The Wilmington morning star., 1947-10-02
Free Market
By W. H.

BY w. II.
The current state of economic illiteracy
being what it is, there need be no sur
prise that current high prices have pro-
turn to rationing and price controls. 1t is
amazing how many individuals who would
not believe that the government could
make water run uphill or prevent the tides
from taking their normal course cherish a
naive faith in the possibility of equally
fantastic miracles in the economic field.
It is becoming fashionable to shed nos
talgic tears over the demise OF the O.P.A.
What the mourners forget is that O.P.A.
was far more successful in driving goods
out of circulation than in making possible
steady and adequate supply at reasonable
prices. Again and again it's bad guessing
hampered or throttled production by Great
ing distortions in the general level OF
prices, setting for example a high ceiling
for an essential raw material and an I'm
economically low ceiling for the finished
product. Moreover, what the O.P.A. saved
for one of the consumer pockets 1t
promptly took out of the other through
the higher taxes which were necessary IN
order to pay the cost of food subsidies:
Rationing, price control, subsidies and
other artificial interferences with the law
of supply and demand are nothing but
slow poisons in the veins of a free econo-
mic organism. In the beginning like harm
full drugs in the human system, these false
remedies may seem to afford relief. But
the final result is always establishment,
lowering of the standard OF living, partial
paralysis Of production and a dangerous
Impairment of the incentive value OF
money.
A currency system is functioning prop
erly only when the principle OF tree con-
vertibility is maintained at home
and abroad. The surest sign of the econo-
mic and social breakdown in Europe which
preceded the outbreak of the Second World
War was the collapse of the external con-
vertibility of many currenc1es. one coulo
pretty accurately mark the frontiers OF
dictatorships by noting the frontier at
which the hapless traveller was set on by
suspicious customs officials and badgered
with questions as to whether he was taking
money in or out of the country.
Equally important Is the internal con-
yertibility of money at prices liked IN q
free market. The temporary hardships OF
high prices are neglible by comparison
with the permanent confusion and stagna-
ton that, judging from all experience
would an attempt to Tx prices,
profits and wages by government decree.
A currency has no true external value
when it cannot be freely taken out OF a
country and brought into a country and ex-
changed for foreign currencles without let
or hindrance. Whenever these conditions
are not fulfilled there is almost always a
wide spread between the arbitrary fictitious
official valuation of the currency and the
far more realistic appraisal of its true
worth on the black, Or free market.
In the same way money is only fulfilling
it's true function when an individual can
buv what he wants, and as much OF What
he wants Of anything he may find on the
market when he wants it. To destroy TINS
internal convertibility OF money through
the imposition of rationing and other con-
trolls is to insure the springing up OF
"black markets. where individuals can
buv what they want and as much OF what
they want when they want 1t at the ln1lateo
prices, which are always an accompanl-
ment of black markets.
The pages of history are stre"n WIN
The wrecks of well-meant schemes 1or eS-
tablishing price levels by mandatory legls-
lation. Invariably the sequel to the IN
auguration Of these schemes was the ap--
pearance OF nefarious individuals calleu
Spectators, who promptly SET up Olach
markets. for the benefit OF people VINO
preferred paying high prices to gong WIN
out goods entirely. This is the familiar al
tentative whenever the state trleS W sop-
plant the free market.
The system of rationing, price controls
and subsidies to keep down the prices OF
imported foodstuffs has been pushed TO us
f1rthest extreme in Great Britain. 1t has
worked under favorable conditions because
it has not been nullified by the large-scale
corruption which one finds in the regimen,
tation methods of some of the continental
countries. But, from the standpoint OF sum
ulating Individual effort and productivity
the results nave been profoundly discourage
ing. What has happened is that everyone
without much effort, can earn an extreme
lv low subsistence livelihood, while no one
has much incentive to put forward the ex7
ira effort that would increase the natlonal
output.
It is difficult for anyone who mas not
lived under a tight rationing system to un-
derstand how it's mere existence lowers
The general standard of living and ellml,
nates the element of individual choice and
taste.
Price controls do not and cannot elm
mate initiation. They only drive it under
ground while removing the immense cura-
t;ve value of a free market Which offers
the highest rewards in fields where scar
citv is greatest. Our wlsest economic oecl-
sions since the end of the war were the
abandonment first of rationing, then OF
nrice controls. The line of the free marKet
Should be held at all costs. 1t is essential
to the efficient f%unctioning OF a free econo-
nv the most productive economy the
world has ever seen.-Wal Street journal
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