It tears apart the whole fabric of stable economic relationships. But the fallacy comes from looking merely at this manufacturer and his employees, or merely at the American sweater industry. When such consequences are pointed out, there are a group of people who reply: “Very well; if it is true that the X industry cannot exist except by paying starvation wages, then it will be just as well if the minimum wage puts it out of existence altogether.” But this brave pronouncement overlooks the realities. These new firms are inefficient compared with those they displace; they turn out inferior and dishonest goods at much higher production costs than the older concerns would have required for continuing to turn out their former goods. Not only should we have to regard all further technical progress as a calamity; we should have to regard all past technical progress with equal horror. In the course of our study, also, we have rediscovered an old friend. The government should put no arbitrary barriers in the way of private lending to countries with which we are at peace. But they could just as well be settled by shipments of cotton, steel, whisky, perfume, or any other commodity. Who subsidizes the consumers will depend upon the incidence of taxation. It is exports that pay for imports, and vice versa. If no honest attempt is made to pay off the accumulated debt, and resort is had to outright inflation instead, then the results follow that we have already described. This means that we have forbidden a man to be usefully employed at, say $25 a week, in order that we may support him at $18 a week in idleness. (This is precisely, however, as we shall later see, what we already do in the case of “non-recourse” government loans to farmers.). The money rate can, indeed, be kept artificially low only by continuous new injections of currency or bank credit in place of real savings. The government money, on the other hand, is likely to be lent for some vague general purpose like “creating employment;” and the more inefficient the work—that is, the greater the volume of employment it requires in relation to the value of product—the more highly thought of the investment is likely to be. The government spenders forget that they are taking the money from A in order to pay it to B. But it is a doctrine that is always publicly false. “Savings” can exceed “investment” only by the amounts that are actually hoarded in cash. Once again, however, the matter does not end there. Yet the same principles apply to a small war destruction as to an overwhelming one. There may be times when an increase in debt is a minor consideration as against the gains achieved with the borrowed funds; when a government subsidy is unavoidable to achieve a certain purpose; when a given industry can afford an increase in production costs, and so on. The cruder apostles of “social credit” may seem ridiculous; but there are an indefinite number of schools of only slightly more sophisticated inflationists who have “scientific” plans to issue just enough additional money or credit to fill some alleged chronic or periodic “deficiency” or “gap” which they calculate in some other way. But it was also their defect that, in taking the long view and the broad view, they sometimes neglected to take also the short view and the narrow view. Such prices are a special privilege. In the first place, the money is either their own or has been voluntarily entrusted to them. The apostles of salvation by unionism sometimes attempt another answer to the problem I have just presented. Who among us does not feel richer and prouder when he is told that our national income has doubled (in terms of dollars, of course) compared with some pre-inflationary period? And several of its members are almost certain to remind each other or the baker that, after all, the misfortune has its bright side. Yet whenever any effort is made to cut down the number of unnecessary officeholders the cry is certain to be raised that this action is “deflationary.” Would you remove the “purchasing power” from these officials? A much smaller proportion of the American population needs to work than that, say, of China or of Russia. If we look at it now from the consumer’s point of view, we find that he can buy less with his money. But here it may be pointed out that when the farmer reduces the production of wheat to get “parity,” he may indeed get a higher price for each bushel, but he produces and sells fewer bushels. The result was that the farmer could not buy industrial products; the city workers were laid off and could not buy farm products, and the depression spread in ever-widening vicious circles. Obviously, think the people who see only what hits them in the eye, he is providing less than half as much employment as Alvin, and the other $25,000 is as useless as if it did not exist. They would keep on buying until the price rose to a point where they saw no further opportunity of future profit. They tell us how much better off economically we all are in war than in peace. In 1992, total credit market debt of $15.2 … We stimulated enormously the growth of cotton in other countries. On the contrary, it is precisely why they want the inflation. If we are wrong about these, there are few things in economics about which we are likely to be right. But as a result of the artificial barrier erected against foreign goods, American labor, capital and land are deflected from what they can do more efficiently to what they do less efficiently. If new capital and new labor are forcibly kept out of the X industry, however, either by monopolies, cartels, union policy or legislation, it deprives this capital and labor of liberty of choice. It would carry us too far afield to describe in detail what actually happened when this program was applied, for example, to American cotton. He has been thrown out of a job by the new machine. As a producer he wants inflation (thinking chiefly of his own services or product); as a consumer he wants price ceilings (thinking chiefly of what he has to pay for the products of others). The first thing that happens, for example, when a law is passed that no one shall be paid less than $30 for a forty-hour week is that no one who is not worth $30 a week to an employer will be employed at all. Taxation for public housing destroys as many jobs in other lines as it creates in housing. For speculators, in the hope of making a profit, would do most of their buying at that time. They are, in fact, eventually forced to buy more from us if their dollar balances are not to remain perpetually unused. Even some of the advocates of “parity prices” recognize this, and use it as an argument to go on to insist upon “parity income” for farmers. Teach children the most important social and emotional lessons, ****UPDATED with digital activities for Google Slides and Microsoft Powerpoint. On the other hand, we offset this investment in efficient transportation by a tariff that makes it commercially even more difficult to transport goods than it was before. And because they think only of Joe Smith, they end by advocating reactionary and nonsensical policies. But the government almost invariably operates by different standards. His mind will, of course, be as receptive to new ideas as to old ones; but he will be content to put aside merely restless or exhibitionistic straining for novelty and originality. And the means they suggest in the fiscal field are like those of the battlefield. Their landlords, grocers, butchers, clothing stores and local motion picture theaters will lose business, and depression will spread in ever-widening circles. Once their capital might have been turned into any of a thousand forms, but today it is trapped, so to speak, in one particular form. The British importer could not pay the American exporter in dollars unless some previous British exporter had built up a credit in dollars here as a result of some previous sale to us. The same reasoning applies to civilian government officials whenever they are retained in excessive numbers and do not perform services for the community reasonably equivalent to the remuneration they receive. The real reasons for those tariffs and other trade barriers are the same, and the pretended reasons are also the same. Consumers can now buy the same quality of sweater for less money, or a much better one for the same money. Costs of production have been substantially lowered for farm products by better applications of chemical fertilizer, improved strains of seed and increasing mechanization—by the gasoline tractor, the corn husker, the cotton picker. Now it is to A, let us say, who has credit, that the banker would make his loan. They are an imposition on the consumer. The plan that started out so gravely to “stabilize” prices and conditions brings incomparably greater instability than the free forces of the market could possibly have brought.

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