DISBANDING TROOPS AND
BUREAUCRATS
WHEN, AFTER EVERY great war, it is proposed to demobilize the
armed forces, there is always a great fear that there will not be
enough jobs for these forces and that in consequence they will
be unemployed. It is true that, when millions of men are
suddenly released, it may require time for private industry to
reabsorb them—though what has been chiefly remarkable in
the past has been the speed, rather than the slowness, with
which this was accomplished. The fears of unemployment arise
because people look at only one side of the process.
They see soldiers being turned loose on the labor market.
Where is the "purchasing power" going to come from to employ
them? If we assume that the public budget is being balanced,
the answer is simple. The government will cease to support the
soldiers. But the taxpayers will be allowed to retain the funds
that were previously taken from them in order to support the
soldiers. And the taxpayers will then have additional funds to
buy additional goods. Civilian demand, in other words, will be
increased, and will give employment to the added labor force
represented by the former soldiers.
If the soldiers have been supported by an unbalanced
budget—that is, by government borrowing and other forms of
deficit financing—the case is somewhat different. But that
raises a different question: we shall consider the effects of
deficit financing in a later chapter. It is enough to recognize that
deficit financing is irrelevant to the point that has just been
made; for if we assume that there is any advantage in a budget
deficit, then precisely the same budget deficit could be maintained
as before by simply reducing taxes by the amount previously
spent in supporting the wartime army.
But the demobilization will not leave us economically just
where we were before it started. The soldiers previously supported
by civilians will not become merely civilians supported
by other civilians. They will become self-supporting civilians.
If we assume that the men who would otherwise have been
retained in the armed forces are no longer needed for defense,
then their retention would have been sheer waste. They would
have been unproductive. The taxpayers, in return for supporting
them, would have got nothing. But now the taxpayers turn
over this part of their funds to them as fellow civilians in return
for equivalent goods or services. Total national production, the
wealth of everybody, is higher.
The same reasoning applies to civilian government officials
whenever they are retained in excessive numbers and do not
perform services for the community reasonably equivalent to
the remuneration they receive. Yet whenever any effort is made
to cut down the number of unnecessary officeholders the cry is
certain to be raised that this action is "deflationary." Would you
remove the "purchasing power" from these officials? Would
you injure the landlords and tradesmen who depend on that
purchasing power? You are simply cutting down "the national
income" and helping to bring about or intensify a depression.
Once again the fallacy comes from looking at the effects of
this action only on the dismissed officeholders themselves and
on the particular tradesmen who depend upon them. Once
68
again it is forgotten that, if these bureaucrats are not retained in
office, the taxpayers will be permitted to keep the money that
was formerly taken from them for the support of the bureaucrats.
Once again it is forgotten that the taxpayers' income and
purchasing power go up by at least as much as the income and
purchasing power of the former officeholders go down. If the
particular shopkeepers who formerly got the business of these
bureaucrats lose trade, other shopkeepers elsewhere gain at
least as much. Washington is less prosperous, and can,
perhaps, support fewer stores; but other towns can support
more.
Once again, however, the matter does not end there. The
country is not merely as well off without the superfluous
officeholders as it would have been had it retained them. It is
much better off. For the officeholders must now seek private
jobs or set up private business. And the added purchasing
power of the taxpayers, as we noted in the case of the soldiers,
will encourage this. But the officeholders can take private jobs
only by supplying equivalent services to those who provide the
jobs-or, rather, to the customers of the employers who provide
the jobs. Instead of being parasites, they become productive
men and women.
I must insist again that in all this I am not talking of public
officeholders whose services are really needed. Necessary
policemen, firemen, street cleaners, health officers, judges,
legislators and executives perform productive services as important
as those of anyone in private industry. They make it
possible for private industry to function in an atmosphere of
law, order, freedom and peace. But their justification consists
in the utility of their services. It does not consist in the "purchasing
power" they possess by virtue of being on the public
payroll.
This "purchasing power" argument is, when one considers it
seriously, fantastic. It could just as well apply to a racketeer or a
thief who robs you. After he takes your money he has more
purchasing power. He supports with it bars, restaurants, night
clubs, tailors, perhaps automobile workers. But for every job
his spending provides, your own spending must provide one
less, because you have that much less to spend. Just so the
taxpayers provide one less job for every job supplied by the
spending of officeholders. When your money is taken by a
thief, you get nothing in return. When your money is taken
through taxes to support needless bureaucrats, precisely the
same situation exists. We are lucky, indeed, if the needless
bureaucrats are mere easygoing loafers. They are more likely
today to be energetic reformers busily discouraging and disrupting
production.
When we can find no better argument for the retention of any
group of officeholders than that of retaining their purchasing
power, it is a sign that the time has come to get rid of them.
BUREAUCRATS
WHEN, AFTER EVERY great war, it is proposed to demobilize the
armed forces, there is always a great fear that there will not be
enough jobs for these forces and that in consequence they will
be unemployed. It is true that, when millions of men are
suddenly released, it may require time for private industry to
reabsorb them—though what has been chiefly remarkable in
the past has been the speed, rather than the slowness, with
which this was accomplished. The fears of unemployment arise
because people look at only one side of the process.
They see soldiers being turned loose on the labor market.
Where is the "purchasing power" going to come from to employ
them? If we assume that the public budget is being balanced,
the answer is simple. The government will cease to support the
soldiers. But the taxpayers will be allowed to retain the funds
that were previously taken from them in order to support the
soldiers. And the taxpayers will then have additional funds to
buy additional goods. Civilian demand, in other words, will be
increased, and will give employment to the added labor force
represented by the former soldiers.
If the soldiers have been supported by an unbalanced
budget—that is, by government borrowing and other forms of
deficit financing—the case is somewhat different. But that
raises a different question: we shall consider the effects of
deficit financing in a later chapter. It is enough to recognize that
deficit financing is irrelevant to the point that has just been
made; for if we assume that there is any advantage in a budget
deficit, then precisely the same budget deficit could be maintained
as before by simply reducing taxes by the amount previously
spent in supporting the wartime army.
But the demobilization will not leave us economically just
where we were before it started. The soldiers previously supported
by civilians will not become merely civilians supported
by other civilians. They will become self-supporting civilians.
If we assume that the men who would otherwise have been
retained in the armed forces are no longer needed for defense,
then their retention would have been sheer waste. They would
have been unproductive. The taxpayers, in return for supporting
them, would have got nothing. But now the taxpayers turn
over this part of their funds to them as fellow civilians in return
for equivalent goods or services. Total national production, the
wealth of everybody, is higher.
The same reasoning applies to civilian government officials
whenever they are retained in excessive numbers and do not
perform services for the community reasonably equivalent to
the remuneration they receive. Yet whenever any effort is made
to cut down the number of unnecessary officeholders the cry is
certain to be raised that this action is "deflationary." Would you
remove the "purchasing power" from these officials? Would
you injure the landlords and tradesmen who depend on that
purchasing power? You are simply cutting down "the national
income" and helping to bring about or intensify a depression.
Once again the fallacy comes from looking at the effects of
this action only on the dismissed officeholders themselves and
on the particular tradesmen who depend upon them. Once
68
again it is forgotten that, if these bureaucrats are not retained in
office, the taxpayers will be permitted to keep the money that
was formerly taken from them for the support of the bureaucrats.
Once again it is forgotten that the taxpayers' income and
purchasing power go up by at least as much as the income and
purchasing power of the former officeholders go down. If the
particular shopkeepers who formerly got the business of these
bureaucrats lose trade, other shopkeepers elsewhere gain at
least as much. Washington is less prosperous, and can,
perhaps, support fewer stores; but other towns can support
more.
Once again, however, the matter does not end there. The
country is not merely as well off without the superfluous
officeholders as it would have been had it retained them. It is
much better off. For the officeholders must now seek private
jobs or set up private business. And the added purchasing
power of the taxpayers, as we noted in the case of the soldiers,
will encourage this. But the officeholders can take private jobs
only by supplying equivalent services to those who provide the
jobs-or, rather, to the customers of the employers who provide
the jobs. Instead of being parasites, they become productive
men and women.
I must insist again that in all this I am not talking of public
officeholders whose services are really needed. Necessary
policemen, firemen, street cleaners, health officers, judges,
legislators and executives perform productive services as important
as those of anyone in private industry. They make it
possible for private industry to function in an atmosphere of
law, order, freedom and peace. But their justification consists
in the utility of their services. It does not consist in the "purchasing
power" they possess by virtue of being on the public
payroll.
This "purchasing power" argument is, when one considers it
seriously, fantastic. It could just as well apply to a racketeer or a
thief who robs you. After he takes your money he has more
purchasing power. He supports with it bars, restaurants, night
clubs, tailors, perhaps automobile workers. But for every job
his spending provides, your own spending must provide one
less, because you have that much less to spend. Just so the
taxpayers provide one less job for every job supplied by the
spending of officeholders. When your money is taken by a
thief, you get nothing in return. When your money is taken
through taxes to support needless bureaucrats, precisely the
same situation exists. We are lucky, indeed, if the needless
bureaucrats are mere easygoing loafers. They are more likely
today to be energetic reformers busily discouraging and disrupting
production.
When we can find no better argument for the retention of any
group of officeholders than that of retaining their purchasing
power, it is a sign that the time has come to get rid of them.
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