In the Beginning…
…Mr. Leonard Read became general manager of the Los Angeles Chamber of Commerce, the largest C. of C. in the country and, I believe, the most enlightened. He had me chosen as a member of his board of directors, which position I have held since 1939. Another result was that the Los Angeles Chamber of Commerce added an economic counsel to its staff, Dr. V. O. Watts, a former student of mine at Harvard.
Through the influence of Messrs. Mullendore [president of the Southern California Edison Co.] , Read, Watts, and myself, the L.A. C. of C. became the spearhead of an active crusade for the return to the principle of freedom of enterprise. That crusade seems to have made an impression, since nearly everybody now (1947) talks in favor of free enterprise and against the police state. If I had something to do with starting Mullendore, Read, and Watts on this crusade, it may turn out to be the most important work of my life.
Source: Thomas Nixon Carver, Recollections of an Unplanned Life (Los Angeles, 1949), p. 241.
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The following artifact is found in the papers of V. Orval Watts at the Hoover Institution Archives. It bears no date, but essentially the same document has been posted as an article at the Foundation for Economic Education with a date of March 1, 1973 with a prefatory note “This article is from remarks at a recent faculty meeting [at the Northwood Institute].” The introductory paragraphs differ and there is an interesting obiter dictum added to the FEE version that “our rules prohibiting the use of liquor and marijuana and requiring the women students to return to the dormitories at a certain time” are not coercive.
V. Orval Watts, Harvard Ph.D. (1932), was a disciple of Harvard Professor Thomas Nixon Carver, his initial academic career morphed into becoming an apostle of laissez-faire, anti-Keynesianism, anti-globalism, and anti-communism. Ultimately he continued his crusades as the economics research pillar at the Judeo-Christian libertarian Northwood Institute (now Northwood University). Watts’ biographical details can be found in a 2018 post and his graduate economics record at Harvard has also been transcribed by Economics in the Rear-view Mirror.
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THE NORTHWOOD IDEA
By V. Orval Watts, Ph.D.
Northwood Institute
NOTE ON AUTHOR
Dr. V. Orval Watts has served as an inspiration and mentor for colleagues and the students of Northwood Institute for almost as long as the College has existed. Organizations grow and prosper because of their distinctive personalities. Ours has been molded and maintained by Dr. Watts. As director of Economic Education, he has reminded us of what we can be, if we will. More than this he carried the message of freedom to every corner of our country for more than six decades. His explanation of the Northwood Idea is a declaration of beliefs around which this institution has been built.
Dr. David E. Fry
President
Introduction: The Northwood Idea
By V. Orval Watts
The Northwood Idea — the thought that went into the founding of Northwood Institute — is as conservative as The Ten Commandments or The Golden Rule.
It is as liberal and progressive as the gains that come to humans as they learn to live by these principles.
Yet this does not make The Northwood Idea new or different. “Education,” we hear again and again, is the one way to solve our problems of crime, poverty, prejudice, racism, and war. Particularly in these United States, schooling in regard for one another’s welfare and in the skills necessary for making ourselves useful in a peaceful society are what every parent and teacher want for our huge investments in the world’s greatest educational effort.
This schooling, we all agree, should teach the ways of peace, goodwill and mutual aid.
Yet crime — especially juvenile crime — is higher than ever and is increasing faster in our cities and states where these expenditures of time and resources are greatest. Levels of literacy and self-discipline actually rose faster in the days before these great investments in compulsory and universal schooling.
The menace of terrorism, war, economic breakdown and famine is greater despite advances in technology which make peaceful cooperation more fruitful than ever before in human history. They offer the opportunity to abolish hunger, famine and pestilence forever.
Clearly something is wrong or lacking in our systems of schooling. At least, the founders of Northwood Institute thought so. Therefore, they ventured and risked greatly to offer something different from the general run of college schooling. My work and contacts with these men and women, and with their helpers and supporters, almost from the beginning of this institution, make me think of their aims — The Northwood Idea — in these terms:
First, the philosophy of Northwood’s founders springs from certain oft-forgotten aspects of the Judeo-Christian Ethic, or culture. In particular, it implies firm belief in the fact of personal, individual responsibility.
Second, the founders and supporters of Northwood Institute have shown by their lives and dedicated efforts that they look on work not merely as the means for obtaining the material necessaries and comforts of life but also as the way to what some call “mental health.” Strenuous and continuing effort in the hope of achieving a better life for oneself and others they see as essential for spiritual (psychological, emotional, mental) well-being.
Finally, they recognize that human progress depends on freedom for business enterprise. This requires private property. It means freedom to buy and sell, freedom to advertise and dicker, freedom to lend and borrow, and freedom to save and invest for profit.
This free-enterprise business, they believe, has been essential in the rise of great civilizations. It arises with acceptance of individual responsibility, the work ethic, and the self-discipline necessary for freedom.
I. THE JUDEO-CHRISTIAN ETHIC
As to the Judeo-Christian Ethic, I’ve been tempted to use instead the phrase “Bourgeois Ethic,” meaning the ethic of the tradesman, but Karl Marx and others have given that phrase so nasty a connotation that I know I would have two strikes against me at the outset if I called our moral code the “Bourgeois Ethic.” Yet, whatever we call it, the moral basis for our Northwood philosophy is the ethic which is necessary for a good life as a trader or financier.
The Idea of Individual Responsibility
This ethic begins with the idea of individual responsibility. That concept is basic for the Judeo-Christian Ethic.*
* The Islamic faith, we should note, stems from the Judeo-Christian ethic and theology.
The Ten Commandments and the moral injunctions of both the Old and the New Testaments were always directed to the individual: “Thou shalt have no other gods before me”; “Thou shalt not make unto thee any graven image”; “Honor thy father and thy mother: that thy days may be long upon the land which the Lord thy God giveth thee.“
Note that “thou,” “thy” and “thee” are singular pronouns, not plural as is “you” or “your.” Therefore, these ancient commandments were directed to one person, the individual, who is thereby charged with responsibility for what he chooses to do. They take it for granted that humans can choose. Our actions are not determined by instinct.
In fact, humans must choose. That is what individual responsibility and self-determination mean. Ideas and acquired values determine our specific actions, and they may prompt us to ignore various influences in the outside environment. We can direct our own actions to prolong and enrich our lives, or we can choose suicidal paths as people choose to smoke when they have abundant evidence that it shortens life. We can choose to jump off cliffs, we can choose to play Russian roulette; or we can choose to follow ways of life, ways of health and well-being.
The Idea of Moral Law
Of equal importance in the Judeo-Christian Ethic is recognition of the enduring nature of Moral Law. The essence of this moral law is summed up in the “Golden Rule,” and it derives from the fact that humans need one another.
Without other human beings, we cannot be born, cannot be reared, cannot prosper; and to have the cooperation of other humans — to avoid the conflicts which would be suicidal for humans — we must follow the “Golden Rule.” When we apply that rule in practice, we find it is the unifying principle of these commandments that refer to the relations between the individual and his fellows: “Thou shalt not steal,” “Thou shalt not kill,” and “Thou shalt not bear false witness.”
Now, it should be clear that obedience to Moral Law means voluntary cooperation and freedom. If we don’t steal, we leave other persons free to use their talents in peaceful and cooperative ways to produce goods for their own use, for exchange, or for gifts to others, such as gifts to one’s family or heirs.
Therefore, we have a state of individual freedom if we live by the “Ten Commandments.” We have private property and numberless associations for voluntary cooperation. Humans develop as humans and make progress only in this condition of individual freedom and voluntary association established by adherence to these moral principles. Therefore, these moral principles are antecedent to and take precedence over all man-made laws and customs.
Respect for Property
In other words, these enduring moral principles require of us respect for the property rights of other people — that is, respect for their rights to control their own persons and for their rights to control those things which they obtain in voluntary cooperation, whether by gift, by voluntary exchange, or by the productive use of these things. Living by these principles requires that we fulfill our contracts, that we speak the truth, and that we revere the laws of Life and Nature. The first four of The Ten Commandments tell us of this need for reverence: a Higher Authority enforces laws vastly more enduring and exacting than the statutes of kings and parliaments.
We should note, incidentally, that this voluntary cooperation and exchange is doubly productive of benefits in contrast to the one-sided gain that anyone may get by coercion, as for example, by burglary, by slavery, or by taxation. In voluntary cooperation, all participants must benefit if the cooperation is to continue, for if it is voluntary, anyone may withdraw when he feels he is not benefiting, when he feels that the gains are distributed unjustly or going entirely to one person or group at the expense of the time and energy of others.
We should note also that living by the Golden Rule involves respect for privacy — the right to be left alone and the right to choose one’s associates. Coercion — the attempt to compel people to associate with others — leads to conflict rather than to the attitudes and actions which are mutually beneficial. Freedom established by the Moral Law of the Golden Rule and the Ten Commandments includes the moral right to withdraw from an unwelcome contact with other persons, as well as the right to cooperate freely in mutually beneficial ways.
As Paul wrote in his “Second Letter to the Corinthians” two thousand years ago, “Be ye not unequally yoked with unbelievers; for what fellowship hath righteousness with unrighteousness and what communion hath light with darkness? … Wherefore come out from among them and be ye separate saith the Lord … and I will receive you.” (II Cor. 6:14-17)
II. EMPHASIS ON WORK AND THRIFT
Next, I wish to call attention to Northwood’s emphasis on work and thrift as marks and means of human progress. It is fashionable in some circles nowadays to disparage both of these values. But, work is merely persistent, purposeful effort. It is investment of human time and energy for long-range, indirect benefits.
Long-range benefits are those that occur in the future. Indirect benefits are those that may first benefit another person, but bring a return benefit of some sort to us later.
Such planned, purposeful effort for a long-range or indirect benefit is surely necessary for human survival and progress; and the traits of character and personality developed by such effort we regard as virtues.
Thrift is the postponement of present consumption in order to obtain greater satisfactions in the future. Like work, it requires the highest human qualities of understanding and imagination to foresee the future and to hold it in mind in order to gain the necessary self-restraint.
In short, work and thrift require understanding, self-control. They are means, not only of self-development, but of service to others.
We’d Still Live In Caves
Where would we be today had it not been for the thrift and work involved in the creation of our buildings, and the production of the myriad tools, or capital goods, that we use? The answer is we would still be living in caves, scratching out a short-lived, hand-to-mouth existence derived from the roots and grubs we could dig up, the small animals we could catch in our hands, and the berries we could get in season.
Everything that we call the material aspects of civilization, and the moral and spiritual ones as well, our understanding that enables us to live longer, to live better and to cooperate — all of this comes from thrift and work, the accumulations of thousands of years of human effort, inventiveness, planning, thrift and self-discipline.
This Puritan Ethic — this system of values, this way of life — is essential to progress. It is essential not only for economic progress but also for developing the qualities that are most distinctively human, the qualities that make us humans. It is mental, moral and spiritual “therapy,” to use a modern cliche.
III. THE IMPORTANCE OF BUSINESS
Finally, if we are to have cooperation, we must exchange services; and as the cooperation gets more and more complicated, we need specialists to work out the terms and procedures of the multitudinous exchanges. Therefore, we must use money and credit; and we must have traders and financiers, advertisers, brokers and salesmen, accountants and collection agencies to complete the exchanges, including those exchanges which are made over a period of time and which therefore require credit and finance.
Finance is the monetary aspect of credit. Credit is merely a delayed exchange, an incomplete exchange. In every civilized society, most exchanges take time to complete because they are indirect, three-cornered or four-cornered exchanges, taking place over a distance and involving roundabout capital-using methods of production. In all such time-consuming transactions, we must have credit (trust and waiting). Therefore, money, credit and financial experts are as necessary for civilized life and progress as are tools and machines, mechanics, and engineers.
Business, then, means those aspects of voluntary cooperation which we call commerce and finance, and the function of the businessman is to promote, inspire, and guide cooperation. He organizes and teaches competitive cooperation — cooperation to provide better opportunities for life and for a more abundant life. These business activities — organizing, inspiring, leading and teaching cooperation — promote development of the highest qualities of mind, character and personality.
Now, from time immemorial — from the first introduction of money and the specialists who traded and promoted trades — business has been widely regarded with suspicion and looked down upon as a degrading occupation. In primitive societies, the view prevails that a merchant or moneylender profits only at the expense of producers. This belief helps explain why such societies remain backward, or “under-developed.”
Of course, this belief is an entire misjudgment as to what most of a businessman’s wealth consists of and what he contributes to the value of other producers’ services and incomes. Most of his wealth consists of the means for serving his customers, and he contributes some of the most essential ingredients of human progress.
Wherever this disparaging attitude toward business becomes general, we find that business is harassed, regulated, plundered and repressed. Under such persecution, the character and wisdom of businessmen tends to fall.
Where opinion-makers teach that business is a dishonest racket, then those who are willing to be racketeers or cheats will monopolize business, while achievers who value the good opinion of their fellows will choose other occupations, such as religion, politics and the military. Then we find the kind of government the Pharaohs had in ancient Egypt, or that prevailed as the Roman Republic gave way to a welfare state Empire. Under such oppressive governments, a businessman must be something of a trickster to survive.
Spreading Hostility
As hostility to businessmen grows, politicians tax them more heavily, while debasing and inflating the currency to maintain an illusion of prosperity. Then, when these policies cause rising price levels, a deluded populace demands price controls, which ambitious politicians are all too ready to impose.
The resulting shortages and “black markets” provide further excuses for more government action to combat these supposed evidences of private “greed.”
This cancerous growth of government produces political “leaders” who promise peace and plenty even while they squander the fruits of industry in pauperizing the poor and waging “perpetual war for perpetual peace.”
The result must be, sooner or later, a spreading decline in the quality of life despite (or because of) the increasing largess to “the poor” and the privileged, the rise of great new public works, and the display of awe-inspiring armaments.
Civilization progresses when business is widely regarded as Horatio Alger represented it in his stories seventy-five or more years ago. In those once-popular tales, work and thrift in honest business service were the high road to personal success in the broadest sense of that word. That view of business helped attract able, enterprising youths into business careers. It prevailed in this country long before Alger wrote and helps explain the astounding economic and cultural progress of the United States during the past two centuries.
On the other hand, insofar as we lose the Horatio Alger understanding and spirit, we succumb to increasing paternalism and despotism, collectivism and war, which demoralize and belittle the individual and produce a wide-spread cultural decline. This retrogression has happened time and time again in history, and if we don’t learn the lesson from this history, we shall be doomed to repeat it.
Every nation has developed and flowered — with art, music, and the other ornaments and means of civilization — only on the basis of flourishing business, trade, commerce. This was true of the Phoenicians, Ancient Greece, and Ancient Egypt, the Chinese civilization, the Byzantine Empire, Venice, Florence, Spain, England, France, Germany and the United States. Go through the history of each and you’ll find in its origins that period in which commerce and finance were highly regarded and relatively free in a developing civilization.
Again and again, however, these eras of progress have ended as the intelligentsia became worshipers of the Almighty State. Then these intellectuals — scribes and priests — became more and more scornful of businessmen; and business lost its vision because it lost its men of vision. Men of talent and imagination, instead, accepted the faith of the state-employed intellectuals that a well-schooled elite must make more and more choices for the general run of the population and compel the inferior masses to accept this planning and direction of their lives.
Submerging the Individual
With this elitist excuse for tyranny, governments organize militaristic and imperialistic gangs to substitute forms of slavery for the voluntary cooperation of free individuals. Then, as in Communist countries today, even the ablest of the ruling bureaucracies find that any individual is expendable — trapped and exploited or liquidated — as millions of humans are sacrificed on the altars of Planned Perfection. The Moral Law of the Golden Rule and of the Ten Commandments may be violated, but not with impunity. He who harms others, harms himself; he who deceives another, cheats himself.
This faith in Moral Law permeates the philosophy of our Northwood administration and faculty. Along with it goes insistence on the fact of individual responsibility and a broad, long-range view of personal success. A businessman’s moral responsibility is no less than that of a teacher, physician, minister, artist or writer.
Essential to The Northwood Idea, then, is appreciation of the unlimited opportunities for character development in voluntary business enterprise.
Temptations correspond to the opportunities, and each occupation has its own peculiar temptations as it has its own peculiar opportunities. As few find the “strait gate” and “narrow way” of righteousness in other walks of life, likewise few businessmen will claim that they have always followed the right path in their work. Only those who look for business profits in life-supporting efforts that are mutually beneficial can achieve success in the true meaning of that word.
This objective may be the most distinctive feature of The Northwood Idea — the view that our graduates should look on business not merely as an easier way to attain ease and affluence but also as an opportunity for utilizing their highest human qualities and attaining lasting satisfaction in a life well spent.
Image Source: Freedom School. Newsletter (January 1964).
