The Revolution Was
by
Garet Garrett
There
are those who still think they are holding the pass against a revolution
that may be coming up the road. But they are gazing in the wrong
direction. The revolution is behind them. It went by in the Night
of Depression, singing songs to freedom.
There
are those who have never ceased to say very earnestly, "Something
is going to happen to the American form of government if we don't
watch out." These were the innocent disarmers. Their trust was in
words. They had forgotten their Aristotle. More than 2,000 years
ago he wrote of what can happen within the form, when "one thing
takes the place of another, so that the ancient laws will remain,
while the power will be in the hands of those who have brought about
revolution in the state."
Worse
outwitted were those who kept trying to make sense of the New Deal
from the point of view of all that was implicit in the American
scheme, charging it therefore with contradiction, fallacy, economic
ignorance, and general incompetence to govern.
But
it could not be so embarrassed and all that line was wasted, because,
in the first place, it never intended to make that kind of sense,
and secondly, it took off from nothing that was implicit in the
American scheme. It took off from a revolutionary base. The design
was European. Regarded from the point of view of revolutionary technic
it made perfect sense. Its meaning was revolutionary and it had
no other. For what it meant to do it was from the beginning consistent
in principle, resourceful, intelligent, masterly in workmanship,
and it made not one mistake.
The
test came in the first one hundred days.
No
matter how carefully a revolution may have been planned there is
bound to be a crucial time. That comes when the actual seizure of
power is taking place. In this case certain steps were necessary.
They were difficult and daring steps. But more than that, they had
to be taken in a certain sequence, with forethought and precision
of timing. One out of place might have been fatal. What happened
was that one followed another in exactly the right order, not one
out of time or out of place.
Having
passed this crisis, the New Deal went on from one problem to another,
taking them in the proper order, according to revolutionary technic;
and if the handling of one was inconsistent with the handling of
another, even to the point of nullity, that was blunder in reverse.
The effect was to keep people excited about one thing at a time,
and divided, while steadily through all the uproar of outrage and
confusion a certain end, held constantly in view, was pursued by
main intention.
The
end held constantly in view was power.
In
a revolutionary situation mistakes and failures are not what they
seem. They are scaffolding. Error is not repealed. It is compounded
by a longer law, by more decrees and regulations, by further extensions
of the administrative hand. As deLawd said in The Green Pastures,
that when you have passed a miracle you have to pass another one
to take care of it, so it was with the New Deal. Every miracle it
passed, whether it went right or wrong, had one result. Executive
power over the social and economic life of the nation was increased.
Draw a curve to represent the rise of executive power and look there
for the mistakes. You will not find them. The curve is consistent.
At
the end of the first year, in his annual message to the Congress,
January 4, 1934, President Roosevelt said: "It is to the eternal
credit of the American people that this tremendous readjustment
of our national life is being accomplished peacefully."
Peacefully
if possible — of course.
But
the revolutionary historian will go much further. Writing at some
distance in time he will be much less impressed by the fact that
it was peacefully accomplished than by the marvelous technic of
bringing it to pass not only within the form but within the word,
so that people were all the while fixed in the delusion that they
were talking about the same things because they were using the same
words. Opposite and violently hostile ideas were represented by
the same word signs. This was the American people's first experience
with dialectic according to Marx and Lenin.
Until
it was too late few understood one like Julius C. Smith, of the
American Bar Association, saying: "Is there any labor leader, any
businessman, any lawyer or any other citizen of America so blind
that he cannot see that this country is drifting at an accelerated
pace into administrative absolutism similar to that which prevailed
in the governments of antiquity, the governments of the Middle Ages,
and in the great totalitarian governments of today? Make no mistake
about it. Even as Mussolini and Hitler rose to absolute power under
the forms of law... so may administrative absolutism be fastened
upon this country within the Constitution and within the forms of
law."
For
a significant illustration of what has happened to words —
of the double meaning that inhabits them — put in contrast
what the New Deal means when it speaks of preserving the American
system of free private enterprise and what American business means
when it speaks of defending it. To the New Deal these words —
the American system of free private enterprise — stand for
a conquered province. To the businessman the same words stand for
a world that is in danger and may have to be defended.
The
New Deal is right.
Business
is wrong.
You
do not defend a world that is already lost. When was it lost? That
you cannot say precisely. It is a point for the revolutionary historian
to ponder. We know only that it was surrendered peacefully, without
a struggle, almost unawares. There was no day, no hour, no celebration
of the event — and yet definitely, the ultimate power of initiative
did pass from the hands of private enterprise to government.
There
it is and there it will remain until, if ever, it shall be reconquered.
Certainly government will never surrenders without a struggle.
To
the revolutionary mind the American vista must have been almost
as incredible as Genghis Khan's first view of China — so rich,
so soft, so unaware. No politically adult people could ever have
been so Little conscious of revolution. There was here no revolutionary
tradition, as in Europe, but in place of it the strongest tradition
of subject government that had ever been evolved — that is,
government subject to the will of the people, not its people but
the people. Why should anyone fear government?
In
the na'ive American mind the word revolution had never grown up.
The meaning of it had not changed since horse-and-buggy days, when
Oliver Wendell Holmes said: "Revolutions are not made by men in
spectacles." It called up scenes from Carlyle and Victor Hugo, or
it meant killing the Czar with a bomb, as he may have deserved for
oppressing his people. Definitely, it meant the overthrow of government
by force; and nothing like that could happen here. We had passed
a law against it.
Well,
certainly nothing like that was going to happen here. That it probably
could not happen, and that everybody was so sure it couldn't made
everything easier for what did happen.
Revolution
in the modern ease is no longer an uncouth business. The ancient
demagogic art, like every other art, has, as we say, advanced. It
has become in fact s science — the science of political dynamics.
And your scientific revolutionary in spectacles regards force in
a cold, impartial manner. It may or may not be necessary. If not,
so much the better; to employ it wantonly, or for the love of it,
when it is not necessary, is vulgar, unintelligent and wasteful.
Destruction is not the aim. The more you destroy the less there
is to take over. Always the single end in view is a transfer of
power.
Outside
of the Communist party and its aurora of radical intellectuals few
Americans seemed to know that revolution had become a department
of knowledge, with a philosophy and a doctorate of its own, a language,
a great body of experimental data, schools of method, textbooks,
and manuals — and this was revolution regarded not as an act
of heroic redress in a particular situation, but revolution as a
means to power in the abstract ease.
There
was a prodigious literature of revolutionary thought concealed only
by the respectability of its dress.
Americans
generally associated dangerous doctrine with bad printing, rude
grammar, and stealthy distribution. Here was revolutionary doctrine
in well printed and well written books, alongside of beat sellers
at your bookstore or in competition with detectives on your news-dealer's
counter. As such it was all probably harmless, or it was about something
that could happen in Europe, not here. A little communism on the
newsstand like that might be gad for us, in fact, regarded as a
twinge of pain in a robust, somewhat reckless social body. One ought
to read it, perhaps, just to know. But one had tried, and what dreary
stuff it had turned out to be!
To
the revolutionary this same dreary stuff was the most exciting reading
in the world. It was knowledge that gave him a sense of power. One
who mastered the subject to the point of excellence could be fairly
sure of a livelihood by teaching and writing, that is, by imparting
it to others, and meanwhile dream of passing at a single leap from
this mean obscurity to the prestige of one who assists in the manipulation
of great happenings; while one who mastered it to the point of genius
— that one might dream of becoming himself the next Lenin.
A
society so largely founded on material success and the rewards of
individualism in a system of free competitive enterprise would be
liable to underestimate both the intellectual content of the revolutionary
thesis and the quality of the revolutionary mind that was evolving
in a disaffected and envious academic world. At any rate, this society
did, and from the revolutionary point of view that was one of the
peculiar felicities — of the American opportunity. The revolutionary
mind that did at length evolve was one of really superior intelligence,
clothed with academic dignity, always sure of itself, supercilious
and at ease in all circumstances. To entertain it became fashionable.
You might encounter it anywhere, and nowhere more amusingly than
at a banker's dinner table discussing the banker's trade in a manner
sometimes very embarrassing to the banker. Which of these brilliant
young men in spectacles was of the cult and which was of the cabal
— if there was a cabal — one never knew. Indeed, it
was possible that they were not sure of it among themselves, a time
having come when some were only playing with the thought of extremes
while others were in deadly earnest, all making the same sounds.
This was the beginning of mask and guise.
The
scientific study of revolution included of course analysis of opportunity.
First and always the master of revolutionary technic is an opportunist.
He must know opportunity when he sees it in the becoming; he must
know how to stalk it, how to let it ripen, how to adapt his means
to the realities. The basic ingredients of opportunity are few;
nearly always it is how they are mixed that matters. But the one
indispensable ingredient is economic distress, and if there is enough
of that the mixture will take care of itself.
The
Great Depression as it developed here was such an opportunity as
might have been made to order. The economic distress was relative,
which is to say that at the worst of it living in this country was
better than living almost anywhere else in the world. The pain,
nevertheless, was very acute; and much worse than any actual hurt
was a nameless fear, a kind of active despair, that assumed the
proportions of a national psychosis.
Seizures
of that kind were not unknown in American history. Indeed, they
were characteristic of the American temperament. But never before
had there been one so hard and never before had there been the danger
that a revolutionary elite would be waiting to take advantage of
it.
This
revolutionary elite was nothing you could define as a party. It
had no name, no habitat, no rigid line. The only party was the Communist
Party, and it was included, but its attack was too obvious and its
proletarianism too crude, and moreover, it was under the stigma
of not belonging. Nobody could say that about the elite above. It
did belong, it was eminently respectable, and it knew the American
scene. What it represented was a quantity of bitter intellectual
radicalism infiltrated from the top downward as a doctorhood of
professors, writers, critics, analysts, advisers, administators,
directors of research, and so on — a prepared revolutionary
intelligence in spectacles. There was no plan to begin with. But
there was a shibboleth that united them all: "Capitalism is finished."
There was one idea in which all differences could be resolved, namely,
the idea of a transfer of power. For that a united front; after
that, anything. And the wine of communion was a passion to play
upon history with a scientific revolutionary technic.
The
prestige of the elite was natural for many reasons; but it rested
also upon one practical consideration. When the opportunity came
a Gracchus would be needed. The elite could produce one. And that
was something the Communist Party could not hope to do.
Now
given — (1) the opportunity, (2) a country whose fabulous
wealth was in the modern forms — dynamic, functional, non-portable,
(3) a people so politically naive as to have passed a law against
any attempt to overthrow their government by force — and,
(4) the intention to bring about what Aristotle called a revolution
in the state, within the frame of existing law — Then from
the point of view of scientific revolutionary technic what would
the problems be?
They
set themselves down in sequence as follows:
The
first, naturally, would be to capture the seat of government.
The
second would be to seize economic power.
The
third would be to mobilize by propaganda the forces of hatred.
The
fourth would he to reconcile and then attach to the revolution the
two great classes whose adherence is indispensable but whose interests
are economically antagonistic, namely, the industrial wage earners
and the farmers, called in Europe workers and peasants.
The
fifth would be what to do with business — whether to liquidate
or shackle it.
(These
five would have a certain imperative order in time and require immediate
decisions because they belong to the program of conquest. That would
not be the end. What would then ensue? A program of consolidation.
Under that head the problems continue.)
The
sixth, in Burckhardt's devastating phrase, would be "the domestication
of individuality" — by any means that would make the individual
more dependent upon government.
The
seventh would be the systematic reduction of all forms of rival
authority.
The
eighth would be to sustain popular faith in an unlimited public
debt, for if that faith should break the government would be unable
to borrow, if it could not borrow it could not spend, and the revolution
must be able to borrow and spend the wealth of the rich or else
it will be bankrupt.
The
ninth would be to make the government itself the great capitalist
and enterpriser, so that the ultimate power in initiative would
pass from the hands of private enterprise to the all-powerful state.
Each
one of these problems would have two sides, one the obverse and
one the reverse, like a coin. One side only would represent the
revolutionary intention. The other side in each case would represent
Recovery — and that was the side the New Deal constantly held
up to view. Nearly everything it did was in the name of Recovery.
But in no case was it true that for the ends of economic recovery
alone one solution or one course and one only was feasible. In each
case there was an alternative and therefore a choice to make.
What
we shall see is that in every case the choice was one that could
not fail:
(a)
To ramify the authority and power of executive government —
its power, that is, to rule by decrees and rules and regulations
of its own making; (b) To strengthen its hold upon the economic
life of the nation; (c) To extend its power aver the individual;
(d) To degrade the parliamentary principle; (e) To impair the great
American tradition of an independent, Constitutional judicial power;
(f) To weaken all other powers — the power of private enterprise,
the power of private finance, the power of state and local government;
(g) To exalt the leader principle.
There
was endless controversy as to whether the acts of the New Deal did
actually move recovery or retard it, and nothing final could ever
come of that bitter debate because it is forever impossible to prove
what might have happened in place of what did. But a positive result
is obtained if you ask:
Where
was the New Deal going?
The
answer to that question is too obvious to be debated. Every choice
it made, whether it was one that moved recovery or not, was a choice
unerringly true to the essential design of totalitarian government,
never of course called by that name either here or anywhere else.
How
it worked, how the decisions were made, and how acts that were inconsistent
from one point of view were consistent indeed from the other —
that now is the matter to be explored, seriatim.
PROBLEM
ONE
TO CAPTURE THE SEAT OF GOVERNMENT
There
was here no choice of means. The use of force was not to be considered.
Therefore, it had to be done by ballot. That being the ease, and
the factor of political discontent running very high, the single
imperative was not to alarm the people.
Senator
Taft says that in the presidential campaign of 1932 "the New Deal
was hidden behind a program of economy and state rights."
That
is true. Nevertheless, a New Dealer might say: "How could we tell
the people what we were going to do when we ourselves did not know?"
And that also may be true — that they did not know what they
were going to do.
Lenin,
the greatest theorist of them all, did not know what he was going
to do after he had got the power. He made up plans as he went along,
changed them if they did not work, even reversed them, but always
of course in a manner consistent with his basic revolutionary thesis.
And so it was with Hitler, who did it by ballot, and with Mussolini,
who did it by force.
There
was probably no blueprint of the New Deal, nor even a clear drawing.
Such things as the A.A.A. and the Blue Eagle were expedient inventions.
What was concealed from the people was a general revolutionary intention
— the intention, that is, to bring about revolution in the
state, within the form of law. This becomes clear when you set down
what it was the people thought they were voting for in contrast
with what they got. They thought they were voting:
For
less government, not more;
For
an end of deficit spending by government, not deficit spending raised
to the plane of a social principle, and,
For
sound money, not as the New Deal afterward defined it, but as everybody
then understood it, including Senator Glass, formerly Secretary
of the Treasury, who wrote the money plank in the Democratic party
platform and during the campaign earnestly denounced as akin to
treason any suggestion that the New Deal was going to do what it
did forthwith proceed to do, over his dramatic protest.
The
first three planks of the Democratic Party platform read as follows:
We
advocate:
"1.
An immediate and drastic reduction of governmental expenditures
by abolishing useless commissions and offices, consolidating departments
and bureaus and eliminating extravagance, to accomplish a saving
of not lees than 25 per cent in the cost of Federal government.
"2.
Maintenance of the national credit by a Federal budget annually
balanced....
"3.
A sound currency to be maintained at all hazards."
Mr.
Roosevelt pledged himself to be bound by this platform as no President
had ever before been bound by a party document. All during the campaign
he supported it with words that could not possibly be misunderstood.
He said:
"I
accuse the present Administration (Hoover's) of being the greatest
spending Administration in peace time in all American history —
one which piled bureau on bureau, commission on commission, and
has failed to anticipate the dire needs or reduced earning power
of the people. Bureaus and bureaucrats have been retained at the
expense of the taxpayer.... We are spending altogether too much
money for government services which are neither practical nor necessary.
In addition to this, we are attempting too many functions and we
need a simplification of what the Federal government is giving to
the people."
This
he said many times.
Few
of the great majority that voted in November, 1932 for less Federal
government and fewer Federal functions could have imagined that
by the middle of the next year the extensions of government and
the multiplication of its functions would have been such as to create
serious administrative confusion in Washington, which the President,
according to his own words, dealt with in the following manner:
"On
July eleventh I constituted the Executive Council for the simple
reason that so many new agencies having been created, a weekly meeting
with the members of the Cabinet in joint session was imperative....
Mr. Frank C. Walker was appointed as Executive Secretary of the
Council."
Fewer
still could have believed that if such a thing did happen it would
be more than temporary, for the duration of the emergency only;
and yet within a year after Mr. Roosevelt had pledged himself, if
elected, to make a 26 per cent cut in Federal government by "eliminating
functions" and by "abolishing many boards and commissions," he was
writing, in a book entitled On Our Way, the following:
"In
spite of the necessary complexity of the group of organizations
whose abbreviated titles have caused some amusement, and through
what has seemed to some a mere reaching out for centralized power
by the Federal government, there has run a very definite, deep and
permanent objective."
Few
of the majority that voted in November 1932 for an end of deficit
spending and a balanced Federal budget could have believed that
the President's second budget message to Congress would shock the
financial reason of the country, or that in that same book, On Our
Way, he would be writing about it in a blithesome manner, saying:
"The next day, I transmitted the Annual Budget Message to the Congress.
It is, of course, filled with figures and accompanied by a huge
volume containing in detail all of the proposed appropriations for
running the government during the fiscal year beginning July 1,
1934 and ending June 30, 1935. Although the facts of previous appropriations
had all been made public, the country, and I think most of the Congress,
did not fully realize the huge sums which would be expended by the
government this year and next year; nor did they realize the great
amount the Treasury would have to borrow."
And
certainly almost no one who voted in November, 1932 for a sound
gold standard money according to the Glass money plank in the platform
could have believed that less than a year later, in a radio address
reviewing the extraordinary monetary acts of the New Deal, the President
would be saying: "We are thus continuing to move toward a managed
currency."
The
broken party platform, as an object, had a curious end. Instead
of floating away and out of sight as a proper party platform should,
it kept coming back with the tide. Once it came so close that the
President had to notice it. Then all he did was to turn it over,
campaign side down, with the words: "I was able, conscientiously,
to give full assent to this platform and to develop its purpose
in campaign speeches. A campaign, however, is apt to partake so
much of the character of a debate and the discussion of individual
points that the deeper and more permanent philosophy of the whole
plan (where one exists) is often lost."
At
that the platform sank.
And
so the first problem was solved. The seat of government was captured
by ballot, according to law.
PROBLEM
TWO
TO SEIZE ECONOMIC POWER
This
was the critical problem. The brilliant solution of it will doubtless
make a classic chapter in the textbooks of revolutionary technic.
In a highly evolved money economy, such as this one, the shortest
and surest road. to economic power would be what? It would be control
of money, banking, and credit. The New Deal knew that answer. It
knew also the steps and how to take them, and above all, it knew
its opportunity.
It
arrived at the seat of government in the midst of that well known
phenomenon called a banking crisis, such as comes at the end of
every great depression. It is like the crisis of a fever. When the
banks begin to fail, pulling one another down, that is the worst
that can happen. If the patient does not die then he will recover.
We were not going to die. The same thing had happened to us before,
once or twice in every twenty years, and always before the cure
had brought itself to pass as it was bound to do again.
In
his inaugural address, March 4, 1933, the President declared that
the people had "asked for discipline and direction under leadership";
that he would seek to bring speedy action "within my Constitutional
authority"; and that he hoped the "normal balance of executive and
legislative authority" could be maintained, and then said: "But
in the event that Congress shall fail... and in the event that the
national emergency is still critical... I shall ask Congress for
the one remaining instrument to meet the crisis — broad executive
power to make war against the emergency, as great as the power that
would be given to me if we were in fact invaded by a foreign foe."
It
is true that people wanted action. It is true that they were in
a mood to accept any pain-killer, and damn the normal balance of
authority between the executive and legislative authority. That
was an emotional state of mind perfectly suited to a revolutionary
purpose, and the President took advantage of it to make the first
startling exposition of New Deal philosophy. Note his assertion
of the leadership principle over any other. Discipline under leadership.
Note the threat to Congress — "in the event that Congress
shall fail." But who was to say if the Congress had failed? The
leader, of course. If in his judgment the Congress failed, then,
with the people behind him, he would demand war powers to deal with
an economic emergency.
The
word emergency was then understood to mean what the dictionaries
said it meant — namely, a sudden juncture of events demanding
immediate action. It was supposed to refer only to the panic and
the banking crisis, both temporary.
But
what it meant to the President, as nobody then knew, was a very
different thing. Writing a year later, in his book, On Our Way,
he said: "Strictly speaking, the banking crisis lasted only one
week.... But the full meaning of that word emergency related to
far more than banks; it covered the whole economic and therefore
the whole social structure of the country. It was an emergency that
went to the roots of our agriculture, our commerce, our industry;
it was an emergency that has existed for a whole generation in its
underlying causes and for three-and-one-half years in its visible
effects. It could be cured only by a complete reorganization and
measured control of the economic structure....It called for a long
series of new laws, new administrative agencies. It required separate
measures affecting different subjects; but all of them component
parts of a fairly definite broad plan."
So,
what the New Deal really intended to do, what it meant to do within
the Constitution if possible, with the collaboration of Congress
if Congress did not fail, but with war powers if necessary, was
to reorganize and control the "whole economic and therefore the
whole social structure of the country." And therein lay the meaning
— the only consistent meaning — of a series of acts
touching money, banking and credit which, debated as monetary policy,
made no sense whatever.
The
first step, three days before the new Congress convened, was an
executive decree suspending all activities of banking throughout
the country. Simply, every bank was shut up. The same decree forbade,
under pain of fine and imprisonment, any dealing in foreign exchange
or any transfer of credit from the United States to any place abroad,
and that was to slam the door against the wicked rich who might
be tempted to run out.
The
second step was an act of Congress, saying, "Acts of the President
and Secretary of the Treasury since March 4, 1933, are hereby confirmed
and approved."
That
made everything legal after the fact: and it was the first use of
Congress as a rubber stamp. The same act of Congress provided that
no bank in the Federal Reserve System should resume business except
subject to rules and regulations to be promulgated by the Secretary
of the Treasury, gave the President absolute power over foreign
exchange and authorized the Federal government to invest public
funds in private bank stock, thereby providing banks with new capital
owned by the government. And that was the act that authorized the
President to require people to surrender their gold. Congress did
not write any of these acts. It received them from the White House
and passed them.
The
third step was a decree by the President requiring all persons and
corporations whatever to divest themselves of gold and hand it over
to the government. The law authorizing him to do that had fixed
the penalty of non-compliance at a fine equal to twice the value
of the gold. The executive decree added the penalty of imprisonment.
In
view of further intentions not yet disclosed it was imperative for
the government to get possession of all the gold. With a lot of
gold in private hands its control of money, banking, and credit
could have been seriously challenged. All that the government asked
for at first was possession of the gold, as if it were a trust.
For their gold as they gave it up people received paper money, but
this paper money was still gold standard money — that is to
say, it had always been exchangeable for gold dollar for dollar,
and people supposed that it would be so again, when the crisis passed.
Not a word had yet been said about devaluing the dollar or repudiating
the gold standard. The idea held out was that a: people surrendered
their gold they were supporting the nation's credit.
This
decree calling in the gold was put forth or April 5. There was then
an awkward interlude. The Treasury was empty. It had to sell some
bonds. If people knew what was going to happen they might hesitate
to buy new Treasury bonds. Knowing that it was going to devalue
the dollar, knowing that it was going to repudiate the gold redemption
clause in its bonds, even while it was writing the law of repudiation,
the government nevertheless issued and sold to the people bonds
engraved as usual, that is, with the promise of the United States
Government to pay the interest and redeem the principal "in United
States gold coin of the present standard of value."
The
fourth step was the so-called Inflation Amendment attached to the
Emergency Farm Relief Act. This law made sure that the Treasury
need not be caught that way again. It forcibly opened the tills
of the Federal Reserve Bank System to three billions of Treasury
notes, authorized three billions of fiat money to be issued in the
President's discretion, and gave the President power in his own
discretion to devalue the dollar by one-half.
The
fifth step was the act of repudiation. By resolution June 5, 1933,
the Congress repudiated the gold redemption clause in all government
obligations, saying they should be payable when due in any kind
of money the government might see fit to provide; and, going further,
it declared that the same traditional redemption clause in all private
contracts, such, for example, as railroad and other corporation
bonds, was contrary to public policy and therefore invalid.
The
sixth step was a new banking act giving the Federal government power
to say how private banks should lend their money, on what kinds
of collateral and in what proportions, and the arbitrary power to
cut them off from credit with Federal Reserve Banks. This arbitrary
power to cut them off from credit was a strangle hold, and it was
gained by changing one little word in the country's organic banking
law. From the beginning until then the law was that a Federal Reserve
Bank "shall" lend to a private bank on suitable security. This word
was changed to "may." Thus a right became a privilege and a privilege
that could be suspended at will.
The
seventh step — and it was the one most oblique — was
to produce what may be described as monetary pandemonium. This continued
for six months. To understand it will require some effort of attention.
When
by the Inflation Amendment the dollar was cut loose from gold it
did not immediately fall. That was because, in spite of everything,
it was the best piece of money in the whole world. Well then, when
the dollar did not fall headlong of its own weight the government
began to club it down, and the club it used to beat it with was
gold. In the President's words the procedure was like this: "I am
authorizing the Reconstruction Finance Corporation to buy newly
mined gold in the United States at prices to be determined from
time to time after consultation with the Secretary of the Treasury
and the President. Whenever necessary to the end in view we shall
also buy or sell gold in the world market. My aim in taking this
step is to establish and maintain continuous control. This is a
policy and not an expedient."
Each
morning thereafter the Treasury announced the price the government
would pay for gold in paper dollars, one day 30 paper dollars for
one ounce of gold, the next day 32 dollars, two days later 34 dollars,
and so on; and not only the newly mined gold in this country but
anybody's gold anywhere in the world. Thus day by day the President
and the Secretary of the Treasury determined the value of gold priced
in American paper dollars, or the value of American paper dollars
priced in gold, which was the same thing; and how they did it or
by what rule, if any, nobody ever knew.
The
spectacle of a great, solvent government paying a fictitious price
for gold it did not want and did not need and doing it on purpose
to debase the value of its own paper currency was one to astonish
the world. What did it mean? Regarded as monetary policy it made
no meaning whatever. But again, if you will regard it from the point
of view of revolutionary technic, it has meaning enough.
One
effect was that private borrowing and lending, except from day to
day, practically ceased. With the value of the dollar being posted
daily at the Treasury like a lottery number, who would lend money
for six months or a year, with no way of even guessing what a dollar
would he worth when it came to be paid back? "No man outside of
a lunatic asylum," said Senator Glass, "will loan his money today
on a farm mortgage" But the New Deal had a train of Federal lending
agencies ready to start. The locomotive was the Reconstruction Finance
Corporation. The signal for the train to start was a blast of propaganda
denouncing Wall Street, the hanks and all private owners of capital
for their unwillingness to lend. So the government, in their place,
became the great provider of credit and capital for all purposes.
It loaned public funds to farmers and home owners to enable them
to pay off their mortgages; it loaned also to banks, railroads,
business, industry, new enterprise, even to foreign borrowers. Thereby
private debt was converted into public debt in a very large and
popular way. It was popular because the government, having none
of the problems of a bank or a private lender, with no fetish of
solvency a restrain it, with nothing really to lose even though
the money should never come back, was a benevolent lender. It loaned
public money to private borrowers on terms and at rates of interest
with which no bank nor any private lender could compete; and the
effect was to create a kind of fictitious, self-serving necessity.
The government could say to the people, and did say to them: "Look.
It is as we said. The money changers, hating the New Deal, are trying
to make a credit famine. But your government will beat them."
In
a Fireside Chat, October 22, 1933, the President said; "I have publicly
asked that foreclosures on farms and chattels and on homes be delayed
until every mortgagor in the country shall have had full opportunity
to take advantage of Federal credit. I make the further request,
which many of you know has already been made through the great Federal
credit organizations, that if there is any family in the United
States about to lose its home or about to lose its chattels, that
family should telegraph at once either to the Farm Credit Administration
or to the Home Owners Loan Corporation in Washington requesting
their help. Two other great agencies are in full swing. The Reconstruction
Finance Corporation continues to lend large sums to industry and
finance, with the definite objective of making easy the extending
of credit to industry, commerce and finance."
The
other great lending agency to which he referred was the one that
dispensed Federal credit to states, cities, towns, and worthy private
organizations for works of public and social benefit. In the same
Fireside Chat he urged them to come on with their projects. "Washington,"
he said, "has the money and is waiting for the proper projects to
which to allot it."
Then
began to he heard the saying that Washington had become the country's
Wall Street, which was literally true. Anyone wanting credit for
any purpose went no longer to Wall Street but to Washington. The
transfer of the financial capital of the nation to Washington, the
President said, would be remembered, as "one of the two important
happenings of my Administration."
What
was the source of the money'! Partly it was imaginary money, from
inflation. Largely it was the taxpayer's money. If the government
lost it the taxpayer would have to find it again. And some of it,
as the sequel revealed, was going to be confiscated money. By this
time the New Deal had got control of the public purse. The Congress
had surrendered control of it by two acts of self-abnegation. One
was the Inflation Amendment and the other was an appropriation of
$3,300,000,000 put into the hands of the President to do with what
he liked as the architect of recovery.
All
through the commotion of these unnatural events one end was held
steadily in view, and that was a modern version of the act for which
kings had been hated and sometimes hanged, namely to clip the coin
of the realm and take the profit into the king's revenue.
The
eighth step was the act of confiscation. At the President's request
the Congress, on January 30, 1934, passed a law vesting in the Federal
government absolute title to all that gold which people had been
obliged to exchange for gold standard paper dollars the year before,
thinking as they did that it was for the duration of the emergency
only and that they were supporting the nation's credit. They believed
the statement issued at the time by the Secretary of the Treasury,
saying: "Those surrendering the gold of course receive an equivalent
amount of other forms of currency and those other forms of currency
may be used for obtaining gold in an equivalent amount when authorized
for proper purposes." Having by such means got physical possession
of the gold, it was a very simple matter for the government to confiscate
it. All that it had to do was to have Congress pass a law vesting
title in the government.
The
ninth and last step was to devalue the dollar. In his message to
Congress asking for the law that confiscated the gold the President
said: "I do not believe it desirable in the public interest that
an exact value be now fixed." Nevertheless, on January 31, 1934,
the day after the act of confiscation was passed, he did fix the
exact value of the dollar at 59 per cent of its former gold content.
The difference, which was 41 cents in every dollar of gold that
had been confiscated, was counted as government profit and took
the form of a free fund of two billions in the Treasury, called
a stabilization fund, with which the President could do almost anything
he liked. Actually it was used to take control of the foreign exchange
market out of the hands of international finance.
Control
of money, banking, and credit had passed to Washington. Thus problem
number two was solved.
The
reason for giving so much attention to it is that it was the New
Deal's most brilliant feat; and certainly not the least remarkable
fact about it was the skill with which criticism was played into
making its fight on false and baited ground. Each step as it occurred
was defended, and therefore attacked, on ground of monetary policy,
whereas the ultimate meaning was not there at all.
Consider
first the logical sequence of the nine steps; consider secondly
that if national recovery had been the end in view many alternative
steps were possible, whereas from the point of view of revolutionary
technic these nine were the imperative steps and the order in which
they were taken was the necessary order. Then ask if it could have
happened that way by chance.
Not
even a New Dealer any longer maintains that the four steps directly
involving gold, namely, the seizure of it, the repudiation of the
government's gold contracts, then the confiscation of the gold,
and lastly the devaluation of the dollar, were necessary merely
as measures toward national recovery. In the history of the case
there is no more dramatic bit of testimony than that of Senator
Glass, formerly Secretary of the Treasury, who in April, 19', rose
from a sick bed and appeared in the Senate to speak against the
Inflation Amendment. He said:
"I
wrote with my own hand that provision of the national Democratic
platform which declared for a sound currency to be maintained at
all hazards.... With nearly 40 per cent of the entire gold supply
of the world, why are we going off the gold standard? With all the
earmarked gold, with all the securities of ours they hold, foreign
governments could withdraw in total less than $700,000,000 of our
gold, which would leave us an ample fund of gold, in the extremest
case, to maintain gold payments both at home and abroad.... To me
the suggestion that we may devalue the gold dollar 59 per cent means
national repudiation. To me it means dishonor. In my conception
of it, it is immoral... There was never any necessity for a gold
embargo. There is no necessity for making statutory criminals of
citizens of the United States who may please to take their property
in the shape of gold or currency out of the banks and use it for
their own purposes as they may please. We have gone beyond the cruel
extremities of the French, and they made it a capital crime, punishable
at the guillotine, for any tradesman or individual citizens of the
realm to discriminate in favor of gold and against their printing
press currency. We have gone beyond that. We have said that no man
may have his gold, under penalty of ten years in the penitentiary
or $10,000 fine."
And
when the "gold eases" went to the United States Supreme Court —
the unreconstructed court — the judgment was one that will
he forever a blot on a certain page of American history. The Court
said that what the government had done was immoral but not illegal.
How could that he? Because the American government, like any other
government, has the sovereign power to commit an immoral act. Until
then the American government was the only great government in the
world that had never repudiated the ward engraved upon its bond.
PROBLEM
THREE
TO MOBILIZE BY PROPAGANDA THE FORCES OF HATRED
"We
must hate," said Lenin. "Hatred is the basis of Communism." It is
no doubt the basis of all mass excitement. But Lenin was not himself
the master propagandist. How shall the forces of hatred be mobilized?
What are the first principles? These are questions that now belong
to a department of political science.
The
first principle of all is to fix the gaze of hatred upon one object
and to make all other objects seem but attributes of that one, for
otherwise the force to be mobilized will dissipate itself in many
directions.
This
was expounded by Hitler in Mein Kampf, where he said: "It is part
of the genius of a great leader to make adversaries of different
fields appear as always belonging to one category. As soon as the
wavering masses find themselves confronting too many enemies objectivity
at once steps in and the question is raised whether actually all
the others are wrong and their own cause or their own movement right....
Therefore a number of different internal enemies must always be
regarded as one in such a way that in the opinion of the mass of
one's own adherents the war is being waged against one enemy alone.
This strengthens the belief in one's own cause and increases one's
bitterness against the attackers."
How
in a given situation to act upon this first principle of strategy
is a matter to be very carefully explored. You come then to method
and tactics, studies of the mass mind, analysis of symbols and slogans,
and above all, skill of manipulation.
Lasswell
and Blumenstock, in World Revolutionary Propaganda, define propaganda
as "the manipulation of symbols to control controversial attitudes."
Symbols they define as "words and word substitutes like pictures
and gestures." And the purpose of revolutionary propaganda "is to
arouse hostile attitudes toward the symbols and practices of the
established order."
It
may be however that people are so deeply attached by habit and conscience
to the symbols of the established order that to attack them directly
would produce a bad reaction. In that case the revolutionary propagandist
must be subtle. He must know how to create in the mass mind what
the scientific propagandist calls a "crisis of conscience." Instead
of attacking directly those symbols of the old order to which the
people are attached he will undermine and erode them by other symbols
and slogans, and there others must be such as either to take the
people off guard, or, as Lasswell and Blumenstock say, they must
be "symbols which appeal to the conscience on behalf of symbols
which violate the conscience."
This
is an analytic statement and makes it sound extremely complex. Really
it is quite simple. For example, if the propagandist said, "Down
with the Constitution!" — bluntly like that — he would
be defeated because of the way the Constitution is enshrined in
the American conscience. But he can ask: "Whose Constitution?" That
question may become a slogan. He can ask; "Shall the Constitution
be construed to hold say it is." And that creates an image, which
is a symbol He can ask: "shall the Constitution be construed to
hold property rights above human rights?" Or, as the President did,
he may regretfully associate the Constitution with "horse-and-buggy
days."
The
New Deal's enmity for that system of free and competitive private
enterprise which we call capitalism was fundamental. And this was
so for two reasons, namely: first, that its philosophy and that
of capitalism were irreconcilable, and secondly, that private capitalism
by its very nature limits government.
In
Russia capitalism, such as it was there, could be attacked directly.
The people were not attached to it in any way. In this country it
was very different. Americans did not hate capitalism. They might
criticise it harshly for its sins, most of which were sins of self-betrayal,
but its true symbols nevertheless were deeply imbedded in the American
tradition, and, moreover, a great majority of the people were in
one way or another little capitalists. To have said, "Down with
capitalism!" or, "Down with free private enterprise!" would have
been like saying, "Down with the Constitution!" The attack, therefore,
had to be oblique.
In
his first inaugural address, March 4, 1933, the President said:
"Values have shrunk to fantastic levels; taxes have risen; our ability
to pay. has fallen;... the withered leaves of industrial enterprise
lie on every side; farmers find no market for their produce; the
savings of many years in thousands of families are gone. More important,
a host of unemployed citizens face the grim problem of existence,
and an equally great number toil with little return.... Yet our
distress comes from no failure of substance.... Nature still offers
her bounty. Plenty is at our doorstep, but a generous use of it
languishes in the very sight of the supply. Primarily this is because
the rulers of the exchange of mankind's goods have failed,... have
admitted their failure and have abdicated. Practices of the unscrupulous
money-changers stand indicted in the court of public opinion, rejected
by the hearts and minds of men.... They know only the rules of a
generation of self-seekers.... Yes, the money-changers have fled
from their high seats in the temple of our civilization. We may
now restore that temple to the ancient truths. The measure of that
restoration lies in the extent to which we apply social values more
noble than mere monetary profit."
There
was the pattern and it never changed. The one enemy, blameable for
all human distress, for unemployment, for low wages, for the depression
of agriculture, . for want in the midst of potential plenty —
who was he? The money-changer in the temple. This was a Biblical
symbol and one of the most hateful With what modern symbol did this
old and hateful one associate? With the Wall Street banker, of course;
and the Wall Street banker was the most familiar and the least attractive
symbol of capitalism.
Therefore,
capitalism, obliquely symbolized by the money-changer scourged out
of the temple, was entirely to blame; capitalism was the one enemy,
the one object to be hated. But never was it directly stacked or
named; always it was the old order that was attacked. The old order
became a symbol of all human distress. "We cannot go back to the
old order," said the President. And this was a very hateful counter
symbol, because the old order, never really defined, did in fact
associate in the popular mind with the worst debacle in the history
of capitalism.
It
was never the capitalist that was directly attacked. Always it was
the economic royalist, the brigand of the skyscrapers, the modern
tory — all three hateful counter symbols. The true symbols
of the three competitive systems in which people believed were severely
let alone. The technique in every case was to raise against them
counter symbols. Thus, against the inviolability of private property
was raised the symbol of those who would put property rights above
human rights; and against all the old symbols of individualism and
self-reliance was raised the attractive counter symbol of security.
To
bring hatred to bear upon the profit motive there were two techniques.
One was to say, as the President said in his first inaugural, that
social values were more noble than mere monetary prost, as if in
any free scheme you could have social gains without plenty of mere
monetary profit; the other was to speak only of great profits, as
if in a free profit and lass system you could have little profits
and little losses without big profits and big losses.
It
is not unnatural for people to think envious thoughts about large
profits, and envious thoughts are very easy to exploit, as every
demagogue knows. But no government before the New Deal had ever
deliberately done it. In a home-coming speech to his Dutchess County
neighbors, in August, 1933, the President explained why it had seemed
necessary for the New Deal to limit personal liberty in certain
ways. It was to make all men better neighbors in spite of themselves;
and as if this were no new thing he said: "Many years ago we went
even further in saying that the government would place increasing
taxes on increasing profits because very large profits were, of
course, made at the expense of the neighbors and should, to some
extent at least, he used for the benefit of the neighbors."
Large
profit as such becomes therefore a symbol of social injury, merely
because it is large; moreover, it is asserted that large profit
had long been so regarded by the government and penalized for that
reason.
Of
all the counter symbols this was the one most damaging to the capitalistic
system. Indeed, if it were accepted, it would be fatal, because
capitalism is a profit and loss system and if profits, even very
large profits, are socially wrong, there is nothing more to be said
for it. But it was a false symbol, and false for these three reasons,
namely: first, there is no measure of large profit; second, large
profits are of many kinds and to say simply that large profits are
"of course made at the expense of the neighbors" is either nonsense
or propaganda, as you like; and; in the third place, the history
is wrong.
When
the Federal government many years ago imposed a graduated income
tax — that is, taxing the rich at a higher rate than the well-to-do
and taxing the poor not at all, the idea was not that large profits
or large incomes were gained at the expense of one's neighbor, not
that the rich were guilty because they were rich. The idea was to
impose taxes according to the ability to pay. The well-to-do could
afford to pay more than the poor and the rich could afford to pay
more than the well-to-do, and that was all.
What
made it all so effective was that this was the American people's
first experience with organized government propaganda designed "to
arouse hostile attitudes toward the symbols and practices of the
established order" — and that, if you will remember, was the
most precise definition of revolutionary propaganda that Lasswell
and Blumenstock could think of in their scientific study of World
Revolutionary Propaganda.
PROBLEM
FOUR
TO RECONCILE AND ATTACH TO THE REVOLUTION THE TWO GREAT CLASSES
WHOSE ADHERENCE IS INDISPENSABLE, NAMELY, THE INDUSTRIAL WAGE EARNER
AND THE FARMER, CALLED IN EUROPE WORKERS AND PEASANTS
This
is the problem for which revolutionary theory has yet to find the
right solution, if there is one. The difficulty is that the economic
interests of the two classes are antagonistic. If you raise agricultural
prices to increase the farmer's income the wage earner has to pay
more for food. If you raise wages to increase the wage earner's
income the farmer has to pay more for everything he buys. And if
you raise farm prices and wages both it is again as it was before.
Nevertheless, to win the adherence which is indispensable you have
to promise to increase the income of the farmer without hurting
the wage earner and to increase the wage earner's income without
hurting the farmer. The only solution so far has been one of acrobatics.
The revolutionary party must somehow ride the see-saw.
In
Russia it was the one most troublesome problem. The peasants understood
at first that there was to be a free distribution of land among
them. When the Bolshevik regime put forth its decrees to abolish
private property and nationalize the land the peasants went on taking
the big estates, dividing the land and treating it as their own;
and for a while the government had to let them alone. To have stopped
them at once would have hurt the revolution. And when at length
the government did come to deal with the peasants as if they were
its tenants, whose part was to produce food not for profit but for
the good of the whole, the revolution all but died of hunger.
The
American farmer was a powerful individualist, with a long habit
of aggressive political activity. His complaint was that his relative
share of the national income had shrunk and was in all reason too
little. This was from various causes, notably, (1) the world-wide
depression of agriculture, (2) the low level of farm prices in a
market where competition acted freely, and (3) the relative stability
of industrial prices in s market that enjoyed tariff protection
against world competition. Everything the farmer sold was too cheap;
everything he bought was too dear. What he complained of really,
though he did not. always put it that way, was the economic advantage
of the industrial wage earner.
The
New Deal was going to redistribute the national income according
to ideals of social and economic justice. That was the avowed intention.
And once it had got control of money, banking, and credit it could
in fact redistribute the national income almost as by a slide rule.
The trouble was that if it gave the farmer a large share and left
the wage earner's share as it was it would lose the support of labor,
And if it used its power to raise all prices in a horizontal manner,
according to the thesis of reflation, the economic injustice complained
of by the farmer would not be cured.
The
solution was a resort to subsidies. If the prices the farmer received
were not enough to give him that share of the national income which
he enjoyed before the world-wide depression of agriculture, the
difference would be made up to him in the form of cash subsidy payments
out of the public treasury. The farmer on his part obliged himself
to curtail production under the government's direction; it would
tell him what to plant and how much. The penalty for not conforming
was to be cut off from the stream of beautiful checks issuing from
the United States Treasury, The procedure was said to be democratic.
It is true that a majority of farmers did vote for it when polled
by the Federal county agents. The subsidies were irresistible. More
income for less work and no responsibility other than to plant and
reap as the government said. Nevertheless, it led at once to compulsion,
as in cotton, and it led everywhere to coercion of minorities.
The
total subsidy payments to farmers ran very high, amounting in one
year to more than eight hundred million dollars. And beside these
direct subsidy payments, the government conferred upon the farmer
the benefit of access to public credit at very low rates of interest
with which to refund its mortgages.
Actually,
the farmer's income was increased. That was statistically apparent.
Whether his relative share of the national income was increased,
beyond what it would have been, is another matter. On the whole,
probably not. For when the New Deal had done this for the farmer
it had to do the equivalent or more for labor, and anything it did
to increase labor's share would tend to raise the coat of everything
the farmer bought. There was the see-saw again.
What
the New Deal did for labor was to pass a series of laws the purpose
of which was to give organized labor the advantage in its bargaining
with the employer. As these laws were construed and enforced they
did principally three things. They delivered to organized labor
a legal monopoly of the labor supply; they caused unionism to become
in fact compulsory,' and they made it possible for unions to practice
intimidation, coercion, and violence with complete immunity, provided
only it was all in the way of anything that might be called a labor
dispute. The underlying idea was that with this power added to it,
together with a minimum wage and hour act that made overtime a way
of fattening the pay envelope, organized labor could very well by
its own exertions increase its share of the national income enough
to equal or to overcome the farmer's new advantage. And this organized
labor proceeded forthwith to do.
But
there was at the same time an indirect subsidy to organized labor
much greater than the direct subsidy paid to the farmer. Federal
expenditures for work relief, amounting in the average to more than
two billions a year, must be regarded as a subsidy to organized
labor. The effect was to keep eight or ten million men off the labor
market, where their competition for jobs would have been bound to
break the wage structure. Thus union labor's monopoly of the labor
supply was protected.
Both
the subsidies to agriculture and those to labor came out of the
United States Treasury, and since the money had to be borrowed by
the government and added to the public debt, you would hardly say
the solution was either perfect or permanent. But from the point
of view of revolutionary technic that did not matter provided certain
other and more important ends were gained. What would those other
ends be? One would be the precedent of making the Federal government
divider of the national income; another would be to make both the
farmer and the union wage earner dependent upon the government —
the farmer for hie income and union labor for its power. Neither
the farmer who takes income from the government nor the union wage
earner who accepts from the government a grant of power is thereafter
free.
PROBLEM
FIVE
WHAT TO DO WITH BUSINESS — WHETHER TO LIQUIDATE OR SHACKLE
IT
There
was a Director of the Budget who was not at heart a New Dealer.
One day he brought to the President the next annual budget —
the one of which the President afterward said: "The country, and
I think most of Congress, did not fully realize the large sums which
would be expended by the government this year and next, nor did
they realize the great amount the Treasury would have to borrow."
At
the end of his work the Director of the Budget had written a paragraph
saying simply and yet in a positive manner that notwithstanding
the extraordinary activities indicated by the figures and by the
appropriations that were going to be made, the government had really
no thought of going into competition with private enterprise.
Having
lingered for some time over this paragraph the President said: "I'm
not so sure we ought to say that."
The
Director of the Budget asked, "Why not, Mr. President?"
The
President did not answer immediately, but one of his aides who had
been listening said: "I'll tell you why. Who knows that we shall
not want to take over all business?"
The
Director of the Budget looked at the President, and the President
said: "Let's leave it out." And of course it was left out. It may
have been that at that time the choice was still in doubt. Under
the laws of Delaware the government had already formed a group of
corporations with charter powers so vague and extremely broad that
they could have embraced ownership and management of all business.
They were like private corporations, only that their officers were
all officers of the government, and the capital stock was all government
owned. The amount of capital stock was in each case nominal; it
was of course expansible to any degree. Why they were formed or
what they were for was never explained. In a little while they were
forgotten.
Business
is in itself a power. In a free economic system it is an autonomous
power, and generally hostile to any extension of government power.
That is why a revolutionary party has to do something with it. In
Russia it was liquidated; and although that is the short and simple
way, it may not turn out so well because business is a delicate
and wonderful mechanism; moreover, if it wi11 consent to go along
it can be very helpful Always in business there will be a number,
indeed, an astonishing number, who would sooner conform than resist,
and besides these there will be always a few more who may be called
the Quislings of capitalism. Neither Hitler nor Mussolini ever attempted
to liquidate business. They only deprived it of its power and made
it serve.
How
seriously the New Deal may have considered the possibility of liquidating
business we do not know. Its decision, at any rate, was to embrace
the alternative; and the alternative was to shackle it.
In
his second annual message to Congress the President said: "In the
past few months, as a result of our action, we have demanded of
many citizens that they surrender certain licenses to do as they
please in their business relationships; but we have asked this in
exchange for the protection which the State can give against exploitation
by their fellow men or by combinations of their fellow men."
Not
even business would be asked to surrender its liberties for nothing.
What was it going to receive in exchange? Protection against itself,
under the eye of the Blue Eagle.
That
did not last. The Blue Eagle came and went. Gen. Hugh Johnson, the
stormy administrator of the NRA, said afterward that it was already
dying when the Supreme Court cut off its head. Yet business was
not unshackled. After all, one big shackle for all business was
clumsy and unworkable. There were better ways.
Two
years later the President was saying to Congress: "In thirty-four
months we have built up new instruments of public power." Who had
opposed this extension of government power? He asked the question
and answered it. The unscrupulous, the incompetent, those who represented
entrenched greed — only these had opposed it. Then he said:
"In the hands of a people's government this power is wholesome and
proper. But in the hands of political puppets, of an economic autocracy,
such power would provide shackles for the liberties of the people."
There,
unconsciously perhaps, is a complete statement of the revolutionary
thesis. It is not a question of law. It is a question of power.
There must be a transfer of power. The President speaks not of laws;
he speaks of new instruments of power, such as would provide shackles
for the liberties of the people if they should ever fall in other
hands. What then has the government done? Instead of limiting by
law the power of what it calls economic autocracy the government
itself has seized the power.
PROBLEM
SIX
THE DOMESTICATION OF THE INDIVIDUAL
This
was not a specific problem. It was rather a line of principle to
which the solution of every other probem was referred. As was said
before, in no problem to be acted upon by the New Deal was it true
that one solution and one only was imperative. In every case there
was some alternative. But it was as if in every ease the question
was, "Which course of action will tend more to increase the dependence
of the individual upon the Federal government?" — and as if
invariably the action resolved upon was that which would appeal
rather to the weakness than to the strength of the individual.
And
yet the people to be acted upon were deeply imbued with the traditions
and maxims of individual resourcefulness — a people who grimly
treasured in their anthology of political wisdom the words of Grover
Cleveland, who vetoed a Federal loan of only ten thousand dollars
for drought relief in Texas, saying: "I do not believe that the
power and duty of the general Government ought to be extended to
the relief of individual suffering.... A prevalent tendency to disregard
the limited mission of this power should, I think, be steadfastly
resisted, to the end that the lesson should be constantly enforced
that though the people support the Government the Government should
not support the people.... Federal aid in such eases encourages
the expectation of paternal care on the part of the Government and
weakens the sturdiness of our National character."
Which
was only one more way of saying a hard truth that was implicit in
the American way of thinking, namely, that when people support the
government they control government, but when the government supports
the people it will control them.
Well,
what could be done with a people like that? The answer was propaganda.
The unique American tradition of individualism was systematically
attacked by propaganda in three ways, as follows:
Firstly,
by attack that was direct, save only for the fact that the word
individualism was qualified by the uncouth adjective rugged; and
rugged individualism was made the symbol of such hateful human qualities
as greed, utter selfishness, and ruthless disregard of the sufferings
and hardships of one's neighbors;
Secondly,
by suggestion that in the modern environment the individual, through
no fault or weakness of hie own, had become helpless and was no
longer able to cope with the adversities of circumstances. In one
of his Fireside Chats, after the first six months, the President
said: "Long before Inauguration Day I became convinced that individual
effort and local effort and even disjointed Federal effort had failed
and of necessity would fail, and, therefore, that a rounded leadership
by the Federal Government had become a necessity both of theory
and of fact." And,
Thirdly,
true to the technic of revolutionary propaganda, which is to offer
positive substitute symbols, there was held out to the people in
place of all the old symbols of individualism the one great new
symbol of security.
After
the acts that were necessary to gain economic power the New Deal
created no magnificent new agency that had not the effect of making
people dependent upon the Federal government for security, income,
livelihood, material satisfactions, or welfare. In this category,
its principal works were these:
For
the farmer, the AAA, the FCA, the CCC, the FCI, the AMA, and the
SMA, to make him dependent on the Federal government for marginal
income in the form of cash subsidies, for easy and abundant credit,
and for protection in the market place;
For
the landless, the FSA, making them dependent upon the Federal government
for a complete way of life which they did not always like when the
dream came true;
For
union labor, the NLRB, making it dependent on the Federal government
for advantage against the employer in the procedures of collective
bargaining, for the closed shop, and for its monopoly of the labor
supply;
For
those who sell their labor, whether organized or not, the FLSA-WHD
(minimum wages and minimum hours), making the individual dependent
on the Federal government for protection (1) against the oppressive
employer, (2) against himself lest he be tempted to cheapen the
price of labor, and (3) against the competition of others who might
be so tempted. Thus for better or worse the freedom of contract
between employee and employer was limited.
For
the unemployed, to, any number, the WPA, making them directly dependent
on the Federal government for jobs, besides that they were kept
off the labor market;
For
the general welfare and to create indirect employment, the PWA,
causing states, cities, towns, counties, and townships to become
dependent upon the Federal government for grants in aid of public
works;
For
home owners in distress, the HOLC, making them dependent on the
Federal government for temporary out-door employment, rehabilitation,
and vocational training, besides that these too, were kept off the
labor market;
For
bank depositors, the FDIC, making them dependent on the Federal
government for the safety of their bank accounts;
For
the investors, the SEC, making them dependent on the Federal government
for protection against the vendors of glittering securities;
For
the deep rural population, the REA and the RHFA, making them dependent
on the Federal government for electrical satisfactions at cost or
less;
For
those who live by wages and salaries the SSB, making them dependent
on the Federal government for old-age pensions and unemployment
insurance; also for stern protection against the consequences of
their own personal thriftlessness, since half of what goes into
the social security reserve fund is taken out of their pay envelopes
by the government, whether they like it or not, the government saying
to them, "We will save it for you until your winter comes." And
since there is no saying anything back to the government this becomes
compulsory thrift.
No
individual life escaped, unless it was that of a desert rat or cave
dweller.
It
was thus that the hand of paternal government, leaving first seized
economic power, traced the indelible outlines of the American Welfare
State.
In
the welfare state the government undertakes to see to it that the
individual shall be housed and clothed and fed according to a statistical
social standard, and that he shall be properly employed and entertained,
and in consideration for this security the individual accepts in
place of entire freedom a status and a number and submits his life
to be minded and directed by an all-responsible government.
When
New Dealers speak in one breath of a welfare economy and with the
next breath bitterly denounce pressure groups it may seem that they
involve themselves in an ironical dilemma. It is easy to say: "What
would you expect, since you have made division of the national income
a matter of political bargaining where before it had been always
a matter of economic bargaining?"
Yet
they are right, the New Dealers. In the welfare state pressure groups,
representing willful political action, cannot be tolerated. They
will have to be suppressed at last, because in the welfare state
the government cannot really guarantee social security until it
goes to the logical end, which is to ration the national income
in time of peace just as all goods and satisfactions are rationed
in time of war.
PROBLEM
SEVEN
TO REDUCE ALL RIVAL FORMS OF AUTHORITY
The
attack on this problem was progressive, with changing features,
but the strategy throughout was consistent. The principal forms
of rival authority were these four:
The
Congress,
The Supreme Court,
Sovereign States, and,
Local Self-Government, for which we may take the symbol to be the
County Court House.
The
Congress is the law-making power. Under the Constitution, which
is the supreme organic law, there is no Federal law-making power
but the Congress. What it represents is the parliamentary principle
in free government.
It
is the function of the Supreme Court, representing the judicial
principle, to interpret the laws when the question is raised whether
or not an act of Congress is contrary to the supreme organic law,
which is the Constitution, and which only the people can change.
It
is the function of the President, representing the executive principle,
to execute the laws.
Lastly,
each state in the Union has certain sovereign rights; these are
rights which in the beginning no state was willing to surrender
to the Federal government.
Such
is the form of the American government. The idea was that it should
be a government of law, not a government of men.
In
the special session called by the President to launch the New Deal
the Congress for the first time was under the spell of executive
leadership and embraced the leadership principle. It did not write
the New Deal laws. It received them from the White House, went through
the motions of passing them, engrossed them, and sent them back
to the President. That was called the rubber stamp Congress. So
long as it was content to keep that role everything was lovely.
In the book On Our Way the President wrote: "In the early hours
of June sixteenth, the Congress adjourned. I am happy once more
to pay tribute to the members of the Senate and House of Representatives
of both parties who so generously and loyally co-operated with me
in the solution of our joint problems."
Loyalty
of the law-making power to the executive power was one of the dangers
the political fathers foretold.
In
that special session the Congress had surrendered to the President
its one absolute power, namely, control of the public purse; also
in creating for the New Deal those new instruments of power demanded
by the President it delegated to him a vast amount of lawmaking
power — so much in fact that from then on the President and
the agencies that were responsible to him made more law than the
Congress The law they made was called administrative law. Each new
agency had the authority to issue rules and regulations having the
force of law. After that for a long time nobody knew what the law
was or where it was, not even the government knew, because the law
might he a mimeographed document in the drawer of an administrator's
desk. When this confusion became intolerable a rule was made that
all pronouncements of administrative law should be printed in a
government publication called The Register. That was some improvement,
because then if you wanted to know what the law was it was necessary,
besides consulting the statute books, only to search the files of
The Register.
In
the next regular session of Congress the spell began to break, and
ever since, with increasing anxiety, it has been running after the
power and prestige it surrendered. But the minute it began to do
that all the New Deal's power of propaganda was turned against it,
in derision, belittlement, and defamation; and in every struggle
over principle it was adroitly maneuvered into the position of seeming
to stand against the people for wrong reasons, on mere pretense
of principle. The attack upon Congress was designed both to undermine
the parliamentary principle and to circumscribe the political rights
of people.
It
is a long story, but well summarized in the report of a special
committee of the House of Representatives appointed to investigate
un-American activities. It said:
"The
effort to obliterate the Congress of the United States as a co-equal
and independent branch of our government does not as a rule take
the form of a bold and direct assault. We seldom hear a demand that
the powers with which Congress is vested by the Constitution be
transferred m toto to the executive branch of our government, and
that Congress be adjourned in perpetuity. The creeping totalitarianism
by which we are menaced proceeds with subtler methods. The senior
United States Senator from Wyoming has called attention to the work
of men who 'in the guise of criticizing individual members of Congress
are actually engaged in the effort to undermine the institution
itself.' Many of the efforts to purge individual members of Congress
are based upon an assumption which reflects discredit upon the entire
legislative branch of government. That assumption consists of the
view that the sole remaining function of Congress is to ratify by
unanimous vote whatever wish is born anywhere at any time in the
whole vast structure of the executive branch of Government down
to the last whim of any and every administrative official.... Over
a large part of the world today democracy has been long dead. Political
processes which once assured the common man some degree of genuine
participation in the decisions of his government have been superseded
by a form of rule which we know as the totalitarian state. The essence
of totalitarianism is the destruction of the parliamentary or legislative
branch of government. The issue simply stated is whether the Congress
of the United States shall be the reality or the relic of American
democracy."
No
one can have forgotten the bitterness of the struggle over the New
Deal's attempt to pack the Supreme Court after it had killed the
Blue Eagle. Nor can anyone who saw it forget the spectacle of C.I.O.
strikers, massed in Cadillac Square, Detroit, intoning with groans
the slogan prepared by New Deal propagandists: "Nine old men. Nine
old men." That was collaboration.
At
this point the President suffered his first serious defeat. The
Congress would not pass his court-packing law. It did not dare to
EBB it. Public opinion was too much aroused. Nevertheless, it was
possible two years later for the President to boast that he had
won. Vacancies on the bench caused by death and retirement enabled
him to fill it up with justices who were New-Deal minded, and so
at last he did capture the judicial power.
Reduction
of the sovereign power of states was accomplished mainly in four
ways, as follows:
One,
by imposing Federal features on the social security systems of the
states and making the administration of old-age pensions and unemployment
insurance a function of the Federal government;
Two,
by enormous grants in aid out of the Federal Treasury to the states
on condition in every ease that the states conform to Federal policies,
the state governments, under popular pressure to accept Federal
funds because they looked like something for nothing, finding it
very difficult to refuse;
Three,
the regional design for great Federal works and the creation of
regional authorities like the T.V.A., with only a trivial respect
for the political and property rights of the overlaid states, and,
Four, by extreme and fantastic extensions of the interstate commerce
clause.
The
Constitution says that the Congress shall have the power "to regulate
commerce with foreign nations, among the several states, and with
the Indian tribes." That is the famous clause. Commerce among the
several states is of course interstate commerce. Now, when the New
Deal undertook to regulate wages or hours or labor conditions in
the nation, it did not write a law saying that such should be the
minimum national wage or such the minimum national day's work, nor
that the rules of the National Labor Relations Board should govern
all employee-employer relations throughout the nation. Not at all.
It could hardly say that without first tearing up the Constitution.
What it did say was that only such goods as were produced under
conditions that conformed to the Federal law — only those
and no other — should be permitted to move in interstate commerce.
And then the New Deal courts stretched the definition of interstate
commerce to the extreme of saying that the Federal government may
regulate a wheat farmer who feeds his own wheat to his own chickens,
on the ground that if he had not raised his own wheat he would have
had to buy wheat for his chickens and buying it would be in the
way of interstate commerce; or, that the Federal government may
regulate the hours and wages of elevator operators, janitors, and
char-women in a Philadelphia office building because some of the
building's tenants are engaged in interstate commerce.
On
the reduction of local self-government, hear the Governor of Kansas.
He was visiting Iowa and made a speech in Des Moines. Twenty years
ago, he recalled, the county — for example, the one in Kansas
where he began to practice law — offered an almost perfect
example of responsible self-government.
"We
were able, I believe, to do a reasonably good job of local government.
In meeting and solving our problems we looked to the state government
very little and to the national government not at all. The citizens
of the county knew who their elected officers were. They came and
talked with us frequently. We knew their difficulties. We dealt
with them across the desk, over the counter, and sometimes down
at the corner drug store. They had definite opinions about the affairs
of the county. They spoke their minds freely and they registered
their approval and disapproval directly at the polls on the second
Tuesday of the next November. There was no doubt and no uncertainty
about it.
"Now,
that has been a matter of only about twenty years — a short
time indeed in the history of people. But in that twenty years there
has taken place a most astonishing change. The court house is the
same. The theoretical structure of county government is unaltered.
But in practical operation the picture now is very different. Federal
agencies are all around us. There is scarcely a problem presented
to the county officials of today which is not either directly or
indirectly involved with implications and issues related occasionally
to state, but more often to Federal, regulation. There are Federal
offices in the basement and in the corridors on the second floor.
Except during the regular term of court there are extra employees
of some Federal agency in the court room. A couple of Federal auditors
or investigators are usually using the jury room. The whale warp
and woof of local government is enmeshed in the coils of bureaucratic
control and regulation.
"And
that is only the story so far as county government is concerned.
You know that parallels could be drawn in our cities, in our educational
districts, and even more clearly in our state capitals. Let me cite
just one example. In 1874 the western part of Kansas suffered a
very severe calamity in the form of a horde of grasshoppers. Our
state was young, only thirteen years old. The ravages of the grasshopper
threatened the livelihood of many of the settlers. Upon that occasion
the Governor called a special session of the legislature. It met,
considered the problem and enacted proper legislation for relief
and aid... and a disaster was averted.
"If
that same situation should occur today we all know what would happen.
It would take practically a photo finish to determine which would
land first — the grasshoppers or a horde of Federal agents.
The state and the county would have absolutely and exactly nothing
to say about it. The policy and the means and the method of dealing
with the problem would all be determined in Washington, D.C. The
benefits, all from the Federal Treasury, in such manner and such
form as Washington should dictate, would come to the farmers without
their scarcely knowing what it was about — and we take it
for granted. The other day a great number of farmers in my state
did receive Federal checks, and dozens of them were wondering what
in the world they were for, as they knew of no payment that was
due under any of the existing programs in which they were participating."
PROBLEM
EIGHT
TO SUSTAIN POPULAR FAITH IN A SPIRAL INCREASE OF THE PUBLIC DEBT
This
problem has its greatest importance in the first few years. Ultimately
the welfare state outgrows it because the perfect welfare state
must in the end ration the national income, and when it does that
money comes to be like coupons in a war-time ration book. At first,
however, the government must borrow heavily. In order to transfer
wealth from the few to the many — wealth in the modern forms,
so largely imponderable and non-portable — it must be able
to borrow and spend, and unless people who have savings to lend
believe in the public credit and trust it the government cannot
borrow. If it cannot borrow in order to spend the revolution will
be bankrupt in the preface. That is why in the second and third
months, with the Treasury empty, the New Deal was obliged to sell
government bonds under the false promise to pay the interest and
redeem the interest in gold dollars — a promise it was preparing
to repudiate.
Well,
the rest is simple because the method was simple.
For
a while, and to the limits of credulity, the New Deal kept saying
it was going to balance the Federal budget — honest to goodness
it was, and anybody who said to the contrary belonged to darkness.
In July of the first year the President said: "It may seem inconsistent
for a government to cut down in regular expenses and at the same
time to borrow and to spend billions for an emergency. But it is
not inconsistent, because a large portion of the emergency money
has been paid out in the form of sound loans which will be repaid
to the Treasury over a period of years; and to cover the rest of
the emergency money we have imposed taxes to pay the interest and
the installments on that part of the debt."
If
true, that would mean a solvent government with a balanced budget;
but it wasn't true.
At
the beginning of the second year, going to the Congress with a budget
that stunned all old-fashioned ideas of public finance, the President
blandly postponed a balanced budget for two years, and said afterward
to the people: "Nevertheless, the budget was made so clear that
we were able to look forward to the time, two years from now, when
we could hope the government would be definitely on a balanced financial
basis, and could look forward also to the commencement of reduction
of the national debt." And that was the end of that line.
The
second line was a resort to the European device of double bookkeeping.
There were two budgets. The one representing the ordinary expenditures
of government was balanced. The other one, representing extraordinary
expenditures, for recovery and so on — that one would have
to be regarded separately for a while. It would be balanced when
recovery had been really achieved and when the national income could
stand it. That was the line for several years.
The
third line was the idea of the investment state. The government's
continued deficit spending; with enormous additions to the public
debt, was not what it seemed. Actually, whether you could account
for it physically or not, the debt was balanced by assets. The government
was investing its borrowed funds not only in the things you could
see everywhere — beautiful and socially useful things that
were not there before; it was investing also in the health and welfare
and future happiness of the whole people. If there was any better
investment than that, or one likely in time to pay greater dividends,
what was it? In a while that line wore out, and although it was
never abandoned it was superseded.
The
fourth line was a doctrine invented and promulgated by New Deal
economists — the doctrine of perpetual unlimited public debt.
What difference did it make how big the debt was? It was not at
all like a debt owing to foreign creditors. It was something we
owed only to ourselves. To pay it or not to pay it meant only to
shift or not to shift money from one pocket to another. And anyhow,
if we should really want to pay it, the problem would be solved
by a rise in the national income.
Many
infuriated people wasted their time opposing this doctrine as an
economic fallacy. But whether it was a fallacy or not would be entirely
a question of the point of view. From the point of view of what
the New Deal has called the fetish of solvency it was a fallacy.
But from the point of view of scientific revolutionary technic it
was perfectly sound, even orthodox. From that point of view you
do not regard public debt as a problem of public finance. You think
of it only in relation to ends. A perpetual and unlimited debt represents
deficit spending as a social principle. It means a progressive redistribution
of wealth by will of government until there is no more fat to divide;
after that comes a level rationing of the national income. It means
in the end the cheapening of money and then inflation, whereby the
middle class is economically murdered in its sleep. In the arsenal
of revolution the perfect weapon is inflation.
(And
all of that was before the war, even before the beginning of the
defense program.)
PROBLEM
NINE
TO MAKE GOVERNMENT THE GREAT CAPITALIST AND ENTERPRISER
Before
coming to regard the problem let us examine a term the economists
use. They speak of capital formation. What is that? It is the old,
old thing of saving.
If
you put a ten dollar bill under the rug instead of spending it,
that is capital formation. It represents ten dollars' worth of something
that might have been immediately consumed, but wasn't. If you put
the ten dollar bill in the bank, that is better. Hundreds doing
likewise make a community pool of savings, and that is capital formation.
Then thousands of community pools, like springs, feed larger pools
in the cities and financial centers. If a corporation invests a
part of its profit in new equipment or puts it into the bank as
a reserve fund, that is in either case capital formation. In a good
year before the war the total savings of the country would be ten
or twelve billions. That was the national power of capital formation.
These saved billions, held largely in the custody of the banking
system, represented the credit reservoir. Anybody with proper security
to pledge could borrow from the reservoir to extend his plant, start
a new enterprise, build s house, or what not. Thus the private capital
system works when it works freely.
Now
regard the credit reservoir as a lake fed by thousands of little
community springs, and at the same time assume the point of view
of a government hostile to the capitalistic system of free private
enterprise. You see at once that the lake is your frustration. Why?
Because so long as the people have the lake and control their own
capital and can do with it as they please the government's power
of enterprise will be limited, and limited either for want of capital
or by the fact that private enterprise can compete with it.
So
you will want to get rid of the lake. But will you attack the lake
itself? No; because even if you should pump it dry, even if you
should break down the retaining hills and spill it empty, still
it would appear again, either there or in another place, provided
the springs continued to flow. But if you can divert the water of
the springs — if you can divert it from the lake controlled
by the people to one controlled by the government, then the people's
lake will dry up and the power of enterprise will pass to government.
And that is what was taking place before the war; notwithstanding
the war, that is what still is taking place.
By
taxing payrolls under the social security law of compulsory thrift
and taking the money to Washington instead of letting the people
save it for themselves; by taxing profits and capital gains in a
system that is, or was, a profit and loss system; by having its
own powerful financial agencies with enormous revolving funds, the
Reconstruction Finance Corporation being incomparably the great
banking institution in the world; by its power to command the country's
private bank resources as a preferred borrower, and by its absolute
ownership of more than twenty billions of gold, which may be one-half
of all the monetary gold in the world, the Federal government's
power of capital formation became greater than that of Wall Street,
greater than that of industry, greater than that of all American
private finance. This was an entirely new power. As the government
acquired it, so passed to the government the ultimate power of initiative.
It passed from private capitalism to capitalistic government. The
government became the great capitalist and enterpriser. Unconsciously
business concedes the fact when it talks of a mixed economy, even
accepts it as inevitable. A mixed economy is one in which private
enterprise does what it can and government does the rest.
While
this great power of capital formation was passing to the government
the New Deal's economic doctors put forth two ideas, and the propagandists
implanted them in the popular imagination. One was the idea that
what we were facing for the first time in our history was a static
economy. The grand adventure was finished. They made believe to
prove this with charts and statistics. It might be true. No one
could prove that it wasn't, because all future belongs to faith.
The effect of this, of course, was to discourage the spirit of private
enterprise.
The
other idea was that people were saving too much; their reservoir
was full and running over, and they t ere making no use of their
own capital because the spirit of enterprise had weakened in them.
There was actually a propaganda against thrift, the moral being
that if the people would not employ their own capital the government
was obliged to borrow it and spend it For them.
CONCLUSION
So
it was that a revolution took place within the form. Like the hagfish,
the New Deal entered the old form and devoured its meaning from
within. The revolutionaries were inside; the defenders were outside.
A government that had been supported by the people and so controlled
by the people became one that supported the people and so controlled
them. Much of it is irreversible. That is true because habits of
dependence are much easier to form than to break. Once the government,
on ground of public policy, has assumed the responsibility to provide
people with buying power when they are in want of it, or when they
are unable to provide themselves with enough of it, according to
a minimum proclaimed by government, it will never be the same again.
All
of this is said by one who believes that people have an absolute
right to any form of government they like, even to an American Welfare
state, with status in place of freedom, if that is what they want.
The first of all objections to the New Deal is neither political
nor economic. It is moral.
Revolution
by scientific technic is above morality. It makes no distinction
between means that are legal and means that are illegal. There was
a legal and honest way to bring about a revolution, even to tear
up the Constitution, abolish it, or write a new one in its place.
Its own words and promises meant as little to the New Deal as its
oath to support the Constitution. In a letter to a member of the
House Ways and Means Committee, urging a new law he wanted, the
President said: "I hope your committee will not permit doubt as
to Constitutionality, however reasonable, to block the suggested
legislation." Its cruel and cynical suspicion of any motive but
its own was a reflection of something it knew about itself. Its
voice was the voice of righteousness; its methods therefore were
more dishonest than the simple ways of corruption.
"When
we see a lot of framed timbers, different portions of which we know
have been gotten out at different times and places, and by different
workmen... and when we see those timbers joined together, and see
that they exactly make the frame of a house or a mill, allthe tenons
and mortises exactly fitting, and all the lengths and proportions
of the different pieces exactly adapted to their respective places,
and not a piece too many or too few... in such a case we find, it
impossible not to believe that... all understood one another from
the beginning, and all worked upon a common plan or draft, drawn
up before the first blow was struck." —Abraham Lincoln, deducing
from objective evidence the blueprint of a political plot to save
the institution of slavery.
Garet
Garett (18781954) was one of America's most articulate
opponents of empire. Here he writes, in 1938, on Roosevelt's New
Deal. See also Bruce Ramsey here
and here.
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