The Naked Communist

by Willard Cleon Skousen

  Second—Freedom to Sell

  If men are to be left free to try their skill and inventive genius they must also be protected in their freedom to sell their product for a profit. Of course, some new product might make a whole industry obsolete, temporarily throw thousands out of work and require numerous economic, social and political readjustments. But this is one of the keys to success in free enterprise economy. It must not be curbed except in the case of products or procedures which involve an immoral or criminal aspect, such as narcotics, pornographic literature, quack medicines, fake stocks, and so forth.

  Freedom to sell also implies the freedom to make a profit even if the price of a product is set at a level which wipes out the profit of a competitor. At first glance this may seem to be a cold, heartless system of economics, but if an American travels abroad through Communist or Socialist countries he begins to appreciate that “Freedom to Sell” is really the opportunity to survive. This means that a competitor must exert his faculties to produce more efficiently and reduce his price, or improve the quality of his product, so that the public will pay the difference to Set it. In either case, the public benefits, and newly improved forms of material wealth are created for the use of the public simply because two or more companies are competing briskly in order to survive.

  Third—Freedom to Buy

  Now, of course, if the inventor of some new product is to enjoy the freedom to sell, then the public must certainly enjoy the freedom to buy. One of the most fatal restrictions on a dynamic capitalistic economy is rationing or governmental control of commerce so that the people are told what they can buy, in what quantity, where and at what price. These artificial devices so completely sabotage capitalism that prices get out of phase, black markets develop and many human needs are neglected. This is why the United States moved so quickly after World War II to eliminate price controls and rationing. Both are inimical to a healthy capitalist economy. France and England failed to follow suit but Western Germany did. As a result, the recovery of Western Germany was one of the sensations of the post-war period, while the recovery of France and England was extremely slow and painful.

  Fourth—Freedom to Fail

  Last of all, we come to the freedom which harbors in its bosom the golden secret of all successful capitalist economies. This is the freedom to fail. Under free enterprise Capitalism every businessman who wishes to survive must do a lot of long term research as well as make a continuous study of his current operation. Services must be continually improved, waste must be eliminated, and efficiency in operations must be constantly pushed. And all of this is simply to keep the individual or company from failing. Occasionally we find a businessman, whose neck may be new to the yoke, refusing to extend himself in order to meet the competition of others who are more alert, more aggressive, and more anxious to serve and more accommodating. This newcomer has a lesson to learn. Perhaps, without quite realizing it, he is exercising his freedom to fail.

  In some planned economies a well-established business is not allowed to fail because it is described as “essential” to the economy. Therefore, if the product of that company will not sell at a profit, it is subsidized from taxes to make up the difference. The company thereby receives a bonus for its inefficiency. No lesson is learned. The expressed choice to fail is not allowed to result in failure. Other companions soon follow. Almost immediately inertia replaces energy. Progress is slowed to a snail’s pace and human needs are no longer adequately satisfied.

  In a dynamic capitalist economy the fact that a person or company will be allowed to fail is the very thing which spurs the individual or company to succeed. Of course, those who do fail are cushioned in their fall so that they do not starve nor do they lose their opportunity to try again. Nevertheless, the cushion is neither a dole nor a stipend which would be so comfortable that the person would want to relax and stay down. Capitalist cushions are thin—by design.

  How Capitalism Makes Things Plentiful and Cheap

  “It was Marx’s dream to produce everything in such overwhelming abundance and distribute goods so freely that no one would need to buy and therefore no one would be able to sell. Unfortunately for Marx, his economic dream was doomed from the start because instead of producing goods in overwhelming abundance, Socialism and Communism were found to stymie production and smother invention. Therefore, it has remained the task of free enterprise Capitalism to push mankind toward the economic millennium of a fully abundant material life.

  An excellent example of how this is being accomplished is taken from a personal observation of Dr. George S. Benson of Harding College. He says: “In China I burned kerosene carried a hundred miles on the shoulders of a coolie. He owned his means of transportation, he owned a bamboo pole and a scrap of rope on each end of it, and he’d tie a five gallon tin of kerosene to either end of the pole and trot along back into the interior. He traveled over a little, single-file trail that nobody kept up, that wound its way between the rice fields in the valleys and then over the hills. He could make about ten miles a day with that burden.

  “How much was he paid? Suppose he had been paid $5.00 a day. In ten days he’d have earned $50.00. But what would he have accomplished? He’d have transported ten gallons of kerosene a hundred miles, he’d have increased the price of kerosene $5.00 per gallon. Of course in China nobody could afford to pay such a price so he was paid what the traffic would bear; he was paid ten cents a day and then he added ten cents a gallon to the price of kerosene when carried a hundred miles—he doubled the price of it.

  “A miserable wage, wasn’t it? But he could do no better with what he had to work with.

  “Now observe how we move kerosene in America where there is an investment of $25,000 in cash for every job created—the roadbed, the steel rails, the great locomotives, the tank cars, the terminals, the loading facilities and so on. We move kerosene at less than one cent per gallon per hundred miles, less than a tenth of the cost in China. What do we pay our workmen? Seventy times what the Chinese coolie gets—and still give to the purchaser a freight rate of less than a tenth of that of a coolie. What’s the difference? Simply the investment and management—nothing else—the result of our American way of life.”

  Here Dr. Benson has pinpointed another of the great secrets of Capitalism’s success: to put expensive tools and vast quantities of power at the disposal of the worker. But since the worker cannot afford to provide these tools for himself, who does? The answer is simple: frugal fellow citizens.

  These frugal fellow citizens are called capitalists. They are often ordinary people who are willing to scrimp and save and store up goods and money instead of consuming or spending them. Therefore, anyone who has savings, stocks, bonds, investments, insurance or property is a capitalist. In America this includes a remarkably high percentage of all the people, No doubt it would come as a great surprise to Marx if he knew that instead of developing a capitalist class as Marx expected, America is becoming a nation of capitalists.

  Each capitalist decides what venture he will sponsor with his money. He often risks his money in places where a government agency would never risk a cent. As a result, new oil is found, new inventions are promoted, new industries are started, “impossible things” are made possible and fantastic constantly accrue to humanity.

  Of course, investing money which people have been painstakingly saving through a lifetime requires that the project be successful so people will continue backing it with their savings. This puts management under a great deal of pressure to cut expenses and get the product out at a price that will make it sell “in quantity.” Management therefore constantly demands more efficient machines which in turn permit the worker to spend fewer hours on the job. The little book called The Miracle of America points out that this free enterprise system has:

  1. Increased the real wages of American workers (wages in relation to prices) to three and one-half times what they were in 1850.

  2. Reduced hours of work from an average of about
70 hours a week in 1850 to around 40 today.

  3. Increased the worker’s share of the national income paid out in wages and salaries from 38 percent in 1850 to about 70 percent today.

  4. Increased the number of jobs faster than the growth of population, so that America has come closer to “full employment” than any nation in the world.

  All of this is made possible because the American worker is furnished expensive equipment to do the job faster and cheaper, and this equipment is purchased with the savings of the workers business partner. He is the frugal fellow citizen called “the Capitalist.”

  The Law of Supply and Demand Sets the Price

  Capitalism works best in a free market where the “value” of goods is fixed at that point where the graph line of “supply” intersects with the graph line of “demand.” For example, if there is an abundant supply of potatoes people lose their anxiety to secure potatoes and the “demand” sinks to a low level. Even so, however, there is a level at which demand will establish itself and that is what “fixes” the price.

  Several years ago, unexpected circumstances resulted in a threatened potato famine. The government made the mistake of interfering on the assumption that if it did not interfere the price of potatoes would shoot sky high and people of modest means could not buy them. It was considered “socially desirable” to peg the price of potatoes at a low level. But what happened? With a short supply and an unnatural, low price it was only a matter of a few weeks until the entire stock was exhausted and nobody could buy potatoes at any price. Here is why Socialism or human control of the economy stifles Capitalism and destroys the “natural” laws by which it has so successfully blessed mankind.

  If the Government had left the market alone the price of potatoes would have gone up to that point where demand would have carried it. The higher price would have provided an “automatic” control of consumption and would have made the supply of potatoes last much longer because people would have considered it economically necessary to use fewer potatoes. They would have gradually begun to buy substitutes which were in surplus and therefore cheaper. By this means the price factor would have helped people limit their consumption of stocks which were scarce while increasing the consumption of stocks which were plentiful.

  All this was turned topsy-turvy when the Government thought it would be “socially desirable” to peg potato prices.

  It not only turned out to be unnatural but also impractical.

  This brings us to our final comment on free enterprise.

  Failure of an American Experiment with Socialism

  One of the most impressive modern documents on American free enterprise in action is a dynamic little book by Ezra Taft Benson, former U.S. Secretary of Agriculture, entitled, Farmers at the Cross Roads. It verities with facts and figures the lesson our generation has learned from an experiment with Socialism through Government control of agriculture.

  The Government attempted to control farm prices by direct control of farm practices. The so-called “basic crops” which were put under controls were wheat, cotton, corn, rice, tobacco and peanuts. The idea was to protect the farmer by guaranteeing him a certain minimum price. To do this it was necessary to control production. Farmers were therefore restricted as to the amount of acreage they could plant.

  The results were amazing. Take wheat for example. More than 30 million acres were taken out of wheat production in an attempt to reduce the supply and thereby maintain a good price for wheat. Each wheat farmer received a Government check which paid him for not planting wheat on a certain percentage of his land. This is what happened:

  The farmer used the money to buy better machinery, more fertilizer and additional help so that frequently he harvested as much or more wheat from his limited acreage than he had previously raised on his entire farm. In other words, curtailed acreage did not curtail production.

  Furthermore, land taken out of wheat production could be used to raise other crops which resulted in an over-supply of feed grains. Feed grain prices went so low that farmers and ranchers were able to greatly increase their cattle and hog production. This pulled the rug out from under meat prices. The government tried to save the situation by purchasing large quantities of each product which was being overproduced, This, coupled with price supports, encouraged even more people to invest in farming with the result that vast areas of sub-marginal land were opened up for production. Many of these investors were not farmers at all, and these made a loud noise in favor of higher supports when they could not make their inefficiently operated farms pay off.

  The Government’s support of artificial high prices also had another destructive influence. It encouraged customers to look around for substitute products or foreign imports. As a result, American farmers not only lost some of their domestic markets, but found they were unable to compete abroad.

  What happened to wheat also happened to cotton and the other “basic crops.” They lost markets everywhere. In the case of cotton the government reduced acreage from 43 million acres to 17.4 million. Still the surplus quantities continued to climb. Before controls, U.S. cotton farmers exported 7 million bales of cotton per year. During 1955 they sold only 2 million bales abroad. Foreign cotton growers saw what was happening and doubled their sales because U.S. cotton brokers could not compete. So it was with all controlled areas of U.S. agriculture.

  In contrast to this, we find that those areas of agriculture which resisted rigid price guarantees did better. Take soybean farming as an example. These producers used the Department of Agriculture to advise and counsel them but not to control. The Department of Agriculture conducted numerous experiments to reveal new uses for soybeans and encouraged producers to use cooperative associations for the exploring of new markets. Today, soybean farmers supply half the tonnage for high protein feeds—twice as much as that which comes from cottonseed meal. Soybeans have risen to fifth place as the farmer’s greatest source of farm income.

  Secretary Benson closes with this significant comment: “A major difference between cotton and soybeans is the fact that cotton decided to fight its battles in the legislative halls, while soybeans decided to fight in the market place.” These are merely a few highlights from the lessons which America should have learned during the past twenty-five years of experimentation with socialized agriculture. There are many things which the Government can do to encourage the “general welfare” of all agriculture as it did with soybeans, but to try to control prices by Washington edicts rather than by supply and demand in the market place proves to be the kiss of death for the handsome goose that lays the golden eggs of American free enterprise prosperity.

  It is time to sell ourselves on our own economic program so we can more effectively share it with the rest of the world. We have a great system which is operating with demonstrable efficiency. Here is a summary of what it is doing:

  1. Capitalism is by far the best known system to provide for the physical needs of man.

  2. Capitalism permits man to satisfy his spiritual needs.

  3. Capitalism allows for variation as between individuals.

  4. Capitalism is naturally self-expanding which tends to create strong economic ties between communities, states and nations.

  5. Capitalism can permit everyone to participate in making a profit, thereby eliminating classes or castes which are inherent in so many other types of economies.

  6. Capitalism promotes the “freedom to try.”

  7. Capitalism allows the “freedom to sell.”

  8. Capitalism allows the “freedom to buy.”

  9. Capitalism preserves the greatest single force of human motivation—the risk of failing.

  10. Capitalism tends to increase the wages of workers in relation to prices.

  11. Capitalism tends to reduce the hours of work necessary to make a living.

  12. Capitalism increases the workers’ share of the national income.

  13. Capitalism increases the number of jobs faster than the growth o
f population.

  14. Capitalism promotes rapid technological advances.

  15. Capitalism is proving to be the most effective means mankind has yet discovered for “sharing the wealth.”

  APPENDIX D

  Did the Early Christians Practice Communism?

  A few students have secretly or even openly defended Communism because they considered it to be an important set of principles practiced by the early Christians. Such persons often say that they definitely do not condone the ruthlessness of Communism as presently practiced in Russia, but that they do consider it to be of Christian origin and morally sound when practiced on a “brotherhood basis.”

  This was exactly the attitude of the Pilgrim Fathers when they undertook to practice Communism immediately after their arrival in the New World. But as we have seen earlier, not only did the project fail miserably, but it was typical of hundreds of other attempts to make Communism work on a “brotherhood basis.” Without exception all of them failed. One cannot help wondering why.

  Certain scholars feel they have verified what Governor Bradford has said concerning “brotherhood Communism,” namely, that it is un-Christian and immoral because it strikes at the very roots of human liberty. Communism—even on a brotherhood basis can only be set up under a dictatorship administered within the framework of force or fear. Governor Bradford found this to be true. Leaders own literally hundreds of similar experiments concur. Students are therefore returning to ancient texts with this question: “Did the early Christians really practice Communism?”