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