Without some governmental direction, the present economy would not long remain either competitive or free. Yet many of the current checks and balances would not have been necessary if previous controls had not been introduced which created new and unanticipated situations requiring still further and different controls.
It is only a few decades since the U.S. began enacting laws to protect labor from the abuses of power by Big Business; today there is evidence of a growing need for legislation to protect business from the abuses of power by Big Labor.
Our present tax structure offers another significant case in point. Excessive taxes inhibit initiative, investment and business expansion—they have a deleterious effect upon free enterprise and the economy. As U.S taxes grew—often in a haphazard and wholly arbitrary manner—the harmful effect upon the economy was partially offset through the introduction of equally capricious exceptions, exemptions, special depreciation, depletion allowances and deferrals.
The result is an unnatural monster of a tax structure—Frankensteinian in concept—created from the blood and bones of private individuals and industry—crippling free competition and sapping the strength of an otherwise vigorous economy.
The current tax setup, both personal and corporate, not only stifles initiative, but the special allowances and loopholes set otherwise honest men to searching for ways and means of avoiding their tax obligations, and a whole new breed of tax counselors and consultants has sprung up to aid them in doing just that. This generates the same sort of antisocial behavior that Prohibition did, and when social commentators criticize the immortality of the modern businessman, they would do well to examine current U.S. taxes, as one of the significant causative factors.
It is not usually recognized, but our excessive taxes, including the graduated income tax, favor the already wealthy individual or company and work their primary hardship on the newcomers who might otherwise offer competition to those at the top. The previously prosperous amassed their wealth before prohibitive taxes were introduced; the present tax structure makes it most difficult for anyone else to duplicate the accomplishment. Higher taxes thus tend to protect established wealth and power, reduce competition and perpetuate the status quo.
Excessive taxes not only limit our own business growth and prosperity; additionally, they compare unfavorably with the taxes of most of the countries of the Common Market, making it difficult for U.S. business to compete internationally.
We approve of President Kennedy's proposed tax cut and only wish it was more substantial. We also wish that the proposed plan included more tax reforms, as was originally contemplated. But our present tax laws are such a maze of special concessions and considerations that the passage of any meaningful reforms is almost impossible. It has been seriously suggested that the best plan of all might be starting all over again from the beginning. That might not be such a bad idea.
The last few generations have witnessed a general trend, in the United States, away from free competitive enterprise toward a more controlled economy. Some of these controls, in the form of social legislation, have served desirable ends and benefited both society and the individual; some have had a stifling influence—shifting the emphasis from initiative to security, discouraging productivity, investment and economic growth.
It is sometimes argued that free enterprise was practical when our society was simpler, but that a complex modern economy requires greater government regulation and control. The opposite view seems to us to make more sense. It is precisely because a modern industrial economy is so extensive and diverse that it requires the managerial supervision of many individuals for its efficient operation rather than the supervision of a single government appointee.
Government control over business should always remain at a practical minimum, because it is our firm conviction that the individual operates best with the fewest number of restrictions and our further belief that excessive power endangers freedom—whether that power is in the hands of government or any other entrenched group.
There is this additional, all-important consideration also: Private enterprise is, other things being equal, more efficient than government; a free society is more productive than a controlled one.
It is not that men in government are any less capable—it is simply that when one removes the primary motivations of personal ownership and profit, along with competition, it markedly reduces enterprise and efficiency.
General Motors and U.S. Steel annually produce profits of most impressive proportions, but though it is not plagued with prohibitive taxes and controls, no one can remember when the biggest American business of all—the U.S. Government—last operated in the black.
The U.S. Postal Department incurs a remarkable deficit each year delivering the mail, despite periodic rate increases with no related increase in service. In contrast, AT&FT supplies Americans with another form of communication and, distressed by the depersonalization of digit dialing or no, we're impressed by the handsome profit they manage to show at the end of every fiscal year and the handsome dividend they regularly send to stockholders, while generally improving the service, lowering the rates, purchasing all those swell ads showing nice folks conversing with loved ones on the phone and giant fingers doing the walking, with enough loot left over to put Telstar into space.
We're not suggesting that the mail delivery be returned to private enterprise where, incidentally, it began; we're simply indicating that the profit motive is a powerful factor in improving efficiency—no doubt, if AT&T had significant competition, that would only further improve our telephone company's operation.
The Cincinnati Enquirer recently offered further evidence of the high cost of government effort in an editorial on the Peace Corps—a pet project of the current administration of which, we hasten to add, both we and the Enquirer approve: "It is worth noting that the budget for the current year allocates the Corps some $40 million, which, according to R. Sargent Shriver, the Peace Corps' director, includes $9000 for each Corps member. A survey of the private and religious organizations that send missionaries abroad—to do very much the same kind of work for which the Peace Corps is responsible—reveals that their normal maintenance cost for each missionary is $2000 a year.
"The obvious moral to be drawn is not confined to the Peace Corps. Whatever government undertakes, it does at several times the rock-bottom cost—a circumstance that ought to make every American think twice before he invites the federal government into any new areas of activity."
A look abroad only confirms the conviction that competitive free enterprise supplies an impetus missing in state-owned or -controlled economies. East and West Germany offer a dramatic contrast in postwar recovery, with half the country prospering under capitalism and the other half suffering the deprivation and despair of Communist control.
The Common Market has demonstrated the remarkable economic stimulus that free competition can provide on an international basis, with the cooperating countries enjoying an unprecedented prosperity as a result. Even Russia has, in recent years, found it necessary to resort to capitalist incentives in both her industrial and farm programs to improve the efficiency of the workers. And while the United States contemplates the problem of grain surpluses, Russia—which once was in the position of being able to export a certain amount of grain herself, this year has been forced to import hundreds of millions of dollars of wheat from the U.S. and the rest of the free world to make up for the deficiencies in its own agricultural output.
The contrast in efficiency between various forms of government reminds us of the humorous list of definitions that crossed our deck awhile back:
Socialism—You have two cows and give one to your neighbor.
Communism—You have two cows; the government takes both and gives you the milk.
Fascism—You have two cows; the government takes both and sells you the milk.
Nazism—You have two cows; the government takes both and shoots you.
Bureaucratism—You have two cows; the government takes both, shoots one, milks the other and throws the milk away.
Capitalism—You have two cows; you sell one and buy a bull.
This spoof of the "Isms" may not supply new insights into the economic policies of the various forms of government listed, and perhaps the elephant jokes have reduced your enthusiasm for animal humor, but the overall point of these definitions is a sound one—the best, most efficient economy is a free economy, which relies upon the resourcefulness of the free individual.
At this crucial time, when our nation is involved in a cold war of ideologies for the uncommitted countries of the world, it is most important that every American have a clear understanding of just what capitalism really is—and recognize that while it may have its defects, as anything man-made does, it is the best economic system yet conceived.