Opinion column by Aubrey Herbert (pseudonym for Murray Rothbard), published in Faith and Freedom, Volume VI, Number 4, December 1954, pp. 8-9

Along Pennsylvania Avenue - Aubrey Herbert

One of the most noteworthy and astonishing aspects of our foreign policy lies in its sense of haste and desperation. Why do our foreign policy architects act as if time were on the side of the Communists? Do we believe that capitalism works more efficiently as an economic system than communism? Then we must grant that time is working for us rather than against us. But the time pressure can be seen in the breakneck speed with which Messrs. Dulles and Eden hastened to put through substitutes for EDC.

The apparent victory of the Paris agreements, however, will erect a jerry-built structure. It does not perform the EDC job of chaining Germany and the other countries to a supranational organization at the beck of Washington. It sets up a system of national alliances which can be broken much more easily. Those of us who want peace can see some hope in this situation.

Time is running out for the bipartisan policy of global intervention. The agreements leave Germany deprived of the Eastern half of its territory, and of its coal-rich Saar Valley. Eventually, the German urge toward reunification can lead to a World War or to a policy of outright neutralism, with the latter hopefully far more likely.

The sands are running out in Britain as well. The general election in Britain sometime around the end of 1955 will very likely return the Labor Party to power, with the result a very strong drift to neutralism. In Italy, Communist strength grows in every election. France's present government shows very strong neutralist tendencies.

The situation looks no more cheerful for Dulles in the Far East. The key factor there is that Chiang Kai-shek's troops are getting old, as soldiers go. In a couple of years, their average age will have reached thirty, too old to back up Chiang's dream of a return to the mainland. And Formosa's natives lack the manpower and enthusiasm to furnish replacements. Chiang, therefore, feels the time pressure more than anyone else, and his sympathizers in Washington are calling loudly for a "tougher" foreign policy.

If we can manage to steer safely through the next two years, therefore, prospects for continued peace will be bright. For we shall have achieved isolationism by a peculiar route: through repelling our allies instead of withdrawing from them ourselves.

A rather widely accepted myth tells us that at least the Eisenhower Administration practices "conservatism in economics." This myth is carefully fostered by the Administration itself. It is designed to demonstrate that regardless of its stand on other matters, the Administration believes in being conservative in economic and business affairs. The present Administration, the fable runs, is devoted to fostering private business enterprise.

How much water this story holds may be gauged by Administration actions on an issue close to the heart of every American—his cup of coffee. As everyone knows, coffee prices shot rapidly upward in the post-war years. The spurt hit a new high in the past year, with the average retail price of coffee jumping from 83¢ a pound in early 1953 to almost $1.40 a pound in the summer of 1954.

What caused this painful situation? The obvious answer—a coffee shortage—must be put down as completely wrong. The production of coffee, in fact, rose by one million bags in 1954 over the previous year. The correct answer can be found in Brazil, traditionally the source of over half the world's coffee crop. For years, the Brazilian government maintained high minimum price supports on the export price of the country's coffee. The result, of course, saw "surplus" coffee pile up in Brazil, unsalable at the artificially high price.

Only two alternatives face the Brazilian government: abandon the high price support for coffee, or wheedle a dollar loan from the U. S. Government. Abandoning coffee supports would stop the mulcting of the American consumer by the Brazilian government cartel. A loan, on the other hand, forces the American taxpayer to subsidize the continued exploitation of himself as a coffee consumer. The more loans granted, the longer Brazil will hold its coffee stocks off the market, waiting for higher prices.

The Eisenhower Administration surpassed its predecessors in taking the subsidy route. In 1953, its export-import bank granted a $300 million loan to Brazil. Matters came to a head in June of this year when the Vargas government outdid itself, and upped the minimum coffee export price to the staggering level of 87¢ a pound. This move triggered the final boom in coffee prices. How did the U. S. government react? Its Federal Reserve Bank granted another $80 million loan to Brazil.

Since then, the Brazilian government felt forced by its surpluses to relax its price supports. As a result, coffee prices fell a little.

Caught in an election year, the Administration looked for a scapegoat for the towering coffee prices. Obviously, blame could not be fastened on the Brazilian government, one of the countless jewels in the "free world" diadem. What would Latin America think of us? Besides, how explain our subsidies? No, an easier and more vulnerable victim was found.

The Administration set out after the New York Coffee and Sugar Exchange, an organization with little political influence. In a swift series of moves, the finger was pointed at that age-old bogey—"speculation."

Speculation on the exchange caused the price rise, the Administration said. No one pointed out that for every "bull" speculator betting on a rise, a "bear" speculator bets on a fall. No one showed that neither bull nor bear wields the power to determine prices of goods. Instead the Administration trotted out the old anti-business, anti-speculator rhetoric, the staple fare of every left wing political movement.

The Federal Trade Commission set the line in its report this August, blaming speculators, restaurant owners, and virtually everyone except the real culprits: the Brazilian and American governments. Senator James Glenn Beall, Eisenhower Republican from Maryland, launched a subcommittee investigation of the Coffee Exchange. Concluding his brief hearings, he promised that the Senate Banking Committee would recommend strict federal regulations of the New York Coffee Exchange. Nobody wondered how a New York trading house could come under federal jurisdiction.

Finally, the FTC launched monopoly proceedings against the Coffee Exchange, charging that it had "restricted" coffee trading. How? By trading in only one grade of Brazilian coffee. In vain the Exchange witnesses, protested that this was convenience; that anyone could trade in other grades of coffee if he so desired. The ancient sport of business baiting was afoot, however; and nothing stood in its way.

Roast Coffee with Red Tape

Four Republican congresswomen, all of whom are supposed to be staunch conservatives (St. George of New York, Harden of Indiana, Church of Illinois, and especially Thompson of Michigan), rushed a congratulatory telegram to the FTC. It read: "This is another example of the diligent efforts of the Republican Administration to protect legitimately the interests of all the American people."

Perhaps the most amusing moment in this sordid affair came when Senator Beall questioned Douglas B. Bagnell, director of "compliance" for the Commodity Exchange Authority of the Department of Agriculture. Beall asked Bagnell, perhaps naively, whether his agency could handle the regulation of coffee trading. Bureaucrats are not noted for resisting temptation, and Bagnell was no exception. He pointed out, in fact, that the Department of Agriculture had repeatedly recommended such legislation.

Who's "conservative in economics"?