ECONOMIC OPINION

IF there were conscious restriction upon the expression of opinion in America, this essay would possess the pompous certainty of an official document. Instead of threading its hazardous way through a mass of confused thought, it would record in formal terms acceptable utterance. In fact, the very restrictions upon thought and speech, with the aid of scissors and a license to speech, could easily be turned into a statement of the reputable theory of the welfare of the community.

Unluckily, however, American life has not been arranged to make matters easy for the interpreter of economic opinion. Every American is conscious of a right to his own opinion about “why all of us taken together are as well off as we are” and “why some of us are better off and others of us worse off than the average of us.” Whether this privilege comes from the Bill of Rights, the constitution of the United States, or his Simian ancestry, he could not say; but he is fully assured that it is “inalienable” and “indefeasible.” No restriction of birth, breeding, position, or wealth limits his right to an opinion or persuades him to esteem his more fortunate neighbour’s more highly than his own. Nor do intellectual limitations check the flow of words and of ideas. No one is examined upon the growth of industrialism, the institutions which make up the economic order, or the nature of an industrial problem before he is allowed to speak. In fact, the idea that a knowledge of the facts about the subject under discussion, or of the principles to be applied to it, is essential to the right to an opinion is a strange notion little understood here. Even if occasionally some potentate attempts a mild restriction upon the spoken or the written word, it checks only those who talk directly and therefore clumsily. Its principal effect is through provocation to add mightily to the volume of opinion.

The result is a conglomerate mass of opinion that sprawls through the known realm of economics and into regions uncharted. The mighty men of finance spin a theory of national welfare in terms of foreign concessions no more glibly than the knights of the road in solemn convention solve with words the riddle of unemployment. The newly enfranchised women compete with the members of the Dynamite Club in proposals for setting the industrial cosmos in order. Economic opinion bobs up in the financial journals, “the labour press,” the periodicals of the “learned” societies, and in all the “Christian” advocates. It shows itself boldly in political speeches, in directors’ reports, in public hearings, and in propagandist sheets. It lurks craftily in editorials, moving pictures, drawing-room lectures, poems, cartoons, and hymns. It ranges from the sonorous apologies for the existing order voiced by the Aaron Baal Professor of Christian Homiletics in the Midas Theological Seminary to the staccato denunciation of what is by the Sons of Martha Professor of Proletarian Tactics in the Karl Marx College for Workers.

A mere semblance of order is given to this heterogeneous mass of opinion by the conditions which make it. A common system of legal, business, and social usages is to be found the country over. This has left its impress too firmly in the assumptions which underlie thought to allow this material to be separate bits from so many mental universes. The prevailing scheme of economic life is so definitely established as to force its imprint upon the opinion that moves about it. Acceptable opinion is created in its likeness, and unacceptable opinion becomes acceptable opinion when the negatives are skilfully extracted. Protestants are concerned rather with eliminating the “evils” of “capitalism” than with eradicating it root and branch. Protestantism is rather a variant of orthodox doctrine than an independent system of thought. Radical opinion that is likely to pass the decent bounds of negation is kept small in volume by a press which allows it little upon which to feed. Accordingly, varied doctrines wear the semblance of unity.

Such elements, however, do not free this adventure into speculation from its perils. They merely make the hazards mortal. In the paragraphs below the economic opinion in America is recklessly resolved into four main classes. These are the laissez-faire opinion of the mid-19th century, the conventional “case for capitalism,” the protestant demand for “control,” and the academic insistence upon conscious “direction” of industrial change. Radical opinion gets a competent judgment elsewhere in this volume. Even in this bold outline the opinions of small minorities are lost to sight, and views and doctrines, seemingly alien to the authors who know their subtle differences, are often blurred into a single picture. To avoid the charge that the lion and the lamb have been pictured as one, no names have been called. Here as elsewhere particulars will rise up to curse their generalizations, and the whole will be found to be entirely too scanty to be disbursed into its parts. But the chance must be taken, and, after all, truth does not reside in copy-book mottoes.

I

The current types of economic opinion in this country all have a common origin. The men who express them are but a scant generation or two removed from the country or the small town. The opinions are so many variants of a stream of thought which goes back to a mid-19th century America of small towns and open country. This primitive economic opinion was formed out of the dust of the ground in the likeness of an exploitative America. The conditions which shaped it might be set forth in two lines of a school history thus: First, abundant natural resources; second, a scanty population; and third, the principle of letting the individual alone.

It was a chance at an economic opportunity which made America of the 19th century the “land of promise.” The raw materials of personal wealth were here in soil, stream, and mine. The equipment necessary to the crude exploitative farming of the time was easy to possess. Since there was an abundance, the resources essential to a chance at a living were to be had for the asking. One with enterprise enough to “go it alone” lived upon what he himself and his wealth in wife and children produced. He did not have to drive a shrewd bargain for the sale of his labour nor purchase the wherewithal to be fed and clothed in a market. There was no confusing scheme of prices to break the connection between effort and reward; opportunity and responsibility went hand in hand; success or failure was of one’s own fashioning. Where nature does most, man claims all; and in rural America men were quite disposed to claim personal credit for nature’s accomplishments. Since ample resources smothered even mediocre effort in plenty, the voice of chronic failure which blamed circumstance, fate, or “the system” was unheard. A freedom to have and to hold economic resources plentiful enough to supply all was the condition of material prosperity.

Even when the lure of natural resources drew men from agriculture to industrial exploitation conditions did not change materially. The population of the new towns for a while kept at least one foot upon the soil. When at last the city possessed its people, aliens came out of Southeastern Europe to do the “dirty work,” and the native born passed up into administrative, clerical, or professional positions. The alternative of farm employment and the rapid expansion of industry fixed a rough minimum beneath which wages could not fall. The expanding machine technique with large scale production by quantity methods turned out an abundance of goods evidenced alike in lower prices and in higher standards of living. The “captains of industry” were regarded by the community as the creators of the jobs which they dispensed and as the efficient cause of the prosperity of the neighbourhood. The trickle of immigration that swelled to a “stream” and rose to a “tide” is an eloquent testimonial of the time paid by the peasantry of Europe to the success of the American system of letting the individual alone in his business.

These conditions brought forth the lay economic theory acceptable to the national community. Its precepts came from experience, rather than from books; by intuition, rather than by reason. The welfare of the individual and the wealth of the nation were alike due to free institutions. In business and industry the individual was to be free to do as he pleased unless specifically forbidden by the State. The State was powerless to interfere with the individual unless granted specific “constitutional” authority to do so. Each knew what he wanted and was able to take care of himself. The interests of all were an aggregate of the interests of individuals. The prevailing scheme of institutions was accepted as a part of the immutable world of nature. Private property, if defended at all, was good because it gave the individual security and enabled him to enjoy the fruits of his own labour. The right of contract, exercised in a market characterized by “higgling,” gave one an occasional adventure beyond the horizon of a household economy. If perchance the individual stumbled into a bad bargain occasionally, so much the better. The mistake was a useful exercise in the development of the cardinal virtue of self-reliance. When the coming of industrialism made contract the basis of all industrial relations, the older justification was still used. Competition, with which it was always associated, was regarded as the prime agency in the organization of industry. It forced the elements of production into order and exercised a moral restraint over them. Under its régime men were rewarded in accordance with their deserts. In general, it was true beyond peradventure that “opportunity” knocked once “at every gate”; that there was “plenty of room at the top”; that each built the ladder by which he rose; and that even the humblest was “master of his fate.”

Out of such raw materials there was fashioned a body of professional economic theory. In a sense it was an imported product; for its earlier statement was that of English “classical” economics. But in reality it was the return of an earlier export, for accepted theory had been made from crude individualistic notions which England had got from America. In addition, at the hands of American economists it received a far more elaborate and articulate statement than had been given it overseas. These theorists used subtle analysis, ponderous logic, and circumlocution; but their decorous processes brought them to much the same conclusions that practical men gained from their limited experiences. Its strength and its acceptability were wholly due to the precision and verbiage with which it reduced to formal terms the common-sense economics of the day.

In its terms the economic order is made up of individuals. Each of these is actuated by the motive of self-interest. Each has for disposal personal services, goods, or property rights. Each must live upon goods and services purchased from others. Each must compete with his fellows in the sale of his wares and the purchase of his articles of livelihood. Because of the competition of sellers the wages of labour, the profits of capital, and the prices of goods cannot be forced to untoward heights. Because of the competition of buyers they cannot be driven too low. The equilibrium of this double competitive process assures to each a return which represents the just value of the service, the property right, or the good. Prices, by moving up and down in response to changing conditions, stimulate and retard consumption and production. Their very movement constantly reallocates resources to the production of a variety of goods and services in just the proportion which the consumers demand. In this theory the institutions which comprise the framework of the economic order are taken for granted. It has no place for an interference by the State with “private business.” It regards monopoly as a thing to be abjured, whether appearing as a capitalistic combine or as a union of workingmen. In the Eden of free enterprise the community’s resources yield all they have and competition rewards justly all the faithful who by serving themselves serve society. It is small wonder that sermons were preached upon “The Relation of Political Economy to Natural Theology.”

II

The conditions which made the economic opinion of the America of small towns and open country are gone. With their passing the older theories have been reshaped to new purposes. There are no longer free economic opportunities for all comers. Natural resources have been appropriated, and the natural differences between men have been enhanced by the artificial ones of ownership and inheritance. Wealth and control have alike been stripped from the many and concentrated in the few. The prevailing unit in business is the corporation. Establishments have been gathered into industries, and these have been articulated into a mighty industrial system, with its established rights, its customary ways of doing things, and its compulsions upon those who serve it. The older personal relation of “master” and “servant” abides only in indices of the records of the law courts. The contract of employment is now between a “soulless” but “legal entity” and a mere creature of flesh and blood. The more human individual, the survival of a less mechanical age, no longer lives upon the fruit of his individual toil. His welfare is pent in between his wages and the prices which he must pay for his necessities. Beyond this immediate bargain lies a mysterious economic system filled with unknown causes which threaten his income and even his employment. Those who possess have come into succession to those who ventured. In short, free enterprise has given way to an established system.

These events have left their mark upon economic opinion. It is altogether fitting that those who fell heir to the wealth piled up by free enterprise should gain its outer defences of theory and dialectic. So the older economics, with its logic and its blessing, has come as a legacy to those who have. Its newer statement, because of its well-known objective, may be called “the case for capitalism.” In its revision the adventurous militarism bent upon exploitation has given way to a pacifistic defence of security, possession, and things as they are.

In outward form few changes were necessary to convert the older theory of laissez-faire into a presentable case for capitalism. A more rigid and absolute statement of the classical doctrine was almost enough. In its terms the economic order is independent of other social arrangements. It is an automatic, self-regulating mechanism. Over it there rules an immutable and natural “law of supply and demand.” This maintains just prices, prevents exploitation, adjusts production and consumption to each other, secures the maximum of goods and services from the resources at hand, and disburses incomes in accordance with the merits of men and the verity of things. So just and impartial is the operation of this law that interference by the State amounts to meddlesome muddling. It cannot override natural law; therefore it should not.

It differs most from the older economics in the more explicit statement of the function of institutions. The growing inequality of income, of control, and of opportunity have presented facts that have to be faced. But even here, instead of contriving new defences, the advocates of capitalism have refurbished the older ones. The thing that is finds its justification in that which was. Property rights are to be preserved intact, because private property is essential to personal opportunity; just as if the propertyless did not exist and each was to win his living from his own acres or his own shop. The right of contract is not to be abridged, because the interests of both parties are advanced by a bargain between equals; just as if the corporate employer and the individual employé were alike in their freedom, their capacity to wait, and their power to shape the terms of the bargain. Prices are to be self-determined in open market, because competition will best reconcile the conflicting interests of buyers and sellers; just as if there was no semblance of monopoly among producers, no open price agreements, and no informal understandings. Individual initiative is not to be abridged, because it creates the wealth of the nation; just as if routine had no value for efficiency and the masses of men still had discretion in economic matters. The arrangements which make up the economic order find their validity in the symbolic language of ritual rather than in a prosaic recital of current fact.

This defence crosses the frontier which separates the economic from the political order only to appropriate the prestige of democracy. Its real concern is the preservation of the prevailing system wherein business controls industry for purposes of profit. Its formal solicitation is lest “the form of government” be changed. This concern finds expression in veneration for the work of the “fathers” (rather young men, by the way), not of machine technology and business enterprise, but of “representative government” and of “constitutional authority.” Its creed becomes propaganda, not for the defence of business, the security of corporations, or the preservation of managerial immunities, but for the defence of the nation, the security of America, and the preservation of “constitutional” rights. The newer economic arrangements are masked behind political rights and given the values of the political institutions which antedate them by many decades. In short, the staunchest defenders of the prevailing economic system believe that “their economic preferences are shared by the constitution of the United States.”

If we may borrow a term from its advocates, this body of opinion must be pronounced “theoretical.” In their speech a “theory” is a generalization which goes much further than its particulars warrant. In that sense their conclusions are not “practical.” The essential question with which this body of opinion is concerned is whether the scheme of institutions which focus upon profit-making make the members of the community, severally and collectively, as well off as they ought to be. It seems offhand that a realistic defence of the prevailing order might be convincingly formulated. At any rate, “the case for capitalism” is good enough to get into the records. Instead, its advocates have confused their own pecuniary success with the well-being of the community and have argued that because profits have been made the system is good. Like the classical economists they vindicate the system by assumption.

III

In the wake of the new industrialism there has come an economic opinion of protest. It is being gradually formulated by professional men, by farmers, by trade unionists, and by the younger business men who have escaped being “self-made.” Its hesitating and confused statement is due to the disturbed conditions out of which it comes. The varied interests of its many authors prevents unity of words or of principles. Its origin in the contact of minds steeped in the older individualism with the arresting facts of the newer economic order explains its current inarticulate expression. It can be set forth briefly only by subordinating the reality of variety to the tendencies which are clearly inherent within it.

The objective of this newer opinion is a modification of the prevailing order, rather than its overthrow. It is quite conscious of defects in its arrangements and knows that its fruits are not all good. It has never considered the question of the efficiency or inefficiency of the system as a whole. The older individualistic notions are strong enough to give an intuitive belief that the theory of the control of industry by business for profit is essentially sound. But it would eliminate the bad, patch up the indifferent, and retain the good. It would set up in the government an external authority which through regulation and repression would make business interests serve the community. Its faith is in private enterprise compelled by the State to promote “public welfare.” Its detail can best be suggested by typical illustrations.

There is, first of all, the attitude of the protestants towards freedom of contract. They accept the prevailing theory that the relations of buyer and seller, employer and employé, owner and agent, can safely be left to the free choice of all concerned. But they point out that in practice the principle does not give its assumed results. For, whereas the theory assumes the parties to be equal in their power to determine the terms of the contract, it is a matter of common knowledge that employers and labourers occupy unequal bargaining positions. They would leave relations to be determined by free bargaining; but, as a preliminary, they would attempt to establish equality of bargaining power. To that end they would have the contract made by “collective bargaining” between employers and employés “through representatives” chosen by each. Moreover, they would use the State to better the position of the weaker party. Thus legislation has been passed depriving employers of their right of requiring employés, as a condition of employment, not to remain members of labour unions. Although the courts have found such legislation to be “an arbitrary interference with the liberty of contract which no government can justify in a free land,” its advocates will insist that their aim has been only “to establish that equality in position between the parties in which liberty of contract begins.”

There is, in the next place, a growing opinion among the protestants that the State is “a moral agent” and should determine the rules under which business is to be carried on. They point out that in business there are bad as well as good conditions, that business men engage in proper as well as in improper practices, and that some activities harm while others help the community. In many instances the employer finds it to his advantage to establish conditions which the interests of the workers and of the consumers require. In others, the elevation of standards waits upon the pleasure of the most inconsiderate employer. The prohibition of child labour, the shortening of the working day, and the payment of a minimum wage may be advantageous alike to labourers and to the community; yet these innovations involve an increase in cost and cannot be made against the competition of the producer who will not establish them. In such cases it is the duty of the State to establish minimum conditions which must be met by all employers. The imposition of such standards in no way affects the system under which business is carried on; for the competition of rival sellers can be just as acute and just as considerate of the public, if all of them are forced to pay their employés a living wage, as if they are all free to force wages down to starvation. Upon this theory the State has established uniform weights and measures, prohibited the use of deleterious chemicals, stopped the sale of impure food, provided compensation for the human wear and tear of industry, and established minimum standards of safety, health, and service.

There is, finally, a growing opinion that in some industries the profit-making motive must be superseded by some other. In the railway industry it has been repeatedly shown that the pecuniary interest of the management fails to coincide with that of either the owners or of the shippers. Long ago the determination of charges for service was put beyond the discretion of the officials. Of late there has been an increasing tendency to make accounts, services, expenditures, valuations, and other matters meet standards of public service. When this has been effected, as it will be, the officials of the roads will become mere subordinates responsible to a public authority. Then profit-making as a guide to administration will have given way to an official judgment of results in terms of established standards. Then it will be discovered that public control formally rejected has been achieved by indirection. But many times ere this American opinion has come by devious paths to goals which its individualism has not allowed it to regard as quite desirable.

For the moment the medley of opinion here roughly characterized as a demand for control is dominant. Its proponents are almost as naïve as the advocates of capitalism in a belief in the essential goodness of a mythical system of “free enterprise.” They differ from them in placing greater emphasis upon voluntary associations and in demanding that the State from without compel business to serve the common good. As yet they have formulated no consistent theory of economics and no articulate programme for achieving their ends. Without a clear understanding of the development of industry and of the structure of the economic order, they are content to face specific problems when they meet them. They are far from ready to surrender an inherited belief in an individualistic theory of the common good.

IV

The changes of the last four decades, which make up “The Industrial Revolution in America,” have left their mark upon the economics of the schools. If there was a time when the thought of the professed economists was a thing apart from the common sense of the age, it ended with the coming of industrialism. Differ as it may in phrase, in method, and in statement, the economics in solid and dull treatises reflects, as it has always reflected, the opinions of the laity. If there were agreement among the sorts of men who gather at ball games and in smoking cars, the books on economics would all read alike. But when the plumber differs from the banker and the scrub woman refuses to take her ideas from the coupon clipper, it is futile to expect mere economists to agree. To some, the classical doctrine still serves as a sabbatical refuge from modern problems. Others, who “specialize” in trusts, tariffs, and labour are too busy being “scientific” to formulate general opinions. Still others insist upon creating a new economics concerned with the problem of directing industrial development to appointed ends. Each of these schools has a membership large enough to allow dissension within the ranks.

The revolt against the classical economics began when it encountered modern fact. Beyond the pale of doctrine taught by certified theorists appeared studies upon corporations, international trade, railway rates, craft unionism, and other matters of the newer fact. For a time those who studied these subjects were content to describe in superficial terms the results of their observations. But as facts accumulated they provoked generalizations at variance with the accepted principles of the older competitive theory. At the same time the rise of a newer history concerned with development rather than chronology, a new ethics that recognized the existence of a social order, and a new psychology that taught that the content of men’s behaviour is poured in by the environment, together made the foundations of the older economics very insecure.

For a time this protest found expression only in critical work. The picture of an economic order as a self-regulating mechanism, peopled with folk who could not but serve the community in serving themselves became very unreal. The complexity of industrialism made it hard to believe that the individual had knowledge enough to choose best for himself. The suspicion that frequently thought follows action made it hard to continue to believe in man’s complete rationality. The idea that incomes are different because opportunities are different led to a questioning of the justice of the ratings of men in the market. The unequal division of income made impossible pecuniary calculations in which each man counted for one and only for one. With these assumptions of 19th-century economics passed “the economic man,” “the Crusoe economy,” and the last of the divine theories, that of “enlightened self-interest.” It was no longer possible to build a defence of the existing order upon “the hedonistic conception of man” as “a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him inert.”

The most immediate effect of this criticism was a change in method. The older process of juggling economic laws out of assumptions about human nature, human motives, and the beneficence of competition lost prestige. It was evident that if the system was to be appraised the facts must be had. Accordingly a veritable multitude of facts, good, bad, and mostly indifferent were treasured up. This process of garnering information soon made it evident that the facts about the relationship of industry to the welfare of the community were too varied and too numerous to be separately catalogued. Since only totals could be used, economics came to rely upon facts presented in the quantitative language of statistics.

But since facts are not possessed of the virtue of self-determination, they did not yield an opinion which was very relevant or very truthful. Their use was for the moment nothing more than a substitution of the superstition of facts for that of logic. The facts were of value, because when properly interpreted they gave the story of what the economic system had done. But without the aid of standards it was impossible to determine whether it had worked well or ill, whether it had much or little to give in return for the solicitous concern about it. It was evident that modern industrialism was developing without conscious guidance. As long as no goal was fixed it was impossible to tell whether industrial development was proceeding in the right direction. As long as we were unmindful of the kind of society we wished ours to be, we could not appraise its accomplishments. Without standards all that could be said was that the system had worked as well as it had worked and that we were as well off as we were well off. The problem, therefore, became one of judging the system on the basis of the facts by means of standards.

Thus the newer economics has been of service in stating the problem with which opinion must be concerned. The “prevailing” economic order is one of many schemes of arrangements for making industry serve the purposes of the community. The system has been slowly evolved out of the institutions of the past, is constantly being affected by circumstances, and for the future is capable of conscious modification. How well it has served its purpose cannot be attested by an abstract argument proceeding from assumptions about human nature and the cosmos. A judgment upon its relative goodness or badness requires an appraisal of the facts in terms of standards. These standards must be obtained from our notions of the kind of society we want this to be. These notions must proceed from a scientific study of the properties of things and the needs of human beings. That judgment will be one not of goodness or badness, but of the relative merits of a very human scheme of arrangements compared with its alternatives.

The economists are reluctant to pass a judgment upon the prevailing order. The relevant facts are too scanty and the standards too inexact to warrant an appraisal of the virtues and the vices of “capitalism.” They distrust the eulogies of apologists because they do not square with the known facts. They are not convinced by the reformers, because they fear that they know as little about their own schemes as they do about current arrangements. They insist that a general judgment must be a progressive affair. The system will change through gradual modification; the larger problem will be solved by attention to an endless succession of minor problems. Each of these must be met with the facts and with an ideal of what our society should be. They have too little faith in the rationality of the collect to believe that problems can be faced in battalions or that a new order can emerge as a work of creation. They have little fear for “the future of the nation,” if only problems can be intelligently handled as they emerge. Their attitude towards the present system is one, neither of acceptance nor of rejection, but of doubt and of honest inquiry. Their faith is neither in the existing order nor in a hand-me-down substitute, but in a conscious direction of the process of change.

* * * * *

This tedious narrative has failed entirely in its purpose, if it has not revealed the strength and the weakness of economic opinion in America. Its merits stand out boldly in the preceding paragraphs; its defects are too striking to be concealed. The reader has already been informed; but the writer must inform himself. The essay, therefore, will close with an explicit statement of some three of the more obvious characteristics.

First, its most striking characteristic is its volume. In quantity it contains enough verbal and intellectual ammunition to justify or to wreck a dozen contradictory economic orders. If, in an orderly way, opinion became judgment and judgment ripened into the society of to-morrow, it would stand condemned. For little of it has a practical consequence and our ways of expression are very wasteful. But it also affords a harmless outlet for the dangerous emotions aroused by the wear and tear of everyday work in a humdrum universe. And, if it is true that we are, all of us, Simians by lineage, this is by far the most important function it serves.

Second, it is grounded none too well in information and principles. The ordinary mortal is busied with his own affairs. He lacks the time, the patience, and the equipment necessary to get at the facts about the material welfare of the nation. In the most casual way he makes up his mind, using for the purpose a few superficial facts, a number of prejudices, and a bit of experience. He has little idea of where we are in the course of social development, of the forces which have brought us here, or of where we ought to be going. Since the opinions of groups and of the nation are aggregates of individual opinion, the ideas of those who have an intellectual right to speak are not a large part of the compound.

Third, despite its crudeness and variety, it possesses elements of real value. Its very volume creates at least a statistical probability that some of it is of high quality. The waste of much of it gives the rest a real chance of expression in social policy. The common features of industrialism are giving to men something of a common experience out of which there will come a more or less common-sense appreciation of problems and of ideals. This will dictate the larger features of a future social policy. The particularized opinion which finds expression in the detailed formulation of programmes must be left to the experts. The great masses of men must learn that these problems are technical and must trust the judgment of those who know. Despite the record of halting development and of confused statement, the pages above indicate that the economic opinion in America is coming slowly to an appreciation of the factors upon which “the good life for all” really rests.

But enough. Opinion by being economic does not cease to be opinion, and an essay about it is only more opinion.

Walton H. Hamilton