Each week, nearly one million Americans sit down to read a highly respected national newspaper edited by one of the country's most knowledgeable and articulate champions of a free society. The publication is Dow Jones's Barron's; the editor is Robert Bleiberg.
Bleiberg is, in many respects, sitting in the optimal seat from which to peruse the great United States. As newspaperman, he gets to peek at the news media. As financial expert on Wall Street, he sniffs the very first winds of a changing business climate. As political commentator, he sees most every move that the politicians make. And since he sees (and sniffs) all this through free-market-colored lenses (or laissez-faire-scented nose guards), he becomes a most fascinating subject for REASON magazine readers. Thomas Hazlett, economist and frequent REASON contributor, interviewed Mr. Bleiberg in the editorial offices of Barron's in the financial district of New York City.
REASON: Let's start right in with the news media. Their economic illiteracy seems to have gone past the point of desperation. Barron's is one of the few publications that actually displays an understanding, both on the editorial page and in the articles themselves, of the economic process. How do you do it where other people don't?
BLEIBERG: Let me start by saying that Barron's is a small, self-contained publication. We have 18 or 19 fulltime staff writers putting out the entire product. We also buy some material, and some material is contributed, but by and large we are talking about a relatively small staff. Nothing gets into the publication that I haven't read, literally. I would have assigned quite a number of the stories along with my colleague, Alan Ableson. The two of us, I would say, are responsible for virtually all of the non-column content of the publication. So you're dealing with a publication that can in effect represent a fairly coherent point of view, a fairly consistent editorial philosophy and editorial background.
REASON: Do you get journalists who are different from the ones who write for other newspapers?
BLEIBERG: No. We have no loyalty oath at Barron's! The people who come to work for me may share my views, but I know in several instances they do not. And all I ask from them, particularly if they are feature writers—and most of our staff consists of feature writers and columnists—is that they do an honest job of journalism, following along a story idea that I or Alan will have given them.
REASON: Isn't there any interest at the New York Times or CBS News in the actual economics behind "obscene profits" or "consumer rip-offs"?
BLEIBERG: I think it's perfectly clear from the content that most of the editors grew up in an intellectual tradition entirely different from the free market, if not indeed hostile to it. That's clear from the editorial policy that the Times, for example, has pursued, and it's fairly clear from the news stories which from time to time show the same sort of uninformed view of what is going on in the world. I don't think they've ever outgrown their college educations. It took me about 15 years. Fortunately, I've been professional now for 30-odd. But the prejudices of the late '30s and early '40s were all-pervasive—let's never forget that. You couldn't go to Columbia University, shall we say, let alone other colleges in this part of the country, without coming out a wholly convinced statist. And it took me 15 to 20 years to unlearn, and I did that basically through on-the-job training around here.
REASON: This is an interesting scoop to hear that the editor of Barron's used to be a believer in socialism.
BLEIBERG: Well, I wouldn't go quite that far. I was certainly a…I voted Harry Truman in 1948, and I don't mind your printing that.
REASON: How did the change come about?
BLEIBERG: It started in the Army, seeing the way they went about things. I was drafted into the infantry straight from college and spent 18 months in the Pacific. A good many of my college classmates were killed in the infantry by an ill-fated government program called the Army's Specialized Training Program, which for a year or so purported to make the best possible use of the Army's college men by giving them further college training. I had just graduated from Columbia with a major in economics, and I was put in a freshmen engineering course at Bradley Tech, but that's by the by. For about a year they fooled around with us and then in the end, as the war really heated up, in early 1944 shipped us all out to whatever infantry divisions needed replenishment. Quite a number of the people are lying somewhere in the South Pacific right now. That began to jolt me a little bit about the way government treats people and the way it uses resources.
When I got a job at Barron's in 1946, I had the singular good fortune to take some basic training in journalism under a man named John Davenport, who took over the publication in 1950 and is a dedicated free-market advocate.
REASON: Why is it that businessmen have such a hard time explaining their position to the public?
BLEIBERG: The businessman's position, to begin with, will be filtered through eyes that I think are basically unsympathetic. There is very little doubt that the average newspaperman, in or outside of New York, is probably not well disposed toward business. But I also think there's been a major problem with many businessmen either not knowing exactly what they are talking about or not being entirely candid, and that's hard to overcome. To this day, you'll get press releases in a good year that quite properly start out that the XYZ Corporation showed record sales and earnings in the three months ended June 30th. And they'll give you chapter and verse; there's nothing wrong with that. But then you'll get a poor year, and XYZ Corporation reports record revenues in the second quarter and maybe all the way down at the bottom of the page or page two, you'll find out that their earnings were cut in half between April and June. Now there's still a little too much of that. So it's a combination, I would argue, between a cool, if not unfriendly, newsman and a businessman who may be trying too hard to put a good foot forward.
REASON: Let's talk about the illiteracy of the business community itself. What should we think about corporate presidents who couldn't pass a basic price theory test?
BLEIBERG: These days, you're going to find they're probably few and far between. But I'm not sure how much I would blame him for his intellectual inadequacies. He is, after all, running a company, which is an entirely different job.
REASON: Well, this is the question—should we be concerned about this?
BLEIBERG: We're almost forced to be concerned, just in the same way as these days the businessman is forced to take on this extra responsibility. He should not have to. He should have, in my opinion, a very well trained school of intellectuals who, by their own leanings, would be taking up his cudgels, exactly as Barron's does, editorially speaking. You're probably familiar with some of the editorials we've done—for example, on behalf of drug companies and against the Food and Drug Administration, or on behalf of automobile companies against the EPA. Well, it's been a lot of years and a lot of editorials, and in all the years and in all the editorials, I can count on the fingers of one hand the number of times I was inspired to do a piece like that by the targets of these agencies—by the victims. You don't find terribly many effective spokesmen for business in business, and you certainly don't find very many of them in the media.
REASON: But this doesn't bother you that there is this division of labor?
BLEIBERG: I think ideally the division of labor should exist. If we had a genuinely free market in ideas—and I've wrestled with the question of why we haven't for a lot of years—Barron's would not be alone (Barron's and the Wall Street Journal, to be more precise about it). And this is extraordinary, because this just leaves a field entirely open to us. We have a semi-monopoly here in certain areas of news coverage which are important, which should be something an eager journalist would want to get a piece of. If more publications did have editorial policies like ours, the businessman could relax a little bit. Unfortunately, since there aren't, he finds himself in the uncomfortable position of having to be his own advocate, and he's not very well suited for that job.
REASON: He could relax and go back to concentrating on competing in his market.
BLEIBERG: Yes. And answering questions honestly, which would really seem to me to be the extent of what anyone should call upon a businessman to do. But instead of that, he increasingly finds himself having to take up his own cudgels. And it's a very rare business these days that doesn't have some tiny little skeleton tucked away somewhere. Twenty-odd years ago, the head of the Federal Trade Commission, Lowell Mason, said that anybody in business is breaking the law. This was in the late '50s. Now can you imagine all the regulations that have gone on in the past two decades and where that leaves a major corporation these days? Wittingly or otherwise, they're undoubtedly in trouble with some agency or another.
REASON: Let's talk about the economy. How much of a mess are we in?
BLEIBERG: We've been in a mess of one kind or another, and we've certainly been in an inflationary mess now, for at least 20 years, and probably more than that. Barron's concern with this problem dates back to the late '50s, believe it or not, when one of my colleagues, now unfortunately deceased, bet an assistant vice-president of the Federal Reserve Bank of New York in 1958 that the United States would lose a billion dollars' worth of gold—bet him a box of cigars, and he collected. In 1958—this is right smack in the middle of the Eisenhower administration—the United States lost $2 billion worth of gold. Most people tend to forget that something called the London gold pool was started in October 1960, because the price of gold in London had soared to the then-unprecedented figure of $38.40 an ounce and jolted the central banks of the world to the point where they set up this gold pool.
What I'm saying is that the mess we're in now began in the '50s when we began to spend more than we took in, both domestically and internationally. The balance of payments in this country began to tip against us in the early '50s. That dollar gap that people talked about then was disappearing even as the expression was being coined. When George Humphrey resigned in 1956 as secretary of the Treasury because he disagreed violently with the policies he could see unfolding, and decades too soon said we'd have a depression that would curl your hair, he was simply pointing out that the longterm consequences of the policies we were embarking upon under Eisenhower were wrong—were inflationary and wrong. And there was Barron's pointing that out at that time. That's a point of view we've never varied, never wavered from—that the government was following wrong policies.
We are also, of course, a weekly publication, and while I think it's part of our job to point out long-term consequences of things, we've also got to go from cycle to cycle and from week to week. We do write for investors, and we like to be on the right side of the cycle, and we like to be on the right side of the markets if we can. That's a job that we've undertaken to do for our readers, to give the best and most dispassionate view of the way we see things going in this particular cycle.
REASON: What makes you think we are going to have a collapse? Why can't we just continue to get poorer like, say, Great Britain? This almost seems to be an article of faith today, among people who advocate the free market; it is automatically assumed that there has to be an apocalypse rather than a long, protracted decline of wealth.
BLEIBERG: Well, all right, because we have seen signs of it. We've approached the danger point in interest rates. In the autumn of 1974 there was a two- to four-week period when the banks were having difficulty rolling over their certificates of deposit, and we have it on the authority of no less than a major New York City banker that he feared for the future of the banking system. It was touch and go.
I would argue that the same thing happened—very close, very, very comparable to it—in March 1980 when word came out that they had suspended trading in the securities of Bache group. For an hour or two it looked as if the whole bottom had dropped out of things, and that could have been the forerunner of a major financial crisis. It turned out it was not; it was a great buying opportunity instead, but I venture to say it would have taken a very sophisticated, knowing speculator to have jumped in that afternoon. Somebody did, more power to him.
REASON: With ice water in his veins.
BLEIBERG: Yes. But what I'm suggesting is that we have seen cracks in the structure already. Twice. We've had several major bank failures in the past five years, all of which have been covered over, paper swept under the rug by the powers that be; and so far they've succeeded very well in doing so. And I'm not the one to say that the next time around there will be a major collapse, although it seems to me that it's increasingly likely. And to the extent that we avoid the collapse, we do so by turning on the floodgates again. And what does that do to a nation year after year and decade after decade? How does a country like this one live with double-digit inflation? I don't know. I wouldn't have thought we could get this far in the process without a collapse, to tell you the truth. But unless we change our ways—it's always my way out, here; and it's not to be despised, because I think there's a fair possibility we may change our ways—we face the ugly choice of running the risk of a financial collapse or running the risk of mounting inflation.
REASON: What if we look at it this way, though? Mightn't it be the case that the collapse has already occurred? The value of the Dow Jones Index is lower today, not even adjusting for inflation, than it was, what, in 1972?
REASON: When inflation is taken into account, an incredible loss of wealth that I would assume is much larger in dollar terms than the 1929-33 financial collapse of the New York Stock Exchange.
BLEIBERG: Well, if you want to talk about the bond market, you've proven your point.
REASON: And the federal government now reports, what is an incredible statistic, that the average American worker is no better off today in terms of after tax take-home pay than he was in the late '60s. When you look at the history of America, where every year, year after year, a real increase of two or three percent of wealth has now been arrested for the last, say, dozen years, maybe we've already seen a collapse—but due to inflationary policies, we think we're still living in the lap of prosperity.
BLEIBERG: I can't quarrel with your analysis as far as it goes, and it goes just too far perhaps. We haven't seen a collapse. We have certainly seen a lack of progress. We have certainly seen retrogression in many ways, as you pointed out. I accept all of that. But that to me is only the first act. This is something that cannot just stagger along from decade to decade. I think either you will see an inflation that will, for us, be a massive runaway in the 25 to 30 percent range or see something in the structure give way and break. I don't think we can just keep going for another 10 or 20 years, with people slowly losing ground and losing hope. I suppose the British have managed to do it, but they're a unique people in many ways. I don't even think they're aware of what the hell's happening, although, let's not forget, there's been a basic change in their government, a genuine Conservative there now who is sticking to her guns. And Britain may in fact be a big argument for my point of view that after a while this does give way to something, either something better or something far worse.
REASON: We had a very interesting thing happening in 1980. Jimmy Carter tightened the money supply, raised interest rates, and sat through a rather marked increase in unemployment in an election year. Was he serious in his aim to stop inflation?
BLEIBERG: No, I don't think so. And I wouldn't say that in any way, shape, or form we had genuinely tight money, although I suppose Carter deserves a small amount of credit for not turning the floodgates entirely loose. I suspect that his reluctance to do so, unlike the stand publicly taken by the Democratic Convention—which was, I guess, a celebration of all the values that are disappearing from the political scene—reflects the new realities of politics, namely, that far more people now, finally, are being hurt by inflation than have been helped by it. For every one million unemployed, there are nearly 13 million jobholders. So there's a very substantial number of people who have nothing to show for their efforts for the past 10 years, and I think the reason why is beginning to dawn upon them.
What I am suggesting here is that inflationary policies are no longer the political be-all and end-all they might have been or it might have seemed 10 years ago and that unemployment at seven and a half and eight percent is not the political horror statistic it used to be. Everybody is increasingly aware of things like the 95 percent of take-home pay that automobile workers get when they're out of a job for a year, so it's perfectly obvious that that statistic vastly exaggerates the amount of economic misery connected with it. While one person losing a job involuntarily is to be pitied, it's perfectly clear that so are the tens of millions of people who are now being affected by inflation, made to suffer from inflation, made to have their long-range plans thrown into a cocked hat and the dreams for their families upset by a 10 to 15 percent compounded annual inflation.
REASON: What difference will Reagan make? When I look at the Nixon and Ford years, I really don't find very many policy differences from the Kennedy-Johnson and Jimmy Carter administrations.
BLEIBERG: That's entirely right. And there's a major risk that we're going to have more of the same. On the other hand, if you contrast the 1980 Republican platform with the 1980 Democratic platform and with previous Republican platforms, you've got to concede at least the possibility that this time around just might be different. Certainly, the cast of characters coming to the forefront is quite different. Jesse Helms, for example. Whether he is as important as he might think he is or some of his people would like him to be is not the point. The point is he is having some influence. The fact that there is no discernible Rockefeller contingent any longer strongly suggests that there is finally, out of a lot of turmoil, a Republican platform that's more or less consistent and some elected Republicans who are more or less consistent, and if they just more or less follow through on their platform, I would think that this country is going to have a better shot at doing better in terms of public policy than if the Democrats had been reelected.
REASON: Why are West Germany and Japan so quickly outstripping the United States in economic growth?
BLEIBERG: Let's not forget that Germany and Japan have been living under our nuclear umbrella, such as it may be. At one point it was a powerful shield. These days, it may leak like hell, but they have been living under it for a lot of years. And from the standpoint of the economic balance sheet, military expenditures are totally wasteful expenditures. I consider them highly significant, important, but they don't help your economy very much; they are a waste of money from year to year. That money is spent unproductively, taxed away from individuals and businesses and spent unproductively. And the German and Japanese economies have, by and large, been free of that burden for the last generation. It's been an enormous advantage to them.
I think, by the way, they're no longer really doing quite as remarkably well as they had been. Both the Japanese yen and the German mark, for example, have not been notably strong this past year—certainly nothing like what they were two or three years ago. They have not been strong either in terms of gold or in terms of the American dollar, particularly. I think they are running into some troubles of their own. While they have pursued policies that in many ways are superior to ours, I don't think that they're the economic miracles they once might have seemed to Americans.
REASON: Well, the West Germans now have a higher per capita income than we do in this country.
BLEIBERG: Yes, I think that's true.
REASON: Rather remarkable, given where they were 30 years ago.
BLEIBERG: There's no gainsaying that. These are all very hard-working people. But also, let's not forget that they enjoy a much better tax structure than we, right across the board in many ways—personal income tax brackets, capital gains, depreciation policies. The 10-5-3 bill that people have been talking about, to speed up depreciation and amortization—these are measures that have been standard operating procedure in both Germany and Japan for 30 years. Now that adds up from year to year in terms of reinvestment, industrial development.
REASON: Well, then, what is going to revitalize America?
BLEIBERG: We have one hope, as far as I'm concerned. I think it's important to point out that even under Jimmy Carter we did get the first sensible piece of tax legislation in probably 15 years—the Revenue Act of 1978. That started out to be the last word in tax reform. It was going to be the culmination of a 10-year determined effort by the Treasury Department, by the IRS, to tax every conceivable dollar that they could get their hands on. Well, it didn't turn out that way. Instead, we ended up with a piece of legislation that cut the corporate tax a couple of percentage points and, most importantly, cut the capital gains tax from an effective rate of around 50 to 28 percent—an incredible turnabout in values, in public policy. I think that for the last two years a consensus has slowly been forming, a bipartisan consensus, that we have gone much too far toward overstimulating consumption at the expense of investment. And the new Congress has dozens, literally dozens and dozens, of sensible gambits to take for reinvigorating investment and economic growth in this country.
REASON: So you look to tax cuts to revitalize American industry?
BLEIBERG: Tax incentives. They may be cuts—they are always couched in cuts. The cost of them is always overstated. The cost of the 1978 capital gains tax cut was first put at almost $3 billion a year. Well, the numbers are now in, and it's winding up that the United States Treasury is not losing anything—at a 28 percent rate, it's taking in as much as it did at 49 percent two years ago. So, at no revenue cost to the Treasury, the entire spectrum of new issues has been revived, a whole slew of new companies are being formed, new stocks being floated, economic activity being engendered which otherwise would not have happened. If you look at any balance sheet at all, the last two years have been a triumph for supply-side economics. Now, of course, every tax incentive will not have, necessarily, that splendid result. There will be some cost to the Treasury, but so what? Let's take the Libertarian Party's 1980 white paper on the budget. I love the idea of cutting $150 billion out of nondefense spending, wiping out the Department of Energy, wiping out the Department of Education. If you took even a third of it, just cut government spending $50 billion and spread that over the spectrum of tax incentives that I'm talking about, you would have gone further toward turning around our basic situation of stagnation or stagflation than we've done in 30 years. And I'm hopeful that something like this is going to happen.
REASON: But you do think that money would come out of the Treasury—which is to say that the Laffer Curve people don't impress you?
BLEIBERG: I won't go that far, but I don't want to take the risk that it doesn't happen and you suddenly have to finance another $20 or $30 billion deficit that you weren't counting on. I don't see why one should take the risk at this particular juncture when there are tens and tens, if not hundreds and hundreds, of billions screaming to be cut from this swollen federal budget. The government is crying out to be cut. It should be cut for philosophic reasons. Forgetting about fiscal and economic reasons, let's cut the hell out of it for very good reasons: there is too much government, and government is not doing what it is supposed to do, namely, maintain domestic tranquility and provide a shield abroad. It hasn't begun to do that in the last 20-odd years. Let's go back to doing what government should be doing. I want to cut government spending for that reason. But I also then say that it's a lovely way to combine cutting government spending with tax incentives at one and the same time. The last thing it seems to me you want to do is leave the government the size it is now. I'm not taking a position on Laffer. Why worry about Laffer at this particular juncture when government is screaming to be cut by the $150 billion the Libertarians talk about.
REASON: A serious question that plagues many market-oriented economists and social philosophers is this: Can businessmen be trusted with capitalism? Every time we turn around there seems to be another Lee Iacocca running to Washington, usually under a much better cover than an outright request for direct subsidy.
BLEIBERG: I think that's the wrong question. If government were put in its proper place, your question would fall into perspective. It would be irrelevant. You wouldn't have to trust businessmen, who aren't any more inherently trustworthy or untrustworthy than some government bureaucrats, let's say. But let's not trust the businessman. Let's just make sure that even the worst-disposed businessman of all would get a very frosty reception in Washington the next time a question of a billion-dollar subsidy came up. There would be no billion dollars available for subsidies. We would turn the clock back, shall we say. In which case it wouldn't much matter whether we could trust the businessman with capitalism—he wouldn't have anywhere to go.
REASON: True enough, theoretically, but even a hundred years ago when government was much smaller—$500 billion smaller—businessmen were still running to Washington and getting favors, tariffs, railroad grants…
BLEIBERG: Yes, of course, that's perfectly true. We have never had an unalloyed free market in this country, no question about that. You will always find people who will put their short-term advantage over a sensible longterm view of how a society should function. I find nothing to despair about in that circumstance, nothing unusual about it. It would be remarkable, human beings being as imperfect as inevitably they seem to be, not to find some businessmen who couldn't be trusted to operate in the way that Adam Smith would prefer or Ayn Rand would prefer. But if enough people have realized that this is short-sighted, this is the wrong way for public policy to go, that Chrysler should be allowed to go broke, and you have structured your society and your economy politically so that you simply gave them no houseroom, then it wouldn't much matter what their sentiments were. Government would simply have no favors to bestow.
This country from day one was never philosophically whole—that's one of its problems, of course. And the favor-seekers are always present. But government in the 18th and 19th centuries was so small that except for just a handful of cases, there were no prizes to bestow, no favors to give, and so businessmen just had to get out there and scratch. That's the way I would hope to see it at some time in the future.
REASON: Are some businessmen beginning to be willing to stand up against special favors for business? Are they waking up to the fact that you can't have your cake and somebody else's cookie, that you've got to oppose all regulation and subsidy to oppose any?
BLEIBERG: I think you're seeing the beginnings of it. You're certainly seeing the beginnings of businessmen standing up for their own interests. Let's start with that. We have sunk so far that until the last few years you would find businessmen supinely accepting the worst affronts and not only accepting them but also saluting them. Let's never forget the way President Nixon's wage and price controls and closing of the gold window were hailed both on Wall Street and throughout industry in August 1971. Both economists and businessmen were hailing this massive new intrusion into their rights to manage their enterprises. I think we've come a long way from that. Enough businesses are being hurt by government regulation now that at least the industries involved are saying things that they wouldn't have said before. They're taking up the cudgels for themselves. You can see it in the advertisements that are running now very frequently, certainly as compared to five or ten years ago, when they were almost unknown. I think it will be a fairly short step from there to taking up philosophical cudgels for the society as a whole, and I think even now you can see some signs of that. SmithKline, for example, has addressed itself to broad issues of public policy way beyond its own corporate concerns by publicizing views like those of Walter Williams on the minimum wage, pointing out that the chief victims of the minimum wage are the young people. And SmithKline has been brave enough to take out ads not only in the Wall Street Journal but in Newsweek, where it's not just their friends they're talking to.
REASON: Unfortunately, our time is running out, but thank you very much.