31 THE PRICE OF PROGRESS

IT CAN BE ARGUED, with considerable logic and rather convincing evidence, that the government delayed progress in automotive design at least ten years when it put Tucker out of business in 1948. If Tucker had continued, the industry would have had to move with him and the public wouldn't have waited this long for aluminum engines, and at least a gesture toward economy of operation.

To the public, the Tucker trial was little more than a sideshow in which the real issues were obscured: whether risk capital is a legitimate tool for attempting progress, or whether in the future men can look solely to government, gambling only on their ability to live long enough to collect Social Security.

The important question is not whether the public suffered by having to wait for aluminum engines, but whether the next Tucker—whatever his name may be—will also have the odds against him multiplied by the government itself.

It is inherent in long shots that the promoter will very possibly lose, and his investors along with him. But it might seem that the least his backers deserve is the same chance to win or lose they would get at Hialeah. The government doesn't indict the owners of a track when a horse loses, or the operator of a casino when some citizen puts his last $50 on red and it comes up black.

It will sound like a pronouncement from the National Association of Manufacturers or the Union League, but it nevertheless is fact that courage and venture capital—just plain gamblers' guts—created every major asset this country has today, from oil and minerals to invention and industry. Not gambling for the petty returns from poker, slot machines and race tracks, but gambling for stakes that can affect the nation, or even the world.

Risk is the price of progress, and when risk is removed as an element of the American economy, progress will eventually be limited to the work of captive scientists, in the narrow channels fixed by men whose chief concern is national power and prestige.

When the little men in SEC condemned Tucker as “having only a smattering of mechanical ability,” it was more than willful distortion of facts. It was failure to realize—and admit—that men like Tucker were responsible for the industrial and technical superiority which kept this nation on top of the pile through two world wars and many decades of peace.

A handful of audacious and gifted men built the automotive industry in America, few of them inventors or even competent mechanics. But all were promoters who, like Tucker, risked their backers' money on dreams.

David D. Buick, one of the few who might have qualified as an inventor, died broke, and if the rest had depended on their own limited engineering ability they probably would have too. The greatest was William C. Durant, founder of General Motors. Durant was a salesman, as were Paul Hoffman of Studebaker and George Romney of American Motors. These were not detail men, but promoters—gambling against odds that make the casinos of Las Vegas look like Bingo at a village street fair.

The Securities and Exchange Act of 1934 was conceived in a period of depression, when it wasn't a problem of balancing security against risk because few could afford risk, beyond an occasional penny ante game or a round with the slot machines. Sausage and hamburger sold as low as five cents a pound, and tens of thousands of persons had to look to the government or charity for even the five cents.

This legislation is already twenty-five years old, and while it may have served a useful purpose in its time, continued it will inevitably stifle new enterprise and with it progress, leaving the field—as with automobiles—to the few giants powerful enough to resist the unending assaults by an army of lawyers, bankrolled by the United States Treasury.

If the theory is accepted that Tucker's biggest mistake was bad timing, there can be no valid complaint over the government's action, or even the means that were used. Because it was no more than carrying out the will of the majority, preserving the status quo and its questionable security at the expense of progress.

But if the nation still believes in private enterprise, even if only in theory, the governments action must be deemed a mistake, which if continued may well prove tragic. An emasculated free enterprise system, by itself, will never be able to counter progress in vital new societies like Russia and China, and eventually India.

Tucker was by no means an isolated example of the Commission's zeal in protecting the public without worrying about the ultimate effect on all new enterprise. What set Tucker apart was the wide publicity the case received. And in spite of being technically a failure in the automotive field, he had become a legend long before his death.

If any morals are to be drawn from the Tucker story, one might be that if you want to promote something that needs more capital, go somewhere else and do it through foreign aid. Tucker dealers bellowed long and loud, though it didn't do them any good, when they discovered that while they were trying to reorganize the company the government dug up $40,000,000 for Fiat in Italy. Fiat is fast becoming one of the major competitors in the American small car market.

More important and deadly serious is the future of speculative investment—whether the Securities & Exchange Commission will continue its autocratic control over new business depending on risk capital, with life-and-death powers over business at the discretion of minor officials, their actions concealed in a blanket of secrecy that even the State Department might envy.

Present restrictions are stupid and dangerous, and SECs endless tirades against gambling in securities are futile, because people are going to gamble in one way or another regardless of law. Under Prohibition it soon became apparent that people would go right on drinking. The only question was whether they would drink legally, and whether the profits would go to legitimate operators or to bootleggers and gangsters.

For the same reason, regulations governing securities should be re-evaluated so speculative issues can be sold and traded without their backers and investors being hamstrung by overzealous bureaucrats, to whom even legitimate gambling seems to rank somewhere between sexual perversion and embezzlement. At least the profits could be channeled to some useful purpose, with always the possibility that something of real value could result.

Present practice in raising venture capital is to hire high-priced attorneys to find legal loopholes, which is expensive to everybody including the taxpayers, and benefits nobody but the lawyers. Relaxing the rules on risk capital could to a degree supplement taxes, by levying a percentage on speculative stock when it is sold, before there is even a question whether the investors will win or lose. It certainly would be as moral as selling Federal gambling stamps in Iowa, and using Federal agents to collect taxes where gambling is illegal.

It is highly unlikely, from SEC's past record, that anything short of legislation could alter its policies. If there is to be a change, the solution would seem to be corrective measures that will make a clear distinction between securities as covered under present laws, and those sold and described openly as speculative.

No better example can be found of the results of present SEC practices than Tucker Corporation, which wasn't broke when it went into trusteeship, has been under trusteeship more than ten years, has millions in assets yet has never paid a dime to its investors, who at least had a long chance of winning as long as the company stayed in business.

The price of progress is risk, and when constructive risk can be re-established as a legitimate factor in new enterprise it may open a new era of industrial expansion. If the example of the Tin Goose could accomplish this and nothing more, it will have been well worth while.