Lecture #11, Unfettered Free Trade Will End War
Human Action Principles
March 19th, 1995
Lecture Number Eleven
Some of you may remember that in 1895, the English novelist and historian Herbert George Wells, better known as H. G. Wells, invented – you know what he invented in 1895? You’ve heard of H. G. Wells? He invented The Time Machine. I’m going to borrow his time machine so that we can take a little journey back in time.
There’s room for all of you. No pushing or shoving. We’re going to travel back some 6,000 years, and if you’ve never done this before, it’s quite safe. Some of you might, to be sure, experience perhaps a degree of culture shock, but there’s really no reason to be afraid. We’re soon going to be arriving at our destination somewhere in the land of the ancient Gauls, which in our time is known as France. In fact, we’re already there. The machine is fast. We’re going to open the hatch of our time machine. We will all step out. As you can see, we are now in the middle of a dense forest of giant trees.
But we’re not alone. This lush forest is the homeland of a tribe of primitive savages. From our modern perspective, these people appear quite backward, but the more we observe them, the more we notice that the similarities to us are greater than the dissimilarities. They’ve built, for example, shelters to protect them from the annual storms of wind, rain, and snow. They’ve fashioned coverings to protect their bodies from the elements. They seek companionship and procreation, and they even have a rudimentary understanding that some specialization of labor will produce more wealth for all of the members of the tribe. I would say these tribesmen, from our view, are good people. They would rather live off the land than to send out raiding parties to plunder their neighbors.
But unfortunately, their neighboring tribes are not all such good people. In fact, it’s rumored that the tribe that lives beyond the giant hill is planning at this very moment to launch an attack against the tribe we’ve come to observe. This attack could come when? It is said at any time. And just like us, these good people seek protection from their enemies. Their problem is a familiar one to all of us, how to gain protection from the enemy.
The tribal elders are the first to be consulted on this critical question. Their answer may determine the safety of the entire tribe. The tribal elders decide the only course is to rely once again upon the wisdom of the great elders of long ago. In fact, every summer, when the sun was highest in the sky, these ancient elders would make a sacrificial offering to the great god of the forest in return for his protection.
These ancient elders said that the only offering that will be effective will be one of human sacrifice. And so, for hundreds and hundreds of summers, the tribal custom had been to choose 12 of the most beautiful maidens from the tribe to become sacrificial offerings to the great god of the forest. The 12 honored maidens would then be carried to the scene of the ceremony on the shoulders of the bravest warriors.
The maidens are then ordered to lie shoulder to shoulder on the forest floor beneath the foot of a giant tree. At the instant that the sun touches the crest of the mountains beyond, the chief elder gives a signal to the nine assistant elders to start the ceremonial dance. Upon command, the nine elders begin to dance in a great circle around the giant tree and the 12 maidens.
Most important, please note, ladies and gentlemen – you may want to make a note of this in your workbook, the direction of their dance is always clockwise. Please note this carefully. At the climax of the dance, the nine elders raise their axes high into the air. As each elder dances by a mark at the base of the tree he gives the mark a sharp blow with his ax.
The repeated blows of the axes quickly erode the base of the tree. Suddenly there’s a loud snap as the base of the tree cracks and snaps, and the chief elder is heard to cry out, “Take this humble offering, and protect us from our enemies.” The great tree seems to hover for a moment above the maidens, and then it leans in their direction, rapidly picking up speed. There’s a great crash as the tree hits the forest floor. The ground shudders, and the sacrifice of the 12 maidens is complete.
All right, you’ve seen enough. It’s time to return now to our time machine and back to the 20th century. But of course, as you can imagine, I don’t tell stories solely for the sake of entertaining you or amusing you. The story must have some kind of a message. In other words, can we in some way understand causality at a higher level than we have in the past?
What can we learn from this story? Why did the tribal members turn human sacrifice into a tribal ritual? Why do they follow a course of action that ended in certain catastrophe for the 12 maidens? The tribesmen sought to gain protection from their enemies. The means they chose in the hope of gaining this protection was human sacrifice. But why this approach?
If you ask the elders, they will tell you, well, we’ve always done it this way. The source of our authority to act comes from the ancient elders. The authority to sacrifice the maidens was passed down from old elder to new elder. Each new generation was taught the wisdom of the past. The wisdom these tribal leaders embraced was a paradigm that exalted human sacrifice.
Their paradigm can be given a name. It’s terminology you should already be familiar with in this seminar and perhaps even earlier. They embraced a win-lose paradigm. For me to gain, you must lose. For us to gain, they must lose.
Of course, from our perspective, we can see they failed to understand what? Causality. This means their tribal wisdom lacked at least two things, understanding and a lot of insight. Wisdom, of course, like beauty, is in the eye of the beholder. Their failure to understand reality is preceded by their failure to understand causality.
Again, what is the great human failure? Please note, dear friends, in all cases at all times, everywhere, your understanding of reality can be no better than your understanding of causality. When we hear stories of primitive tribes and their superstitious customs, all of us have a tendency to look down upon them from our superior view, at least as we perceive it, a greater understanding of causality.
But it does not occur to us, perhaps, that we too are members of a tribe, and if it does, we most certainly do not see ourselves as primitive. Not one of you sees yourself as primitive. Let me share with you my Random House dictionary definition of tribe. Tribe is any aggregate of people united by ties of descent from common ancestors, common community of customs and traditions, and adherence to the same leaders.
Hey, that sounds like us. Doesn’t it? Does that fit us? By definition, we too are members of a tribe. And what is the source of our view of reality? What is the source of your view of reality? Write me an essay. I’ll share it with you. Our view of reality is molded by the authorities we have been indoctrinated to respect. These authoritarian figures play the traditional authoritarian roles including parents, teachers, professors, politicians, writers, theologians, and bureaucrats.
These are the people, living and dead, that we rely upon for our perception, our view of reality. And when we accept their view, then our view of reality is not seen through our own eyes, but it’s seen through the eyes of whom? Our indoctrinators. Your view of reality is seen through the eyes of your indoctrinators.
Some of these authority figures are our contemporaries. Others have been dead for hundreds or thousands of years. All of these authorities are claiming to know reality and causality. They all say, believe this, but don’t believe that. Study this, but don’t study that. Do this, but don’t do that. This is the cause of this, and this is the cause of that.
A timely question is, do you have any choice in the matter? I would say yes, everyone has a choice, and nearly everyone abdicates this choice. They give it up. Here are all of the choices you have. There are three. Let’s look at them. Three choices on understanding the nature of reality and the causes of physical, biological, and social effects.
One, you can accept all authoritarian positions, or, two, you can reject all authoritarian positions, or, three, you can accept some authoritarian positions and reject others. Let’s look at all three. If you, one, accept every authoritarian position on the nature of reality and the causes of social effects, does this present you with a problem, and, if it does, what problem?
What do you do when two or more authorities disagree on the nature of reality and the source of causality? What do you do then? If you accept every authority, you must accept an endless conglomeration of conflicting views. On the other hand, if you reject every authority, you must reject every idea past and present on the nature of reality and the source of causality.
If you take this approach, you might ask, well, what will be your own independent means to identify reality? If you reject one and two, you’re left with three. Accept some authorities and reject others. Is there anyone willing to admit that this is a difficult and challenging problem to solve? Anyone? Good. I know it’s all of you.
I won’t ask for a show of hands who thinks it’s not a challenge. I’ll make it easier for you. You can divide all authorities into two camps, those who use the methods of science to explain reality and causality and those who don’t. That covers all possibilities. Those who use the methods of science to explain reality are clearly taking a different approach than those who do not.
There are those who have done more than just call what they’re doing scientific but have actually applied the methods of science. It’s not enough to call what you’re doing scientific. Anybody can do that. The critical question is what? What is the method you’re employing that you call scientific? What kind of a track record do you have in creating useful knowledge?
We will continue to use the methods of science to explain reality until a better method comes along. When the aim is to know and to understand, then what counts more toward knowing and understanding than anything else? What is essential? What is paramount in importance? If you could only know one thing, what would give you the greatest gain of knowledge?
You should be able to answer that in this seminar by this time. The question is, why do we need science to see reality? The answer to that is because reality is hidden from view.
We want to talk about understanding causality. When I say, causality, cause and effect, causation – these are all different ways of saying the same thing. Unfortunately, understanding causality is difficult. It is so difficult that we need a science to know and understand causality. The reason we need a science, and I cannot overemphasize this, is that causality is hidden from view.
We must discover the hidden causes of everything we like and dislike. And why must we do this? Dear friends, I don’t know how to tell you this gently, but every time you take an action based upon a false explanation of causality it’s like shooting yourself squarely in the foot when instead you meant to shoot the flying duck.
If I can show you how to become a successful human action scientist, then you can achieve what is called an independent view of causality – independent from all other observers. On your own, you can learn how to aim at the duck and hit the duck instead of your foot. The difference between shooting the duck and shooting your foot is always large.
But don’t expect to discover causality all at once. Causality must be discovered piece by piece, chunk by chunk. And then, every time you discover a new chunk of causality you ask, how is this interesting chunk of causality connected up with all these other chunks of causality? It might be useful now for me to give you your lifetime intellectual assignment. Are any of your ready for this? It will be interesting to see who’s willing to accept the challenge.
Here is your lifetime assignment, if you choose to accept it. Continue pursuing the discovery and understanding of new chunks of causality, and each time you find a new chunk see if you can connect it up with all the other previously discovered chunks of causality. The depth and scope of your understanding of reality and what the hell is going on in both society and in the universe can be no better than your ability to connect these chunks of causality.
And especially you must learn what causes both the effects you like and the ones you dislike. This is precisely what almost all so-called educated people have failed to do, especially where the subject is social causality or what is generally caused the social sciences. In this matter, in this seminar, I call the connectors to your understanding of causality and reality the progressive and regressive domino effects. In this lecture, the main chunk of reality and causality we will be discussing is the reality of and the causes and effects of interventionism. Some of you might think, well, why does Snelson keep returning to the subject of interventionism? Interventionism may not seem like a very exciting subject.
If I were to take out a $5,000 one-page ad in the L.A. Times and advertise, for example, this evening’s lecture with this title, “The Reality of Interventionism: Everything You Need to Know in One Lesson.” Nobody will show up. I would blow the $5,000 on the ad, another $1,000 on the lecture hall. Nobody will show up.
The more important the topic, the harder it is to get educated and intelligent people interested in that topic. If they’re uneducated or unintelligent, it doesn’t matter what they believe. How about a headline in the L.A. Times? I’ll spend my $5,000 on this headline: “How to Retire in Five Years with A Million Dollars Without Risk Working in Your Spare Time?” That might generate a little interest. I might get a few people to come out for that.
How about an ad like this: “New Pathways to Romantic Love?” Nearly everyone would find love and romance more interesting than the subject of interventionism. Almost everybody would. I know this. What is missing here is knowledge of the connections between love and interventionism. There’s a very important connection that cannot be shown in the limited space of an ad.
Ladies and gentlemen, the attenuation of hatred and the optimization of love are directly related to the subject of interventionism. You will find the magnitude of love that will be unleashed upon the world when the reality of interventionism is scientifically understood will amaze you.
Your understanding of this connection will enable you to play a part in unleashing this love upon your fellow man, if you want. I gave you earlier the dominant issue of this and the next century. It’s the win-win society, also called the free society, also called the non-interventionist society versus the win-lose society, also called the un-free society or the interventionist society.
To paraphrase Shakespeare, the issue is to intervene or not to intervene, that is the question. To quote Hamlet himself, the issue for every human in our time is, “To be or not to be, that is the question.” What does the Prince of Denmark mean when he speaks the most famous line and question ever written, at least in English? What does he mean, “To be or not to be, that is the question”?
We probably have some Shakespeare aficionados here who could give us a short lecturette on what that means, right? The English verb to be means to exist or to live. The salient question for every human of this and the next century is to exist or not to exist, to live or not to live, to be or not to be. Dear friends, believe it or not, the answer to this question will be determined in part by your ability to understand the reality of interventionism.
To gain this understanding you need a science of interventionism. The science begins with a precise definition of interventionism. Interventionism is any imposed interference with the production, distribution, and consumption of any product derived through market exchange. Where possible, I try to remove academic and esoteric trappings from the language, but sometimes some of this remains for scientific reasons. We can’t always choose a non-academic-sounding term.
When something is imposed upon you, it is inflicted upon you. Interventionism always imposes by force the confiscation of individual choice. If you are a producer, distributor, or consumer of products, your choices of just how to produce, distribute, and consume have been violently taken away from you. However, at this point, we’re not concerned with whether interventionism is either right or wrong, moral or immoral.
I have not raised this issue. The main question here is, can the use of interventionism against producers, distributors, and consumers attain the stated aims of the interventionists, which is to attain what? The greatest good for the greatest number. If it can be scientifically shown that interventionism doesn’t work whenever and wherever it is tried, with zero exceptions, if that can be shown scientifically, then maybe it’s time to reconsider its use. It has never worked.
In science, when an experiment always fails, it’s time to try something else. All acts of interventionism involve acts of aggression commanded and aimed by the interventionist against their fellow humans. This aggression always takes the form of an unprovoked attack aimed at a human target.
Our English term aggression comes from the Latin aggressus, meaning “to attack.” If you survey the history of all civilizations, the overwhelming majority of all acts of aggression in every civilization have come in the form of acts of violent interventionism executed by political and bureaucratic authorities against whom? Their own people.
All acts of political and bureaucratic interventionism are acts of aggression against one or more individuals. Fill in the blank. All these acts of aggression always take the form of outright violence or the threat of violence directed toward the individual. For more than two centuries the major weapon of violence used by politicians and their bureaucratic agents is the familiar device known as a gun.
The gun comes in the form of a revolver, pistol, rifle, machine gun, cannon. They’re all designed to propel a projectile that, upon striking a human being, will cause that human being to suffer serious physical injury or death. All politicians and bureaucrats enforce all political laws and bureaucratic decrees with the actual use of a gun or the threat of its use.
Again, there’s no attempt here to claim or even imply that this is wrong or immoral behavior. I have not said this. I’m describing a human action phenomenon. However, to the extent that all politicians and bureaucrats impose their laws and decrees at the point of a gun, it is accurate to name these politicians and bureaucrats gunmen.
My dictionary gives the following definition of gunmen: A gunman is a man armed with a gun and skilled in its use. When a politician or bureaucrat does not actually carry the gun on his person then he will always have an aide carry the gun for him. Either he carries the gun or he has an aide carry it for him.
These aides are known by many different names familiar to all of you: gendarme, policia, policeman, officer of the law, constable, peace officer, sheriff. These gunmen are the ultimate enforcers of all political laws and bureaucratic decrees. However, a gunman does not have to point their gun at you in order for the gun to be a threat.
Even when the gun is in its holster, what is that? That’s an implied threat. Think about it. The holster is the gun’s display case. The gun, in sight or out of sight, in its holster or concealed, is the ultimate means of all bureaucratic political confiscation of choice.
All gunmen can be divided into two broad categories, the legal gunman or the illegal gunman. Both the legal and the illegal gunman use their guns to impose interventionism, which always results in the confiscation of individual choice.
The most publicized illegal gunmen are the various members of both organized crime and unorganized crime, two basic kinds of crime, organized and unorganized. The film industry has produced, as you know, hundreds of melodramas over the years featuring various crime bosses as both villains and heroes. The most infamous of these organized criminals, of course, are members of the mafia, at least in the United States.
In contrast to these illegal gunmen, who are the legal gunmen? What do they look like? What do they do? How do they differ? The legal gunmen only use their guns to impose political and bureaucratic interventionism. The more successful they are at wielding their guns to impose interventionism, the greater will be both their fame and fortune.
Please note, all legal and illegal gunmen have these characteristics in common; they fear the people might resist the confiscation of their choices, which includes the confiscation of their wealth, if these choices are not taken away at gunpoint. This is true of both the legal and the illegal gunmen.
Is their fear justified? What do you think? How many think their fear is justified? I think so. Almost all of the people would not allow the confiscation of their wealth and their choices if it were not backed up with a gun. But if you live in a civilized society, you have been taught to make a distinction between these two classes of gunmen.
Therefore, every society refers to the legal gunmen as civilized and the illegal gunmen as uncivilized. In every civilized society, the legal gunmen are the major confiscators, and the illegal gunmen are the minor confiscators. But all of these gunmen, legal and illegal, have this in common, they confiscate your choices at gunpoint.
Says the illegal gunman, “I’m confiscating your choices. If you oppose me in this confiscation, you will be shot.” What does the legal gunman say? He says, “I’m confiscating your choices. If you oppose me in this confiscation, you will be shot.” Often, the legal gunmen has better diction and better usage of the English language than the illegal gunman. Have you noticed?
But which gunman is the good guy, and which gunman is the bad guy? Every society refers to the legal gunman as a good man and the illegal gunman as a bad man. You might ask which gunman confiscates the greatest number of choices, the greatest amount of wealth from the people. The good gunman or the bad gunman?
So, we have two classes of gunmen. Please note, the good gunman always confiscates more from you than the bad gunman. Have any of you ever had, in your own personal experience, the reverse of this where a bad gunman has taken more from you than the good gunman? Another good essay assignment would be to write an essay on the difference between a civilized man versus an uncivilized man.
In this seminar, the goal, as I said, is to apply science to understand the reality of human action, just as we apply science to understand the reality of physical action. To illustrate this point, two men live next-door to each other. One of these men is uncivilized, and we’re going to assume that his neighbor is doing something that this uncivilized man does not like.
You might ask, what is the potential range of actions that the civilized neighbor is taking that the uncivilized man dislikes? What could he be doing? It could be one of hundreds of things that he dislikes. True? The neighbor may be producing a product that he doesn’t like. Is this possible? Or he likes the product, but the neighbor’s price is too high. Is that possible? Or it’s too low. That’s also possible.
Or perhaps his neighbor is producing a product that he shouldn’t even be allowed to produce at all. Is that possible? Or maybe his neighbor distributes the product in some objectionable way. It’s a fine product but it’s terrible the way he’s distributing this product. Or perhaps his neighbor is consuming products he should not be allowed to consume. Maybe he is reading the wrong books. Is this possible?
Or maybe he is drinking the wrong drinks, or maybe he’s attending the wrong meetings. Is this possible? All of these could be things that this fellow here doesn’t like. This uncivilized man could object to any of his neighbor’s human actions with regard to hundreds, if not thousands of other things.
How might this uncivilized man solve the problem of his neighbor doing something he dislikes? What does he do? He does what is expedient. He picks up a gun, runs next-door, and confronts the neighbor with the gun, and he screams, “If you don’t immediately stop doing all of these things I dislike, I will kill you.”
If the neighbor doesn’t stop, then he makes good on his threat and he shoots the neighbor. Bang. I think most of us would agree that a man who would behave in this manner is uncivil. He’s barbarous, which means he is mercilessly harsh. He is uncivilized.
Please note, in a civilized society, how do humans impose interventionism against their fellow humans? In sharp contrast, the civilized man would never take this uncivilized approach in dealing with his neighbor. What will he do? Please note very carefully what the civilized man does. He appoints another civilized man to threaten his neighbor and, if necessary, kill him.
The civilized man has appointed an agent to confiscate for him or to kill on his behalf. The civilized agent is a bureaucrat. Under civilized rules, this agent cannot kill the neighbor immediately. He doesn’t even want to kill him. He only wants what? Compliance. Killing is a last resort.
So, he says, Sir, if you will turn over a certain amount of your property to me, that’s your fine, then I won’t kill you. If you pay the fine, I won’t kill you. If you refuse to pay the fine, that’s not a good idea. Then we will send armed gunmen to capture you. And if you try to escape from them, they have orders to shoot you and, if necessary, kill you.
Since you refuse to pay the fine, you will be thrown into prison. If you don’t like the place or the company, when you attempt to escape from this prison, the guards up in the towers have orders to shoot and even kill you, and if they do shoot you, you shouldn’t get mad at the guards because they’re only doing their duty.
If a guard does kill you, although he doesn’t even want to kill you, but somebody has to kill you. Don’t take it personally. It’s the law. You’ve broken the law. Any questions? Good.
One of the things I hope to increase your sensitivity to, ladies and gentlemen, is the importance of differentiation. If you cannot differentiate, you will never know what the hell is going on your entire lifetime. The more important it is, the less likely that it will be taught in what are called schools. There should be Differentiation 1A, the first thing you take in a university.
Let’s look at a fundamental difference between the civilized man versus the uncivilized man. It has to do with this important question: What do you do when your neighbor is doing either something you think he ought not to be doing or he is not doing something you think he ought to be doing? If you are uncivilized, the uncivilized man, what does he do? He pulls the trigger himself.
But if you are civilized, what will you do? All of you know, right? The civilized man appoints a gunman to pull the trigger for him. The truly civilized man will not appoint his agent, the gunman, even openly. He will not do this openly if he’s truly civilized. In most civilized places, and you can check this out, he will make the appointment in secret through a procedure known as the secret ballot.
Some of you have heard of this technology? What does this mean? By keeping secret the names of the gunmen they have appointed to attack their neighbors, the voters never have to accept responsibility for their actions do they? It’s all done in secret. In a civilized society, it is the role of the educational system to convince everyone that these elected gunmen are public servants and that all the neighbors and all the people are being served.
Any student who fails to understand this will be deemed a poor student. They may even flunk. As you can see, you live in a highly civilized society. I have this question for you, was my differentiation between the uncivilized man versus the civilized man an accurate representation of reality? Yes or no?
Have all of you acted out your life in a civilized manner? Have any of you ever in secret appointed a gunman to attack your fellow tribesmen? Have you ever done this? Most of you have done this. However, I have not said it is wrong or immoral for you to have done this. I did not say this.
But I will ask you this question, dear friends, and you can think about it. Did you know what you were doing, or did you get there through indoctrination? For what it’s worth, I’ve done this, but I also didn’t understand reality or what I was doing. In fact, I even got an A in the course in school that said this is proper action to take. What grade did you get? I got an A.
I’ll give you a graphic illustration of how we use gun-imposed interventionism against our neighbors. In the upper right corner of this chart, there’s a box entitled, “Italian Shoe Manufacturers.” The Italians are selling shoes to the USA shoe importers. These Italian-made shoes are higher quality and lower price than the USA shoes.
As you can imagine, the 200 million American shoe buyers at the bottom love this. The USA shoe importers love it. In Italy, the Italian shoe manufacturers love it. But what about the USA shoe manufacturers at the lower left?
American consumer bosses are switching their market votes from USA-made shoes to Italian-made shoes. The effect is that USA-made shoe sales are falling. In time, USA-made shoe manufacturers begin to experience entrepreneurial loss. But does this mean the Italian shoe manufacturers’ profit is due to the USA shoe manufacturers’ loss? Is one man’s profit due to another man’s loss?
I’ve discussed this in depth. The question can be answered with this very important definition that I gave you of entrepreneurial loss. The entrepreneur produces products, which the consumers aren’t willing to purchase at a price that exceeds the total cost of production. At any time, for 100 different reasons, a consumer boss may be unwilling to pay a price for the product that is higher than the cost of production.
This is why, if you are going to assume the humanitarian role of entrepreneur, you better be ready to assume extreme high risk that always goes with the territory. If you’re an entrepreneur in the shoe business and your competitors are getting most of the market votes, then there are only two things you can do. One, figure out how to produce a better shoe at a lower price, or, two, get out of the shoe business.
Where there is a free society, these are your only choices. But in the USA, do we have a free market and a free society? What do you think? We do not. Because we do not have a free society and a free market, this gives the USA shoe manufacturers on that chart a third choice. Please note what they will not do. They do not pick up their guns and march over here to the offices of the USA shoe importers and threaten to kill them if you don’t stop importing these Italian shoes. Why don’t they do this?
Because they are civilized. When you are civilized, this is not how things are done. You can’t just shoot your neighbor simply because he’s selling higher-quality shoes for less money than you are. You can’t do that. That’s not even sportsmanlike conduct.
Therefore, what happens? In a civilized society, how does man impose interventionism against his fellow man? As I said, in a civilized society, man will appoint another civilized man to threaten to shoot the neighbor dead. So, at the top of the chart is the government gunmen. The USA shoe manufacturers appeal to the government gunman for protection, hence the name protectionism. That’s where it comes from.
“We need protection,” they say. What are they actually demanding from the government? As the arrows indicate, they are demanding special privilege. What will be the cause of their special privilege? What do the USA shoe manufacturers demand that the government gunmen give the USA shoe importers? They say, essentially, “Give us shoe manufacturers special privilege and give those SOB shoe importers the gun.”
At gunpoint, a tariff tax is confiscated from the USA shoe importers, and the USA shoe manufacturers gain their special privilege. But whenever a government gunman imposes interventionism, this will always set in motion regressive domino effects. The backward social effects of imposing the win-lose paradigm upon society cannot be avoided.
Win-lose government interventionism always generates, as we will see, more losers than winners. This means government interventionism always generates a net loss. When the USA shoe manufacturers get their special privilege, here are some of the regressive domino effects.
First of all, let’s look at the losers. The Italian shoe manufacturers and their employees are big losers. Their sales to the U.S. market have been sharply curtailed or even terminated. The American or U.S. shoe importers are losers for the same reason. Over 200 million American consumers are losers who now have a lower standard of living imposed upon them, but there are even more losers than the chart indicates.
There are all of the USA manufacturers who cannot sell their products in Italy to the Italians. If we prevent the Italians from exporting to us, then at the same time what else do we prevent? American manufacturers from exporting to the Italians. But who, dear friends, will be witness to the sales that are not made?
How many not-made sales do you witness? The not-made sales of American manufacturers to Italian consumers. The regressive domino effects will not be seen unless you know where to look for them and you know that you should be looking for them. I’ve given you a principle earlier that explains this, the principle of export-import. You can only export when you import, and you can only import when you export.
We’ve seen who the losers are from this win-lose protectionism. Who are the winners? We’ve got winners at the top; a handful of domestic shoe manufacturers and their employees are big winners. The politicians and their bureaucratic enforcers are big winners.
The gun-imposed collection of terrorists will add to their power and wealth. Wherever there is win-lose interventionism, it will always generate regressive domino effects. In the long term, there will be consequences of interference with free trade that will end in war. If it ends in a third world war it will be hard to find any winners at all. Both the winners and the losers will be buried.
I’ve now given you the scientific evidence. That means we are going beyond opinion. Remember, all opinions are worthless. You cannot get to the moon on opinions. They’re all worthless. We’re looking for scientific evidence for scientific conclusions. In this case, on protective tariffs, here’s a scientific conclusion. If the goal is the greatest good for the greatest number, then win-lose protectionism is always a false means.
Please note that by applying science I have given you a conclusion, again, that goes beyond dogma, beyond superstition, beyond opinion. I have given you a scientific reason to establish free trade among all nations. Scientific methodology confirms that we must establish free trade because human survival depends upon it. You might ask, well, why else is it important? That ought to be enough.
At this point, we’re just beginning the second half of the “Principles” seminar. How many of you were here this morning, just out of curiosity? Let me see. All right. Thank you, ma’am, sir. A number of you. Good. I have this question for you: Are you convinced of the superiority of win-win free trade over win-lose protectionism?
I’ve been applying science to show you the superiority of the win-win paradigm, “For us to gain, they must gain,” over the win-lose paradigm, “For us to gain, they must lose.” If you’re convinced or close to being convinced or would like to be convinced, not quite convinced yet but would like to be convinced, my aim is to use the power of science to convince you of something else.
In order to achieve external free trade between nations, we must also achieve internal free trade within nations. I hope to convince you of this in the lectures to come. We must expand the principle of free trade to include all individuals who wish to exchange with one another regardless of where they happen to be standing on the planet.
The classical economists taught us the great advantages of establishing free trade between nations. I call that external free trade. There’s a second area of free trade that I call internal free trade. The classical economists did not refute all of the many arguments advocating government interference with internal free trade.
Due to the many regressive domino effects of internal interference with free trade, you cannot safeguard external free trade unless you also safeguard internal free trade. Of the few people who advocate external free trade without compromise – there are some who do – most of them are not advocates of internal free trade without any compromise.
The result is, many people advocate non-interventionism between nations and much interventionism within nations. That’s common. There are socialists, for example, who are advocates of free trade, but it’s external free trade. No socialist is an advocate of internal free trade.
These people fail to see that internal interference with free trade causes regressive domino effects, always, that lead to external interference with free trade. There’s a generalization that shows a connection between interventionism and interference with free trade. All acts of win-lose interventionism are interferences with free trade.
Since most of the acts of interventionism that take place throughout the world have a bureaucratic cause, the term bureaucratic interventionism is used commonly in this seminar. But there are also acts of private interventionism, which I will deal with largely in an upcoming lecture.
The most pervasive and damaging form of interventionism is the form of interventionism wielded by the bureaucracy. The great French novelist Balzac gave us this 19th-century image of the entrance of French bureaucracy when he said, quote, “And thus bureaucracy, the giant power wielded by pygmies, came into the world.”
At the time of Balzac’s death in 1850, the bureaucracies of the world were minute compared to our 20th-century administrative behemoths. Balzac’s satiric image of the bureaucracy, I think, falls short of the reality of its intrusive nature. Our science of reality reveals a more accurate picture.
Bureaucracy in one lesson: All political bureaucracies are win-lose government agencies designed to prevent both external and internal free trade by fining, imprisoning, or killing those who seek to freely trade. Every bureaucratic action is an attack upon free trade. No exceptions.
Every attack upon free trade is an attack upon freedom. No exceptions. Was any of this explained to you in school? You were absent on the day they explained this right?
Whenever you find a bureaucracy, you will find a win-lose society. In every win-lose society, the bureaucracy is the prime imposer of the win-lose paradigm: “For us to gain, they, or you, must lose.”
I’ll now discuss some of the regressive domino effects generated by interference with internal free trade. To illustrate, let’s assume you want to establish a small entrepreneurial venture to manufacture electronic parts. To be competitive, you invest $100,000 in a machine to make these parts faster, better, and cheaper than your free market competitors can make them.
Because you do not want to operate the machine yourself, you advertise an offer of compensation to anyone qualified to operate your machine. A qualified machinist accepts your offer within a day. This is a free market exchange between buyer and seller, and the machinist is a seller of his technical skills. You, the entrepreneur, are the buyer of his services. Therefore, what will happen?
If you, as the entrepreneur, can pay for the machinist’s services without any bureaucratic interventionism, if this can be done, then the principle of free trade has not been violated. But where there’s a win-lose government, its bureaucratic agents will prevent free trade and free exchange between the owner of the machine and the operator of the machine.
Why do we have this interference with free trade? Here’s why. Most educated adults have been indoctrinated to believe that if the government allows free trade between the owner of a machine and the operator of a machine, then, somehow, the operator will be harmed by the owner. Nearly all educated people have been indoctrinated to believe this.
As a consequence, it is a common opinion that the operator of a machine must be protected from the owner of a machine. The foundation of this opinion can be found in the popular acceptance of the win-lose paradigm. for the operator of a machine to gain, the owner of the machine must lose. When you use the word corollary, a corollary is a restatement of a main concept or principle, simply a restatement of the main win-lose paradigm, for me to gain, you must lose. For us to gain, they must lose. That’s the main statement of the win-lose paradigm.
And then we have this corollary, which is a variation on the theme. And so, it is believed the full aggression of the government gunman must be imposed to protect the operator of the machine from the owner of the machine. The win-lose government must interfere with free trade between the buyers of services and the sellers of services.
There have been tens of thousands of books written on the pros and cons of labor unionism. Dear friends, if you’re ever tempted to read any of these for or against unionism, save your valuable eyes. The entire concept of labor union interventionism is simply one of many schemes designed to interfere with the principle of free trade.
Let’s discuss, with that in mind, why labor union interventionism can only diminish the progress of the worker. That’s all it can ever do. You’ll find that most of those people opposed to labor unions usually blame the growth of unionism upon the ignorance and credulity of the workers. A more significant factor leading to the growth of unions has been the ignorance of the entrepreneurs and the proprietors on how free markets operate.
Most entrepreneurs have generally been ignorant of how free markets operate. So, have all of the non-entrepreneurs, which is a class how large? Everybody. For one reason, what school ever taught the principles of the free market? Where is Free Market 1A? In what college? Nearly all colleges in the world except maybe one or two teach anti-free market concepts in their universities. There may be only one or two exceptions on the planet.
I’d like to point out, because a factory owner may detest union membership on the part of his employees, that does not mean he will understand the magnitude of the regressive domino effects that are unleashed by unionism. If you’ve come into this seminar with a negative image of labor unions, I must caution you, a big word of caution.
If your response to this discussion is, “Well, you know, Snelson confirmed what I’ve always believed all along. Those damn unions are no damn good.” If that is your response, then you will have missed the entire point. Hating unionism and understanding unionism are not the same. As a matter of fact, I’d like to point out, you only have to hate something when you do not understand it. All haters don’t know what they’re doing, or they wouldn’t hate.
In our science on the qualitative analysis of doctrines, we will apply science to evaluate the quality of the union doctrine. Let’s look at the win-lose union function. It is to set wage policies that are imposed upon the entrepreneurs by bureaucratic gunmen. Wherever union-imposed interventionism interferes with the freedom of the entrepreneur to trade with employees or would-be employees, the effect is always the same.
Unionism causes unemployment by not allowing the unemployed to under-bid union-imposed wages. How does this bring about unemployment? Whenever the government imposes its violence to interfere with free trade between anyone, this will always generate regressive domino effects. When the government forces entrepreneurs to pay their employees a higher wage than they would have paid had there been free trade or a free market, there are always unavoidable consequences, in other words they cannot be avoided. The greatest impact will fall upon those areas of production where profits are marginal, where profits are just barely being earned. Where the imposed higher wages are enough to make a once-profitable area of production suddenly unprofitable, what would you do if you were the entrepreneur?
You have two choices: One, close down the now-unprofitable area of production, laying off all of those people employed there, or, two, lay off enough employees to reduce labor costs, hopefully enough to still earn a profit. In either case, the regressive domino effect is that the government is actually throwing people out of work.
In so doing, the government imposes a rigid class system. The policy of gun-imposed union interventionism splits the what? The union-imposed classes – you have, one, the employed classes who earn higher wages as a result of the interventionism, and, two, the unemployed classes who earn nothing. Where you have forced unemployment, you also have a forced class system of two separate and distinct classes. They are the employed and the unemployed.
In fact, the man who is unemployed commonly feels like a second-class citizen, and that’s because he is. In contrast, the man who is employed is the first-class citizen. But the man who is forced out of work fails to understand causality. He fails to see that union interventionism is just another scheme to gain special privilege for some special group at the expense of some other group.
The special privilege is imposed with what? A gun. However, since today’s union members are largely civilized men and women – it wasn’t always that way, but they are today – they do not take up their own guns and threaten to kill those entrepreneurs and workers who choose to freely trade. Instead, the union leaders demand that the government gunmen use their guns against the entrepreneurs to force them to pay the union-demanded wage.
The unionists cry, “Give our union a special privilege and give those entrepreneurs the gun. Give our union a special privilege and give those unemployed scabs the gun.” As you know, the so-called scab, the lowest of the low in the union mentality, will work for less than the union-demanded wage. The unionist cries, “Give our union a special privilege and give those consumers who want the highest-quality products at the lowest price, give them the gun too.”
But there are few who will see the regressive domino effects of unionism that makes losers and victims out of entrepreneurs, consumers, and the unemployed. All union interventionism makes victims out of consumers, entrepreneurs, and the unemployed. All these are losers, because compulsory collective bargaining excludes the unemployed non-union member from bargaining directly with the entrepreneur.
What is the underlying fallacy behind all of this destruction? The familiar theme now, the win-lose paradigm. For the workers to gain, the entrepreneurs must lose. A popular fallacy is that you can improve the standard of living of the employee by imposing government interventionism on behalf of the employee against the employer.
However, most educated adults have failed to learn this lesson. No amount of violence directed toward the entrepreneurs by union and bureaucratic interventionists can ever raise the level of prosperity for the worker. Dear friends, if violence is not the cause of prosperity, then what is? Is there a principle in optimization theory that refutes this popular superstition, and if there is, what is it called? Can you put a handle on it? What refutes this?
What is the cause of prosperity? How many causes have I said there are?
There are not five. There are not two. There is one. And we call it the principle of prosperity. There is only one means to societal prosperity, the accumulation of the tools of consumer production at a faster rate than the accumulation of consumers. In other words, in shorter words, give birth to tools faster than you give birth to babies.
The failure to understand this principle has led to another popular union fallacy. You’ve heard of it. That is, “Well, there just aren’t enough jobs to go around. What can we do? There’s a shortage of jobs.” How many have heard this? “There’s a shortage of jobs. What can you do?” Acting upon this fallacy, the union bosses have imposed upon the entrepreneurs various spread-the-work schemes.
Thus, the union requires two men to do the work of one. The improvement on that is, voila, three men get to do the work of one. This imposed form of union violence is commonly called feather bedding. What are the regressive domino effects? In every case where the quantity of workers is increasing at a faster rate than the quantity of tools, the cost of production rises. The cost of products rises. The standard of living falls.
There’s a corollary of the principle of prosperity. I call it the principle of company prosperity. Increase the quantity and quality of company tools at a faster rate than you increase the quantity of company workers. This is a road to prosperity for everyone. When one worker can do the work of two, you’re on the road to prosperity, and when one worker can do the work of 10, that’s the path to even greater and greater prosperity. That’s what we want. One worker can do the work of 20.
This is another example of a principle I gave you earlier called the closest-to-zero-but-not-zero solution. Do we want more farmers per capita, or do we want fewer farmers per capita? This can be generalized for workers in every area of production. If the manufacturers are making ball bearings, do we want everybody making ball bearings? No. Do we want nobody making ball bearings? No.
What do we want? The solution is what? Closest-to-zero-but-not-zero. Compulsory unionism fails to advance the progress and prosperity of the worker because union compulsionism and violence is a false means to that end.
Let’s visit a new subject, namely, price controls. But first I’m going to show you the connection between price controls and union interventionism. All union-imposed wage rates are a subclass of price controls, since a wage is a price paid for labor. Government-imposed union interventionism is merely a price control on the price of labor.
Now let’s make some generalizations concerning all price controls. Whenever the government sets the selling price of any product, you have another example of interference with the principle of free trade. With one generalization, you can summarize the true nature of every price control, past, present, and future.
Every price control confiscates the producer’s freedom to make any offer to sell his product or service. Every price control, by its very nature, is an attack upon individual freedom. Furthermore, every price control confiscates the choice of the consumer boss to purchase the highest-quality products at the lowest price.
The consumer is left with the alternative of a lower-quality product or a higher price or perhaps, as is often the case, no product at all. Therefore, all price controls harm the consumer. The main problem caused by price controls is not so much that they harm the consumer, which is bad enough, but that they are interferences with free trade. That’s the main problem.
I’ve already explained that all acts of interventionism are interferences with free trade. Since all government price controls are acts of interventionism, we may conclude that all price controls are government interferences with free trade. Whenever and wherever man violates the principle of free trade, there will be regressive domino effects. This will cause more destruction.
The only alternative to this destruction is to maintain a free society. One of the characteristic features of a free society is that there are no internal restrictions upon free trade. In an earlier session I gave you on price, I explained that every price is merely an offer to sell. You cannot understand price unless you know that all prices are nothing more. They’re always nothing more than offers to sell. That’s all they can ever be.
If a high school student offers to package, let’s say, the customer’s groceries in a supermarket for $3 an hour, this is an offer to sell his labor. When the government imposes a minimum wage law of $4.25, the store owner or the store manager’s freedom of trade to accept the offer has been confiscated. If it is not profitable for the store manager to pay box boys $4.25 an hour, what will happen? The job of box boy will be eliminated.
But this regressive domino effect will not be seen of the confiscated job because people do not see jobs that do not exist because they’ve been confiscated. You do see that this is not seen? These minimum wage laws, along with union imposed minimum wage rates, become the major source of mass unemployment. When the government-caused unemployment becomes serious enough, then the people clamor for more government confiscation of free trade, which is what caused the unemployment in the first place.
The people demand more confiscation in the form of lavish government spending projects. The government responds by providing funds for various public works schemes. The funds come from what? More tax confiscation and by incurring more bonded indebtedness. The bonds will be paid with future tax confiscation.
When the new government spending is financed by borrowing from commercial banks, it means credit expansion, which means more inflation. Thus, the price of all commodities and services will rise forcing consumers to, in effect, subsidize the public works. In other words, the public works, which have been thrust upon them, along with a lower standard of living through inflation and, ultimately, more taxation.
All taxes that you pay give you a lower standard of living. There’s no end to the regressive domino effects. Through government spending, the government abolishes, on the one hand, more jobs than it creates on the other hand. But the public never sees all of the private jobs the government has confiscated through government interventionism with internal interference with free trade. The public only sees what it believes to be an increase in the total jobs available through spending on public works.
Let’s talk about price controls on tangible products. These may take the form of compulsory price ceilings, maximum price ceilings. When a seller offers his product at a price that is more than the imposed maximum price, the seller is called by the government a violator of the law and is thus looked upon as a criminal. The price control forces the price to remain a lower price than it would have been if there were still free trade in a free market.
What are the regressive domino effects of this interventionism? A direct effect is the bureaucratic confiscation of some or all of the entrepreneurial profit that would have been properly earned had there been free trade. When the government confiscates profit, it also confiscates the incentive to invest in that area of production. The quantity of the price-controlled product goes into decline.
Consumers soon find that, instead of a lower price for the product, the product has become so scarce it is becoming less and less available. What happens? The consumer finally winds up with no product at all at the government-controlled lower price. Of course, even though you don’t have the product, if you had the product, you would get it at a lower price. Oh, well, that’s good, isn’t it? I’m sure glad the government’s looking out for me.
When consumers demand lower prices for products through compulsory price controls, freely translated, what do the consumers demand? Give us consumers special privilege. Give those SOB entrepreneurs the gun. They are demanding more government compulsion and one more violation of the principle of free trade. Of course, they are victimized by the win-lose paradigm, which they accepted hook, line, and sinker.
Another popular form of maximum price ceiling is rent control. The owner of an apartment house is compelled at gunpoint not to charge his tenants more than a government-imposed ceiling on his rental prices. What are the regressive domino effects? This immediately drives investment capital away from investment in the construction of new apartment houses. The effect will be a growing shortage of apartment housing. Renters will begin to find that, instead of lower-priced apartments, there are fewer and fewer available at the lower price.
Where there’s a long history of rent control, renters may find themselves on a five or ten year waiting list for the special privilege of finally acquiring a substandard apartment at the imposed so-called lower price, hopefully 12 years out, 15 years from now or whatever. But if you must accept low-quality quarters, some might find this to be paying a higher price. Wouldn’t you?
Furthermore, existing apartments will fall into what is called disrepair. Where the rent ceiling confiscates a substantial portion of what would have been the apartment owner’s profits, the government has also confiscated the owner’s incentive to maintain high standards, high-quality maintenance for his apartments.
Historically, in such places like New York City where rent controls have confiscated profits, you have witnessed a regressive domino effect of rent control called slums. One of the prime causes of slums where you have rent control is the rent control itself. Dear friends, you shouldn’t have to be a scientist to recognize that where property is not maintained, the result will quickly be a slum. Where property is not maintained, this fosters an increase in street crime and other attacks upon property.
I’d like to point out that the fact that a neighborhood gets old does not make it a slum. Here’s a neighborhood, for example, in Amsterdam.
This neighborhood is 300 years old. These houses are three centuries old, some of them. This is not a slum. Why is this not a slum even though the houses are 200, 300 years old? Can anyone tell me why?
They repaired the roof. We can all generalize from that. If they were smart enough to repair the roof, then they were smart enough to repair windows when they got broken, paint the facade when it needs painting to weatherproof it and protect the wood and so forth to maintain the integrity of the dwelling.
This is not unique to Amsterdam. It’s a case wherever property is properly maintained. Old does not mean bad. The entire reality of rent control has a cause. Rent control in one lesson: “Give us renters special privilege. Give those SOB landlords the gun.” The win-lose mentality makes rent control possible in the first place. Here’s the win-lose paradigm again: For the tenants to gain, the landlords must lose.
Ladies and gentlemen, you have now been presented with the intellectual foundation for some scientific conclusions on the subject of all price controls. In the long run, whenever and wherever politicians and bureaucrats impose any price control upon the people, the effect is always the same. All price controls lower the consumers’ standard of living by diminishing the quantity and quality of the goods and services available to them.
Therefore, we may conclude – here’s a scientific conclusion – if the aim is to harm the consumer, then every price control is a true means. Conversely, here is another scientific conclusion: If the aim is to benefit the consumer, then every price control is a false means. That is more than opinion. It is a scientific conclusion based on everything I’ve said up to this point.
Again, our science does not attempt to make value judgments on the goodness or badness of government-imposed price controls. Optimization theory does not begin with the premise that price controls are good or bad, right or wrong, moral or immoral, utilitarian or non-utilitarian. The question of concern is this: If the goal of price controls is to attain the greatest good for the greatest number, then have the means employed attained the ends sought?
The answer is a succinct and emphatic no. With regard to all price controls in the future, the only question of concern is this: Can the means employed achieve the ends sought? We can predict with great scientific confidence that the effects of price controls in the future will be no different than the effects of price controls in the past. They have not worked in the past for the reasons I’ve explained, and they will not work in the future for the very same reasons.
In understanding the reality of bureaucratic interventionism, it is importance to recognize that the interventionism does not begin at the bureaucracy. The genesis of interventionism commonly starts with a civilized man or woman demanding some form of special privilege who says, “If you think I’m going to take the risk of competing with others in the marketplace to serve these consumer bosses, forget it. I don’t want that risk. I know people who’ve risked everything, and they’ve lost everything. I don’t want to do that. I want special privilege without any risk at all. I will not earn this privilege. I want it without risk.”
If he’s not going to earn this privilege, there’s only one other way to get it. They must steal it or get others to steal it for him. That covers all possibilities. So there are two classes of special privilege: one, gain privilege through the gain of others. Two, gain privilege through the loss of others. Once you decide to gain privilege through the loss of others, then all you have to determine is who the losers are going to be.
Once you have targeted the losers, there’s only one other decision you have to make. If you are a farmer, for example, and you are demanding the special privilege of a farm subsidy before you will grow wheat or corn, then who is going to be the loser? Who will have to pay for the subsidy, is the only question.
If you are a civilized farmer, you can’t just pick up your shotgun and go into town and confront the local banker and the doctor with, “I need a subsidy, therefore I am confiscating your wealth, Charlie. If you oppose me in this confiscation, Charlie, you’ll be shot.” You can’t do that, because that would be what? Uncivilized. That would be violent, and we’re all against violence, aren’t we? All good people, all civilized people are against violence.
The farmer, of course, does not see himself as violent. He even raises orchids as a hobby, and he doesn’t even own a gun. But the farmer has a paradigm. Everyone has a paradigm. The beggar on the street has a paradigm. The Ph.D. at the university has a paradigm. Everybody’s got a paradigm. It’s your model of how the world works. It’s your worldview. It’s how sustenance is gained. That’s your paradigm. How do we gain sustenance?
And it can be a win-win paradigm or a win-lose paradigm. That covers all possibilities. Your paradigm defines who you are. It is indelible. Either you’re a win-loser or you’re a win-winner. There are no other possibilities. No surprise to you from what I’ve said, the farmer’s paradigm is the win-lose paradigm: For me to gain, you must lose.
Here is the problem for this farmer. His aim is to gain through the loss of his fellow humans, but not one of his fellow humans will voluntarily give him the subsidy he demands. What will he do? He doesn’t own a gun, and he’s not a violent man. Enter the bureaucrat. The bureaucrat says, “Not to worry; I’ve got a gun, and I’m trained to use it against anyone who refuses to cough up the subsidy. They will be fined, imprisoned, or killed.” Says the bureaucrat, “All you have to do is authorize me as your agent to use a gun, and I’ll use it against the taxpayers to get you your subsidy.”
The farmer says, “That’s all there is to it? Hey, that’s great. I sure don’t like to use guns against anyone. That’s just too violent for me. I’d rather raise orchids.” So the farmer, not a violent man, has appointed an agent to do violence on the farmer’s behalf against his fellow humans. The result is, the farmer gets his subsidy. So we have farm subsidy in one lesson. “Give us farmers special privilege, and give those taxpayers the gun.”
It’s important to note that I have not called those farmers who embrace the win-lose paradigm evil men. I have not even said they are bad people. What are they? They are good people who do not understand the causes of things. I have not even said the bureaucrats who use a gun against their fellow humans are bad people. They don’t understand causality either.
How can you be certain? How can you be 100 percent certain they don’t understand causality? Because if they did, they would seek to serve the consumer bosses rather than the political bosses. I’m not here for the purpose of condemning any of these people.
There is an important lesson to be learned from the renowned philosopher of Amsterdam, Baruch Spinoza. Spinoza gives us one of the most useful, insightful guides to human action ever captured in one sentence. He says, “I have made a ceaseless effort not to ridicule, not to bewail, not to scorn human actions, but to understand them.”
I’ve chosen this as one of the two models of the Institute for Human Progress. Like Spinoza, I am not here to ridicule, bewail, or scorn human actions, but to understand them, and it takes a science to understand them. That’s what’s important. Once we understand the causes of things, it becomes clear that all of these good people are demanding that the government interfere with internal free trade.
The result is, these good people are causing an effect that is a potential catastrophe for all of us. Internal interference with free trade leads to external interference with free trade, and external interference with free trade leads to war. As it turns out, a good man who doesn’t know what he’s doing is far more dangerous to society and his fellow humans than a bad man who doesn’t know what he’s doing.