Business Should Fight Back Against Controls

The April 1974 issue of Reason contains a newly relevant essay – “Fighting Back Against Controls” – by the late Henry Manne (who twelve years later became Dean of the law school at George Mason University). In this essay, which is derived from a speech given to a group of business executives, Manne bemoaned the political and public response to the nationwide fuel shortages that swept through the United States starting in late 1973. What makes this essay newly relevant is its applicability to the political and public response to today’s pandemic. The parallels are notable.

The Fuel Shortage

After quoting from a November 30^th, 1973, Wall Street Journal piece by Phil Gramm – who argued that “Crises, as opposed to simple scarcity, result from market disruptions; and the only sector of society which possesses the power to disrupt a large market is the government” – Manne wrote:

Professor Graham [sic] is correct. However, the government, plus the mass media and one hell of a lot of economic boobs, can also create an hysteria that many people are presently mistaking for a real crisis.

Of late, it is difficult to find a news story on the subject that is not headlined “Rationing Necessary to Cure Fuel Shortage,” or words to that effect. T.V. commentators of erudite voice and visage and editors turned amateur economists tell us daily that some form of rationing is required to deal with the fuel shortage. A large and perhaps crucial segment of the literate public actually believe that the “cure” for a shortage is some form of government rationing. Well, there are a lot of things rationing can do – all of them bad. But one thing it can absolutely never do is to increase the total supply of any commodity.

Although I was then only 15 years old, I well remember the 1973-74 fuel shortage and the resulting public panic. Yet I recall no talk then of this shortage being caused by the U.S. government’s price controls on energy.

Of course, one reason why I missed any mention of price controls is that I was so young and still unaware of economics. I’m sure that some people somewhere – such as in the pages of the Wall Street Journal (which I was not then reading) – were correctly identifying price ceilings as the culprit. But I, like most Americans, wouldn’t have noticed such talk unless it had been a central feature of the public discussion. But I’m quite sure that it wasn’t.

Any such serious, adult talk of the actual causes of the fuel shortage was certainly not front and center, if it was there at all, on the CBS Evening News with Walter Cronkite or in the pages of the New Orleans Times-Picayune. Instead, there was much talk of greedy oil companies, of grasping oil sheiks, of gluttonous consumers, and incessantly – as Manne noted – of the inevitability of rationing.

My memory here is vivid because I first got my driver’s license in September 1973, less than a month before the Yom Kippur war. This war disrupted global oil supplies and thus sparked the shortages. I recall my disappointment upon realizing that, having finally become old enough to drive, I’d likely spend the rest of my life doing less of it than I’d like due to the apparent need, for the remainder of my days, to deal off and on with rationing coupons or, worse, long queues of automobiles waiting to buy gasoline.

Reality can be cruel. But thank goodness government is on the job to ease the pain – or so I, again like many Americans, back then believed.

The Parallels

Then as now, reality threw humanity a curveball. But instead of dealing with war-disrupted oil supplies intelligently and calmly, fear mongering by the media became de rigueur. For our own benefit and that of society, we little people must be reminded of the calamity that awaits us if we resist being regimented by our superiors. Here’s Manne again on the fuel shortage:

I was encouraged recently by a headline over a recent column on this subject by Pulitzer Prize winning WASHINGTON POST columnist David Broder. That headline really laid it on the line. It stated simply: “Politicians Fooling Public on Crisis.” But my optimism was short lived. It turned out that Mr. Broder was simply angry about Congress’ delay in adopting what he considered urgently required legislation to ration gasoline and set prices. He thought that the members of Congress lacked the guts to adopt the politically unpopular but economically correct controls….

Broder’s column contained some nice, though obviously unintended irony. He stated that during World War II “despite all the horror stories today’s politicians are telling, it appears that rationing was darned effective. Automobile mileage was cut in half in the first year the rationing plan was in operation. And despite a black market that involved widespread forgery of coupons and some blatant hijacking…the official estimates were that 95 percent of the available fuel supplies moved through legitimate channels.” I wonder how many of his readers noticed that in the absence of those same controls 100 percent of our fuel supplies would have moved through legitimate channels. And incidentally, even that five percent slippage amounted to a quarter of a million barrels of gas and oil a day.

….

The news media must surely bear a good part of the responsibility for creating our present crisis atmosphere. That is, after all, their stock in trade.

Note the parallel with today’s events. Prominent pundits insist that too many ordinary people underestimate the severity of the problem. This underestimation is said to be due in part to cowardly or dastardly politicians who disregard the truth. These pundits then recount tales of strict interventions that, in the pundits’ telling, succeeded splendidly.

But the fact is that, then as now, these tales of successes are questionable. Most pundits not only see and report only part of the picture, they never ask “As compared to what?” And just as Broder insisted that the fuel-shortage problem required even stricter price controls, many pundits today insist that the pandemic problem requires even stricter lockdowns. After all, our crisis is extraordinary – the media tell us so! – and an extraordinary crisis requires extraordinary government controls.

Understanding neither markets nor just how unfathomably complex are commercial and social relationships, the only ‘solution’ that the typical pundit (or politician) can envision for any problem is strictly enforced compulsion of the ignorant and unruly masses by a god-like state. Any claim that such compulsion might make matters worse is dismissed as a dangerous superstition.

Resistance

Henry Manne was a courageous and clear-minded thinker. Seeing that the elites’ demand for stricter controls on humanity would be counterproductive, he called for peaceful resistance:

I want to call on the business community of the United States to announce publicly and vigorously, both as individual companies and through associations such as this one, that they will not cooperate with the government beyond the legally compelled minimum in developing or complying with any control programs.

The full spirit and many of the practical steps that Manne recommended to business people nearly 50 years ago as rational responses to the unwarranted hysteria over fuel shortages apply today to the unwarranted hysteria over Covid-19. Today, I recommend such resistance, and not only by business people, but by all individuals.

I leave you with Manne’s stirring call to action – and to inaction:

The threats of controls and higher taxes, the vilifications by politicians and the media, and the calls to patriotism and social responsibility are but the carrots and sticks of political bullies who can ultimately rationalize the last ounce of control over our private lives.

If you have any faith in the economic and social miracle that is the free market system, use every legal means at your command to vex, confuse, delay, undermine and avoid every regulation adopted or proposed by Congress, the administration, and the bureaucracy. Instruct your lawyers and your accountants to stay as narrowly within the letter of the law as they possibly can while still keeping you out of jail. You are not legally obliged to follow the spirit of a law and not morally obliged to follow the spirit of a law that is without any redeeming economic or social justification.

….

Force the government into litigation at every turn. Whenever possible, on constitutional or other colorable grounds, seek individually or in a class action to enjoin the enforcement of price controls and allocation regulations. Force the government to prove the constitutionality of every one of these intrusions, and seek declaratory judgments when there is the slightest possibility of confusion in the interpretation of regulations.

Finally publicize as widely as possible the inevitable inefficiencies, mistakes, and human miseries that will develop with these controls. They are and will be all around us, and no one will have to look far for examples. That price controls prevented production of the equipment necessary to produce more oil refining capacity is the kind of thing that the public should be made to understand. The public should not be allowed to believe that racketeering, black markets, favoritism, misallocations, delays and inconveniences are sacrifices they must endure in the nation’s interest. These are, after all, unnecessary costs resulting from economic stupidity or political knavery.

….

Businessmen should help the public understand that morality, in the case of arrogant, intrusive, totalitarian laws, lies in the barest possible obedience and in refusal to cooperate willingly beyond the letter of the law. The business community should have the courage to inform the public that the stakes are very high and that they are the potential victims.

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