In earlier chapters, we learned how First Layer aggression of licensing laws allowed the FDA and AMA to dictate our health care options and increase their cost. The previous chapter showed us how Second Layer aggression, exclusive licensing, creates monopolies that overcharge us and promote our depend-ence on fossil fuels. With the addition of the Third Layer, however, we are forced- at gunpoint if necessary- to subsidize the monopoly service- even if we choose not to use it! Most often, the subsidized monopoly service is provided by a government agency or department. This transfer to the public sector has its own hidden costs- including large-scale environmental destruction.

Increasing Costs

Public services on the average cost twice as much as the same service provided by the private sector. (1) Bureaucrats have little incentive for efficiency when consumers must pay for the service, whether they use it or not. The proof of this inefficiency is the enormous savings enjoyed when public services are contracted out to private firms instead of being performed by government employees. California cities save between 37% and 96% by contracting out their street cleaning, janitorial services, trash collection, traffic signal repairs, grass cutting, and street maintenance/overlay construction. (2 )Private municipal transit service saves taxpayers30 to50%. (3) Savings have also been realized in various locales by contracting out fire protection, (4) emergency ambulance service, (5) building or operation of water and sewage treatment plants, (6) and solid waste recycling. (7) The monopoly services are still subsidized, but to a lesser extent.

Encouraging Waste

Whenever people do not pay the full costs for something they use, they have much less incentive to conserve. For example, when people pay the same amount of taxes for solid waste disposal whether they recycle or not, fewer people are inclined to conserve. As a consequence, more waste is generated and disposal problems increase.

Conversely, when subsidies decrease, conservation automatically follows. In Seattle, during the first year that customers were charged by the volume of trash they generated, 67% chose to become involved in the local recycling program. (8) Since about 18% of our yearly trash consists of leaves, grass, and other yard products, (9) composting coupled with recycling can dramatically lower a person's disposal bill. As less waste is generated, fewer resources are needed to dispose of it. What could be more natural?

Discouraging Conservation

Ownership and distribution of water is most often a government monopoly subsidized by our tax dollars. In California's San Joaquin Valley, 4.5 million acres of once-desert farmland is irrigated by subsidized water. Our tax dollars, taken- at gunpoint, if necessary- were used to construct dams for irrigators, pay many of their delivery costs, and support zero-interest loans so that farmers pay only about 10% of the water's market value! (10) These subsidies encourage wasteful over-irrigation, resulting in soil erosion, salt build-up, and toxic levels of selenium in the run-off. Kesterson Wildlife Reservoir has been virtually destroyed by irrigation-induced selenium build-up, which now threatens San Francisco Bay as well. (11)

As long as our tax dollars subsidize the irrigators, however, they have little financial incentive to instill drip sprinkler systems or other conservation devices. As a result, less water is available for other uses, so prices increase for everyone else. Without subsidies, irrigators would be motivated to conserve water, which is desperately needed in California's coastal cities for domestic use.

Destroying the Environment

The above examples of Third Layer aggression deal with exclusive monopolies where service is provided by a public works department, subsidized in whole or in part by taxes. Strictly speaking, the grazing rights, timber sales, and park operations by governmental units are not exclusive monopolies. No one is stopped at gunpoint from creating wealth by providing these same services to willing customers. Rather than exclusive licensing, another form of aggression- forcible prevention of homesteading- made the U.S. government the largest single provider of such services. In addition, these services are subsidized by tax dollars, making them similar to the other examples in this chapter.

Homesteading is a time-honored way of creating wealth. An individual or group improves previously unused land by clearing it for agriculture, fencing it for grazing, making paths for hikers, building a home, etc. To own the wealth they have created, the creators lay claim to the property on which it resides.

Much of our country was settled this way. On 42% of U.S. territory, however, the government prevented the creation of wealth through homesteading- at gunpoint, if necessary. (12) Such widespread aggression has an impact similar to the exclusive licensing characteristic of the Second Layer of the Pyramid of Power. Adding subsidies through the aggression of taxation gives governmental administration of range land, forests, and parks many of the characteristics of Third Layer aggression.

If the guns of government were used only to prevent homesteading (Second Layer), the lands would simply be left in their natural state. Some wealth would be consumed protecting the lands from squatters, just as would happen with individual homesteaders. However, the land could not be used constructively or sustainably to create new wealth. No trees would be harvested for wood. No cattle would be raised for food.

Sometimes we equate wealth creation on rangelands and in forests with their ultimate destruction. These natural ecosystems, however, are renewable and sustainable if they are properly cared for. Individual homesteaders or owners have incentive to do just that, because they will profit most if the creation of wealth is able to continue year after year. An individual who wishes to leave wealth to children and grandchildren is more likely to care whether the property continues to be fruitful.

Overgrazing the Range

The incentives are very different for the congressional representatives who oversee the Bureau of Land Management. To appreciate their perspective, we should listen in on an imaginary conversation between a congressman and some of his constituents.

"Mr. Congressman, we represent the ranchers in your district. Things are pretty tough for us right now, but you can help us. Let us graze cattle on all that vacant rangeland the governmeber as in this area. We'll be properly grateful when it comes time to contribute to your campaign. As a token of our good will, we'd like to hire your out-of-work daughter as the assistant manager of our association."

The congressman has twinges of conscience. He knows that the ranchers will overstock the government lands, even though they carefully control the number of cattle on their own. Since they can't be sure of having the same public range every year, however, they cannot profit by taking care of it. They cannot pass it on to their children. They profit most by letting their cattle eat every last blade of grass. When he shares his concern with the ranchers, they reply:

"Mr. Congressman, we will pay a small fee for 'renting' the land. Renters don't take as good care of property as owners do, it's true, but the land is just sitting there helping no one. All those people who want to save the land for the next generation must not have the problems we do just keeping food on the table so there will be a next generation. Your next generation benefits most if you allow us to give her a job and you keep yours. If you don't help us, sir, neither of you will have a job. We'll find someone to run against you who knows how to take care of the people he or she represents. We'll make sure that you're defeated."

The congressman sighs and gives in. After all, the ranchers gain immensely if allowed to graze cattle on the land he controls. They have every incentive to make good their threats and their promises. The people who might prefer to let the land simply remain au naturale do not benefit financially from doing so. While the ranchers will share the money they make from the rangeland with the congressman, no profit is generated by maintaining the status quo. If anyone objects, the congressman and the ranchers can use the money generated from the range to finance its own destruction.

The congressman tries to get a coalition of his colleagues together to encourage changes in the way the Bureau of Land Management (BLM) operates. He finds that some of their constituents have similar desires for the construction of a dam, access to timberland, etc. He agrees to help them change the policies that control resources in their area in return for their agreement to help him with the Bureau of Land Management, which controls an area almost twice the size of Texas, including nearly all of Alaska and Nevada. (13) Naturally, these changes set precedents for all the resources controlled by the BLM, not just the ones in this congressman's district.

Because of these skewed incentives, almost half of these lands are rented out to ranchers for grazing cattle at one-fifth to one-tenth the rate of private grazing land. (14) By 1964, three million additional acres had been cleared by "chaining" (15) to create more rentable rangeland. Because the ranchers and their representatives cannot profit by protecting the land, they have little incentive to do so. As early as 1925, studies demonstrated the inevitable result: on overgrazed public ranges, cattle were twice as likely to die and had half as many calves as animals raised on private lands. (16)

Are the ranchers and their representatives selfish others whom we should condemn? Not at all! Had ranchers been permitted to homestead these lands in the first place, the rangeland would now be receiving the better care characteristic of private grazing. Our consent to aggression has taken the profit out of caring for the environment. When this aggression is even partially removed, the situation improves.

For example, in 1934, Congress passed the Taylor Grazing Act to encourage ranchers to care for the public grazing land by allowing them ten-year transferable leases. (17) Essentially, ranchers were allowed to homestead or own the land for ten years. Ranchers who cared for the land were given the positive feedback of good grazing or a good price when selling their lease. As a result, almost half of the rangeland classified as poor was upgraded. (17) However, in 1966, leases were reduced to only one year, giving ranchers less incentive to make improvements. As a result, private investment in wells and fences in the early 1970s dropped to less than a third of their 1960s level. (18)

Logging the Forests

As subsidies increase, so does the environmental destruction. Most of the trees in our national forests wouldn't be logged without subsidies, because the cost of building the roads necessary to transport the timber exceeds the value of the lumber. Once again, however, the special interests found a way to use the aggression of subsidy to their own advantage. Let's listen to an imaginary conversation between the timber companies and their congresswoman.

"Ms. Congresswoman, the U.S. Forest Service has money in its budget for hiking trails. Now we're all for hiking; we just think we should get our fair share of the forest and our fair share of the subsidy. Some of that money for trails should be used to build logging roads. Consumers will benefit by increases in the supply of timber. We'd profit too and see that you got your 'fair share' for your campaign chest. We'd pay some money for replanting too, so the environmentalists will be happy."

The Congresswoman considers their offer. She knows that the loggers, like the ranchers, have little incentive to log sustainably on public lands. She also knows that if the hikers complain, she can ask for a larger subsidy for the U.S. Forest Service. Some of that subsidy can be channeled to more logging roads and more campaign contributions. If anyone objects, the profit from the forests can be used to lobby for their own destruction.

Special interests reap high profits with subsidies, so it is worth their while to spend large sums of money to protect them. If the congresswoman doesn't agree to the timber companies' demands, they'll put their considerable money and influence behind her opponent. The timber companies will be able to log the forests. The only question is which congressional representative will reap a share of the profits. The congresswoman sighs and agrees to fight for more logging subsides.

As a result, the U.S. Forest Service, which has custody of forest and rangeland covering an area larger than Texas, uses our tax dollars to log the national forests. By 1985, almost 350,000 miles of logging roads had been constructed in the national forests- eight times more than the total mileage of the U.S. Interstate Highway System! (19) Construction of roads requires stripping the mountainous terrain of its vegetation, causing massive erosion. In the northern Rockies, trout and salmon streams are threatened by the resulting silt. Wildlife and fragile ecosystems are disturbed. (20)

The Forest Service typically receives 20 cents for every dollar spent on roads, logging, and timber management. (21) Even though the timber companies are charged for the cost of reforestation, 50% of these funds go for "overhead". (22)

While logging vehicles are encouraged, hikers are discouraged. Even though the number of backpackers increased more than ten times between the 1940s and the 1980s, trails in the national forests dropped from 144,000 miles to under 100,000. (23)

Should we blame the timber companies and their congressional representatives for this travesty? Hardly! After all, if we sanction aggression to prevent homesteading, we take the profit out of protecting the forest. The nation's largest private landowner, Inter-national Paper, carefully balances backpacking and other forest recreation with logging. In the Southeast, 25% of its profit is from recreational use. (24) When we honor the choices of others, they profit from honoring ours.

Slaughtering Wildlife

Our tax subsidies have also been responsible for the extermination of wildlife, sometimes to the point of near extinction. While state governments were encouraging the shooting of hawks (Pennsylvania paid hunters a bounty), Mrs. Rosalie Edge began a sanctuary for them with voluntary contributions. She bought what is now known as Hawk Mountain, an eastern Pennsylvania area of the Appalachians that was ideally suited to bird watching. Before she established the Hawk Mountain Sanctuary in 1934, sportsmen had used it to shoot the magnificent birds. (25)

In 1927, the owner of Sea Lion Caves, Inc., the only known mainland breeding and wintering area of the Stellar sea lion, (26) opened it to visitors as a naturalist attraction. Meanwhile, Oregon's tax dollars went to bounty hunters who were paid to shoot sea lions. The owners of Sea Lion Caves spent much of their time chasing the hunters off their property. While the owners of Sea Lion Caves and Hawk Mountain Sanctuary were protecting the wildlife that inhabited their land, they were also forced- at gunpoint, if necessary- to pay the taxes that rewarded hunters who en-dangered it!

Not everyone in a group wants resources treated in the same way. When all people treat their property as they think best, one owner's careless decision is unlikely to threaten the entire ecosystem. When bureaucrats control vast areas, however, one mistake can mean ecological disaster. In addition, special interest groups struggle for control.

For example, Yellowstone, the crown jewel of the national park system, has been torn apart by conflicts of interest. In 1915, the Park Service decided to eradicate the Yellowstone wolves, which were deemed to be a menace to the elk, deer, antelope, and mountain sheep that visitors liked to see. (27) Park employees were permitted to keep or sell hides from wolves they had trapped as an inducement to hunt them. Eventually, the fox, lynx, marten, and fisher were added to the list. (28) Without predators, the hoofed mammals flourished and began to compete with each other for food. The larger elk eventually drove out the white-tailed deer, the mule deer, the bighorn sheep, and the pronghorn. As their numbers increased, the elk ate the willow and aspen around the river banks and trampled the area so that seedlings could not regenerate. Without the willow and aspen, the beaver population dwindled. Without the beavers and the ponds they created, water fowl, mink, and otter were threatened. The clear water needed by the trout disappeared along with the beaver dams. Without the ponds, the water table was lowered, decreasing the vegetation growth required to sustain many other species. When they realized their mistake, the Park officials began removing the elk (58,000 between 1935 and 1961). (29)

Meanwhile, the elk overgrazed, greatly reducing the shrubs and berries that fed the bear population. In addition, the destruction of willow and aspen destroyed the grizzly habitat, while road construction and beaver loss reduced the trout population on which the grizzlies fed. When the garbage dumps were closed in the 1960s to encourage the bears to feed naturally, there was little left for them to eat. They began seeking out park visitors who brought food with them. Yellowstone management began a program to remove the problem bears as well. In the early 1970s, more than 100 bears were removed. Almost twice as many grizzlies were killed. (30)

Subsidies create tension between special interests with different views. Yellowstone visitors wanted to see deer and elk. Some naturalists would have preferred not to disturb the ecosystem, even if it meant limiting visitors and disappointing some of them. Since everyone is forced at gunpoint, if necessary to subsidize the park, each person tries to impose his or her view as to how it should be run. The resulting compromise pleases no one.

Contributors to private conservation organizations, in contrast, choose to donate to a group that shares their common purpose. For example, at Pine Butte Preserve, the Nature Conservancy replanted overgrazed areas with chokecherry shrubs for the grizzlies and fenced off sensitive areas from cattle, deer, and elk, animals that thrive in the absence of predators.31 The Nature Conservancy has preserved more than 2.4 million acres of land since 1951. (32)

The Audubon Society also uses ownership to protect the environment. The Rainey Wildlife Sanctuary is home to marshland deer, armadillo, muskrat, otter, mink and snow geese. Carefully managed natural gas wells and cattle herds create wealth without interfering with the native species. (33) Other private organizations investing in wilderness areas for their voluntary membership include Ducks Unlimited, National Wild Turkey Federation, Inc., National Wildlife Federation, Trout Unlimited, and Wings Over Wisconsin.

The story of Ravena Park illustrates how aggression compromises the care given to the environment. In 1887, a couple bought up the land on which the giant Douglas firs grew, added a pavilion for nature lectures, and made walking paths with benches and totems de-picting Indian culture. Visitors were charged admission to support Ravena Park; up to 10,000 people came on the busiest days.

Some Seattle citizens weren't satisfied with this non-aggressive arrangement. They lobbied for the city to buy and operate the park with tax dollars taken at gunpoint. In 1911, the city took over the park, and one by one the giant fir trees began to disappear. Concerned citizens complained when they found that the trees were being cut into cordwood and sold. The superintendent, later charged with abuse of public funds, equipment, and personnel, told the citizens that the large "Roosevelt Tree" had posed a "threat to public safety." By 1925, all the giant fir trees were gone. (34) The superintendent could personally profit from the beautiful trees by selling them.

Power Corrupts

The above example illustrates why layering aggression upon aggression forms a Pyramid of Power. Licensing laws (Layer 1) give a group of professionals the power to limit our choices. Exclusive licensing (Layer 2) gives a single firm the monopoly power. Subsidizing (Layer 3) allows a tiny handful of bureaucrats the power to trade public assets for personal gain. Unlike the personal power that comes from wisdom, inner growth, and hard work, this power comes from the point of a gun. This power of aggression corrupts those who use it, impoverishes those who have little, and destroys the earth that supports us. We ask for these results when we vote for subsidies.

The Easy Way Out

In earlier chapters, we saw that the aggression of exclusive licensing inhibited innovation, increased costs, and lowered the quality of service. Subsidies encourage inefficiency and waste as well.

Ironically, we often sanction the aggression of subsidized, exclusive, government-run monopolies because of the erroneous belief that they promote improved efficiency and prudent use of resources. Subsidies are sometimes tolerated in the equally mistaken belief that they allow the poor access to ser-vices they otherwise couldn't afford. The cost of aggression, however, is so great that the poor are harmed instead of helped.

For example, those too poor to own property pay no property taxes directly. Instead, they rent from property owners, who raise rents to compensate for tax increases. The municipal services that these taxes fund will cost considerably more than they would in the absence of aggression. The tax increases, therefore, are higher than the cost of the services would be. The poor end up paying higher rents to subsidize inefficiency and waste even for services they do not use!

Socialist countries abound with exclusive, subsidized government-run monopolies. Not surprisingly, many are reacting to this new knowledge by privatizing subsidized government-run monopolies, including railways and highways, by selling them to individuals or corporations. (35) In New Zealand, the post office has been privatized. Without increasing rates, the private postal service was still able to maintain service to all addresses, increase on-time delivery of first-class mail from 84% to 99%, and transform an annual loss of $37 million to a profit of $76 million! (36) Since this yearly $37 million loss was usually made up by the taxpayer, real postal rates actually went down as quality went up!

How can privatizing decrease costs so quickly? When provision of services is not restricted to a subsidized government agency, the profit motive spurs businesses to adopt the latest, most efficient technology possible. For example, instead of dumping refuse into landfills, waste disposal companies find ways of turning trash into cash. Recomp, Inc. (St. Cloud, Minnesota), and Agripost, Inc. (Miami, Florida), use composting whenever possible and sell the resulting loam to landscapers, Christmas-tree farms, and reclamation projects. Other projected uses for the nutrient-rich compost include topsoil replacement for the farms, rangelands, and forests (9) that have been devastated by Third Layer aggression.

Better quality at lower cost is only the beginning of the natural beauty of the marketplace ecosystem, however. Private companies can offer ownership to employees through stock options. Government employees sometimes become owners of newly privatized firms. Surly employees whose jobs were guaranteed by subsidies are transformed overnight into dedicated workers whose profits depend on serving their customers efficiently and well. Saying "No!" to the aggression of subsidies reduces waste and encourages employees to take pride in their work, while benefiting the poor and the consumer.

Doing away with subsidies means doing away with the aggression of taxation that generates them. As aggression decreases, prosperity increases. Studies of the U.S. economy show that a measure of wealth creation, our Gross National Product (GNP), plunges when taxes increase. (37) The economic growth of individual states is also highly dependent on how heavy a burden of taxation they place on their populace.38 We can hardly expect to prosper if we subsidize inefficiency and waste!

Privatization of public lands and waterways holds a special bonus for the American populace. Although its value is difficult to estimate, a substantial percentage of the national debt could likely be retired with the proceeds!

In 1989, 15% of our federal expenditures went to pay the interest on the national debt. (39) If the debt were repaid and the taxes lowered, tremendous economic growth would result.

Some people don't worry much about the national debt because they believe we simply "owe it to ourselves." In a way, that is true. The government I.O.U.s are held by individuals, corporations, and pension plans (including Social Security) throughout the land. For our pension plan to pay us, taxes will have to go up to pay off the I.O.U. We will have to pay more taxes so that our pension plan can pay us. The net result is that we may have no pension at all!

To understand how we came to such an impasse, we should look at the apex of the Pyramid of Power the money monopoly.

 If we can prevent the Government from wasting the labors of the people under the pretense of caring for them, they will be happy.

- Thomas Jefferson, author of the Declaration of Independence

Forces which impede innovation in a public service institution are inherent in it, integral to it, and inseparable from it.

- Peter Drucker, INNOVATION AND ENTREPENEURSHIP

The most entrepreneurial, the most innovative people behave like the worst time serving bureaucrats or power hungry politicians 6 months after they have taken over the management of a public service institution, particularly if it is a government agency. Forces which impede innovation in a public service institution are inherent in it, integral to it, and inseparable from it.

- Peter Drucker, INNOVATION AND ENTREPENEURSHIP

What is common to many is least taken care of, for all men have greater regard for what is their own that what they possess in common with others

- Aristotle

...government ownership has another kind of impact on society: it necessarily substitutes conflict for the harmony of the free market.

- Murray Rothbard, POWER AND THE MARKET

 In the previous chapters, we've seen how the Pyramid of Power we've created controls us more with each layer of aggression. The First Layer of licensing laws stops us at gunpoint, if necessary from choosing whoever serves us best. The Second Layer, exclusive licensing, creates monopolies that exploit us. The Third Layer forces us to subsidize these monopolies, often to the detriment of the environment. The Fourth Layer then forces us to use the subsidized service.

One example of Fourth Layer aggression is the money monopoly. To understand why it is the apex of the Pyramid of Power, we must first understand how money works.

The Difference Between Money and Wealth

Earlier we learned that wealth consists of goods and services, not money. Money is a claim check on the goods and services that constitute wealth. The more money people have, the larger a percentage of the goods and services they are able to claim or buy for themselves. Historically, gold and silver were commonly used as money because they could easily and accurately be coined or weighed. Moreover, in societies where precious metals were made into jewelry or used industrially, gold and silver were goods as well. They constituted a form of wealth as well as money.

As people prospered, carrying metallic money or protecting it against theft became burdensome. People began to deposit their gold and silver with bankers equipped toguard it well. Some bankers simply charged a fee for this service. Others found that if they could loan part of the gold to someone else, interest could be collected and shared between the bank and the depositor.

The banker gave the depositor a promissory note, which was a promise to return the gold to the depositor whenever the note was returned to the bank. A bank with many customers could usually count on being able to make this promise good, because it was unlikely that everyone would want to withdraw his or her money at the same time. In the interim, the depositor could exchange the promissory note for goods and services as if it were gold. Thus, these notes began to function as money or claim checks for the available goods and services. Our U.S. dollars were once promissory notes of this type, which were redeemable in the gold and silver that people had stored with their local banker.

The Cause of Inflation and Deflation

Since people did not want their gold and silver all at the same time, banks kept a fraction of the precious metal on reserve and loaned the rest. In doing so, they created money. Today's banks can create money the same way, although they have other methods at their disposal as well.

For example, assume that your bank needs to put 20% of its funds on reserve to operate optimally. You deposit $100 in your favorite bank; the bank puts $20 into reserve and loans out the other $80. The person who borrowed the $80 deposits it in his or her checking account. That person's bankbook says he or she has $80. Yours says you have $100. Together, the two of you have $180 in the bank. But wait! Only $100 is there to begin with! The bank has created the $80 it lends out!

The process continues. The bank puts 20% of the newly deposited $80 (i.e., $16) in reserve and lends out the remaining $64, which is then redeposited and goes through the same process. When the reserve is 20%, the $100 eventually becomes $500. The lower the reserve requirement, the more money is created. For example, when the required reserve is 10%, every deposit is multiplied by 10 instead of 5. How amazed I was when my father, a bank manager and economics teacher, first explained this process to me!

Creating this extra money can cause price inflation when there is no compensating increase in goods and services. In the board game Monopoly®, each player starts out with $1,500 and struggles around the board several times before being able to acquire enough property and enough money to build houses and hotels. If players each had $7,500 at the start instead, the houses and hotels could be built much earlier in the game. A boom in building would result. When the starting money was only $1,500, players might sell some properties to other players to get enough money to build their hotels and houses on the remaining ones. When starting with $7,500, property owners might not need to raise the cash. Players without property would probably have to pay owners more in order to entice them to sell. Real estate prices would rise with inflation in Monopoly just as they do in the real world.

On the other hand, price deflation can occur when the money supply decreases without a compensating loss in goods and services that people want. Banks can cause deflation by increasing their reserves, keeping money out of circulation instead of lending and creating it. In our Monopoly example, deflation would be simulated by everyone returning a percentage of his or her cash to the bank.

Now players are much more likely to be caught short when their mortgages or rent comes due. If players try to sell their properties, they find others with less money to buy them. Real estate prices fall, just as they do in the real world.

The Rich Get Richer

In real life, the inflation and deflation caused by changes in the money supply don't affect everyone equally, as in our example above. When the bank creates new money, it increases its claim checks on wealth relative to everyone else. The bank is like a Monopoly player who gets more money than the other players to start with. If you and another player were bidding on the same property at auction, and the other player's pile of cash increased while yours stayed the same, the other player would likely top your best bid and get the property.

When the other player is sure to outbid you with new money, the auctioned property will probably sell for a slightly higher price than it otherwise would have. The sellers would thereby acquire some of the newly created money. As they spend that extra money, by outbidding other players for property, it slowly diffuses into other hands by increasing each seller's profit. Several turns may pass before some players get access to the new money. Those who have no property may never get part of the new money. They are worse off relative to the other players than they would have been if no new money had been created at all!

In real life, the banks that create money use it first. Those wealthy enough to put up collateral can borrow the money and use it next. Since governments are the biggest borrowers, they benefit at the expense of those who have little property and savings. As we've seen, government officials tend to support special interests with the wealth they control. Deficit spending, which occurs when the government needs to borrow, is really a redistribution of wealth from the poor to the rich.

The Poor Get Poorer

The longer Monopoly players wait for a share of the new money, the worse off theyare. In real life, prices rise before wages do, as more money is created. People who do not get the new money at all (those on a fixed income without savings or property) must contend with rising prices without an increase in income.

Those who get the new money last are worse off than if there had been no inflation at all. Inflation through new money creation artificially increases the claim checks on goods and services for the wealthy, but not for the poor. This redistributing of wealth to the banks and the well-to-do by increasing the claim checks (money) that these groups have is frequently referred to as the inflation tax.

The U.S. banking system alternates inflation with deflation. Without alternating the cycles, inflation would run rampant, as it has in several Latin American countries. In nations that inflate rapidly, getting the new money even a few hours later than someone else makes a person very much worse off. That is why workers in such countries rush to buy goods and services as soon as they receive their paycheck!

Alternating inflation and deflation creates other problems. When the rate of new money creation slows, people and businesses cannot borrow as readily as before. Consumers cannot buy goods; businesses must cut back production; workers get paid less or are laid off. Those who have little savings find themselves unable to make their mortgage payments. As a result, banks repossess many more homes in times of deflation.

The same people who were hurt by inflation usually find themselves crippled by deflation as well. People without property and without savings suffer the most. Alternating inflation and deflation bankrupts those living on the edge. Creditors repossess the homes and belongings of these unfortunates. The rich get richer and the poor get poorer.

The Marketplace Ecosystem Protects the Consumer

Luckily, the marketplace ecosystem regulates banks in the absence of aggression so that the destructive boom-bust cycles are minimized. The banking system in Scotland between 1793 and 1845, for example, was almost entirely free from aggression.1 Each bank issued its own notes, promising to return depositors' gold on demand. In other words, each bank issued its own money.

This could be a very confusing situation unless every bank and service vendor accepted each note at face value. In Scotland, everyone did so because banks had to make good on their promises. If a bank ran out of reserves, its owners (stockholders) had to pay the depositors out of their own pockets. Each bank was thus highly motivated to limit the amount of new money it created to what was truly needed. Limiting inflation attenuated deflation as well. In the marketplace ecosystem free from aggression, the poor would be protected from the devastating effects of alternating these two policies.

Occasionally, a bank would foolishly print so many notes that it could not meet deposi-tors' demands. If the stockholders of a failing bank were unlikely to be able to pay off their debts, sound banks sometimes did so to retain the confidence of the Scottish people and gain grateful new customers. Scottish prosperity was attributed in part to the efficient banking system that evolved in the marketplace ecosystem free from aggression.

Across the border, the English depositors did not fare so well. In 1841, total losses to Scottish depositors over the preceding 48 years were estimated at 32,000 pounds, while public losses in London were twice that amount for the previous year alone! (2) Although records do not allow a precise correction for differences in population and per capita deposits, English citizens appeared to be exposed to 24 times more risk than the Scots. (3) The English were at the mercy of the central bank, an exclusive monopoly-by-aggression. Unfortunately, we are too!

Aggression Disrupts the Marketplace Ecosystem

In 1914, the Federal Reserve (Fed) received an exclusive monopoly to issue U.S. currency. Like AT&T, the Fed is a private corporation, owned by its member banks. The Fed is a powerful institution; some believe it is the most powerful in the world. Let's find out why.

Before the creation of the Fed, banks found they needed reserves of approximately 21% so that they would have enough money on hand when their customers wanted to make a withdrawal. When the Fed took over the reserves of the national banks, it lowered the reserve requirement to half that. (4) The Fed itself used a reserve system: it kept only 35% of the reserves entrusted to it by the member banks! (5) The balance was loaned out, mostly to the government, with the wealth of the American people as collateral.

Lowering reserves resulted in the creation of more money. As a result, the money supply doubled between 1914 and 1920 (6) and once again from 1921 to 1929. (7) In contrast, gold in the reserve vault increased only 3% in the 1920s. (8) The bankers would obviously be unable to keep their promise to deliver gold to depositors if a large number of people withdrew their money at the same time.

Businesses could not use all the newly created money the banks wished to loan, so stock speculators were encouraged to borrow. (9) Many people got heavily into debt, thinking that the boom would continue.

In 1929, the Fed started deflation by slowing the creation of new money. (10) People who had counted on renewing their loans to cover stock speculations or other investments found they could no longer borrow. They were forced to sell their securities, and a stock market plunge ensued. The mini-crash in October 1987 also may have been triggered by the Fed's slowing the creation of new money. (11)

People who lost money spent less on goods and services; business began to slow. With banks unwilling to renew loans, (12) businesses began to reduce their work force. People nervously began withdrawing their gold deposits as banks in other countries quit honoring their promise to return the gold. Rumors circulated that the Federal Reserve would soon be bankrupt as well. (13) Naturally, there was no way for the banks to exchange the inflated dollars for gold.

As people withdraw their bank funds, the money supply decreases_just the reverse of what happens when they deposit it. The banks' failure to loan coupled with massive withdrawals, caused even greater deflation. People lost their savings and their purchasing power; in turn, businesses lost their customers and laid off workers. Each loss contributed to the next, resulting in the most severe depression Americans had ever known.

Had this happened in Scotland between 1793 and 1845, bank owners (stockholders) would have to make their promises good by digging into their own pockets. In our country, however, the government enforcement agents were instructed to come after the American citizenry instead! Franklin Roosevelt convinced Congress to pass a bill making it illegal for Americans to own gold. (14) Everyone had to exchange their valuable gold for Federal Reserve notes, which had no intrinsic value. Gold was still given to foreigners who brought their dollars to be exchanged for gold, but not to Americans!

While U.S. banks failed in the early 1930s and Americans were shorn of their gold, no Canadian banks failed. Between 1921 and 1929, American depositors lost an estimated $565 million, while Canadian losses were less than 3% of that. (15) Canada enjoyed a banking system similar to the one described earlier for Scotland few licensing laws and no central bank with an exclusive monopoly on currency issue. (16) Each bank issued its own notes and protected itself and the public by refusing to loan to inflating banks. Just as in Scotland, the stockholders of the banks were obligated to make good the inflated currency. Unfortunately for Canada, the aggression of licensing laws was instituted in 1935. (17)

Why did the Canadians switch from a system that protected them from bankruptcy? Why did England eventually impose its inferior system on Scotland? Why was the Fed introduced in the United States and relieved of its promise to return gold that was deposited by our great-grandparents and their contemporaries? Why did the Fed slow money creation in 1929, precipitating the stock market crash? Why does the Fed alternate inflation and deflation at the expense of the American public today?

Several authors have proposed that the evolution of central banks represents a collusion between politicians and a small elite with ownership/control of major banking institutions. (18) Bank owners want to create as much money as possible, without having to dig into their own pockets when depositors want their money. Politicians long to fulfill their grandiose campaign promises without visibly taxing their constituency. Central banking can give both groups what they want.

First, through the aggression of exclusive licensing, politicians give the central bank a monopoly on issuing currency. As long as banks must make good on their promises to depositors, however, they are still subject to the regulation of the marketplace ecosystem. The politicians encourage the aggressive practice of fraud by refusing to make banks and similar institutions (i.e., Savings & Loans, known as "S&Ls") keep promises to depositors. Instead, owners and managers who make risky loans can simply walk away from their mistakes, as President Bush's son Neil did. (19) Depositors either lose their life savings or are reimbursed from taxes taken at gunpoint, if necessary from their neighbors.

The bankers, of course, must give the politicians something in return. When the ranchers, loggers, or other special interest groups want more subsides, our representatives need not incur the wrath of the populace by suggesting more taxes. Instead, they borrow some of the Fed's newly created money! When it comes time to pay the loan back with interest, the politicians pay it back with a bigger loan using our wealth as collateral. The special interest groups thank the politicians by funding their reelections.

As a result, our national debt has grown so big that the interest alone consumed 25% of 1989 federal outlays! (20) The single largest holder of the national debt is the Federal Reserve itself. As mentioned in the previous chapter, our pension and investment plans often buy the government I.O.U.s. For our pension funds to pay us, we may first have to pay higher taxes to cover the I.O.U.s. How much higher will our taxes be? The 1989 national debt was more than $11,000 for every man, woman, and child! (20)

Like any special interest group, the Fed is inclined to help the politicians who protect it. By manipulating the money supply to cause boom or bust at the appropriate times, the Fed controls the illusion of prosperity an illusion that determines which politicians people will vote for or against. Like any other special interest group, the Fed can control our government to a significant extent.

For example, the exclusive monopoly of the Second Bank of the United States was scheduled to end in 1836. Andrew Jackson swore not to renew it if he were reelected president in 1832. Soon after his victory, he removed the government's deposits from the central bank. The bank's president, Nicholas Biddle, attempted to bring about a depression by cutting back on the creation of money, just as the Federal Reserve would do almost 100 years later. Biddle hoped to blackmail Congress into renewing the banks's monopoly by making the voters miserable. Fortunately, these tactics were not successful. (21) The American people were not fooled and the bank charter was not renewed. Unfortunately, this lesson was forgotten, and central banking was reestablished with the Federal Reserve.

A Lose-Lose Situation

The money monopoly is our first example of Fourth Layer aggression. The Federal Reserve has an exclusive monopoly on currency issue (Third Layer aggression). We subsidize the monopoly through the aggression of taxation and inflation (Fourth Layer aggression). Finally, we are forced at gunpoint, if necessary to use the Federal Reserve notes we call dollars. Clearly written on our Federal Reserve notes is the phrase "This note is legal tender for all debts, public or private." Our taxes, for example, must be paid for in the monopoly currency.

Forcing people to use a service prohibits them from providing it for themselves. Even though AT&T has an exclusive monopoly on local phone service, bypassing it is still a legal option. Even though many utilities are exclusive monopolies, we can still provide our own power and septic systems if we choose. Even though we must subsidize the municipal bus system, we don't have to use it. With the exclusive money monopoly, however, we are forced at gunpoint, if necessary to participate whether we want to or not. When everyone uses the money monopoly, it controls the financial fate of the entire nation. In trying to control others, we find ourselves controlled!

Without the money monopoly, politicians would be unable to borrow the large sums of money that create deficits. Without these deficits, the enforcement of licensing laws and the provision of special interest subsidies could be financed only by more taxes. The American citizens would be unlikely to support subsidies and waste if the true cost of these items were reflected in their tax bills. The money monopoly makes this sleight of hand possible.

Destroying wealth or curtailing its creation makes the world poorer. By forcibly shunting the wealth toward special interests, the gap between the rich and the poor widens. New medicines, old-age cures, advanced space exploration, or a three-day work week with five-day benefits are just a few of the possible increases in wealth we forgo because of the money monopoly.

Even people who believe they benefit from the money monopoly are only fooling themselves. The bankers and politicians condemn themselves to a culture that is backward in comparison to what would otherwise be possible. They are like royalty in an ancient civilization, having more than their contemporaries, but less than they would otherwise have in a culture with more abundance.

We can hardly blame the politicians and bankers for this state of affairs, however. We elect politicians who promise to cater to our special interests without raising taxes. We encourage them to mask the true cost of the aggression we demand. They give us only what we have asked for.

How can we blame the owner-bankers of the Federal Reserve for asking that we favor them with an exclusive monopoly just as we favored AT&T? How can we blame them for seeking the same subsidies we are willing to give the ranchers and timber companies? Like our Biblical ancestors in the Garden of Eden, we want to blame the serpent because we ate the apple. As always, the choice and responsibility belongs to us. When we accept our role in creating the problem, we empower ourselves with the ability to solve it!

The Easy Way Out

The demise of the Second Bank of the United States demonstrates that selfish others are capable only of igniting the flames of war and poverty. We control its growth, its very survival. When we say "No!" to the aggression of monopoly-at-gunpoint, we protect ourselves from selfish others who would exploit us.

A modern banking system free from aggression would be much like the Scottish system described earlier. Since owner/ managers could be liable if the bank lost its depositors' money, they would probably buy liability insurance to protect themselves and their depositors. Unlike the Federal Deposit Insurance Corporation (FDIC) or the Federal Savings and Loan Insurance Corporation (FSLIC) of today, premiums would differ for each institution, depending on how well each bank invested its depositors' money. Poor managers would be saddled with high premiums, just as poor automobile drivers are today. As premiums go up and profits go down, poor managers would be fired.

Today, each bank pays the same premium regardless of the way it does business. Managers can make risky loans that generate high closing fees, and walk away if their loans turn sour. The taxpayer then picks up the tab. Estimates made in the early 1990s indicate that every man, woman, and child will pay an average of $6,000 (22 ) to cover recent S&L defaults. This money is essentially a giant subsidy to the poor managers and investors. This is the cost of the Pyramid of Power created by our eagerness to control our neighbors.

The money monopoly has international implications as well. We'll learn more about these in Part IV (Lead Us Not Into Temptation: Foreign Policy). For now, let's examine another example of Fourth Layer aggression, the monopoly over our minds. Let's find out why we never learned in school about the way the world really works!

By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

- John Maynard Keynes, English economist and board member of the Bank of England

When the President signs this bill, the invisible government of the Monetary Power will be legalized...

- Congressman Charles A. Lindbergh, 1913, referring to the Federal Reserve Act

Depressions and mass unemployment are not cause by the free market but by government interference in the economy.

- Ludwig von Mises, THE THEORY OF MONEY AND CREDIT

If the American people ever allow banks to control the issuance of their currency, first by inflation, then by deflation, the corporation that will grow up around them will deprive the people of all of their property until their children will wake up homeless on the continent their forefathers conquered.

- Thomas Jefferson, author of the Declaration of Independence

This great government, strong in gold, is breaking its promises to pay gold to widows and orphans... It's dishonor, sir.

- Senator Carter Glass, 1933, principal author of the Federal Reserve Act

The entire banking reform movement, at all crucial stages, was centralized in the hands of a few men who for years were linked, ideologically and personally, with one another.

- Gabriel Kolko, THE TRIUMPH OF CONSERVATISM

Every effort has been made by the Fed to conceal its power but the truth is-the Fed has usurped the government. It controls everything here and it controls all our foreign relations. It makes and breaks governments at will.

- Congressman Louis T. McFadden, 1933, Chairman, Banking and Currency Committee

The bold effort that present bank had made to control government, the distress it had wantonly produced... are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or establishment of another like it.

- President Andrew Jackson

 At the turn of the century, horses were still the mainstay of the transportation industry. Today, automobiles and planes take us all over the world. Most of our great-grandparents remember using Rockefeller's kerosene to light their homes. Today, electricity and natural gas provide light, heat, and power for innumerable appliances. Just a few generations ago, infectious disease was the most frequent cause of death. Today, most bacterial plagues are effectively controlled with antibiotic treatment. In most areas of our lives, radical progress has been made over the past century. Unfortunately, education is one of those rare exceptions.

In the early 1900s, our great-grandparents trudged off to the neighborhood school. For the better part of the day, the teacher stood in front of the class, chalk in hand, to expound on lessons contained in the school books. To-day, our children might ride a bus to their neighborhood school, but once there, every-thing is very similar to the way it was for our great-grandparents. For the better part of the day, the teacher stands in front of the class, chalk in hand, to expound on the lessons contained in the school books. The facilities are newer and the curriculum includes some ad-ditional subjects, but the teaching methods have changed little.

The cost of doing things the same old way, however, has skyrocketed. Only national defense consumes more of our taxes than the public school system. (1) In spite of this great expenditure, a survey on education finds the United States "A Nation at Risk." (2) Almost 25% of our high school students do not graduate, and another 25% have too few academic qualifications to be placed in a job or college program. (3) Even those in the top 50% of their graduating class frequently find themselves classified as unskilled labor. After a 25-year decline in scholastic aptitude tests (SATs), (4) our best and brightest compare unfavorably to students from other nations. (5)

Perhaps we shouldn't be too surprised. Af-ter all, our grade school and high school educations are examples of Fourth Layer ag-gression. The educational system is basically an exclusive monopoly (Second Layer aggres-sion). All schools, even private ones, must meet the requirements of the accreditation (licensing) boards. Such boards usually dictate the core curriculum, the list of acceptable textbooks, and the educational standards for teachers. (6) High prices, low quality, and lack of innovation are hallmarks of licensing laws, especially exclusive ones that create monopolies.

Education is heavily subsidized by taxes (Third Layer aggression). Subsidies cause waste, especially when services are provided by the government. Public schools consume twice as many dollars in operating costs as do private ones. (7) The amount of money spent per pupil, however, does not significantly affect educational quality. (8) The real waste is not money, however, but the minds of our children. A poor education means fewer skills with which to create wealth. As always, aggression breeds poverty.

School-age children are forced at gun-point, if necessary to attend a licensed school (Fourth Layer aggression). Because we want all children to get a good education, we view tuition-free public schools and mandatory attendance as a way to ensure that neglectful parents are not allowed to deny their children this valuable asset. As always, aggression gives us results we'd rather not have. Specifically, Fourth Layer aggression allow others to control the way we think about our world, just as it allows an elite group to control our finances (Chapter 9: Banking on Aggression).

The Marketplace Ecosystem: Honoring Our Neighbor's Choice

Early in our country's history, Americans were considered to be among the most literate people in the world. (9) Schooling was neither compulsory nor free, although private "charity" schools provided education to those too poor to afford formal instruction. (10) Licensing requirements for teachers and schools were almost non-existent. In the early 1800s, Boston had schools that were partially tax-supported public institutions, but twice as many children attended the private ones. Admission to these public schools required that the students already have been taught to read and write either by their family, a tutor, or one of the private "dames" schools. (11) Nevertheless, a survey in 1817 revealed that over 90% of Boston's children attended the local schools! Evidently, only a few parents were too proud to take charity, didn't feel schooling was of much value, taught their children at home, or needed the extra income the child could make working. (12) Education was readily available for those who chose to take advantage of it. Not surprisingly, school attendance in New York City showed no change after the establishment of tuition-free public education. (13)

Parents had a variety of schools from which to choose, especially among institutions that were not restricted by conditions attached to state support. Some schools prepared students for the university and some taught the trades. Some schools provided a broad-based education, while others focused on a particular area of expertise. Private tutoring was available for those unable to attend ordinary day school. The marketplace ecosystem, free from aggression, quickly adapted to consumer needs. Parents voted with their dollars to support the educators who served them best. In this way, parents determined both the content and process by which their children would be educated.

Aggression Disrupts the Marketplace Ecosystem

The diverse education available in the United States greatly pleased the immigrants, who came from societies where their children could not go to a school that taught the values they cherished. Some influential citizens, however, felt that society was disrupted, rather than enriched, by the different perspectives and faiths that the immigrants brought with them. With a uniform system of "American" education, they could mold children into what they perceived as proper citizens. They clamored to increase the aggression of taxation so that public schools wouldn't need to charge much tuition. Parents would be forced at gunpoint, if necessary to turn over their hard-earned dollars to the public schools. If they were wealthy enough to have any money left, their children could still go to the private school of their choice. Like the serpent in the Garden of Eden, the so-called reformers tempted the American citizenry to use aggression against the poor immigrants, ostensibly to create harmony throughout the land.

Many immigrants had come to the United States to escape this holier-than-thou attitude. In spite of the additional financial burden, impoverished immigrants made great sacrifices to educate their children as they saw fit rather than send them to inexpensive or even free public schools. Catholics saw the public schools as vehicles for Protestant propaganda and established parochial schools; German immigrants sent their children to private institutions when the public ones refused to teach them in German as well as in English. Immigrants who preferred that their children be taught in their native tongue and learn about their Old World heritage opted for private or parochial schools that catered to their preferences. (14)

The willingness of poor parents to send their children to private instead of public school tells us how highly they valued education, specifically, education that reflected theiheirlief system and culture. Many people had come to the United States for a chance to pull themselves away from the poverty trap spun by Europe's guild-style licensing laws and other forms of aggression. Perhaps they didn't want their children in schools that were created by the kind of aggression from which they had recently fled. Perhaps they feared that schools built on aggression would teach aggression. If that seems farfetched, consider your own education. As you've read through the past few chapters, have you been saying to yourself, "That's not the way my teachers told me the world worked"?

Can you imagine a school system that is funded by taxation hiring a teacher who equated taxation with theft? Such a teacher would be unlikely to seek a job in the public school system in the first place. Obviously then, public school teachers are highly likely to believe that selfish others are the cause of war and poverty and that altering their behavior at gunpoint, if necessary is justified even noble. From this perspective, children will be taught that first-strike force, fraud, or theft is acceptable as long as it's for a good cause. An obvious underlying assumption of this philosophy is that the ends are not influenced by the means used to obtain them. To parents with an enlightened view of how the world works, this is analogous to teaching their child that 2 + 2 = 5! Unfortunately, these are the beliefs that are being propagated. These are the beliefs that are keeping us from a world of peace and plenty.

We interpret facts according to our world view. If our interpretation is correct, we will do the things that take us to our goal. We will be able to create peace and plenty in our hearts, our families, our communities, and our world. If our interpretation is faulty, we will create problems instead of solving them. No wonder parents who wanted the best for their children were willing to make great sacrifices to send them to a school that would complement their home instruction!

The immigrants not only wanted their children instructed according to their faith and culture, they wanted their children to develop readily marketable technical skills. Since school boards were drawn from the upper class and professional groups, curricula tended to be geared toward a liberal arts education as preparation for college. (15) Those who could not afford to pay public school taxes and private school tuition sometimes opted for informal instruction in the trades or home schooling.

Some immigrant children worked because their families needed their support. (16) Today, our society is wealthy enough that child labor is usually unnecessary, but this was not true in the 1800s. Immigrant children, especially those on farms, contributed substantially to their family's financial well-being. When the family's financial condition improved, the level of the children's education did too. (17) This pat-tern suggests that rather than being "exploitation," child labor was a matter of necessity and was dispensed with as soon as possible. Since schooling was not compulsory, children could mix work and school as necessary to strike a balance between creating enough wealth to survive and learning long-range wealth- creating strategies in school. Of course, working was also a form of education. It gave the child experience, skills, and accountability training. Employers look for experience. By forbidding children to work, we deny them an excellent educational opportunity.

Compulsory school attendance made it more difficult for children to obtain work experience. Children were less available for learning a trade or obtaining employment when they had to be in school for many months each year. Without the ability to mix work and school, private education became less affordable. Private education was an option only for children with parents wealthy enough to pay for private school tuition in addition to the taxes that supported free public schools.

As always, when we sow the seeds of aggression, we reap the bitter fruit. The reformers were successful in getting education by aggression but the results have not been what they desired. Because children are required by law to be in school, the public institutions find themselves saddled with some individuals who have little motivation to learn. Although these children can be disruptive, sometimes even violent, expelling them is not a legal option. As attendance has risen, so has theft, drugs, and violence perpetrated by students unmotivated by the curriculum. (18) As attendance has increased, SAT scores have declined (Figure 10.1), suggesting that keeping problem students in school adversely affects learning for other students.

In response to schools that cannot educate or even guarantee student safety, many parents have chosen to keep their children out of schools and teach them at home. In many states, home schooling is legal only if a state-certified teacher is instructing. Parents without certification have been fined or jailed for home schooling, even when the education has been progressing well.

The Amish have been persecuted as well. These closely knit rural communities shun modern technology and embrace a simple, non-violent way of life. They found that standard curricula encouraged a materialistic and violent perspective that was incongruent with their spiritual beliefs. Certified teachers were ill-equipped to teach the Amish children the values the community cherished. In addition, certified teachers were more expensive than their Amish counterparts.

Reprinted with permission of the National Center for Policy Analysis

The Amish believe secondary education should consist of learning agricultural and domestic skills, rather than the liberal arts and science. Instead of honoring their choice, aggression is used to herd their children into the schools of "the one best system." While we deplore historical references to the persecution of early scientists, such as Galileo, we feel comfortable in dictating the choices of those who prefer a life without technology. If the Amish tried to force our children to learn their ways, we'd be appalled; yet we feel justified in doing to them what we don't want done to us.

Of course, well-to-do parents needn't worry about persecution or home schooling or even paying private school tuition in addition to school taxes. They congregate in expensive neighborhoods where only "their kind" can afford to live. Their local public schools cater to their values. Indeed, the suburban public schools have become more exclusive than the private ones. (19)

On the other side of the tracks, parents too poor to move from the ghetto shudder at the prospect of sending their children to neighborhood public schools where violence prevails and learning is difficult. Through their rents, they pay a large portion of their income for the property taxes that support schools they dare not send their children to. Instead, they've started to enroll their children in the local parish or independent neighborhood schools even if they have to pay tuition with their welfare checks! (20) As a result, the proportion of minorities in private schools increased from the early 1970s to the early 1980s, even though tuition costs continued to rise. (21) In the late 1970s, more private school students came from families in which the parents earned between $5,000 and $10,000 a year than from families with incomes of $25,000 or better. (22)

The minorities and low-income families are not the only ones choosing private education for their children, however. Public school teachers, who ought to be best informed, are twice as likely as the rest of the population to send their children to private schools! (23)

Obviously, parents choosing private schools do so for reasons other than their religious beliefs or their concern for their children's safety. Public schools are doing such a poor job of teaching students, that many children are being sent to private after-school learning centers, (24) which were virtually non-existent a generation ago. Private schools nationwide are much more successful at teaching students than public schools are. This difference was obvious to me even as a high school student. Students from the Catholic schools took a higher proportion of awards at the Science Fair than public school students did. A 1987 study found the reason: parents can choose to take their children and their dollars elsewhere if schools don't meet their standards. (25)

One innovative private institution charges less than half of the dollars consumed by the public system, even though it caters to students who are about to drop out of school. Using computer technology and a low student to teacher ratio, the school boasts an 85% graduation rate. (26) The founder of this school is a former public school teacher who just couldn't convince the bureaucracy to try something new.

The secret behind the success of private schools is less aggression. Parents are not forced at gunpoint, if necessary to send their children to the neighborhood public school. Instead, they can remove their child if they are not satisfied with the educational content or process and can enroll them elsewhere. Removing even a tiny amount of aggression from public education has a beneficial effect. For example, public schools in Harlem were encouraged to each take on an individual specialty, one emphasizing science and math, another encouraging the performing arts, and still another providing special attention for those with learning difficulties. Parents could choose which school their child would attend. If things didn't work, they could move to another. Schools had to either perform or lose their clientele. The results are impressive. Before "choice," only 15% of the district's students read at grade level; now 64% make the grade. (27) Similar results have been reported in other areas of the country. (28) No wonder the poor and the minorities are the strongest supporters of educational choice that is engendered by less aggression. (29)

The Easy Way Out

If such a little freedom from aggression goes such a long way, what might we expect if we were willing to forgo it altogether? If we honored our neighbor's choice, what educational heights could we aspire? Let's try to imagine what a successful school might look like if education were totally deregulated (i.e., completely free from aggression).

Quest, Inc., might be such a school. Larger than most high schools before deregulation, it's still expanding to accommodate the large number of student applicants. Quest's success is largely due to its effective use of computers and audiovisual equipment, which have long been known to double a student's learning. (30)

Both of Carol's parents work and are easily able to pay her tuition at Quest. Some of Carol's classes begin with a professionally produced, entertaining video produced by a company that sells exclusively to schools. This company pays royalties to any teacher whose ideas for improvements or new subjects are incorporated. Continuous updating ensures that the videos use the best ideas and methods to maintain the student's interest.

After the video, students go into one of several "query" classrooms where the resident teacher answers any questions the students may have. Different students relate best to different teachers; letting the students gravitate to those who "speak their language" facilitates understanding. Not all Quest teachers have advanced degrees, but all in-structors must facilitate students' learning. Teachers who can't attract students to their query sessions won't be at Quest very long. Teachers who do especially well are given bonuses and asked to share their techniques with other Quest faculty members. Teachers reap as they sow.

When their questions are satisfied, students proceed through an interactive computer program that tests their new knowledge gained from the video. Students who do not properly answer the computers' queries review the relevant part of the lesson on the computer in a different format, and the student is retested later in the session. Students may then opt for more sophisticated problems or mini-lessons to extend their knowledge.

The programming is designed according to a student's strengths and weaknesses. Carol excels in history and the social sciences and does poorly in math and the sciences. When she keys in her password on the computer, she accesses the math problems formulated in terms of historical events. Sometimes Carol finds the math video so confusing that she spends all her time in the query session, never getting to the computer at all. Since her family has a home computer, she can either take a disk home to catch up or stay after class, since Quest staff is available from 7 a.m. to 9 p.m. This format lets ambitious teens work and go to school part-time.

Some teens are actually placed in jobs by Quest. Students aspiring to be scientists or doctors, for example, cannot be sure they have made the appropriate choice until they actually find themselves immersed in the type of work they have chosen. Quest cultivates relationships with good employers/mentors to expose students to work environments (e.g., hospitals or laboratories) before students need to make definitive career choices. Before deregulation, students might be in their last year of college before they actually held the type of job for which they had spent so much time learning.

The instructors enjoy working at Quest, Inc., because they can do what they were trained to do teach. The repetition is taken out of their jobs by the extensive series of professionally produced videos and computer learning programs provided for the students. Some teachers supplement their income by preparing audio-visual texts in their specialty. Teachers devote most of their time to answering students' questions, guiding them toward the curriculum most suited to their needs, or teaching essay writing and other skills that do not lend themselves to electronic instruction.

The computer summarizes each student's progress, so teachers can monitor what each child is learning on a regular basis and give special attention when needed. Since they are paid partially in stock certificates and they share in school profits, teachers make sure all students meet their predefined targets.

For example, Carol's counselor explained that her exceptional grasp of the socialsciences and her weaker understanding of math and the sciences gave her several options. She could spend more time on science and math to match her proficiency in other areas. Alternatively, she could elect to focus only on the basics in math and the sciences while earning college credit in her specialties. Most colleges expect applicants to take some of the privately administered national tests to be sure prospective students meet college standards. High school diplomas are a thing of the past. Instead, students continue until satisfied that their test scores indicate the proficiency level they had targeted. By age 12, most Quest students have the equivalent of an old-style high school diploma. Most also have at least one work reference from on-the-job training.

Problems with drugs or violence are virtually non-existent, since students are suspended for the first offense and expelled for recurrence. If they choose to, expelled students can still get a Quest education through the home-study program described below.

Social interaction is integrated into the curriculum. Children are instructed in how to tutor younger siblings and classmates, engage in constructive teamwork, and practice leadership by taking turns coordinating cooperative assignments. Some of this instruction is intertwined with physical education or work-study assignments.

Quest is less expensive overall than the old-style public school system, for a number of reasons. Because of the advanced technology, students learn faster and spend less time in school. Teachers are able to give whatever level of attention is needed to maximize each student's learning. Bureaucracy is minimized, and teachers are discharged if they aren't proficient.

Nevertheless, the yearly tuition is still beyond the means of many who would like to see their children go there. Pete's father, for example, never finished high school and works as a janitor for a small hotel. He wants his son to have the best education money can buy but he doesn't have the money to buy much. Quest enrolled Pete in the parent-student work-study program. The school assigns Pete's dad evening and weekend janitorial and maintenance work under the watchful eye of the full-time school maintenance supervisor. Most of the non-teaching function of the school is provided this way. Eventually, Pete will do his part by supervising younger children as they watch the teaching videos, working with the cafeteria staff, and tutoring less-advanced students. Pete will not only get a Quest education, but a work reference as well.

Stephanie Baker's single mother wants her daughter to get a Quest education. Tuition, however, is beyond her means, and work-study is difficult because Stephanie's bedridden grandmother requires constant supervision. By providing the day school to three children with working mothers, Mrs. Baker pays for the rental of Quest video tapes and workbooks for Stephanie. Computer software is available too, but Stephanie's mother doesn't have a home computer. The children watch teaching videos, then use their workbooks to solve problems and test their understanding. Mrs. Baker answers their questions and helps them as much as she can. Every two weeks, the children are given a Quest test. Quest provides the children with recommendations for further studies. For example, one child had trouble with math and received a special series of videos and workbooks for his homework. As the children get older, they begin tutoring in their neighborhood to pay for the formal testing that colleges and employers frequently require.

The children Stephanie has tutored got most of their schooling from one of the cable television stations that carry programmed learning courses. For a monthly fee slightly higher than the entertainment channels, a family can order the educational programs geared to the ages of their children. Some parents have gotten each child his or her own television, and learning becomes an all-day affair at home. Workbooks and textbooks come with the cable subscription, complete with answer books to test questions. A number of correspondence courses are also available for subjects in which a professional's evaluation is desirable (e.g., essay writing).

Even less expensive are the TV-schooling channels supported by advertising. Many churches combine day care and education by providing space for volunteers to use. To keep the attention of the young people, the videos tend to be highly participatory. Children sing their alphabet to catchy jingles and march around the room chanting historical dates, names, and happenings. Madison Avenue techniques are used to produce stimulating programs so that the firms would pay top dollar to sponsor them. Some of this programming was pioneered before deregulation and was available in a few futurist locations. (31)

With all of the options available at costs ranging from substantial to trivial, few children are unschooled. The exceptions tend to be children of parents who despise education of any kind. Since family background is a significant factor in a child's scholastic achievement, many of these children would not have benefited by any kind of schooling. Before deregulation, these children would have disrupted the learning of others with drugs and violence, while learning little.

Now they do have a chance. The local Kiwanis and Rotary Clubs run newspaper advertisements asking concerned citizens to help them identify such children, hoping to get their parents' permission to get them special teaching assistance. With advertised educational TV channels widely available, few such children were located. People smart enough to want to learn are smart enough to tune the selector button to the channel that has what they want!

In no other industry in U.S. history has there been so little technological change as in the field of public school education.

- National Center for Policy Analysis, "The Failure of Our Public Schools: The Causes and a Solution"

Only 20 percent of job applicants at Motorola can pass a simple seventh-grade test of English comprehension or a fifth-grade mathematics test.

- Nation's Business, October 1988

Of the Aquarian Conspirators surveyed, more were involved in education than in any other single category of work... Their consensus: Education is one of the least dynamic of institutions, lagging far behind... other elements of our society.

- Marilyn Ferguson, THE AQUARIAN CONSPIRACY

Historically, much of the motivation for public schooling has been to stifle variety and institute social control.

- Jack Hugh, Cato Institute

...public schooling often ends up to be little more than majoritarian domination of minority viewpoints.

- Robert B. Everhart, Professor of Education, University of California, Santa Barbara

A general State education is a mere contrivance for molding people to be exactly alike one another; and as the mold in which it casts them is that which pleases the predominant power in the government, whether this be a monarch, a priesthood, an aristocracy, or a majority of the existing generation; in proportion as it is efficient and successful, it establishes a despotism over the mind, leading by a natural tendency to one over the body.

- John Stuart Mill, English philosopher and economist

Yet some parents are now saying that deliberate withdrawal of their children from compulsory schooling-an illegal act in most states-is not unlike draft resistance in an immoral war.

- Marilyn Ferguson, THE AQUARIAN CONSPIRACY

...the Plain Peoples' approach to education may be one of the most effective yet devised. Their success in training the young to be farmers has impressed many agricultural experts. Unemployment, indigence, juvenile delinquency, and crime are surprisingly infrequent. Amish prosperity and self-sufficiency are legendary. These are not the characteristics of a preparation for adulthood that has failed.

- Donald A. Erickson, Professor of Education, University of California, Los Angeles.

...when it (the State) controls the education, it turns it into a routine, a mechanical system in which individual initiative, individual growth and true development as opposed to a routine instruction become impossible.

- Sri Aurobindo, SOCIAL AND POLITICAL THOUGHT

Public educators, like Soviet farmers, lack any incentive to produce results, innovate, to be efficient, to make the kinds of difficult changes that private firms operating in a competitive market must make to survive.

- Carolyn Lochhead, Insight, December 24, 1990