Frenzied Liberty; The Myth of "A Rich Man's War"

by Otto H. Kahn

III

Much is being said about the plausible sounding contention that because a portion of the young manhood of the Nation has been conscripted, therefore money also must be conscripted. Why, that is the very thing the Government has been doing. It has conscripted a portion, a relatively small portion, of the men of the Nation. It has conscripted a portion, a large portion, of the incomes of the Nation. If it went too far in conscripting men, the country would be crippled. If it went too far in conscripting incomes and earnings, the country would likewise be crippled.

Those who would go further and conscript not only incomes but capital, I would ask to answer the riddle not only in what equitable and practicable manner they would do it,[^[1]] but what the Nation would gain by it?

Only a trifling fraction of a man’s property is held in cash. If they conscript a certain percentage of his possessions in stocks and bonds, what would the Government do with them?

Keep them? That would not answer its purpose, because the Government wants cash, not securities.

Sell them? Who is to buy them when everyone’s funds would be depleted?

If they conscript a certain percentage of a man’s real estate or mine or farm or factory, how is that to be expressed and converted into cash?

Are conscripted assets to be used as a basis for the issue of Federal Reserve Bank Notes? That would mean gross inflation with all its attendant evils, dangers and deceptions.

Would they repudiate a percentage of the National debt? Repudiation is no less dishonorable in a people than in an individual, and the penalty for failure to respect the sanctity of obligations is no different for a nation than for an individual.

The fact is that the Government would gain nothing in the process of capital conscription and the country would be thrown into chaos for the time being. The man who has saved would be penalized, he who has wasted would be favored. Thrift and constructive effort, resulting in the needful and fructifying accumulation of capital would be arrested and lastingly discouraged.

I can understand the crude notion of the man who would divide all possessions equally. There would be mighty little coming to anyone by such distribution and it is, of course, an utterly impossible thing to do, but it is an understandable notion. But by the confiscation of capital for Government use neither the Government nor any individual would be benefited.

A vigorously progressive income tax is both economically and socially sound. A capital tax is wholly unsound and economically destructive. It may nevertheless become necessary in the case of some of the belligerent countries to resort to this expedient, but I can conceive of no situation likely to arise which would make it necessary or advisable in this country. More than ever would such a tax be harmful in times of war and post-bellum reconstruction, when beyond almost all other things it is essential to stimulate production and promote thrift, and when everything which tends to have the opposite effect should be rigorously rejected as detrimental to the Nation’s strength and well-being.

There is an astonishing lot of hazy thinking on the subject of the uses of capital in the hands of its owners. The rich man can only spend a relatively small sum of money unproductively or selfishly. The money that it is in his power to actually waste is exceedingly limited. The bulk of what he has must be spent and used for productive purposes, just as would be the case if it were spent by the Government, with this difference, however, that, generally speaking, the individual is more painstaking and discriminating in the use of his funds and at the same time bolder, more imaginative, enterprising and constructive than the Government with its necessarily bureaucratic and routine regime possibly could be. Money in the hands of the individual is continuously and feverishly on the search for opportunities, i. e., for creative and productive use. In the hands of the Government it is apt to lose a good deal of its fructifying energy and ceaseless striving and to sink instead into placid and somnolent repose.

Taxation presupposes earnings. Our credit structure is based upon values, and values are largely determined by earnings. Shrinkage of values necessarily affects our capacity to provide the Government with the sinews of war.

There need not be and there should not be any conflict between profits and patriotism. I am utterly opposed to those who would utilize their country’s war as a means to enrich themselves. Extortionate profits must not be tolerated, but, on the other hand, there should be a reasonably liberal disposition toward business and a willingness to see it make substantial earnings. To deny this is to deny human nature.

Men will give their lives to their country as a matter of plain and natural duty; men, without a moment’s hesitation, will quit their business and devote their entire time and energy and effort to the affairs of the Nation, as a great many have done and every one of us stands ready to do, without any thought of compensation. But, generally speaking, men will not take business risks, will not venture, will not be enterprising and constructive, will not take upon themselves the responsibilities, the chance of loss, the strain, the wear and tear and worry and care of intense business activity if they do not have the prospect of adequate monetary reward, even though a large part of that reward is taken away again in the shape of taxation.