Does Price Fixing Destroy Liberty?/Introduction
INTRODUCTION.
Defense of freedom requires no apology; but, were it otherwise, ample excuse for this Essay is obvious from what we see about us.
Men are pleading guilty, paying enormous fines, in some jurisdictions, whilst, in others, it is constantly decided that identical conduct constitutes no offense.
One even sees those who, having taken great risks most helpful to trade, indignantly deny it, because of the undefined terrors of the Lever Act. Every business man is constantly seeking what he may or may not lawfully do:—with no possibility of adequate answer; the freedom and courage requisite for large production, a deficiency in which prompted the Act, are being more and more discouraged. All history teaches that but few will face a possible jail term, with its accompanying discrace, whilst nearly all will encounter even death for their love of Liberty. In all England but four Knights could be found courageous enough to join with John Hampden in facing the danger of refusing to pay ship-money, although they were saving the principles upon which our liberties still rest; whilst Cromwell had no difficulty in recruiting his invincible Army. Nothing is so terrorizing as the unknown; for, to real danger, are added all the fears that may be conjured by overwrought imagination.
But what is of compelling importance is that mistake in the economic law may as greatly endanger Freedom as error in Civil Law; and that an examination of the decisions so far rendered in our Federal Courts, touching the Lever Act (with the exception of those of the Supreme Court upon kindered subjects), discloses a complete lack of inquiry into the economic law of the case, the necessity of which Mr. Justice Holmes has pointed out in the Harvester and Northern Securities cases, as referred to hereinafter.
The result has been that the lower Courts have had difficulty in reconciling the decisions of the Supreme Court in the Nash[1] case and the International Harvester case,[2] although economic law entirely vindicates the results reached by the Supreme Court in both cases. The present purpose, therefore, is to inquire into this vital though neglected part of the subject; to call attention to the economic truths that money and credit fluctuate as much, and often more, than commodities; again to point out that continuing trade is, in substance, only its original form of barter; to show that an exchange of a commodity for money constitutes but a single step, the second and most vital step being the replacement of the commodity with the money thus obtained. That this second step is really the determinative one; and that a continuing business is but a continuing repetition of these cycles from commodity back to commodity, which does not chiefly consist of money, but in which money is merely a device for facilitating the barter. That past years, as well as future years, are necessarily involved in the matter; and the measurement of the risks and the necessity for constant replacement present problems of such ever varying uncertainties that, as has been pointed out in the International Harvester case, it is beyond the power of the human mind to measure them, with any judicial degree of certainty!
In other words, that the exploded "mercantile system," as it always has, still remains based upon pure fallacies, fallacies which, if adhered to, will not only destroy our prosperity, but will of necessity end our Freedom!
That there may, at the very beginning, be a clear comprehension of what it is intended to explain, a single illustration may suffice. There are many indictments founded upon the Lever Act pending in our Federal Courts, in substance, on the basis that a man who has purchased a commodity at one price and sold it at a much greater, is necessarily a criminal. Suppose he bought at five cents and sold at ten, and the indictment calls the latter price "unjust," "unreasonable" and "excessive." Neither the Government nor the seller could know whether this were so at the time of the sale. This will be illustrated at large in the following chapters, but a few of the questions involved will now be mentioned. In the first place, the seller has to guess at what the taxes on his profits will be subsequently declared. They may be anywhere from one to one hundred per cent. He has also to guess what his money will be worth in the future revolutions in trade that will constitute his continuing business. Professor Fisher, of Yale, estimates that the dollar has fallen in purchasing power, through inflation of currency and credit, to but thirty-five per cent. of its rightful value. To say, therefore, if the seller buy at five and sell at ten, that he must have had criminal intent in making his guess, and that this can be established beyond a reasonable doubt, is perfectly absurd. If we but keep in mind that all the while he was really only exchanging commodities for commodities, the absurdity becomes perfectly apparent. For the moment, let us leave money out of the question. Could any man justly be indicted, should the result of the transaction be that he had borne all the expenses and risks, and yet, had ended with but one pound of goods to replace his original pound? Much less, could he be indicted, had he in the end actually given two pounds of goods for but one? And, yet, that is substantially happening, under an inconceivable return of the thoughts underlying the "commercial system" that is now being unconsciously revived. The minute money is introduced into the discussion, its real function and complete lack of stability are both entirely lost sight of, resulting in preposterous and constant error. But, strangely this only relates to our own money. When it is some other country's money, we all think as clearly as Adam Smith did upon the subject, and wonder at its folly or commiserate its resulting misfortunes. Take the German marks, for example, how successful an indictment would be there if the mercantile system is to be revived! On the low price of marks, a man could be proven to a jury to have made two thousand two hundred and twenty-two and one-third per cent. profit, although he had simply gotten one pound back for another pound. If it had been the Russian Government, and they had forced him to take their present roubles, he could be convicted of having profiteered to the extent of five thousand one hundred per cent., although all honest men here agree in denouncing them for really stealing his property. And when we come to the Austrian kronen, the man who had simply gotten his pound for pound cycle completed, would certainly go to jail when it was proven that in the intermediate illusory money step he had apparently made a profit of six thousand six hundred and sixty-six and two-thirds per cent.! This is taken only as a single illustration, for all other things in relation to commodities are fluctuating in the same way, though in varying degrees. No man ever has or ever will be able to forecast such situations with even ordinary certainty. To put him where he must do so beyond reasonable doubt of error is to create a dilemma where, if he guesses right, he goes to jail, and, if he guesses wrong, he becomes a bankrupt; so that Governmental price fixing, as to all going business ultimately but means that there will be no trade sufficient even to pay for the keep of those men, heretofore carrying on the business enterprises of the United States, in the jails that will have to be provided for their occupancy. The Government constantly interfering with the essential "liberty of pursuit" will have ended the freedom of which it is so essential a part.
The Common Law and the Supreme Court, having, however, always understood that economic knowledge is as essential to commercial law as Anatomy is to Surgery, have never failed properly to safeguard our Liberty, through their appreciation of it!
A change in either, placing all those actively engaged in production under the dangers of indictment, for conclusions that they can only have guessed at, and convictions because of further guesses by juries must not only paralyze enterprise, but destroy all that fearless independence of citizenship necessary for the preservation of free government. An apology is made for repetition to be found in the following pages, however constant the effort by which it was sought to be avoided.
George H. Earle, Jr.
Philadelphia, October 1, 1920.
This work is in the public domain in the United States because it was published before January 1, 1929.
The longest-living author of this work died in 1928, so this work is in the public domain in countries and areas where the copyright term is the author's life plus 95 years or less. This work may be in the public domain in countries and areas with longer native copyright terms that apply the rule of the shorter term to foreign works.
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