Part II - Toward the Point of No Return

In the final decades of the nineteenth century a number of dissenting movements developed, mainly among farmers of the Middle West, the Northwest, and the South. There were Grangerism, Populism, Greenbackism, and other political movements and parties. There were many notable agitators, such as Ben Tillman, Jerry Simpson, and Jacob Coxey. There were writers like "Coin" Harvey and Henry George, and later there were authentic statesmen like Robert M. La Follette, Hiram Johnson, Tom L. Johnson, Hazen S. Pen- . and John P. Altgeld. In Congress there finally arose a 73 Origins, Theories, and Motives of Statism group of recalcitrant Republicans led by Victor Murdock, George Norris, and others. There was William Jennings Bryan, whose life spanned the whole era and whose naIve belief in the power of govern ment to cure economic and social ills was revealed in a series of such proposals as free silver and government ownership of railroads. As Secretary of State, Bryan proposed and secured the adoption of "cooling-off" treaties to cure war. In the twi light of life, still turning to governmental panaceas, he would have cured intemperance by prohibition and atheism by laws against the teaching of evolution. His life was an epic in primitive statism.

This movement of protest, of which Lincoln Steffens was the most colorful historian, challenged the existing order on three fronts. It protested against corruption in government. It sought, through legislation, a larger control by govern ment over economic life. And it sought through government to provide a larger measure of services· and social ameliora tion for the so-called underprivileged. Theodore Roosevelt, who joined and became the leader of this movement, added a new factor to its program-the en largement of Federal power. He pointed out that the control of business by government failed because there was a "twi light zone" between Federal and state authority, and he sought to push Federal power into this gap. The essential character of the progressive movement was therefore a greater intervention by government in private economy and life, and the enlargement of Federal authority at the expense of the states.

Noone except the extremists in this progressive movement envisaged or advocated socialism as a remedy. They assumed free enterprise. There was socialism and "labor" socialism. But the plat forms of the Socialist and Socialist Labor parties of those 74 Sources of American Statism years contain a .mixture of proposals for government owner ship, easy money, and paternalism of various kinds. Organized labor played only a small part in these move ments of protest. There were great strikes, but these had no direct political significance. Samuel Compers, the major la bor leader of those times, was as valiant a champion of free enterprise as was his friend Mark Hanna. Progressivism. in more recent years has moved far beyond its original scope, assuming that because a small amount of government intervention proved to be a healthy corrective for the evils of capitalism, more and more is needed. In this perversion, more than in an invasion of alien doctrines, lies our present danger.

WESTERN SEEDS OF SOCIALISM Mingled here and there with grass-roots progressivism in the Middle West and Northwest was authentic socialism brought over by Scandinavian, ·German, and Czech immi grants. The traditions of the forebears of these excellent peo ple were developed quite independently of those of the Brit ish ancestors of earlier immigrants. They did not share the deep Anglo-American distrust of government. Nor were they essentially Marxist, for Marxism in Europe did not really get under way until most of our North European immigrants had come to America. But in the heritage of these people there was a deeply rooted antagonism to feudal rulers. The Norwegians also brought a dislike for the trading classes of the Norwegian cities. . It is also important to note that these immigrants brought with them well established practices of municipal ownership ..and cooperative buying and selling. The ideals of the free market and free enterprise were never basic in· Germany and Scandinavia, but were always overshadowed by the centuries75 Origins, Theories, and Motives of Statism old "corporation" or guild spirit. Cartels and other forms of regulated markets were taken as a matter of course.

Even in such a stalwart Republican state as Nebraska, mu nicipal ownership of public utilities, especially electricity, is quite general. That state, it may he added, for forty years consistently supported George Norris, the father of TVA. Later there came great numbers of Poles and other Slavic strains. They had no republican government in their past, only oppression, grinding poverty, and the shadow of great landowners. The more vital minds among them were already aware of Marx. Volumes might be written on the influence "in our life of the collectivist and socialistic thought of various immigrant groups. While all these strains of new Americans have been potent factors in our economic progress, the immensely com plex and long-standing influences toward statism which they brought are a part of the background of our problem. The influence of these Continental ideas has been shown in the preachments and acts of many political leaders in the Midwest and Northwest, and of such groups in that region as the NonPartisan League, the Farmer-Labor Party and, more recently, the Farmers' Union.

Their influence on economic theory has been noticeable. Thorstein Veblen, the inspiration of many economists, was the embitter~ed son of impoverished Scandinavian parents. THE MARXIAN INVASION The voluminous writings of British Fabians have had wide acceptance among educators and other leaders of American opinion. George Bernard Shaw, Sidney and Beatrice Webb, Harold Laski, and others have made thousands of Americans sympathetically aware of socialism. The influence of John Maynard Keynes, who was not a 76 Growth and Manifestations of Statism Fabian but who believed in compensatory spending, is too well known to need more than a mention. A considerable number of American economists have also been deeply moved by such Continental writers as Werner Sombart, who rather regretfully predicted that socialism was inevitable. Professor Joseph Schumpeter of Harvard, who was at one time Austrian Minister of Finance, said again and again,· and most impressively shortly before nis death in 1949, that the trend in the United· States toward the .welfare state had become too strong to be stopped.

The idea of economic planning by the state was vigorously promoted by Walter. Rathenau in a pamphlet published in 1914, "Germany's Raw Material Management." This had its place in the over-all economic planning of the First World War. Ironically, its partial use here became a major factor in crushing Germany in two wars. Four hundred thousand cop" ies of the English translation of Rathenau's pamphlet: were sold. Lenin, suddenly possessed of power, had no plans. Later, he said: "I do not know of any socialist who has dealt with these problems. . . . We need a plan at once to give the masses a shining, unimpeded example to work for." Rathenau supplied the idea and Communism adopted planning as state policy. Planning came also to the bewildered British Fabians. And its echoes reached many Americans. Growth and Manifestations of Statism THE REVOLUTION IN EDUCATION There has been, also over the past half century, a profound change in American education. An entire generation has 77 Origins, Theories, and Motives of Statism been indoctrinated in a point of view quite unlike that of the youths of fifty years ago. This point of view has affected all learning and literature, but it is sufficient here to note only the aspect dealing with the so-called social sciences, includ ing history.

Our schools, except for a fe,v large universities, before the beginning of this century taught practically no economics, political science, or sociology. History was dominated by a classic tradition, perhaps best illustrated by Bancroft's great work on the United States. That tradition was pervaded by an almost mythological view of America· as a· sort of preserve guarded by divine concern and dedicated to a Manifest Des tiny. Early in this century, with the leadership of Charles A. Beard, James Harvey Robinson, Carl Becker, and others, his tory ,vas rewritten, with emphasis upon economic and social facts and developments. It was to be expected that this change should be overemphasized, since these new writers were engaged in overwhelming an old and highly entrenched and privileged intellectual order. Their writings expounded plenty of the materialistic interpretation of history. Some of this came from Marx, but it also had roots in more remote philosophers and historians. The new order was almost com pletely victorious and its viewpoints penetrated the texts not only at the college level but far down into the common schools. John Dewey has been the philosopher and prophet of this movement.

This emphasis on economic and social facts manifested it self in the rise of the so-called social studies in the lower grades, and sociology in higher education. The old "civics," in which the Constitution and governmental institutions were stressed, was almost obliterated in the lower ranges of education. In the colleges the social sciences burgeoned into large departments with many specialized and detailed courses. Ultimately the great law schools were impregnated by so78 Growth and Manifestations of Statism cial studies, and courses and research originally devoted to precedent in case-law threw more and more emphasis on eco nomic and social facts. The influence of this trend upon a 'new generation of lawyers and judges has been apparent in judicial lawmaking. Not only in the slant of education, but in its services has there been immense change. Under the leadership· of the great state universities there has been an enlargement of the range of teachable subjects and an extension of general as sistance to citizens.· Since this expansion has been most nota ble in public schools and state-supported universities and colleges~ the importance of government in our life has in creased.

A large part of this expansion has been a wholesome influ ence in our life. I note it merely to point up an enlargement of emphasis on government. Still it deserves to be said that this indiscriminate expan sion of education has offered a good deal of opportunity for the wholesale infusion of propaganda into teaching. The forces released in such a revolution involve much special pleading under the guise of free inquiry. Our so-called "so cial" teaching tends to assume that, since government has steadily increased in importance over a generation or so, "progress" can only consist in a continuation of that trend. In that respect, pioneers like Beard set·.in motion more. than they anticipated, and in some cases·.they lived to view with great apprehension the perversion of their ideas. This was especially true of Beard. THE PERVERSION OF THE NEW DEAL The early New Deal measures, with the exception of the Tennessee Valley Authority plan, were fairly mild reforms.

They came from many sources. In general the early or, as I would designate it, the first 79 Origins, Theories, and Motives of Statism New Deal was merely an extension of the 1912 Progressive Party platform. It seemed in 1932 that we had merely picked up the trail abandoned two decades before. The famous Na tional Recovery Act was an adaptation of the Progressive idea of a cooperative effort of competitors in an industry for wholesome common purposes under the mediating but not the controlling influence of the government. The farm pro gram was created by organized farm movements in the Mid dle West. The idea of regulating the issue and exchange of securities for the protection of investors was taken from the "blue sky" laws of several states and from century-old British legislation. The Tennessee Valley Plan, the socialistic poten tialities of which were not widely realized at the time, caIne largely from the public-ownership ideas of Senator George Norris. The fiscal policies of Franklin D. Roosevelt were largely hit-or-miss improvisations mixed with plenty of the old inflationary ideas of Bryan and others. Social security plans later were derived from those of some of the states and Britain.

After two or three years some of these measures were ex tended, not to say perverted, by Roosevelt into a trend that is the source for much of our present danger. After the NRA, there was enacted the Wagner Labor Relations Act, which threw the power of government on the side of labor in indus trial disputes and authorized government intervention in or ganizing labor. The relief program and the carrying on of public works on a modest scale were perverted into a great spend and spend, tax and tax, elect and elect government agency. The farm program, which Roosevelt originally said would not be a burden on the Treasury, developed into an immense structure of subsidies, supports, and guarantees. The TVA excited the imaginatio~ of the planners and led to the present effort to create such authorities on a nationwide scale. And the acceptance of deficits, first regarded as a nec80 Growth and Manifestations of Statism essClrry evil, finally, under the influence of the new economics, was regarded as an unmitigated good. Meanwhile, bureauc~ racy and Federal power grew apace at the expense of the tax· payers and the states.

POLITICAL ACTION· GROUPS Over the .past seve,nteen years many private. groups, com mittees~ and associClrtionshave been formed and reformed, changing names and officers with great .frequency, but always with the single purpose of extending the scope· of govern ment. Some· of these have been genuine Communist fronts, some have had Communist infiltration; others are simply made. up of well~intentioned people who favor special ver.. sionsof a welfare state. The most permanent residuary sur.. vivor of these movements is the Americans for Democratic Action. AMONG THE ·BUREAUCRATS In the early days of the New Deal, I was in a position to see clearly and in detail the great migration of those who came to Washington seeking, and for the most part finding, government employment. The accession of Roosevelt was re garded by them as a political, almost a social revolution. As in all such upheavals, thousands were inspired to participate, either in response toa wholly idealistic impulse to help, or as a means of slaking a thirst for adventure, or for the more pro saic purpose of getting gainful employment after years of more or less impoverished dedication to opposition to things as they were.

These people were a variegated lot. Nonconformity is in.. finitely diversified. There might be some uniformity in a·be.. lief that the country is sick, but prognosis and treatment in 81 Origins, Theories, and Motives of Statism politics depend upon personal predilection and character. It is unnecessary to suggest the kinds of remedies and nostrums that were advocated. The point is that nearly everybody who applied for employment sooner or later found it. There was little sifting or investigation, and far too little adaptation of the employee to the job. Those who made the selections, even some Cabinet members, were themselves new to public service. Allegiance to the policies and personality of the President was a test. But this was a poor test, because the Roosevelt policies were themselves an amalgam of many phi losophies. One test was fairly well observed, and the President him self regarded it as important. People were not to be put in charge of matters in which they had lived their lives and ac quired their habits of thought and action. Thus, it was be lieved, private "interests" would be kept from places of privi lege and power. One Cabinet member, in seeking to fill a responsible place in his department, told me that he wanted only college professors, for only in them could he find "intel lectual honesty." Skills were at a discount. Ideological sym pathy was at a premium.

To anyone of even mildly conservative instincts, it was deeply disturbing to witness at first hand the activities of some of these innovators. The possession of power spurred them to new schemes for government action. An abundance of leisure, permitted by the lax discipline of bureaucracy, of fered them time for the exercise of fervent imagination. It was no secret that a great number of these reformers were admirers of the "great Soviet experiment." And some, we now know, were secret agents of Communism. In my opinion, there is a greater danger in collectivists than in the betrayal of our secrets to foreign powers. The danger lies in what can be done to a nation by public officials who do not believe in a free economy. In Roosevelt's day there were many people working for the government who re82 Growth and Manifestations of Statism garded his reforms as a mere prelude to revolution. "He is only a Kerensky," they were in the habit of saying.

STATISM IN THE STATES The wide possibilities of independent state action, always latent in the Constitution, were perhaps most fully demon trated by Huey Long in Louisiana. At the height of his re gime, he achieved an almost complete dictatorship. The forms of republic that are guaranteed to the states under the Constitution were maintained, but Long's will or caprice was dominant, and great public works and miscellaneous hand outs to poor people and communities were the basis of his power. Long, however, was no doctrinaire socialist. He wanted business to remain in private hands and to prosper, for thus he could exact through taxation or political contri butions what he needed to consolidate his power. He could do this because he ruled a state rich in resources. Other· states, however; have drifted toward socialism with out dictatorship. This has not taken the form of actual con...

trol of the means of production. It has come about through the great expansion of social services. The best examples of this. are Washington and California. There the advocates of state welfare have persistently worked to eliminate the prin ciple that .government concern for personal welfare should stop at securing a minimum subsistence for all. They have largely substituted the objective of equal shares for all. By this I mean specifically the violent opposition to any "means test" in the dispensing of such gratuities as old-age assistance, medical aid, and pensions. In those states it has been possible to further such ends un der direct legislation by a vote of the people. Thus by a sim ple exercise of suffrage a state is obliged to set up and pay for .vast welfare projects, and the assent of governors and legisla tures becomes more or less formal. Governor Warren of.Cali8S Origins, Theories, and Motives of Statism fornia, in his budget message in 1949, pointed out that two thirds of the billion dollars required had been voted by the people; the established government could do nothing but find the taxes to pay the bill.

The peril here is that the resources of a state are limited. Ultimately, if people continue to vote money to themselves, states must depend more and more upon Federal grants, and state responsibility and power will be engulfed. Moreover, in such states organizations with socialist. objec tives are spawned, supported, and encouraged. The threat of the famous socialistic "production for use" movement is well remembered in California. RIFTS IN THE CONSTITUTION The Constitution is a mighty protector of our liberties, but the past twelve years have proved that through its inter pretation socialism could arrive in this country without for mal amendment. The late Justice Frank Murphy asserted this in the Schneiderman case in 1942 • A wide avenue for socialism is the expression "general wel fare," which appears twice in the Constitution. The Pream ble lists among the purposes of the Constitution "to promote the general welfare." Muchmore important, in judicial in terpretation, is the expression in Article I, Section 8: "The Congress shall have power to lay and collect taxes, duties, im posts and excises, to pay the debts and provide for the com mon defense and general welfare of the United States."

For more than a century "general welfare" was very cau tiously dealt with both by Congress in its legislation. and by the Supreme Court in its interpretations. There is great dis pute about what the makers of the Constitution had in mind in phrasing this sentence. Certainly they could not have con ceived of its use to permit the Federal government to levy Growth and Manifestations of Statism taxes for purposes either clearly within the province of the states or forbidden to both the Federal government and the states. Jefferson scrutinized this grant of power with grave con cern. His opinion was that under it Congress "could do what ever they may think or pretend would promote the public welfare, which construction would make that of itself acorn plete government without limitation of power." Presumably, he hoped for Congressional testraint if the courts disre garded the Tenth Amendment, a hope since dashed by Con gressional majorities that .have sought votes in the sacred name of this same Jefferson.

Common sense would suggest that, since the statements among which the words "promote the general welfare" ap pear all relate to the nation as a whole, "general welfare" means the welfare of the nation as a whole. But instead, we are asked to believe that every little welfare is embodied in this generality. It is easy to see that if every individual or group were to attain all the "welfare" it wants and can exact by voting strength, the nation's solvency~i.e., the nation's welfare-would vanish and all would sink in common ruin. The general welfare of the nation is more than the. sum of all individual welfares. There is also a trend in decisions by the so~called "liberal" judges of the Supreme Court to arrange the rights of life, lib erty, and property in an order of descending importance. This trend has been vigorously attacked by some of the judges themselves and by· such authoritative expon~nts of constitutional law as the late Chief Justice Stone and former Appellate Judge Learned Hand. Professor Paul A. Freund of Harvard has clearly defined the· dangers of this trend in his' little book, On Understandingthe Supreme Court. 1 Such an interpretation violates the entire body of tradition that the 1 (Boston: Little, Brown and Company; 1949).

85 Origins, Theories, and Motives of Statism rights of life, liberty, and property are equal and indivisible. The present Court majority makes property a second-or third-class right. The Declaration of Human Rights of the United Nations, created under the chairmanship of Eleanor Roosevelt, goes a step further. It eliminates property from the trilogy of rights and substitutes "security of person." Finally, there is the income-tax amendment to the Consti tution, which lays no limit at all upon the power of Congress to take the income of individuals and corporations, from whatever source derived. This brief re'Ziew of the manner in which the Constitution has been breached in the interes~ of statism makes it clear that the answer to the trend toward supergovernment cannot come through the courts. It must be expressed politically and at the polls. THE CAPTURE OF THE DEMOCRATIC PARTY There is little likeness between the Democratic Party of 1932 and the Democratic Party of 1951. The personnel of its leadership and the nature of its policies have undergone a profound change.

When Roosevelt was nominated, the party stood for a se ries of traditional principles-the constitutional rights and powers of the states, economical government, reduction of the bureaucracy, and justice in industrial relations. It pas gradually been transformed into a Federalist party, a collab orator with labor unions, with an unprecedented bureauc racy, an unbalanced budget as a first principle, and a welfare state as an objective. An intense· struggle within the party has accompanied this change. In the early Roosevelt years the more conservative Northern leaders broke away from the party leadership. Southern conservatives remained nominally Democratic, but carried on their dissent in Congress. 86 Growth and Manifestations of Statism The change in policy and strategy by Roosevelt and others was calculated. Labor union leaders, particularly those of the new C.I.O., abandoned the traditional detachment of the Gompers era and moved bag and baggage into the party. A whole battalion of socialistic planners moved into positions of political power in the government. City machines and bosses, little concerned with principle and a1vare of the vast patronage involved in the government's new policies, learned the jargon of the welfare state and went along. Per sistent preference in appointments by Roosevelt raised the more radical partisans to high places.

The most vivid demonstration of the power. of the· statists was in the Democratic convention of 1948, when over the op position of traditional Democrats and despite the plans of the nominal· leaders of that convention a resolution on civil rights was jammed through. The party that began with Jeffersonian distrust of govern ment has become a powerful instrument of statism through Federal power. MACHINE POLITICS ON THE FEDERAL LEVEL While statists· and statism have become more powerful in the Democratic Party, another development has taken place. The immense appeal to minority groups which is possible in a government dedicated to the welfare principle has enabled leaders of the party to weld it into a powerful machine. At the head of this machine, which is centered in the Federal government, is the Chief Executive. Presidents Roosevelt and Truman have been by temperament and training ideally suited to the purposes of this development. The former was not only the shrewdest politician of his time, but a man with a major appetite for power. The latter, while less imperial in his ambitions, conceives of high politics in terms of the lower tones of his Kansas City tradition.

87 Origins, Theories, and Motives of Statism To win elections,· such a politician considers it sufficient to exact political service in return for jobs or favors at public expense and also to appeal to the cupidity and prejudices of a sufficient number of minority groups to assure a majori~y. Promises are made, to be redeemed out of the public treas .. ury, and class is set against class by sly charges and innuen does. It seems quite obvious that President Truman rose in pol.. itics with no special predilection for statist ideology. Funda mental questions of economic and social reform probably never entered his cosmos. He, like Roosevelt in his earlier years, accepted the order of things as it stood. President Tru man is probably mystified when people call his policies so· cialistic. His speeches are filled with capitalistic platitudes. His economic proposals ·are carefully coated-no doubt by shrewd helpers-with fulsome assurances of free markets and capitalistic prosperity.

But Truman's preference for machine rule, his alliances with radical minorities, his preference for centralized gov.. ernment, and his belief in the welfare state-all these widen the avenue for the advent of socialism. For socialism seeks first the control of the machinery of a party and then (through the party) of the government and the nation. , Statist Economics POLITICS DISCOVERS THE NEW ECONOMICS Almost any political purpose can be supported by what can be called "scientific economics." It is largely a matter of selecting the appropriate economist or economic theory. The New Deal was a fortuitous combination of many the ories. For a while, none of these gained complete ascendancy. 88 Statist Economics But after two or three years the Federal Administration turned to more government spending and more governmen tal intervention ·in economic life. Doctrines held by an artic ulate· minority of professional economists were found to be useful rationalizations of political policies.

The influence of these -economists became clear after 1936. By 1939-40, they were clearly dominant in the Administra tion, and in the famous hearings of the Temporary National Economic Committee (T.N.E.C.) they had afield day. Their point of view can be summarized in a series of propositions: 1. The economy of the United States has become "ma ture"-i.e., the frontier is gone and with it free land for an expanding population. The great industries that dominate economic ,life are also mature-i.e., they need no venture capital, and live off their own earnings. Also-and this is ob viously absurd-their plant has been built and new expan sion is unnecessary. 2. Opportunity for new and small industries is shrinking, owing to a constant increase (due to inflation) in the amount of capital necessary to start, and owing also to large fixed costs· in wages and overhead. Hence, government must fi nance new industries at very low rates of interest.

3. Since a "mature economy" has arrived and there isa dearth of opportunity for capital investment in big indus tries, there is a growth in private hands ofa "poisonous'" sup ply of savings. This must be '''channeled off" by taxation. 4,. The most convenient "channel" is taxation to raise money for huge public works, to create employment, and "stabilize" the economy. This is called ~'''compensatory spending." 5. More purchasing power must be created by higher wages. Hence, government influence must be thrown behind labor unions and their demands. 6. In order to enlarge spending quickly to meet the fluc tuations of economic activity, appropriations should be made '89 Origins, Theories, and Motives of Statism by Congress in great lump sums for a series of years. The Ex ecutive should then have wide discretion as to when and why to spend. This proposal really asks Congress to surrender its power over the purse.

7. Closely related to this is the proposal to give to the Ex ecutive power to fix taxes. This is pleasantly called "flexible taxation." It is a broadening of the Executive power to fix tariff rates. This, of course, nullifies the great principle of taxation through representation. 8. Roosevelt toyed with, and cautiously experimented with in at least one budget message, an idea advanced by some economists to arrange the budget by setting up against expenditures the "value" of the public works created. One name for this was an "assets budget." Its effect would be to hide the real state of the nation's finances. Its fallacy lies in its deviation from established principles of accounting, be cause, for instance, a public work that produces no revenue to liquidate its costs is not a material asset: it is a liability. The fact that such works are good for people is important, but these intangibles cannot be calculated in budgetary fig ures.

It is easy to see in these "principles" an approach to social ism. The steps are: the suppression of free enterprise; the as sumption by the state of industrial financing; the redistribu tion of wealth through taxation; great spending, sugar-coated by artful but specious changes in budgeting and accounting' methods; the acquisition of vast powers by those in charge of government; and, finally, the gradual dissolution of repre sentative government by the absorption into the Executive of the powers of Congress. THE NEWER ECONOMICS OF THE TRUMAN ERA The war, with its enormous taxes and spending, Executive discretion, and wide government controls, fulfilled for a time 90 Statist Economics the wildest dreams of the statist economists and little was heard of their peacetime plans and ideas. But with the end of war and the accession of Truman, statist views began to· re appear in a modified form. Their first embodiment in legis lative proposals was a so:-called "full employment bill,"

which proposed virtual economic dictatorship by the Presi dent. This.was watered.down by Congress to an act, passed in 1946, that gave the President a "Council of Economic Ad visers," which was to provide him with an annual report, the oretically a comprehensive account of the economic state of the union but actually what Dr. Edwin G. Nourse, the first chairman of the Council, now regards as a rationalization, in economic terms, of the political purposes of the President. Since a majority of the President's Council of Economic Advisers were devoted to the economic theories that domi nated the prewar Roosevelt Administration, and since the Council has become the center of the Administration's eco nomic thinking, it has been easy, since 1946, to identify the economics behind the President's policies. Briefly summarized, it is as follows: I. It assumes not a "mature" economy but an ever ex panding one.

2. In the field of agriculture, it calls for price supports and "production payments." The latter are actually food subsi dies in indeterminate amounts. 3. If business hesitates to provide private investment, there should be large lending by the Federal government to businesses and would-be businesses to stimulate production and employment. Government should go into businesses of its own, such as iron and steel. 4. Federal deficit-spending is to be accepted not as an un pleasant necessity but as an economic benefit. There will be balancing of the budget, therefore, not in a single year but over an indefinite number of years, which in reality will mean never. 91 Origins, Theories, and Motives of Statism 5. Encouragement of labor demands for a high rate of wage-increases. 6. A quasi-corporative economy similar to European pat terns consisting of (a) government "fact-finding" boards, which go beyond mere fact-finding to determining how to distribute the gains of efficiency; (b) union-managed pension funds; (c) industries like bituminous coal actually operated by unions with government backing; and (d) labor-management-government-controlled industries.

7. The adoption of inflation as a permanent policy. Re... course to inflationary methods in the early years of the Roosevelt Administration was justified by the fact that we were in a state of deflation. "Reflation" was the term used to distinguish the recovery effort from one of calculated infla: tion, with all of its dangerous potentials. Price supports for farmers, higher wages for workers, low, managed interest rates, silver purchases, and deficit financing were the rule. Al ways in those days there was the assurance that when prices attained a predetermined height, say the level of 1926, these accelerants would be discontinued and stability would be maintained. In the Truman era the second· half of the pre scription has been dropped. Thus the economics of the Truman Administration car ries on where that of the Roosevelt Administration left off. THE CULT OF PLANNING In the British Parliamentary election in February 1950, I was struck by the extent to which Labour Party orators talked of planning. They seldom spoke of socialism and al most never of nationalization. That was because they were desperately trying to win the votes of the middle class. They had also found that their working-class supporters were in92 Statist Economics terested not in socialism for its own sake but in the necessi ties and amenities of life, such as food, houses, and social services. "Planning" is a good Anglo-American word that means all things to all men except socialists, to whom it is an exact synonym of socialism.

This political hypocrisy in using the word "planning" in stead of socialism has been emulated by Americans of the same persuasion and with the same objectives. American stat ists have revealed their interpretation of a planned economy at great length and on many occasions. In a planned economy there would be set up government committees or authorities to study and plan either the entire economy at once, or vari ous segments of it, and lay down working rules. If these plans are not followed, the government will take over· and operate them itself. Planning is therefore not distinct from socialism; it is national socialism in its initial stage. It should be emphasized that government planning has be come a reality in Britain. It has not reached that stage in the United States. It is, however, the very heart of the political and economic philosophy of such people of influence as Henry Wallace, Walter Reuther, Rexford Tugwell, Stuart Chase, and George Soule. It runs through the entire program of the A.D.A. It is being assiduously applied within special fields by the bureaus in Washington. It is the basic argument for such projects as the various valley authorities. Its realiza tion as a primary policy of the Democratic Party is inevitable if the left wing of that· party retains dominance. Moreover, the necessities of war preparation offer. a perfect screen for its extension.

THE MARXIAN PROGRAM In this review of the characteristics of the statist trends in America, it may be well to keep before us the !post orthodox of socialist plans of conquest. The following are the measures 93 Origins,Theories,and Motivesof Statism proposed by Marx and Engels in the Communist Manifesto. It should be noted that these are designed for "the most ad vanced countries." 1. Abolition of property in land and application of all rents of land to public purposes. 2. A heavy progressive or graduated income tax. 3. Abolition of all right of inheritance. 4. Confiscation of the property of all emigrants and rebels. 5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly. 6. Centralization of the means of communication and transport in the hands of the state .. 7. Extension of· factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accord ance with a common plan.

8. Equal obligation of all to work. Establishment of in dustrial armies, especially for agriculture. 9. Combination of agriculture with manufacturing in dustries; gradual abolition of the distinction between town and country, by a more equable distribution of the popula tion over the country. 10. Free education for all children in public schools. Abo litionof child factory labor in its present form. Combination of education with industrial production, and so forth. The Seductive Appeal of State Welfare Since the origins and manifestations of statism are so many and so complex, it follows that those who favor it have many and complex motives. Some of these are rooted in pure selfishness. People in ev94 The Seductive Appeal of State Welfare ery party or movement acquire after a while a vested interest to· protect and enlarge. There are others who. hope for per sonal betterment or renown in any change in the existing· or der. They have nothing to lose and much to gain. Others are driven by envy or hatred ..

Psychopathology manifests itself in many ways. There is the quest for a faith by people who find conservative reli gions and patriotism inadequate for their spiritual yearnings. There is the urge within some who are fortunately born or well-to-do to purge themselves of imagined selfishness .by turning against their own interests. A well-known psychia trist has encouraged this means of "deliverance" among his patients. His theory is that by becoming an antagonist to one's "class," one reaches an eminence above that class. There are also persecution complexes, in which the victim imagines that a few "rich, evil men" are subtly seeking to de stroy him. The list of such motives for embracing radical causes is very long. A more important motive of those who embrace statism is the belief, already mentioned, that a capitalist society cannot overcome its defects and must die. Thus, since there has been so strong a trend toward state intervention over the past half century, there must be a continuation of that trend to com plete socialism. A distinguished Republican after the 1948 election said in a tone of resignation that he was convinced that the world was in the grip of a revolution and that he felt it useless to struggle against it. A short time after that, he retired permanently from politics.

Most important of all are those who believe that the ulti mate in mutual aid, humanitarianism, and the realization of an abundant life for all can be achieved only by the ministra tions of a benevolent government. These people believe, fur ther, that all our traditional freedoms. can be preserved· in a state exclusively dedicated to those ends. Neither ridicule nor an attack upon personal motives should be used to meet 95 .

Origins;)-Theories;)and Motivesof Statism their arguments, for most of them are sincere and unselfish, and within limitations their argument is rationally urged. It is with this belief that we should have a real concern. The easiest way to describe the grip of the' concept of a welfare state on so many warm-hearted Americans is by a brief case history. Herbert Lehman, United States Senator from New York, was' for many years a successful businessman. He is a member of an influential investment-banking family. Prior to his entrance into politics, he gave much time and ef fort to private philanthropic activities. In 192 9 he became Lieutenant ,Governor of New York and, after Franklin Roosevelt's election to the Presidency, attained the office of Governor, which he held for ten years. During and after the war he served the Federal government in ;:lmeliorative activi ties in foreign countries. In 1949 he was elected to the office he now holds.

Senator Lehman deserves his reputation as a benevolent, kindly man. As a statesman, he is neither brilliant, eloquent nor profound. His mental processes are simple; his most suc cessful role has been that of a tidy, energetic administrator. His instincts made it easy for him to participate actively and vocally in the humanitarian movement in New York pol itics. Concern for "humanity" was the watchword in the po litical career of Governor Alfred E. Smith, whom Lehman supported; in the Governorship of Franklin Roosevelt, under whom Lehman served; and in Lehman's own administration. As Senator, Lehman has become a notable advocate of what he freely calls a welfare state. In his political career he has moved from a belief that the state should have a decent concern for welfare to advocating the theory that the state ex ists primarily, perhaps exclusively, for the promotion of wel fare. He accepts, apparently without question, all the statist implications of that theory. This is shown by his member ship in Americans for Democratic Action and his support of the Fair Deal program of the Truman Administration.

Q6 The Seductive Ap'peal of State Welfare This change in the position of a simple and sincere man is significant. For, perhaps without perceiving the fact himself, he has crossed a great divide in economic and political prin .. ciple. ' Because so many hold this belief in a state solely dedicated to human welfare, the advocates of a state dedicated to the satisfaction of innumerable welfares have seized political ad* vantage by posing as the promoters of humanitarianism and the possessors of a monopoly of the sweet spirit of charity. For years, New York State Democrats have sounded the note of humanitarianism and have sought to c~nvey the impres ... sion that government before they began' electing a succession of Governors in 1918 was cold, ruthless, and indifferent to human needs. A superficial validity is given to their claims, because the years since the turn of the century have been marked by improvements in factory laws and by more ade quate care of the delinquent and unfortunate---reforms that would have come under any party.

One expression of this humanitarian' theme was raised to the Federal level by President Franklin D. Roosevelt in his acceptance speech in Philadelphia in 1936. He said: Governments can err. Presidents do make mistakes. But the im mortal Dante tells us that divine justice weighs the sins of the cold-blooded and the ~ins of the warm-hearted on different scales. Better the occasional faults of a government that lives in a spirit of charity than the constant omissions of a government frozen in the ice of its own indifference. There is a mysterious cycle in human events. To some genera tions much is given. Of others much is expected. This generation of Americans has a rendezvous with destiny. I wrote those words for that speech. They were intended to display a trait in Roosevelt that had endeared h,im as President to thousands of people who knew him only from his speeches: a genuine willingness to admit mistakes and to try again. after such mistakes. The original draft of the speech 97 Origins,Theories,and 'Motivesof Statism conveyed a message of national unity and sympathy for all groups. Roosevelt at first wholly agreed with that draft. A day later, he revised the speech and incorporated passages that seemed to be designed to inflame class feeling and bitter antagonisms. 2 This I believed to be gratuitous and unwise, because the time had come to face a new Presidential term, which was practically assured, with an effort to temper government reg imentation and to seek broad cooperation among all groups.

Roosevelt's changes literally destroyed the import of the speech and left only the frame, including the passage quoted above. It was then, after he made that choice, that with no personal rancor I ended my association with his cause and never entered the White House again. There was a fundamental difference in point of view be tween us. For to persist, as he did, in the attitude that only the greed and selfishness of some people were denying the decent interests of other people and that only government can de fend those "oppressed" people, was to my mind to precipitate devastating conflict and to pervert the moderating role of government. That speech of Roosevelt's marked the end of one New Deal and the beginning of an entirely new New Deal. Politicians, following Roosevelt, have learned to use their terms in a manner that Ludwig von Mises calls "a cheap log ical trick." He writes: "They want to render their ideas safe from criticism by at tributing to them an appellation that is cherished by every2 The speech as delivered was marked by the expressions "economic royal ists," "new dynasties," "concentration of control," "royal service," "privileged princes," "economic dynasties thirsting for power," H new despotism ... in the robes of legal sanction," "new mercenaries," "privileged enterprise." It said in one place: "... throughout the nation ... individual initiative was crushed in the cogs of a great machine." And again: "A small group had concentrated in their own hands an almost complete control over other people's property, other people's money, other people's labor-other people's lives." And: "Men could no longer follow the pursuit of happiness."

98 The Seductive Appeal of State Welfare body. Their terminology implies tqat all opponents are ill intentioned scoundrels eager to foster their selfish int~rests to the prejudice of the majority of good people." 3 Then, when concern ·for welfare extends to many people and groups, the statist derives the conclusion that the sole provider of this benefit· should be the state. For by tradition the term "welfare," especially in America, has meant the care of someone who is unable to care for himself. Thus, the good word welfare has become the captive of statism. 3 Ludwig von Mises: Human Action (New Haven: Yale. University Press; 1949), p. 830. 99 ,CHAPTER V Statist Policies Socialism by Installments It is certain that socialism by that name and in all its implica tions will not in the foreseeable future be accepted by the American people. It has never been a popular philosophy in this country. Moreover, traditional socialism has involved so .many noneconomic theories and purposes, such as philo sophical materialism and opposition to religion and the family, that powerful church groups, notably the Roman Catholic, are its implacable enemies.