Lewis Corey

The Decline of American Capitalism


PART ONE
The American Crisis


CHAPTER I
Ballyhoo: The New Capitalism


THE acute nature of the American crisis appears in the failure of the desperate resort to more drastic state intervention in industry – in the failure of the National Industrial Recovery Act and its creations. It had to fail. For in essentials, in spite of differences in institutional forms, the Act merely introduced measures of state capitalism which have been tried in Europe and have not restored prosperity there. Yet Niraism was greeted as another “new capitalism,” the beginnings of a new era in American civilization. Consider a few of the magnificent claims:

Senator Capper: “The changes are revolutionary.” ... H.I. Harriman, president, Chamber of Commerce of the United States: “A new business dispensation; holds out the promise of a better day.” ... A speaker at a convention of the Advertising Federation of America: “Marks the threshold of a new era.” ... Nelson B. Gaskill, president, Lead Pencil Institute and former member of the Federal Trade Commission: “The beginning of a new epoch; a systematized democracy.” ... Mrs. Laura W. McMullen, chairman, international relations department of the General Federation of Women’s Clubs: “An economic revolution, in the course of which the institution of private property is being quietly undermined.” ... General Hugh Johnson, NRA Administrator: “A new era; high level of prosperity.” ... The New York World-Telegram: “A revolution to bring order to industry and security to the masses, to redistribute wealth, to fit the wage system into the power age.” ... Oswald Garrison Villard, liberal of the old school: “The revolution which has taken place in so short a time; taint taken off socialism.” ... William Green, president, American Federation of Labor: “Planning for national welfare; sound fundamental philosophy of the relationship between government and industry; serves the welfare of investors of capital and producing workers.” ... American Federation of Labor, Current Survey of Business: “Points the way to a new order.” ... Frances Perkins, Secretary of Labor: “We may find we have built up a new kind of civilization; a blessing beyond anything we in our generation have ever dared to dream of.” ... Rexford Guy Tugwell, Assistant Secretary of Agriculture: “To save our institutions from unlimited greed, and to turn the results of common efforts toward more general benefits: enlarged incomes for common people, greater leisure, security from risk.” ... Leonard Rogers, an interpreter of current events: “The American compromise with communism.” [1]

These claims, already shattered by events, are more than mere demagogic incitation. They are part of an ideology in the making, by means of which the decline of capitalism is masked and the way prepared for the ideological subjugation of the masses. At its basis is the conception of a “new capitalism.” This conception is recurrent. Any new stage or twist in the development of capitalism is seized upon by apologists, who proclaim that the economic order is being transformed. The conception of the “new capitalism” is a form of struggle against the workers and farmers, the clerical and professional workers.

After the depression of 1873–79, marked in its later stages by aggressive labor struggles, a considerable ballyhoo arose about profit-sharing and the “partnership” of labor and capital. One economist, echoing others, spoke of “a new regime of production and distribution,” of an irresistible and continuous upward movement of wages, mass consumption, and standards of living, which would result in “the end of human poverty.” [2] Four years later the prophecy was answered by the depression of 1893-97, and by the following seventeen years during which wages, mass consumption, and standards of living were practically stationary ...

The immediate parentage of the NRA ballyhoo was the ballyhoo of prosperity which flourished in 1923-29, and ended in the most disastrous of all depressions. It is important to recall this fact, not only because that prosperity is now mocked by depression, but because all its essential claims reappear in the “new capitalism” of the NRA.

The pre-1929 ballyhoo of prosperity, which expressed the “Golden Age” of American capitalism, had as its basic claim the old concept of “a new regime of production and consumption,” thus restated by one bourgeois economist:

“Increasing productivity of labor and industry, advancing wages, higher living standards and greater consuming or purchasing power rapidly became the avowed policy and practical program of American industry ... a new industrial revolution which is the marvel of the civilized world.” [3]

Another economist said:

“A new principle works: consumption finances production. The more wealth is consumed, the more it will increase. In this country the demonstration of that idea occurred. It is the American contribution to economic experience.” [4]

American capitalism, the prophets insisted, accepted the fact that prosperity depends upon mass consumption, and, consequently, upon increasingly higher wages. It was heady wine, this flattery of the capitalists; they began to believe in the ballyhoo and millionaires gravely prophesied the end of poverty ... Charles E. Mitchell, president, National City Bank of New York: “A revolution in industry has been taking place that is raising all classes of the population to a more equal participation in the fruits of industry, and thus, by the natural operation of economic law, bringing to a nearer realization the dreams of those Utopians who looked to the day when poverty would be banished.” ... James H. Rand, president, Remington-Rand, Incorporated: “The economic revolution of the 1920’$ will appear as vital as the industrial revolution in England and it will likewise mark the beginnings of a new era.” ... Andrew W. Mellon, Secretary of the Treasury and a powerful financial capitalist: “America has adjusted herself to the economic laws of the new industrial era, and she has evolved an industrial organization which can maintain itself not only because it is efficient, but because it is bringing about a greater diffusion of prosperity among all classes.” ... Melvin A. Traylor, president, Continental National Bank of Chicago and the American Bankers Association: “We need not fear a recurrence of conditions that will plunge the nation into the depths of the more violent financial panics such as have occurred in the past.” (This was in 1927, when a minor cyclical depression warned of the greater disaster to come.) ... E.A. Filene, president, W. Filene and Sons Company: “What the socialists dreamed of the new capitalism has made a reality, but not by their methods. The ever-present human desire for greater total profits will lead to the adoption of the new principles.” ... Haley Fiske, president, Metropolitan Life Insurance Company: “Here is a new business era. The glory of wealth fades. Extent of power fades. What does remain here and throughout eternity is that every man try his best in serving God to serve well his fellowmen.” [5]

Captains of industry and finance appear Jovelike in prosperity and bewildered in depression, but at no time do they really understand the movement of the economic forces they exploit. Their pre-1929 invocations to the “new era” expressed sheer misunderstanding; but they also expressed, if partly unconsciously, the defensive, self-justifying ideology of predatory capitalism. [1*]

The prosperity ballyhoo reached its crescendo in a book, Make Everybody Rich – Industry’s New Goal, published a few months before the breakdown of prosperity in 1929. It is a curiosity of economic literature. The theme was this:

“The real industrial leaders of present-day America do not need to be told that the goal of industry is to make everybody rich. It was they who discovered the fact ... who discovered the economic necessity of high wages ... Not merely will prosperity be stabilized, but the rule of class will for the first time in human history utterly disappear.” [6]

Within a few months industry changed its “goal” and began to make everybody poor, an undertaking crowned with infinitely greater success. One of the two authors of Make Everybody Rich, Benjamin A. Javits, has since been chanting the praises of the NRA in the same millennial terms he used to invoke prosperity everlasting ...

In addition to increasingly higher wages and mass consumption, the pre-1929 “new capitalism” claimed that it was introducing “industrial democracy.” In 1924, Herbert Hoover spoke of “the great increase in ownership of industries by their employees and customers,” and of “forces slowly moving toward some sort of industrial democracy.” [7] Arthur Williams, vice-president of the New York Edison Company, a part of the electric power oligarchy under control of the House of Morgan, insisted that wageworkers were becoming capitalists:

“As a result of a gradual economic revolution we are beginning to see that every worker is a potential capitalist. Wealth is not only increasing at a rapid rate, but wages are rising. There are at least three kinds of evidence which indicate roughly the extent to which workers are becoming capitalists: the rapid growth of savings deposits, the investment by workers in shares of corporations, and the growth of labor banks.” [8]

These ideas were widely spread and believed and were echoed at the 1925 convention of the American Federation of Labor by Spencer Miller, director of the Workers Education Bureau. Miller maintained that “so significant is this whole economic change that it has been properly characterized as an economic revolution by students of our economic life.” Out of this conception arose the theory of “trade union capitalism,” whose basic assumption was that the “higher strategy of American labor” is “based upon the solid ground of capital ownership.” [9] This “capital ownership” was to be mobilized by labor banks, which the Grand Chief of the Brotherhood of Locomotive Engineers considered the “American answer to Marx and Lenin.” [10] The banks are now a mass of ruins ...

The master mind of the “new capitalism” was Thomas Nixon Carver, professor of economics and major prophet of prosperity. His book, The Present Economic Revolution in the United States, originated all the assumptions of the pre-1929 “new capitalism.” It is another curiosity of economic literature, a fantastic combination of misleading statistics, apologetic economics, slipshod sociology, and rationalized prejudices. After smugly declaring that “to be alive to-day, in this country, and to remember the years from 1870 to 1920 is to awake from a nightmare ... [no more] slums and socialist agitators, blatant demagogues and social legislation,” Carver opened the case for the “new capitalism” with a distortion of history:

“The great war produced a number of political revolutions in Europe. It has not yet produced an economic revolution. The only economic revolution now under way is going on in the United States. It is a revolution that is to wipe out the distinction between laborers and capitalists by making laborers their own capitalists and by compelling most capitalists to become laborers of one kind or another, because not many of them will be able to live on the returns from capital. This is something new in the history of the world.” [11]

Not even, Carver insisted, was there an economic revolution in Soviet Russia, where the working class expropriated the capitalists and landowners. Carver was one of the bourgeois scholars who greeted the New Economic Policy in Russia as a “reversion to capitalism,” the final proof of the bankruptcy of Marxism. They dismissed as rationalization Lenin’s argument that the new policy was merely a retreat to reconstitute forces for a new offensive. Yet in a few years the Soviet Union unloosed another offensive against capitalism and systematically began building the economic basis of socialism. Carver’s American “revolution” led to the most appalling of cyclical breakdowns and economic decline, the Russian revolution leads to economic advance and socialism – a trifling difference!

Blind, as only the scholar become ballyhoo-maker can be, to economic reality, Carver painted a glowing picture of the American revolution:

“Instead of the concentration of wealth, we are now witnessing its diffusion; but the old tirades against plutocracy are still repeated ... Instead of low wages for the manual trades, we are now having high wages; and yet the old phraseology, including such terms as wage slavery, still has a certain vogue ... Instead of the laborer being in a position of dependence, he is now rapidly attaining a position of independence ... Laborers are becoming capitalists. We are now approaching equality of prosperity more rapidly than people realize ... Neither state socialism, guild socialism, sovietism, nor the ordinary cooperative society presents a plan of organization so well suited to the needs of the workers who desire to own their own plants as does the joint-stock corporation ... The full development of the so-called capitalist system will not be reached until practically everyone has become a capitalist, that is, an owner or part owner of some of the instruments of production ... It is just as possible to realize equality under capitalism as under any other system.” [12]

Is it any wonder that the capitalists, as they scooped in the profits of industry and speculation, began to believe they were the saviors of mankind? ...

Another aspect of the pre-1929 mythology of prosperity was the theory that cyclical fluctuations were now measurably under control. There were to be no more alternations of prosperity and depression, no more hard times prosperity would be everlasting! (Similar claims were made for the “planful” system of “controls” instituted by the National Industrial Recovery Act.) Among the exponents of the theory of everlasting prosperity were the members of the President’s Committee on Recent Economic Changes, including Owen D. Young, Daniel Willard, John J. Raskob, and Clarence M. Woolley, identified with corporations under the control or influence of the House of Morgan, and William Green, president of the American Federation of Labor. In its report, issued a few months before the breakdown of prosperity in 1929, the Committee said:

“Control of the economic organism is increasingly evident ... Once an intermittent starting and stopping of production-consumption was characteristic of the economic situation. It was jerky and unpredictable, and overproduction was followed by a pause for consumption to catch up. For the seven years under survey [1922–29] a more marked balance of production-consumption is evident ... A sensitive contact has been established between the factors of production and consumption which were formerly so often out of balance ... In many cases the rate of production-consumption seems to be fairly well under control ... There is now a more even flow from producer to consumer ... It would seem we can go on with increasing activity.” [13]

An economist-statistician expressed the general illusion in “objective” terms:

“There have developed in this nation mainly since the war period basic factors of a long-time nature which can be termed largely American ... First, increased use of power per worker; second, the receptivity of the public to new commodities; third, modernized distribution technique; fourth, increased purchasing power of the public; and, fifth, industrial research ... American industry and business have reached that status of well-being where it no longer has to fear a recurrence of the radical spreads from prosperity to depression that formerly afflicted business and industry.” [14]

More moderate, but definitely optimistic, was the opinion of Rexford Guy Tugwell, professor of economics at Columbia University, who later became a major prophet of Niraism:

“Depressions continue to recur. They seem, however, to lessen in extent ... Some of their worst effects may be said to have been mitigated ... We seem to have made some considerable progress toward correcting the swings of the rhythm and toward smoothing out the fluctuations in activity.” [15]

This confidence expressed itself in unlimited speculation. Much of the ballyhoo of prosperity was created by intellectuals and professional people, who were inflamed by their share of the “easy money” of speculation. One day before the stock market crashed in 1929, Prof. Irving Fisher said: “Current predictions of heavy reaction affecting the general level of securities find little if any foundation in fact.” The market will “return eventually to further steady increases,” and “gains are continuing into the future” – sentiments he repeated five weeks after the market crash, when he said there would be “no permanent ill effects” from the “false fear” created by the fall in stock prices. [16] The belief in prosperity everlasting was so strong that the depression, in its earlier stages, was not taken seriously. Said Colonel Leonard Ayres, bank economist: “It does not seem at all probable that the bear market of 1929 will be followed by any slowing down of business at all comparable with the old business depressions. The business and banking of 1929 are almost inconceivably strong.” [17]

Crudely expressed or subtly rationalized, the ballyhoo of the “new capitalism” evoked an enormous response. The “new” liberals and “progressives,” while they continued sniping at abuses, believed that prosperity, with all its shortcomings, was working toward the “larger good.” Thus Stuart Chase wrote just before prosperity crashed:

“The scene is at once ludicrous, arresting, inspiring, and always genuinely stimulating ... There is just a chance that America might whirl itself into the most breath-taking civilization which history has yet to record ... But to date the chief exhibit is activity.” [18]

The form is negative but the content positive: American capitalism may create a new social order. This appeared more clearly when Chase wrote, after the collapse of prosperity, that capitalism in the United States and communism in the Soviet Union “both in the last analysis have similar goals, of which the most immediate and important is the abolition of poverty.” [19] This is a conception as crude as those of any of the more vulgar myth-makers of prosperity. But the “new” liberals and “progressives” felt that American capitalism was different, exceptional, and that in some mysterious fashion all its own it would remake the world. The faith was lyrically and mystically expressed by Charles A. Beard in the concluding words of the Rise of American Civilization:

“Belief in unlimited progress the continuous fulfillment of the historic idea ... an invulnerable faith in democracy ... a faith in the efficacy of that new and mysterious instrument of the modern mind, ‘the invention of invention,’ moving from one technological triumph to another, effecting an ever wider distribution of the blessings of civilization – health, security, material goods, knowledge, leisure and esthetic appreciation, and through the cumulative forces of intellectual and artistic reactions, conjuring from the vasty deeps of the nameless and unknown creative imagination of the noblest order, subduing physical things to the empire of the spirit – doubting not the capacity of the Power that had summoned into being all patterns of the past and present, living and dead, to fulfill its endless destiny.

“If so, it is the dawn, not the dusk, of the gods.” [20]

Within a few years the “dawn of the gods” appeared in the most disastrous and brutalizing of depressions, with 14,250,000 wage-workers and 3,000,000 clerical and professional workers (and their dependents) abandoned by Dr. Beard’s deities. Now the prophets of state capitalism, including Dr. Beard himself, are invoking another dawn of the gods ...

Dr. Beard was, moreover, contradicted even by the pre-depression reality. Prosperity was unequally distributed, only meagrely shared by the workers and farmers. There was grinding poverty and terrible insecurity. Not only that: even if prosperity had been as great as its ballyhoo, it was still woefully incomplete, still far behind prevailing technical-economic resources. For capitalism always restricts production and consumption, the possibilities of abundance and leisure potential in the productive forces of society.

There was chaos in mining, textiles, and other industries, and increasing unemployment. The number of strikes decreased considerably, but the strikes that did occur were brutally suppressed. Poverty prevailed on a large scale. The deepening agricultural crisis made peasants of newer and larger groups of American farmers. The lightning of the Sacco-Vanzetti tragedy revealed the yawning gulfs of rulingclass savagery. But the mythology of prosperity, and particularly of rising speculative profits, cast a glow over the unpleasant aspects of economic reality.

Always, in one form or another, capitalism creates an ideology to disguise and justify its predatory character: it is a necessary device of class domination. Always there exists a deceptive millennial conception of capitalism. It accompanied the growth (and decay) of profit-sharing, flourished on the basis of the war-time controls of industry, and acquired magnificent scope in 1923–29. It appeared again in the “new capitalism” of Niraism, with only slight revisions in argument and style.

The pre-1929 myth-makers of prosperity did their job well. The ideology they created lingered, as a cultural hangover, after the breakdown of prosperity and helped to prevent any considerable revolt. As the ideology began to crumble under the impact of prolonged depression, it was revived and reinforced by the ballyhoo of the National Industrial Recovery Act. But when the ideology begins to crumble again, as it must, and the hopeless reality it disguises is revealed, the economic crisis of American capitalism will become a class and political crisis. We are witnessing not a “dawn of the gods” but the dawn of an era of momentous social struggle and change.

Footnote

1*. The invocations to the “new era” were also profitable. Among other successful exploiters was True Story, a magazine of highly sexy stories deodorized with moral platitudes and reached a circulation of over 2,000,000. At first True Story was used only by the cheaper class of mail-order advertisers. An advertising promotion story was necessary to “sell” the magazine to the big national advertisers. So True Story launched a promotion campaign, emphasizing that its readers were wage-earners, that wage-earner families constitute 86% of America, and that the income of wage-earners had increased enormously. “For the first time in history,” True Story informed advertisers, “the wage-earner is a prospect for advertised goods. He is the New Market that may make or break to-morrow’s merchandising leaders.” The climax of the campaign was a series of full-page advertisements in the New York Times (some of them appeared in the issues of May 21, June 25, October 14, and December 9, 1929). Here are a few gems:

“The economic history of the past ten years has been startling. The volunteering of bigger pay and shorter hours, in order that labor might have the money to buy and the leisure to enjoy the things that it helped to make, has virtually ended a capital-labor war which has been going on now for upward of three hundred years. And the opportunity now offered to labor to own an interest in the concerns in which it works has opened up an experiment in equality that has never been known before in the history of civilization.

“In making labor co-partner in your efforts and your enterprise, sharing your profits and your dreams with so little to be gained on your part and so much to be lost, you have probably taken the greatest forward step in human conduct that the world has ever known.

“To-day labor is buying over 65% in dollar volume of the things it helps to make ... It is the freedom from care with which they are buying, the freedom from worry in their eyes, the freedom from fear in their shoulder blades.”

It worked: True Story made millions in profits. But in spite of the imposing array of “economic” arguments and statistics, the campaign was based on distortions. Most of True Story’s readers were not wage-earners; 86% of America was not composed of wage-earners, and they did not buy “over 65%” of consumption goods; the rise in wage-earner income was grossly exaggerated.



Notes

1. New York Times, June 29, 1933; June 25, 1933; June 28, 1933; June 8, 1933; July 8, 1933; July 29, 1933; editorial, The Spirit of ’33, New York World-Telegram, July 3, 1933; Oswald Garrison Villard, The Roosevelt Revolution, Nation, July 26, 1933, p.91; New York Times, June 25, 1933; May 23, 1933; Rexford Guy Tugwell, The Ideas Behind the New Deal, New York Times Magazine, July 16, 1933, p. 2; Leonard Rogers, Industry’s New Deal, New York World-Telegram, June 12, 1933.

2. David A. Wells, Recent Economic Changes (1889), pp. v, 381, 466.

3. W. Jett Lauck, The New Industrial Revolution and Wages (1929), pp. 2, 84.

4. Caret Garett, The American Omen (1928), p. 84.

5. Melvin A. Traylor, New York Times, October 10, 1927; E.A. Filene, Times, March 8, 1928; Haley Fiske, Nation’s Business, May 20, 1927; the Mitchell, Rand and Mellon quotations are from New Market News, an advertising promotion publication issued by the magazine True Story (1928).

6. Benjamin A. Javits and Charles W. Wood, Make Everybody Rich Industry’s New Goal (1929), pp. 90, 280.

7. Nation’s Business, June 5, 1924, pp. 7–8.

8. New York Journal of Commerce, November 13, 1925.

9. Lewis Corey, The New Capitalism in American Labor Dynamics (1928), p. 62.

10. F.P. Stockbridge, The New Capitalism, Saturday Evening Post, November 6, 1926, p. 226.

11. Thomas Nixon Carver, The Present Economic Revolution in the United States (1924), pp. 9, 261–2.

12. Carver, Economic Revolution, pp. 91, 263.

13. Report of the Committee on Recent Economic Changes, of the President’s Conference on Unemployment, Herbert Hoover, Chairman, National Bureau of Economic Research, Recent Economic Changes in the United States (1929), 2 vols., v. I, pp. xxi–xxii.

14. Robert M. Davis, Long-Time Guarantees of Prosperity, Journal of the American Statistical Association, June, 1928, pp. 138–43.

15. Rexford Guy Tugwell, Industry’s Coming of Age (1927), pp. 93, 206.

16. New York Times, October 22 and December 3, 1929.

17. Quoted by W.J. Eiteman, Two Decades of Depression, New Republic, July 15, 1931, p. 225.

18. Stuart Chase, Prosperity: Fact or Myth (1930), p. 184.

19. Stuart Chase, Out of the Depression and After (1932), p. 11.

20. Charles A. and Mary R. Beard, Rise of American Civilization, 2 vols. (1928), v. II, p.800.

Last updated on 21 July 2018