AFTER 30 YEARS IN THE MAKING, ANNOUNCING AN HISTORIC FIRST…

Mark Skousen with the bull and bear

THE MAXIMS OF WALL STREET
A Compilation of Financial Adages, Ancient Proverbs, and Worldly Wisdom

By Mark Skousen

“Bears Make Headlines, Bulls Make Money”

Attention all investors, subscribers, stockbrokers and money managers!

For nearly 30 years, I have been collecting all the old wise adages, proverbs, and legends on Wall Street, based on in-depth interviews with old timers, reading rare financial books, and my own experiences in the financial markets. (I’ve been writing Forecasts & Strategies since 1980, when President Reagan was elected.)

“Maxims” is destined to be a classic reference that you will read with delight for years to come, and an ideal gift to investors, stockbrokers and money managers.

“Maxims” is the closest thing to Wall Street scripture ever created. The work contains:

• Over 800 adages, by such notables as Warren Buffett (“If you wait to see the Robin sing, Spring may be over”)….J. P. Morgan (“Troubled waters make for good fishing”)….Humphrey Neill (“The public is right during the trends but wrong at both ends”)….Richard Russell (“In a bear market, the winner is he who loses the least”)….and Steve Forbes (“Everybody is a long-term investor until the market goes down”).

• Old Timer’s stories like the “trading sardines”…..where are the customer’s yachts?…..the gold bugs…..commodity traders…..The origin of “blue sky”…

• Famous lines from Baron Rothschild, Ben Franklin, John D. Rockefeller, Joe Kennedy, J. P. Morgan, Bernard Baruch, John Templeton, Jesse Livermore, John Maynard Keynes, Ben Graham….

• Sage advice on beating the market, diversification vs. concentration, value vs. growth, bulls vs. bears…..black swan events…..day traders…. doomsdayers and casandras….plungers and the peakcocks….hot tips and insider information….Losing money and missed opportunities…Wall Street vs. Main Street…chartists vs. fundamentalists….leverage and debt….privacy and government….taxes and tax havens….inspiring “Rich Man’s Pearls of Wisdom”…and intriguing short stories such as “The Extra-Ordinary Life of Warren G. Hardaway.”

• Quotes from the profound to the profane: “Nobody is more bearish than a sold-out bull” and “In the land of the blind, the one-eyed is king”….“To err is human, but to be paid for it divine” and “Definition of obscene profits — something you always hear about but never experience yourself.”

How to Order Your Special Numbered Copy

“Maxims” is nearly 300 pages long, published handsomely in a special limited edition in leather and gold lettering. Only 1,000 copies were printed in this first edition. Each copy is numbered and autographed. Choose your favorite number (anywhere from 10 to 1000; the first ten are already taken). Price is only $24.95 plus $5 S&H, or a total of $29.95. Once the 1,000 copies are sold, the first edition will no longer be available. To order, call or send to:

Eagle Publishing, 1-800-211-7661
One Mass. Ave. NW, Washington, DC 20001

When you call, mention code MAXIMH. And be sure to mention your favorite number.

IMPORTANT NOTE: “MAXIMS” IS NOT AVAILABLE IN BOOKSTORES OR AMAZON.COM. You can only order this book through my publisher, Eagle Publishing, 1-800-211-7661.

I’ll end with an appropriate quote from Ben Franklin: “Genius without education is like silver in the mine.”

I guarantee you’ll be a better investor by frequently reading “Maxims of Wall Street.”

Bullishly yours, AEIOU,

Mark
Mark Skousen
Producer, FreedomFest
“The world’s largest gathering of free minds”
www.freedomfest.com
July 14-16, 2011, Las Vegas

P. S. I will be giving my first talk on “Maxims of Wall Street” at FreedomFest, followed by an autograph session. We are expecting over 2,000 attendees, so I urge you to join us now by going to www.freedomfest.com or calling 1-866-266-5101.

Las Vegas, Nevada (July 11, 2009): Five American prominent writers and economists –Henry Hazlitt, Murray Rothbard, Rose Wilder Lane, H. L. Mencken, and Booker T. Washington — were inducted into the Free Market Hall of Fame at the Saturday night banquet at FreedomFest. This year’s conference attracted over 1,700 attendees.

Each year FreedomFest honors individuals who have made a significant contribution to the cause of economic liberty. The first induction ceremony was held last year, and the recipients were Scottish economist and philosopher Adam Smith; French writers J.-B. Say and Frederic Bastiat; Austrian economists Carl Menger, Ludwig von Mises, and Friedrich Hayek; American writer Ayn Rand; and American economist Milton Friedman.

Mark Skousen, producer of FreedomFest, announced this year’s inductees, followed by comments by Steve Forbes, editor-in-chief of Forbes magazine.

Five Inductees into Free Market Hall of Fame in 2009

Henry Hazlitt (1894-1993) was the premier libertarian journalist and popularizer of Austrian economics in the 20th century. He used his position as financial editor of the New York Times and columnist for Newsweek to editorialize against Keynesian economics, the New Deal, and the imperial powers of government. His book, Economics in One Lesson, has sold over a million copies and become a classic. He was a founding vice-president of the Foundation for Economic Education, and early editor of The Freeman.

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” — Henry Hazlitt

Murray N. Rothbard (1826-1995) was the dean of Austrian school of economics during the latter half of the 20th century, and a scholar who made major contributions to economic theory, history, and philosophy. He was the author of numerous books, including Man, Economy and State (1962), America’s Great Depression (1963), and The Ethics of Liberty (1982). His pamphlet, “What Has the Government Done to Our Money?” inspired a new generation of libertarians and the hard-money movement. Rothbard was a vociferous critic of Keynesianism and all forms of government intervention.

By Murray Rothbard:

“The establishment of Central Banking removes the checks of bank credit expansion, and puts the inflationary engine into operation.”

“It is easy to be conspicuously ‘compassionate’ if others are being forced to pay the cost.”

Rose Wilder Lane (1886-1968) is the author of Discovery of Freedom, a classic in libertarian literature. She is best known for her laissez faire political writings and the many stories she and her mother, Laura Ingalls Wilder, wrote about growing up on the prairies of America, where she learned the difference between individual initiative and government welfare. As a newspaper reporter and freelance writer she traveled throughout the United States, Canada, the Caribbean, Europe, Egypt, the Middle East, and Russia. In her travels she experienced firsthand the effects of communism, socialism, and fascism, and observed that rigid organization and central planning have a stifling and stultifying effect, to the point that “very few men have ever known that men are free.”

“Individualism, laissez faire and the slightly restrained anarchy of capitalism offer the best opportunities for the development of the human spirit.” — rose Wilder Lane

H. L. Mencken (1880-1956) was America’s favorite libertarian journalist, essaying, satirist and bon vivant of the the 20th century. He wrote the classic work, The American Language, and is regarded as one of the most influential American writers and prose stylists of his age. Known as the “Sage of Baltimore,” he was a skeptic and critic of all forms of government mischief.

By H.L Mencken:

“Democracy is the theory that the common people know what they want and deserve to get it good and hard.”

“A good politician is quite as unthinkable as an honest burglar.”

“Puritanism: The haunting fear that someone, somewhere, may be happy.”

Booker T. Washington (1856 – 1915) was an American educator and the dominant leader of the African-American community in the early 20th century. Author of a classic autobiography, “Up from Slavery,” he supported education, self-help, and economic independence in the private enterprise system as the best way to escape poverty and achieve political equality. Born to slavery and freed by the Civil War in 1865, Washington became head of the new Tuskegee Institute, and built a personal organization that gained the support of wealthy industrialists as well as middle class blacks in pursuit of equality through “patience, industry, thrift, and usefulness.”

“The individual who can do something that the world wants done will, in the end, make his way regardless of his race.” — Booker T. Washington

Vote for your favorite free market supporter at www.freemarkethalloffame.com.

FreedomFest is an independent conference held annual in Las Vegas and billed as “the world’s largest gathering of free minds.” Next year’s conference will be held July 7-11, 2010, at Bally’s Events Center in Las Vegas. For more information, go to www.freedomfest.com.

A giant has died.  William F. Buckley Jr., the founder of National Review magazine and the modern conservative movement, passed away on Wednesday, February 27, at the age of 82.

We will be dedicated one of the rooms at FreedomFest (www.freedomfest.com) in his honor.

To me, Bill Buckley was a distant hero. As a teenager, I frequently read his “National Review” magazine.  I had met him several times, starting with his appearance at Jim Blanchard’s Gold Conference in the late 1970s when he ably debated John Kenneth Galbraith.  He was also the emcee at the Foundation for Economic Education (FEE)’s 50th anniversary party at the Waldorf-Astoria Hotel in 1996, where I witnessed Margaret Thatcher upstage him — a first!

Despite his fame and fortune, Buckley was always friendly and helpful. He never put on airs. He never insisted on being called “William.” He was always “Bill.” His interests were ubiquitous. He loved to pontificate, travel, sail, ski (especially with Milton Friedman), play chess, drink fine wines, smoke, and entertain, listen to classical music, write, debate (“Firing Line”), appear in public (the Johnny Carson Show), defend the undefendable (Joe McCarthy), worship (as a practicing Catholic who was no prude — he wrote frequently for Playboy magazine), and even befriended enemies (John Kenneth Galbraith but not Norman Mailer).  He was married only once, to his sweetheart Patricia, with which he had one son, Christopher (also an entertaining writer).  His only weakness was his passion for wine and cigars.  He was a heavy drinker and may have become an alcoholic.

I became his friend when I was president of the FEE in 2001-02.  And, through a miraculous unpredictable series of events, he landed me a position at Columbia Business School!  Here’s the story:

When I moved to New York to became president of FEE, the oldest free-market think tank, I contacted Bill Buckley about getting together, since I knew he was friends with the founder, Leonard Read. He graciously invited my wife Jo Ann and me over to his ocean-front home in Stamford, Connecticut, for lunch. It was a beautiful, warm spring day in 2002, and we spent a delightful two hours together reminiscencing about the conservative movement.  After drinking a couple of glasses of red wine, he smoked a couple of cigarettes, which surprised me. (I found out later that he died of emphysema.)

I brought with me my first edition of “God and Man at Yale” for him to sign. It is a classic that will, in my judgment, become his most famous book (although I have a fondness for his sailing books.)

After touring his house and study where he writes his books and columns (located in his garage!), he pointed to multiple copies of all his novels and political books, and offered to give me and my wife any book we wished.  I picked up the third in his trilogy of sailing books, which he promptly autographed.

As we were leaving, I thought at the last minute to give him a copy of my book, “The Making of Modern Economics,” which had just been published.  I had no idea if he had more than a passing interest in the history of the great economic thinkers such as Adam Smith, Karl Marx, or John Maynard Keynes, but I gave it to him anyway.  We said our good-byes and drove away.

A Surprise Invitation

I didn’t think any more about it, until a month later I got a surprise call from John Whitney, a professor of management at Columbia Business School, who said he had read a highly favorable review of my book in National Review, written by Bill Buckley himself.  Buckley praised my history and ended his review with the statement, “What an absolutely ideal gift for college students.”

Professor Whitney read my book and invited me to give a guest lecture at Columbia……and a few months later, Whitney said he would like to recommend me to the dean to take over his course at Columbia Business School. I immediately accepted.

I will be eternally grateful to William F. Buckley, Jr., for opening this door to my career.

Listening to His Memoirs

Bill and I corresponded by letter after that, and occasionally got together at a social function in New York City.  When Regnery came out with his memoirs, “Miles Gone By,” I read it from cover to cover.  I told Marji Ross, the publisher, that that the one small CD attached to the hardback only whetted my appetite for a full reading, and lo and behold, a few months later, my wish came true and I listened to Bill Buckley’s melodious voice for days on end.  If you want a lasting memory of the private and public persona, buy the audio version of “Miles Gone By.”  It’s priceless.

Jeff Carneal, the president of Eagle Publishing, invited me to join him at his table for Buckley’s 80th birthday celebration on November 17, 2005.  As celebrities honored him, I thought of the great Chinese-American philosopher Lin Yutang, who wrote the following about “Growing Old Gracefully” in his classic libertarian work The Importance of Living (one of my favorite philosophy books), pp. 193-195:

“A natural man loves his children, but a cultured man loves his parents….

“It is to be assumed that if man were to live his life like a poem, he would be able to look upon the sunset of his life as his happiest period, and instead of trying to postpone the much feared old age, be able to actually look forward to it, and gradually build up to it as the best and happiest period of his existence.

“In my efforts to compare and contrast Eastern and Western life, I have found no differences that are absolute except in this matter of the attitude toward age….The East and the West take exactly opposite points of view.

“This is clearest in the matter of asking about a person’s age or telling one’s own.  In China, the first question a person asks the other on an official call, after asking about his name and surname is, ‘What is your glorious age?’

“Enthusiasm grows in proportion as the gentleman is able to report a higher and higher age, and if the person is anywhere over fifty, the inquirer immediately drops his voice in humility and respect….

“The sixty-first birthday is a happier and grander occasion than the fifty-first and the seventy-first is still happier and grander, while a man able to celebrate his eighty-first birthday is actually looked upon as one specially favored by heaven.”

I sent a copy of this essay by Lin Yutang, which he graciously received.

A year later, I met up with him for the last time on the National Review cruise around Great Britain.  Although he was no longer making public appearances, he still had a sparkle in his eye, and he said, unexpectedly, “I keep your economics book at my bedside and tell all my friends to read it!”

Praise does wonders for the sense of hearing!  William F. Buckley will always be #1 in my book.

Dear Worldly Philosophers,

Are you a seeker of worldly wisdom?  Do you like to read about the lives and ideas of great thinkers, entrepreneurs, and creative geniuses and how you can apply their stories in your own life?

In college, I read the book “The Worldly Philosophers,” about the great economic thinkers and their influence in the world — giants like Adam Smith, Karl Marx and the most worldly wise of them all, John Maynard Keynes (both a successful speculator and devotee of politics and the arts).

Each week I will highlight a worldly wise figure in history, present or past, who can teach us ways to make money, achieve financial and personal freedom, and enjoy life to the fullest:  People like J. Paul Getty, Benjamin Franklin, J. P. Morgan, John Maynard Keynes, Jesse Livermore, Andrew Carnegie, King Solomon, and many other worldly philosophers, based on my large personal library of financial, business and economics books.

Sign up today with your email address here and every week you will be introduced to a new “worldly philosopher” and how you can apply his or her principles.  It will be entertaining and educational.

To sign up, go to www.worldlyphilosophers.com.

Wisely yours, AEIOU,

Marcus Aurelius
The Worldly Philosopher

Was Benjamin Franklin an indispensable public servant, or a cunning chameleon? A believer, or a heretic? A hard-headed entrepreneur, or an opportunistic privateer? A devoted family man, or a salacious womanizer? An important scientist and inventor, or a hoaxer and self-promoter? The first civilized American, or the most dangerous man in America? Read the article below.

History of Freedom
Liberty Magazine
December 2006

Franklin and His Critics
by Mark Skousen

“Let all men know thee, but no man know thee thoroughly.” — Poor Richard’s Almanac

Was Benjamin Franklin an indispensable public servant, or a cunning chameleon? A believer, or a heretic? A hard-headed entrepreneur, or an opportunistic privateer? A devoted family man, or a sala­cious womanizer? An important scientist and inventor, or a hoaxer and self-promoter? The first civilized American, or the most dangerous man in America?

Probably, he was all of the above. But no matter where you come down on this debate, one thing is clear: Franklin’s stature has increased dramatically since his death in 1790.

A recent AOL poll ranked him after Washington as America’s most admired founder. None of the others (Jefferson, Adams, Madison) even came close. This year, the nation celebrates Franklin’s 300th birthday with fanfare: two commemorative coins by the U.S. Mint, four stamps by the U.S. Postal Service, and a national exhibit that is making its way around the country. A bevy of biographies has been published, and most of the books are laudatory. H.W. Brands identifies Franklin as “the first American . . . who is perhaps the most beloved and celebrated American of his age, or indeed of any age.”

Michael Hart ranks him as “the most versatile genius in all of history” — the most multi-dimensional of the founders as businessman, scientist, writer, and politician.

Joyce Chaplin identifies Franklin as one of only two scientists in the world who have achieved “international icon” status (the other is Einstein).

Many consider Franklin the cultural father of American capitalism, because of his emphasis on self-education, industry, and thrift. And Gordon Wood argues that Franklin was second only to Washington as America’s “necessary man,” the man who single-handedly raised 34 million livres (equivalent to $14 billion in today’s money) to finance the war of the revolution. Washington won the war at home, but Franklin won the war abroad: “He was the greatest diplomat America has ever had.”

I was privileged to be part of the Franklin celebration when, last April, I was invited to speak at the First Day Issue Ceremony in Philadelphia for the four commemorative stamps honoring Franklin as a printer, scientist, postmaster, and statesman. I’ve been an admirer of this versatile genius since reading his “Autobiography,” which is rightly regarded as America’s first “how to” self-improvement book, championing the virtues of industry, thrift, and prudence. Over the years I’ve collected dozens of other books on him, including the voluminous edition of his “Papers” compiled and edited by Yale University Press. It was while reading through the “Papers,” now approaching 38 volumes, that I came up with the idea of completing the “Autobiography.” These memoirs end abruptly in 1757, just as Franklin is about to embark on his career as an international political figure. He lived another 33 years as colonial agent, revolutionary, signer of the Declaration of Independence, America’s first ambassador, and delegate to the Constitutional Convention. In going over the “Papers,” I realized that it might be possible to gather together the autobiographical passages from his letters, journals, and essays, and complete his story, all in his own words. The result was “The Compleated Autobiography by Benjamin Franklin,” published this year by Regnery.

Yet I have sometimes wondered whether my admiration of Franklin was misplaced, and how, if at all, his ideas could be defended.

Among libertarians, there is a great deal of animosity toward wise ol’ Dr. Franklin. Just last month, for example, I came across an article called “Benjamin Franklin Was All Wet on Economics,” written by a college student for the Mises Institute website. The author focused on Franklin’s labor theory of value and his support of paper money.

No doubt the philosopher was seriously misguided on a number of important issues. Yet, if we are willing to take a broad view of his economics, a case can be made that even in this area he was a sound thinker. Actively involved in the creation of the three major documents of American government (the Declaration of Independence, the Articles of Confederation, and the Constitution), Franklin was an advocate of a limited central government. “A virtuous and laborious people may be cheaply governed,” he declared. He was a disciple of Adam Smith and free trade, and was enamored of the laissez-faire policies recommended by the French physiocrats (Turgot, Condorcet, et al.). His are the admirable sayings: “Laissez nous faire: Let us alone. . . . Pas trop gouverner: Not to govern too strictly.”

Franklin was certainly no Keynesian. He defended the rich and worried about how incentives for the poor would be affected if the state adopted a welfare system. He was no Malthusian, either. He opposed a minimum wage law and wrote in favor of free immigration and fast population growth. He rejected any form of state religion or mandatory religious oaths and demanded that slavery be abolished in the new nation — in 1789. And he learned by sad experience (through the careers of his son and grandson) that public service is less rewarding than private business. His ideas on foreign policy anticipated George Washington’s farewell address by nearly 20 years. In 1778 he stipulated that “the system of America is to have commerce with all, and war with none.”

Granted, he was no anarchist. In economics, he did favor paper money and a “real bills” doctrine of expanding the money supply beyond specie, though “no more than commerce requires.”

He believed that easy money would facilitate trade. During the American revolution he justified the runaway inflation of paper “Continentals” as an indirect way for all Americans to pay for the war, although he begged Congress to improve the creditworthiness of the United States by 2006 paying interest in hard currency. He was a strong supporter of Hamiltonian-style central banking and an investor in the Bank of North America. His likeness on the $100 bill — the highest denomination of an irredeemable American paper currency — would greatly please his vanity.

He argued that the state should be actively engaged in the free education of youth and other public services, and in dispelling the ignorance represented by public fads and superstitions. From several sources, it appears that he was in league with Jefferson in emphasizing “life, liberty, and the pursuit of happiness” as the goal of government, downplaying John Locke’s inalienable right to property. Property, he wrote, is purely a “creature of society” and can be legitimately taxed to pay for civil society. He was quite critical of Americans who were unwilling to pay their share of society’s “dues.”

None of this is likely to endear Franklin to libertarian theorists, and it hasn’t. Among them, the leading detractor has been Murray Rothbard, who in his four-volume history “Conceived in Liberty” describes Franklin as “perhaps the most over inflated [leader] of the entire colonial period in America.” At every turn in the history of the American revolution, Rothbard deprecates Franklin’s achievements and accentuates his peccadilloes. He finds in the sly Dr. Franklin “a sinister, subversive devil . . . an opportunist par excellence . . . cunning . . . fawning . . . meddling . . . opportunistic hedonist . . . ”

According to Rothbard, Franklin was a warmonger, a Tory imperialist, and a speculator with his “cronies” who engaged in a “pattern of plunder of the American taxpayer” during the war. His Albany Plan was far more than an innocent way to unify the nation; it was a deliberate attempt to create a “central super government.” Franklin comes off almost as badly as the “deep-dyed conservative” Washington, who is characterized as a fumbling, inept general who sought to “crush liberty and individualism” among his soldiers and impose a “statist” army.

Rothbard would have preferred as American commander “the forgotten hero,” the “brilliant, gifted” Charles Lee, champion of “liberty and guerrilla war.” And instead of Franklin as envoy to France, Rothbard would have selected the “estimable liberal” Dr. Arthur Lee.

Never mind the fact that other historians uniformly describe Arthur Lee as a “bilious” and “cantankerous” patriot who hated America’s French allies and accomplished little himself. Rothbard also likes Thomas Paine, promoter extraordinaire of the American cause — while ignoring the fact that Paine’s mentor was none other than Benjamin Franklin, and that Franklin was a lifelong supporter of Paine’s ideas. What did Paine see that Rothbard couldn’t?

Rothbard never explains the way in which somehow, by July 1776, the “Tory imperialist” suddenly became the “radical revolutionary” and co-conspirator of John Adams and Thomas Jefferson. Indeed, Franklin was one of the first of the founders to call for independence. As early as 1771, he observed that the “seeds are sown of total disunion” between England and her colonies. In 1775, he drafted a resolution to Congress to dissolve “all ties of allegiance” with a country that had failed to “protect the lives and property of [its] subjects,” adding: “It has always been my opinion that it is the natural right of men to quit, when they please, the society or state, and the country in which they were born, and either join with another or form a new one as they think proper.”

Furthermore, Franklin (like Rothbard) appears to have been an advocate of natural rights: “I am a mortal enemy to arbitrary government and unlimited power. I am naturally very zealous for the rights and liberties of my country, and the least encroachment of those invaluable privileges is apt to make my blood boil.”

No modern libertarian could have said it better. It is surprising that modern libertarians should fail to give Franklin credit for the “radical” and “libertarian” Pennsylvania Constitution written in 1776 and endorsed by him throughout his lifetime. And what about his critical role in raising military and financial aid in France? This is what we receive from Rothbard’s witty but poisoned pen: “The wily old tactician Franklin proved to be a master at the intricacies of lying, bamboozling, and intriguing that form the warp and woof of diplomacy. Moreover, the old rogue was a huge hit with the French, who saw him as the embodiment of reason, the natural man, and bonhomie.”

Rothbard is deadly silent about Franklin’s thrill of victory and Arthur Lee’s agony of defeat when it came to fundraising for the American cause.

Unfortunately, the only biography that Rothbard recommends is Cecil B. Currey’s “Code Number 72: Ben Franklin: Patriot or Spy?”, which accuses Franklin of being a double agent for the British. (Carl Van Doren’s “Benjamin Franklin” [1938] is the most comprehensive work in the field, and quite different in its conclusions from Currey.) Currey is a tough-minded researcher but ignores the evidence that doesn’t fit his agenda. “I have not . . . pretended to write a ‘balanced’ picture of Franklin (for I have focused on his shadows).”

Currey put together a sizeable amount of circumstantial evidence that while Franklin was ambassador to France he played both sides of the conflict. “The story involved treason, breaches of security, lackadaisical administration, privateering, misplaced truth, war profiteering, clandestine operations, spy apparatus, intrigue, double-dealing.” Today we know that Franklin and Adams were surrounded by spies, including one of their secretaries, Edward Bancroft. “A cell of British Intelligence was located at Franklin’s headquarters in France, and Benjamin Franklin — covertly perhaps, tacitly at least, and possibly deliberately — cooperated with and protected this spy cell operating out of his home in France from shortly after his arrival in that country until the end of the war.”

It is true that Franklin loved England before he loved France. He lived in London for nearly 20 years and considered it home, more even than Philadelphia. His son William was so enamored with the British Empire that he remained a loyalist throughout the war, thus giving rise to the rumor that his father was a double agent. In France, Franklin met with British agents and listened to their offers of honors, emoluments, and bribes. He did little to hide his activities and papers from alleged spies, whether French or British. And, yes, he was identified clandestinely as “Number 72.”

But it is also clear that Franklin broke with his son and was so bitter about being deserted “in a cause where my good fame, fortune and life were all at stake” that they never reconciled. Currey is correct that the British had a code number for Franklin, but the French also had a code for him (“Prométhée,” the Greek god who brought fire from heaven). The British had code numbers for almost everyone, including Washington (“Number 206”). And British and French spies were so common that Franklin simply ignored them.

Again, it’s important to look at the big picture. If indeed Franklin was playing both sides of the war, would he have worked so enthusiastically to obtain essential aid from France? If you buy Currey’s argument, you could just as easily make the argument that Arthur Lee and even John Adams were traitors, because both seemed to make every effort to insult the French and sabotage Franklin and his fundraising efforts. Practically every historian today agrees that without Franklin, the French would not have given the financial and military support necessary to win the war at Yorktown.

Nevertheless — and this demonstrates the influence of Rothbard in libertarian circles — when Gary North devoted the 1976 bicentennial edition of his “Reconstructionist” journal to a symposium on Christianity and the American Revolution, he chose only one historian to write “The Franklin Legend,” Cecil Currey. Today Currey’s book is out of print, and for good reason. Franklin clearly switched from loving the British Isles to hating the Crown and its ministers. He considered the War for Independence “the greatest revolution the world has ever seen” and a “miracle in human affairs.”

But let’s consider some other historians’ attacks on Franklin. Tom Tucker wrote an entire book (“Bolt of Fate” [2003]) contending that Franklin’s famous kite experiment was faked, that it was one of Franklin’s hoaxes. His evidence? Franklin didn’t write about the kite story for years, and the only detailed account was written by his friend Joseph Priestley, some 15 years after the event. Yet according to Priestley, Franklin dreaded the ridicule of performing an unsuccessful experiment in public, so he used his son William as his only witness — and William never denied the kite test, even after he and his father had become estranged.

Another assault on Franklin is embodied in “Runaway America” (2004), by David Waldstreicher, who argues that Franklin masked his true feelings about slavery, and that he was a slave trader and slave owner in an age of supposed freedom and equality. Here again the author ignores or downplays contrary evidence, such as the fact that in 1763 Franklin visited the Negro School of Philadelphia, which he helped establish, examined the students, and discovered “a higher opinion of the natural capacities of the black race . . . Their apprehension seems as quick, their memory as strong, and their docility in every respect equal to that of white children.”

Franklin was never much of a slaveholder — compared, for example, to Washington or Jefferson — and the few slaves he held as servants were freed in London before he returned to America in 1775. Two years before he died, he became president of the Philadelphia Society for the Abolition of Slavery and helped introduce legislation in Congress to abolish slavery once and for all.

Franklin has been blamed for abandoning his devoted wife, Deborah, and becoming a lecher in London and France. There is plenty of evidence to support a charge like this. He wrote several risqué bagatelles, such as “Advice to a Young Man on the Choice of a Mistress,” and “The Speech of Miss Polly Baker,” which defends a single mother who was prosecuted for the fifth time for having an illegitimate child. Franklin himself had a “natural” son, William. In his “Autobiography” he confessed that, as a young man, his “hard-to-govern’d passion of youth” led him into “intrigues with low women.” (This paragraph was censored in grade schools until the early 20th century, when, presumably, it was realized that children no longer understood what this usage of “intrigues” might mean.) Carl Van Doren says that “he went to women hungrily, secretly, and briefly.”

In 1730, Franklin entered into a common-law marriage with Deborah Read, whose husband abandoned her without a divorce. Together they raised William and had two children of their own: Franky, who died of smallpox at age four, and Sally, who cared for Franklin in his final years. Despite all the rumors, there is no hard evidence that Franklin sired any other illegitimate children. He settled into a faithful relationship with his wife in Philadelphia and focused on his printing business.

The relationship changed in the last 18 years of their marriage, when they lived separate lives. But he did not by any means abandon her. When he was made a colonial agent in 1757 and moved to London, he begged her to come with him, but she had a mortal fear of crossing the ocean and repeatedly refused. “I have a thousand times wished my wife with me, and my little Sally,” he wrote from London. Over time, they drifted apart emotionally, corresponding largely about mundane household matters and local gossip. Claude-Anne Lopez, a Franklin expert, notes that “it strains credulity to imagine that so vigorous a man was never unfaithful in all that time.”

Deborah died in late 1774, when Franklin was still in London. Two years later, as a widower, he was back in Europe. The French lionized the American ambassador, who developed a considerable friendship and correspondence with several beautiful French women, including Madame Brillon, who was an artist and musician, and the wife of a diplomat. Their relationship supposedly never went beyond friendship, although Franklin admitted to a friend, “I sometimes suspected my heart of wanting to go further.”

Their letters are intimate and flirtatious, and fun to read. (See chapter 6 of “The Compleated Autobiography.”) He considered flirtation a legitimate “amusement” and refuge from a grueling schedule of diplomacy. Gossip spread about him and Madame Brillon. Her husband once found them kissing; they played a game of chess in her bathroom; she sat on his lap at a dinner party attended by John and Abigail Adams, puritans who were “disgusted” by Franklin’s behavior. Jefferson observed that “in the company of women . . . he loses all power over himself and becomes almost frenzied.”

One of his critics wrote this ditty:
Franklin, though plagued with fumbling age,
Needs nothing to excite him,
But is too ready to engage,
When younger arms invite him.

The old doctor was 70 years of age when he arrived in France in 1776. During his long stay he suffered severely from gout and kidney stones. Sometimes he could hardly walk. It is doubtful that he fulfilled his sexual fantasies in any meaningful way. As historian Robert Middlekauff suggests, “Reading his correspondence of this period and remembering what we know of his physical condition, we might conclude that Franklin’s sex life was very much like Jane Austen’s novels — all talk and no action.”

Franklin was often criticized by contemporary Christians for his heretical religious views. He was not a churchgoer, and had doubts about the divinity of Jesus. But he believed in God. A deist for most of his life, he supported a pragmatic religion that favored good works and charity more than simple faith and hope. And by “good works,” he said, “I mean real good works, works of kindness, charity, mercy, and public spirit; not holiday-keeping, sermon-reading or hearing, performing church ceremonies, or making long prayers, filled with flatteries and compliments, despised even by wise men, and much less capable of pleasing the Deity.”

Franklin is justly famous for engaging in innumerable civic and charitable causes throughout his adult life — and into the afterlife, by means of his perpetual fund, established in his will, for the benefit of young tradesmen in Boston.

But to return to the heart of libertarian concerns about Franklin, it can be said that, in many ways, he was America’s first champion of free enterprise. Economists of the “Austrian” school, who have been so influential on modern libertarian thought, would be pleased with his emphasis on entrepreneurship, industry, and thrift. Eugen Böhm-Bawerk and Max Weber recognized his genius, and so did American capitalists Andrew Carnegie and Thomas Mellon, who were deeply influenced by the “Autobiography.” Franklin anticipated the incredible material and technological progress that America has made in the centuries since its founding. An incurable optimist, he was always bullish on America, and life in general. At the end of the War for Independence, he predicted, “America will, with God’s blessing, become a great and happy country.” The United States, he said, is “an immense territory, favored by nature with all advantages of climate, soil, great navigable rivers and lakes . . . [and] destined to become a great country, populous and mighty.” More importantly, he told potential immigrants that the country “affords to strangers . . . good laws, just and cheap government, with all the liberties, civil and religious, that reasonable men can wish for.” (He underlined the word “cheap.”)

What were his politics? Franklin was opposed to a strong central executive. In his original draft of the Articles of Confederation, he proposed twelve members of the executive instead of one president, to disperse political power. He opposed public “offices of profit.” As Bernard Fay concludes, “They [Congress] were directly opposed to Franklin’s philosophical tendency, which might be summed up in this formula: the least government possible is the greatest possible good.”

Certainly he was no social libertarian, despite his image as a libertine and free thinker. While he is famous for reading books in the nude, frequenting the salacious Hell-Fire Club in London, and flirting with French ladies in Paris, he wrote stern letters to his daughter Sally chastising her for wanting to wear the latest fashions while a war was going on, and he refused to buy his grandson Benny a gold watch while in France. He dressed plainly and constantly preached economy. He always promoted frugality and industry in both public and private life. Readers might be surprised by his attack on the growth of taverns in Philadelphia upon his return from England in 1762. Though a defender of free speech, he railed against scurrilous newspaper reports.

There is nothing special about this side of Franklin. His distinctive contribution is not found in his lectures on the more conventional virtues but in his openness to the new, entrepreneurial, can-do spirit. He lambasted privileged public offices and aristocracies of birth, and told European immigrants that “in America, people do not inquire concerning a stranger, What is he? but What can he do?”

He illustrated what an individual could do by doing it himself, helping to finance good causes with his own business profits. He was civil-minded early in his career, involving himself with the nation’s first fire company; the nation’s oldest property insurance company; and Philadelphia’s own hospital, library, and militia. All were created with mostly private funds. “America’s first entrepreneur may well be our finest one,” concludes John Bogle, founder of the Vanguard family of mutual funds.

Like all the founders, he had his share of foibles. How should one weigh his mammoth achievements against his inscrutable flaws? Before you make up your mind, I suggest you spend a few days reading Franklin’s own accounts of his life. You may see a different Franklin from the man his critics and I have described.

Libertarians are not used to winning. They prefer being in the minority. They figure that if they are victorious, they must be compromising their principles. That may be what galled Murray Rothbard: Franklin was so damned successful as a scientist, businessman, and diplomat. To libertarians, it may help to know that he wasn’t always successful. He had his share — and perhaps more than his share — of enemies. Here’s his philosophy about his critics: “As to the abuses I have met with, I number them among my honors. . . . The best men have always had their share of this treatment . . . and a man has therefore some reason to be ashamed when he meets with none of it. Enemies do a man some good by fortifying his character. I call to mind what my friend good Rev. Whitefield [the famous evangelist] said to me once: ‘I read the libels writ against you, when I was in a remote province, where I could not be informed of the truth of the facts; but they rather gave me this good opinion of you, that you continued to be useful to the public: for when I am on the road, and see boys in a field at a distance, pelting a tree, though I am too far off to know what tree it is, I conclude it has fruit on it.”

Now that’s a saying that all libertarians can appreciate.

1. H.W. Brands, “The First American: The Life and Times of Benjamin Franklin” (Doubleday, 2000), jacket.

2. Michael H. Hart, “The 100: A Ranking of the Most Influential Persons in History,” 2nd ed. (Kensington, 1992) 516–17.

3. Joyce E. Chaplin, “The First Scientific American: Benjamin Franklin and the Pursuit of Genius” (Basic Books, 2006) 1.

4. Gordon Wood, “The Americanization of Benjamin Franklin” (Penguin, 2004) 196.

5. “The Compleated Autobiography, by Benjamin Franklin,” compiled and edited by Mark Skousen (Regnery, 2006) 189, 300.

6. “Compleated Autobiography” 148.

7. “Compleated Autobiography” 357.

8. “Compleated Autobiography” 298–99.

9. Murray N. Rothbard, “Conceived in Liberty” (Arlington House, 1975) 2.64, 67, 172; 3.273; 4.358. My disagreement with Murray Rothbard on his assessment of Franklin, as well as Adam Smith, does not diminish my admiration of Rothbard’s tremendous contributions to economics, including “America’s Great Depression,” “Man, Economy, and State,” “Power and Market,” and “What Has the Government Done to Our Money?”

10. Rothbard, “Conceived in Liberty” 4.359, 4.43–44.

11. Rothbard, “Conceived in Liberty” 3.218, 4.34–35

12. “Compleated Autobiography” 65, 120.

13. “Compleated Autobiography” 80.

14. Rothbard, “Conceived in Liberty” 4.232–33.

15. Cecil B. Currey, “The Franklin Legend,” Journal of Christian Recon­struction (Summer 1976) 143.

16. Cecil B. Currey, “Code Number 72: Ben Franklin, Patriot or Spy?” (Prentice Hall, 1972) 12, 266.

17. “Compleated Autobiography” 130–32.

18. “Compleated Autobiography” 26. Waldstreicher ignores this passage.

19. Carl Van Doren, “Benjamin Franklin” (Viking Press, 1938) 91.

20. Claude-Anne Lopez and Eugenia W. Herbert, “The Private Franklin: The Man and His Family” (Norton, 1975) 26–27.

21. “Compleated Autobiography” 162.

22. Quoted in “Benjamin Franklin: The Autobiography and Other Writ­ings,” ed. Kenneth Silverman (Penguin, 1986) 206.

23. Hugh Williamson, “What Is Sauce for a Goose Is Also Sauce for a Gan­der” (1764).

24. Robert Middlekauff, “Benjamin Franklin and His Enemies” (University of California Press, 1996) 115–16.

25. “Compleated Autobiography” 387.

26. “Compleated Autobiography” 290.

27. Bernard Fay, “Franklin, Apostle of Modern Times” (Little, Brown, 1929) 504.

28. Some libertarians are critical of Franklin for opposing the notorious “outlaw” John Wilkes, a defender of free speech who was imprisoned for libeling the king of England in 1768, and the “drunken mad mobs” supporting “Wilkes and Liberty.” This is another case of Franklin’s so­cial conservatism before the American Revolution. Interestingly, after the war, Wilkes’ sister and mother came over to America and stayed at Franklin’s home in Philadelphia. See “The Compleated Autobiogra­phy” 59–62, 349.

29. “Compleated Autobiography” 292.

30. John Bogle, Introduction, “Benjamin Franklin: America’s First Entrepre­neur,” by Blaine McCormick (Dallas: Entrepreneurial Press, 2005).

31. “Compleated Autobiography” 44–45.

Mark Skousen and Milton Friedman at lunch

I was at the New Orleans Investment Conference when I learned that free-market economist extraordinaire Milton Friedman, died on November 16. He was a dear friend. I was probably the last person to go out to lunch with Milton. We met at his favorite restaurant in San Francisco, where I showed him a picture of him standing next to John Kenneth Galbraith, the premier Keynesian and welfare statist of the 20th century. Galbraith towered over the diminutive Friedman. Beneath the picture was a funny line by George Stigler: “All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman.” Milton was so pleased with the photo and caption that he sent it to all his friends only two weeks before his passing.

“All great economists are tall. There are two exceptions: John Kenneth Galbraith and Milton Friedman.” –George J. Stigler

George Stigler, Milton Friedman and John Kenneth Galbraith

(Left to right: George Stigler, Milton Friedman, John Kenneth Galbraith.
Creation of Mark Skousen. Technical assistance by James Durham.)

Milton had just turned 94, yet his mind was sharp. We discussed the latest Nobel Prize in economics. He said, “We’re running out of good names.” What about the new field of behavior economics that Richard Thaler (Chicago), Robert Shiller (Yale), and Jeremy Siegel (Wharton)? “Yes,” he agreed. “They are making an important contribution. Siegel worked with me at Chicago in the 1970s and is doing brilliant work.”

I asked Milton if he wouldn’t mind giving me a blurb for my next book, “The Big Three in Economics.” He loved my previous history, “The Making of Modern Economics,” and agreed to give me a quote. It saddens me to know he never got to it.

For the past few years, he walked with a cane. He suffered from pain in his legs, a weak heart (after two heart surgeries in the 1980s), and was losing his eye sight. As we left, I asked him, “Do you think you’ll live to be 100?” He answered quickly, “I hope not!”

A few days later he fell and was taken to the hospital. He died a couple weeks later of a heart attack.

Friedman was not only a great economist, but a memorable quotesmith. Besides the standard bearers, such as “Inflation is always and everywhere a monetary phenomenon” and “There’s no such thing as a free lunch,” here are some others less well known:

“Competition is a tough weed, but freedom is a rare and delicate flower.” — (with George J. Stigler)

“If a tax cut increases government revenues, you haven’t cut taxes enough.”

“I favor tax reductions under any circumstances, for any excuse, for any reason, at any time.”

“A society that puts equality ahead of freedom will end up with neither equality or freedom.”

“Nothing is so permanent as a temporary government program.”

“Inflation is taxation without legislation.”

“The economy and the stock market are two different things.”

“If government is to exercise power, better in the county than in the state, better in the state than in Washington.”

“The great advances of civilization, whether in architecture or painting, in science or in literature, in industry or agriculture, have never come from centralized government.”

“The minimum wage law is one of the most, if not the most, anti-black laws on the statute books.”

“Nobody spends somebody else’s money as carefully as he spends his own.”

“The government solution to a problem is usually as bad as the problem.”

I will miss our lunches and dinners together. He was one of the most unforgettable people I ever met.

In liberty, AEIOU, Mark

P. S.  At our luncheon last month, Milton Friedman and I also talked about the upcoming FreedomFest.  He was a big fan and was looking forward to it. He wrote me this statement to all freedom lovers:  “FreedomFest is a great place to talk, argue, listen, celebrate the triumphs of liberty, assess the dangers to liberty, and provide that eternal vigilance that is the price of liberty. We have so much to celebrate but also much to be concerned about.”  We are going to have a special tribute to Milton Friedman at FreedomFest 2007, set for July 5-7, 2007, at Bally’s in Las Vegas.  For more information, go to www.freedomfest.com.

December 2001
PERSONAL SNAPSHOTS
Forecasts & Strategies

by Mark Skousen

“A noble man cannot be lost in a crowd.” — Maori Saying

I just returned from my 25th appearance at the New Orleans Investment Conference. I know hundreds of you have been to this classic “granddaddy “of seminars. There’s a reason why this investment conference has lasted so long. Jim Blanchard, the founder, wanted to bring together investors who not only wanted to preserve their capital, but also cared about their country. As he used to say, “What’s the point of being a millionaire if you are on the Titanic?” His conferences always mingle solid investment advice with a hefty dose of sound money and free-market ideas. Last month we heard from Milton Friedman and John Stossel, among other giants in the freedom movement.

Jim was first and foremost a teacher (he used to teach high school in New Orleans), and he wanted his subscribers and conference attendees to know that inflation and the ups-and-downs of the economy were caused by government, not capitalism. He urged his followers to read Ayn Rand’s novels (he named one of his children Anthem!) He was one of the original goldbugs, and he devoted his entire career to the cause of liberty and sound money. In the early 1970s, he formed the National Committee to Legalize Gold. Because of Jim’s untiring efforts, in 1974 it once again became legal for Americans to own gold. Jim saw gold ownership as a fundamental human right, a hedge against government mismanagement.

Jim was also an entrepreneur who turned a $50 investment into a $115-million precious-metals coin business. He started the Blanchard group of mutual funds. He used his profits for many good causes, and his love of liberty led him to support pro-freedom forces and anti-Communist causes in Africa and Europe.

Finally, Jim overcame personal tragedy. He was nearly killed in an automobile accident at age 17 and was unable to walk. But his handicap only spurred him on. He became a powerful figure for liberty, entrepreneurship and sound money.

Tragically, Jim died of a heart attack in 1999 at age 55.His family issued a formal notice with the sentence: “James U. Blanchard III was a man who accomplished much against great odds, and changed more people’s lives than he ever knew.”

How to Honor Jim’s Life: The Blanchard Scholarship Fund

Since Jim’s untimely death, I’ve often wondered how we — untold numbers of friends and followers who were inspired by Jim’s example — honor our friend ’s memory. When I became the president of the Foundation for Economic Education (FEE), I thought of a way to honor Jim ’s life: to create the James U. Blanchard III Memorial Scholarship Fund. The scholarship fund will help teach students all over the world the principles of sound money and free markets. To qualify to become a Blanchard Scholar, students will be required to write an essay on inflation, sound money, entrepreneurship, limited government and other topics Jim advocated. Once chosen, Blanchard scholars will qualify to attend a weeklong course at FEE headquarters in Irvington-on-Hudson, New York, on free-market economics. We hold several of these seminars each summer (go to www.fee.org for the current schedule). Typically, it costs about $1,000 to pay for one student at a weeklong FEE seminar, including room and board, tuition, books and materials, and airfare. But through the generous support of the Blanchard Scholarship Fund, students will be able to attend and learn about the freedom philosophy. And their lives will be changed forever.

Jim, by the way, was a strong supporter of FEE, and read regularly the monthly magazine, The Freeman (now called Ideas on Liberty). He was a friend of Leonard Read, the founder of FEE. And FEE, by the way, is one of the few free-market organizations that favors a gold standard. It’s a perfect match.

So far the response has been incredible. Friends everywhere have come forward and made contributions. Will you join us? You can make donations by check, credit card, securities or other assets. All donations to the Blanchard Fund are tax deductible through the Foundation for Economic Education, which is an IRS-approved 501(c) 3 educational organization.(Rick Rule, one of my recommended brokers, has offered at no charge to assist anyone who wishes to donate stock — him at Global Resource Investments at 800/477-7853). For more information on FEE, go to our website, www.fee.org. Send your donation to: The Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, New York 10533. For donations by credit card, call 800/960-4FEE (4333). Be sure to designate “Blanchard Scholarship Fund,” which will be kept as a segregated account. Thank you!

P.S. Any donation above $100 will receive a complimentary one-year subscription to our flagship monthly publication, Ideas on Liberty. You’ll love it!

November 2001
PERSONAL SNAPSHOTS
Forecasts & Strategies

by Mark Skousen

“It was a time for every man to stir.” — Thomas Paine

Westchester County, New York, where I now reside, is full of American heroes. Two are buried in Sleepy Hollow cemetery — Carnegie, the steel magnate (highlighted last month) and Samuel Gompers, the great labor leader. Another hero is Thomas Paine (1737-1809), the revolutionary writer, who owned a farm in New Rochelle. Paine is famous for writing Common Sense, the anonymous pamphlet that galvanized Americans into revolution in 1776. I read it as a teenager one summer and was overwhelmed by the candid, powerful case he made for separation from England. But there were actually three revolutions in 1776 — political revolution declared on July 4 by Thomas Jefferson’s Declaration of Independence; an economic revolution propelled by Adam Smith’s magnum opus, The Wealth of Nations (published on March 9,1776); and a cultural/religious revolution as expressed in Edward Gibbon’s best-seller, The Decline and Fall of the Roman Empire (the first volume published on February 23,1776). Thus, 1776 was a year of wonders.

The Age of Paine: A Supporter of Free Enterprise and a Hater of Taxation

Even more amazing, Tom Paine spoke out in favor of all three revolutions. In Common Sense, published on January 9,1776, he made the greatest case for political independence ever penned. “Government even in its best state is but a necessary evil; in its worst state an intolerable one …Nothing can settle so expeditiously as an open and determined declaration of independence.” He coined the name, “United States of America.” He hated the King and the privileged aristocracy that went with it. He referred to the idle nobility as “no-ability.” What mattered most to Paine was a man’s productivity, not his pedigree. Paine was also an unrepented follower of Adam Smith and laissez faire capitalism.

In The Rights of Man (1791) he defended individualism, property, business enterprise and Jeffersonian democracy. He favored a world in which political and social place would be determined by talent, merit and hard work — reliant individuals. He defended the rich and the businessman. His one villain: government. The invisible hand of merchants, manufacturers and bankers create a wholesome civil society; but the “greedy hand of government” oppressed and taxed citizens at home and waged war abroad. He was obsessed with taxation, a symbol of tyranny and corruption. Finally, Paine’s social and religious philosophy was in keeping with Gibbon’s. He favored free thought and freedom of religion, and was opposed to a state religion. He was an outspoken critic of slavery. He was cursed as an atheist and an infidel based on his sharp criticisms of the Bible in The Age of Reason (1794),but he was in fact a deist who strongly believed that “the hand of providence has …accomplished the independence of America.”

The Spirit of Paine Lives On

Some of the stirring words of Tom Paine seem modern to me. After the war on terrorism began, I thought of his words: “These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.” Long live the spirit of Tom Paine. That spirit lives on at the Foundation for Economic Education (FEE). I urge you to subscribe to our monthly publication, Ideas on Liberty.The cost is only $30 a year for 12 issues. To subscribe, call 914/591-7230. Ideas on Liberty would also make a great holiday or birthday gift.

UPDATE

Foreign Affairs, the premier establishment journal, loves AND hates my new history, just as it goes into a second printing! The October/September issue of Foreign Affairs calls The Making of Modern Economics “both fascinating and infuriating.” On the positive side, the book is “engaging, readable, colorful and entertaining,” on the negative side, it’s “credulous, disingenuous and tendentious.” My kind of review! Love it and hate it! I ’m also happy to report that the first printing is sold out and a second printing is now available from M.E. Sharpe Publishing, 800/541-6563. Be sure to mention you are a subscriber to Forecasts &Strategies, and you pay only $49.95 for the hardback and $24.95 for the paperback, plus S&H, a considerable bargain over the retail prices.

November 2001
From the President’s Desk
Ideas on Liberty

by Mark Skousen

“Individualism, private property, the law of accumulation of wealth, and the law of competition . . . are the highest result of human experience, the soil in which society, so far, has produced the best fruit.” —ANDREW CARNEGIE’

A few days after my move to New York, I paid my respects to an icon of capitalism, Andrew Carnegie (1835-1919), whose tombstone is appropriately located only a few miles up from FEE headquarters, in Sleepy Hollow Cemetery. In three ways, Carnegie reflects the spirit of FEE—he was a fierce defender of free-enterprise capitalism; he gave generously to good causes; and he worked hard for the cause of world peace and democracy. All three are in short supply in today’s uncertain world of regulatory state capitalism, welfarism, and terrorism.

As a joint creator (along with J. P. Morgan) of U.S. Steel, the first billion-dollar corporation in the world, Carnegie was a successful entrepreneur who benefited humanity by offering cheaper and better steel with which to build a modern world. He would reject the “robber baron” title. Capitalism was not a device to enrich the rich at the expense of the poor, as the Marxists contend; “Capitalism,” he said, “is about turning luxuries into necessities.” He started out as a poor Scottish immigrant, a classic Horatio Alger hero. He liked to be different; his favorite advice to young men was, “Attract attention.”

For Carnegie, there were in the world other values than those of the business culture: he loved books, and became friends with intellectuals, writers, and statesmen such as Herbert Spencer, Mark Twain, and William Gladstone. He was intensely competitive, even glorying in beating his friends in golf. In business, he drove down the cost of steel, even as he improved the quality. “Cheaper and better” became the American way. “Watch the costs, and the profits will take care of themselves,” he explained.2 He made no apologies for his ruthless competitive spirit, which he justified as a Darwinian form of “survival of the fittest” and as a fulfillment of Jesus’ parable of the talents. Like an old-fashioned Hank Rearden in Ayn Rand’s novel Atlas Shrugged, Carnegie wasn’t merely an apologist for anarchic individualism; he was its celebrant.

Carnegie objected strenuously to the “progressives” who favored socialism and communism over individualism. “To those who propose to substitute Communism for this intense Individualism, the answer therefore is: The race has tried that. All progress from that barbarous day to the present time has resulted from its displacement.”3

“The Man Who Dies Rich Dies Disgraced”

Following his retirement in 1901, the Man of Steel did not live it up with ostentatious mansions, limousines, and hundred-dollar cigars, which Thorstein Veblen labeled “conspicuous consumption” of the idle rich. Carnegie spoke of the millionaire’s duty to live a “modest” lifestyle, shunning extravagant living and administering his wealth for the benefit of the community. To do otherwise, he warned, would encourage an age of envy and invite socialistic legislation attacking the rich through progressive taxation and other onerous anti-business regulations.

Carnegie practiced what he preached, giving away over $350 million in his lifetime. One of his first acts after U.S. Steel went public was to put $5 million into a pension and benefit plan for his workers. He was careful in his philanthropy, avoiding at all costs “indiscriminate charity.” He disdained the conventional practice of accumulating wealth solely to be bequeathed to heirs, which he regarded as “sterile” and even “perverse” if it resulted in profligate living. Instead, he spent millions building 2,811 public libraries, donating 7,689 organs to churches, and establishing Carnegie Hall in New York and the Carnegie Institution in Washington. He financed technical training at the Carnegie Institute of Technology and established a pension fund for teachers through the Carnegie Foundation for the Advancement of Teaching. I cannot help but think that were he alive today, he would be a major donor to FEE!

Finally, Carnegie devoted the rest of his life to promoting world peace and democracy. He was convinced that the United States surpassed Europe economically in part because Europe was constantly embroiled in wars with its neighbors while the United States largely avoided such conflicts. He campaigned against imperialistic entanglements with other nations and in favor of peaceful arbitration as a means to end conflicts. He was a passionate believer in democracy, universal suffrage, and equality of opportunity through free public education. But he opposed equality of property or ability, and argued that all citizens had the right to choose their own occupation and had the right to earn income in any amount and spend it as they wished. He expressed distaste for royalty, aristocracy, and any form of state religion.

The Spirit of Andrew Carnegie Lives at FEE

Today I am happy to report that the world has a goodly share of modern-day Andrew Carnegies. As the new president of FEE, I have had the pleasure of becoming aware of these unique men and women of the business world who have not only added value to the global economy through their entrepreneurial efforts, but have sacrificed time and money to promote FEE and its mission. For example, last week Larry Reed, president of the Mackinac Center for Public Policy and a FEE trustee, told me about a FEE donor who spent half his life sponsoring FEE seminars on free-market economics in his hometown, often at considerable personal sacrifice of time and financial resources. Another individual, on hearing that a FEE student seminar might have to be canceled due to a lack of attendees, arranged for several dozen students to attend. The seminar turned out to be a great success. Hundreds of other FEE supporters have arranged conferences, raised funds, and distributed copies of Ideas on Liberty to their friends and acquaintances. And with your help we are planning many new programs to spread the gospel of FEE and to “attract attention,” as Andrew Carnegie would advise.

When barbaric terrorists destroyed the Twin Towers at the World Trade Center a symbol of global capitalism and individual creativity, and built with Carnegie steel—I was heartened to read how thousands of private business leaders stepped forward and provided $200 million in financial aid to rebuild the area. I salute them for being living examples of FEE’s gospel of peace, prosperity, and freedom.

1. Andrew Carnegie, The Gospel of Wealth and Other Timely Essays (Cambridge: Harvard University Press, 1962 [1900]). p. 19.
2. Michael Kiepper and Robert Gunther, “Andrew Carnegie,” in The Wealthy 100 (New York: Carol Publishing Group. 1996). p. 31.
3. Carnegie, p. 18.

October 2001
PERSONAL SNAPSHOTS
Forecasts & Strategies

by Mark Skousen

“The business career is a stern school of all the virtues. The business man pursues fortune.”— Andrew Carnegie

After moving to New York last month to become the president of the Foundation for Economic Education (FEE), I took the opportunity to pay my respects to an icon of capitalism, Andrew Carnegie (1835-1919). His body is buried only a few miles up from FEE headquarters in Sleepy Hollow cemetery. In three ways, Carnegie reflects the spirit of FEE — was a fierce defender of free-enterprise capitalism, he gave generously to good causes, and he worked hard for the cause of world peace and democracy.

“CAPITALISM IS MORE NOBLE THAN COMMUNISM “

As a joint creator (along with J.P. Morgan) of U.S. Steel, the first billion-dollar corporation in the world, Carnegie was a successful entrepreneur who benefited humanity by offering cheaper and better steel with which to build a modern world. He rejected the “robber baron “title. Capitalism was not a device to enrich the rich at the expense of the poor, as the Marxists contend; “Capitalism,” he said, “is about turning luxuries into necessities.” He started out as a poor Scotch immigrant, a classic Horatio Alger. He liked to be different; his favorite advice to young men was, “Attract attention.”

For him, there were other values in the world than just those of the business culture: He loved books and became friends with intellectuals, writers and statesmen such as Herbert Spencer, Mark Twain and William Gladstone. He was intensely competitive, even glorying in beating his friends in golf. In business, he drove down the cost of steel, even as he improved the quality. “Cheaper and better ” became the American way. “Watch the costs, and the profits will take care of themselves,” he explained in his book, The Gospel of Wealth, first published in 1900. He made no apologies for his ruthless competitive spirit, which he justified as a Darwinian form of “survival of the fittest “and as a fulfillment of Jesus ’s parable of the talents. Like an old-fashioned Hank Reardon in Ayn Rand’s novel, Atlas Shrugged, Carnegie wasn’t merely an apologist for anarchic individualism; he was its celebrant. Carnegie objected strenuously to the “progressives “who favored socialism and communism over individualism. He said communism had been tried, and failed.

“The Man Who Dies Rich Dies Disgraced.”

Following his retirement in 1901,the Man of Steel did not live it up with ostentatious mansions, limousines and hundred-dollar cigars, which Thorstein Velben labeled “conspicuous consumption “of the idle rich. Like The Millionaire Next Door, Carnegie spoke of the millionaire’s duty to live a “modest” lifestyle, shunning extravagant living and administering his wealth for the benefit of the community. To do otherwise, he warned, would encourage an age of envy and invite socialistic legislation attacking the rich through progressive taxation and other onerous anti-business regulations.

Carnegie practiced what he preached, giving away over $350 million in his lifetime. One of his first acts after U.S. Steel went public was to put $5 million into a pension and benefit plan for his workers. He was careful in his philanthropy, avoiding at all costs “indiscriminate charity.” He disdained the conventional practice of accumulating wealth solely to be bequeathed to heirs, which he regarded as “sterile” and even “perverse” if it resulted in profligate living. Instead, he spent millions building 2,811 public libraries, donating 7,689 organs to churches, and establishing Carnegie Hall in New York and the Carnegie Institution in Washington. He financed technical training at the Carnegie Institute of Technology, and established a pension fund for teachers through the Carnegie Foundation for the Advancement of Teaching. I cannot help but think that were he alive today, he would be a major donor to FEE!

“Democracy Means That Privilege Shall Cease.”

Finally, Carnegie devoted the rest of his life to promoting world peace and democracy. He was convinced that the United States surpassed Europe economically in part because Europe was constantly embroiled in wars with its neighbors while the United States largely avoided such conflicts.(If the U.S. must maintain a high defense budget to eradicate terrorism, it could severely retard economic growth.) He was a passionate believer in democracy, universal suffrage and equality of opportunity through free public education. But he opposed equality of property or ability, and argued that all citizens had the right to choose their own occupation and had the right to earn income in any amount and spend it as they wished. He expressed distaste for royalty, aristocracy and any form of state religion.

The Spirit of Andrew Carnegie Lives at FEE

Today I am happy to report that the world has a goodly share of modern-day Andrew Carnegies. As the new president of FEE,I have had the pleasure of becoming aware of these unique men and women of the business world who have not only added value to the global economy through their entrepreneurial efforts, but have sacrificed time and money to promote FEE and its mission. For example, last week Larry Reed, president of the Mackinac Center for Public Policy and a FEE trustee, told me about a FEE donor who spent half his life sponsoring FEE seminars on free-market economics in his hometown, often a considerable personal sacrifice of time and financial resources. Another individual, upon hearing that a FEE student seminar might need to be canceled due to a lack of attendees, stepped up and arranged for several dozen students to attend. The seminar turned out to be a great success. Hundreds of other FEE supporters have arranged conferences, raised funds and distributed copies of our flagship publication, Ideas on Liberty, to their friends and acquaintances. And with your help we are planning many new programs to spread of the gospel of FEE and to “attract attention,” as Andrew Carnegie would advise.

How to Help FEE

I am developing some new ways to help FEE teach Americans and the rest of the world the simple but powerful principles of economics. One goal is to dramatically increase the circulation of Ideas on Liberty. If you haven ’t subscribed yet, you should —$30 for a 12 subscription to: Foundation for Economic Education, Irvington on Hudson, New York 10533, telephone 914/591-7230. We are also spending money to create a top-notch interactive website at www.fee.org. We are planning special seminars on “Fast Track Executive Economics Courses “at various investment conferences (Money Shows, New Orleans, Atlanta, etc) to explain the basics of the roller-coaster global economy. Plus we’re expanding our student and business seminars to teach future generations the benefits of the free market. If you give $100, you become a “Friend of FEE “and will receive many benefits. I look forward to hearing from you.

EAST AND WEST

“The enjoyment of books has always been regarded among the charms of a cultured life….” -Lin Yutang, The Importance of Living (1937)

One of the benefits of a cruise is that you get time to read new books. Most people read novels, but I prefer non-fiction. Two books caught my interest on my recent Australia-New Zealand cruise: East and West: China and the Future of Asia, by Christopher Patten, the last British governor of Hong Kong, and The Noblest Triumph, by Tom Bethell.

Both books have much in common. East and West is a fascinating account of the agonizing, yet inevitable, transfer of a free and prosperous British colony to a totalitarian and brutal communist regime. In his five years as governor (1992-97), Patten changed his views about the Asian economic miracle.

After World War II, Hong Kong was a poverty-stricken rock of only 400 square miles. Six million refugees poured in from mainland China. Over the years, Hong Kong has had no foreign aid, no natural resources, and has even had to import most of its water and food while being thousands of miles from its trading partners.

Hong Kong’s economic miracle can be explained, says Patten, “as an example of the benefactions of free trade and technological advance. It cannot be attributed to some continent-based value system. ‘Asian values’ has been a shorthand for the justification of authoritarianism, bossiness and closed collusion rather than open accountability in economic management.” He goes on to say, “Values are universal. So, too, is the case for market economics, which work everywhere better than any other economic system, and free and open economies perform most effectively in plural societies. Liberal economics and liberal democracy go hand in hand: Freedom, democracy, the rule of law, stability and prosperity…” (p.4)

THE IMPORTANCE OF PROPERTY RIGHTS

How does democratic capitalism achieve prosperity? That’s the subject of the second book, Tom Bethell’s The Noblest Triumph. Bethell says the key to stability and prosperity is the enforcement of property rights.

“When property is privatized, and the rule of law is established in such a way that all including the rulers themselves are subject to the same law, economies will prosper and civilization will blossom,” writes Bethell. Bethell goes on to say property rights include the right to use and transform the property, to buy and sell land, goods and other assets, to pass it along to your heirs, and to enforce contracts through an independent judicial system. Without property rights, all other rights mean little or nothing, as those who have lived under tyranny can testify. Bothell demonstrates that the Arabs, despite their vast oil riches, have remained relatively poor because Arabic governments don’t guarantee property rights against the state. He argues that the Irish starved during the potato famine of the 1840s because the British didn’t allow enough private ownership of Irish property. Are we in danger of losing our prosperity due to asset forfeitures, taxes, and government controls? Let’s hope not.

Forecasts & Strategies
Personal Snapshots
August 2000

by Mark Skousen

“The Chief didn’t believe in the Protestant ethic or trust in Poor Richard’s aphorisms. A penny saved might be a penny earned, but a penny borrowed was worth even more.”
- David Nasaw, author The Chief: The Life of William Randolph Hearst

In the past year, I’ve had the chance of visiting the two biggest mansions in the United States, the Biltmore in Asheville, North Carolina, erected by the Vanderbilts, and the Hearst Castle, built by William Randolph Hearst. Both are monuments of capitalist extravagance, and both bankrupted the owners. The Vanderbilts never recovered and not a single Vanderbilt appears on today’s list of the Forbes 400 Richest People in America. The Hearst family was luckier and somehow survived the excesses of the Chief. Several of the Hearst sons are listed today as billionaires on the Forbes list.

In reading his latest biography, The Chief (Houghton Mifflin), I was surprised to learn that William Randolph’s father, George Hearst, started out as a forty-niner prospector who made a fortune in Homestake Mining and Anaconda Copper. He bought the San Francisco Examiner to advance his political career as a U.S. Senator. His only son, William, was trained by his ambitious mother, Phoebe, who took him overseas and sent him to private schools, where he learned Greek, Latin, French and German. Learning business and finance at a course in “political economy” at Harvard, he took over the Examiner and made it profitable. He had the patience to wait on his investments, which paid off handsomely in the future after heavy initial outlays. He was an incurable optimist, a necessary characteristic to succeed in business. Gradually, Hearst built his media dynasty throughout the nation, and wielded influence like no other publisher in American politics. He was the baron of publishing, just as Carnegie was in steel, Rockefeller in oil, and Morgan in banking.

But, sadly, Hearst omitted a cardinal principle of finance: Live within your means! His newspapers were mostly profitable, but he could never retain the earnings. He was a man of insatiable appetites-in politics, high society and personal possessions. He spent all his profits and borrowed to the hilt to make movies, live the high life with his actress-mistress, and build his dream homes (at his peak, he held over 40 homes, beach houses, castles and other kinds of real estate around the world). During the Great Depression of the 1930s, it all came crashing down, and in many ways he died a broken and friendless man.

William Randolph Hearst was bigger than life, but he could have learned from Poor Richard’s Almanac: “Beware of little expenses, a small leak will sink a great ship.”

Personal Snapshots
Forecasts & Strategies
March 2000

by Mark Skousen

“The rich are different from you and me.” — F. Scott Fitzgerald

“Yes, they have more money.” — Ernest Hemingway

In 1996 when I jogged with President Clinton (see My Jog with Bill Clinton), I complained about his constant attacks on the wealthy. During the presidential campaigns, he would often opine, “The rich don’t pay their fair share of taxes.” Politicians and the media love to take potshots at the well-to-do. Hollywood producers delight in portraying the rich as big spenders who use drugs, engage in white-collar crime, avoid taxes, and dump their companions in favor of trophy wives.

Millionaires Are Model Citizens!

Thomas J. Stanley, former professor of marketing at Georgia State University, shows that the critics of capitalism are dead wrong. Prof. Stanley, you may recall, is the author of the huge best seller, The Millionaire Next Door, which I reviewed last May in Forecasts & Strategies. Now he has a new book out, and it’s a blockbuster. According to The Millionaire Mind, (available from www.amazon.com or Laissez Faire Books www.lfb.org) millionaires are model citizens. Here are the results of his survey of over 1,000 super-millionaires (people who earn $1,000,000 a year or more):

• They live far below their means, and have little or no debt. Most pay off their credit cards every month; 40% have no home mortgage at all.
• Millionaires are frugal; they prepare shopping lists, resole their shoes, and save a lot of money; but they are not misers; they live balanced lives.
• 97% are homeowners; they tend to live in fine homes in older neighborhoods. (Only 27% have ever built their “dreamhome.”)
• 92% are married; only 2% are currently divorced. Millionaire couples have less than one-third the divorce rate of non-millionaire couples. The typical couple in the millionaire group has been married for 28 years, and has three children. Nearly 50% of the wives of the super-rich do not work outside the home.
• Most are one-generation millionaires who became wealthy as business owners or executives; most did not inherit their wealth.
• Almost all are well educated; 90% are college graduates, and 52% hold advanced degrees; however, few graduated top of their class — most were “B” students. They learned two lessons from college: discipline and tenacity.
• Most live balanced lives; they are not workaholics; 93% listed socialiazing with family members as their #1 activity; 45% play golf. (Stanley didn’t survey whether they were avid book readers — too bad.)
• 52% attend church at least once a month; 37% consider themselves very religious.
• They share five basic ingredients to success: integrity, discipline, social skills, a supportive spouse, and hard work.
• They contribute heavily to charity, church and community activities (64%).
• Their #1 worry: taxes! Their average annual federal tax bill: $300,000. The top 1/10 of 1% of U.S. income earners pays 14.7% of all income taxes collected!
• “Not one millionaire had anything nice to say about gambling.” Okay, but his survey also showed that 33% played the lottery at least once during the year!

Thus, we see how the super upper-income families of this nation are not the ones contributing to crime, welfare, divorce, child abuse, and a spendthrift society. But they are playing a lot of taxes and making a lot of contributions to solve these social problems.

Although Stanley did not cover this issue, I’ve also seen studies indicating that higher-income individuals live longer, on average five to ten years longer, than the average American (76 years) and enjoy better health, fitness and quality of life. They aren’t the ones causing Medicare to go bankrupt.

Instead of bashing the rich, let’s salute them. If indeed the wealthy are such good citizens, as Stanley’s work suggests, our goal should not aim to impoverish the rich, but the enrich the poor. That our goal at Forecasts & Strategies.

Ideas Matter
F0RBES
November 15, 1999

The For-Profit Antipoverty Agency
by Mark Skousen

This summer’s spectacle of World Bank officials lobbying Congress for more foreign aid money was an embarrassment, or should have been. In the past half-century the bank has poured a staggering $450 billion in loans, grants and other aid into the Third World, with not very much to show for the money except some grandiose infrastructure projects. Even these bureaucrats concede that most of the money they have lent out has bypassed the poor.

Who should fill the vacuum? Can the private sector reduce poverty?

It can, and Exhibit A is the Grameen Bank, the brainchild of Muhammed Yunus, formerly an economics professor at the Chittagong University in Bangladesh. Yunus showed the World Bank how to fight poverty-at a profit.

The Grameen Bank (www.grameen.com) started in 1983 by lending amounts ranging from just $30 to $200 directly to poor people in Bangladesh. Applicants didn’t have to be able to read or write; no collateral or credit check was required.

The bank’s strategy was to lend money to entrepreneurs (or would-be entrepreneurs) who needed only a few dollars to buy supplies and tools. Borrowers might make bamboo chairs, sell goats’ milk or operate rickshaws.

By avoiding the usurious interest rates of local moneylenders-often 20% a month-many of these villagers finally broke out of poverty. Their small businesses grew, and thousands of borrowers now own land, a home (often using a $300 Grameen house loan) and even a cell phone (through Grameen Telecom).

By now, the Grameen Bank has made millions of these tiny loans, totaling $2.5 billion. Note that Grameen is a for-profit, private-sector bank that charges interest of 20% per year. Amazingly, Grameen’s loss rate is about 2%, largely because borrowers are bound together in small, local groups. If anyone in the group defaults, no one else may borrow more. That’s a powerful incentive.

You could call this social collateral. The strategy has been used by other microlenders in the Third World, and in a way it is reminiscent of what went on in small building-and-loan societies generations ago in the U.S., in which borrowers and savers all knew one another. Successful Grameen borrowers are not starving, and neither are their children. Most of the Grameen Bank’s 1,140 branches are profitable, albeit marginally. At the end of last year Grameen had $450 million in assets; for the year it managed to earn only $200,000. The bank is mostly owned by its 2.4 million borrowers, with each allowed to own only one share of stock. Yunus and other administrators are salaried employees.

Yunus’ success has inspired hundreds of other microlending operations worldwide-including at the World Bank, where $3.1 billion has been spent on microlending organizations since 1990. Ex-Wall Streeter and current World Bank President James D. Wolfensohn, to his credit, has moved the bank heavily into such partnerships with the private sector.

The Grameen Bank is powerful proof that the private sector can perform most of the World Bank’s functions. There is a renaissance occurring in private charity. Credit innovative organizations like Habitat for Humanity (and its best-known hammer-wielder, Jimmy Carter), which can catch the imagination of the public; and credit the huge fortunes that have been created by the current bull market.

With the Bill and Melinda Gates Foundation, for example, Bill Gates has finally shoveled some of his money out into the world. Many more bull market moguls will be giving money away. The next 50 years will see tens of trillions of dollars in wealth pass from one generation to the next, and a fair amount of this will go to charities.

The World Bank is scheduled to release a big report on world poverty next September. It should not overlook a most important lesson: The World Bank is a puny force in fighting poverty compared with the private sector. It should limit itself to encouraging developing nations to provide the infrastructure (private property rights, sound money policy, limited government) necessary for private markets and independent charities to flourish.

Discovery
LIBERTY Magazine

The Other Austrian
By Mark Skousen

Swashbuckling corporate raiders take heed, here’s another Austrian economist offering advice.

Peter F. Drucker once walked into the boardroom of a major company in crisis and bluntly demanded, “Gentlemen, what is your business?” Most of the executives thought it was a sophomoric question, but Drucker kept pushing. He repeated the question over and over again. “What is your business?” It took them an hour to figure out what Drucker was getting at: they had lost their vision. Once they returned to fundamentals, they found their way back to profitability — all because Drucker asked a “dumb” question.

Drucker is eclectic, independent and unpredictable. Although he is known as Mr. Management, he is a lone wolf, operates without a secretary, and has no supporting organization. He is an outsider. In the words of one admirer, he is an “iconoclast–the smasher of idols, seeker of proof, demander of evidence, gadfly, thorn in the side, tough and hard-nosed commentator on problems faced by our society.” 1

Nearly everyone in the business world is familiar with Drucker, either through his books or his columns in The Wall Street Journal. He is a household name among MBAs, corporate executives and business students. Drucker is the world’s most sought-after business consultant. His vitae are multifarious: lawyer, journalist, political theorist, economist, novelist, futurist, and philosopher extraordinaire. Now in his eighties, with 25 books under his belt, he is still active in writing and consulting, though he does not travel much anymore.

Business students and executives have often told me that Drucker’s ideas have a certain “Austrian” streak to them. They say that his emphasis on entrepreneurship, innovation and investment capital as well as his denunciations of big government, excessive taxation and Keynesian economics, has right in harmony with the ideas of Bohm-Bawerk, Mises, Hayek and the Austrian school of economics.

So: is Peter Drucker a closet Austrian?

Viennese Roots

In the very literal sense, Drucker is an Austrian. He was born in 1909 in Vienna, during the heyday of the Austrian school. But he was too young to attend Ludwig von Mises’ famous seminar. When he graduated from gymnasium in 1927, he went to the University of Frankfurt, where he got his LL.D. in the early 1930s. But his roots remained Viennese. He refused a job offer from the Nazi’s Ministry of Information. Instead, he wrote a 32-page monograph on the 19th century German philosopher, Friedrich Julius Stahl. There is as much to learn about Drucker as there is about Stahl in this paper. Stahl was paradoxical: a Jew by birth, a Protestant by conversion, and a conservative opposed to absolute monarchy.  Not surprisingly, Drucker’s paper was banned by the Nazis. Like Mises, Hayek, and other enemies of the Nazi state, Drucker immigrated to the West before the war broke out. He traveled to England in 1933 and the United States in 1937.

The Manager’s Manager

Of course, the question of whether Drucker is an Austrian is not a question about his birthplace. It is a question about his economic theory. If one limited the question to his management approach, the answer is clearly in the affirmative: Drucker’s style of management is Austrian through and through. Time, expectations, new information, and potential change in production processes–all Austrian focal points–are constantly emphasized in his writings and consultations. The manager must be an entrepreneur, not just an administrator. Innovation is essential. In 1985, he wrote an entire book on the subject, Innovation and Entrepreneurship.

He criticizes management for engaging in short-term planning, what he labels “industrial Keynesianism.” Long-term planning is more risky, says Drucker, but is essential for survival, especially for large corporations. Owners and managers must be future oriented, he stresses. “Tomorrow’s vision is today’s work assignment.” The Japanese have been so successful, Drucker asserts, because they’re so long-term oriented.

In Search of a New Social Order

It was his life in America that turned his interest to business management. During the late 1930s, Drucker began searching for a new social and industrial order. He became disenchanted with “unbridled” capitalism as the Great Depression wore on and on. But socialism, fascism, and communism seemed even worse alternatives to society’s ills.

He finally found his answer in the only “free, non-revolutionary way”–the large corporation. He was enthusiastic about his discovery: big business could provide a superior alternative to socialism and big government. According to Drucker, the large corporations should be the conduit through which economic stability and social justice would be established. Only big business could afford to assume social responsibilities such as job security, training and educational opportunities, and other social benefits. Such an alternative was absolutely critical in an age when free enterprise was on the defensive around the world.

After the war, Drucker got a consulting contract with General Motors, which gave him an opportunity to develop his thesis more fully. His exhaustive study of GM culminated in the 1946 publication of Concept of the Corporation. Drucker came to the unshakable conviction that the large corporation should be the “representative social institution” of the postwar period and that major American companies such as GM should take the lead in building the free industrial society.

Top officials at General Motors resented the book and scoffed at the idea that a large corporation should assume social responsibilities. But Drucker’s reputation as a management expert grew despite GM’s cold shoulder. By 1950, he was professor of management at New York University, and in 1973 he was appointed Clarke Professor of Social Science at Claremont Graduate School in California.

Drucker maintains that a company is more than an economic entity. “Even more important than economics are the psychological, human, and power relationships which are determined on the job rather than outside it. These are the relationships between worker, work group, task, immediate boss, and management.” 3 A company’s administrators have a moral purpose and social responsibility beyond making short-term profits. Drucker envisions the large corporation as the social institution, far superior to government in providing a retirement income, health care, education, childcare, and other fringe benefits. He argues that corporate welfarism should replace government welfarism. Drucker acknowledges that such social activity could undermine economic performance, but he rejects Milton Friedman’s admonition that business’ only legitimate responsibility is to increase its profits. A lethargic government has created a “vacuum of responsibility and performance” which big business must fill.

A Moral Dimension

Drucker’s attitudes toward business management and government may not be economic in origin, but religious. “The only basis of freedom is the Christian concept of man’s nature: imperfect, weak, a sinner, and dust destined for dust; yet man is God’s image and responsible for his actions.”‘ He calls for a return to spiritual values, “not to offset the material but to make it fully productive.”

But how far he is willing to carry this insight is open to question. Drucker has been criticized as an apologist for big business. And it is true that he has been reluctant to discuss big business as a special interest lobbying power. Drucker usually envisions business and government in an adversarial role rather than a cooperative one. In his massive volume, Management, his chapter on “Business and Government” fails to mention how big business often uses its power to gain special tax breaks, subsidies, monopoly power and restrictions on foreign competition.

Paul Weaver, a former Ford executive, describes the extent of corporate statism as follows: “From the beginning it [big business] has worked aggressively and imaginatively in this spirit, and over the years it has won a dazzling array of benefits — tariffs, subsidies, official monopolies, tax breaks, immunity from certain tort actions, government-supported research and development, free manpower training programs, countercyclical economic management, defense spending wage controls, and so on through the long list of the welfare state’s indulgences and beneficences.”6 Unfortunately, the master is oddly silent on this critical issue.

Drucker Qua Economist

Drucker is much more than a management consultant and writer. He is also a commentator on politics, economics and culture. Here Drucker is less easy to categorize.

His economic views are often in line with Mises and today’s Austrians; other times they are not. He often rejects notions that Austrians consider essential. Ludwig von Mises and he were colleagues at New York University in the 1950s, but they did not see much of each other. “Mises considered me a renegade from the true economic faith,” Drucker says, and “with good reason.”‘ Drucker became disenchanted with pure laissez faire capitalism during the Great Depression. Today he supports a Hamiltonian approach to government — small, but powerful. He believes in a strong president and a central government that plays a serious role in education, economic development, and welfare. Furthermore, he rejects the gold standard and favors a central bank.

At the same time, however, Drucker advocates many positions that free market economists would applaud.

Inflation is a “social poison.” Government has gotten bigger, not stronger, and can now only do two things effectively — wage war and inflate the currency. The state has become a “swollen monstrosity.” He continues, “Indeed, government is sick–and just at a time when we need a strong, healthy, and vigorous government.” 8 Drucker advocates privatization of government services as a way to reduce a bloated bureaucracy. Indeed, Drucker claims he invented the term, calling it reprivatization in his 1969 book, The Age of Discontinuity. 9 Social Security should be gradually replaced by private pension plans. The corporate income tax, says Drucker, is the “most asinine of taxes” and should be abolished (but replaced with a value added tax). Defense spending is a “serious drain” on the civilian economy, and should be cut sharply. The costs of “free” government services are “inevitably high.” 10 Echoing Hayek, Drucker claims that no public institution can operate in a businesslike manner because “it is not a business.”

Drucker is largely optimistic about he future. He talks excitedly about an expanding global economy and the collapse of Communism. Multinational corporations, both large and small, are far more important than foreign aid or domestic spending programs by the state, and will lead the way into a new nirvana. The more firms become “transnational,” the healthier the world economy will be.

Drucker is encouraged by events in developing countries, especially efforts to privatize and denationalize and open up domestic economies to foreign capital. The worst move a developing country can make is to adopt Marxism. “Communism is evil. Its driving forces are the deadly sins of envy and hatred. Its aim is the subjection of all goals and all values to power; its essence is bestiality; the denial that man is anything but animal, the denial of all ethics, of human worth, of human responsibility.” 11 Drucker debunks Soviet-style central planning, which only produced “disdevelopment.”  He rightly concludes that Soviet economic growth rates are largely figments of the bureaucratic imagination.

Search for the “Next Economics”

Drucker expresses a withering contempt for the economics profession, which he says is still largely Keynesian in nature. Economists are too concerned with the equilibrium theory of a closed economy rather than the growth, innovation and productivity of a global economy. Drucker claims that contemporary economics is where medical school or astronomy was in the 17th century. “There are no slower learners than economists. There is no greater obstacle to learning than to be the prisoner of totally invalid but dogmatic theories.” 12

He blames Keynesianism for an unhealthy anti-saving mythology, causing “undersaving on a massive scale” among the western nations, especially the United States. Moreover, “Keynes is in large measure responsible for the extreme short-term focus of modern politics, of modern economics, and of modern business … Short-run, clever, brilliant economics — and short-run, clever, brilliant politics — have become bankrupt.”

The management guru is also discouraged by today’s popular schools of economics, including the monetarists and the New Classical school. They too ignore entrepreneurship, uncertainty and disequilibrium. Drucker calls for the “next economics” to be “microeconomic and centered on supply,” not aggregate demand, and should emphasize productivity and capital formation.”

Contemporary Austrian economics seems very much like Drucker’s vision of the “next economics.” Somewhat surprisingly, Drucker’s writings do not mention the work of today’s Austrians, like Murray Rothbard, Israel Kirzner and Roger Garrison. When I asked him his opinion of contemporary Austrians, he told me that he was not familiar with their writings. He had not heard of Kirzner’s major work, Competition and Entrepreneurship, even though Kirzner and Drucker both taught at NYU in the sixties.15

Drucker’s favorite economist is Joseph Schumpeter, the Austrian-born Harvard economist. In a 1956 article, Drucker advocates privatization of government services as a way to reduce a bloated bureaucracy. Indeed, Drucker claims he invented the term, calling it “reprivatization” in 1969.

“Modern Prophets: Schumpeter or Keynes?,” he clearly sides with Schumpeter, predicting that of these “two greatest economists of this century … it is Schumpeter who will shape the thinking … on economic theory and economic policy for the rest of this century, if not for the next thirty or fifty years”16 Drucker likes Schumpeter’s emphasis on dynamic disequilibrium and innovation by entrepreneurs who engage in “creative destruction.” In his 1985 book, Innovation and Entrepreneurship, he emphasizes the impact of technological change, innovation, the unexpected and new knowledge on business and the world economy.

But, of course, Schumpeter was an enfante terrible and renegade from the Austrian school as it developed under Mises and Hayek. In this sense, Drucker fits more into the Schumpeterian mode, although he does not share Schumpeter’s pessimism about the future of capitalism.

In the final analysis, Peter Drucker is his own man.

Drucker’s mind is like a rough diamond, providing flashes of insight at every turn. He is able to analyze complex subjects so that his readers and clients catch Drucker’s vision, seeing the essential simplicity behind the apparent chaos.

Sooner or later, every student of business discovers Peter Drucker. Now it is time for economists and social scientists to discover him too.

Notes

1 Tony H. Bonaparte, Peter Drucker: Contributions to Business Enterprise (New
York: NYU Press, 1970), p. 23.

2 Peter F. Drucker, Preparing Tomorrow’s Business Leaders Today (Englewood Cliffs, NJ: Prentice Hall, 1969), p. 290.

3 Drucker, The Unseen Revolution (New York: Harper 6r Row, 1976), pp. 134-35, 168.

4 Quoted in John J. Tarrant, Drucker: The Man Who invented the Corporate Society (Boston: Cahners Books, 1976), p. 30.

5 Drucker, The Landmarks of Tomorrow, p. 264.

6 Paul H. Weaver, The Suicidal Corporation: How Big Business Fails America (New York: Simon & Schuster, 1988), p. 18.

7 See Drucker’s autobiography, Adventures of a Bystander (New York: Harper k Row, 1979), p. 50. In an interview in 1991, Drucker told me that on the few occasions they met, Mises was always depressed. “He was one of the most miserable men I ever met.”

8 Peter F. Drucker, The Age of Discontinuity (New York: Harper k Row, 1969), p· 212

9 ibid., p. 234.

10 Drucker, The New Realities (New York: Harper & Row, 1989), p. 215.

11 Drucker, The Landmarks of Tomorrow (New York: Harper & Row, 1959), p. 249.

12 Drucker, The Frontiers of Management (New York: Harper & Row, 1986), p. 13. 13 Drucker, The Unseen Revolution, pp. 114-15.

14 Drucker, Toward the Next Economics and Other Essays (New York: Harper k Row. 1981), pp.1-21.

15 Israel M. Kirzner, Competition and Entrepreneurship (University of Chicago Press, 1973).

16 The Frontiers of Management, p. 104.

Darwin on Wall Street
Mark Skousen
Forecasts & Strategies August 1998

“No other theory or concept ever imagined by man can equal in boldness and audacity this claim — that everything revolves around human existence — that all the starry heavens, that every species of life, that every characteristic of reality exists for mankind and for mankind along. It is simply the most daring idea ever proposed.”
– Michael Denton, Nature’s Destiny

I can’t think of a more depressing philosophy than that of Darwinian evolution as expressed by apologists Stephen J. Gould and Richard Dawkins.

According to them, life is a mindless perpetuation of the species, without meaning or design, just natural selection and survival of the fittest.

Man is nothing special. The creation of life did not have man in mind. Man is accidental and random, a descendant of “punctuated equilibrium.” There’s no God, no special creator, no life after death, no spiritual existence at all. There’s no beauty in life — it’s all random matter. There’s no free will, only material determinism.

It’s all in the genes, didn’t you know?

Not surprisingly, Darwin suffered from this blead outlook on life and was terribly unhappy at the end of his life. Prior to writing The Origin of Species, he delighted in reading poetry and Shakespeare, and listening to music.

Afterwards, however, he lost all interest. “But now for many years, I cannot endure to read a line of poetry: I have tried lately to read Shakespeare, and found it so intolerably dull that it nauseated me. I have also almost lost any taste for pictures or music.” (The Autobiography of Charles Darwin, pp. 138-139)

The evolutionist view is pervasive; we even see it in economics and the financial world. “Today’s economy is a dog-eat-dog world; it’s a jungle out there, and only the fittest survive; the big corporations gobble up the weak competition.”

Economic Darwinism ignores the cooperative side of the economy, and the ability of weaker participants to survive and even thrive.

In the financial field, the efficient market theorists proudly declare: “The markets are random and unpredictable. You can’t beat the market, so why try?” Their investment technique is pretty boring stuff: Buy index funds, never trade, just buy and hold until retirement. It’s like watching paint dry.

A Better Alternative: Intelligent Design

Fortunately, there’s an alternative to Darwinian philosophy called “intelligent design,” and there’s growing support for this more upbeat theory of life, even among evolutionists.

One of the most fascinating books I’ve read recently is Nature’s Destiny: How the Laws of Biology Reveal Purpose in the Universe, by Michael J. Denton (Free Press, $27.50, buy at a discount through www.amazon.com).

Denton is a biologist at the University of Otago in New Zealand. He joins forces with the physicists who have demonstrated how the planet is uniquely formed to sustain life.

Moreover, Denton concludes, “the cosmos is uniquely fit for only one type of advanced intelligent life — Homo sapiens.” He demonstrates, for example, how the earth’s size and atmosphere are fit both for our size and dimension.

He writes eloquently about the unique features of man compared to other animals — our superior intelligence, vision, linguistic ability, and most interestingly, the dexterity of the hand. (A chimp can’t peel an apple, tie a knot, use a typewriter or thread a needle.)

Denton also points out how man is just the right size to handle fire. He also has an engaging chapter on water, and why humans and life in general couldn’t exist without it.

In one of his great books, Human Action (hardcover, $49.95, paperback, $24.95 available at www.lfb.org), the Austrian economist Ludwig von Mises asserted correctly that man alsways acts purposefully and with design.

Human beings think, adopt values, make choices, are conscious, make mistakes and learn from experience. In the financial markets, humans invest with a specific purpose in mind, whether to earn income, make a capital gain or hedge their portfolio. Thus, all movements in stock prices are purposeful, and never random.

In sum, Darwinian evolution as a philosophy is an empty black box. It’s time sciencists and social thinkers look to “intelligent design” as a more consistent and more fulfilling concept of life.

Forecasts & Strategies
August 1998 issue

Ideas Matter
FORBES

By Mark Skousen

The first time I met Wade B. Cook was at a seminar for small investors in the early 1980s, when real estate and other inflation hedges were the rage. Cook gave a workshop on how to buy and sell mortgages–”discounted paper”–for quick profits, which he called the Real Estate Money Machine, which became a best-selling book of the same name. Forget buy-and-hold, he urged. Speculate. Trade mortgages: “Roll them.” Churning mortgages to create a “money machine.”

For a while Cook sold lots of books and tapes and had lots of fans, but apparently his money machine stopped working, and in 1984 he filed for bankruptcy well ahead of the real estate crash that took place later in the decade.

I thought Wade Cook would disappear like the rest of the get rich-off-real-estate gang, but I was wrong. He’s back, reincarnated as a stock market expert. Three of his books are on the Business Week bestseller list: Wall Street Money Machine, Wall Street Miracles and Bear Market Baloney. His book Real Estate Money Machine is back in print. His company is on the radio, promoting his one-day seminars, his books, videos and his three-day, $4,700 Wade Cook Workshops. Apparently the fish are biting.

Never one to overlook an opportunity, Cook has taken his company public (Nasdaq: WADE), and it has risen 500% in the past year. Recent market cap: $210 million. Cook owns 62% of the stock.

Cook’s enticements would catch the eye of any red-blooded investor: Get 14% to 34% monthly returns-consistently! Double your money every 2 1/2 to 4 1/2 months! The evangelist is not timid: “I’m into formulas which produce safe, sane 20%-plus monthly returns,” he says.

You don’t even need patience for the Cook approach: He promises fast results. In his books he annualizes his weekly, daily and even hourly returns. You’d think people would know better, but apparently they don’t.

How does Cook suggest going about investing? Forget buy-and-hold, he urges once again. Trade options. Make full use of margin. Turn your stocks over constantly. “Roll them” like a money machine. He urges buying stock right before the ex-dividend date, capturing the dividend and then selling. But doesn’t the stock price drop by the amount of the dividend “This is not always the case,” Cook claims.

For quicker profits, Cook goads his followers to load up on companies announcing stock splits. He pleads, “Show me a company that has done a stock split, which one year later (or two) is trading down.” Want faster profits? Buy options and buy on margin.

Can’t you get into trouble with a margin account? “Absolutely not.” It’s not surprising that with claims like these Cook’s company has been the subject of a fraud investigation by the SEC since March 1996. He denies any wrongdoing. And goes right on leading naive investors to potential doom.

Perhaps Alan Greenspan had Wade Cook in mind when he referred to “irrational exuberance” on Wall Street. It’s certainly irrational. This is the same nonsense Cook was peddling nearly 20 years ago, but this time it’s stocks, not real estate. The advice is just as dangerous and the people buying it are just as uninformed.

What I find scary is that there is a market for this stuff. The last time Cook prospered was when real estate became overheated and later crashed. Is his resurgence a harbinger of doom. Is the popularity of his stock market stuff telling us something? I hope not.

If it’s good stock market advice you want, read J. Paul Getty’s 12-page chapter on “The Wall Street Investor” in his classic work How to Be Rich. Sample: “The seasoned investor buys his stocks when they are priced low, holds them for the long-pull rise and takes in-between dips and slumps in his stride.” There’s more wisdom in those 26 simple words than in all the get-rich books ever written.

Forbes, December 1, 1997