Montreal, March 15, 2012 • No 298


Dr. Edward W. Younkins is a Professor of Accountancy and Business Administration at Wheeling Jesuit University in West Virginia.



Henry Hazlitt's Time Will Run Back:
A Tale of the Reinvention of Capitalism


by Edward W. Younkins


          Henry Hazlitt’s novel, Time Will Run Back, was originally published in 1951 as The Great Idea. It teaches that if capitalism did not exist, then it would be necessary to invent it. It makes the case that the discovery of capitalism is one of the greatest triumphs of the human mind. In his nonfiction works, Hazlitt is a master with respect to making economics understandable (e.g., Economics in One Lesson). In Time Will Run Back, he skillfully uses fiction to illustrate his teachings on economics. He makes his points, although the book was not written as an economic treatise. The book has a good story line to keep the readers interested.


          In Time Will Run Back, the author creates a hypothetical future in the year 2100 that might have been if Soviet influences had spread throughout the entire world. The novel depicts a future where the whole world is ruled by a communist regime. All traces and artifacts of the ancient capitalist world have been wiped out. All of the history, including books, music, etc. that could evoke capitalist ideas or question socialist ones have been destroyed or kept in secret places where only the highest members of government have access to it. History prior to the creation of the communist Wonworld is not to be remembered. Wonworld is the fictional country comprised of all of the territories of the world ruled under communism. Top government officials have fabricated new history books for the masses, and all of the political and economic writings of the past (except for that of the Marxists) have been totally destroyed, and consequently, the hero is required to create out of his own mind the ideas that actually have taken generations of economic thinkers to develop and to refine.

          The plot is based on the unraveling of a socialist/communist system and the rediscovery and triumph of capitalism. It foreshadows events in Russia, China, and other countries. Highlighting the inadequacies of a centrally-planned economy, the novel argues that under world totalitarianism, the world would not only stop progressing but would also decline economically, technologically, and morally.

          Time Will Run Back can be classified in a genre that includes works like Edward Bellamy’s Looking Backward (1888), Yevgeny Zamaytin’s We (1921), Aldous Huxley’s Brave New World (1932), Ayn Rand’s Anthem (1938), and George Orwell’s 1984 (1949). The style and settings are remindful of the novels by Orwell and Huxley. Both Orwell and Hazlitt delimit the linguistic capacities of individuals through new languages, Newspeak and Marxanto (a combination of Esperanto and Marxian concepts). These languages restrict ideas and give more control to the government. Interestingly, Time Will Run Back, reverses the situation described in Looking Backward. These two novels are great candidates for back-to-back use in college courses.

          The story is told mainly from the perspective of Peter Uldanov, son of Stalenin, dictator of Wonworld. Peter was raised by his mother in the Bermudas, far away from his father’s influences. He was taught by teachers and in subjects that his mother chose. Peter was well-educated in math, science, and music but was taught nothing about politics and economics. He was a bright young man who could think for himself. Having received a well-rounded education, Peter would later be able to make his own judgments with respect to political economy. Peter was fond of classical music and had a passion and talent for playing the piano.

          When Peter was very young, his father and mother disagreed when it came to politics and economics. In fact, Peter’s mother was seen to be a threat to communism who needed to be silenced. Stalenin exiled her and Peter to Bermuda. Stalenin was a true believer in Marxism who wanted to prove to his wife that his beliefs were correct. He wanted to challenge her ideology and to demonstrate that it was wrong. She subsequently passed away before he could do so.

          Peter receives a letter from his ruler father summoning him back to Russia. Peter has grown up knowing very little about his father. Stalenin, who is getting old, is in poor health and is in fact dying. He wants Peter to study politics and economics and to become his successor. When Peter meets his father, he is surprised that he is not as large and imposing as the propaganda signs portray him to be. He informs Peter that he is very ill and that he wants Peter to be his successor. Peter declines and says that he is not ready because he knows nothing about Marxist history, politics, and economics. Stalenin explains that his current would-be successor, Bolshekov, would kill Peter, who would be a threat to him, because he was Stalenin’s son and because he was not brought up under the communist ideology. As a result, Peter agrees to study Marxist politics and economics. In addition, early on in the novel, Stalenin has Peter imitating his signature in case something happened to Stalenin, such as another stroke.

          Bolshekov, number 2 in Wonworld’s ranking system, is Stalenin’s rival who constantly conspires to be the next ruler. Stalenin shrewdly assigns Bolshekov to teach Peter about their political and economic system. Bolshekov is not aware of Stalenin’s real intentions. This intelligent plan is an attempt to keep Bolshekov from assassinating Stalenin and Peter. The plan does create some turmoil as Peter pushes boundaries and tests waters by asking questions that no one else would ever dare to ask. Normally, questioning anything is punishable by death. Thinking outside the box, Peter learns about Wonworld’s Marxist ways, is confused from the beginning, and questions the socialist teachings. The inexperienced but bright Peter perceives that there is something wrong under socialism. Peter’s unconventional ways of thinking anger Bolshekov who is completely dedicated and true to Marxist teachings.

          Peter learns about government production methods and motivation through fear. All people, even Stalenin himself, live in fear in Wonworld. Under communism in Wonworld, there is an immense hunger for power by any means. Everybody is told to spy on their neighbors. Each person’s duty is to report any incidences of nonconformance with the party’s rules. People are just numbers and are referred to by their respective numbers. People are assigned where to live, with whom to live, and with whom to work. Jobs are simply assigned to individuals who have no choice in the matter. There are long workdays, with people being marched to and from work each day. Living conditions are miserable, with people packed into rooms as tightly as possible. There is no privacy. Government propaganda is everywhere. People are taught to believe and not to question whatever government officials tell them. If a person publicly disagrees, he will suffer severe repercussions. Peter is told that certain ideologies no longer exist and that the “truth” is whatever is good for the communist state. There is a single party called the Politburo that devises five-year plans. Peter witnesses arbitrary economic control procedures and the repression of the population. He begins to think about the ramifications of nationalization and collectivization.

          Society in Wonworld is made up of protectors, deputies, proletarians, and social unreliables. The protectors make up one percent of the population and are the top level officers. The deputies (intellectuals, managers, and technology experts) comprise about 10 percent of the population. It is only the highly ranked members who are treated well and are granted special privileges. Social unreliables are the 20 percent of the people who have committed crimes or who are incapable of being good proletarians. The proletarians, who make up the remainder of the population, are the so-called “rulers” of the nation. Marxist doctrine proclaims the emancipation of the proletariat, the oppressed class under a previous ideology.

          Bolshekov steps down from educating Peter, and number 3, Thomas Jefferson Adams, an American, is appointed to continue Peter’s education in the ways of the state in Wonworld. As an American, Adams has similar fears of Bolshekov as does Peter. Peter and Adams form a bond and the pleasant and patient American becomes Peter’s ally and best friend. Through their Socratic-style discussions they discover the workings of production, incentives, prices, profits and losses, ownership, markets, the meaning of money, entrepreneurship, and so on.

          While Bolshekov is away, Peter is made a member of the Party—only about one in every ten Protectors is so honored. A little later, Stalenin tells Peter that there are two records labeled X and Z that are kept in a safe, and he gives Peter the combination to the safe. Record X is to be broadcast over the entire Wonworld network if Stalenin has a stroke that incapacitates him. Record Z is to be broadcast immediately in the case of Stalenin’s death. Soon thereafter, Stalenin arranges for Peter’s election to the Politburo. He is admitted at the bottom as number 13. Early in the novel, Peter had met and befriended Edith Maxwell, a librarian, and her father, John Maxwell. After Peter’s appointment to the Politburo, they are taken away by secret police and Peter tries desperately to find them but he fails to do so. It is not until the last part of the novel that their fates are revealed.

"Time Will Run Back can be classified in a genre that includes works like Edward Bellamy’s Looking Backward (1888), Yevgeny Zamaytin’s We (1921), Aldous Huxley’s Brave New World (1932), Ayn Rand’s Anthem (1938), and George Orwell’s 1984 (1949)."

          Stalenin suffers a debilitating stroke, forcing Peter to act quickly to ensure his safety. He opens the safe and pulls out envelope X which contains a record that Peter and Adams rush to the Central Broadcasting Station where it is played over the airwaves. The recording of Stalenin’s voice says that he will no longer make public appearances but instead will work quietly by himself to make the state more prosperous. He says that Peter will act as his deputy in his absence. This keeps Bolshekov out of power, and Peter and Adams are safe at least for the time being. Bolshekov is named to be head of the Army and Navy, but Peter takes the Air Force for himself so that number 2 will not control all of the powerful military forces.

          Adams tries to convince Peter to have Bolshekov killed so that Peter does not have to fear for his own life. Peter declines to take that brutal and degraded action. He says that it is not worth living in a society that is based on violence. Bolshekov decides to hold a parade in order to showcase his military power. Just before the parade, an announcement is made on the radio that Stalenin has made Peter number 1-A and that he would rank just below number 1. The announcer adds that this man has the wholehearted endorsement of number 2, Comrade Bolshekov. Of course, Bolshekov is infuriated when he hears the news.

          Part Two of the book, called “Groping,” consists of many dialogues and debates between Peter and Adams as they attempt to figure out and correct the problems of communism and to implement economic improvements. These discussions and attempts carry over into the third section of the book, entitled “Discovery.” Peter and Adams increase their understanding as they see their errors, in addition to learning from unanticipated results as the reforms elicit emergent behaviors in the population. Adams is Peter’s sounding board and makes sure that Peter thinks things through before any decisions are made.

          Peter and Adams discuss how coordination and synchronization failures result from a centralized planning system. They deduce that a centrally directed economy cannot solve the problems of economic calculation and that without private property, free markets, and freedom of consumer choice, no solution to the problem of economic calculation is possible. They conclude that it is impossible for anyone to manage everything effectively and efficiently. No single person or board can have knowledge of what is concurrently going on everywhere in the economy. In a centrally-planned system, it is impossible to measure the real costs of things and the extent of wasted resources.

          They discuss the benefits of having a legal system that is separated from executive power and how a person should be considered innocent until proven guilty. Peter wants to introduce a new system to put an end to oppression and fear. They consider the necessity of the rule of law, where the law must be general and abstract, known and certain, and equally applicable to all people. Under the rule of law, everyone would be bound by the rules, including the government. They reason that the existence of general rules plus the functional distribution of state power would lead to a smoothly functioning social order. Peter and Adams examine the advantages of majority rule, democracy, and periodic free elections. As an experiment, they hold small free elections in France, but the voters are suspicious and tend to vote for who they think the government officials support.

          Peter and Adams agree that the key to a better society is freedom, including freedom of choice for workers and consumers, freedom of the press, and freedom even to criticize the government. Under the current system, anyone who opposes or criticizes the government is dealt with immediately and harshly. Peter wants people to be free so that they will have more initiative to be productive at work. He wants people to have options to choose which goods, and how much of each good, they will acquire. He realizes that freedom brings out the best in people.

          Peter says that in agriculture, workers should be able to enjoy profit from the surplus that they produce. He also notes that people are issued ration coupons that allow them to purchase specific amounts of particular goods. He decides to implement a new ration coupon plan in which every individual is permitted to trade coupons with others to meet their own needs and wants. Markets shortly appear as Peter’s coupon-trading scheme creates the phenomenon of market prices. People are better off and happier as a result. Peter has sown the seed for what will become money in the future.

          Peter and Adams learn that a market economy evolves as a voluntary association of property owners when people are free to trade to their mutual advantage. They view the market as an effective communicator of data and prices as transmitters of knowledge that economize the amount of information required to produce a given economic result. Prices are a mechanism for carrying out the rationing function and are a fast, effective conveyor of information in a society in which fragmented knowledge must be coordinated.

          They envision the market as a social process that derives from conscious, cooperative, and purposeful individual exchanges of people’s ration tickets. Through trial and error, competitively determined market prices permit individuals to assess the relative value of scarce means and alternative uses in competing applications and alternative uses of goods and services. The pricing process, a social process, is accomplished through the interaction of all valuers within the society. The social function of the price system is to promote the use of knowledge in society by making calculation possible. Calculation is necessary for a person to determine the best allocation of his scarce resources. Peter and Adams conclude that private property, the market, and money are prerequisites for the mental tool of rational economic calculation. Prices are expressed through the common denominator of money.

          Peter and Adams reason that rational central planning under socialism is impossible. Without market-based prices, decision making by central planners is irrational and arbitrary. A centrally planned economy is unable to allocate resources rationally. Socialism destroys the incentive of profits and losses, private ownership of property, and the benefits of competition. They also figure out that Marx’s labor theory of roles was mistaken. Marx held that the value of commodities is solely determined by the amount of physical labor used in making them. He thought that only labor produces the surplus over costs from which capitalist profits derive. Our heroes conclude that others, such as owners and managers, also contribute toward the generation of profits.

          Peter and Adams dismantle controls step by step and slowly, gradually, and incrementally move Wonworld toward having a free-market economy. Bolshekov is not at all pleased by what is happening. He sends an assassin who kills Stalenin. Peter and Adams quickly broadcast a message recorded on record Z making Peter the next dictator. The angered Bolshekov attempts to kill them and they escape to America with the help of the Air Force. There, Peter has the opportunity to implement his economic ideas in a new country called Freeworld.

          Peter becomes the leader of Freeworld and establishes private ownership of the means of production with ownership of companies evidenced by what came to be known as shares—this leads to the establishment of markets for shares of stock. Peter sees that private property is essential for the preservation of individual freedom. When property rights are respected and protected, a person is able to keep and enjoy the product of his labor. Corporations evolve as voluntary associations and as private property. People come to understand that men have an inherent right to form a corporation by contract.

          Peter and Adams had already learned back in Wonworld that it is prices, articulated through the common denominator of money, that make economic calculation possible. In Freeworld, they observe money, in the form of gold, emerge from the domain of directly exchanged commodities. Money originates on the free market when a specific commodity is no longer valued only as a consumer good or a producer good but also as a medium of exchange. Gold becomes currency because it is stable, nonperishable, and noninflationary. Gold, as a measure of price, becomes the commodity by which all other commodities can be valued without using roundabout procedures. After a certain time period, money certificates become money substitutes (i.e., claims to a definite amount of money payable and redeemable on demand that circulate indefinitely).

          A market system soon evolves. Freeworld develops a market economy as a voluntary association of property owners for the purpose of trading to their mutual advantage. Peter and Adams understand that a market economy is a necessary condition for a free society. People who become known as enterprisers begin to create new products and services, new businesses, new production methods, and so on. The market process becomes a competitive process through which profit incentives induce competing producers to find better ways of serving customers. People start to lend money, thus earning interest, to risk-taking enterprisers so that they can create in the hope of making profits. Some people come to envy and resent the enterprisers. Our heroes observe that it is simply a fact of human existence that some individuals are more capable than others, that some individuals work harder than others, and that some individuals are better at creating wealth than others. This is not a matter of injustice.

          Peter even reinvents Adam Smith’s term, the “invisible hand,” to explain how things work in a free economy. He and Adams marvel at how competitors compel each other to cooperate more effectively with the buying public. Successful competitors are those who best cooperate with, or satisfy, others in society. They understand that profits indicate that a person has served his fellow men by using resources to produce a product or service at costs below the value people place upon the product or service. They also realize that losses indicate that a person has failed to serve his fellow man effectively and efficiently. Profit provides risk-takers with incentives, serves as a guide for allocating resources, supplies a reward for serving other people, and serves as a measure of effectiveness in the use of resources to satisfy customers.

          Peter and Adams eventually learn the fate of Edith and John Maxwell. In one of his speeches, Bolshekov tells of the execution of two traitors who had committed acts of sabotage and treason at the direct order of arch traitor, Peter Uldanov.

          Going back to their discussions, Peter and Adams discover the nature of interest. They note that creditors don’t force loans on borrowers, who instead pay interest voluntarily. They conclude that interest is the economic expression of positive time preference (i.e., that people prefer to have something sooner rather than later).

          The years pass and a state of war still exists between Wonworld and Freeworld. However, it is a war of propaganda rather than a war of battles and bloodshed. Adams exhorts Peter to attack Wonworld before Bolshekov attacks Freeworld but Peter hopes to convince Wonworld that Freeworld’s system is the better system.

          Peter and Adams continue to debate topics such as selfishness, altruism, charity, generosity, competition, etc. They are against state charity because the only way the state can “help” people is to give them wealth taken from someone else. Only people who are allowed to keep what they have earned have the means to be benevolent, compassionate, and charitable. The obligation for charity is that the benefactor owes it to himself, not to the recipients. Freely given charity may be considered as perfective of a person’s capacity for cooperation and an embodiment of that capacity.

          After five years, Bolshekov decides to attack Freeworld. During the first strike, Peter is injured and spends many weeks in the hospital. Edith Robinson is the nurse who takes care of him after he is injured in the attack on the White House. Eventually they fall in love and marry.

          While Peter is in the hospital, Adams brilliantly conducts the military operation of the war, but he does not fare as well in the economic sphere. Adams calls in all of the gold coins and replaces them with warehouse receipts promising to pay actual gold on demand. Then, to finance the high cost of the war, Adams issues more engraved warehouse receipts for gold even though there is no additional gold to back such issuances. Inflation results. Peter explains that instead of printing additional money, Adams should have allowed the system time to adjust. Adams had also tried to remedy the inflation by fixing prices, another flawed action.

          Peter explains that inflation, a monetary phenomenon, consists of expanding a nation’s money supply by adding something other than real money (i.e., gold). Fiat money, backed only by government decree, produces general price increases. Such an increase in the money supply necessarily dilutes the purchasing power of money. He also notes that price controls in the form of price ceilings end up producing shortages of products. The nature of price controls (i.e., maximum or minimum prices) is to control and force people to do what the government wants them to do. Prices maintained by artificial mechanisms necessarily contain misinformation, inhibit the feedback that permits transactors to communicate, and create market distortions that harm producers and consumers.

          Freeworld is incomparably superior to Wonworld with respect to war production. As a result, Wonworld surrenders and the war is over. A constitution is written and a democracy is created. Peter decides not to run for election and appoints Adams to assume the leadership of the Freedom Party. For a while it looks like an eloquent candidate, who proposed a “Third Way” between capitalism and socialism, might win. In the end Adams’s party wins and he asks Parliament to name Peter as the first President.

          Time Will Run Back has been out of print for a long time, but it is now available online and in printed form. Reading this tale of political intrigue in a grim, socialistic future is a fine way for people to learn the principles underpinning a free-market society.