go broke . . . but it wouldn’t take a whole nation of innocent people into ruin with it. The free market would, at last, give consumers protection in an area where they have never had it (because of governments) and desperately need it—the value of their money and, with it, the strength of their economy.
In addition to gold (and possibly silver) coin, money substitutes would be used in a free market because of their convenience, particularly for large transactions. These money substitutes would be in the form of bank notes, certifying that the bearer had on deposit in a certain bank a specific amount of gold. The banks would have to hold a 100% reserve of gold against these notes, because not to do so would be fraud and would cause them to lose their customers to banks with less risky policies. Since the banks would hold a 100% reserve of gold, these money substitutes would not inflate the currency as do unbacked government notes. Nor would there be any danger of runs on banks, leaving the banks insolvent and many of their customers ruined. Such runs are the product of fractional reserve banking, which exists because it is legally condoned and enforced by governments.
With competition to guarantee that only gold was used as a monetary standard of value and that all money substitutes had 100% gold backing, a laissez-faire society would be permanently safe from monetary crises. The free society's healthy economy would remain strong because its money would be of permanent value and, therefore, unassailable.
Back to Part Two
Forward to Chapter Six
Copyright © 1970 by Morris and Linda Tannehill
All Rights Reserved
I’ve provided this free online-text of the Tannehills’ book, despite the copyright status, because it is, in my opinion, such a great primer on the functions of the stateless society. I felt comfortable making this chapter available in .html format because the Ludwig von Mises Institute has already made the entire book available in .pdf format, and has made the fifth chapter also available here. If the copyright-holder contacts me with the demand I remove this chapter from the site, I will comply.
