The business depression points an accusing finger at professional economists. This paper is not an apology for the economists—quite the contrary. At the same time it is proper to point out that when an epidemic disease attacks the community, (a fair analogy in the physiological world) we do not upbraid the doctors. We welcome them into our houses, place our individual sick in their hands, and listen anxiously to their guesses at the source of infection. We recognize that physicians are paid by individuals, and are not conservers of the public health in the strict sense, and so we do not hold them, even collectively, responsible for the spread of typhoid or influenza. They are to lock the individual stable door after the steed is stolen, and so long as they do this with reasonable quickness and accuracy, we do not complain.
American economists have been somewhat less occupied with the ills of the individual than have doctors as a class, and yet the share of their attention demanded by the enterpriser, the lender, the borrower, the speculator as such, absolves them in part from the indictment of neglecting the public interest. Until recently the forces in American economic life have been centrifugal, and students have been invited to become specialists. This direction of their effort was not always the case. The profession of “Political Economy” clearly implies a concern for public, collective problems, and it is only within the last two generations that American economists have departed from the historical tradition. The term “economics” in the narrow sense, and, more explicitly, the term “business economics,” indicates the drift toward preoccupation with private economy. The word “private” refers here, of course, more to the particular enterprise or even the particular industry than to the individual person. Our division of professional labor has brought specialized attention to accounting, salesmanship, marketing, insurance, foreign trade, banking, and a host of other subjects.
I do not mean that study of the public aspects of American economic life has lost absolutely; it has not, but its relative diminution has been conspicuous. There is an increased interest in economic history, and in the history of economic thought, and lively debate over the amendment of doctrinal tenets. Labor problems have been developed from the broadest premises, and taxation, currency, prices, and the business cycle have been set forth by a scholarship informed with social idealism. Nevertheless, economists have more and more become the retainers of American business enterprise. Whether they labor over consolidated balance sheets, conduct bureaus which dance to the tune of the local chamber of commerce, or become the appendages of financial houses, they forsake the general welfare in order to lend acumen to private advantage. They, have devoted themselves to working the system which we have, and they think tardily of its evolution, and less of its more deliberate change. Just as the sanatorium reconditions the ailing patient, and just as the civil engineer lays out a railway, line with least expenditure, so the economist tries to resuscitate the sick business or becomes the tactician for the well one. In comparison with this concentration of ttalent upon private business manoeuver, social engineering by the economist, in volume and in public acclaim, suffers.
In some instances the interest appears to broaden, but it is only in appearance. Consider the stock market dope-sters. Their information may be made available to as wide a clientele of subscribers as they or their employers are able to attract, but all is done in the name of enabling the individual to make more money, or to protect what he has. These are the economic fortune tellers. Enter their booths, cross their palms with silver, and they will go into a statistical trance (often with their eyes shut in the conventional manner of the tribe) and tell you how you are to become rich. Sometimes they are so rash as not to save their credit by warning you against a dark-haired man or a light-complected lady who will cross your path, to whose bane or ben-ison you must be alert. Their rites of curves and calculations are mysteries, guarded even from each other.
In the fall of 1929, before the stock market crash, their tide was at its ecstasy. Think you that it has ebbed since then? Not so. Plenty there are of old adherents who complain of being stranded, but the special protection of the economic soothsayers is that we look to them as anxiously in bad times as we do expectantly in good times. They seem as necessary to our comfort as the court fool to a monarch— they must assist our mirth, and beguile our melancholy.
These, together with adept accountants, many industrial engineers and efficiency experts, sales managers and their companions, the psychologists who advise on advertising, are the high priests of the new cult; they serve at the altar, but they are not without their acolytes. The business schools and many institutions which profess less utilitarian motives, are training their thousands of students to be humbler practitioners, who will nurse each one his aspirations.
All of them are witch-doctors, herb-brewers, and mere bone-setters. Taken at their maximum professions, their comprehension of the social body as a whole and their desire to see it prosper can mean no more than expert service under the system of individualism. At most, they can only assist the individual to function effectively in an atomic universe. But it is constantly clearer that between the cup of self-interest and the lip of general welfare there is many a slip.
That a large section of American economists have become practitioners rather than scientists, plumbers rather than sanitarians, is due in the first instance to natural and good enough motives. Economic thought, indeed all thought about society and its workings, is like iron filings in the field of a magnet. The magnet shifts the filings into a pattern. In the case of economic thinking, the magnet is the technique of the production of goods. This technique changes markedly from time to time, and so, consequently, does economic surmise. So long as the individual capitalist and enterpriser were the rule in America, and so long as we had large opportunities yet to be occupied by small men, the economic analysis which described, justified, and proclaimed them, served private interest and economic welfare in the same act. But even here the average economic writer and thinker was apt to speak in the name of what he conceived to be the social good; if he was uneasy in his conscience, he at least protested his disinterestedness. There were few individual firms, industries, or even regions powerful or integrated enough to deflect the loyalty of economists to their special purposes. You may be tempted to instance the earlier protectionists in contradiction. Or the earlier free traders. I can say only that I have read their advocacies with some care, and I find them in the main high-minded and honest. They tried to do what they believed was good for America. Political exigency often led to temporary disguise, but beneath this we must credit them with excellent motives.
After the panic of 1873 came a change in American economic life, due to the growth of large-scale industry. In the battles between Lilliputians appeared here and there a giant Gulliver. Then more giants, and these had at one another. Blood flowed; the streams of industry and commerce ran red. Competition for an interval took on an aspect new in fierceness and new in proportions, but the necessary issue of the conflict was the progressive disappearance of competition. This came either in the humiliating terms which victor laid upon vanquished, or in compromises between nearly equal contenders. American economists perceived only vaguely, and public executives and legislators not at all, that competition, in anything like the old habit, was doomed and not to be revived. Anti-trust acts, the Interstate Commerce Act and Federal Trade Commission were so many pulmo-tors hastily hauled out to pump air into collapsed lungs. There was confusion, indignation, exhortation. Nothing did any good. Competition was dying; in rapid succession and with exasperating ingenuity came pools, trusts, holding companies, gentlemen’s agreements, interlocking directorates, communities of interest, mergers, and trade associations, generally to control output and prices.
Now it is important, if you are interested in this discussion at all, to grasp the fact that at this point physical industrial development overtook and bore down economic thinking. While some economists persisted in the hopeless battle against monopoly and large-scale business enterprise, the larger number of more talented ones sought to make places for themselves in the households of the new masters. At this juncture any immediate hope for social leadership from among American economists went out like a snuffed candle. Those who assailed the new development had no kind of understanding of its power and permanence. Those who served the new development were not appreciative of its true portent. The best among these last saw that American economic life was no longer competitive in anything like the theoretical sense, but was increasingly controlled; that individual action had become mass action; that the formerly counterpoised mechanism was now hopelessly weighted to this side or that. But these were content to describe what they saw, and gave little hint of the next step in the evolutionary process. How the new dispensers of our economic fortunes were themselves to be dispensed was rarely thought on and more rarely mentioned.
The bravest efforts of professional economists at generalization and conclusion were pitifully weak. Reform was the maximum program, and reform meant minor abatement, and only here and there. Municipal ownership of gas and electric plants and street railways; child labor laws, minimum wage, and workmen’s compensation; postal savings banks and regulation of small loans; the supreme court shoved forward as a burnt offering to monopoly; a less condescending administration of charity; a back-to-the-farm movement—all were efforts to purify the well by painting the pump. It was bad enough for these economists of the end of the last century and the beginning of this to be lacking in insight and invention. But their further disability was rank timidity. I say timidity (not excusing them on account of the suddenness with which a new phenomenon had confronted them), because they were offered better lights. The Utopian socialists, whatever their shortcomings, had nowhere been more declarative of their faiths than in this countiy; John Stuart Mill in 1848 had acknowledged himself on the verge of despair at the seemingly incurable iniquities of laissez-faire; much more than these, Karl Marx had sounded the knell of the old order and set forth the character which the new was to take. And American economists —but, be it noted, economists without the gates of institutionalism—proposed thoroughgoing remedies. Chief among these was Henry George, whose idealism was as high as his testimony was eloquent. It was sought to cry him down as a fanatic with a cure-all, but history will not permit his critics to reach to his knees. Of a very, different sort was Edward Bellamy, whose “Looking Backward” captured popular imagination if not that of the devotees of the science of economics.
Radical proposals were branded as being such, and professional economists turned their faces away, and scurried up the wind from them as men shunning the plague. Their too evident dismay and confusion did not prompt the economists to humility and the lending of a respectful ear; they did not have even the wit to recognize that they were on the defensive. With no plan themselves, they spurned all plans of others.
They did study the manifestations of the new era of large-scale business enterprise with its many concomitants, and thus became, within however limited a sphere, realists. As the consequences of the new era unfolded, their studies broadened and exhibited, necessarily, more and more social implications. A milestone was reached in studies of the greenbacks and the business cycle. Here was a resolute and competent attempt to understand major economic phenomena, and that through inductive inquiry. Conclusion and advocacy, to be sure, were not clear, and the remedies, such as the compensated dollar, which were offered in this and other fields, while more respectable than the pettifogging of the earlier period, are after all only plasters on a wooden shin. And the authors of such proposals have been the choicer spirits. The routine teachers of economics, and the texts from which they taught, lay in a dense fog. (Some of these text-books, by the way, were written by people who should have known better.) The rule of conduct was an orthodox exposition of the competitive system, with designedly separate treatment of monopoly, public utilities, labor problems, panics and the like. It was declared that these last developments represented wicked departure from normal and righteous practice; they were treated as exceptions to prove the rule of ideal competition. There was the least possible effort to accomplish an infiltration of these evidences of mass action with the body of economic description. They were regarded as excrescences merely. If there were any chirpings from the teachers of economics (who were, after all, handing out, so far as schooling could do it, the economic pabulum of the nation), they were by way of proposing changes in methodology and had little enough to do with recognition of changes in economic life about them.
With the World War came a new phase, so different in degree as to amount almost to a difference in kind. Industrial and financial technique matured overnight. The country was still in the momentum engendered by the conflict of arms. It had drawn to itself the major part of the world’s gold supply, its producing machine was active and expanding while that of other countries lay crippled or outmoded. Only temporarily, halted by the business sags of 1920-21, 1924, and 1927, the conspicuous tendency was upward and onward. Integration of industry and concentration of control were accelerated. New forms of collective effort appeared day by day — chain stores, increased numbers of branch factories and banks, the linking of power plants into gigantic systems, subtler efforts of monopoly to ingratiate itself with public opinion (or, more boldly, to club public opinion into compliance with monopoly purpose). International domination was added. America was the world’s banker, and would be the world’s purveyor as well.
The economists were caught up in the country’s confidence. We had reached, it was said, “a new economic era.” We were going to stay rich now, and get richer. There was no limit to the ingenuity of American business enterprise. Economic experts who broadcasted for “investors’ ” services were eloquent in their assurance of further upclimb of prosperity; those who advised the patrons of brokerage houses were diligent to seize upon the unending chances of gain. If there were qualms now and again, and faint stirrings of memory of former collapse which penetrated the general elation, these were put down as unmeaning automatic reflexes. If there were premonitory, murmurs, even yelps, among over-producing farmers, debenture debate would have to satisfy them. We were too busy to pause. The Federal Reserve was our talisman against a sorrowful end to all of this; we scolded it sometimes for its deflationist policy, but they were the mild scoldings of an indulgent parent to a naughty child. Most of the time we patted our regionalized bank reserves in comfortable thought of possession. The sun shone in our eyes, and we heeded no warnings. A comically low ratio of earnings to stock prices— what was that?
And so, alack, alas! A downward cascading of stocks which took the country’s breath away. But, though this was violent in all conscience, it must be temporary. A wicked jolt from which we would rebound. And so again, alack, alas! When many downward shoots convinced us finally of what had happened to the stock market, we were still fatuously sure that underlying business was sound. All our hopes prompted this belief. Unemployment appeared, but we were told it was not as bad as three years before or six years before. The federal government’s spokesmen minimized what was happening—sometimes with motive kinder than it was wise, sometimes with ineptitude that almost called honesty in question.
Only since the depression is as generally acknowledged as it is lamented have the economists as a body reverted to the wide social implications of economic forces. At the recent annual meeting of the American Economic Association, it is safe to say, the members talked more about the progressive disappearance of competition, and the disabilities of what remains, than in the ten years previous. One would have thought that current evidences of the substitution of cooperation would have convinced them further—what with the farmers receiving a subsidy of hundreds of millions, the unemployed hardly less, the President pleading for relaxing of the anti-trust acts and promoting mergers of the railroads, and every community chest receiving added funds for those whom individualism has left behind. They arrived with painful labor at the conclusion that we live in what is in effect a controlled economy, and that for the present selfish and largely blind control we need to substitute an economics of stewardship. They seemed a little frightened at their own venturesomeness, but glad all the same that they, had taken high ground.
The economists would be surprised to reflect (for I can hardly believe they really do not know) that such propositions, evolved by them with so much puffing, form the commonplaces of socialist thinking. Stop the first man you meet in Union Square and he will tell you as much. With rather elaborate terminology obscuring simple ideas, the professional economists begin to approximate socialist points which have been stated, reiterated, and abundantly illustrated any time these last hundred years. The academicians’ “institutionalism” which they recognize as in conflict with the neo-classical laissez-faire is, if I am judge, nothing different from the Marxian principle of total change in society consequent upon evolution in the methods of production. The business mergers which excite the economists to tabulations and graphic representations are just one of many evidences of the inveterate urge of competition to transform itself into cooperation. This, of course, has been a major theme of socialism since the year of the Communist Manifesto.
The contrast between the academic economists and the economic philosophers is, in this respect, the contrast between attempts to reach the North Pole by dog sledge and by airplane. The American economists have toiled along these years—freezing on mountain slopes, marooned on ice floes, falling into crevasses — while those who dared give wings to thought have long since made the journey quickly and spied out the intervening country with no less effect.
In Europe the case has been different—in Great Britain and Germany notably, but scarcely less in Czechoslovakia, Denmark, and Belgium. Some of the best minds among English academic economists have been at the service of the Labor Party. These men have dared to be partisans, not because they give themselves to one-sided advocacy, but because they have made a generalization and expect and want to see their analysis justified. I do not overlook a few in America who have moved in the same direction, but their assistance has been given as experts on government boards, or their preachments have been partial rather than comprehensive, or, where very outspoken, they have been ushered out of academic chairs.
It may be said that nothing similar to the manifesto of the British Labor Party in 1918, outlining a new social order, is possible in pragmatic America. It is true that we have been occupied with goods rather than with the good life. Like Martha, we have been anxious about many things, and have not, like Mary, chosen the better part. Organized labor in the United States, following stubborn tradition, has not welcomed alliances with academicians. In England there has been an aristocracy of letters which naturally took place alongside the aristocracy of birth in participation in government. The English universities are public institutions in a way that ours in the United States are not.
Yet when all is said and done, American business technique, in its progressive substitution of collectivism for individualism, and in attempts at internal stabilization, has gone beyond public policy and beyond academic thought about public policy. Industry, the individualism of which is said to color academic economic opinion, is itself dismissing individualism.
Two present influences may lead American professional economists to broad social thinking. One is the greater emphasis recently placed upon inductive study of economic enterprise. This makes for realism, and such realism as suggests modification of old laissez-faire notions. The other is the current business depression. Pharoah is asking to have his dream interpreted, and there is no Joseph. Economists may become ashamed of their bankruptcy, and set about a solution. They may revert to the classical tradition, and aim to be publicists. As the medical fraternity begins to concern itself with the public health, so the economic fraternity may afford some who give attention to the common wealth.