by Sidney Lens
Mr. Lens, a Chicago-based labor leader and activist in peace and radical movements, is the author of a number of books, including, most recently, The Promise and Pitfalls of Revolution .
This article appeared in The Christian Century, February 26, 1975, pp. 192-196. Copyright by The Christian Century Foundation; used by permission. Current articles and subscription information can be found at www.christiancentury.org. This material was prepared for Religion Online by Ted and Winnie Brock.
Today’s pessimism has little to fasten on — no islands of hope, no prefabricated ideologies. It gropes in semidarkness, conscious only that the light at the end of the tunnel is flickering.
In the mid-’70s a new despair permeates America, unlike anything we have seen since the 1930s. "When the world was simpler but just as dark," writes columnist Max Lerner, "my earlier friends used to be pessimistic romantics. But my friends today have become despondent realists. . . . They glumly face the prospect of the inevitable slide along the downward chute, with no prospect for mankind except a general, universal, ineluctable destruction."
In this day of unending crises -- from the cold war, the arms race, McCarthyism and Korea, to Vietnam, Watergate, the energy crisis, inflation and recession -- not many of the cheerless intellectuals have lost hope entirely. But the new despair, unlike that of the 1930s, is not compensated for by the ennobling visions of Marxism or the hope that a Soviet Union might fulfill those visions. Today’s pessimism has little to fasten on -- no islands of hope, no prefabricated ideologies. It gropes in semidarkness, conscious only that the light at the end of the tunnel is flickering.
Typifying today’s intellectual pessimists are Richard N. Goodwin -- who used to write speeches for John F. Kennedy and Lyndon Johnson -- and political scientist Hans Morgenthau. Their probing focuses on two questions that are essentially moral: Can there be freedom without economic and material equality? Can there be democracy when there is no hope of forging a true countervailing power? These questions are not being discussed in the White House or in the counting houses, but the answers to them are far more important than monetary or fiscal manipulation for dealing with inflation and recession.
As Goodwin sees it, freedom is "the use and fulfillment of our humanity . . . to the outer limits fixed by the material conditions and capacity of the time." Freedom is not the pulling of a lever each year on election day but "requires that material possibilities be fully exploited and totally devoted to the enrichment of human life." Self-evident as this definition sounds, it is not an exercise in platitudes. For Goodwin, like John Kenneth Galbraith, Robert Heilbroner, Douglas Dowd, and so many others, is really questioning whether certain American axioms are still axiomatic. The guarantors of freedom and equality, we were once led to believe, are economic and political dogmas such as laissez-faire, the free market, free enterprise, checks and balances, and free choice through elections. Yet not only are these dogmas no longer relevant; they are in fact being used as moral justification for enlarging inequality and subverting democracy.
We are currently in the midst of an economic crisis which the pundits call "stagflation" -- stagnation accompanied by inflation. One of the axioms of the free-enterprise system was that inflation is impossible during a period of economic downturn: when demand lags behind supply, prices must fall. Yet in the recession year 1974 prices rose three times as rapidly as in previous "good" years. Automobile sales in 1974 slumped by more than a third -- a classic circumstance in which prices should slide downward; yet the price of Detroit’s famous product was hiked by the automakers seven times in just 2 months.
Economists, overawed by such developments, have invented a new name for this form of inflation -- "cost-push" inflation as contrasted to "demand-pull" inflation. What they are saying, without being too explicit, is that the corporate goliaths have abrogated the law of supply and demand by "administering" prices. They have created a condition -- call it collusion, if you wish -- whereby the three or four giants in each of the major industries hike price tags in concert, so that the consumer loses the choice which "free-enterprise competition" was supposed to give him. He can buy Shell or Standard gasoline, but they are both 50 per cent higher than a year ago; and he can buy a Ford or a Chevy, but they are both 20 to 25 per cent higher, give or take a few dollars.
A System Built on Greed
The obverse side of this economic problem is a moral one, for it relates to power -- who has it and who doesn’t -- and to the axioms behind present power relationships. General Motors’ axioms vis-à-vis "the enrichment of human life" obviously differ totally from Richard Goodwin’s. To grasp the significance of this conflict in moral values we must go back to the beginning, to the implicit social contract under which we thought we were living.
Back in 1776, Thomas Jefferson, following Thomas Hobbes and others, framed his famous Declaration of Independence, which boldly stated that government derives its powers from the consent of the governed. The economic and moral underpinning for this thesis was provided by a 53-year-old Scottish professor named Adam Smith, who that same year published his equally famous Inquiry into the Nature and Causes of the Wealth of Nations.
Men and women who met on the free market to exchange shoes and wheat, Dr. Smith conceded, were motivated by greed, the desire to pay less for what they bought and to receive more for what they sold. But if this motive was a moral minus, it was like the pain inflicted by a dentist who drills into a cavity to preserve the tooth. Out of the individual greed of millions of buyers and sellers, said Dr. Smith, would come a great collective good; for the gladiators who challenged each other on the free market were forced to improve their products, and often lower their prices, in order to defeat their competitors. Hence they unwittingly gave us access to more and better goods, improved our living standards, and assured progress.
In accord with this concept of the free market came other freedoms to supplement and enhance it: the freedom of an individual to engage in enterprise, the freedom to speak his mind and worship his God, the freedom to choose those who govern, as well as protection from those who govern, through a system of "checks and balances" whereby each of the three branches of government curbed the power of the others. It was a nice, symmetrical system, deemed morally sound, for while it unleashed individual greed, it also placed all individuals on an equal footing. The sine qua non of this free-enterprise system was that the government must not intervene in favor of one person against another, but must let their talents play themselves out in the free market. To further assure a fair contest, the government was expected to prevent the coagulation of economic power into monopoly.
Say what you will about laissez-faire capitalism -- and it certainly never lived up to its advance billing -- this was a moral transformation that was breathtaking in scope. It reversed the ancient maxim of feudalism -- "It’s not what you know, but who you know" -- and gave wings to individualism. Originally, Jefferson foresaw true freedom in a society of small landholders, none too powerful to overwhelm the others.
In any case, early capitalism rested on the moral thesis that the person who risked failure and the loss of his savings was entitled to the reward -- profits. So insistent were our forebears on this principle that they looked with disdain on the corporate form of business -- because it limited the liability, the risk, of the shareholders.
At the Constitutional Convention the delegates rejected a proposal that would give the federal government the right to issue corporate charters, the general view being that corporations were a dangerous institution leading to monopoly and, worse, aristocracy. That right remained with the states, and under very restricted conditions. Long into the 19th century, corporations were circumscribed as to the amount of capital they could solicit ($100,000, for instance, in New York under the law of 1811); they were usually confined to a single type of operation (say, textile manufacturing or flour milling); and they were required to dissolve after a specific number of years, 20 or 30. As of the year 800, there were only 335 corporations in the U.S., more than two-thirds of them in turnpike, bridge and canal companies, and only six in manufacturing.
A Welfare State for the Rich
Nonetheless, in due course the corporation -- an institution that limits individual risk -- became the dominant form of business venture. Worse still, since the Great Depression, more and more of that risk has been placed on the shoulders of government. Side by side with the welfare state for the poor (welfare, public service jobs, unemployment compensation, social security, Medicare), there has arisen a welfare state for the rich that is awesome to contemplate.
The keel for this second welfare state, like that for the first, was laid by the New Deal. It began as an emergency measure whereby the government did for business and banking what they were unable to do for themselves. By pumping billions in new purchasing power into the economy (through relief, WPA, higher wages in the NRA codes), the government created a market for a business community with loaded warehouses and no customers; and by pumping more billions into the economic bloodstream (through such devices as PWA, rural electrification, the Reconstruction Finance Corporation), it formed new venture capital.
What started as an emergency action, however, has now become a way of life: the role of government in the economy is infinitely more important than that of the entrepreneur, whether corporate or individual. Government, through the Federal. Reserve and its own budget, manipulates the money supply and interest rates, so that in effect its decisions are the decisive factor in capital formation. A few years ago, when the seventh largest corporation in America, Penn Central, was on the verge of forfeiting on hundreds of millions of dollars in short-term loans, the Federal Reserve saved hundreds of banks from bankruptcy -- and the economy from catastrophe -- by offering to cover all the loans required at that point to maintain stability.
Government is also by far business’s biggest customer; it now spends one out of every three or three and a half dollars of the gross national product. Without it the defense industry would collapse overnight, and many others -- construction, steel, agriculture, glass, oil, export, rubber, communications, auto, to name a few -- would slowly strangle. Government is far and away the major researcher and developer, spending about $18 billion a year for this purpose -- most of which ultimately redounds to the benefit of industry. To get some idea of the overriding scope of the government’s role in the economy, consider what has happened to taxes: back in 1885, taxes levied by Washington came to $1.98 per person; by 1970, the figure was $960.07 -- 500 times higher. In 1902, state and local governments spent $12.80 for each citizen within their confines; in 1970, they spent $646.20 -- 50 times higher.
Not a single major American industry could survive today without government. Detroit’s auto-makers build mechanical wonders that glide along at 80 miles an hour; but they would glide nowhere without the $16 billion spent annually by government to maintain and extend the 4 million miles of roads. Once upon a time, in early America, the risk for building turnpikes was assumed by private companies; now it is assumed entirely by the public, which pays for highways through the tax structure.
Public Risk, Private Profit
As a measure of how the risk has been shifted from private entrepreneurs to the public, consult, if you will, a 1965 report of the Joint Economic Committee. It contains ten cramped pages of small type listing the forms of government subsidy that flow to the affluent. Some of it is direct subsidy (e.g., sums paid to shipping firms to keep them competitive with foreign firms); some of it is indirect (e.g., tax credits for investment in new machinery or depletion allowances to the oil and mineral industries); but, according to Jerry Jasinowski of that committee’s staff, it totals $63 billion a year.
A few years ago, when the railroads protested that they were losing money on passenger service, the government bailed them out by forming a quasi-public corporation, Amtrak, to "socialize" their losses. For every dollar in risk capital contributed by private companies to manufacture the supersonic transport plane (SST), the government, according to author Leonard Baker, contributed $6.50. The government guarantees hundreds of millions in loans to bankrupt firms such as Penn Central because private banks refuse to take the risk without such guarantees. The Pentagon alone has made 3,500 loans and subsidies to shore up small firms on the verge of disaster. As of two or three years ago, the federal government had outstanding the astronomical sum of $6 billion in direct loans and another $167 billion in loans it had guaranteed, or a total of $223 billion.
This is no longer Adam Smith’s capitalism, but what I. F. Stone calls "private socialism" -- the public takes much or most of the risk; private entrepreneurs take the whole profit. In these circumstances it is inevitable that during a period of economic "bust" scholars will begin asking whether the risk-taker, the government, should go further and take the profits as well. Should the oil industry be nationalized, considering that its profits have sextupled in less than a decade? Or should that money remain with the petroleum combine, which could not possibly have prospered as it has without State Department pressures to win it concessions overseas, not to mention domestic subsidies running into billions? Arthur Okun, who was chairman of Lyndon Johnson’s Council of Economic Advisers, estimates that the superprofits taken’ by these firms alone account for almost half the drop in the standard of living last year (1974). If these super-profits had been drained off in excess-profits taxes, the rest of us would have a tax bill 5 or 10 per cent smaller.
Again, the economic issue blends with the moral one -- in whose interests shall the government be operated? The dictionary defines morality as that which is "good and right." The moral stance of the nation originally was that the "greatest good for the greatest number" would ensue if the risk-takers -- capitalists -- were rewarded with profits commensurate with their risks and talents. But while those risks have progressively declined and in some industries (such as defense) are now zero, the rewards to the goliaths of business are immeasurably higher. And by the same token, without public awareness or discussion, we have converted the moral justification for laissez-faire capitalism into justification for state-managed capitalism. Hence it becomes impossible to curb inflation, if in the process of curbing inflation government must also curb what is euphemistically called "incentive" -- i.e., profits. This is the moral trap that bedevils people like Goodwin.
A New Aristocracy
Concurrent with the shift in moral values vis-à-vis the economy, there has been a similar shift vis-à-vis politics. The founders of the nation feared more than anything else a return to "aristocracy" -- to concentrated and monolithic power. Their solution was to arm the individual with certain inalienable guarantees, contained in the Bill of Rights, and to disarm the government by constructing a system of checks and balances to ensure that none of the three branches -- and in particular the executive -- became all-powerful. This was to be the essence of political democracy.
Again, the system never worked in practice as it was blueprinted in theory, in considerable measure because of the deficiency in economic democracy. Nonetheless the structure was there. In the past 40 years that structure has been steadily undermined. The enlarging sphere of state management in the economy, paralleled by the emergence of an enormous military-CIA machine that engages in thousands of secret acts not subject to popular perusal, has brought the nation to a new configuration of power, a new type of aristocracy.
Hans Morgenthau, who once believed that the system of checks and balances was viable, now thinks otherwise. "The American political system," he wrote in the spring of 1966, "seems to have fulfilled the intentions of its founders: it continuously oscillates between the ascendancy of the President and that of Congress and the judiciary. It is indeed a system of checks and balances." Though alarmed by the metamorphosis of Lyndon Johnson into an "uncrowned king," Morgenthau felt that Johnson was not a "selfish tyrant," because he had introduced the reforms of the Great Society. Had he been a full-blown dictator, "Congress and the Court would cut down his powers . . ."
That optimistic estimate has been revised. In a classic article for the New Republic (November 9, 1974), Morgenthau now paints a gloomy picture of the "decline of democratic government" and offers no insight as to how it can be restored. "The drastic shift of power from the citizen to the government," he observes, "has rendered obsolete the ultimate remedy for the government’s abuses -- popular revolution." For a number of reasons he is convinced that the established order today can be neither overthrown nor effectively challenged -- the primary reason being that "the relevant decisions are made neither by the people at large nor by the official government, but by the private governments where effective power rests." Not even the removal of Richard Nixon after the Watergate trauma has bolstered Morgenthau’s spirits.
This pessimism is undoubtedly overdrawn. But there is no question that the moral theme of "government by consent of the governed" is being converted into its opposite, "government without consent of the governed." In the area of foreign policy we are thrust into wars and involved in dozens of interventions, military and otherwise, into the affairs of foreign nations without the consent of either Congress or the public. No one discussed whether it was right for the CIA to overthrow the governments of Guatemala and Iran, or to help Mobutu against Lumumba, or to preserve the monarchy in Ethiopia, or to "destabilize" the Allende government in Chile.
There is no public debate on the issue of militarism; not even members of Congress effect policy here -- except on trivia. Article 1, Section 8, of the Constitution, which provides that only Congress can declare war, has been violated wholesale, and the provision that only the Senate can ratify treaties has been made all but meaningless by dozens of secret "contingency agreements" with the dictators of Spain, Thailand, Ethiopia, Brazil, Bolivia, etc., without the Senate’s concurrence. After World War II the executive branch of government argued that it needed absolute power in foreign affairs because (1) in a nuclear age, when missiles can make the trip from Moscow to New York in 20 minutes, there is no time to consult Congress and the people, and (2) the "secret, subversive" techniques of the communists can be challenged only by subversion and secrecy on our part. Hence the President is entitled to, and for all practical purposes has received, carte blanche.
Executive prerogative is only slightly more restricted in domestic matters. No individual or group of populists -- not even Ralph Nader -- can keep up with the millions of economic decisions made daily by government at the behest of the "private governments" -- the corporate monopolies and conglomerates. Our welfare is almost completely determined by those decisions -- whether interest rates are up or down, whether "old oil" is allowed a price of $5 a barrel or $8, whether natural gas is deregulated, whether government should aid or inhibit the construction industry, and so on.
The Moral Dilemma
There is very little we can do to influence those decisions. The public seems to sense that, because in the 1974 elections only 38 per cent of eligible voters bothered to go to the polls and only 14 per cent were able to name the two candidates running for Congress in their district. So meaningless has the electoral process become that the most persistent activity of the candidates is not to discuss issues but to gain "name recognition."
The moral transformation of the American political system was manifest during the Vietnam war when large numbers of youth despaired of influencing their government and opted out of the system instead. It is manifest now by a new despair, reflected popularly in the belief of three-quarters of the public (as told to Gallup) that we are headed toward much worse days, including a depression, and reflected within the intelligentsia by the dolorous writings of a Goodwin or a Morgenthau.
The moral dilemma expresses itself most dramatically in the present inflation-shortage-recession crisis. Everyone waits for the President or Congress to "do something," but beyond a few minor measures such as increasing the period of unemployment compensation or creating a few hundred thousand public service jobs, not much is being done. The options are limited. The President and Congress begin with a moral imperative against upsetting the status quo. They can’t reorder national priorities because that would mean a sharp reduction in the military and CIA budgets, both of which are sacrosanct. They can’t redistribute income and wealth because that would destroy "incentive." And they can’t introduce an overall economic plan, so that our resources might be better divided, because that too would stifle "individual initiative."
In theory, it would seem to be a simple matter to alleviate the national malaise. Our material capacities, to use Goodwin’s term, are at an all-time peak, a $1.4 trillion gross national product annually. Divided equally, that would allow for an income of $20,000 per family of four -- after taxes. Divided unequally, it could still result in a floor, say, of $12,000 and a ceiling of $28,000 per family, or $10,000 to $30,000. But, given our present moral stance, the government is as likely to adopt that solution as the pope is to adopt atheism. And the public, as Morgenthau establishes, is so denuded of power that it is unable to force its government (or the private governments in the wings) into a different moral stance.
Back in the 1930s, when the despair was greater and the willingness of people to look for new alternatives stronger, John Dewey, Charles Beard and Rexford Tugwell (none of them Marxists) proposed a planned economy that would eventually blend into democratic socialism. Figure out, they said, what you have to import from abroad, set aside exports, and money to cover those imports, and set targets for each industry and the economy as a whole, so that every family can be assured an adequate standard of living. For a while, even the president of General Electric, Gerard Swope, pro-posed a form of economic planning. Roosevelt never accepted the Dewey-Beard-Tugwell nostrum, but at least it had a very wide currency. That, however, was at a time when, as Marc Connelly said in his play Green Pastures, "everything nailed down is comin’ loose."
In the 1970s "everything nailed down" has not yet come loose -- but many intellectuals are groping toward the same moral imperatives. The new despair focuses on the immorality of spending $90 billion annually on the arms race while millions hunger, on allowing profits to burgeon while millions are losing their jobs. What Goodwin, Heilbroner, Galbraith et al. are telling us is that unless we change our moral guidelines so that "material possibilities" are "totally devoted to the enrichment of human life," the pendulum of history will swing from freedom to totalitarianism. An epoch has come to an end, and we are charged by history to review that epoch’s concepts of what is "good and right." The new despair, cheerless as it is, is an initial step in that direction.