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a liberal cannot afford to neglect. It is not too much to say that the most serious short-run threat to economic freedom in the United States todayaside, of course, from the outbreak of World War IIIis that we shall be led to adopt far-reaching economic controls in order to ''solve" balance of payments problems. Interferences with international trade appear innocuous; they can get the support of people who are otherwise apprehensive of interference by government into economic affairs; many a business man even regards them as part of the "American Way of Life"; yet there are few interferences which are capable of spreading so far and ultimately being so destructive of free enterprise. There is much experience to suggest that the most effective way to convert a market economy into an authoritarian economic society is to start by imposing direct controls on foreign exchange. This one step leads inevitably to the rationing of imports, to control over domestic production that uses imported products or that produces substitutes for imports, and so on in a never-ending spiral. Yet even so generally staunch a champion of free enterprise as Senator Barry Goldwater has at times been led, when discussing the so-called "gold flow," to suggest that restrictions on transactions in foreign exchange may be necessary as a "cure." This "cure" would be vastly worse than the disease. |
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There is seldom anything truly new under the sun in economic policy, where the allegedly new generally turns out to be the discard of a prior century in flimsy disguise. Unless I am mistaken, however, full-fledged exchange controls and so-called "inconvertibility of currencies" are an exception and their origin reveals their authoritarian promise. To the best of my knowledge they were invented by Hjalmar Schacht in the early years of the Nazi regime. On many occasions in the past, of course, currencies have been described as inconvertible. But what the word then meant was that the government of the day was unwilling or unable to convert paper currency into gold or silver, or whatever the monetary commodity was, at the legally stipulated rate. It seldom meant that a country prohibited its citizens or residents from trading pieces of paper promising to pay specified sums in the monetary unit of that country for corresponding pieces of paper expressed in the |
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