Rude Awakenings

Chapter 5 (Part 3 of 4) of the book

The Discovery of First Principles, Volume 3

Edward J. Dodson


Late in 1954, only months before his death at age 76, Albert Einstein wrote to Joseph Lewis, " dean of American freethinkers," of his grave concerns over how little had been learned about justice in an age when the communication of ideas and information had been more broadly experienced than ever before in history:

In my younger years all of us intellectuals thought a happier age for mankind would be ushered in when kings and emperors who reigned "by the grace of God" were abolished. There is no doubt that they did constitute a great evil. Well, they have been rather radically abolished, but mankind does not seem to be much better off. Demogogues and clever professional politicians soon came to serve as effective substitutes.

Superstition and priest rule are grave evils, and it is good that you are waging such a resolute and skillful campaign against them. ...True, this form of evil must and should be fought; but when victory is at hand -- and it is certain in the long run -- it will be more than ever apparent that the source of mankind's afflictions is to be found in its own innate heritage.

Well, we must struggle and educate, even when the goal is believed to be unrealizable; for without active resistance on the part of those endowed with vision and relative freedom things would be far worse.[83]

What about our "innate heritage" so bothered Einstein? Georgist literature has frequently reprinted two statements made by Einstein concerning the influence Henry George had on his thinking. In 1935, Einstein wrote to one E. Paul DuPont: "I have twice read, with admiration and approval, Henry George's book, Progress and Poverty."[84] Given Einstein's commitment to democratic socialism, one cannot but wonder whether Einstein found George a heroic but naive figure, or was unwilling for some reason to align himself with a community of transnationals so small and outside the mainstream. The second statement is the more frequently reprinted; however, its source is (to the extent I have been able to research) undocumented:

I have already read Henry George's great book and really learnt a great deal from it. Yesterday evening I read with admiration -- the address about Moses. Men like Henry George are rare, unfortunately. One cannot imagine a more beautiful combination of intellectual keenness, artistic form and fervent love of justice. Every line is written as if for our generation. The spreading of these works is a really deserving cause, for our generation especially has many and important things to learn from Henry George.[85]

From these comments, one is able to conclude that Einstein looked upon George as a guiding light not merely in political economy but in the realm of socio-political philosophy as well. Francis Neilson includes in his autobiography details of how his own acquaintance with Einstein began, during a 1920 visit to Chicago by the world's most celebrated physicist. "I tried to persuade him that the world of political economy needed his mind as urgently as the world of physics and mathematics," Neilson recalled. "He was keenly interested in free trade because he regarded it as a peace movement."[86] Einstein saw clearly the path of moral relativism down which vested interests and ignorance were taking the United States at this crucial period of awakening ethnic nationalism:

When I look at mankind today, nothing astonishes me quite so much as the shortness of man's memory with regard to political developments. Yesterday the Nuremberg trials, today the all-out effort to rearm Germany. In seeking for some kind of explanation, I cannot rid myself of the thought that this [United States], the last of my fatherlands, has invented for its own use a new kind of colonialism, one that is less conspicuous than the colonialism of old Europe. It achieves domination of other countries by investing American capital abroad, which makes those countries firmly dependent on the United States. Anyone who opposes this policy or its implications is treated as an enemy of the United States. It is within this general context that I try to understand the present-day policies of Europe, including England. I tend to believe that these policies are less the result of a planned course of action than the natural consequence of objective conditions.[87]

Einstein could also look around the globe and very easily make the same connections made by Henry George about the causes of human misery. Landed aristocracies had evolved into agrarian and industrial landlords, in greater or lesser degrees wedded to the State by laws that created monopoly privilege. State socialism removed any pretense to equality of opportunity, instituting rigid and inherently corrupt bureaucratic control over decision-making. Outside the one-party States, internal tensions and dissent revolved around just how participatory government would remain or become. Everywhere, the practice of interventionism expanded the domain of government at the expense of individual liberty but without effective corrective treatment in the realm of economic licenses or penalties imposed to thwart criminal behavior (particularly when this behavior was perceived to be in the national interest or was accompanied by gifts and contributions to elected and appointed government officials).

The world's empty spaces were also rapidly coming under cultivation and settlement. Peasant farmers were repeatedly uprooted to accommodate modernization schemes, the expansion of landed estates and the nurturing of agribusiness built on the exporting of cash crops. A report issued in 1956 by the United Nations indicated that access to land for nearly two-thirds of the world's population had been affected by shifting national boundaries, the emergence of new sovereign nations, expropriation of landed estates and various efforts at what conventional wisdom accepted as land reform. In some parts of the globe, the State took control of most land. In other places, multinational corporations were allowed to - or encouraged to - extract resources with virtually no regard to ecosystems or the well-being of indigenous populations.

I have earlier examined the contradictory results achieved by schemes of land redistribution initiated in Japan and Formosa. On the African and Asian continents, in the Central and Southern Americas, the departure of Old World colonial administrations (with only rare exceptions) did nothing to establish new societies built on participatory socio-political arrangements. Where land was redistributed, the recipients too often gained access to marginal, ecologically-sensitive lands and received little or no education on the best manner of cultivation. Assertions of sovereignty over territory based on occupancy or control prior to the era of European imperialism resulted in the eruption of tribal wars. Production of necessary goods suffered as a result of the insecurity associated with periodic destruction of crops and improvements associated with armed conflict.

Those who molded United States foreign policy faced enormous challenges in their dealings with the governments of societies caught in various stages of transition and upheaval. One faction believed the U.S. had to structure an interventionist policy that nurtured democracy in places where democracy had never existed and where there was no popular support or understanding for the give and take of the democratic process. They were supported in this endeavor by intellectuals such as Robert M. Hutchins, who was convinced that only by keeping the great ideas of intellectual history in the forefront of global change did humanity stand a chance of finding peaceful solutions to its problems. This was a uniquely American attitude, linked with the evangelical belief in the essential goodness of the principles upon which the Democracy was founded (while recognizing that even the home of Paine and Jefferson had strayed from those imperfectly implemented principles). In an effort to resurrect broad interest in the principles of the founders, Hutchins launched a major new undertaking. He and Mortimer Adler emerged in 1961 as the primary editors of a new Encyclopaedia Britannica annual publication, The Great Ideas Today. Two long essays, responding to the question, "Is democracy the best form of government for the newly formed nations?," appeared at the beginning of the first volume.

William O. Douglas (who, ironically, had supported Diem's bid for power in South Vietnam) was invited to make the case for democracy, and he took a positive, long-term view. "Self-government within systems that make room for all minorities and for all the diversities among people is destined to be the achievement of all mankind,"[88] he asserted in his opening statement. There was clear evidence that democracy could be successfully introduced even into societies where traditional rule had been autocratic. One example acknowledged by Douglas was that of Mohammed Mossadegh, who had introduced reforms in Iran that appropriated rent from landlords for the benefit of the local villages. These decisions were made by elected village councils. In this modest experiment - designed to help people to control their day-to-day lives -- Douglas recognized that creating an opportunity for even illiterate people to participate in the management of their local village represented a material gain for the democratic spirit. They might not have the capacity to make informed decisions on complex technical problems where specific expertise was required; however, along with universal suffrage, "service on juries, participation in municipal affairs, membership in voluntary groups, and [a] myriad of activities ... add up to the political education of a free people."[89] At bottom, he argued, was the human right of people to choose their form of government and those who were to have key roles therein. In his essay, Douglas examined the nature of governments emerging out of the demise of Old World imperialism and colonialism. One of the most difficult transitional hurdles to overcome, he observed, was the acceptance of the two-party system and the presence of a "loyal opposition" existing on a continuous basis:

Leaders of nations that are young in the ways of democracy often resent criticism. Criticism is considered a personal affront. Unlimited criticism carried so far as to label the opposition a "party of treason" leads to a breakdown of democratic processes in any country. Tolerance of criticism and debate -- the maintenance of a loyal opposition -- is one first and hard lesson the newly emerging nations must learn.[90]

To elaborate an opposing view, Hutchins and Adler called upon the British journalist Peregrine Worsthorne, Assistant Editor of the London Sunday Telegraph. Worsthorne wrote from a Marxist perspective the history of how human societies develop, asserting: "It is not until society advances to a certain stage of technical expertise which enables individuals to produce far more than they need to consume, that the temptations of government really begin to operate."[91] Where did this leave the historian faced with evidence that warrior-chieftains and the priests appropriated wealth for their own use even at the cost of denying subsistence to others in their societies? For societies that had existed under primitive forms of tribal democracy, in the second half of the twentieth century they faced the challenge of developing and enforcing rules of law sufficiently sophisticated to respond to the pressures of extractive development. Under Old World colonialism, only a very small elite managed to acquire the education and training required for the responsibilities of governing a developing nation-state. The stage was thereby set for arbitrary rule by leaders who professed nationalism but practiced self-indulgence and monopolistic privilege. The fundamental problem in these societies, Worsthorne argued, was the absence of a truly viable and self-sufficient commercial sector, out of which "in the classical democracies, the habits and attitudes of democracy and parliamentary government took root."[92] One important truth Worsthorne gets to, is that the experience of democracy is cumulatively acquired and cannot be effectively implemented by edict. "In Asia and Africa," he concludes, "[i]t is the governments who, while still enjoying the instinctive support of primitive peoples, have embraced democracy from the start, while the great majority of those over whom they govern are quite ignorant of their democratic rights. Democracy, in short, has begun as a method of government, before establishing itself as a method of limiting government."[93] His fear is that by virtue of the experience of life under government democratic in form but not in substance the people will come to reject the true virtue of democratic government; namely, the promise of establishing the means to protect individual liberty.

Hutchins, Adler and others on the editorial team, added their own thinking to the problem of how to secure individual liberty under the system of nation-states. "Colonial government," they wrote, "is by definition dictatorship, and if colonialism is preparation for anything but continued colonialism, it is necessarily preparation for the one-party state which is developing in nearly all of the new nations of Africa."[94] They looked to the UN as the eventual arena where transnational values would come to dominate relations between peoples and governments. The terrible legacy of colonialism was, they acknowledged, an unavoidable struggle in which the universal principles based on moral law had to find their way into the dialogue taking place in each society over what form of government ought to be established and what socio-political arrangements and institutions were best under specific circumstances. The lure of communism, tribalism and ethnic nationalism (each with its own elements of state religion incorporated) denied transnationals an opportunity to persuasively compete in the marketplace for ideas. Hutchins was doing his part to change that balance.

Four years earlier, representatives from forty African and Asian nations (and of societies still subjected to external domination) met in Cairo, Egypt, to discuss their plight and find solidarity with one another. They condemned continued U.S. support for Old World imperialist and colonial policies. That same year, Arab nationalists took power in Iraq and threatened to do so in Jordan and Lebanon. Thailand was brought under military dictatorship by General Sarit Thanarat; in the process, although communist insurgents were purged, moderate dissidents were also silenced. Another general, Ibrahim Abboud, gained control of the Sudan and dissolved the nation's parliamentary form of government. The pace of upheaval seemed to be accelerating on a daily basis. Then, early in 1959, Fidel Castro deposed the Cuban dictator Batista and established a new government with himself as premier. In Laos, the Pathet Lao guerrilla force attacked government forces in the north, in response to which the United States government pledged financial assistance and arms. The Chinese Communists put down a Tibetan revolt and threatened war with India over disputed frontier territory. After more than 100,000 demonstrators marched on the government buildings in Seoul, South Korea, staging a pro-democracy protest, Syngman Rhee resigned the presidency (escaping under U.S. protection). The Turks fell victim to military dictatorship, while an independent Republic of the Congo was formally created. Within weeks, however, civil war erupted in the Congo, further evidence that Old World colonialism had done nothing to reduce the underlying tensions of tribal rivalries.

Onto this global stage in 1960 arrived the junior U.S. Senator from Massachusetts, now a candidate for the Office of President of the United States. The importance of his ascendancy into the arena of global politics has been debated endlessly ever since.

The Education of John Fitzgerald Kennedy

John F. Kennedy followed his older brother Joe to England in 1933 for a year of study at the London School of Economics under Harold Laski. Professor Laski was a graduate of Oxford and during the 1920s lectured at Harvard University. His book, The American Presidency, published in 1940, was highly regarded as a primer on the executive branch of government in the United States. We continue to struggle with many of the contradictions he identifies. Perhaps most importantly is this:

The big problem that is raised by the American method of nominating presidential candidates is whether it puts a premium … against the opportunity of first-rate men to receive consideration. …The answer to that argument is, first, that many first-rate men have become president by reason of the system; and second, that the reasons which stopped others would have been powerful reasons against their elevation in any representative democracy.[95]

We might ask ourselves whether 'people of color' and women continue to face an uphill struggle for recognition because of ongoing prejudice or because of the manner in which U.S. political parties are organized. Laski suggested to Americans that we consider eliminating the Electoral College and elect the President by direct national vote and that the President have a line item veto over the budget. Speaking more generally, he reminded Americans of the source of the nation's strength and warned them that much had already changed:

First, the United States is essentially a continent; the making of unity out of its various sections was bound, therefore, under any circumstances, to be a difficult adventure. Second, because it was, until the nineties of the [nineteenth] century, a civilization in which expansion was always internal and not external, the creation of safeguards against discontent was a relatively easy matter. Opportunity, at least in comparison to Europe, was boundless; there was abundance of land, there was no residuary feudalism, almost any taxes produced a surplus in the treasury. Few members of the working class expected to remain there; most of them enjoyed conditions far higher than anything the European peasant or industrial worker has ever known. The triumphs of the business man were, on any showing, immense; in three generations he had built a civilization out of a wilderness. Up to the Civil War, there might have been doubts and hesitations about the future of American civilization; there were none after the issue of secession had been decided. From the presidency of Grant onward, the United States seemed, to most, to have made a permanent bargain with fate. The less positive the action of government, the greater seemed to be the tempo of its development. Parties, therefore, adjusted themselves to an atmosphere in which weak government seemed the very condition of prosperity; and, since the weaker the government the greater was the leeway given to the power of the propertied interests, the more jealously the latter scrutinized any movement toward regulation. …

For something over a century they had every reason to believe that they were right. The system, on occasion, creaked and trembled; but, upon balance, within that period it resulted in a triumphant progress it is impossible not to admire. It was only after a century, when the epoch of abnormal expansion had begun to draw to its close, that analysis could suggest how real was the resemblance between the ends they had secured and the ends they had sought to avoid. For, having distributed authority, they found that, to cope with discontent, they had to bring it together again in order to prevent paralysis. …The relation of the great interests to Congress has not been so unlike the domination of the eighteenth-century Parliaments to the interests of the great landowners.[96]

After the outbreak of the Second World War, Laski hoped to shed light on the causes of discontent that permitted fascists to grab power. He saw the United States coming to increasingly resemble the Old World, burdened by "a leisured class with many of the habits, and much of the outlook, of the functionless aristocracy of Britain and France, above all with the same deep concern lest its economic privileges be invaded."[97] John F. Kennedy was, in fact, perceived as coming from this new leisured class, and his religion was Roman Catholic besides. Kennedy's exposure to Harold Laski's lectures was short-lived, forced to return to the United States after only one month because of serious health problems. He tried again at Princeton to resume his academic studies but was forced to leave school, again for medical reasons. After recuperating in Arizona, he returned in the summer of 1936 in time to return to school, this time at Harvard University. He was by all accounts a mediocre student, generally, while displaying a more serious interest in the subject of international law and the philosophies of Plato, Aristotle, Hobbes, Locke and Rousseau.

On the eve of the Second World War, Joseph P. Kennedy became Franklin Roosevelt's ambassador to England. The elder Kennedy was a loyal New Deal Democrat, but he was also an isolationist who gave Roosevelt a rather rough time. In Britain, Kennedy was described by one liberal and anti-appeasement member of Parliament, Josiah Wedgwood, as "a rich man, untrained in diplomacy, unlearned in history and politics, who is a great publicity seeker and who is apparently ambitious to be the first Catholic President of the United States."[98] The Kennedy sons accompanied their father to Europe, one result of which was that Jack returned to Harvard for his junior year with a much greater sense of purpose. In February of 1939, he began a seven-month personal assessment of Eurasia that exposed him to all of the Old World intrigues -- from Paris, to Russia to the Holy Land and Germany. Throughout this period he provided his father with detailed analyses of what he saw and heard. He later wrote his senior thesis on the course of events, policy decisions and internal pressures that culminated in Chamberlain's capitulation to Hitler at Munich. By this time he had managed to meet and spend some time with Harold Laski in London, from whom he apparently gained additional insights into the making of British foreign policy. His own thinking was beginning to diverge from that of his father, and he acknowledged Winston Churchill as having understood full well the necessity for readiness in a world filled with ruthless dictatorships.

Despite Jack's break with his father's brand of orthodoxy, the elder Kennedy used his influence to have Jack's senior paper published in book form under the title Why England Slept. Harold Laski, who did not see the final manuscript, expressed regret that such an obviously immature work was to be published, its only merit (in his opinion) being its authorship by the son of the U.S. ambassador to England. Herbert Parmet, on the other hand, identifies the enormous differences in style, tone and organization that distinguished the book from Jack's college paper:

[P]robably the most significant single difference relates to the problem of the international crisis and democracy. The thesis emphasized Kennedy's long-standing deliberations over the limitations of democracy vis-a-vis totalitarianism, doubts that had been especially reflected in his thinking while touring the Continent, when he had been impressed with the efficiency and order of fascism and speculated that democracy might be an unaffordable luxury. The finished book has a far different tone. It includes lyrical endorsements of democracy and views its preservation as the reason for rearming, rather than seeing it as an impediment to national security.[99]

Whether or not Jack Kennedy was fully responsible for the changes made to the text is relatively unimportant. He received good advice from people more politically astute than he could have become in so few years. What is important, is that the book launched him on his public career. After his discharge from the U.S. Navy and recovery from his wartime injuries, he began to give consideration to the postwar environment. At this point in his political development, he believed peace could only be preserved by an international agreement to control armaments. An arms race, moreover, would drain the United States of resources needed to modernize the nation and employ returning veterans.

Jack in this crucial period benefited significantly by his family's connections. He was able to gain a good deal of experience and exposure to world affairs in a manner that prepared him for the political arena and debate with those decades senior to him in age and public service. William Randolph Hearst hired him to report on the organizational conference of the United Nations and then the elections in Britain. By the following year, as he campaigned for his first elected office, his thinking began to once again change with circumstances; as a first-term Congressman, his committee assignment placed him in the first round of investigations into communist infiltration of the country's labor unions. This was to become the time when labor was purged of its more radical elements, and Jack Kennedy did what he could to nurture the mainstreaming of labor leaders into the Democratic party. Thus, although Kennedy held strong anti-communist beliefs, his voting record while in the House of Representatives was overwhelmingly pro-labor. Early on he made a determined effort to argue against the Taft-Hartley legislation because of the diminution of legal protections the bill would impose on labor unions.

When rising housing prices exacerbated an already tense situation in and around the cities, Kennedy advocated providing incentives to private developers and lending institutions to channel funds into new rental housing units subject to rent controls. Where the market failed to respond to demand, Kennedy was more than willing to use federal powers to intervene. He did not understand the theoretical aspects of political economy all that well, but he was learning how to stay in office by serving his constituency and making a national name for himself one issue at a time.

When dealing in theory, when lecturing about the nature of government, he fell back to the classical liberal doctrines held by his father that had come to seem conservative in the years since they were first formulated. Along with his Whiggish belief in the rule of the elite, he had the liberal's concern for the maximization of freedom for the individual. When considering social issues, he seemed to embrace the utilitarianism of Jeremy Bentham. At other times, when thinking about "free enterprise," he seemed to echo the words of Adam Smith. And behind it all were the ideas of John Stuart Mill, who had noted that the "struggle between liberty and authority is the most conspicuous feature in the portions of history with which we are earliest familiar. ..."[100]

He was emerging from obscurity to take his place as one of the important architects of an increasingly-interventionist liberalism. All along the way he had the interesting advantage of exposure to a number of individuals who embraced many of the public policy choices out of which liberalism was taking shape. For example, Jack's father recruited James Landis (dean of the Harvard law school) to join the Kennedy family advisory group. Out of constant debate within his circle of accomplished advisers, Jack's own political philosophy emerged, hardened by the process.

Driven by aspirations to national political office, Jack would be forced as a Catholic in a predominantly Protestant United States to deal with the extremely controversial constitutional questions related to the influence of religious orthodoxy on public policy. By extension, his Catholicism placed him squarely in the debate over all questions of the rights of minorities under the law. One such issue was the public funding of schools. In the United States, school districts raised taxes from all property owners to finance the public school systems. The property owner's obligation to pay had (and still has) no connection with either the number of the property owner's children attending the schools or with household income. Thus, parents of children attending private or parochial schools -- even those of quite modest means -- paid to support two school systems. Only the assessed value of whatever real estate one owned mattered. In the early 1950s, the U.S. Congress was considering the use of Federal funding to improve the quality of education, and one of the issues faced by Kennedy was whether any of this money ought to be channeled into the parochial school systems. Firmly grounded in liberalism, Kennedy never ventured beyond the centrist policy choices under consideration. He never questioned - publicly, at any rate -- the appropriateness of agents of the State assuming the responsibility for establishing schools, of creating an education hierarchy, of defining curricula, of certifying and hiring teachers -- and requiring that anyone who owns real estate in a given education jurisdiction be taxed to support the system according to some formula related to the market value of the real estate owned. As noted above, under this type of funding system, there is an assumption that all persons who own real estate of similar value have a similar capacity to support the schools. No direct consideration is taken for the taxpayer's housing debt, income level or number of children attending the schools. Kennedy did not question whether these laws were consistent with just principles. By the 1960s, the system was accepted as part of the American System. Most Americans, if asked, would probably have responded that they have never critically thought much about the virtues of publicly-funded, government-organized education -- and even less about the fairness of the manner by which the revenues are raised to pay the expenses of these schools. Communities attracted and held new arrivals in part because of their reputation for a high level of public services, and good schools were certainly important to the community. A community willing to tax itself to build modern schools and hire experienced teachers benefited all residents, and particularly homeowners, whose land value increased in response to rising demand for housing. A libertarian asks two questions. First, is the publicly-funded and administered system of schools in reality a threat to individual liberty; and, second, even if citizens agree to tax themselves to provide for the education of the young, is it not more consistent with liberty to provide parents with vouchers and allow them to use this funding to send their children to whatever schools they choose? In the Protestant-dominated United States of the 1950s, however, the majority of citizens were unmoved and unconcerned by these questions. Jack Kennedy's emergence as a national leader opened one particular set of church-state issues. Yet, even he was reluctant to dwell on the socio-political implications of his own challenge to the traditions of the American System.

Already, Kennedy was instinctively an Establishment Cold Warrior -- joining with the anti-communist hard core in blaming Rooseveltian naivete for the loss of Eastern Europe and Trumanesque bumbling for the collapse of Nationalist China. He rightly opposed and feared the liberty-destroying power of communism, but he also unthinkingly joined with other interventionist crusaders who judged despotism solely on the basis of short-term interests of the American System. He was sufficiently independent in his views to argue in 1951(after returning from a tour of the European continent) that the United States should demand from other NATO members a fixed proportionate contribution to support the defense effort. Equally important to the times, he also condemned what remained of Old World colonialism. First-hand experience gradually convinced him that the most potent force in Africa, the Middle East and Asia was nationalism and not communism. The question for the United States was how to link the desire of people for sovereignty to a respect for democratic processes and institutions. For Jack Kennedy, the opportunity to have something influential to say on such matters meant capturing a seat in the U.S. Senate.

By the time he announced his candidacy for the Senate, running against Republican Henry Cabot Lodge, Jr., Kennedy was also softening his views on the extent to which communists had and were influencing government policy in the United States. Joseph McCarthy was a family friend whose willingness to make unsubstantiated charges against people bothered Kennedy -- but not enough for him to speak out against McCarthy's tactics. At the same time, Kennedy lived amidst an intellectual community whose members held freedom of thought and expression as a supreme constitutional right. As the newly-elected Senator from Massachusetts, he began to create his own "brain trust," a group that included Harvard University economics professor Seymour Harris and a young attorney, Theodore Sorensen, who was already convinced that the Federal government needed -- and was legitimately empowered -- to play a far more interventionist role in the protection of civil liberties.

The Kennedy team took on as its first challenge development of an economic revitalization plan for New England. What they produced was something quite more, a program of national industrial development. Seymour Harris sold Kennedy on the need to protect New England's surviving textile mills with tariffs against low cost foreign producers and on the feasibility of making the St. Lawrence into a fully-functioning international seaway. Kennedy realized that promoting regionalism (i.e., using government largesse to create advantage to one part of the nation over others) might win votes for him in his home state, but would do very little in creating a full employment economy or enhance his reputation as a national leader. No state could put up barriers against trade and expect to survive as an export economy; other states (and other countries) would retaliate with their own trade restrictions as had occurred in the early 1930s. The answer, the Kennedy team agreed, was coordinated regional development.

At the same time as he broadened his views on domestic matters, Kennedy was also moving quickly to establish his own reputation as a national spokesperson on foreign policy questions.

As Kennedy looked closer at the nature of colonialism and the rise of ethnic nationalism, particularly in the Middle East and Asia, he reached conclusions very different from those of John Foster Dulles and others in the Eisenhower camp. He was most critical of the Eisenhower administration's continued support of the French in Indochina, where little was being spent on efforts to improve living conditions for the population or to achieve redistribution of control over land. Kennedy sought out the perspective of Edward Gullion, who had represented the U.S. Department of State in Saigon under Truman. He agreed with Gullion that the U.S. had seriously blundered by not championing the Indochinese cause for complete independence from the French. Ho Chi Minh might be a communist, but he was also the leader of the nationalist movement committed to throwing off external domination; and, United States assistance had been going to the French rather than the Vietnamese people. Despite the risks, however, Kennedy eventually joined with those U.S. leaders who feared that the loss of Indochina to the communists would destabilize all of Southeast Asia. He argued against a negotiated division of Indochina into separate states because (unlike the situation in Korea) there was no indigenous support for the leaders associated with the colonial regime. In April, 1954, as the French position deteriorated, Kennedy demonstrated in open session of the U.S. Senate just how much he had learned, arguing "that no amount of American military assistance in Indochina can conquer an enemy which is everywhere and at the same time nowhere, 'an enemy of the people' which has the sympathy and covert support of the people."[101] On this point, he was consistently joined in the press by Walter Lippmann, who feared that what was being lost in the dialogue was a willingness on the part of politicians fearful of losing power to investigate and address difficult issues. In The Public Philosophy, published in 1955, Lippmann attempted to arouse the thoughtful from their drift into conformity:

Strategic and diplomatic decisions call for a kind of knowledge -- not to speak of an experience and a seasoned judgment -- which cannot be had by glancing at newspapers, listening to snatches of radio comment, watching politicians perform on television, hearing occasional lectures, and reading a few books. It would not be enough to make a man competent to decide whether to amputate a leg, and it is not enough to qualify him to choose war or peace, to arm or not to arm, to intervene or to withdraw, to fight on or to negotiate.

Usually, moreover, when the decision is critical and urgent, the public will not be told the whole truth. What can be told to the great public it will not hear in the complicated and qualified concreteness that is needed for a practical decision. When distant and unfamiliar and complex things are communicated to great masses of people, the truth suffers a considerable and often a radical distortion. The complex is made over into the simple, the hypothetical into the dogmatic, and the relative into an absolute. ...[102]

Observing what he believed was a "massive popular counter-revolution against liberal democracy,"[103] Lippmann joined Robert Hutchins in warning that the principles of just socio-political arrangements and institutions were not being taught. He could have easily added that few of those who might do the teaching actually understood what those principles were.

The revolutionary mood of the twentieth century had become Jacobin and Marxist, with adherents who believed the good could only be obtained by sweeping away all that had existed, all that had sanctioned past oppressions. They would then rely on the inherent goodness and wisdom of the people to create the just society (after exterminating any and all opposition by whatever force was required to do so). These attitudes and feelings were 180 degrees apart from the world view shared by most citizens and leaders in the United States, where neither transnationals nor the Remnant were advocating more than incremental change.

What Lippmann, Hutchins and others came to accept was that the Democracy had been unprepared for the avalanche of immigration, the cultural diversity and the demand for continuous improvements in living standards that stressed socio-political institutions relatively unseasoned by time and refinement. The generation of Jefferson and Paine had codified, but only in a compromised form, the moral sense philosophy nurtured by reason and experience. The distance between the ideal and the real appeared immediately because there was no means by which communities could replicate in the form of citizen education the wholesale adoption of universal values. There came a point in time, although Lippmann does not describe the conditions, when the safety valve of the frontier disappeared and the monopolistic qualities of agrarian and industrial landlordism began to stamp out the social fabric born of equality of opportunity. The consequences, he concluded, were everywhere to be seen:

As long as it worked, there was an obvious practical advantage in treating the struggle for the ultimate allegiance of men as not within the sphere of the public interest. It was a way of not having to open the Pandora's box of theological, moral and ideological issues which divide the Western society. But in this century, when the hard decisions have had to be made, this rule of prudence has ceased to work. The expedient worked only as long as the general mass of the people were not seriously dissatisfied with things as they are. It was an expedient that looked towards reforms and improvements. But it assumed a society which was secure, progressive, expanding, and unchallenged. That is why it was only in the fine Victorian weather, before the storm clouds of the great wars began to gather, that the liberal democratic policy of public agnosticism and practical neutrality in ultimate issues was possible.[104]

Lippmann should have added that what the leaders of the social democracies -- and, in particular, those in the United States -- were doing their best to institute was stability by means of a massive program of government spending on physical infrastructure, supplemented by rising spending on social welfare programs. In some instances this was also accompanied by a willingness to tinker with varying degrees of nationalization. None of this had escaped the attention of a Jack Kennedy determined to gain experience and expertise in the shortest amount of time possible.

Rising in stature as an outspoken critic of the conventional wisdom of the moment, Kennedy had the enormous advantage over all but a handful of Americans by having seen first-hand conditions in much of the Old World. Moreover, his family and college connections offered a ready supply of internationalists to question and put his ideas to. By the mid-1950s, he was in a position to counter any apologists for state socialism sufficiently bold as to suggest Stalinism had been an aberration. He was becoming a sophisticated spokesperson of the restless, but patriotic generation of Americans who became adults during the Second World War and were eager to have more of their own generation assume positions of influence and power from the old guard. The more they heard of Jack Kennedy the more they identified with him and with his call to public service, which he set forth in the early pages of Profiles In Courage:

Today the challenge of political courage looms larger than ever before. For our everyday life is becoming so saturated with the tremendous power of mass communications that any unpopular or unorthodox course arouses a storm of protests such as John Quincy Adams -- under attack in 1807 -- could never have envisioned. Our political life is becoming so expensive, so mechanized and so dominated by professional politicians and public relations men that the idealist who dreams of independent statesmanship is rudely awakened by the necessities of election and accomplishment. And our public life is becoming so increasingly centered upon that seemingly unending war to which we have given the curious epithet "cold" that we tend to encourage rigid ideological unity and orthodox patterns of thought.

And thus, in the days ahead, only the very courageous will be able to take the hard and unpopular decisions necessary for our survival in the struggle with a powerful enemy -- an enemy with leaders who need give little thought to the popularity of their course, who need pay little tribute to the public opinion they themselves manipulate, and who may force, without fear of retaliation at the polls, their citizens to sacrifice present laughter for future glory. And only the very courageous will be able to keep alive the spirit of individualism and dissent which gave birth to this nation, nourished it as an infant and carried it through its severest tests upon the attainment of its maturity.[105]

Courage meant, in one instance, opposing farm price supports that benefited corporate agribusiness at the expense of consumers and small, family farmers. On another front, Kennedy ignored the analysis of Harold Laski and argued successfully against reform or elimination of the Electoral College system. As the commencement speaker at Harvard University in 1956 he praised the intellectual and scholarly nature of the nation's early political leaders and called for renewal of enlightened, learned leadership. At the same time, he was becoming increasingly influenced by the plight of the underprivileged and receptive to the application of government remedies (although such remedies remained conventional in design, directed at mitigating rather than solving problems). Thus, he supported government-funded health care for senior citizens, minimum wage standards, a stronger role for workers in the operation of business and greater protection of the public domain from private exploitation. Consistent with the agenda of liberalism, Kennedy also advocated strengthening the public school system. Worthy of mention is that in these last few years of stature-building, his team of advisers was frequently joined by economist John Kenneth Galbraith.

Kennedy took the lead in urging on the United States a clear moral position against continued French colonial rule in Algeria, causing the Eisenhower administration no small degree of discomfort. Remarkably, a considerable degree of sympathy for Algerian independence existed among the French themselves and within the world's community of transnationals. By their standard, Kennedy was demonstrating real courage in the face of the combined energy of powerful defenders of the status quo. Yet, Herbert Parmet tells us that Ted Sorenen felt Kennedy's positions were determined more by what was politically expedient than by any adherence to principles linked to fundamental human rights. This certainly seemed to be the case based on his timid position on questions of equal protection under law for African-Americans and other minorities. Georgists also wondered whether Mr. Kennedy could bring himself to challenge the entrenched privileges enjoyed by the landed. Roosevelt brain-truster Raymond Moley took time out in 1960, for instance, to give the Presidential candidate some advice on how to deal with demands by city officials for federal highway funds:

The issue comes down to the simple point that, with some exceptions, cities which are rich enough and busy enough to have traffic problems have the resources to bear a considerable part of the burden of street improvement.

While they are screaming for federal aid, the Holy Grail of relief is right in their midst, to be captured if the authorities and the people who elect those authorities have the courage to make use of it. ...

When federal money goes into what is called "urban renewal," land values are enhanced, and the major profits go to speculators. In a recent article in Newsweek about Joseph P. Kennedy ... it is stated on good authority that the father of the candidate "made $100 million in New York real estate alone."

Thus Congress gives and landowners receive. That sort of thing is why cities pretend to be unable to remedy traffic conditions and eliminate slums and the mayors run to Washington for help.[106]

When Richard Nixon debated John F. Kennedy on September 26, 1960, Mr. Kennedy briefly skirted around the idea that the collection of property taxes was closely related to the quality of education provided in a community. Galbraith (who had spent the better part of three years bringing Adlai Stevenson up-to-speed on economic policy choices) writes that the young Senator occasionally called on him to discuss economic policy but offers no insights into Kennedy's grasp of fundamentals. Needless to say, few with the Georgist community (and about as few within the Remnant as a whole) were impressed by Kennedy's proposed solutions to economic problems.

More and more, as his health permitted, Kennedy was called upon by Democratic Party stalwarts to hammer away at the shortcomings of the Eisenhower administration and the Republicans generally. Under Sorensen's direction, Galbraith, Arthur Schlesinger, Jr., Seymour Harris, Paul Samuelson, Walt Rostow, Daniel Ellsberg, Henry Kissinger and several other professors were brought together as an Academic Advisory Committee with whom Kennedy began to meet every so often. While they participants added depth to the discussion of specific national and international issues, they exercised no discernable influence over Kennedy's thinking. By this time he was quite confident and comfortable with his own powers of reasoning.

Historian Allan Nevins and civil rights lawyer Harris Wofford, Jr. soon began compiling Kennedy's foreign policy speeches into a book first published in 1960 under the title, The Strategy Of Peace. Here was Kennedy's world view unfolding over the course of five or six years; and here one found a key point of departure from the cynical adoption of anti-communist interventionism as justification for the worst manifestations of the American System:

If the title deeds of history applied, it is we, the American people, who should be marching at the head of this world-wide revolution, counseling it, helping it to come to a healthy fruition. For whenever a local patriot emerges in Asia, the Middle East, Africa, or Latin America to give form and focus to the forces of ferment, he most often quotes the great watchwords we once proclaimed to the world: the watchwords of personal and national liberty, of the natural equality of all souls, of the dignity of labor, of economic development broadly shared. Yet we have allowed the Communists to evict us from our rightful estate at the head of this worldwide revolution. We have been made to appear as the defenders of the status quo, while the Communists have portrayed themselves as the vanguard force, pointing the way to a better, brighter, and braver order of life.[107]

As a candidate for the office of President of the United States, Jack Kennedy offered the promise of leadership independent from the owners of laissez-faire interventionism. "John F. Kennedy proved," Richard Hofstadter wrote shortly after the victory over Richard Nixon, "what perhaps should not have had to be proved again -- that the reading of books, even the writing of books, is hardly a fatal impediment for a presidential aspirant who combines a reputation for mind with the other necessary qualities."[108] More accurately, perhaps, was that Kennedy cultivated and relied upon the aura of intellect in a way none of his predecessors had -- almost going back to Adams, Jefferson and Madison. In numerous ways, he articulated the central beliefs of their socio-political philosophy, even if he did not fully comprehend the depths of agrarian and industrial landlordism into which the nation had fallen. Galbraith later wrote of Kennedy that "no leader ever learned more quickly from experience."[109] Walter Lippmann, after observing Kennedy's maturation in the Senate, was also hopeful the new President could lead the nation (and the social democracies) out of the quagmire of global confrontations and into a new era of security and prosperity.

Elected to office by the narrowest of margins, Kennedy was hardly in control of his own destiny let alone that of the nation. Despite his respect for the young President, Lippmann was not all that sure Kennedy could pull off a rapprochement with the communist world or bring equality of opportunity to the United States:

As of now, there are many more people who like John Kennedy, and his appointments, and his style of operating in office, than there are people who understand and believe in what he is committed to doing. He will have to close this gap; he will have to persuade the large majority who like him that they must also believe in him. ...

... He is committed to positive programs that require new laws and new appropriations and perhaps new taxes. His predecessor was primarily interested in undoing rather than in doing. High personal popularity with a passive and negative program makes for an easy life. But personal popularity is not enough to carry with it an active and innovating program.

The President will have to find ways of communicating his own convictions to a working majority of the people. ...There is a missing element in his press conferences, his speeches, and his public appearances, and for lack of it he receives much approval without creating sufficient conviction.

That missing element is, I think, the willingness to take the time and to take the trouble to explain, to expound, to describe, in a word, to teach. ...He must also be a popular teacher. The greatest leaders are also great teachers.

The instinct to teach, to make himself understood because he has explained himself, has not yet shown itself in the President. I say not yet because I have no doubt that this instinct to teach is in him. It is in every man who has deep convictions and a passion to realize them.[110]

A month after the election, Kennedy visited Lippmann to ask his advice on who to choose for the job of Secretary of State. After listening to Kennedy cover the problems connected with nominating Arkansas Senator J.W. Fulbright (viewed by civil rights activists as a segregationist and racist), Lippmann suggested McGeorge Bundy, dean of the Faculty of Arts and Sciences of Harvard University. In the end, Kennedy chose Dean Rusk (who had served as Assistant Secretary for Far Eastern Affairs under Dean Acheson and was in 1960 president of the Rockefeller Foundation). Bundy became special assistant for national security affairs. Galbraith helped to recruit Walter Heller as Chairman of the Council of Economic Advisers, then departed for India as Kennedy's new Ambassador. Heller added James Tobin of Yale and Kermit Gordon of Williams College to the Council; all three were dedicated advocates of Hansen-Keynesian demand management fiscal and monetary policies. Another economist, David E. Bell of Harvard, became Kennedy's budget director. Douglas Dillon was kept on as Secretary of the Treasury from Eisenhower's cabinet. And, Robert MacNamara left Ford Motor Corp. to become Secretary of Defense.

When Kennedy began the first year of his Presidency, official unemployment in the United States was stated to be 8 percent. By almost everyone's definition, the nation had fallen into recession. The value of imports greatly exceeded exports, creating a balance-of-payments deficit. All things being equal, the outflow of currency into the hands of foreigners ought to have had a neutral or even deflationary effect on prices. Common sense suggests that with fewer dollars in the hands of domestic consumers this would alter the ratio between the demand for goods and services and the quantity of dollars to go around. However, because national governments had historically equated the amount of gold bullion in reserve with national wealth, foreign governments took the opportunity of so many dollars coming into European central banks to build up their own gold stocks - returning the surplus dollars to the U.S. Between 1958 and 1961, foreign governments exchanged their U.S. dollars for $6.3 billion worth of gold at the fixed price of $35 per ounce. Eisenhower's commitment to reign in Federal spending had been very strong, and he used the revenue from gold sales to help balance the budget. Domestic employment languished in the face of continued rising imports and modest investment by industry in capital goods.

Walter Heller proposed to Kennedy a tax cut to stimulate private spending, and Arthur Goldberg urged spending on public-works projects. Kennedy, however, was not yet ready to sacrifice Eisenhower's hard won effort to achieve a balanced budget as the primary approach to reducing unemployment. Instead, he proposed investment tax credits. Neither Kennedy nor his economic advisers had apparently joined with Harvard economist Arthur Smithies, whose 1960 paper[111] argued that attempting to balance the budget on an annual basis was both inefficient and counterproductive to the long-range character of many government programs. Unfortunately, neither had they given any thought to Harry Gunnison Brown's extensive analyses of the relationship between business cycles and tax policy.

Economists were still not all that confident that demand management tools could flatten the business cycle. Government interventions had achieved mixed results, and individuals in the United States controlled something close to $1 trillion in liquid assets (currency, stocks, bonds, mortgages, bank deposits and other claims on physical wealth). Just since 1953 the dollar value of these assets had increased by more than $400 billion. Stocks alone accounted for more than a third of the total. This did not mean, however, that businesses had received a massive infusion of financial reserves with which to build state-of-the-art plant and equipment, expand into new markets and hire new employees. Companies and individuals holding shares of stock experienced paper gains, but only those companies who sold stock during this period of rising prices became more solidly capitalized. Some would wisely use the cash to retire debt and in that way strengthen their balance sheets (a strategy that in the 1980s would expose companies to purchase by speculators who recognized the potential to take in enormous profits by acquiring companies and selling off land held for decades on the corporate books at cost and currently worth tens or hundreds of times the book value). Overall, however, business investment was far below that necessary to bring down unemployment to a manageable level. In the face of a continued stagnating economy, Walter Heller called for either greater government spending or tax cuts. In addition to the investment tax credit, Kennedy supported significant reductions in tariffs in an effort to stimulate foreign trade. At the 1961 annual conference of Henry George Schools, held in Hartford, Connecticut, E.C. Harwood (director and founder of the American Institute for Economic Research at Great Barrington, Massachusetts) assessed the quality of advice Kennedy was receiving:

Heller ... participated with other Keynesians in recommending to European nations features that are repeated in their advice to the United States today. This includes more spending and less concern about inflation. West Germany chose to disregard that advice, to do the opposite in fact; and the results are evident for all to see: a "miracle" of economic recovery, sustained prosperity, and economic growth at a rate not approached in the United States since our nation applied similar policies in the decade and a half after resuming the gold standard in 1879.

Some economists in Washington appear to be Socialists determined to create a "welfare state" managed by themselves (or as they advise) instead of the constitutional republic originally created as the United States. ...

The fact that many in government positions appear to be Fabian Socialists and that most of Mr. Kennedy's economic advisers were trained at Harvard are disquieting, when one remembers that the principal Communists exposed in government agencies were composed largely of graduates of the same university, as also were Alger Hiss and Harry Dexter White.

Many Harvard students became indoctrinated with the belief that the capitalist system was dying and that it would be superseded by the "wave of the future," a form of government intervention and "planning." ...[112]

I suspect that Harwood's broadside against the teaching being done at Harvard University left some of his listeners feeling rather uncomfortable. We need not revisit the complex nature of the actions of either Alger Hiss or Harry Dexter White. Where Harwood was unquestionably correct in his concerns that massive borrowing and ongoing deficits would eventually jeopardize what was left of individual liberty and equality of opportunity for U.S. citizens. The beneficiaries of entrenched privilege were determined to prevent any erosion of their personal fortunes even as government's appetite for wealth consumption expanded. They were determined to make sure that if the welfare state was on the horizon, the cost would be borne by actual producers whose incomes offered a ready source of taxation.

One of Kennedy's more interesting appointments was that of Senator Paul Douglas to head a task force on providing assistance to the nation's poorest citizens. Douglas helped to revive the depression-era food stamp program and worked to bring industry into regions where unemployment was consistently high. Douglas, trained in economics at Columbia and Harvard Universities, was also friendly to reform of the real estate tax in accordance with Georgist proposals. Unfortunately, as he later recalled, he believed "the issue involved local and state governments, rather than national,"[113] and so remained silent on the subject while in the U.S. Senate. He added this curious remark to his memoirs:

When I pass before the Great Judgment seat, I hope Saint Peter may forgive my silence as a senator on the increase in land values and accept my later efforts as at least partial atonement.[114]

What Douglas meant, I believe, is that he made no effort to convince Kennedy that a relationship existed between poverty and the private appropriation of land rent, and so let close a very real window of opportunity. From the wilderness, however, others less concerned with the possible stigma of advancing Henry George's analysis and policy proposals continued with their efforts to reach public officials, academics and activisits. Shortly before his death at age 73 in August 1961, economist (and Georgist) Glenn E. Hoover delivered a stinging attack against the assertions of Kennedy's "New Frontier" policy agenda. He reiterated the relation to just principles by which "reformers have demanded that the socially created value of land be taken by society,"[115] then went on to express his concern over the "decline in the self-reliance of the individual"[116] so intimately attached to the adoption of welfare state programs. Ironically, one of liberalism's new architects and now the U.S. Secretary of State, Dean Rusk, had taught alongside Hoover at Mills College in Oakland, California.

Harry Gunnison Brown also continued with his warnings against the adoption of Hansen-Keynesian demand management policies. In 1955, Lucas Brothers published the third edition of his Basic Principles of Economics, a statement that at least some students of economics were still learning something of classical political economy, and of the importance attached to distinguishing nature from what was produced from nature (i.e., the difference between the source of wealth and wealth) where property law and public policy (especially taxation) were concerned. His calls for rational tax policy and his challenges to Keynesian interventionism continued to appear regularly in the American Journal of Economics and Sociology. Unfortunately, fewer and fewer of his colleagues were listening. Even those who essentially agreed with him were unwilling to jeopardize their careers and professional standing to boldly sail against the wind. In one of his articles reprinted in the Henry George News,[117] Brown reminded the converted that Keynes had conveniently ignored the influence of tax policy on the individual's decisions to hoard, invest or sell assets. His challenges were lost in the sea of interventionist writings pouring out of universities and think tanks.

Even before John F. Kennedy was elected to the U.S. Presidency, E.C. Harwood was already deeply concerned over the expanding acceptance of the Hansen-Keynesian approach to achieving full employment and sustaining economic growth. He pulled together the editorial staff of the American Institute for Economic Research to prepare a penetrating analysis of conventional wisdom on economic matters. Interestingly, as this group of unrepentant monetary reformers traced the development of economic policy during the twentieth century they applauded creation of the Federal Reserve System as a step in the direction of a sound national banking structure. They recalled how the Federal government had, predictably, resorted to massive borrowing during the First World War, which prevented the Federal Reserve Banks from limiting monetary expansion. Apologists for deficit spending argued the public would not stand for the level of direct taxation required to pay for the war. In the atmosphere of wartime production, the result, of course, was widespread price increases during the war and immediately thereafter, followed (in the wake of Europe's return to peacetime production) by reduced demand for surplus agricultural and other goods, falling prices, rising unemployment and bank failures. In response, the Federal Reserve Banks adopted a strategy of prolonged monetary expansion during the remainder of the 1920s, a direct consequence of which was runaway land and stock market speculation that eventually resulted in a deeper and more profound collapse. The Second World War was similarly financed with borrowings, creating a $70 billion national debt that - without taxing away unearned income and windfall profits -- could not be easily retired by taxation without short-circuiting the transition of production to consumer goods. An expansionary monetary strategy accommodated rising prices and also allowed repayment of the national debt with dollars dramatically reduced in purchasing power. One might argue, therefore, that the postwar inflation was redistributive -- from those who were able to put aside income for investment purposes in U.S. government securities, in favor of taxpayers whose earned incomes were being taxed to cover the interest payments on the debt.

Throughout most of the 1950s, the Federal government had managed to balance the trade-off between inflation and unemployment with some finesse. Structural problems were effectively hidden by a general prosperity kept going by broadly-held savings. For those who owned homes, land, businesses, shares of stocks and bonds, inflation brought paper gains in their net worth. A growing number of people received shares of stock as part of their pension plans. When inflation and rising incomes combined, the burden of long-term home mortgage debt was softened. Economists recorded that real income had grown by almost 30 percent since 1947. Thus, for more and more U.S. households, their financial future seemed reasonably secure. These circumstances were less important to Harwood and his associates than the accompanying expansion of government's intervention in the market system:

By no means the least of inflation's effects has been the subsidizing of that proficient spendthrift, the Federal Government, with increasing taxes seemingly almost painlessly extracted from continually increasing personal incomes and business profits. The huge sums so easily obtained have fostered national delusions of economic grandeur. Grandiose plans for aiding other nations and silly schemes for remedying our own internal problems such as those of agriculture have been fostered by politicians seeking votes and by exuberantly confident bureaucrats who have, it must be conceded, at least the ability to spend money rapidly if not wisely. In fact, so lavish was the giving and "lending" to other nations that ... we managed in a single decade to give foreigners demand claims on nearly all of the Nation's basic gold reserves.[118]

The Harwood team stated the historical case against the "controlled economy" on the basis of lost efficiency and declining economic growth. The British experience was one strong indicator of how poorly an economy performed under the weight of heavy bureaucratic intervention or direct management by government. Improving economic performance could come only one of two ways: allowing individual liberty to operate in the realm of wealth production and exchange; or, creating a totalitarian regime under which liberty was fully extinguished.

To those who might point to Sweden as the success story of democratic socialism, Harwood's team simply compared the percentage increase in industrial production in West Germany (79 percent) against that of Sweden (15 percent) for the period 1950-1955. There were other differences, of course, besides the degree to which government was involved in directing the economy; yet, how could this tremendous difference in output be ignored? Spending by the U.S. government during the 1930s had not, they reminded readers, provided the underpinning of a general economic recovery. Before the orders for war goods started rolling in, some ten million Americans remained unemployed. As for those who now either clung to neo-classical economic theory or jumped on the Keynesian bandwagon, the Harwood team sought to bring them back to earth:

The science of economics is relatively immature. Much that is published on the subject, including supposed remedies for recessions, has no more scientific standing than the notions of the itinerant medicine men who sold health elixirs to a gullible public a few decades ago.[119]

How, they wondered, could anyone listen to Paul Samuelson's assertion that the United States or any nation would benefit by a steady increase in prices; that is, a steady erosion in purchasing power. Rather, the objective of public policy ought to be full employment without inflation, achieved by "[r]estoration of free markets" where everyone is "free to buy and sell at prices agreed upon themselves without government intervention, subsidies, or controls."[120] After also calling for the return of a gold-backed currency, they boldly pulled alongside Harry Gunnison Brown and other Georgists in condemning the privileges granted to the landed:

Holders of special privileges, especially those related to monopolies of natural resources (including land), under existing customs and laws acquire, at the expense of the producers, an expanding portion of the wealth currently produced. This situation results in increasing the number of underprivileged members at the base of society from whom communism derives its voting strength (but not, of course, its intellectual "front"), and it diverts from producers some of the means that could be used to increase production. Because the situation in this respect is more acute in various other countries, for example Italy, many observers see the problem there more clearly. Nevertheless, this problem is evident here in the United States and seems destined to become far more acute as the temporarily stimulating effects of prolonged inflation diminish.[121]

The reforms advanced under Harwood's direction were designed to reign in the ability of government to spend beyond its willingness to impose taxation. Neither hoarding, speculation, privilege (nor production) would be subsidized by some citizens to the benefit of others. And, as inflation was eliminated from the economy, prices would stabilize then gradually fall. For those who earned their livings -- from labor or investment in capital goods -- their purchasing power would rise, and their standard of living improve. The process would require a decade to complete, the end result being the elimination of "long-existing maladjustments that have thwarted our efforts to progress toward the ultimate goals of a freely competitive (and therefore perfectly cooperative) society with equality of opportunity for all."[122]

Harwood expressed his deep disdain for Hansen-Keynesian economic policies in his review of the fifth edition of Paul Samuelson's introductory text on the subject, which was published in 1961. Samuelson had retreated from his earlier position that an annual 5 percent rate of increase in prices would be a desirable objective of economic policy makers. By 1961 he urged that price increases be kept to below 2 percent. The strength of Harwood's attack was to show that during the last quarter of the nineteenth century -- the period of the most rapid growth for the U.S. economy -- there had been a 40 percent decline in commodity prices. In a 1959 article similarly countering the Hansen-Samuelson stabilization proposals, economist Jules Backman also reminded readers of the fallacies inherent in the neo-Keynesian strategies:

History does not support the assumption that economic growth must be accompanied by rising prices. Economic growth has occurred in many periods of stable or declining prices. ...On the other hand, from 1955 to 1957, when prices crept upward almost 3 per cent a year, national output rose less than 2 per cent annually.[124]

Backman recommended a more appropriate balance between the objectives of full employment and price stability. Achieving this balance would, he asserted, require that the power of unions be reduced by limiting their ability to strike and by setting limits on the size of an individual union. Harry Gunnison Brown had already explained why these types of measures would not work. Most of his colleagues -- even those most critical of Keynesian intervention -- totally ignored the consequences of taxation on the economy. On the one hand there was the over-taxation of physical assets and income flows generated by labor and investment in capital goods. On the other hand was the under-taxation of unearned income flows from land holdings (and other forms of economic license).

The attention of economists, generally, was focused on the technical aspects of how to effectively manipulate and control growth or contraction of the supply of money and credit. Inflation, they reasoned, was best controlled by reducing the demand for money, which, in turn, was best achieved by pushing up the cost of borrowing. Higher earnings on savings or investment in government securities would divert disposable income from higher income consumers. Institutional investors would move some financial reserves from shares of stocks as well. The end result would be a lessening of demand pull on prices, perhaps even a fairly general fall in prices. Some economists warned that one could not always predict this outcome in response to changes in monetary policy. In response, Lawrence S. Ritter wrote in 1961 that Hansen and other "orthodox Keynesians" had advanced a simplistic view of the monetary system and individual responses to real or expected changes in comparable returns on various forms of investment. Yet Ritter, too, failed to identify land as a material component in the equation. If holding gold, the world's traditional storehouse of value, was illegal in most countries, the individual investor more than ever needed to play the land market as a close (and sometimes superior) alternative. What Ritter should have looked at was the relation between the effects of bank loans made available for land acquisition and the demand pull such lending had on the price of land. Unfortunately, Ritter was too caught up in the technical issues to think clearly about a factor of production he and most of his professional colleagues declared did not exist:

[I]f monetary policy is to be effective -- i.e., if changes in the money supply are to produce changes in aggregate spending, and thus in income -- then velocity must either remain more or less stable or else move in the same direction as the money supply.

If the phrase "money matters" is to have any operational meaning, it must imply the existence of such conditions.[125]

Not long after John F. Kennedy was inaugurated as President of the United States, a report on the monetary system was published by the Commission on Money and Credit. The work of this commission had taken four years and strongly recommended greater coordination of economic policy within the Executive branch of government. Their assessment of past practices indicated that stabilization could be achieved only by the timely management of both fiscal and monetary policy tools, but they offered no solutions of a structural nature (a point soon made by economist G.L. Bach of Stanford University). If the policy objective of government was, in fact, full employment without inflation, then the commission had contributed very little to the discussion.

Other than E.C. Harwood and his team at A.I.E.R., one of the most original monetary theorists of the postwar era was an obscure writer named Edwin C. Riegel, who in the 1940s founded the Valun Institute for Monetary Research. Riegel had spent most of his adult life crusading as a consumer advocate. Then, in the midst of the depression era, he began to focus his energies on economic policy and theory. In 1935, after obtaining from Irving Fisher a list world's top monetary economists, Riegel organized a symposium that included Fisher and, among others, Harry Gunnison Brown. The transcript, published in book form under the title, The Meaning of Money, revealed enormous disagreement over fundamental principles and assertions. From his own analysis of the U.S. monetary system, Riegel concluded that only by privatization of the monetary system could the powers of competitive markets truly be unleashed. He put his ideas into book form, which he titled Private Enterprise Money. Published in 1944, this book circulated broadly among others concerned with government's renewed habits of deficit spending and the self-creation of credit. In 1949 he published another of his own essays, The New Approach to Freedom, which restated and further clarified his case. "Man's ignorance of the laws of money has blinded him to the very touchstone of freedom," he wrote, "without which the state cannot be curbed or his own capacity for progress and prosperity facilitated."[126] One of his most poignant insights into the very nature of money relates to the distinction between commodities (including precious metals) pledged to back paper currency and coinage produced with specific metallic content and circulated directly:

Money ... has not value, and this is not any less true of currency. Money merely permits value in the abstract, dissociated from any specific commodity, to be exchanged for an equivalent value in any commodity at any time or place, at the behest of the holder. While metallic coins are useful as currency for small transactions or making change, the fact that they may have intrinsic value does not, therefore, make them superior to paper as money. Indeed, the reverse is true. For to the extent of their intrinsic value, they are not money at all, but instruments of whole barter. They are only monetary (split-barter) instruments for the balance of their face sum. A commodity can never act as money, for the very purpose of money is to obviate the necessity of transfer of value from the buyer to the seller and, thusly, to escape the limitation of whole barter and gain the freedom and facility of split barter.[127]

What government does, Riegel explains, is practice a form of legalized counterfeiting. The State declares for itself the power to issue paper currency, which it requires private individuals and entities to accept in payment of obligations, but "offers nothing on the market with which to redeem them."[128] One consequence of this usurpation of power in the initial stage is the gradual withdrawal of certificates of deposit backed either by precious metals or other commodities (i.e., sound money) by those in possession, who pass off on those in a weaker competitive position the new paper currency. While nominally denominated the same as sound money, the exchange value of unbacked paper currency is based partly on confidence in government and partly on the coercive police power of the State. If the law requires, for example, that all taxes be paid to the government only in legal tender, and that only legal tender will be paid to government employees or vendors doing business with the government, only those who engage in the illegal, underground economy materially escape from the direct effects of this arrangement. World federalists were urged by Riegel to take note that so long as sovereign governments, or a global confederation government, retained control over the monetary system, there was little to be gained by consolidation of many corrupt systems into one giant system operating against just principles.

From his own small corner of the wilderness, Riegel carried on a determined dialogue with many members of the Remnant as well as the mainstream Establishment. Spencer Heath MacCallum, who spent a decade organizing and editing Riegel's papers, included some of this correspondence at the end of Riegel's major (but until 1978 unpublished) work, Flight From Inflation: The Monetary Alternative. Interestingly, Riegel viewed the debate over specie versus fiat money as a side issue, to be resolved by preferences demonstrated under competitive conditions; his primary argument was that money had to be nonpolitical. In 1949 he wrote to Mildred Loomis (an activist working under the direction of the Decentralist philosopher Ralph Borsodi) declining her invitation to work with her to incorporate monetary reform into a more holistic program for societal change. In letters to John Chamberlain and Ludwig von Mises written in 1952, Riegel warned that without freeing the monetary system from government control all else would in the end fail to free the individual from the coercive power of the State. In another letter that year, he criticizes Frank Chodorov for clinging to the false virtues of the old gold standard -- what Riegel viewed as a continuation of paternalism -- and not recognizing the need for wholesale privatization. He would not have been surprised to learn that the coming decades would bring little change, despite what in hindsight is an extraordinary period of irresponsibility on the part of one government after another. The global citizenry remains insufficiently organized against the legal tender onslaught; however, the arrival of the electronic, cashless economy may soon shift the balance of power in favor of a privatized monetary system. We are, perhaps, on the verge of a new era in which Gresham's Law is made to work in reverse; that is, in which good money drives out bad and in which governments are forced by live by private sector monetary rules rather than the reverse. The debate over whether this change is desirable or dangerous continues.

Riegel was one of the very few analysts of the period to forecast problems for the U.S. economy as a result of sizeable fluctuations in the purchasing power of U.S. currency. Ralph Borsodi also contributed a powerful (and broadly read) criticism of the postwar economic structure emerging out of the Bretton Wood Conference. Borsodi later wrote that despite extensive sales of his book,[129] "nobody in power in Washington and nobody in the prevailing Keynesian establishment has paid any attention to my call for the establishment of a stable dollar."[130] Economists advising politicians in the Eisenhower and Kennedy administrations were hardly going to advance programs for reform that would diminish their ability to manipulate the economic system to achieve political objectives. That did not deter others outside the political arena, such as Yale economics professor Robert Triffin, from vigorously attacking policy decisions he thought counterproductive or destructive.

Investment by Western European producers in modern industrial plant had finally reached the point where they were more than competitive with U.S. producers. By 1958, for example, U.S. manufacturers were importing large quantities of finished steel from Europe. At the same time, U.S. prices had been rising against those of the Europeans. From the perspective of mainstream U.S. policy makers, this presented an unattractive reversal of fortunes, where the value of imports significantly exceeded that of exports. The currency market was responding by driving down the exchange value of the U.S. dollar. In an effort to maintain parity, European central banks kept buying surplus dollars from those who received them. The French, in particular, then began using these dollars to purchase large quantities of gold from the U.S. government. Triffin observed that higher interest rates in Europe, volatile gold prices and shifting exchange rates between currencies were pulling currency reserves out of U.S. banks and away from investment in U.S. government securities and into the European economies. He was ready with a warning:

While we must, of course, continue to watch the course of our current over-all balance between foreign earnings and foreign expenditures, the most urgent threat to the dollar today lies in the volatility of the short-term investments funds which can move nearly overnight from one currency into another or into gold. A full understanding of this danger and of the measures that can be taken to ward it off, requires a thorough re-examination, not only of our own balance-of-payments problem, but of the working of the international monetary system itself since the collapse of the nineteenth-century gold standard nearly a half century ago.[131]

Triffin observed that underneath this volatile currency exchange market there was a complex web of cross-investment that tied the global economy together. A growing list of companies were already operating multi-nationally, with revenues obtained in many countries and in many currencies. Investors with large financial reserves sought out the highest returns on shares of stocks and bonds in markets all around the world. He saw the U.S. monetary problem differently, as a mismatch between "lending long -- and even giving funds away -- while borrowing short and losing gold."[132] The almost automatic domestic consequences included the disappearance of profit margins, reduced production, a steady rise in unemployment and increased demands on government to provide a social welfare safety net.

Under the existing international economic structure, there was really no long-term solution to the problem. And, even Triffin did not fully understand the underlying causes of the business cycle and its movement from one country to another - or one region to another region within the same country. He argued for the adoption of one system of international money and credit as roughly equal to the much less practical return to global use of gold in coinage form. How could rational people believe that digging gold from the earth in order to bury it in heavily-guarded vaults was a productive use of labor and capital, he wondered? But, if currency in circulation was not in the form of certificates of deposit, then how could the issuance of such currency be justified? Political leaders anxious to be freed from the constraints of a commodity-backed currency and having to limit spending to the revenue taxation would yield or what private currency holders were willing to lend to government managed a justification. They argued that national interests dictated the continued restriction against the private hoarding of gold and the need to protect that nation's gold supply by ending the convertibility by foreign central banks of currency holdings into gold. Without the threat of convertibility, governments could safely spend far beyond an economy's means. This new trend prompted Henry Hazlitt (co-editor of The Freeman) to write of gold:

The gold standard is not important as an isolated gadget but only as an integral part of a whole economic system. Just as "managed" paper money goes with a statist and collectivist philosophy, with government "planning," with a coercive economy in which the citizen is always at the mercy of bureaucratic caprice, so the gold standard is an integral part of a free-enterprise economy under which governments respect private property, economize in spending, balance their budgets, keep their promises, and refuse to connive in overexpansion of money or credit. Until our government is prepared to return to this system in its entirety and has given evidence of this intention by its deeds, it is pointless to try to force it to go on a real gold basis. For it would only be off again in a few months. And, as in the past, the gold standard itself, rather than the abuses that destroyed it, would get the popular blame.[133]

Yet, even Hazlitt believed that the primary cause of inflation was "an increase in the supply of money and credit."[134] He and many others somehow missed making the connection between almost continuously increasing land prices and the concentration of unearned incomes generated from land sold or offered under lease which were, to a great extent, either speculatively invested in the stock market (and/or additional land) or deposited with the banks, whose lending officers turned around and provided loans to land speculators and real estate developers. Credit fueled the speculative flames of real estate, commodities markets and stock markets until prices reached levels where no one would take the next level of risk. On the way up, prices are paid for land based on assumptions that values will continue upward faster than the rise in other prices. Business tenants are charged higher fees for space in office buildings, shopping malls and warehouses. In turn, to the extent competition will permit they increase prices on the goods they transport, store and sell. The general work force, faced with a rising cost of living, negotiates for wage increases. Rising land costs combine with rising labor and materials costs to make housing more difficult to afford. When foreign competition prevents domestic producers from passing on added costs of production to consumers, cost cutting becomes not merely a matter of efficiency but of survival. Workers are released and lose income in an atmosphere of increased competition for a dwindling number of job opportunities. Some of those who cannot find new employment attempt to sell their homes and relocate; with demand for housing now down, many cannot find buyers willing to pay a price sufficient for them to satisfy mortgage debt. A chain of mortgage defaults begins (closely matched by defaults on credit card debt, automobile loans and other credit) that jeopardize the health of banks and other institutional investors, who have taken on the enormous risk of loans made on the basis of highly speculative real estate valuations. The less diverse the regional economy, the greater the risk of deep and prolonged recession. These relationships, which seem so easy to identify and follow, were not in fact recognized by the overwhelming majority of economists writing in the 1950s and after. Thus, for example, when economic historian W.W. Rostow[135] attempted to explain in 1959 the cause of business cycles, he made absolutely no mention of land market anomalies or land speculation as essential ingredients in the equation.

Despite the general ignorance among economists and policy analysts that land markets operated very differently from markets for labor, for capital goods or for credit, the patient effort by a handful of knowledgeable economists and others to educate the influential on these issues kept apace. And, in fact, Georgists were heartened when, in 1959, Perry I. Prentice, editor of the U.S. periodical House & Home, organized a round table conference on the connection between inflation, land markets and public policy. Economists Ernest M. Fisher (Columbia University) and Mason Gaffney (University of Missouri) were joined by housing industry economists and finance experts to tackle the problem of rapidly rising land prices. In August of 1960, House & Home devoted eighty-five pages to publication of the conference transcript. Research documented the doubling and re-doubling of land prices all across the United States during the postwar decade and a half. Prentice added a dire warning:

Many of America's biggest panics and depressions were touched off by over-speculation in land and a bust in land prices that carried hundreds of banks and other lending institutions down with it. ...

A land bust in the Sixties could be even more serious if nothing is done quickly to check the inflation, because this land boom is blowing up to such monstrous size. Paper prices for land now total close to half a trillion dollars -- nearly twice the national debt, more than six times the federal tax revenue, nearly twice today's price of all listed stocks, more than twice the resources of our commercial banks.

If this bubble can be deflated quickly and now, little harm will be done. The speculators will lose their unearned paper profits, but that is about all.[136]

Rapid deflation of land prices was something the banks could not live with. Certainly, their lobbyists would never support deliberate public policy decisions designed to bring this about. The only politically-palatable strategy was to work for stability and a very gradual decline in land prices. In Washington, D.C., however, the focus was on the short term. As unemployment continued to increase in the United States through 1960 and 1961, leading economists debated the causes and what ought to be done. Walter Heller and other Hansen-Keynesian interventionists called for increased federal spending and tax cuts to stimulate the economy. Countering the credit-fueled pressure on land prices, the U.S. was experiencing the consequences of Eisenhower's drive for a balanced budget, out of which had come large cuts in military spending. At the same time, a prolonged strike by steelworkers also served to open the door to importation of European steel. Continued concern over inflation by Federal Reserve chairman William McChesney Martin resulted in tight money policies. Treasury Secretary Robert B. Anderson urged Eisenhower to initiate a more orthodox Keynesian approach to fiscal policy -- running a surplus during economic expansion so that reserves would be available to mitigate recessionary pressures. Within the span of just fifteen months, the Eisenhower administration withdrew more than $20 billion in spending from the U.S. economy. In response to all these dynamics, interest rates on corporate bonds and government securities rose rapidly. Homebuilding and the automotive business -- two industries heavily dependent on affordable credit -- experienced dwindling sales throughout 1960.

Conventional wisdom suggested to policy makers in the United States that only an expansion of exports -- given Eisenhower's determination to maintain a balanced budget -- could pull the U.S. out of recession without igniting inflationary pressures. By maintaining a fixed price for gold at $35 an ounce, the U.S. government unwittingly turned European central bankers into profiteers. A good deal of this gold stock ended up in London's open market, where private investors from all around the world acquired gold as a hedge against the declining purchasing power of domestic currencies.

Jack Kennedy's own acceptance of conventional economic policies was translated into a firm commitment to maintain fixed exchange rates and a controlled market for gold. George Ball, appointed by Kennedy to chair a task force on monetary policy that brought together Robert Triffin and Paul Samuelson (among others), recalled that the new President was constantly pressured by his father to do whatever was necessary to stem the flow of gold stocks. In response, Kennedy established a Balance of Payments Committee under the direction of the New York Federal Reserve Bank's Robert Roosa, who "devised a series of so-called 'Roosa Bonds' and developed an extensive network of currency swaps and bilateral arrangements"[137] to stabilize the dollar. Other measures adopted by the Kennedy administration included continued reductions in military expenditures outside the U.S. and conditions on foreign loans and grants requiring purchases of goods from U.S. producers. Pressure on the U.S. dollar could also be reduced if European countries relaxed their own monetary constraints, so that U.S. investors in European businesses were able to borrow European currencies rather than have to first borrow U.S. dollars for deposit with the European banks. Ball urged Kennedy to press for multilateral agreements with the major political and trading partners of the U.S., agreements that recognized the interdependence of each country's economy as well as the threat to political stability associated with volatility of each country's currency. In the end, Kennedy opted for measures far less controversial (and less satisfactory to his own Treasury Secretary, Douglas Dillon).

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